THE "PORK" IN NEW YORK, Thoughts of an older American on Constitutional Government in the USA Options

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THE FINANCIAL TIMES

"US bond insurers expected to fall further"

By Aline van Duyn and Saskia Scholtes in New York

Published: January 29 2008 21:13 | Last updated: January 29 2008 21:13

Large numbers of investors are continuing to ‘short’ shares in Ambac and MBIA, the two biggest US bond insurers, suggesting expectations of further share price falls despite growing efforts by regulators to push through a rescue plan for the sector.

According to Data Explorers, which tracks short selling, the percentage of shares on loan relative to the market capitalisation of Ambac stood at 40 per cent last Thursday.

For MBIA, the proportion was 39 per cent.

Efforts to shore up US bond insurers gathered pace this week as New York state regulators appointed investment bankers to advise on a rescue plan that could include back-up credit lines.

Perella Weinberg, an advisory firm based in New York, has been hired as a financial adviser by the New York state insurance superintendent department.

Regulators are talking to banks about providing back-up credit lines for the bond insurers.

In addition, they are talking to other parties, including private equity firms and billionaire investors such as Wilbur Ross and Warren Buffett, about providing fresh equity capital for insurers such as Ambac and MBIA.

The rescue efforts come amid concerns that bond insurers are running out of time to reassure rating agencies that they have enough capital to deal with losses related to guarantees of bonds exposed to subprime mortgages.

Debt markets are pricing in the likelihood that bond insurers will lose their triple-A status.

Those going short include Bill Ackman, head of Pershing Square Capital Management LP, a New York hedge fund that has been betting heavily for years against bond insurers.

Current short levels are below the highest proportion of borrowed shares reached at the beginning of January for the bond insurers.

However, they still represent a very high level of borrowing.

Even in other cases where shares have been shorted, such as those of UK bank Northern Rock last year, the proportion of shares on loan to market capitalisation rarely reaches the levels on Ambac and MBIA.

Data Explorers said that Northern Rock’s borrowed shares peaked at about 22 per cent of market capitalisation in September of last year.

The threat of further downgrades for the bond insurers has sparked concerns about the broader fallout for holders of insured bonds, particularly municipal money market funds.

”Over the last eight weeks, money market fund managers have been looking to reduce risk and their exposure to insured bond programs, and they have been exercising their right to put these back to the brokers,” said Said Rafat, managing director at Fitch Ratings.

http://www.ft.com/cms/s/0/84a403ec-cead-11...0077b07658.html

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THE FINANCIAL TIMES

"Thain says bond insurers bail-out unlikely"

By Ben White and Aline van Duyn in New York

Published: January 30 2008 23:36 | Last updated: January 31 2008 02:08

John Thain, Merrill Lynch’s new chief executive, said he expected individual credit insurers would receive capital infusions from investors, but that it would be difficult to craft an “industry-wide” bail-out for the beleaguered guarantors.

Mr Thain said an effort by New York state regulators to help leading bond insurers maintain their credit ratings was raising interest in the sector on the part of investors including private equity groups and specialists in distressed companies.

However, he said in an interview with the Financial Times on Wednesday that getting banks to agree on a single approach was unlikely because they have different exposures to the credit insurers and varying opinions on what should be done.

“I think that’s very hard to get a transaction put together across the whole industry."

"I think it’s more likely you’ll have a company by company solution,” Mr Thain said.

Uncertainty about whether leading bond insurers will be able to retain their triple-A credit ratings hit the stock market on Wednesday, with shares of Ambac and MBIA, the two largest insurers, falling 16 per cent and 13 per cent, respectively.

Highlighting the pressure on bond insurers, Fitch, a credit rating agency that has already cut Ambac’s triple-A rating, on Wednesday slashed the triple-A rating of FGIC, another bond insurer.

Eric Dinallo, New York state insurance superintendent, last week held a meeting with leading banks to urge them to provide up to $15bn for credit insurers.

Discussions have since focused on two possible sources of support – direct investments and back-up credit lines provided by banks.

Moody’s Investors Service and Standard & Poor’s, the biggest credit rating agencies, have so far maintained their triple-A credit ratings for Ambac and MBIA, although they have warned that these could be cut.

Such a move could force banks to take significant writedowns on securities and hedges that rely on the insurers’ triple-A credit ratings.

Merrill already has taken writedowns on its exposure to bond insurers, including those still rated triple-A.

The New York regulators are in daily contact with the rating agencies to reassure them that talks about potential capital infusions are continuing.

http://www.ft.com/cms/s/0/86f57ea6-cf88-11...00779fd2ac.html

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THE FINANCIAL TIMES

"Banks link to solve bond insurers crisis"

By David Wighton, Aline van Duyn and Henny Sender in New York and Peter Thal Larsen in London

Published: February 1 2008 19:53 | Last updated: February 2 2008 02:49

US and European banks are joining forces to try to solve the crisis among US bond insurers that could exacerbate the impact of the credit squeeze.

One group, including Citigroup and Barclays, is examining options for supporting Ambac Financial, the bond insurer.

Separate teams are working with other bond insurers, according to people close to the process.

The moves come after efforts by Eric Dinallo, New York state insurance superintendent, to persuade the banks to back an industry-wide bail-out.

John Thain, chief executive of Merrill Lynch, said such a solution would be “hard to get” given banks’ different exposures to the credit insurers.

But Mr Dinallo has spurred the banks to look support on an individual basis.

Moody’s Investors Service and Standard & Poor’s, the credit rating agencies, say they might cut the Triple-A ratings of Ambac and MBIA, forcing banks to make further writedowns or provide more capital against investments insured by the guarantors.

The group looking at supporting Ambac includes Citigroup, Wachovia, Barclays, Royal Bank of Scotland, Société Générale, BNP Paribas, UBS and Dresdner.

The members of the group, which is being advised by Greenhill, were understood to be the banks most exposed to the insurer.

Credit Suisse is advising Ambac.

Ambac, which has lost its Triple-A rating by Fitch, needs to raise at least $1bn, analysts say.

Ambac shares rose 13.4 per cent on Friday to $13.20, and MBIA rose 5.55 per cent to $16.36.

http://www.ft.com/cms/s/f024e784-d0f7-11dc...0b5df10621.html

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THE FINANCIAL TIMES

"‘Vultures’ circle companies at bargain prices"

By Francesco Guerrera in New York

Published: January 31 2008 22:04 | Last updated: January 31 2008 22:04

Cash-rich financiers including Warren Buffett, Wilbur Ross and Ron Perelman are preparing to pounce on US companies hit by the financial turmoil – moves that could herald a new era of “vulture investing”.

After years pushed to the sidelines by high valuations and fierce competition from private equity, so-called “value” investors believe the financial and capital market crisis now offers a great opportunity to buy companies at bargain prices.

Mr Ross, who is considering either buying into one of the troubled monoline insurers, which insure against bond defaults – or setting up a new one – told the Financial Times the turmoil provided an embarrassment of riches.

“Nowadays so many things are starting to come unglued that the real problem is sorting out what the real opportunities are,” he said.

In a recent note to clients, the credit rating agency Standard & Poor’s said that, as the number of ailing companies in sectors ranging from brokerage and banking to media and consumer products grows, “vultures begin to stir”.

Mr Ross, who has made millions by restructuring troubled companies in out-of-favour industries such as mining and car parts, on Thursday announced the closing of a $4bn fund to “invest in and restructure financially distressed companies”.

He said his next moves were likely to be in insurance, mortgage servicing and car parts.

Mr Buffett, who has been lamenting the lack of takeover targets for several years, has struck deals worth a combined $6bn over the past few months.

But he is widely believed to be still looking to spend the $40bn cash-pile held by Berkshire Hathaway, his conglomerate, on a large financial or industrial company.

“The elephant gun is still out,” said Mohnish Pabrai, a California-based asset manager who owns shares in Berkshire, and follows Mr Buffett closely.

“This is Berkshire’s market."

"When you have this kind of sell-off in equity markets and the capital Berkshire has, things will happen”.

Mr Perelman, who has assembled a collection of businesses ranging from Revlon cosmetics to Allied Barton security services by taking over companies in distress, said he regarded the current conditions as a “buying opportunity”.

“Over the next six months you are going to see very, very unique opportunities,” he said in a video interview with the FT last week.

