Health Care Companies in Merger Frenzy

Abstract: In a fast-paced financial version of musical chairs, health care companies of all kinds — drug makers, hospital groups and insurers — have been frantically circling to be sure they are not left out of the latest frenzy of deal making. Mergers and acquisitions worth about $270 billion have been announced in the first nine months of 2015 in the United States, easily outpacing the activity in recent years, according to a tally by Mergermarket. On Thursday, Allergan, itself the product of a recent merger, said it was in talks to be bought by Pfizer in a deal that could easily become the year’s biggest deal. Allergan’s current market value is $113 billion. But the quest for size goes beyond the drug industry. The year’s biggest deals included mergers among the nation’s five largest health insurance companies, which pursued one another until only three may remain. Anthem is trying to buy Cigna for nearly $50 billion, and Aetna is pursuing Humana. Only UnitedHealth Group remains without a partner. But UnitedHealth, which has created a portfolio of health care businesses, fortified its pharmacy benefit manager, known as OptumRx, by buying Catamaran Corporation a fast-growing competitor, this year. The combined entity, which is expected to process more than one billion prescriptions in 2015, is better equipped to compete with the industry giants Express Scripts and CVS Health, which operates CVS/caremark in addition to drugstores. CVS, in turn, acquired Omnicare to broaden its reach into nursing homes and bought 1,700 pharmacies from Target. Not to be outdone, earlier this week, Walgreens Boots Alliance, the giant drugstore chain, said it planned to buy Rite Aid, a competitor. The activity has been dizzying among pharmaceutical companies, always in the market for a promising new drug or pipeline. Last November, Actavis bought Allergan, the Botox maker, and took its name. The combined company then decided to sell its generic business to Teva Pharmaceuticals for around $40 billion. Allergan says its talks with Pfizer do not affect that deal. Then there were the mergers that weren’t: AbbVie, a drug maker, dropped its deal with Shire of Ireland, at least temporarily ending the flurry of “tax inversion” mergers that had occurred as a way to cut tax obligations by merging with an overseas company. AbbVie cited new federal rules that made such deals less attractive. But then the company set its sights on an easier target: Pharmacyclics, which offers an attractive cancer drug. Pfizer’s flirtation with Allergan, which may not come to fruition, could represent a return to American drug makers’ strategy of finding a base overseas. Allergan’s headquarters are technically in Dublin, and Pfizer had made an earlier run at AstraZeneca in London. Why the Urge to Merge? Low interest rates and cheap capital are fueling merger activity across many industries, but health care is especially devoted to the mantra that bigger is always better. And there are both the short-term goal of increasing revenue and the longer-term need to restructure in response to changes in the health care landscape under the Affordable Care Act. Unlike other areas, like telecommunications, where a tremendous amount of consolidation has already occurred, health care has been fragmented, with many smaller players. All of the parties are under intense pressure to reduce costs, and consolidation is seen as necessary to do so, especially among smaller entities like hospitals. “There is serious economy of scale to be accomplished,” said Dr. Kaveh Safavi, the managing director for Accenture’s global health practice. Hospitals continue to join forces to create a larger presence in their markets or regional systems. In New Jersey, for example, in July, Barnabas Health and Robert Wood Johnson Health System. announced plans to combine. That will create the state’s largest hospital network, with 11 hospitals. Hospitals have also been buying physician groups. “Scale matters,” said Mark Claster, a partner at Carl Marks Advisors who specializes in hospital mergers and is chairman of the board for North Shore-LIJ Health System, which is renaming itself Northwell Health. Hospitals are looking for the size and clout necessary to negotiate with insurance companies, he said, but they are also preparing for changes in how they are paid in which they assume financial risk for how much it costs to care for patients. Hospitals are also supersizing so they can invest more in technology and computer systems that allow them to better track patients’ care. While many of the recent acquisitions involve hospitals combining with hospitals, Dr. Safavi of Accenture predicted that future activity would focus more on hospitals buying medical specialty groups , adding clinics or even acquiring digital health companies that may specialize in giving people in remote locations access to doctors. Accenture predicts the share of hospital-hospital mergers will fall to about 6 percent of transactions by 2018, from 21 percent in 2014. Politics aside, the Affordable Health Care Act is credited with accelerating the pace of change. Many of the pressures to combine existed before the law was passed, but it has forced health insurers and hospitals to try to reduce costs. What Does This Mean to Patients? Consumer advocates and others worry that some of the big deals, including those being proposed by large for-profit health insurers, will not benefit consumers. They say competition could decline significantly in some businesses, like private Medicare plans, and in some local markets where there may already be one or two powerful players. Consumers may pay more because, without competitors, insurers could raise premiums or hospitals could raise prices. In many cases, however, the acquisitions, are likely to be under regulators’ radar said Leemore S. Dafny, a former regulator who is now a professor at the Kellogg School of Management at Northwestern University. This could especially be the case if they are not two hospital groups joining forces but a health system adding another cardiology group or buying a home health business in its market, she said. Little information may be available about the impact of these deals on a market, she said, and she predicted that antitrust concerns would not stop much of the consolidation. Are Regulators Giving the All-Clear Signal? Any large transaction is going to get a careful regulatory review by federal and state officials. The Justice Department is looking at the insurance mergers, and the Federal Trade Commission has scrutinized some of the hospital mergers, including one in which a hospital system acquired a physician practice. “The big question for regulators is, Where does that leave consumers and purchasers like employers?” said Ceci Connolly, managing director of PwC’s Health Research Institute. “It’s an open question.” But certain types of deals, especially those that create behemoths, could run afoul of government officials, she warned. “There’s the potential for backlash,” she said, not unlike the federal government’s reaction to the spate of tax inversion mergers. If regulators take firm action against these deals, “it would be a splash of cold water,” Ms. Connolly said, and might dissuade other entities from pursuing similar acquisitions. Will This Merger Frenzy Continue? The short answer is yes. Drug makers, hospitals and health insurers, drugstore chains and pharmacy benefit managers are all seeking to bulk up to gain more leverage in negotiating with the other sides. While the overall state of the economy and other factors could curb the enthusiasm for deals, health care are likely to continue because of the Affordable Care Act and the resultant pressure to deliver better care at lower prices. Mergers beget more mergers, as hospitals seek to keep up with their rivals down the street, and everyone looks for more power in negotiations with payers. “Our view from the ground is that the pace will continue,” said Torrey McClary, a lawyer for Hogan Lovells who specializes in mergers. “Nobody is sitting still. Everybody in the industry is thinking hard about their next move.”

Hospital
Mergers and Acquisitions
Allergan
Pfizer
Health Insurance
Pharmaceuticals
Obamacare,Affordable Care Act


Bombings at Mosque in Yemen Kill at Least 25

Abstract: SANA, Yemen — Bombings at a mosque killed at least 25 people here on Thursday during prayers to commemorate Eid al-Adha, a major Muslim holiday, Interior Ministry officials said. Tamim al-Shami, a spokesman for Yemen’s Health Ministry, said that the mosque, in the Al-Bilili neighborhood, was struck by two bombs, one hidden in a shoe and left at the entrance of the mosque, and another consisting of explosives detonated by a suicide bomber who attacked worshipers as they fled the initial blast. A Yemeni-based affiliate of the Islamic State released a statement later on Thursday saying that one of its members had carried out the bombing. The group has claimed responsibility for a string of recent similar attacks on mosques in Sana, including one this month that killed at least 32 people. The bombings by the Islamic State, a Sunni extremist group that is also known as ISIS or ISIL, have often been seen as efforts to incite a broader sectarian conflict with followers of the Houthis, the Shiite-led rebel movement that has controlled Sana for more than a year. Some of the mosques the group has attacked, including the one on Thursday, were frequented by Houthi supporters, though Yemen’s mosques are generally not segregated by sect. The frequency of the attacks has also raised questions about how securely the Houthis control the capital, six months after a Saudi-led military coalition began an offensive to drive them from Sana and other cities. Coalition warplanes have been battering Sana with airstrikes for weeks now, in what is seen as a possible preparation for a ground invasion of the city by allied forces in a province east of the capital. The war started in March after the Houthis drove Yemen’s president, Abdu Rabbo Mansour Hadi, into exile in Saudi Arabia. The Saudis, alongside a coalition of other Sunni Arab states, began the air offensive against the Houthis to restore Mr. Hadi and his government to power.

Mosque
Yemen
Houthis
Sana Yemen
Terrorism
ISIS,ISIL,Islamic State
Fatalities,casualties


