Obama Said to Seek $300 Billion Jobs Package
By Albert R. Hunt - Sep 7, 2011
Source: Bloomberg
President Barack Obama plans to propose sparking job growth by injecting more than $300 billion into the economy next year, mostly through tax cuts, infrastructure spending and direct aid to state and local governments.
Obama will call on Congress to offset the cost of the short-term jobs measures by raising tax revenue in later years. This would be part of a long-term deficit reduction package, including spending and entitlement cuts as well as revenue increases, that he will present next week to the congressional panel charged with finding ways to reduce the nation’s debt.
Almost half the stimulus would come from tax cuts, which include an extension of a two-percentage-point reduction in the payroll tax paid by workers due to expire Dec. 31 and a new decrease in the portion of the tax paid by employers.
Obama is set to lay out his plans in an address to Congress tomorrow as unemployment remains at 9.1 percent more than two years after the official end of the worst recession since the Great Depression. Payroll growth stalled last month.
The unemployment rate and the sluggish recovery will be central issues as Obama runs for re-election next year. Former Massachusetts Governor Mitt Romney, a leading Republican seeking the party’s nomination to face Obama in November 2012, yesterday offered his own 59-point economic plan, including tax cuts for those making $200,000 or less a year. He and seven other Republican candidates are scheduled to debate tonight in California.
Plan Previewed
The main components of Obama’s jobs plan, though not its scale, have been largely telegraphed by the administration. For weeks, people familiar with deliberations have said the White House is considering tax incentives, infrastructure and assistance to local governments. Obama has stressed construction and tax cuts in recent public speeches...Read more...
The US postal service in great financial turmoil
Postal Service Is Nearing Default as Losses Mount
By STEVEN GREENHOUSE
September 4, 2011
The United States Postal Service has long lived on the financial edge, but it has never been as close to the precipice as it is today: the agency is so low on cash that it will not be able to make a $5.5 billion payment due this month and may have to shut down entirely this winter unless Congress takes emergency action to stabilize its finances.
“Our situation is extremely serious,” the postmaster general, Patrick R. Donahoe, said in an interview. “If Congress doesn’t act, we will default.”
In recent weeks, Mr. Donahoe has been pushing a series of painful cost-cutting measures to erase the agency’s deficit, which will reach $9.2 billion this fiscal year. They include eliminating Saturday mail delivery, closing up to 3,700 postal locations and laying off 120,000 workers — nearly one-fifth of the agency’s work force — despite a no-layoffs clause in the unions’ contracts.
The post office’s problems stem from one hard reality: it is being squeezed on both revenue and costs.
As any computer user knows, the Internet revolution has led to people and businesses sending far less conventional mail.
At the same time, decades of contractual promises made to unionized workers, including no-layoff clauses, are increasing the post office’s costs. Labor represents 80 percent of the agency’s expenses, compared with 53 percent at United Parcel Service and 32 percent at FedEx, its two biggest private competitors. Postal workers also receive more generous health benefits than most other federal employees. Read more...
By STEVEN GREENHOUSE
September 4, 2011
The United States Postal Service has long lived on the financial edge, but it has never been as close to the precipice as it is today: the agency is so low on cash that it will not be able to make a $5.5 billion payment due this month and may have to shut down entirely this winter unless Congress takes emergency action to stabilize its finances.
“Our situation is extremely serious,” the postmaster general, Patrick R. Donahoe, said in an interview. “If Congress doesn’t act, we will default.”
In recent weeks, Mr. Donahoe has been pushing a series of painful cost-cutting measures to erase the agency’s deficit, which will reach $9.2 billion this fiscal year. They include eliminating Saturday mail delivery, closing up to 3,700 postal locations and laying off 120,000 workers — nearly one-fifth of the agency’s work force — despite a no-layoffs clause in the unions’ contracts.
The post office’s problems stem from one hard reality: it is being squeezed on both revenue and costs.
As any computer user knows, the Internet revolution has led to people and businesses sending far less conventional mail.