Analysts said that, aside from well-known investors, several hedge funds and private equity groups have been raising billions of dollars in anticipation of a sharp rise in the volume of distressed assets and companies.

http://www.ft.com/cms/s/0/26e7c1e8-d02f-11...0b5df10621.html

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THE WALL STREET JOURNAL

January 23, 2008, 5:35 pm

"I’m Eric Dinallo. I’m Here to Save the World"

Posted by Heidi Moore

New York State Insurance Superintendent Eric Dinallo sure works fast: only days after announcing plans to find investors to save struggling bond insurers like Ambac and MBIA, Dinallo already is holding meetings about how such a plan would work.

Success in creating the financial detente necessary to rescue the bond insurers would be in marked counterpoint to the modus operandi of his old boss, mentor and former state attorney general, Eliot Spitzer, who always seemed more inclined to jail executives than save their companies.

If Dinallo’s plan works, it wouldn’t be the first time he has stepped in to save a troubled financial institution.

Dinallo worked for Spitzer from 1999 to 2003 as head of the AG office’s investor protection bureau and the main point man on Spitzer’s investigations of Wall Street research, late trading and market timing as well as insurance industry kickbacks.

In 2002 Dinallo gained recognition among regulators (and the bankers who dreaded them) for the Dinallo Affidavit, the blow-by-blow account of Wall Street research violations, including those of former Merrill Lynch analyst Henry Blodget.

In 2003, then-Morgan Stanley general counsel Donald Kempf hired Dinallo as the firm’s chief regulatory officer to clean up the firm’s compliance process and fend off future Spitzerian investigations.

By 2006, with that task completed and both Kempf and his boss, Phil Purcell, gone from Morgan Stanley, Dinallo became general counsel for insurer Willis Group Holdings — a Morgan Stanley client and recovering former target of Spitzer’s insurance investigations.

Willis already had settled with Spitzer and other regulators through a $51 million restitution payment to clients.

A person close to a major bond insurer tells Deal Journal that a bailout — or even widespread sales of the bond insurers — would meet with eager interest from private-equity firms looking for undervalued assets and banks with enough enlightened self-interest to prevent a total collapse.

Let us hope so, because if Dinallo’s plan doesn’t work, Wall Street sure wouldn’t want Spitzer to step back in.

–Heidi Moore is U.S. Bureau Chief of Financial News, a Dow Jones & Co. publication and a contributor to Deal Journal.

http://blogs.wsj.com/deals/2008/01/23/im-e...orld/trackback/

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"NY employee accused of extorting companies to use historic armory"

By DEEPTI HAJELA, Associated Press

Last updated: 4:23 p.m., Wednesday, February 6, 2008

NEW YORK -- A former superintendent of a landmarked National Guard armory has been indicted on charges of extortion and bribery for demanding thousands of dollars from companies that wanted to use the historic site for events including Marc Jacobs fashion shows, state officials said.

James Jackson, a 30-year employee of the state Division of Military and Naval Affairs, was arraigned Wednesday on a 31-count indictment that charged him with taking cash bribes and material goods, including exercise equipment, from companies in exchange for their use of the 69th Regiment Armory, state Attorney General Andrew Cuomo and Inspector General Kristine Hamann announced at a news conference.

The armory is being used for current Fashion Week events.

Cuomo said the public had the right to pay a fair price for using a state space, which the armory is, and should not accept any attempts at extorting more money.

"You pay the fair value for that space," he said.

"What you don't pay is a gratuity or a bribe or an illegal tip to get you into that space."

Jackson, who resigned from his post shortly after his arrest in October, pleaded not guilty at his arraignment.

His attorney, Alan Abramson, declined to comment.

If convicted, Jackson, 56, could face more than 20 years in prison.

The indictment charged Jackson with taking bribes in connection to Marc Jacobs shows from February 2000 to September 2007 and other trade shows in 2007 and with defrauding the government.

Cuomo said Jackson received more than $30,000.

Cuomo said the bribes for the fashion shows were paid by KCD, a public relations company that the fashion house used.

Neither KCD nor Marc Jacobs was named in the indictment.

The investigation was continuing, though, and Cuomo said the payment of bribes could be a crime depending on the circumstances.

KCD attorney Ken Breen said the company was cooperating with Cuomo's investigation.

In a statement, a Marc Jacobs representative said the fashion house, which is using the armory for shows this Fashion Week, was aware of the charges against the armory superintendent and was cooperating with the state attorney general's office in its investigation.

"We are using the armory for this week's fashion shows with the full knowledge and consent of the attorney general's office," the statement said.

The 69th Regiment Armory, which occupies much of a Manhattan block at 25th Street and Lexington Avenue, was built to serve as a training center and social clubhouse for the National Guard.

It was entered into the State and National Register of Historic Places in 1994 and was listed as a National Historic Landmark two years later.

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THE NEW YORK DAILY NEWS DAILY POLITICS BLOG:

And it is indeed interesting that in his quotes in the Friday, August 31, 2007 RICK KARLIN story in the TU entitled "Troopergate called unethical but not criminal - Cuomo calls probe of scandal involving Spitzer aides adequate despite limitations", young Andy Cuomo states clearly and unequivocally that:

"The use of police is an issue that troubles people," Cuomo said.

"This is a conversation that we should have had 15 years ago."

end quotes

Fifteen years ago from now would be the year 1992, and on November 30, 1992, Assistant Rensselaer County District Attorney Richard McNally was standing before then-Rensselaer County Criminal Court Judge M. Andrew Dwyer in the Rensselaer County Court House, being forced to admit before all the people in that courtroom that day that he had no evidence whatsoever to substantiate his malicious prosecution of former Rensselaer County Associate Public Health Engineer Paul R. Plante, P.E. in the various town courts of Rensselaer County from January of 1990 to that time ...

After Plante was the victim of a hit-and-run driver on Liberty Lane in the Town of Poestenkill, Rensselaer County on December 29, 1989 ....

A politically-connected hit-and-run driver who was PROTECTED by the New York State Police ...

And who was then allowed to bring false criminal charges in Poestenkill Town Court against Plante to cover up the hit-and-run, which false charges McNally then prosecuted for him:

JUDGE: There is a MOTION on, that I might as well dispose of first.

That is PEOPLE v. PLANTE.

Apparently, it is pro se.

Mr. McNally, are you here for the PEOPLE?

This is a legal question.

I don’t see that argument is necessary!

MCNALLY: This is a Motion to Dismiss!

]JUDGE: A Motion to Reargue a Motion to Dismiss!

MCNALLY: I have no position, other than to say, the Court, in its previous position, left me without any recourse other than to not oppose a Motion to Dismiss, in my opinion!

JUDGE: That is your position?

MCNALLY: That is my position!

JUDGE: THEN YOU CONSENT TO THE DISMISSAL?

MCNALLY: I do, Judge, based upon the fact that the Court, in its previous Decision, left me with an untenable position at trial!

JUDGE: How closely did you read the decision?

MCNALLY: Very!

JUDGE: The District Attorney consented?

MCNALLY: It was the Court’s opinion at trial that there was other evidence out there, and I can affirm that there IS NOT OTHER EVIDENCE ON WHICH TO BASE A PROSECUTION AND THE COURT RULED THE EVIDENCE THAT WAS PRESENTED INSUFFICIENT, AND I HAVE NO OTHER EVIDENCE!

JUDGE: And you take the position that you have no further evidence, at all?

MCNALLY: No further evidence, Judge!

JUDGE: Then it is dismissed!

(Whereupon, matter concluded)

- EXCERPTED from pages 121-124 of the O’Connor BIBLE submitted to the federal Second Circuit Court of Appeals in New York City on behalf of defendant REPUBLICAN Rensselaer County Executive Kathleen Jimino and her co-defendants, in or about November of 2005

http://blogs.timesunion.com/localpolitics/?p=193#comments

And so ....

Posted by: John Galt | September 3, 2007 6:39 PM

http://www.nydailynews.com/blogs/dailypoli...1.html#comments

THE NEW YORK DAILY NEWS DAILY POLITICS BLOG:

And this business with former Assistant Rensselaer County District Attorney Richard McNally ....

Who did Joe Bruno a big political favor by falsely and maliciously prosecuting Plante to protect the BRUNO-ITE GOON who had run Plante down in December of 1989 ...

Is relevant to what is taking place on the political stage here in NYS right now ....

Because the Working Families Party has endorsed McNally to be the next District Attorney up here in Joe Bruno's Rensselaer County ...