Corporate Jet Industry to Fight to Keep Tax Breaks

Abstract: WASHINGTON — President Obama used to like corporate jets. As a senator in 2005, he crisscrossed the country in them nine times to attend fund-raisers and other events, reimbursing the corporate jet owners at first-class rates. But Mr. Obama said he soon grew uncomfortable with the high-flying perk in his Senate days and started flying commercial. Now, as the president squares off with Republicans over the debt ceiling , he and fellow Democrats are looking to turn tax breaks for corporate jet owners — and yacht owners, too — into a potent political symbol of a tax system that Democrats say tilts toward the very rich. Mr. Obama and Democratic leaders have made a rollback of tax breaks for corporate jets a frequent talking point in recent days in their efforts to persuade Republicans to agree to raise taxes as well as make spending cuts as part of the budget talks. But the drumbeat from Democrats has set off a counterattack from a small but powerful group of jet manufacturers and users, who have contributed millions of dollars over the years to lawmakers from both parties. The debate is less about dollars and cents than it is about political imagery and a bit of class warfare. Ending special deductions for the depreciation of corporate jets would raise an estimated $3 billion in tax revenues — or, as the jet manufacturers point out, a fraction of one percent of the deficit the country is facing. “The president is vilifying an entire industry,” said Dan Hubbard, a senior vice president for the National Business Aviation Association , which represents 8,000 companies that use private planes. “This is an attempt to score some cheap political points on the back of an industry that employs 1.2 million people.” Jet industry officials, in buttonholing sympathetic lawmakers and organizing an e-mail campaign in the past week to maintain the tax break, are making the case that raising taxes on jet ownership would inevitably cut jet production, endanger jobs and affect ordinary Americans. Mr. Hubbard said it would be the Montana real estate broker, who relies on a plane to travel the state’s vast expanses, or the employee in Schenectady, N.Y., who makes jet upholstery, who would ultimately be harmed, not the jet-setting corporate executive that Democrats have focused on. He said the industry was surprised by Mr. Obama’s focus on private jets — the president mentioned the issue six times in a news conference last week — because it was Mr. Obama who had helped create an expanded deduction last year for the industry as a way of creating jobs. In fighting to hold on to the tax break, the industry has some major backers, with executives from Wal-Mart, J.P. Morgan and many other Fortune 500 companies all flying private jets. Warren E. Buffett, the Omaha investor who leads Berkshire Hathaway, bought a plane-sharing business, now known as NetJets , after using its planes for a number of years. Asked in a CNBC interview on Thursday about tax breaks for corporate jets, Mr. Buffett declined to take a direct position but said that “I don’t really see where a business aircraft is different” from other types of capital investments in how they should be taxed. Political action committees and employees for jet manufacturers and related aviation sectors accounted for more than $6.6 million in political contributions to federal lawmakers in the last decade, according to an analysis by MapLight, a nonprofit group that analyzes campaign finance data. But while Republicans accuse the White House of distorting the fiscal basis of the tax break for jets, they acknowledge that the issue carries a big political wallop in tough economic times. “President Obama and our colleagues on the other side of the aisle are obviously using poll-tested rhetoric about only raising taxes on millionaires and billionaires and corporate jets,” said Senator Jon Kyl, Republican of Arizona. “That sounds good. They want ordinary Americans to believe they will not be affected by the president’s tax-increase proposals.” Indeed, the embarrassing image of executives from the Big Three automakers flying to Washington in private jets in 2008 to ask for private bailout money looms large in the current debate. Democrats figure that trillion-dollar deficits are a tough concept for Americans to get their arms around. Tax breaks for corporate jet fliers and yacht owners, they say, are much easier. “Yes, believe it or not, Uncle Sam subsidizes the purchase of sprawling, luxurious, 72-foot Viking yachts,” Senator Charles E. Schumer, Democrat of New York, said on the Senate floor in arguing to close what he sees as tax loopholes for jet and yacht owners. “As long as your yacht has a place to sleep and a place to — how shall I put it — relieve yourself, you can classify it as your ‘second home’ and claim the mortgage interest deduction.” The Democrats’ scrutiny of tax breaks for jets, yachts and other luxury items is a calculated strategy meant to force the Republicans to give ground in their demands for big spending cuts in areas like Medicare , said Representative Chris Van Hollen of Maryland, the top Democrat on the House Budget Committee. “This was a very clear symbol of the fact that Republicans are willing to protect big-money interests and loopholes at any cost,” Mr. Van Hollen said. “If Republicans are willing to dig in to protect tax breaks for corporate jets, they’re clearly not serious about deficit reduction.”

Private Aircraft
Tax Credits Deductions and Exemptions
Federal Budget (US)
United States Politics and Government
Obama Barack


Federer-Led Swiss Are Tied

Abstract: Roger Federer eased to victory over Mikhail Kukushkin, 6-4, 6-4, 6-2, on Friday, bringing host Switzerland level at 1-1 with Kazakhstan in the Davis Cup quarterfinals. Federer’s win restored order after the Australian Open champion, Stanislas Wawrinka, surprisingly lost the opening singles match, 7-6 (5), 6-2, 3-6, 7-6 (5), to 64th-ranked Andrey Golubev. In Naples, Fabio Fognini overcame an injury and tough resistance from James Ward to give Italy a 1-0 lead over Britain on a rain-delayed opening day. Britain’s No. 1, Andy Murray, led Andreas Seppi, 6-4, 5-5, in the second singles match, which will resume Saturday. Peter Gojowczyk upset Jo-Wilfried Tsonga in a five-set marathon to give Germany a surprising 2-0 lead over host France. In Tokyo, Radek Stepanek and Lukas Rosol won their matches to give the Czech Republic, the defending champion, a 2-0 lead over Japan.

Roger Federer
Switzerland
Davis Cup
Tennis
Stan Wawrinka


Tampering Claim in Case Against Patrick Kane Is Called a Hoax

Abstract: BUFFALO — The district attorney investigating rape accusations against the Chicago Blackhawks All-Star forward Patrick Kane said Friday that the mother of the accuser lied this week when she charged, through a lawyer, that there had been evidence tampering in the case. At a news conference at his office, the district attorney, Frank A. Sedita III, broke a self-imposed public silence to describe the mother’s claims that she had found an evidence bag on her doorstep as an “elaborate hoax.” The revelation was the second bizarre turn in 48 hours for a high-profile investigation that has been beset by leaked details and lurid news reports. After meeting with investigators from the district attorney’s office Thursday night, Thomas Eoannou, the lawyer for Kane’s accuser, abruptly resigned, citing concerns about whether his client’s mother had misrepresented how she came to possess an evidence bag. In quitting the case, he essentially disavowed claims he had made one day earlier . On Wednesday, Eoannou had called a news conference to say that a brown-paper evidence bag with his client’s identifying information had been anonymously dropped on the mother’s doorstep. Eoannou said the bag was the kind used to contain rape kits with forensic evidence. He said DNA evidence could have been tampered with, and he called for an independent investigation to determine the chain of custody. On Friday, Sedita said his office had conducted its own investigation and had debunked the mother’s claims. “A rape kit is a box,” he said. “It’s not a bag.” Sedita then showed a video with date and time stamps showing the police delivering the box containing the rape kit to an evidence locker at Erie County Central Police Services at 12:06 p.m. on Aug. 2. That is the date the suspected assault was said to have occurred at Kane’s summer home in Hamburg, 20 miles south of Buffalo. Sedita then laid out a timeline that he said explained how the evidence bag had been given to the accuser’s mother by a nurse at Erie County Medical Center, the hospital where the forensic exam occurred. After leaving Kane’s home on Aug. 2, Sedita said, the accuser returned to her mother’s house and changed her top. She and her mother then went together to the hospital, where an examining nurse gave the mother the paper evidence bag with identifying information. The nurse told investigators that she instructed the mother to place the original top in the bag when she returned home, and that Hamburg police would come to her home and collect it. When the Hamburg police went to the mother’s house later to collect the top, it was not yet in the bag from the hospital. The police instead used one of their own evidence bags for the top. Sedita said the mother “was the last person with the bag.” “There was not evidence tampering,” Sedita said. “We believe the complainant’s mother has engaged in an elaborate hoax.” The mother most likely will not face charges, because lying to a lawyer is not a crime in New York, unless it is done under oath. Sedita said his office would try to determine whether the woman who has accused Kane was aware of her mother’s actions with the bag. Investigators have not been able to speak with her since the accusations of tampering were made earlier this week. Sedita said he broke his silence in the case because the integrity of his office’s investigation had been called into question. “The issue here is the integrity of the criminal justice system and the public’s confidence in the criminal justice system,” he said. “I think we have put that to bed.” The investigation into the rape allegations will continue. Kane has not been charged. Once complete, the investigation could result in an administrative closure, or evidence could be brought before a grand jury. Sedita did not put a timetable on the matter, or tip his hand. “The question in my mind is not when this case will go to a grand jury,” Sedita said. “The question is if this case will go to a grand jury.” Eoannou, the accuser’s lawyer, said that his office had met with former prosecutors and former investigators of sex crimes before going public with the mother’s initial claim about the bag, and that the district attorney’s office in Buffalo had not raised questions about its authenticity. The bag, which did not contain the rape kit used on the victim, had other personal information about her, including her name, birth date and the hospital where she was examined, Eoannou said. Eoannou did not go into further detail about what led him to conclude that the bag was not authentic, but he said that the development “does not in any way reflect upon what occurred on the night in question.” Kane, 26, has been under investigation since early August, when the woman says he assaulted her. Known as Kaner to his fans, he has long been known for his unapologetic, hard-partying antics, which have at times crossed the line into violence. In this case, Kane has said that he is confident that he will be cleared of any wrongdoing. “While I have too much respect for the legal process to comment on an ongoing matter, I am confident, once all the facts are brought to light, I will be absolved,” he told reporters on Sept. 17. On Wednesday, The Associated Press reported that Joel Quenneville, who coaches the Blackhawks, said that despite the news media attention surrounding the case, Kane’s status with the team had not been affected. In his own news conference on Thursday, Kane’s lawyer, Paul Cambria, said the case had been “tainted from one end to the other,” and said that whoever was behind false claims of evidence tampering should be charged criminally, The Buffalo News reported . “It’s obvious to me that Eoannou dropped out of the case because someone in this woman’s family lied to him about the evidence,” Cambria said. “I told you yesterday that this was a hoax, and now it’s obvious.” Late Thursday evening, WGRZ in Buffalo reported that the victim’s family had released a statement in response to Eoannou’s departure. “While we are disappointed that Eoannou has withdrawn from his role providing advice and counsel in the criminal investigation of Patrick Kane, we have every intention of pursuing this case to a just conclusion,” the statement read.