At the same time, decades of contractual promises made to unionized workers, including no-layoff clauses, are increasing the post office’s costs. Labor represents 80 percent of the agency’s expenses, compared with 53 percent at United Parcel Service and 32 percent at FedEx, its two biggest private competitors. Postal workers also receive more generous health benefits than most other federal employees. Read more...
Tough economic climate as Obama seeks 2nd term
By CHARLES BABINGTON - Associated Press | AP – 5 septembre 2011
WASHINGTON (AP) — President Barack Obama faces a long re-election campaign having all but given up on the economy rebounding in any meaningful way before November 2012. His own budget office predicts unemployment will stay at about 9 percent, a frightening number for any president seeking a second term.
Obama's prospects aren't entirely grim, however. The GOP, heavily influenced by the tea party, may nominate someone so deeply flawed or right-leaning that, Democrats hope, Obama can persuade Americans to give him a second chance rather than risk the alternative.
Democrats say the man who ran on hope and change in 2008 will have to claw his way toward a second term with a sharply negative campaign.
The strengths and weaknesses of his prospects seem clear.
Next year's unemployment rate is likely to be the highest in a presidential election since 1940. But the leading Republican contenders have denigrated Social Security, switched positions on critical issues and done other things that might make them ripe targets for Obama's well-funded campaign.
Democratic strategist Doug Hattaway says GOP candidates, including Texas Gov. Rick Perry and former Massachusetts Gov. Mitt Romney, may turn off independent voters with their embrace of tea party stands on taxes, spending and program cuts.
Obama "should lump them all together and make them answer for their slash-and-burn politics," said Hattaway, a former top aide to Hillary Rodham Clinton, Obama's rival for the 2008 Democratic presidential nomination.
To do so, Hattaway said, Obama must link the candidates to congressional Republicans, blamed by Democrats for the nation's stalled job growth and recent downgrade of U.S. creditworthiness.
Making the connection might not prove easy.
Obama's potential challengers have avoided getting dragged into details of the bitter Capitol Hill fights over deficit spending. At least for now, they can lob criticisms at the president while offering few specific, measurable alternatives.
"President Obama oversaw an economy that created zero jobs last month, and that is unacceptable," Romney said Friday.
But the influence of the tea party and other conservative groups may give Obama some openings, by pushing the GOP field so far to the right that the candidates risk alienating vital independent voters.
In a debate last month, the top contenders pledged to oppose a deficit-reduction plan even if it cut $10 in spending for every $1 raised by new taxes. Perry, who entered the race after that debate, also has taken a tough stand against higher taxes.
Obama's team says independents, who might pay scant attention to ideologically driven primaries, will find such positions extreme when they compare the eventual GOP nominee and the president.
Political aide David Axelrod hinted that Obama will try to sharpen his differences with Republicans who insist on spending cuts in virtually every area and who refuse to let tax cuts expire, as scheduled, for the wealthiest.
It's hard "to create an economy in which people can get decent jobs and raise a family at the same time we're cutting back on our commitment to spending on education and research and development that will create innovation and jobs," Axelrod said in an interview.
The Republicans' "essential message is, let's go back to the policies that helped get us in this mess," he said, citing Wall Street deregulation and corporate tax breaks.
If GOP lawmakers, backed by the presidential hopefuls, continue to thwart Obama's bid to mix targeted spending cuts with tax increases, Axelrod said, "we're going to take our case to the American people."
Recent polls underscore Obama's challenge. A Pew Research poll found that 39 percent of independents approve of his job performance, while 52 percent disapprove.
An AP-GfK poll showed a sharp erosion of support for Obama among white voters and women. Less than half of all women and less than half of all men approve of the job he's doing, and only 50 percent of women say he deserves re-election.
But the same polls show that far more voters blame former President George W. Bush more than Obama for the nation's economic woes. Whether that sentiment lingers for 16 more months could prove crucial.
Hattaway said Obama must start by winning back moderates and motivating "millennials," voters in their 20s and early 30s.