And there is a real good chance that with that WFP endorsement, McNally is going to win, and become OUR next Rensselaer County District Attorney ....

As P. David Soares is DA over there in Albany County ...

With a similar endoresement by the WFP ....

And it is our information and belief ...

That the WFP endorsed McNally precisely BECAUSE McNally could demonstrate, through his false and malicious prosecution of Plante, that McNally will and has bent and twisted the law for political purposes ....

To protect political friends ....

And to punish political enemies ....

Which would make the WFP a "PLAYER" up here, having someone like McNally in its stable of politicians ...

Along with P. David Soares ....

Who is said to be giving Eliot Spitzer aid and comfort in connection with this TROOPERGATE FIASCO ...

And so ...

Posted by: John Galt | September 3, 2007 7:02 PM

http://www.nydailynews.com/blogs/dailypoli...101.html?page=2

"Democratic committee endorses DA candidate"

Albany, New York Times Union

First published: Saturday, May 26, 2007

TROY -- Democrat Richard J. McNally Jr. has secured his first endorsement on his way to being the party's candidate for Rensselaer County district attorney.

The county Democrats' Executive Committee endorsed McNally of Valley Falls on Thursday night.

"McNally launches bid for DA - Democrat cites lengthy courtroom experience in Rensselaer County"

By BOB GARDINIER, Staff writer, Albany, New York Times Union

First published: Tuesday, June 12, 2007

TROY -- Democrat Richard McNally announced his run for district attorney Monday, referring to himself as a "lunch-pail lawyer" and taking some shots at the current Republican administration.

In a fiery speech on the courthouse steps before a large crowd of local and state Democrats, McNally cited his nearly 20 years of experience in area courtrooms.

"I have tried cases in every court in this county from Hoosick Falls to Castleton, from Stephentown to Schaghticoke," McNally said with his wife, Karen Carlson, and daughters Sarah, 9, and Eloise, 6, by his side.

"I have been on both sides of the courtroom in some of the most serious criminal cases in this county in the past 20 years."

"Rensselaer County probe fades"

By KENNETH C. CROWE II, Staff writer, Albany, New York Times Union

Last updated: 5:48 p.m., Friday, February 8, 2008

TROY - The term of a Rensselaer County grand jury investigating complaints against the county Democratic chairman for soliciting political donations from patronage appointees expired Friday without any action being taken, according to court records.

County Democratic Chairman Thomas Wade testified before the grand jury in the fall about allegations that he was forcing Democratic employees at the county Board of Elections to make contributions to the county committee.

The grand jury's term was extended in December at the request of Patricia DeAngelis, the former Republican district attorney.

District Attorney Richard McNally, a Democrat, did not request a third term for the grand jury, according to a check of court documents.

"I can't comment at all," McNally said Friday regarding the grand jury's actions.

Wade and his attorney, Brian Premo, said the allegations were groundless.

The Wade case was the sixth politically related complaint made to DeAngelis' office in 2007.

It was the only case in which a special prosecutor was not requested.

Albany County District Attorney David Soares was named as a special prosecutor in April, 2007, to investigate those five complaints.

Heather Orth, a spokeswoman for Soares, said the cases remain open and the office would not comment on them.

Two of the five complaints included allegations by Colleen Regan, a former Rensselaer County Legislature Republican employee, that county employees had to do political work for Victory Lane, a political consulting company owned by Legislature Majority Leader Robert Mirch and Richard Crist, the GOP majority spokesman; and that Regan had to make a political attack advertisement at Troy City Hall for Mirch.

Mirch in turn filed two complaints about Troy Democratic Councilman Clement Campana allegedly making political calls from Hudson Valley Community College and Legislature Minority Leader Virginia O'Brien asking Mirch to assign city crews to clean up a property.

The fifth complaint by Legislature Vice Chairman Richard Salisbury requested an investigation of Susan Steele, the Democratic minority's spokeswoman, taking photos of Crist during a county Legislature meeting that were used in a political mailing.

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"Bruno: 'Framework' of deal set for NYRA, race tracks"

By MICHAEL GORMLEY, Associated Press

Last updated: 5:14 p.m., Thursday, February 7, 2008

ALBANY -- State leaders have a "framework of an agreement" that would give the New York Racing Association a $105 million bailout as part of a 25-year franchise to run New York's thoroughbred race tracks, Senate Majority Leader Joseph Bruno said Thursday.

In exchange for the lucrative 25-year franchise, NYRA would drop a claim that it owns the tracks at Aqueduct, Belmont and Saratoga along with some high-priced property around them.

Bruno said the tentative agreement is expected to be final by Feb. 13, when a temporary extension of NYRA's franchise is scheduled to end.

State Operations Director Paul Francis, speaking for Gov. Eliot Spitzer, wouldn't confirm the elements Bruno released as part of the tentative agreement.

But Francis said Bruno's details are "generally consistent" with the closed-door talks that include NYRA officials.

"I don't have any problem with what the senator said," Francis said.

"On the substantive issues, I think we're essentially in the same place."

NYRA spokesman John Lee said the private group remains optimistic and is preparing to hold races on the day after the temporary extension would expire.

The agreement Bruno outlined Thursday includes $105 million in state money to help NYRA out of bankruptcy court and more revenue for purses and breeders.

NYRA's board would also be changed to provide greater oversight of the private group, which has held the franchise since 1955.

Bruno called a news conference a day after NYRA threatened to lay off workers and close Saratoga Race Course -- in Bruno's district -- for this coming season if a deal wasn't reached by next week.

"Can I tell you this is a done deal?"

"No," Bruno told reporters.

"I cannot say that."

But, "Racing will continue," he insisted.

Assembly Speaker Sheldon Silver wouldn't confirm the specific elements that Bruno released, but didn't deny a deal was near.

"We are actively engaged in negotiations and we are working toward resolution by next week's deadline," said Silver spokesman Dan Weiller.

"The speaker is optimistic that we will meet next week's deadline."

According to Bruno, there is general agreement -- subject to further talks -- on the following elements:

-- State taxpayers would bail out NYRA for a third time, this time with $75 million to pay off some of its debt and get out of federal bankruptcy court.

Another $30 million in state money would be used for operating expenses this year.

NYRA would still be about $200 million in debt.

Francis said the bailout would likely be borrowed and paid back with video slot machines revenue.

-- A company to operate video slot machines at Aqueduct would be selected in about a month, with revenue from the machines expected to give NYRA the cash it needs to operate and pay off its debt.

-- No video slot machines would be put at Belmont.

But Francis said the administration will continue to push for Belmont video slot machines.

The 2008-09 state budget is counting on $250 million in revenue from Belmont machines.

-- Saratoga Race Course, the jewel of New York racing, wouldn't be changed.

Local zoning laws would be established to make sure development is in keeping with the historic track, which attracts hundreds of thousands of gamblers and tourists from around the world every summer.

-- The new NYRA board will include six or seven appointees of the governor, including representatives of horse owners and breeders, two appointed by Bruno and two by Silver.

NYRA-appointed members would still have a one-seat majority on the board.

-- NYRA's board chairman would be limited to two four-year terms.

-- There will be no layoffs.

Bruno said he felt Spitzer and Silver --both Democrats -- unduly "pressured" him in recent days to accept the basic elements of Spitzer's proposal to keep NYRA running the tracks.

Bruno cited NYRA's public statements that Bruno was standing in the way of a deal, threatened Saratoga's season that is critical for his district, and would cause layoffs of workers in NYRA and the racing industry.

"We are always hopeful," said NYRA's Lee.

"Unfortunately, lacking an agreement, we've had to prepare our employees as well as trainers and their employees for the reality that racing may cease on Wednesday."

"Are they creating pressure?" Bruno said, noting he's the only leader in talks with a track in his district this legislative election year.

"Absolutely, no doubt about it."

"Nobody squeezed anybody," Francis said.

"The governor has three tracks in his district."

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"Court: NY can't enforce $1 million NASD fine against stock broker"

Associated Press

Last updated: 5:53 p.m., Thursday, February 7, 2008

ALBANY -- New York's top court ruled Thursday that lower state courts can't enforce a $1 million fine for improper trading levied by a national regulator against a stock broker and his firm.

The Court of Appeals found state courts have no authority to enforce the disciplinary actions of the National Association of Securities Dealers, now known as the Financial Industry Regulatory Authority.

Wall Street firms join NASD voluntarily and agree to abide by its rules, but the association isn't a government regulator.