Patrick Kane
Rape
Chicago Blackhawks
Thomas Eoannou
Ice hockey


With New Name and Mission, the Infamous Abu Ghraib Prison Is to Reopen

Abstract: BAGHDAD — The Iraqi government has renamed and partly renovated the infamous Abu Ghraib prison on the outskirts of Baghdad, and it plans to transfer about 3,000 convicts there shortly, the first to occupy the facility in any numbers since it was handed over by the Americans in 2006. The government says it sorely needs Abu Ghraib — now Baghdad Central Prison — and other detention centers around the country being refurbished with American money because of overcrowding at prisons and continued threats to security, said Safaa el-Deen al-Safi, who was the acting justice minister for almost two years, until Thursday. A former judge, Dara Noureddin, who was imprisoned in Abu Ghraib in 2002, was named the new justice minister. Mr. Noureddin, a Kurd, was freed in October of that year after Saddam Hussein emptied the prison ahead of the American invasion. Although Abu Ghraib was notorious under Mr. Hussein’s government as a place for torture and executions, it may forever be defined around the world by the images made public in 2004 of Iraqi detainees being abused and sexually humiliated by American soldiers and interrogators. Some of the victims, who are now suing the American contractors that supplied interrogators and translators to Abu Ghraib when it was under American control, are opposed to its reopening as a prison and want instead to turn it into a museum to immortalize Iraqis’ suffering. Others say it should simply be razed. But the Iraqi government is determined to operate it as a prison. “It’s not so easy for us to waste a state resource,” said Mr. Safi, who is also minister of state for parliamentary affairs and a confidant of Prime Minister Nuri Kamal al-Maliki. “Yes, this prison has a bad reputation, but this is not an excuse in itself to demolish this prison, given that we need it.” Mr. Safi said that renaming Abu Ghraib as the Baghdad Central Prison and changing its mission to rehabilitation would help remove some of the stigma. Mr. Safi said that he personally oversaw the renovation of the cellblocks where the worst of the abuses were committed by American soldiers and contractors, and that the prison now had classrooms, a library, plots of land for gardening and hothouse farming, and workshops where inmates would be taught sewing, hairdressing and computer skills. Abu Ghraib, designed by an American architect, Edmund Whiting, and built by British contractors in the late 1960s, occupies a site of nearly 280 acres about 15 miles west of Baghdad. Mr. Safi spoke with pride about the Iraqi government’s ability to complete the limited renovation of Abu Ghraib for about $1 million, as opposed to the millions of dollars being spent by American government agencies on similar projects around the country. Reading from a document on his desk, Mr. Safi listed American-financed prison renovations and projects in Basra, the Kurdistan region, Nasiriya and Ramadi at a total cost of about $100 million. Mr. Safi said there were about 17,000 inmates in prisons under the administration of the Ministry of Justice, adding that this figure did not include those being held by the Ministry of Interior and other security organs of the government. The American military is holding about 14,500 inmates as what it calls “security detainees.” Mr. Safi said their cases were being examined in batches of 1,500 for release or referral to Iraq’s judicial system, as called for in the security agreement signed between Baghdad and Washington in the fall. Mr. Safi estimated that 5,000 of those in American custody would ultimately be convicted in Iraqi courts and sent to prison. That influx, in light of the already overcrowded Iraqi prison system, makes reopening Abu Ghraib all the more pressing, Mr. Safi said. But the reopening is stirring unease among many Iraqis, who associate the prison not only with American abuses but also with a long history of government brutality and repression. In a report issued in December that underscored those concerns, Human Rights Watch warned that long pretrial detentions and the prevalence of abuse in Iraqi prisons — including the coercion of confessions and arrests made based on testimony by secret informants — “show disturbing continuity” with the abuses of Mr. Hussein’s era. Hassan al-Azzawi, who spent seven months in the prison in 2004 when it was under American control, said the reopening showed the government’s lack of commitment to reconciliation, or perhaps betrayed an intention to stuff the prison with its opponents. Mr. Azzawi, 50, is among more than 300 former inmates suing two American contractors, CACI International and the Titan Corporation, for torture and abuse in American courts. The companies supplied the military with interrogators and translators. Another plaintiff, who wished to be identified only by his first name, Asaad, because his case is pending, described in detail the tactics used by the interrogation teams. He said he was made to stand for hours under a freezing cold shower until he collapsed. He was then dragged to the cellblock’s hallway, where he said he had to crawl naked on the hard floor as he was punched by guards and threatened with rape. Asaad, 36, said he was once shackled to his bed for more than a day. “I am an average citizen, I have no say, but it is better to turn it into a museum,” Asaad said. “Horrible things happened in Abu Ghraib.” Balkis Sharara cringes when she recalls how her husband, Rifat Chadirji, one of Iraq’s most prominent architects, was incarcerated there 30 years ago after being sentenced to life in prison for “economic sabotage” and “grand treason” after declining to work on a government-financed project. “These were the darkest days of our lives,” she said by telephone from the couple’s home in Lebanon. Mr. Chadirji, now 83, recalled hearing torture sessions nearly every night, and the execution in one day of 180 fellow inmates in the cellblock for political detainees. He was pardoned in late 1981 by Mr. Hussein, and the couple left Iraq for good the next year.

Torture
Abu Ghraib (Iraq)
Prisons and Prisoners
Iraq War (2003- )
Restoration and Renovation


Bailout of Iceland Held Up by Disputes Over Compensating Foreign Savers

Abstract: PARIS — The $6 billion International Monetary Fund -led bailout of Iceland appeared to be on the back burner Wednesday amid haggling over how the country would compensate overseas customers who lost deposits when Icelandic banks failed. The managing director of the monetary fund, Dominique Strauss-Kahn, announced on Oct. 24 a $2.1 billion loan and an economic stabilization plan for, Iceland, a country of 300,000. The Icelandic government hopes that, with the addition of significant funds from Nordic countries and others, the rescue package will total about $6 billion. The government has approached China, Russia, Japan and the United States for help in bridging the gap, but is about $500 million short. The rescue package and the backing of Nordic countries are contingent upon the approval of the monetary fund’s executive board, which had been expected Nov. 4. The board is not expected to approve the loan, however, until Iceland resolves a conflict with European governments over how foreign savers will be compensated for billions of dollars in losses suffered on their deposits in Icelandic banks, mainly at Landsbanki’s Icesave unit. Iceland’s prime minister, Geir H. Haarde, said in an e-mailed statement that his government was still working on the loan package, and that Poland had offered to participate. He said Iceland was seeking to resolve the compensation issue with Britain and the Netherlands. “I think it is unfortunate if they or anyone else tries to block our case at the I.M.F. board because of that,” he said. “We regard these as two separate matters and that the Icesave issue should be resolved on its own merits. I hope that the executive board of the I.M.F. will put our economic plan on the agenda as soon as possible.” The Icelandic currency and the country’s stock market began collapsing in September, as the global credit crisis made it impossible for banks and businesses to roll over heavy foreign-currency debts. Financial institutions in the country overextended themselves during the era of easy credit. In October, the government stepped in to nationalize the three Icelandic banks — Glitnir, Landsbanki and Kaupthing — which together made up 90 percent of the financial system. Since then, officials have been seeking to arrange international support to stave off an economic collapse. The international repercussions of the bank failures have complicated matters. Savers in much of Northern Europe deposited money with the local units of Icelandic banks, which offered relatively high interest rates. British charities and local government organizations had deposited more than £1 billion, or $1.7 billion, in Icelandic banks. Lenders in Austria, Britain, Germany and the Netherlands have also reported exposure to the banks. Wouter Bos, the Netherlands finance minister, told Dutch television on Tuesday that he opposed any monetary fund bailout unless Iceland compensated Dutch savers. The Dutch lent the Icelandic government 1.3 billion euros, or $1.7 billion, to help it pay back Dutch depositors. Iceland has not said how or whether that would be repaid. Gordon Brown, the British prime minister, has called Iceland’s unwillingness to compensate savers “totally unacceptable and illegal,” and he has even threatened to use antiterrorist legislation to take over assets of Icelandic companies in Britain. “We think it’s important that Iceland resolves its issues with other countries before the I.M.F. grants the loan,” Hendrienke Bolhaar, a spokeswoman for Mr. Bos, said Wednesday.

Iceland
International Monetary Fund
Credit
Subprime Mortgage Crisis


Kaepernick to Start Again for 49ers

Abstract: Colin Kaepernick will start at quarterback over Alex Smith for the San Francisco 49ers on Sunday at St. Louis. Kaepernick led the N.F.C. West-leading Niners (8-2-1) to victories in the past two games, his first two N.F.L. starts. Coach Jim Harbaugh said that the decision was just for this Sunday and that he might return to Smith later in the season. ¶ The N.F.L. fined Ndamukong Suh of the Detroit Lions $30,000 for unnecessary roughness because of a kick to Texans quarterback Matt Schaub’s groin that Suh said was unintentional.

San Francisco 49ers
Kaepernick Colin
Smith Alex
Harbaugh Jim
Football
St Louis Rams