"The economy is not going to come roaring back before the election, so he has to give them a vision" for a future with jobs and with social justice for groups, including gays, Hattaway said.
Obama also must try to minimize the frustration among his liberal base supporters, many of whom feel he is too quick to compromise. Some complained loudly Friday when Obama yanked a proposal to tighten federal smog standards.
Questions about the environment, war and foreign affairs will figure into the 2012 race. But all parties agree jobs are the overriding issue.
Analysts differ on what level of unemployment is politically fatal.
President Ronald Reagan handily won re-election in 1984 with unemployment at 7.2 percent, which was down slightly from the rate at the start of his term. President Jimmy Carter lost when unemployment was at 7.5 percent and President George H.W. Bush lost with a similar level, but both faced other problems as well.
Hopeful Democrats say Obama can survive next year if people feel growth is coming soon. Another way to survive is uglier: admitting the economy is a mess, but pressing the case that the GOP alternative is so unacceptable that the incumbent should stay in office, even with no recovery in sight.
Obama's aides say the election will be "a choice, not a referendum." That hints at a bruising effort to divert attention from the president's record and focus on what the Obama campaign believes are the GOP nominee's chief shortcomings.
Democratic optimists feel the GOP nominating process will play into that strategy. The Democratic National Committee issues a steady stream of statements and videos with headlines such as "Romney makes move to embrace Tea Party."
Several Republican candidates, including Romney, Minnesota Rep. Michele Bachmann and Perry, are proven vote-getters at the state level. Soon they will show whether they can handle the scrutiny and grind of a presidential campaign.
Democrats say their records provide much to use against them.
Perry, for instance, has called Social Security "a Ponzi scheme," and said climate change is a "contrived phony mess."
Romney switched his position on abortion, gay rights and gun control after leaving the Massachusetts governor's office and seeking the Republican presidential nod. He also is criticized for his role in Bain Capital, a corporate takeover firm that eliminated jobs in some cases but expanded them in others.
Bachmann has spent only three terms in the House; the last member to go directly to the White House was James Garfield, elected in 1880. If Sarah Palin decides to run, she will be asked why she quit her job as Alaska's governor with more than a year left in her term.
WASHINGTON (AP) — President Barack Obama faces a long re-election campaign having all but given up on the economy rebounding in any meaningful way before November 2012. His own budget office predicts unemployment will stay at about 9 percent, a frightening number for any president seeking a second term.
Obama's prospects aren't entirely grim, however. The GOP, heavily influenced by the tea party, may nominate someone so deeply flawed or right-leaning that, Democrats hope, Obama can persuade Americans to give him a second chance rather than risk the alternative.
Democrats say the man who ran on hope and change in 2008 will have to claw his way toward a second term with a sharply negative campaign.
The strengths and weaknesses of his prospects seem clear.
Next year's unemployment rate is likely to be the highest in a presidential election since 1940. But the leading Republican contenders have denigrated Social Security, switched positions on critical issues and done other things that might make them ripe targets for Obama's well-funded campaign.
Democratic strategist Doug Hattaway says GOP candidates, including Texas Gov. Rick Perry and former Massachusetts Gov. Mitt Romney, may turn off independent voters with their embrace of tea party stands on taxes, spending and program cuts.
Obama "should lump them all together and make them answer for their slash-and-burn politics," said Hattaway, a former top aide to Hillary Rodham Clinton, Obama's rival for the 2008 Democratic presidential nomination.
To do so, Hattaway said, Obama must link the candidates to congressional Republicans, blamed by Democrats for the nation's stalled job growth and recent downgrade of U.S. creditworthiness.
Making the connection might not prove easy.
Obama's potential challengers have avoided getting dragged into details of the bitter Capitol Hill fights over deficit spending. At least for now, they can lob criticisms at the president while offering few specific, measurable alternatives.
"President Obama oversaw an economy that created zero jobs last month, and that is unacceptable," Romney said Friday.