The court reversed rulings that upheld the fine against Fiero Brothers and its owner -- securities broker John J. Fiero -- but said Thursday that federal courts could have jurisdiction in the case.

The fine was imposed by NASD for a so-called "bear raid" that drove down the price of securities held by a competitor.

Fiero had signed a registration with NASD in which he agreed to be subject to "all requirements, rulings, orders, directives and decisions of, and penalties, prohibitions and limitations imposed" by NASD.

In December 2000, a NASD hearing board claimed the firm violated the federal Exchange Act and rules of the federal Securities and Exchange Commission and the NASD.

The board expelled the firm from NASD and imposed a $1 million fine, plus $10,000 in hearing costs.

The firm lost an apeal to the NASD's National Adjudicatory Council, according to Thursday's court decision, in 2002.

The firm didn't appeal the decision to the SEC, which could have sought to enforce the order in federal court, the decision stated.

The Fiero Brothers argued the NASD's subsequent attempt to collect the penalty was in the wrong court, because state courts lacked authority in the area.

State Supreme Court sided with NASD in 2005, noting that the firm had agreed to abide by NASD rules.

An appellate court agreed, but the case wasn't done yet with the penalty growing to $1.3 million with interest by 2006.

The Fiero Brothers took the case to the state's highest court, which found that the lower state courts "do not possess the power to hear and decide this controversy."

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THIS ARTICLE IS INSERTED HERE FOR BACKGROUND

THE FINANCIAL TIMES

"Rescuing monolines is not a long-term solution"

By William Gross

Published: February 7 2008 18:14 | Last updated: February 7 2008 18:14

What is good for Ambac, the bond insurer, is good for the country.

Well, perhaps in the short run if it prevents a run on the shadow banking system – our over-leveraged system of financial conduits that have provided the spending power to keep the US economy going in recent years.

But not in the long run.

The Ambac business model is as faulty now as was chairman Charles Wilson’s forecast for General Motors more than a half century ago.

Wilson’s response to a US Senate inquiry in 1955 implied that GM’s near monopolistic control was beneficial to the country.

It was, until the domestic motor industry fell asleep at the wheel of innovation and became more concerned with placating its labour unions with outsized pay packages and long-term pension and healthcare benefits.

Creative destruction and the incessant march of globalisation changed a GM chairman’s smile to a frown, and the US economy turned from industrialisation to financialisation in order to stay at the top of the global pecking order.

Those who put their faith in the ability of a finance-based economy to remain healthy are being similarly challenged today.

A critic can find numerous examples of incredible, bubble-popping asset structures – from subprime mortgages to structured investment vehicles to collateralised debt obligations squared – that are threatening to reverse the expansion of the shadow banks and break our finance-based economy’s back.

The most recent one, however, centres around the monoline insurers with Ambac as the most important link in the chain that presumably cannot be allowed to break.

Monoline insurers are so named because they originally covered just one line of business – municipal bonds.

Today, however, because they do not insure lives, or automobiles or medical expenses, the name has stuck despite their additional reach into insuring financial assets of all varieties.

In a real sense, the monolines have taken on their shoulders a supersized portion of the guaranteed solvency of modern asset structures.

In combination with overly generous triple-A ratings on not only these assets but the monoline companies themselves, they have fostered a bubble of immeasurable but clearly significant proportions.

That the monolines could shoulder this modern-day burden like a classical Greek Atlas was dubious from the start.

How could Ambac, through the magic of its triple-A rating, with equity capital of less than $5bn, insure the debt of the state of California, the world’s sixth-largest economy?

How could an investor in California’s municipal bonds be comforted by a company that during a potential liquidity crisis might find the capital markets closed to it, versus the nation’s largest state with its obvious ongoing taxing authority?

Apply the same logic to the gargantuan size of the asset-backed market it has insured in recent years – subprimes and CDOs in the trillions of dollars – and you must come to the same logical conclusion: this is absurd.

It is as if Barney Fife, television’s Sheriff of Mayberry in The Andy Griffith Show, promised to bring law and order to the entire country.

As long as the illusion lasted, however, it is clear that monoline guarantees fostered an expansion of our modern shadow banking system and therefore an extension of US and even global economic prosperity.

Because US consumers were able to borrow at “guaranteed” triple-A rates with an additional servicing/underwriting spread, their spending power was artificially elevated.

In order to maintain those levels and avoid a nasty recession, authorities through both official and backdoor channels now endorse a rescue effort.

What is good for Ambac, they reason, is good for the country – and by extension the world.

As stock markets rise on optimistic workout developments, it is clear that it is – in the short run.

But like General Motors a half century back, the sense of stability imparted to an oligopolistic industry with visible flaws is not likely to last, nor may the hope for a return to economic growth of recent years.

The modern US financed-based economy has a striking resemblance to Barney Fife, guaranteeing global prosperity without the productive industrial-based firepower to back it up.

Neither ultra-low interest rates or tax rebates, nor investor-led and authority-based monoline bailouts are likely to change that significantly during the next few years.

The writer is founder and managing director of Pimco

http://www.ft.com/cms/s/0/bb7e80c8-d58c-11...00779fd2ac.html

[Livyjr]

"NYRA rescue to go ahead - Despite a $384 million shortfall in projected revenue, state will trim other areas and proceed with bailout, officials say"

By JAMES M. ODATO, Capitol bureau, Albany, New York Times Union

First published: Monday, February 11, 2008

ALBANY -- The Spitzer administration now forecasts $384 million less in revenue than projected three weeks ago, but the state can still afford a bailout of the New York Racing Association, state officials said Sunday.

The administration has decided to demand greater agency belt-tightening, $75 million more in insurance industry taxes and deeper cuts to reimbursement rates paid hospitals, nursing homes and home care providers to balance the next budget.

Recession-like trends require more-conservative budgeting, Budget Director Laura Anglin said Sunday.

But she said the state still plans to provide NYRA $105 million as part of a proposed 25-year franchise extension.

Details of the NYRA plan remained under discussion late Sunday, although negotiators were beginning to give in to demands by the racing association to improve the chances of a deal and avoid the cessation of racing.

Anglin said the weakened economy will produce less than Gov. Eliot Spitzer projected when he released a $124.3 billion spending proposal on Jan. 22.

Amendments to be announced Tuesday to his 2008-09 budget will be more substantial than the typical technical changes that come following an executive budget unveiling, she said.

Indeed, the governor is paring the budget to $124.2 billion, with $56.3 billion raised from general funds, compared with the $56.7 billion proposed last month.

"The risk of recession has increased since we got out our budget," Anglin said.

She is coping with the reduced personal income, corporate franchise and capital gains revenues now forecast by adding $50 million more to the amount the state wants to get by assessing higher fees on health insurance companies.

That is on top of the $140 million Spitzer's already scheduled and increased revenues from the "covered lives assessment," which bring the total tax to more than $1 billion levied on health insurance policies.

Representatives of insurance companies say the assessment is passed on to those paying premiums for private health insurance, such as employers and individuals.

That could result in increasing the number of uninsured in the state by making policies cost too much, industry officials warn, at a time Spitzer is trying to reduce the number of people without coverage.

Anglin said insurers also will be expected to come up with another $25 million to help the state pay for diabetes and obesity prevention programs.

Those costs could also be passed on.

Anglin said the industry can afford the costs because insurers have ample reserves from years of profits.

She also said the prevention programs will help insurance companies because, if successful, more expensive medical care won't be necessary to treat diabetics and the obese.

She also said the state is forced to cut the rates paid to the health care industry by 35 percent, compared with the 25 percent cut Spitzer proposed in January, to save another $18 million.

The state also will try to increase the number of generic drugs provided under its program to help elderly people get medications, saving $19 million.

Another $36 million in "agency efficiencies" are required on top of tens of millions Spitzer called on this year and planned already for next year because of the shortfalls.

Anglin said the agency savings will come from cutting back on overtime, restricting travel and, potentially, curtailing filling vacancies.

She maintained that a hiring freeze is unnecessary.

Wall Street profits and income will be worse than predicted, she said, resulting for much of the pessimistic outlook.

Indeed, she predicted 8.6 percent bonus growth for Wall Street employees next year in January.

Now, she said, the forecast is of no growth after a 5.5 percent dip this year.

Nevertheless, she said, investing in the NYRA franchise is a good short-term spending initiative for long-term economic health in the racing and horse industry.