Russia Quietly Starts to Shift Its Oil Trade Into Rubles

Abstract: MOSCOW — Americans surely found little to celebrate when the price of oil settled above $100 a barrel last week. They could, though, be thankful that oil is still priced in dollars, making the milestone of triple-digit oil prices noteworthy at all. Russia, the world’s second-largest oil-exporting nation after Saudi Arabia, has been quietly preparing to switch trading in Russian Ural Blend oil, the country’s primary export, to the ruble from the dollar. Industry analysts and officials, however, say that this change, if it comes, is still some time off. The Russian effort began modestly this month, with trading in refined products for the domestic market. Still, the effort to squeeze the dollar out of Russian oil sales is yet another project notable for swagger and ambition by the Kremlin, which has already wielded its energy wealth to assert influence in Eastern Europe and former Soviet states. “They are serious,” said Yaroslav Lissovolik, the chief economist at Deutsche Bank in Moscow. “This is something they are giving priority to.” Oil trading is nearly always denominated in dollars. When Middle Eastern oil is sold to Asia, for example, the price is set in dollars. Similarly, Russia’s large trade with Western Europe and the former Soviet states in crude oil and natural gas is conducted in dollar-denominated contracts. Gazprom, the natural gas monopoly, set the price of gas in Ukraine at $179 per 1,000 cubic meters in 2008, for example. There are no proposals yet to switch gas pricing away from dollars. As a result, companies and countries that buy petroleum products are encouraged to hold dollar reserves to pay for their supplies, coincidentally helping the American economy support its trade deficit. Russia would like to change this practice, at least among its customers, as a means of elevating the importance of the ruble, a new source of national pride after gaining 30 percent against the dollar during the current oil boom. In a speech on economic policy this month, Dmitri A. Medvedev, a deputy prime minister and the likely successor to President Vladimir V. Putin in elections on March 2, said Russia should seize opportunities created by the weak dollar. “Today, the global economy is going through uneasy times,” Mr. Medvedev said. “The role of the key reserve currencies is under review. And we must take advantage of it.” He asserted that “the ruble will de facto become one of the regional reserve currencies.” Other oil-exporting countries are also chafing at dealing in the weakening dollar. Since 2005, Iran, the world’s fourth-largest oil exporter, has tried to open a commodity exchange to trade oil in currencies other than the dollar. The Iranian ambassador to Russia said Iran might choose rubles to free his country from “dollar slavery.” To be sure, some economists have dismissed the project as improbable, given the exotic nature of a security — oil futures contracts denominated in rubles — that would blend currency risk with the dollar-based global oil market. Ruble-denominated futures contracts for Ural Blend, the main Russian grade, would be attractive only if the dollar continues to depreciate, said Vitaly Y. Yermakov, research director for Russian and Caspian energy at Cambridge Energy Research Associates. “There is a big distance between the desire to trade commodities for rubles and the ability to do so,” he said. All this has not stopped the Kremlin from trying. In a sign of the government’s seriousness, a new glass-and-marble high-rise home for a ruble-denominated commodity exchange is rising this spring in a prestigious district in St. Petersburg, Russia’s second-largest city after Moscow. The exchange will occupy three floors of the 16-story tower on Vasilievsky Island, one of the islands that make up the historic city center. The director of the St. Petersburg exchange, Viktor V. Nikolayev, said that the intention was to move slowly and gain market acceptance; the government will not strong-arm sellers or buyers onto the exchange, even in an industry dominated by the state. Web-based trading for refined products like gasoline or diesel is being introduced in three phases for domestic customers, beginning with government buyers like the Russian navy or municipal bus companies. Private brokers will be allowed to trade in March; futures contracts will be introduced in April. Mr. Nikolayev said no timeline had been established for trading for export on the exchange, which also handles grain, sugar, mineral fertilizer, cement and esoteric financial products like Russian government beef and pork import quotas — all in rubles. “We are in Russia, and the currency is rubles, not euros, not dollars,” he said. “We don’t want to depend on the rise or fall of the dollar.” “We will trade in rubles, to strengthen the ruble,” he said.

Russia
Oil (Petroleum) and Gasoline
International Trade and World Market
Prices (Fares Fees and Rates)


Upon Return to Uruguay, Luis Suárez Is Met With Support

Abstract: PORTO ALEGRE, Brazil — Barred from soccer for the next four months for biting an opponent and obliged to leave his team in the midst of the World Cup, Luis Suárez arrived home in Uruguay before sunrise Friday and was met with cheers and a presidential hug on the tarmac. José Mujica, Uruguay’s president, had already made one trip to Montevideo’s Carrasco International Airport earlier in the evening, along with hundreds of other Uruguayans, with the intent of greeting Suárez and his family. But as the hours passed with no sign of Suárez’s charter flight, the 79-year-old Mujica left the premises, only to return when the plane finally did land in the capital about 5:30 a.m. “We gave him a humble hug on behalf of the Uruguayan people and invited him to continue living, learning and fighting,” Mujica said on Uruguayan radio later in the day, speaking of himself in the first person plural. “At 5:30, we were there with his family, greeting him on a cold morning, but all of us with warm hearts, united as a society. “Actually, more than going for ourselves, it was an attempt to symbolize the affection of the Uruguayan people, who, in these circumstances, do not judge, rather demonstrate affection, because everything else is the equivalent of hitting him while he’s down. The Suárez case is perceived differently in his home country than in much of the wider world. That alternative view is a reflection of the people’s elemental connection with soccer, which has brought the nation two World Cup titles and raised its international profile, as well as their deeper understanding and connection with Suárez’s life story and rise from modest beginnings. The domestic circling of wagons also reflects the mentality that comes with being a nation of 3.4 million people bordered by larger and more powerful neighbors. The prevailing sentiment of Uruguayans as they bonded at perceived injustice on Friday was not that Suárez was innocent, but that FIFA, soccer’s world governing body, had overreached drastically in punishing him with a nine-game suspension and a four-month ban from all soccer-related activities. Suárez, a star striker who had already been suspended twice earlier in his career for biting opponents, bit the Italian defender Giorgio Chiellini in the shoulder in the second half of Uruguay’s 1-0 victory on Tuesday, an act missed by the on-field officials but not by cameras. The victory secured the team’s passage to the knockout rounds. FIFA’s ruling, announced by its disciplinary committee on Thursday in Brazil, can be appealed, an option Suárez is reportedly considering. But even if there is an appeal, Suárez will not be reinstated for the World Cup, in which Uruguay will face Colombia in the Round of 16 on Saturday. “I’m not saying that Suárez wasn’t at fault, surely he was, but I just think this punishment does not fit the crime,” said Jose Luis Estevez Sainz, a 43-year-old from Montevideo who attended the Italy game and was returning home through Porto Alegre on Friday. Estevez continued: “From my point of view, there clearly have been worse things done on the field that haven’t been punished to this degree. But no matter what happened, it takes nothing away for me from what he’s done as a soccer player. He’s still a phenomenon, one of the best in the world.” In his radio address, Mujica said Suárez had been provoked during the game by the Italian team. Mujica was deeply critical of FIFA’s disciplinary approach, calling it “a monstrous aggression not only against a man,” but a country. He said Suárez’s case will be “an eternal shame on the memory of World Cups.” Óscar Tabárez, Uruguay’s coach, was less bombastic but repeatedly called the ban excessive during the team’s mandatory pregame news conference on Friday in Rio de Janeiro. Not only Uruguayans used that language. Chiellini, the defender, who pulled down his shirt during the game to show the bite marks, also called Suárez’s punishment “excessive” in a post on his website Friday. “At the moment my only thought is for Luis and his family because they will face a very difficult time,” Chiellini wrote. Tabárez took no questions on Friday, departing after delivering a 15-minute soliloquy that touched on the fairness of the process and the motivations behind the ban, including the psychology of creating a scapegoat to send a message. Tabárez announced that he would be resigning his largely ceremonial post on a FIFA committee because he felt he could not work with those who have “values very different from those I believe I have.” But Jerome Valcke, FIFA’s secretary general, made it clear in a news conference on Friday that he fully supported the ruling and also suggested, when asked if he had advice for Suárez, that the striker seek treatment. “I don’t know if it exists, but he should do something for himself because it’s definitely wrong,” Valcke said of Suárez’s repeated biting during play. “If it’s the first time, it’s an incident. If it starts to be more than once, it’s not an incident anymore.” After Suárez and his family had returned home, a crowd gathered in front of his residence in Lagomar, near Montevideo, and he eventually responded to their cheers by appearing on a balcony with his two young children and waving to the crowd. “I’m upset with Suárez,” said Victoria Vergara, a 30-year-old lawyer. “I can’t believe what he did, but I came out to welcome him to show my solidarity. The FIFA sanction has succeeded in converting someone who was a victimizer into a victim and in getting people who aren’t even interested in football behind Suárez.”

Uruguay
Soccer
2014 World Cup
Luis Suarez
Jose Mujica


Anti-Semitic Attack Reported Near Paris

Abstract: PARIS — Three men wearing masks forced their way into a home in a southeastern suburb of Paris this week, robbed a young couple they believed was Jewish and raped the woman, the French authorities said Wednesday. The French interior minister, Bernard Cazeneuve, deplored the attack in the suburb of Créteil, saying the young couple assaulted in the middle of the day on Monday had clearly been victims of anti-Semitism. Mr. Cazeneuve said that arrests had been quickly made in the case and that neither he nor the government would ease up on the fight “against all forms of racism and anti-Semitism.” The local prosecutor later issued a statement saying that three young men had been arrested in connection with the rape and robbery as well as a break-in on Nov. 10 in which a 70-year-old man was beaten. The statement said that three robbers, armed and wearing masks and gloves, pushed into the home of the young couple when they answered the doorbell. They robbed the couple of money and jewelry and then forced them to give up a bank card, all the while making explicit references to the “religion, real or imagined, of the family living in the house.” The 21-year-old man and the 19-year-old woman were tied up before she was raped, the statement said. A lawyer for the victims, Séverine Benayoun, said the assailants had seemed to believe that a family member brought cash home from the clothing store he worked in. A stranger had come to the door three weeks before, pretending to be a neighbor in need of sugar, possibly to look the place over, she said. She added that the three men kept saying things like “Tell us were you hide the money, you Jews always have money.” The country’s most prominent Jewish organization, the Representative Council of Jewish Institutions of France, condemned the break-in and the assault on the young woman as “savage.” “Anti-Semitism continues to ravage our country,” the council said in a statement.