But the influence of the tea party and other conservative groups may give Obama some openings, by pushing the GOP field so far to the right that the candidates risk alienating vital independent voters.
In a debate last month, the top contenders pledged to oppose a deficit-reduction plan even if it cut $10 in spending for every $1 raised by new taxes. Perry, who entered the race after that debate, also has taken a tough stand against higher taxes.
Obama's team says independents, who might pay scant attention to ideologically driven primaries, will find such positions extreme when they compare the eventual GOP nominee and the president.
Political aide David Axelrod hinted that Obama will try to sharpen his differences with Republicans who insist on spending cuts in virtually every area and who refuse to let tax cuts expire, as scheduled, for the wealthiest.
It's hard "to create an economy in which people can get decent jobs and raise a family at the same time we're cutting back on our commitment to spending on education and research and development that will create innovation and jobs," Axelrod said in an interview.
The Republicans' "essential message is, let's go back to the policies that helped get us in this mess," he said, citing Wall Street deregulation and corporate tax breaks.
If GOP lawmakers, backed by the presidential hopefuls, continue to thwart Obama's bid to mix targeted spending cuts with tax increases, Axelrod said, "we're going to take our case to the American people."
Recent polls underscore Obama's challenge. A Pew Research poll found that 39 percent of independents approve of his job performance, while 52 percent disapprove.
An AP-GfK poll showed a sharp erosion of support for Obama among white voters and women. Less than half of all women and less than half of all men approve of the job he's doing, and only 50 percent of women say he deserves re-election.
But the same polls show that far more voters blame former President George W. Bush more than Obama for the nation's economic woes. Whether that sentiment lingers for 16 more months could prove crucial.
Hattaway said Obama must start by winning back moderates and motivating "millennials," voters in their 20s and early 30s.
"The economy is not going to come roaring back before the election, so he has to give them a vision" for a future with jobs and with social justice for groups, including gays, Hattaway said.
Obama also must try to minimize the frustration among his liberal base supporters, many of whom feel he is too quick to compromise. Some complained loudly Friday when Obama yanked a proposal to tighten federal smog standards.
Questions about the environment, war and foreign affairs will figure into the 2012 race. But all parties agree jobs are the overriding issue.
Analysts differ on what level of unemployment is politically fatal.
President Ronald Reagan handily won re-election in 1984 with unemployment at 7.2 percent, which was down slightly from the rate at the start of his term. President Jimmy Carter lost when unemployment was at 7.5 percent and President George H.W. Bush lost with a similar level, but both faced other problems as well.
Hopeful Democrats say Obama can survive next year if people feel growth is coming soon. Another way to survive is uglier: admitting the economy is a mess, but pressing the case that the GOP alternative is so unacceptable that the incumbent should stay in office, even with no recovery in sight.
Obama's aides say the election will be "a choice, not a referendum." That hints at a bruising effort to divert attention from the president's record and focus on what the Obama campaign believes are the GOP nominee's chief shortcomings.
Democratic optimists feel the GOP nominating process will play into that strategy. The Democratic National Committee issues a steady stream of statements and videos with headlines such as "Romney makes move to embrace Tea Party."
Several Republican candidates, including Romney, Minnesota Rep. Michele Bachmann and Perry, are proven vote-getters at the state level. Soon they will show whether they can handle the scrutiny and grind of a presidential campaign.
Democrats say their records provide much to use against them.
Perry, for instance, has called Social Security "a Ponzi scheme," and said climate change is a "contrived phony mess."
Romney switched his position on abortion, gay rights and gun control after leaving the Massachusetts governor's office and seeking the Republican presidential nod. He also is criticized for his role in Bain Capital, a corporate takeover firm that eliminated jobs in some cases but expanded them in others.
Bachmann has spent only three terms in the House; the last member to go directly to the White House was James Garfield, elected in 1880. If Sarah Palin decides to run, she will be asked why she quit her job as Alaska's governor with more than a year left in her term.