She did not specify from where the proposed $75 million to help NYRA get out of bankruptcy, or the $30 million for its operations this year, will come.

She said the governor's budget will continue to plan for $250 million from selling development rights for Belmont Park, a plan opposed by Assembly Speaker Sheldon Silver.

Also planned is getting some $100 million from selling development rights on Aqueduct, according to people familiar with negotiations.

Negotiators for Spitzer and the Legislature on Sunday continued working on a proposed deal to extend NYRA's hold on the Aqueduct, Belmont Park and Saratoga tracks, said Steve Newman, chairman of the state's NYRA oversight board.

He said reports of a completed deal have been exaggerated.

NYRA officials maintain it intends to close the Aqueduct winter meet Thursday, off hundreds of personnel, unless acceptable terms are offered.

So far, NYRA officials have turned down the plan worked out privately by the Senate, Assembly and Spitzer officials.

However, the negotiators removed one objectionable term: That any vote of the NYRA board require a supermajority.

It also was expected to capitulate on the composition of the NYRA board to get the deal done.

Senate Majority Leader Joseph L. Bruno, who has been advocating for a greater government control of NYRA's board, said the plan was to set up a board with only one NYRA appointee more than the number of government appointees.

Plans being discussed over the weekend involved giving NYRA 13 members and the Legislature and Spitzer a total of 11.

Three busloads of NYRA employees planned to travel from downstate to the Capitol on Tuesday to express their concerns that a deal is essential, a racing industry official said Sunday.

James M. Odato can be reached at 454-5083 or by e-mail at jodato@timesunion.com.

[Livyjr]

FOR IMMEDIATE RELEASE:

January 18, 2008

"GOVERNOR SPITZER LEADS FIRST MEETING OF COMMISSION TO MODERNIZE REGULATION OF FINANCIAL SERVICES - Commission Discusses Regulatory Reform to Help Maintain New York’s Status as World Financial Capital and Ensure the Highest Standards of Consumer Protection for New Yorkers"

Governor Eliot Spitzer today hosted the first formal meeting of the Commission to Modernize the Regulation of Financial Services, which includes heads of major financial services organizations, consumer advocates, the business community, legislators and regulators.

The commission discussed an innovative proposal to institute principles-guided regulation in New York along with other potential reforms.

New York’s financial services market has been burdened by current regulations – a litany of detailed rules that are ineffective at achieving consumer protection.

The United Kingdom and other international markets are moving to principle-based regulation, which focuses on broad guidelines.

Some companies and consumers are concerned this may mean diminished compliance with specific rules, but the new principles-guided approach preserves relevant rules, while asking regulators and companies to focus on achieving desired outcomes.

The result will be healthy markets and strong consumer protection without unneeded burdens.

The financial services industry is a bedrock of New York’s economy.

The commission will make recommendations for new laws and regulations that promote competition and business growth, while effectively protecting consumers and honest businesses from unfair or unethical practices.

By reforming burdensome and ineffective regulation, the commission's recommendations will help New York retain and enhance its status as the world's financial capital.

“Modernizing regulation of financial services is first and foremost about keeping New York the financial capital of the world,” said Governor Spitzer.

“The fact of the matter is that New York’s current regulations are out of date."

"We must have regulations that promote our essential goals: a healthy, creative competitive market for financial services, access for consumers and businesses to the services they need, and strong, effective consumer protection."

"Furthermore, my experience has demonstrated to me that proper regulations will have a positive impact on the financial market."

"We have brought together many of the best minds in the State to accomplish this task.”

After the meeting, Governor Spitzer was joined by Herbert M. Allison, Chairman, President and Chief Executive Officer, TIAA-CREF, Laurence D. Fink, Chairman and Chief Executive Officer, BlackRock, John J. Mack, Chairman and Chief Executive Officer, Morgan Stanley and Martin J. Sullivan, President and Chief Executive Officer, AIG at a press conference to discuss the work of the commission and how principles-guided regulation will lead to a focus on outcomes rather than process.

The principles guide the regulator to focus on outcomes, rather than the rules in and of themselves.

Examinations of financial services companies should focus on what is important and what really makes a difference.

Martin J. Sullivan, President and CEO of American International Group, Inc., said:

“We are grateful for the opportunity to participate in this important and promising initiative."

"We look forward to helping ensure that the commission achieves its goal of streamlining the regulation of New York’s financial services sector in a way that enhances the industry’s ability to compete globally and better serve its customers.”

http://www.ny.gov/governor/press/0118081.html

"Stocks rise in uneasy trading"

By MADLEN READ, Associated Press

Last updated: 5:52 p.m., Monday, February 11, 2008

NEW YORK -- Wall Street finished higher in an uneasy session Monday as retail and homebuilders stocks rose on expectations for more interest rate cuts, but banks and insurers fell on worries about further mortgage debt troubles.

The Federal Reserve has been in rate-cutting mode this year and it is expected to lower the federal funds rate once more either this month or at its next regularly scheduled meeting March 18.

And the cheaper cost of money is beginning to register in the stock market.

"A number of sectors like retail and housing stocks have done better since the Fed acted, and they are leading the market again today," said Steve Goldman, chief market strategist at Weeden & Co.

"These stocks are called early bellwethers and they tend to lead a recovery."

But investors continue to grapple with bad news in the credit markets.

The stock market fell in early trading and remained volatile even after recovering, with Wall Street clearly concerned by news that American International Group Inc. might have more mortgage debt to write off.

AIG, one of the 30 companies that make up the Dow Jones industrial average, said in a regulatory filing it would need to alter the way it values its credit default swaps involving collateralized debt obligations.

Credit default swaps are insurance policies against defaults, and CDOs are funds that contain slices of bonds, some of which are backed by mortgages.

The insurer said auditors found it "had a material weakness in its internal control over financial reporting and oversight" regarding how it valued certain credit default swaps.

The filing raised concerns that there will be further losses at AIG, and that other financial companies might reveal similar problems.

AIG dropped $5.94, or 11.7 percent, to $44.74.

The Dow rose 57.88, or 0.48 percent, to 12,240.01.

Dow Jones & Co. said it was replacing two of the blue chip index's 30 components -- Altria Group Inc. and Honeywell International Inc. -- with Bank of America Corp. and Chevron Corp., effective Feb. 19.

Broader stock indicators ended higher, too.

The Standard & Poor's 500 index rose 7.84, or 0.59 percent, to 1,339.13, and the Nasdaq composite index rose 15.21, or 0.66 percent, to 2,320.06.

In addition to rate cut expectations, Hasbro Inc. gave the market a lift, saying its fourth-quarter income soared 24 percent, thanks to a 16 percent increase in sales.

Its shares rose 54 cents, or 2 percent, to $26.41.

Meanwhile, Yahoo Inc.'s board rejected a $44.6 billion takeover offer from Microsoft Corp. Yahoo said its board concluded that Microsoft's unsolicited offer "substantially undervalues" the Internet search company.

Microsoft, a Dow component, fell 35 cents to 28.21, but Yahoo rose 67 cents, or 2.3 percent, to $29.87.

In other dealmaking news, The Wall Street Journal reported that Motorola Inc. and Nortel Networks are in talks to merge their wireless infrastructure businesses.

If a deal happens, it would create a firm with $10 billion in annual sales.

Motorola rose 31 cents, or 2.8 percent, to $11.57, and Nortel dipped 18 cents to $10.89.

Bond prices rose.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.62 percent from 3.65 percent late Friday.

The dollar was mixed against other major currencies, while gold prices rose.

The Russell 2000 index rose 0.85, or 0.12 percent, to 699.75.

Advancing issues outnumbered decliners by about 8 to 7 on the New York Stock Exchange.

Consolidated volume came to 3.51 billion shares, down from 3.66 billion Friday.

Light, sweet crude oil rose $1.82 to settle at $93.59 per barrel on the New York Mercantile Exchange.

Last week was the worst week, percentage-wise, for the Dow since March 2003.

The blue-chip index fell 4.4 percent, and meanwhile, the S&P's 500 index declined 4.60 percent and the Nasdaq dropped 4.50 percent.

The Dow is about 15 percent below its Oct. 9 record close of 14,164.53, and about 4 percent above the 15-month lows it hit in January.

Though Wall Street managed a gain Monday despite AIG's report suggesting possible credit-related losses, many analysts believe there is still bad news yet to come in the credit markets that could have more deleterious effects on the stock market and the broader economy.