Before Summer Music Tours, a Burst of New CDs From Texans

Abstract: As the midpoint of 2013 approaches, an impressive array of high-profile releases from Texas artists has already emerged, highlighted by an octogenarian legend (Willie Nelson), a cult favorite (Iron and Wine), an embattled Dixie Chick (Natalie Maines) and a promising country starlet (Kacey Musgraves). Who’s next? A Beyoncé album, still unscheduled, is somewhere on the horizon. But more immediately there is a robust selection of Texans releasing new music — from hip-hop to country and indie rock to Top 40 — in advance of the summer touring season. Pure X Crawling Up the Stairs (out May 14) THE STORY The genesis of this trippy Austin trio’s sophomore album was rooted in real-life drama: Nate Grace, its guitarist and singer-songwriter, spent much of last year recuperating from a serious leg injury without insurance or a guarantee he would walk again. The result is a bleak and unsettling song cycle about pain and the healing process, both physical and emotional. START HERE The atmospheric heartbreaker “Thousand-Year-Old Child” finds its way from delicate acoustic guitars to loud blasts of electric feedback and back again. At its core — and arguably the core of the album itself — is the line “What am I doing with my life?” Jason Boland and the Stragglers Dark & Dirty Mile (May 14) THE STORY Armed with a distinctive baritone and a catalog of songs you can two-step to, the Oklahoma-bred and Austin-based Mr. Boland has been a consistent favorite on the Red Dirt touring circuit. On album No. 7, he confirms that he is one of the country scene’s most multidimensional songwriters, unfurling honky-tonk rave-ups, slices of slow-burn swing and tear-in-your-beer ballads. START HERE On “Electric Bill,” traditional fiddle and pedal-steel belie a very modern love song about the economy and advanced government surveillance: “When they need to take a closer look at what it means to love, they can watch with a drone from miles above.” Demi Lovato Demi (May 14) THE STORY At 20, this Dallas-raised singer and “X Factor” judge’s roller-coaster career arc — from Disney Channel sensation to 2010 rehab graduate — has routinely threatened to overshadow her music. Coming off the 2012 chart-topping single “Give Your Heart A Break,” she returns with a fourth album that somehow feels like a comeback effort, even though she never really fell off the pop-star radar. START HERE The first single, “Heart Attack,” is an anthem about resisting love that alternates between bravado and vulnerability but is resolute in its message: she is happy to be a single lady without the ring. George Strait Love Is Everything (May 14) THE STORY Now on Year 2 of the Cowboy Rides Away tour, his long goodbye from the road, Mr. Strait, the self-proclaimed “king of country,” returns with album No. 40 and three songs written with his son, Bubba Strait. START HERE Although “Give It All We Got Tonight” has yet to crack the Top 10, Mr. Strait’s label and fans have teamed up for the “60 for 60” campaign to make this lush, summery love song his 60th chart topper before his 61st birthday (May 18). Fat Tony New album (June 11) THE STORY A three-time winner of the Houston Press Music Awards’ best underground hip-hop artist title, this Nigerian-American’s third full-length album brims with equal parts smarts and swagger. Like “Rabdargab” (2010) and the “Double Dragon” mixtape (2012), this is a collaboration with his go-to producer, Tom Cruz. START HERE The frenetic “Hood Party” is a convincing bid for dance-floor play, but it is also an evenhanded meditation on gentrification that refers to the Houston Housing Authority’s Cuney Homes and the upscale River Oaks neighborhood. The former Das Racist rapper Kool A. D. scores bonus points for a guest verse that name-drops Sufjan Stevens and the CNBC “Mad Money” host, Jim Cramer. Bob Schneider Burden of Proof ( June 11) THE STORY On his 12th solo release since 1998, this prolific Austinite — who has freely bounced among rock, Americana and X-rated funk — tones it down a notch or three for a largely mellow collaboration with the Tosca String Quartet, the Austin classical ensemble. There are surprising stylistic nods to Leonard Cohen and Paul Simon, but Mr. Schneider is also still balancing the odd and perverse: the record features both a gorgeously straightforward reading of “Tomorrow,” from the musical “Annie,” and a double-entendre-laden love song with a title unfit to print. START HERE There is nothing subtle about “Unpromised Land,” which finds Mr. Schneider shouting come-ons over crashing drums and loud guitars. It’s a jarring outlier when considered in the context of the rest of the album, but it works well as a stand-alone: Mr. Schneider sounds confident navigating the tightrope between brash and melodic.

Music
Texas
Pure X
Demi Lovato
George Strait
Fat Tony
Bob Schneider


Plane Debris Would Be Modest Clue Two Weeks After a Crash, Experts Say

Abstract: WASHINGTON — Even if searchers are fortunate enough to spot floating debris in the ocean west of Australia from the missing Malaysia Airlines jet, it would be only a modest step in locating the rest of the Boeing 777, according to oceanographers and recovery experts. And only then could they dig into the question of why it crashed. Almost two weeks after a crash, there is certain to be less of the debris on the surface, and what remains is more dispersed and farther from the clues that investigators really want, in the wreckage that has sunk beneath the waves, experts say. The delay in finding any wreckage on the surface will “create a cone of uncertainty, which is going to be bigger with time,” said Luca Centurioni, a researcher at the Scripps Institution of Oceanography in San Diego and the director of the Global Drifter Program there. “The more time goes by, the more difficult it will be to try to go back to the point of impact with the ocean.” The amount of debris and degree of dispersion would depend in part on the circumstances of a crash. “A gentle landing on a smooth sea with mild currents keeps the debris field more intact,” David G. Gallo, director of special projects at the Woods Hole Oceanographic Institution, said in an email. “A high-velocity impact or midair breakup on a stormy sea will scatter objects much more.” In the case of Air France Flight 447 — which came down in the equatorial Atlantic in June 2009 while traveling from Rio de Janeiro to Paris — searchers found debris after five days, and experts estimated that the impact site was 15 miles away. It turned out to be 30 miles away, and in a different direction, said Michael J. Purcell, the principal engineer at Woods Hole, who spent months on that search. If the Air France case is any guide, Malaysia Airlines debris could have drifted hundreds of miles. The Search Area West of Australia New computer models of possible flight paths suggested that the plane may have gone down in the southern Indian Ocean when it ran out of fuel. Median ocean current speed is about a foot per second, said Mr. Centurioni, which comes to about 16 miles a day. The tropics are a bit slower; the Air France wreckage was moving at about 10 miles per day, Mr. Purcell said. Average speed at the site of any Malaysia Airlines crash would depend on where that airliner went down. Some debris would be pushed more by wind than current, and the wind could be moving in the same direction as the current, or against it. Some parts of airplanes, like seat back cushions, are designed to float. Aluminum parts with air trapped inside will tend to sink in rough seas. Planes like the Boeing 777, the type in the Malaysia flight, or the Airbus A330, in the case of the Air France crash, make major use of composite materials, and some of those are in the form of a honeycomb using light materials with air trapped inside. Those parts will float for some time, as the tail of Air France Flight 447 did, and the tail of the American Airlines A300 jet that crashed shortly after takeoff from Kennedy International Airport in November 2001. The searchers, flying in various aircraft but notably in airplanes designed to hunt enemy submarines, are using infrared scanners, which detect minute temperature differences between the water and debris, as well as radar. They make low passes at hundreds of miles per hour. Video Relatives of Chinese passengers onboard Malaysia Airlines Flight 370 demanded answers about the missing plane. Credit Credit Vincent Thian/Associated Press If the airplane searches locate floating debris, and oceanographers calculate where it originated, the next step would be to use robot submarines to scrutinize the ocean floor. Mr. Purcell said the Woods Hole drone submarines, like the Remus 6000 , travel about four miles per hour, covering a little less than a mile in width if the sea floor is smooth. They were not built with this purpose in mind. (In fact, this week the Remus 6000 was gathering clam larvae, Mr. Purcell said.) In search work, the submarines follow a pattern like a lawn mower, laboriously tracing back and forth. The search area is now over two million square nautical miles, but would have to be narrowed to about 5,000 square miles before it would be sensible to use the submarines, he said. The cockpit voice recorder, important in any investigation and crucial when a hijacking or other crime is suspected, would probably not be useful, one investigator said, because it is a two-hour loop, and the plane flew for hours after leaving its planned route. The boxes originally captured 30 minutes, on a loop of audiotape, but in 1999 the Federal Aviation Administration endorsed the idea of going to two hours. The recording is now on microchips.

Australia
Malaysia
Malaysia Airlines
Malaysia Airlines Flight 370
Plane Crashes and Missing Planes
Oceans and Seas