U.S. Is Set to Sue a Dozen Big Banks Over Mortgages
By NELSON D. SCHWARTZ
Published: September 1, 2011
The federal agency that oversees the mortgage giants Fannie Mae and Freddie Mac is set to file suits against more than a dozen big banks, accusing them of misrepresenting the quality of mortgage securities they assembled and sold at the height of the housing bubble, and seeking billions of dollars in compensation.
The Federal Housing Finance Agency suits, which are expected to be filed in the coming days in federal court, are aimed at Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank, among others, according to three individuals briefed on the matter.
The suits stem from subpoenas the finance agency issued to banks a year ago. If the case is not filed Friday, they said, it will come Tuesday, shortly before a deadline expires for the housing agency to file claims.
The suits will argue the banks, which assembled the mortgages and marketed them as securities to investors, failed to perform the due diligence required under securities law and missed evidence that borrowers’ incomes were inflated or falsified. When many borrowers were unable to pay their mortgages, the securities backed by the mortgages quickly lost value.
Fannie and Freddie lost more than $30 billion, in part as a result of the deals, losses that were borne mostly by taxpayers. Read more...
Published: September 1, 2011
The federal agency that oversees the mortgage giants Fannie Mae and Freddie Mac is set to file suits against more than a dozen big banks, accusing them of misrepresenting the quality of mortgage securities they assembled and sold at the height of the housing bubble, and seeking billions of dollars in compensation.
The Federal Housing Finance Agency suits, which are expected to be filed in the coming days in federal court, are aimed at Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank, among others, according to three individuals briefed on the matter.
The suits stem from subpoenas the finance agency issued to banks a year ago. If the case is not filed Friday, they said, it will come Tuesday, shortly before a deadline expires for the housing agency to file claims.
The suits will argue the banks, which assembled the mortgages and marketed them as securities to investors, failed to perform the due diligence required under securities law and missed evidence that borrowers’ incomes were inflated or falsified. When many borrowers were unable to pay their mortgages, the securities backed by the mortgages quickly lost value.
Fannie and Freddie lost more than $30 billion, in part as a result of the deals, losses that were borne mostly by taxpayers. Read more...
Rupert Murdoch receives $12.5m bonus
News Corp chief's total pay package soars 47% to $33m, though his son James has declined $6m bonus
Rupert Murdoch, the chairman and chief executive of News Corporation, received a $12.5m (£7.7m) cash bonus for the last financial year, while his total remuneration rose 47% to $33m, according to the company's annual statement to shareholders.
His son James Murdoch – who is deputy chief operating officer, with responsibility for News Corp's business in Europe and Asia – was awarded a $6m cash bonus as part of an $18m pay package – a 74% rise on his 2010 take-home pay.
But in a statement on Friday night, James Murdoch said he would not be taking the bonus in "light of the current controversy" over phone hacking at the News of the World. "I feel that declining the bonus is the right thing to do," he said.
The bonuses were for the year to the end of June, during which time News Corp became mired in the phone-hacking scandal that engulfed the News of the World. The affair only escalated into a full-blown corporate crisis – with the closure of the News of the World and several executive resignations – in July, shortly after the end of News Corp's financial year.
Chase Carey, News Corp's chief operating officer and Murdoch's right-hand man, took home $30m in the year to 30 June, including a $10m bonus. Roger Ailes, who runs Fox News, received a slight increase in total compensation in 2011, up to $15.5m from $13.9m in 2010. Ailes received a $1.5m cash bonus.
The Murdochs' remuneration was revealed in their report to shareholders. Elisabeth Murdoch, the chief executive of TV production company Shine, received a salary of $1.7m from News Corp last year, the report shows. She received $214m in cash after News Corp bought Shine earlier this year.
Rupert's eldest son, Lachlan – who is acting chief executive of the Australian TV firm Ten Network – took home a total of $504,000 in 2011 for his work on the News Corp board. Read more...