"The absolute seizure of the credit markets in the corporate arena is going to put enormous pressure on American companies," said George Feiger, CEO of Contango Capital Advisors, the wealth management arm of Zions Bancorporation.

"And this is really bad news for the economy."

Overseas, Japan's stock market was closed for a holiday, while in Hong Kong, the Hang Seng index finished down 3.64 percent.

Britain's FTSE 100 closed down 1.32 percent, Germany's DAX index fell 0.35 percent, and France's CAC-40 lost 0.57 percent.

------

AP Business Writer Leslie Wines contributed to this report.

------

On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

[Livyjr]

"Legislature, lobbying forces blast Spitzer's revised budget"

By MICHAEL GORMLEY, Associated Press

Last updated: 5:17 p.m., Monday, February 11, 2008

ALBANY -- Lawmakers and the labor and business forces that drive New York state government are criticizing Gov. Eliot Spitzer's gloomy revision of his state budget proposal.

Projecting $384 million less in revenue for the budget due April 1 because of a continued decline in the national economy, Spitzer trimmed his proposed 2008-09 budget so it would increase spending by 4.8 percent over the current budget.

Before the amendments, the plan was to increase spending by about 5 percent to a total of $124 billion.

To help fill the gap, Spitzer proposes $36 million in savings at government agencies, a withdrawal of $25 million from the Environmental Protection Fund, and $50 million more revenue from a "covered lives assessment" charged to health insurance companies, among other measures.

"The governor would increase taxes again," said Republican Assemblyman James Hayes of Erie County at a legislative budget hearing.

"It will almost assuredly be put on the backs of consumers and insurers in New York state."

Senate Republican leader Joseph Bruno says Spitzer's to plan hike assessments on health insurers is actually a tax increase, despite the governor's promise not to raise taxes.

Bruno says the state will lose businesses if they are taxed more and much of the cost will likely be passed on to consumers.

"I don't know the economics of that, I don't know the common sense of that," Bruno said.

Assembly Speaker Sheldon Silver says he understands Spitzer's economic concerns, but says the Legislature still must review and revise the proposed budget.

"It's a good starting point," Silver said of Spitzer's budget.

But he added: "We clearly have concerns."

He told the New York Bankers' Association Monday that although there is "uncertainty in our economy," the state must honor its moral obligations to increase school aid, provide health care for every child, and other measures that are priorities for the Democrat-led Assembly.

The New York Health Plan Association said Spitzer's latest targeting of health care cuts too deeply when the governor also wants to make sure more New Yorkers have health insurance.

"The proposed amendments to the 2008-2009 Executive Budget clearly raise taxes on those who currently have health insurance and, frankly, we are perplexed at how Gov. Spitzer hopes to expand the number of New Yorkers covered by health insurance when he is making the very cost of insurance more unaffordable," said Paul Macielak, president and CEO of the association.

He said Spitzer's amendments would result in a $190 million increase in the assessment on health plans if the Legislature doesn't change it.

"The covered lives assessment is pure and simple a tax on every insurance policy sold in New York," he said.

Environmentalists are also upset with Spitzer's amendment.

Spitzer's plan to take $25 million more from the Environmental Protection Fund will result in a total loss of $125 million or about half the fund, said John Sheehan of The Adirondack Council.

Sheehan said Spitzer's budgeting threatens the planned purchase of $200 million worth of Adirondack land that would protect those areas from development.

"The EPF was created by the Legislature to be used for the express intent of environmental protection and the protection of public health," said the council's Scott Lorey.

"This raid on the dedicated fund is contradictory to the Legislature's intent for creating it."

[Livyjr]

"Lake-effect snow batters communities along eastern Lake Ontario"

Associated Press

Last updated: 3:52 p.m., Monday, February 11, 2008

OSWEGO, N.Y. -- Persistent lake effect squalls buried parts of upstate New York along eastern Lake Ontario under more than three feet of snow Monday.

Route 104 was nearly impassable in some sections between Oswego and Hannibal due to tractor-trailer accidents, state police said.

The blowing snow prompted Oswego Town Supervisor Victoria Mullen to issue a statement asking motorists to avoid the area because of hazardous driving conditions.

"The highway crews are having a difficult time keeping up with the amount of snow and blowing conditions," Mullen said.

Forecasters said the squalls were expected to continue Monday night.

A winter storm warning was in effect for Tuesday when a storm system developing over the lower Mississippi Valley was expected to bring widespread snow to upstate New York.

Meanwhile, many schools from Buffalo to Syracuse were closed or delayed the start of classes Monday because of bitterly cold conditions.

Single-digit temperatures plus high winds drove the wind-child factor to nearly 20 below across much of upstate New York.

The arctic conditions hit the region on Sunday, when blowing snow was blamed for a 36-car pileup on an interstate just west of Rochester.

A 17-year-old girl was killed in the crash and 24 other people were injured.

[Livyjr]

"Empire Zone tax breaks for businesses blasted"

By MICHAEL GORMLEY, Associated Press

Last updated: 3:23 p.m., Monday, February 11, 2008

ALBANY -- State Comptroller Thomas DiNapoli said Monday that the state's multimillion dollar Empire Zone program isn't monitored closely enough to determine whether it's effective at retaining and attracting jobs.

The Democrat said it's time for the state to rethink the program, which gives millions of dollars in tax breaks to companies.

The Empire Zone program was also a topic Monday at a state budget hearing on economic development programs.

Westchester Assemblyman Richard Brodsky said Empire Zones have failed to turn around the upstate economy.

He proposed a new approach, including helping businesses pay employees higher, union-level wages to create an economic engine that would help communities thrive.

"If these programs were for poor people it would have been shot down years ago," Brodsky said.

He noted the $30 million bailout of dairy farmers in 2007 was a success because it sent checks directly to 5,100 farmers hurt by falling prices.

He said the farmers used that money in their communities, creating a positive ripple effect in the economy.

Spitzer economic development chiefs Dan Gundersen and Patrick Foye told legislators at the hearing that the program is being changed.

They said aid is now being more clearly targeted to need in each region.

As a candidate, Spitzer had been critical of Empire Zones under the Pataki administration, saying they were long used to help political cronies and failed to provide the jobs that were promised.

DiNapoli, a Democrat, found that officials failed to determine if job creation claims in Empire Zones were accurate.

His report was based on reviews of Empire Zones in municipalities including Buffalo, Syracuse, Rochester, Tonawanda and Yonkers and in Broome County.

A 2004 comptroller's office report found similar concerns in those areas.

"New York should take another look at the Empire Zone program," DiNapoli said.

"We need to know if we're getting a bang for the taxpayers' buck."

"If officials representing local zones can't demonstrate that the program is working, and if local governments and taxpayers are not benefiting from a program that's supposed to generate economic development and create jobs, it calls into question the value of the program."

After years of criticism, Monday's comments could signal the beginning of an overhaul of the system that was at the core of economic development efforts by Pataki and the Legislature.

Senate Republican leader Joseph Bruno of Rensselaer County agreed he could support some changes in Empire Zones to make sure the jobs that are promised are realized.

But he said there's no need to scrap the program.

"I think they have been effective," Bruno said.

[Livyjr]

THE NEW YORK TIMES

"Spitzer Quickly Reduces Revenue Projections, Citing the Gloomy Economy"

By DANNY HAKIM

Published: February 11, 2008

Only three weeks after presenting its budget, Gov. Eliot Spitzer’s administration is lowering projections for tax revenue by $384 million, because of increasingly ominous reports of distress on Wall Street and in the nation’s economy.

To keep the budget in balance, the governor is proposing several new spending cuts, including further paring back increases in Medicaid reimbursements to hospitals, nursing homes and other health care providers, and dipping into the state’s environmental protection fund more than had been expected.

While the changes represent a small fraction of New York’s $124 billion budget, they are a sign of how rapidly shifting economic forecasts are causing havoc with the state’s fiscal planning.

It is rare for a governor to second-guess his own budget, especially so soon after releasing it.

The new projections may also be an indicator of long-term problems; the state is anticipating annual tax revenue to be $500 million less than expected for several succeeding years.

The governor’s budget director, Laura L. Anglin, said she did not know whether the administration might have to cut back further later in the year.

“I cannot rule that out,” Ms. Anglin said on Saturday.

“If things continue to deteriorate, it will become part of the budget discussions again."

"We hope that’s not the case.”