Rikers Island Struggles With a Surge in Violence and Mental Illness

Abstract: With dry bureaucratic precision, the daily incident reports from Rikers Island chronicle a surge of violence and disorder churning within the vast New York City jail complex. Since New Year’s Eve, according to the internal reports, at least 12 inmates have been slashed or stabbed, eight of them in the face or neck. Inmates and correction officers suffered lacerations, concussions, punctured eardrums, and fractures to noses, eye sockets, jaws and hips. In one recent brawl, a chunk of an inmate’s ear was bitten off, according to the confidential reports, which were obtained by The New York Times. Not since the gang riots of the 1980s and early 1990s has violence at Rikers Island so alarmed oversight officials, union leaders and inmate advocates. Over the past decade, the use of force by correction officers has jumped nearly 240 percent, even as the daily population has declined by almost 15 percent over the same period, according to data from the city’s Correction Department obtained under the Freedom of Information Law. The mayhem inside city jails is especially striking given the historic declines in rates of homicide and other violent crimes outside of them. At the heart of the rising violence is an inmate population that has changed significantly in recent years and has in many ways grown more volatile. In particular, correction officers have struggled with an increasing concentration of mentally ill inmates who experts say often respond defiantly or erratically to the harsh, zero-tolerance disciplinary measures successfully employed in the past. While conditions today are far from the near-anarchy of 20 years ago, the tools used to bring that era of violence under control may now be partly responsible for creating further disorder. Reports of Abuse In interviews, current and former inmates described arbitrary and wanton abuse by other inmates and correction officers. Robert Hinton, who takes medication for aggression and paranoia, said he and another Rikers prisoner were set upon by correction officers. “I was cuffed, they kicked us, punched us, threw garbage on us, and Maced me all at the same time,” Mr. Hinton said in an interview. In another confrontation, Mr. Hinton said, he was beaten by at least 10 correction officers in April 2012 after he refused to leave his cell. He had a fractured nose and vertebra and said he was choked until he passed out. He said one officer told him: “You’re going to die today.” Mr. Hinton, 26, who is suing the city over the altercation, was brought back to Rikers last week on a parole violation. A spokesman for the Correction Department said the agency would not comment on Mr. Hinton’s lawsuit because it was active litigation. Another inmate, Rodney Brye, 40, was acquitted after spending nearly four years at Rikers Island for a weapons charge. He left in 2012 with two fused vertebrae and a plate in his neck and now walks with a cane as a result of a what he says was a beating by correction officers. He is also suing the city. “They will hit you with anything; they’ll hit you with a radio,” he said. “You can actually take somebody’s life like that, and they do it on a regular basis.” Norman Seabrook, president of the Correction Officers’ Benevolent Association, said officers were overwhelmed by a difficult and often violent inmate population. Officers are routinely punched and kicked, and sometimes doused with urine and feces, Mr. Seabrook said. This month, an officer was stabbed in the face with a pen. The violence has simmered behind the walls and barbed wire of Rikers Island, overshadowed by other priorities at City Hall. Mayor Bill de Blasio, who entered office in January vowing to curtail abuses in the Police Department and to enact education reform, has spoken little of the jails, though he has acknowledged the need for changes. Last week, he appointed Joseph Ponte , a longtime corrections official known for reforming violence-plagued prisons and jails around the country, to lead the Correction Department. In introducing Mr. Ponte, the mayor said the department had “sadly lagged behind other corrections systems in terms of updating its practices and procedures.” The situation at Rikers Island mirrors an “epidemic of violence” in big-city jails across the country, said Dr. James Gilligan, a clinical professor of psychiatry and co-author of a 2013 report that found the treatment of mentally ill inmates at Rikers Island violated the city’s mental health standards. He said an overreliance on solitary confinement and force at Rikers Island and elsewhere perpetuated violence among inmates, particularly the mentally ill, who have crowded the nation’s correctional facilities as mental hospitals and other institutions have closed. “A jail like Rikers Island has a subculture of violence,” Dr. Gilligan said. On a recent tour of a juvenile solitary confinement unit at Rikers, he said, “We saw young kids who had been really beaten to a pulp.” One young inmate, Dr. Gilligan said, had been handcuffed by correction officers, who then banged his head against the floor. The inmate, he said, had a concussion and had lost a tooth, and he was vomiting and urinating blood. The inmate was taken to a medical unit for treatment, he said. A Vulnerable Group With 10 jails housing an average daily population of nearly 12,000 inmates, Rikers Island — on an East River island of the same name, near La Guardia Airport — is one of the largest jail complexes in the country. Though primarily a pretrial center, it houses some sentenced inmates. Image Rodney Brye says a beating from correction officers at Rikers Island caused him to require a cane. He is suing New York City. Credit Fred R. Conrad/The New York Times Inside, the tension is acute. Rival gangs — the Crips, the Bloods, the Latin Kings and Trinitarios — wage bloody power struggles like a cellblock game of thrones. Vicious fights erupt over the telephone or the television channel, inmates and correction officers said. The officers, wearing body armor and armed with pepper spray and clubs, resort to force frequently and, critics say, overzealously. In this environment, mentally ill inmates are particularly vulnerable, experts say. The proportion of inmates with a diagnosed mental illness has grown to 40 percent, from 20 percent, over the last eight years, according to the Correction Department. These inmates are responsible for about two-thirds of infractions at city jails, the department said. The monotony, the isolation and the aggression of officers and inmates can worsen mental illness, causing inmates to lash out, said Dr. Bandy X. Lee, a professor of psychiatry at Yale University who specializes in violence at prisons and jails. “Right now, jails and prisons are grappling with a population they are not prepared to deal with,” Dr. Lee said. “It is not so much a fault on the part of the correction system. They are simply not equipped and have not been able to adjust quickly enough.” Inmates who receive mental health treatment were five times as likely to require an “injury visit” to a jail clinic after a violent altercation with officers or inmates, according to a 2012 study by the city’s health department. They also stay in jail much longer than those not treated for a mental illness and have higher rates of recidivism. Shateek Bilal, 40, who has paranoid schizophrenia, has been in and out of Rikers Island since 1991, mostly for drug crimes and parole violations. Last year, he served three stints in custody, two at Rikers and one in the Manhattan Detention Complex, another city-run jail, for a total of seven months. He was released on Dec. 12 and now lives with his sister. The jail time, he said, “exacerbated my mental illness, made me paranoid, made me more apt not to take the medication.” Changes to Punishment The Correction Department has enacted reforms to cope with the changing population. Since the 1990s, new correction officers have received a 35-hour course on mental health and suicide prevention, the department said. In recent years, officers assigned to mental health units at city jails have received additional training from the health department. The addition of video surveillance in many sections of the jail has made officers and inmates think twice about resorting to force, officials said. In January, the Correction Department announced that it would no longer punish mentally ill inmates with solitary confinement, which had expanded under the administration of Mayor Michael R. Bloomberg. Instead, the department plans to send such inmates to therapeutic units that have been set up over the last few years and are staffed by mental health professionals. Image Robert Hinton said he and another inmate were beaten by correction officers. "I was cuffed, they kicked us, punched us, threw garbage on us, and Maced me all at the same time," Mr. Hinton said. Credit Chang W. Lee/The New York Times But while the most seriously mentally ill inmates now receive some therapy, isolation remains a widespread punitive tool, oversight officials said. Solitary confinement and some therapeutic units are rife with abuse and neglect, city officials and inmate advocates said. They described walls that are covered with feces and body fluids, and inmates who scream incessantly and throw themselves into walls and doors. Inmates are housed in the units 22 to 24 hours a day, while inmates in the jails can watch television, work out and interact with others. At a January meeting of the Board of Correction, which oversees city jails, Bryanne Hamill, one of its members, said that on a recent visit to a specialized housing unit, she and other board members knocked on the door to a cell after noticing the window had been covered in feces. After failing to get a response, they asked correction officers to open the door. Ms. Hamill said it took over an hour before a medical team arrived, opened the door and found the female inmate, naked, wrapped in a blanket with some kind of ligature around her neck. “The medical, one in particular screamed, ‘She’s trying to kill herself; we need help,’ ” Ms. Hamill said. Mr. Seabrook, the president of the correction officers’ union, faulted the department’s leaders for not adequately training officers to handle mentally ill inmates and then punishing his members when they use force to protect themselves. “The inmate can use and abuse and do whatever it is he wants, and when a correction officer attempts to restrain the inmate and use whatever force is necessary to defuse the incident, the officer goes to be charged with a crime,” he said. Speaking of mentally ill inmates, he said: “They need medication, treatment, psychological help. They don’t need a corrections officer.” Some of the most severe abuse of inmates appears to stem not from a lack of training, but from what critics have described as a culture of indifference. On Aug. 18, 2012, a 25-year-old inmate named Jason Echevarria, who had bipolar disorder, swallowed toxic soap that had been given to inmates in a mental health unit. The inmates were expected to use the soap balls — which, according to court papers, contained bleach, sodium carbonate and ammonium chloride — to clean their cells after the toilets overflowed with raw sewage. Over the next several hours, correction officers ignored Mr. Echevarria’s cries for help, even as he began vomiting blood, according to court documents. At one point, according to the documents, Capt. Terrence Pendergrass, who was in charge of the unit, told an officer who had come to seek help: “Don’t call me if you have live, breathing bodies. Only call me if you need an extraction, or if you have a dead body.” Mr. Pendergrass has told city investigators that he did not know that Mr. Echevarria was sick, according to the union that represents Rikers captains. Mr. Echevarria was found dead in his cell the next day. The medical examiner ruled his death a homicide, citing “neglect and denial of medical care.”

Rikers
Prison
Mental Health
Solitary Confinement
Correction Department NYC
NYC
Security guard


Medivation Rejects Takeover Bid From Sanofi

Abstract: Medivation, which makes drugs for prostate cancer, has a message for the French drug company Sanofi: The $9.3 billion cash takeover offer was not good enough. On Friday, David Hung, the founder, president and chief executive of Medivation, called Sanofi’s proposal “opportunistically timed.” The board of Medivation, a biotechnology company based in San Francisco, determined that the offer “substantially undervalues Medivation” and was “not in the best interests of the company and its stockholders.” The board unanimously rejected it. On Thursday, Sanofi went public with the offer it had made several weeks ago to Medivation, apparently wanting to apply pressure to the company to accept it. Medivation had not responded to the letter other than to acknowledge its receipt, so Sanofi hoped to appeal to Medivation’s shareholders. Under the terms, Sanofi would pay $52.50 a share in cash, which was a 50 percent premium over Medivation’s two-month volume-weighted average, Sanofi said. Medivation’s shares were falling earlier this year, reaching about $27 in February, almost half of where they traded a year earlier. The lower value presented an opportunity for Sanofi, which sought to acquire biotechnology companies that could strengthen its portfolio. Sanofi first discussed a possible takeover in a call with Mr. Hung on March 25 and again on April 3. Although Medivation was not interested in discussing a transaction, Sanofi sent its offer letter on April 15, and it received no definitive answer until Friday. Recently, Medivation has been trading around $56. Despite the rejection, Sanofi is not walking away. “While to date Medivation has chosen not to enter into discussions regarding this value-creating transaction, Sanofi remains committed to the combination and looks forward to engaging directly with Medivation shareholders with regard to our proposal,” Sanofi said in a statement. Medivation produces Xtandi, a prostate cancer drug that has generated billions of dollars in sales since it was approved four years ago. The treatment is protected by a patent that extends for another decade, and the company is expecting even greater adoption by urologists this year. The company has an additional treatment in the pipeline that could treat breast cancer, ovarian cancer, prostate cancer and small-cell lung cancer. This set of facts led the board to determine that Sanofi’s offer undervalued Medivation. Investors did not appear surprised by Medivation’s decision, and shares were trading flat on Friday.