Rupert Murdoch, the chairman and chief executive of News Corporation, received a $12.5m (£7.7m) cash bonus for the last financial year, while his total remuneration rose 47% to $33m, according to the company's annual statement to shareholders.
His son James Murdoch – who is deputy chief operating officer, with responsibility for News Corp's business in Europe and Asia – was awarded a $6m cash bonus as part of an $18m pay package – a 74% rise on his 2010 take-home pay.
But in a statement on Friday night, James Murdoch said he would not be taking the bonus in "light of the current controversy" over phone hacking at the News of the World. "I feel that declining the bonus is the right thing to do," he said.
The bonuses were for the year to the end of June, during which time News Corp became mired in the phone-hacking scandal that engulfed the News of the World. The affair only escalated into a full-blown corporate crisis – with the closure of the News of the World and several executive resignations – in July, shortly after the end of News Corp's financial year.
Chase Carey, News Corp's chief operating officer and Murdoch's right-hand man, took home $30m in the year to 30 June, including a $10m bonus. Roger Ailes, who runs Fox News, received a slight increase in total compensation in 2011, up to $15.5m from $13.9m in 2010. Ailes received a $1.5m cash bonus.
The Murdochs' remuneration was revealed in their report to shareholders. Elisabeth Murdoch, the chief executive of TV production company Shine, received a salary of $1.7m from News Corp last year, the report shows. She received $214m in cash after News Corp bought Shine earlier this year.
Rupert's eldest son, Lachlan – who is acting chief executive of the Australian TV firm Ten Network – took home a total of $504,000 in 2011 for his work on the News Corp board. Read more...
Infrastructure bank could be part of jobs package
By JIM ABRAMS - Associated Press | AP – September 1, 2011
WASHINGTON (AP) — A national infrastructure bank that would entice private investors into road and rail projects could be a major part of the jobs package that President Barack Obama hopes will finally bring relief to the unemployed.
The White House hasn't divulged the contents of the package that Obama is to unveil in an address to a joint session of Congress next week. But the president has pushed the idea of an infrastructure bank in recent speeches and has praised Senate and House bills that create such a government-sponsored lending institution.
Whether the bank, which would need time to organize, could have any real impact on the jobs situation in the coming year — and particularly before the November 2012 elections — is in dispute.
Obama seems to think it would.
"We've got the potential to create an infrastructure bank that could put construction workers to work right now, rebuilding our roads and our bridges and our vital infrastructure all across the country," he said at a news conference in July.
But Janet Kavinoky, director of infrastructure issues at the U.S. Chamber of Commerce, cautioned that "even in the next two years I don't believe the bank is going to be that kind of job creator."
The best way to spur job growth in the short term is for Congress to pass long-stalled bills to fund aviation and highway programs, she said.
The Chamber of Commerce strongly supports the infrastructure bank. Kavinoky said the United States is one of the few large countries that lack a central source of low-cost financing for construction projects. But she said it's going to take time to get it running and come up with a pipeline of projects where funds can be invested.
Sen. John Kerry, D-Mass., who's sponsoring an infrastructure bank bill, argued that "we have projects all across America that are ready to go tomorrow." He said the bank "could have money flowing in the next year easily."
Michael Likosky, senior fellow at the NYU Institute for Public Knowledge and author of "Obama's Bank: Financing a Durable New Deal," says he is working with transportation agencies in California and New York that "are waiting for the federal government to say they are going to support these projects."
A commitment to a national infrastructure bank could also provide a positive spark to financial markets and encourage investment, he said.
The bank would supplement federal spending on infrastructure by promoting private-sector investment in projects of national or regional significance. The private sector currently provides only about 6 percent of infrastructure spending.
Supporters, which range from the Chamber of Commerce to the AFL-CIO, say pension funds, private equity funds and sovereign wealth funds have hundreds of billions of dollars ready to be invested in low-risk infrastructure projects.
It's better than having pension fund money go to Treasury bonds, Likosky said. "It's really about changing our approach; we're in tough economic times and we will be for a while. We have to make sure the money we have goes further."