The governor is already taking criticism from advocacy groups that say he cut too much with his first effort, and from fiscal conservatives who have called for even deeper cuts than Mr. Spitzer is now proposing.

Some prominent labor unions in industries affected by the cuts have taken steps to bolster their alliances with Senate Republicans.

Explaining how the state’s numbers could shift so quickly, Ms. Anglin said the budget released by the Spitzer administration on Jan. 22 was based on an economic forecast from the end of last year.

In recent weeks, several forecasters have said that the nation’s economy is in recession, though Mr. Spitzer is not ready to go that far.

“Obviously the national economic situation has continued to deteriorate; the risk of a recession has increased,” Ms. Anglin said.

The new plan calls for state spending to increase by 4.8 percent — still more than one and a half times the rate of inflation — instead of 5 percent.

The governor and the Legislature will negotiate a final budget over the next several weeks, aiming for a March 31 deadline.

The primary causes for the new estimate are shrinking projections for Wall Street bonuses because of losses on subprime mortgages and lower-than-expected revenue from capital gains taxes on real estate transactions.

The Spitzer administration had projected that Wall Street bonuses would recover by next year and grow by 8.6 percent.

Its new projection is for bonuses to remain flat next year after falling 5.5 percent this year.

“You keep wanting to put one foot on the ground,” Ms. Anglin said, “but it’s hard to tell where you’re going to land.”

Besides smaller increases in Medicaid spending, the administration will propose making health insurers finance some programs the state had planned to pay for, like vaccinations against cervical cancer and anti-obesity efforts.

The state is making up $147 million of the shortfall because lower Medicaid enrollments are leading it to reduce estimates of spending for some health programs.

The governor also plans to take about $25 million that was set aside for environmental programs and use it instead for general spending.

Mr. Spitzer’s original budget had a deficit of $4.4 billion.

He proposed to close it by reducing increases in health care spending by $1 billion and paring a planned rise in education aid.

Teachers’ and health care workers’ unions had already vowed to fight for more money in their sectors.

The latest changes will include some creative steps, like prepaying $88 million to the state pension fund so it will count in the current fiscal year instead of the next one, which begins April 1.

Edmund J. McMahon, director of the Empire Center for New York State Policy, a conservative group, said last week that the governor should propose a spending increase closer to the rate of inflation, projected at 2.7 percent for the state.

Among other things, he said, the administration should be cutting jobs, instead of adding them, as is still the plan.

“Government should be forced to live well within its means, especially at a time like this,” Mr. McMahon said.

Ms. Anglin portrayed the revisions as the only viable course.

“It was really the right decision to put forward such major revisions, but it’s not normally done,” she said. “People will be surprised. It was the right thing to do to protect the state’s finances.”

http://www.nytimes.com/2008/02/11/nyregion...amp;oref=slogin

[Livyjr]

THE NEW YORK POST

"PAPER-TRAIL SHOCK - GOV'S FILES BARE PLOT'S EARLY START"

February 11, 2008 -- Gov. Spitzer'S office has turned over "damaging" documents to the Albany County District Attorney's Office revealing that the Dirty Tricks plot against his chief GOP opponent began much earlier than suspected, The Post has learned.

Law-enforcement sources said Dirty Tricks Scandal material subpoenaed weeks ago by DA David Soares from Spitzer's office suggests that the effort to damage or destroy the career of state Senate Majority Leader Joseph Bruno (R-Rensselaer) began as early as January 2007, the month Spitzer took office.

"The documents, which include e-mails, are damaging and embarrassing, and the press will have a field day if the material ever becomes public," said a source close to Spitzer.

Meanwhile, two sources said Spitzer's chief counsel, David Nocenti, testified under oath for several hours on the scandal Thursday before the state Public Integrity Commission, which is conducting its own probe.

A day later, members of the Spitzer-controlled commission - which is believed to be focusing on the actions of former top Spitzer aide Darren Dopp - were told at a secret "executive session" that action in the case, most likely a charge against Dopp, is expected within weeks.

Until now, Spitzer - who has yet to testify under oath about the scandal - has maintained that the use of the State Police by his aides to gather supposedly damaging information on Bruno began only weeks before The Post disclosed the existence of the plot last July 5.

Spitzer, in response to Attorney General Andrew Cuomo's bombshell July 23 report on the plot, also insisted he became aware of the effort to gather evidence on Bruno only shortly before The Post's disclosure.

Meanwhile, officials said "serious tensions" have developed between Soares and Herbert Teitelbaum, executive director of the Spitzer-controlled Public Integrity Commission, over who should have the lead responsibility for investigating the scandal.

Soares, officials said, believes Spitzer's aides are pressing Teitelbaum to place most of the blame for the scandal on Dopp, even though evidence made public by Cuomo shows that other senior officials were involved.

Soares has told associates he is conducting a "much broader" review of the scandal and has said others besides Dopp were deeply involved.

Dopp, a longtime Spitzer loyalist now working for Spitzer-connected lobbyist Pat Lynch, has sent signals to several political figures that he "won't remain silent" if he is legally charged.

fredric.dicker@nypost.com

http://www.nypost.com/seven/02112008/news/...shock_19928.htm

[Livyjr]

THE NEW YORK POST

"SPITZ AIDE FACING SLAP OVER SCANDAL 'He wants to wrap this thing up quickly, bringing the investigation to a close.'"

February 4, 2008 -- THE state Public Integrity Commission could seek disciplinary action against a former top aide to Gov. Spitzer at a meeting Friday, while Senate investigators prepare for a new hearing on the Dirty Tricks Scandal four days later.

Sources said the commission's executive director, Herbert Teitelbaum, may ask the 13-member Spitzer-controlled panel to approve a "notice of reasonable cause" against Darren Dopp, the governor's former communications director.

The sources said the notice would charge Dopp with violating the state Ethics Law by using the State Police to gather evidence purportedly damaging to Senate Majority Leader Joseph Bruno (R-Rensselaer), which he then leaked to an Albany newspaper.

Teitelbaum, who has been accused by Republicans and some close to Dopp of trying to cover up for Spitzer in the scandal, told associates that "he wants to wrap this thing up quickly, bringing the investigation to a close," a source told The Post.

http://www.nypost.com/seven/02042008/news/...ndal_251165.htm

THE NEW YORK DAILY NEWS

"New Troopergate probe on Spitzer's top state counsel Nocenti"

Monday, February 11th 2008, 4:00 AM

Troopergate probers are taking aim again in Albany, with the cross hairs now trained on Gov. Spitzer's top state counsel.

David Nocenti, who joined Spitzer in his first days as state attorney general in the 1990s, was grilled for several hours last week by the state Commission on Public Integrity, according to a source familiar with its investigation.

The probe centers on the Spitzer administration's failed effort to discredit the governor's top political enemy - Senate Majority Leader Joseph Bruno.

A source close to Albany County District Attorney David Soares confirmed he, too, is looking with renewed interest at Nocenti, who notarized statements given to state Attorney General Andrew Cuomo last July by Spitzer's former communications director, Darren Dopp, and the governor's secretary, Richard Baum.

Both Dopp and Baum had refused to be interviewed by Cuomo's investigators.

Neither Nocenti nor his attorney, Peter Moschetti, a former member of the now-defunct state Lobbying Commission, returned calls for comment.

Investigators have questioned whether the statements Nocenti notarized were properly sworn, despite the governor's own insistence to the contrary.

The Notary Public License Law requires notaries to issue oaths.

Failure to do so is a misdemeanor, although experts say the law is routinely flouted and charges are rarely brought.

The tersely worded statements notarized by Nocenti do not include a phrase typical to sworn affidavits - "the signatories attest to these statements under penalty of perjury" - but merely state that they were sworn to Nocenti on July 22.

Confusion over the statements prevented Soares from charging Dopp with perjury in December after the Public Integrity Commission flagged a discrepancy between Dopp's written statement to Cuomo and his testimony under oath before the commission.

Soares initially cleared his fellow Democrat, Spitzer, of any wrongdoing in a report released in September and went so far as to say that he did not believe the governor and his aides engaged in "a plot to smear" Bruno, adding, "It's pretty hard to believe that they actually conspired."

But Soares reopened his investigation two months later, eying a potential perjury charge against Dopp.

The DA is also reportedly trying to determine whether Dopp was pressured, coerced or encouraged to sign his statement to Cuomo by other Spitzer aides -including Nocenti, and two other lawyers, Peter Pope and Sean Patrick Maloney.