Medivation
Sanofi
Mergers and Acquisitions


Varied State Responses to Issue of Gun Violence

Abstract: Although the debate over curbing gun violence after the massacre in Newtown, Conn., is breaking down mostly along partisan lines in the nation’s statehouses — with several Democratic governors calling for stricter gun laws and most Republicans urging tighter security or revamped mental health policies — the handful of exceptions show the political and geographical complexities of the issue. More than a dozen governors invoked the Newtown school shooting in their State of the State addresses in recent weeks, and most have weighed in on the shooting in other forums. Several Democratic governors, mainly along the East Coast, are calling for banning some semiautomatic weapons or large-capacity magazines, while several Republican governors have pressed for other measures, noting their opposition to more restrictive gun laws. But the state-level debate has not always followed party lines. Gov. Chris Christie of New Jersey, a Republican who is mentioned as a possible presidential candidate, recently noted that he had long supported his state’s laws, which he described as “some of the toughest gun-control measures in place in the country.” Gov. Mark Dayton of Minnesota, a Democrat, was quoted after the shooting as saying that his “reading of the Constitution is that it provides a complete permission for any law-abiding citizen to possess firearms, whichever ones he or she chooses, and the ammunition to go with that.” Image Gov. Jan Brewer of Arizona rejects calls for stricter laws. Credit Matt York/Associated Press Another Democrat, Gov. Mike Beebe of Arkansas, is likely to sign a bill working its way through the Republican-controlled legislature that would allow people to take concealed handguns into churches that choose to allow them. But a more traditional party-line approach is being taken elsewhere. Democratic governors in Colorado, Connecticut, Delaware, Maryland and Massachusetts are among those calling for stricter gun laws, and Gov. Andrew M. Cuomo of New York has already won the passage of sweeping gun measures since the Newtown shooting. “Who can watch the sad images of the last several weeks, who can see the pictures of those young faces, and honestly say that we are doing enough?” Gov. Martin O’Malley of Maryland, a Democrat, asked in his State of the State address last week. Mr. O’Malley urged state lawmakers to ban the sale of “military-style assault weapons,” require licenses for buying handguns, bolster mental health treatment and information sharing, and spend more on school security. Gov. Mike Pence of Indiana, a Republican who took office this year, said in his speech that he would seek additional money in the state budget for “a comprehensive school safety review,” but he made it clear that he would oppose limiting access to guns. “All of us were heartbroken after every parent’s worst nightmare unfolded in Newtown, Conn.,” said Mr. Pence, a former congressman. “While others have rushed to the well-worn arguments over gun control, Hoosiers know this is not about access to firearms. It is about access to schools. Hoosiers have responsibilities to protect our kids, and Hoosiers have rights. We will protect our kids, and we will protect our rights.” On the federal level, the Obama administration’s push for stronger gun laws faces tough opposition in the Republican-controlled House and garnered a muted reaction even from the Senate’s top Democrat. Image Gov. Peter Shumlin of Vermont wants action on a federal level. Credit Mary F. Calvert for The New York Times Senator Harry Reid of Nevada, in an appearance Sunday on ABC’s “This Week,” said, “I want to get something done on guns.” But on specific measures, his language was guarded. He noted that he had opposed the 1994 ban on assault weapons but would consider one now. On restricting high-capacity magazines, he said, “I think that’s something we definitely have to take a look at.” Regarding universal background checks, he said, “Yeah, we need to increase that.” But as a gun owner himself, Mr. Reid said he would not allow the influence of the National Rifle Association to prevent the Senate from acting. As a polarized Washington debates President Obama’s proposals, the state-level debate is also unfolding at an unusually partisan moment, with more states controlled by just one party than at any time in the past six decades. Republicans have the upper hand, holding the governor’s office and legislative majorities in 24 states, while the Democrats control both the executive and legislative branches in just 13 states. The stark divide can be seen in many of the bills being weighed in states this year. In Tennessee, which is controlled by Republicans, lawmakers have introduced bills that would allow school employees to carry guns, let people keep guns and ammunition locked in their cars in public and private parking lots, and bar state money from being used to enforce any new federal law or executive order that “imposes restrictions on citizens who lawfully possess or carry firearms in this state.” In heavily Democratic Massachusetts, Gov. Deval Patrick is calling for legislation to ban magazines containing more than seven rounds, require background checks for private gun sales and limit people to buying one gun a month. In his address to lawmakers, he said the proposals would “help stop tragedies like Newtown or the recent shooting of a 13-year-old boy in Roxbury on his way to choir practice.” Image Gov. Mike Beebe of Arkansas is expected to sign a bill that would allow guns in some churches. Credit Danny Johnston/Associated Press Most Republicans said they had drawn other lessons from the Newtown shooting. Gov. Jan Brewer of Arizona, a Republican, said in her speech that “the massacre at Sandy Hook Elementary was unimaginable” but rejected calls for stricter gun laws. “Arizonans have reduced crime by punishing criminals, and not by infringing on the rights of law-abiding gun owners,” she said. Ms. Brewer focused instead on school safety, saying her budget would call for more money for school resource officers to provide security. “Our job now is to take common-sense steps that lessen the likelihood of a similar tragedy striking Arizona — while resisting the urge to turn a school into a fortress,” she said. Gov. C. L. Otter of Idaho alluded to the Newtown shooting in his address as he called for building a 579-bed mental health facility at a prison complex south of Boise. “We all saw just a few weeks ago the terrible impact on a community and a nation when mental illness leads to tragedy,” Mr. Otter said, echoing a commonly held belief, although the authorities have not described the mental state of Adam Lanza, the Newtown gunman, or said if he suffered from mental illness. Mr. Otter also ordered a review of school safety. Some Democratic governors have said they are holding out hope for a federal law. Gov. Peter Shumlin of Vermont, the chairman of the Democratic Governors Association who was endorsed last year by the National Rifle Association Political Victory Fund, has opposed taking action on gun laws at the state level but has said he supports Mr. Obama’s recommendations. And Gov. Dannel P. Malloy of Connecticut, a Democrat who has said he would pursue measures on gun control, school safety and mental health in response to the shooting that killed 20 first graders and six educators in his state, said those issues must be addressed at the national level. “As long as weapons continue to travel up and down I-95,” he told lawmakers, “what is available for sale in Florida or Virginia can have devastating consequences here in Connecticut.”

Governors
Gun Control
Sandy Hook Elementary Shooting


European Car Sales Extend Fragile Recovery

Abstract: PARIS — Sales of European passenger cars continued their feeble recovery in February for the sixth straight month, according to an industry report on Tuesday. New-vehicle registrations, a proxy for car sales, rose 8 percent last month in the European Union from February 2013, the European Automobile Manufacturers’ Association reported from Brussels. The European economy has been slowly recovering since the first half of last year, but the car market has been moribund since the onset of the global credit crisis in 2008. As millions of jobs in the European Union depend on car sales directly or indirectly, economists watch the data for hints about the trajectory of growth and the prospects for the region’s more than 26 million unemployed people. While sales have risen steadily since bottoming out in August, the total of 861,058 vehicles registered last month was still the second-lowest on record for a February, the association said. In a data series that goes back to 2003, when the European Union had fewer members, only the figure for February 2013 was lower. Analysts say that the tepid pace of economic recovery and cultural changes have delayed both the ages at which young people get their licenses and even whether they choose to buy cars. As a result, they said, sales might not return to precrisis levels before the end of the decade, at the earliest. With the exception of the French market, which contracted 1.4 percent, all major European Union markets posted growth in new-car sales, the association said, with sales in Germany, the largest market in Europe, up 4.3 percent. Britain, Italy and Spain also improved. The data Tuesday applied to 27 of the 28 European Union member states; figures for Malta were not available. Philippe Houchois, the head of European auto industry research at UBS in London, said the February figure was “good news, but it’s still at very low levels.” He added that many analysts viewed sales as being artificially supported by discounting in countries like Germany. “That’s bad for profitability,” he said. Mr. Houchois noted that sales in the French market remained about 20 percent lower than at their peak in 2009, while Germany’s was down 16 percent. In contrast, the Spanish market, which is racked by depression-level unemployment, is about 70 percent below its precrisis peak, he said, and Italy’s is 48 percent lower. While those figures suggest the potential for a big rebound, Mr. Houchois said there was nothing in the data to suggest that such a comeback was happening anytime soon. He said he had not changed his forecast for European Union sales growth of 2.5 to 3 percent this year. Sales fell 1.7 percent last year. The largest European automaker, Volkswagen Group, which includes the Volkswagen, Audi, Seat and Skoda brands, posted an 8 percent sales gain from a year earlier. The No. 2 automaker, PSA Peugeot Citroën, posted a 3.6 percent gain. Its sales were eclipsed by those of its French rival Renault, which posted an 11.7 percent rise in sales, led by the continuing success of its low-cost Dacia brand, whose sales rose more than 34 percent from a year earlier. General Motors and Ford Motor both showed increases of more than 12 percent in February sales, and Fiat Chrysler’s sales rose 5.6 percent. Among major automakers, only Hyundai Motor and Honda Motor had lower sales than in February 2013.

Europe
Cars
Volkswagen
Peugeot
Audi Division of Volkswagen
European Automobile Manufacturers Assn