The Public Integrity Commission has also subpoenaed an Aug. 10 letter to Nocenti from Terence Kindlon, a lawyer who once represented Dopp, asking the administration when Dopp would be reinstated to his $175,000-a-year job.

Dopp, another veteran of Spitzer's attorney general office, was suspended without pay by the governor on July 23, after Cuomo released a report that found Dopp and another former Spitzer aide, William Howard, had misused the state police in their effort to tar Bruno, although they did not break any laws.

Dopp returned to the payroll Aug. 27 - just over one week before he testified before the Public Integrity Commission - but he only drew vacation pay and wasn't formally reinstated to his job.

He left the governor's staff and now works for Albany lobbyist Patricia Lynch as a communications specialist.

ebenjamin@nydailynews.com

http://www.nydailynews.com/news/columnists...amin/index.html

[Livyjr]

THE NEW YORK TIMES

"Editorial - On Investigating a Republican"

Published: February 9, 2008

The federal investigation involving Joseph Bruno, the New York Senate majority leader, reportedly broadened this week.

The wider investigation raises new questions about Mr. Bruno’s own conduct, of course.

But, the sluggish pace also makes us ask whether White House politics could be dragging out an investigation of considerable importance to New Yorkers and to Washington.

Mr. Bruno first said that he was part of a federal inquiry in December 2006, but he indicated that the investigation had been going on for some time.

The questioning seemed to focus in part on a consulting business he runs, the details of which have always been unnecessarily sketchy.

This week, The Times reported that the investigation had expanded to include subpoenas to pension funds affiliated with various union locals.

The unions, which often have business before the Legislature, have large sums in an investment fund that once employed Mr. Bruno.

Mr. Bruno has denied any wrongdoing or that he is a target.

And there have been no charges filed.

Still, New Yorkers have a strong interest in having these matters settled as quickly as possible.

By virtue of his control over the State Senate, Mr. Bruno is an enormously important figure in state government.

He not only has a large say in how laws are written and taxpayers’ money is spent, but he is also the state’s top Republican official.

This year, Mr. Bruno’s efforts are crucial as he heads up the fight to keep the State Senate in the hands of his fellow Republicans.

Because Democrats control the lower house and Gov. Eliot Spitzer is a Democrat, losing the narrow Republican majority in the Senate would be a big deal far beyond Albany.

New York’s Democrats would then control Congressional redistricting after the 2010 census and could use their power to wrest seats in the House from the Republicans.

Given all of this, it is hard not to be at least a tad skeptical of the pace at which the investigation is proceeding.

Last year, it became clear that the Bush Justice Department was driven by political partisanship.

After revelations pointing to political motives in hiring and firing United States attorneys, which led to former Attorney General Alberto Gonzales’s resignation, the Justice Department hardly deserves the benefit of the doubt in its handling of investigations of Republicans.

In the end, Mr. Bruno may well be fully exonerated, but right now these serious questions are out there hanging over the Senate and its leader.

New Yorkers are entitled to have the matter wrapped up as quickly as possible, to resolve any doubts about Mr. Bruno and about those charged with investigating him.

http://www.nytimes.com/2008/02/09/opinion/...runo&st=nyt

[Livyjr]

THE NEW YORK TIMES

"The Empire Zone - Bruno’s Activities Give Pause to Ethics School"

By DANNY HAKIM

Published: February 11, 2008

ALBANY — The federal investigation of the Senate majority leader, Joseph L. Bruno, is weighing on a Connecticut school dedicated to teaching ethics.

How’s that?

Wright Investors’ Service, an investment firm that had employed Mr. Bruno, below, for more than a decade, is largely owned by the School for Ethical Education.

John Winthrop Wright, the former chairman and chief executive of Wright Investors’ Service, founded the school and left his Wright holdings to it upon his death in 1996. T

The school has no students of its own but teaches ethics courses to students at institutions ranging from elementary schools to colleges.

Both the school and Wright are based in Milford, Conn., and continue to be closely intertwined.

Not only does the school own roughly 40 percent of Wright, but the chairman of the school’s board, Peter Donovan, is also the chairman and chief executive of Wright, and other Wright executives also serve on the school’s board.

Some of the non-Wright trustees said they were concerned that Wright had been enmeshed in a federal investigation of Mr. Bruno’s business activities.

Wright and Mr. Bruno severed their relationship in December after The New York Times disclosed that several labor union locals that were close to Mr. Bruno and had lobbied Senate Republicans had been using Wright to manage their pension money.

Federal investigators have subpoenaed records from several of the pension funds.

“Our big push is to tell people they need role models,” said Jacky Durrell, one of the non-Wright trustees, adding, “You can’t tell people how to act if you aren’t following the rules.”

In a statement, Wright Investors’ Services said that the company had “steadfastly supported S.E.E.’s mission of promoting the advancement of ethical behavior” and “we also practice what we preach.”

The statement concluded, “Any suggestion that the events of recent months represent a departure from those standards or compromise our ability to maintain a close working relationship with the school in support of its principles is without foundation.”

Mr. Bruno reiterated last week that he had done nothing wrong.

Another non-Wright trustee, Steve Monahan, said that he was prepared to raise the issue of Mr. Bruno’s job at a meeting late last year “but Donovan pre-empted me by saying Bruno had already resigned.”

Mickey Herbert, another trustee who is not employed by Wright, described the discussion from a recent board meeting:

“What we were told was that they didn’t believe the school or Wright had done anything wrong.”

Asked whether Mr. Donovan should step down from his role at the school, Mr. Monahan said:

“I think as chairman of the school, he does a very good job."

"I think it’s a reasonable question to put on the table, but I see no reason to consider it at this time.”

Plan for a Free College Education

A boon for Syracuse parents is tucked away in the bowels of the budget.

Under a pilot program, the Spitzer administration is proposing that Syracuse high school graduates be eligible for free tuition to any State University of New York or City University of New York college.

The proposal will require the approval of the Legislature and is expected to cost a couple of million dollars annually within a few years.

Would the program expand beyond Syracuse?

While the Syracuse effort is linked to a program by the private Say Yes to Education foundation, Manuel Rivera, the state’s deputy secretary for education, said, “The success of the demonstration will determine future expansion of the program.”

A Debate Over Parole Rates

Republican lawmakers are blaming the Spitzer administration for an increase in the parole rates of violent criminals.

“This administration philosophically seems to be very soft on criminals and doing everything and anything they can to get prisoners who have committed murder out of prison,” the Senate majority leader, Joseph L. Bruno, said last week.

Mr. Bruno and other Senate Republicans have introduced legislation that would make it tougher for the state’s most violent prisoners to get out on parole.

Thirteen percent of first-time violent offenders were paroled last year, up from 3 percent in 2005, according to the parole board.

Errol Cockfield, a spokesman for Gov. Eliot Spitzer, pointed out that most of the appointees on the parole board were Republicans.

Of the 17 members on the board, 5 were appointed by Mr. Spitzer.

“The overwhelming majority of appointees now serving on the state parole board were appointed by former Governor George Pataki and confirmed by the Republican-led Senate,” Mr. Cockfield said.

In January 2006, about 1,000 inmates filed a class-action lawsuit against the Pataki administration, claiming that they were unfairly denied parole.

The case is ongoing.

TRYMAINE LEE

Making Businesses Accountable

In recent weeks, the Spitzer administration has sent letters to 180 businesses threatening to rescind their tax credits under the Empire Zone program because they had not created enough jobs.

The administration also made it tougher to earn future credits under the program, which tries to encourage economic growth.

The steps are aimed at shoring up a program that has cost the state billions of dollars, and not always with appreciable results.

Warning letters were sent to 2,500 businesses last year, and the latest round has only begun.

“Some of those 180 companies have already given up the ghost and told us they’re not going to contest it,” said Patrick Foye, above, the downstate chairman of the Empire State Development Corporation.

“The news here is that there will be for the first time ever companies decertified under the Empire Zone program,” he said.

Kenneth Adams, president of the Business Council of New York State, said he supported efforts to tweak the program, but added, “There should be less emphasis on looking back, nickel-and-diming companies.”

But the move did draw praise from a frequent administration critic.

“For all the shouting of reform, this is finally the beginning of reforming something that really matters,” said Assemblyman Richard L. Brodsky, a Westchester Democrat.

http://www.nytimes.com/2008/02/11/nyregion...ml?ref=nyregion