A.F.L.-C.I.O. Leader Says Donald Trump Won’t Sway Working Class

Abstract: As union officials convene at the Democratic National Convention in Philadelphia, the president of the largest umbrella labor group in the United States is bracing for a battle against a Republican nominee who is making a direct appeal to union members. In a wide-ranging interview about the 2016 presidential race, Richard L. Trumka , the president of the A.F.L.-C.I.O., spoke some of his warmest words about Hillary Clinton, the Democratic Party’s presumptive nominee for president, and predicted that appeals from her Republican opponent, Donald J. Trump, would sound hollow to working-class voters. “I think she’s running to change America, not to manage America,” Mr. Trumka said, describing what he saw as a difference between the two. Asked if that meant he considered her to be an agent of change, he replied, “I do.” That is a case that Mrs. Clinton will seek to make herself at the convention, which will take place this week in a battleground state that the Trump campaign is seeking to put in play in the general election because of its density of working-class white voters, to whom he is directing his message. Mr. Trumka is expected to address the convention on Monday. He sat out the nominating fight between Mrs. Clinton and Senator Bernie Sanders of Vermont, but his organization endorsed her in June. He sees a campaign in which his members will play a definitive role, and in which they will not be swayed by Mr. Trump’s “appropriation” of their issues like opposition to trade deals. “This election is going to be about two things — it’s going to be about income inequality and raising wages,” said Mr. Trumka, who is closely aligned with Senator Elizabeth Warren, Democrat of Massachusetts, and who has, for months, called on all candidates for president to address wage stagnation. “Union members are really going to drive the debate about writing new economic rules,” Mr. Trumka said. “That’s the rise of Donald Trump — people who think the rules don’t work for them.” Mr. Trump’s base of support is working-class white voters, and he plans to make an effort to win voters in Rust Belt states. The Republican nominee also has made a clear pitch for voters who backed Mr. Sanders , and this weekend he seized on the news of a leak of hacked emails from Democratic National Committee staff members who worked to thwart the senator. Mr. Trumka predicted that Mr. Trump’s pitch would fall on deaf ears. “He doesn’t appeal to the Sanders voters, because all of his solutions are at the other end of the spectrum, with one exception, and that’s trade,” Mr. Trumka said of Mr. Trump’s plans to address the economy. “I think he’s tapped into the legitimate anger and frustration that’s out there,” Mr. Trumka said. “He knows a great issue and a powerful issue and a powerful narrative when he sees it, and our narrative is very, very powerful.” Image Richard L. Trumka, the president of the A.F.L.-C.I.O., speaking at a rally in Indianapolis in April. Credit Eric Thayer for The New York Times Mr. Trumka spoke before Mrs. Clinton’s announcement on Friday of her vice-presidential nominee, Senator Tim Kaine of Virginia. Like Mrs. Clinton, Mr. Kaine supported the Trans-Pacific Partnership trade accord, which organized labor strongly opposes. Mr. Kaine was not among those whom Mr. Trumka listed as strong choices for Mrs. Clinton’s ticket; he favored Ms. Warren and Senator Sherrod Brown of Ohio, another progressive who is a favorite of the Democratic base. But he argued that Mrs. Clinton had already proved she would be a reliable ally. “I think she had a very positive influence on the platform,” Mr. Trumka said of the Democratic Party’s statement of principles. “She’s done a good job of highlighting her skills and her credentials and her strengths,” he added. “If you look at it dispassionately, there hasn’t been anyone who has better qualifications to run for president in a number of decades. She knows things about foreign affairs that Donald Trump hasn’t even suspected.” Mr. Sanders also “did a great job in helping to shape the platform,” Mr. Trumka said. “I think we all come together now.” He said there would be a focused effort to inform his members and other voters about Mr. Trump’s views. “He thinks our wages are too high. He thinks outsourcing is great. He thinks Carl Icahn will be a great Treasury secretary,” Mr. Trumka said of the activist investor. “There are still workers who remember all the jobs that Icahn destroyed.” The labor federation will focus primarily on six states: Florida, Missouri, Nevada, Ohio, Pennsylvania and Wisconsin. All of those states are not only in play in the presidential race but have competitive races for Senate or governor, Mr. Trumka said. With a large number of union households in most of those states, the labor group plans to run television and online advertisements to move voters, as well as registration drives. Mr. Trumka said he was worried about Mr. Trump’s “loose talk” about racial divisions. “That’s not good for this country,” he said. He was confident that Mr. Trump’s history — including making his company’s products in places like China — would leave a lasting mark with voters. “We don’t have to distort Trump’s record,” Mr. Trumka said. “He will hang himself.”

Donald Trump
Hillary Clinton
Pennsylvania
Richard L Trumka
2016 Presidential Election
Democratic National Convention,DNC
AFL-CIO


Disposing of Assets of Failed Banks Tests F.D.I.C.

Abstract: WASHINGTON — When regulators took over the First National Bank of Nevada last year, they faced a showdown with the Terrible Herbst, the mustachioed cowboy who boasts of being the “best bad man in the West.” This was no real gunslinger, but the name and logo of a chain of gas stations and convenience stores in Nevada that feature slot machines next to candy and beer. The family-owned Herbst chain, auditors at the Federal Deposit Insurance Corporation concluded, did not generate enough sales at its Reno-area gas stations to support the repayment of a loan, leaving auditors with three bad choices: Move to take over those stations and put the government in the gambling business. Cut off any flow of additional loan money. Or sell the loan at a steep loss. The F.D.I.C. faces tough choices like this every day as it struggles to manage $15 billion worth of loans and property left from failed banks. If still-to-be-sold assets from IndyMac Bancorp of California, whose demise last year was the fourth-largest bank failure, are included, the number jumps to $40 billion. The F.D.I.C. inherited the collection of loans and property after the failure of 25 banks in 2008, compared to just three in 2007. Thirteen more have failed this year, including four on Friday night, and no one doubts that more are on the way. The F.D.I.C., which insures bank deposits and ultimately has responsibility for liquidating failed banks, is selling hundreds of millions of dollars worth of loans through eBay-like auction sites. DebtX of Boston and First Financial Network of Oklahoma City, for instance, sell loans at auction to investors who typically pay 5 cents to 85 cents for each dollar of outstanding principal, according to Bliss A, Morris, First Financial’s president. It is unloading hundreds of houses across the country at bargain basement prices. In November, Lula Smith, 86, of Kansas City, Mo., bought a two-bedroom house across the street from her home for $4,000, one-tenth of its value two years ago. “I am real satisfied with that price, yes sir,” she said, adding that after about $1,000 in additional costs to repair the house, and some new carpet, her son and daughter-in-law will move in. “It was a nice little deal, indeed.” And — in the most closely watched tactic — the F.D.I.C. is negotiating a series of billion-dollar deals with private equity partners who will take over huge batches of loans in exchange for a chunk of the sale proceeds. Even as the solutions to the financial crisis are debated in Congress and among economists, the F.D.I.C., one of the agencies that deals most closely with the nation’s banks, has already been transformed. The rising tide of foreclosed real estate is so overwhelming that the agency, which had shrunk to a relatively tiny 4,800 employees from as many as 15,000 in the last period of bank meltdowns in the 1990s, is in the midst of a military-scale buildup as it undertakes one of the greatest fire sales of all time. The agency is frantically calling in retirees and holding job fairs, looking to hire as many as 1,500 people. It has rented a high-rise office building in Irvine, Calif., the new headquarters for a West Coast branch of 450 employees who are wrestling with a real estate crisis in one of the hardest-hit regions. It is also budgeted to pay hundreds of millions of dollars for a small army of contractors to augment its staff. “We are trying to be ready for the inevitable,” said Mitchell L. Glassman, director of the F.D.I.C.’s division of resolutions and receiverships. The budget for that division is increasing to $1 billion this year, from $75 million last year. Nearly $700 million of the increase is set to go to contractors like RSM McGladrey of Minneapolis, which provides temporary workers to help the agency close banks. These workers come at an hourly rate of $50 to $250. It is a high price, but the F.D.I.C contends the cost is much less than it would have to pay to hire permanent staff. “It was so painful downsizing after the last banking crisis,” James Wigand, deputy director of the F.D.I.C. receivership division, said, referring to the layoffs after the last cycle of bank failures. “We’re really trying to avoid going through that again.” The blitz by the F.D.I.C. may offer lessons for the Treasury Department, which is separately struggling with an even more monumental challenge: how to help still-operating banks move giant loads of toxic debt off their balance sheets, in the hope that the banks will begin taking risks again and stimulate the economy. Tuesday, for example, is the deadline for online bids for $108 million in loans left from the default of Freedom Bank of Bradenton, Fla., which DebtX is selling at auction. Particularly instructive for Treasury may be the partnerships the F.D.I.C. has formed with private equity groups and other profit-seeking investors, who are being given a chance to earn a big return in exchange for their help in managing billions of dollars worth of troubled loans acquired from defunct banks. Last month, the F.D.I.C formed a partnership with a company called Private National Mortgage Acceptance Company, based in Calabasas, Calif., which paid $43 million to take possession of $560 million in loans left from First National Bank of Nevada. Private National, a company set up last year to profit from the bad-debt market, paid the equivalent of 38 cents on the dollar for the 3,800 loans, which were left after another bank took over First National’s branches and deposits. The company will try to collect payments from borrowers after renegotiating mortgages, or, if necessary, foreclose on loans and sell the property. Private National said it hoped to make an annual profit of more than 20 percent for its investors. Despite the small upfront price Private National paid, F.D.I.C. officials said they considered it a good deal. The government will receive, at least initially, 80 percent of any money Private National can generate from the loans. As a bank teeters, the F.D.I.C. swoops in virtually overnight and shifts as many good loans and deposits as possible to a healthy bank. The F.D.I.C. persuades the healthy bank to accept some of the bad loans by agreeing to take a share of certain future losses. What is left is a miserable stew of failed real estate projects, vacant land, boarded-up houses and loans to defunct or bankrupt businesses, among other stories of misery from these recessionary times. About 4 percent of the assets from bank closures last year were bad, totaling some $15 billion in loans and property that once belonged to institutions like the Douglass National Bank of Kansas City, Mo., and Sanderson State Bank of Sanderson, Tex. This is the stuff that no healthy bank wanted to buy, losing propositions, or in the diplomatically bureaucratic language of government, “assets in liquidation.” The F.D.I.C.’s new workload is bringing back retirees like Gary Halloway, 58, of Spicewood, Tex., who has had assignments in seven states since he returned to work last year as the leader of regulatory SWAT team, moving from one failed bank to another. “I wake up, I don’t know where I am, much less which time zone,” Mr. Halloway said in Jackson, Ga., last month, where he was working out of a former funeral home as he helped close First Georgia Community Bank. Next stop: Houston, to work on the failure of Franklin Bank. “Sometimes I am driving on the highway and I see a sign and I even forget what state I am in,” he said. For the F.D.I.C staff, the hardest part of taking control of failed banks may be deciding which outstanding loans to cut off, even in cases where perhaps a house development is only half built. Ending a loan almost certainly shuts down a project. In the case of Terrible Herbst and its Reno-area gas stations, officials at the F.D.I.C. considered taking the highly unusual step of applying for a temporary casino license, allowing the agency to operate the gas stations and the electronic games after perhaps foreclosing on the nearly $10 million loan, one official involved in the effort said. Another option, simply cutting off additional advances of cash from the loan, was ruled out because the business might close, making it nearly impossible to collect any of the outstanding principal. The resolution of the case turned out to be a windfall for Terrible Herbst. The government put the loan on sale, and who should buy it directly from the government but the Herbst family, at a discount of more than 50 percent. The government ate the loss, but at least it collected on some of the bad debt, the F.D.I.C. official involved in the deal said. Executives at Terrible Herbst, who said they never formally refused to pay off the loan in full, were hardly disappointed. “It worked out just fine,” said Sean Higgins, the company’s general counsel. “At least for Terrible Herbst.”

Federal Deposit Insurance Corp
Banks and Banking
Subprime Mortgage Crisis
Shutdowns (Institutional)