The Kerry bill would require $10 billion in start-up money from the government to get the first loans going and cover administrative costs. The bank would be government owned, run by a board of directors, independent of any federal agency and self-sustaining after the initial expense. Public-private partnerships, corporations and state and local governments would be eligible for the loans.
The bank's directors would pick which projects to finance based on an analysis of costs, benefits and revenue streams, such as from tolls or fees, for repaying the loan. Once the terms of the loan, including interest rates and fees to cover risk, are set, the Treasury Department would disburse the loan.
Urban projects would have to be at least $100 million in size, rural ones $25 million. The infrastructure bank's loan could cover no more than 50 percent of a project's costs.
"There is going to be a revenue stream for payback and therefore the project is going to stand on its own because it will be a good enough project to attract private-sector funding," said Sen. Kay Bailey Hutchison of Texas, one of several Republican co-sponsors of the Kerry plan.
Supporters estimate the bank could set up as much as $160 billion in government loans over a decade and anchor as much as $650 billion in projects.
In the House, Rep. Rosa DeLauro, D-Conn., has a similar bill that relies on $25 billion in start-up money and makes use of bonds as well as loans to stimulate construction projects. Both Kerry and DeLauro would cover transportation, water and energy projects.
DeLauro would also include communications projects. She says her bill is modeled after the European Investment Bank, which has been financing infrastructure projects for 50 years and last year invested more than $100 billion.
Obama, in his 2012 budget proposal, envisioned spending $30 billion to start an infrastructure bank within the Transportation Department that would provide grants as well as loans to transportation projects.
That idea drew opposition from the House Transportation Committee chairman, Rep. John Mica, R-Fla. He said in a recent article in the congressional newspaper Roll Call that it would be better to increase help for existing state infrastructure banks "rather than increasing the size of the bloated federal bureaucracy, as some advocate, by creating a national infrastructure bank."
Kerry pointed to a 2009 American Society of Civil Engineers report that said $2.2 trillion needs to be spent over five years to bring the nation's roads, bridges and water systems up to an adequate level. He said Congress needs to both pass a new highway bill and agree on alternatives like the bank.
"If we can leverage $650 billion and get money going in the transportation bill, we can begin to nibble away at the problem," Kerry said.
WASHINGTON (AP) — A national infrastructure bank that would entice private investors into road and rail projects could be a major part of the jobs package that President Barack Obama hopes will finally bring relief to the unemployed.
The White House hasn't divulged the contents of the package that Obama is to unveil in an address to a joint session of Congress next week. But the president has pushed the idea of an infrastructure bank in recent speeches and has praised Senate and House bills that create such a government-sponsored lending institution.
Whether the bank, which would need time to organize, could have any real impact on the jobs situation in the coming year — and particularly before the November 2012 elections — is in dispute.
Obama seems to think it would.
"We've got the potential to create an infrastructure bank that could put construction workers to work right now, rebuilding our roads and our bridges and our vital infrastructure all across the country," he said at a news conference in July.
But Janet Kavinoky, director of infrastructure issues at the U.S. Chamber of Commerce, cautioned that "even in the next two years I don't believe the bank is going to be that kind of job creator."
The best way to spur job growth in the short term is for Congress to pass long-stalled bills to fund aviation and highway programs, she said.
The Chamber of Commerce strongly supports the infrastructure bank. Kavinoky said the United States is one of the few large countries that lack a central source of low-cost financing for construction projects. But she said it's going to take time to get it running and come up with a pipeline of projects where funds can be invested.
Sen. John Kerry, D-Mass., who's sponsoring an infrastructure bank bill, argued that "we have projects all across America that are ready to go tomorrow." He said the bank "could have money flowing in the next year easily."
Michael Likosky, senior fellow at the NYU Institute for Public Knowledge and author of "Obama's Bank: Financing a Durable New Deal," says he is working with transportation agencies in California and New York that "are waiting for the federal government to say they are going to support these projects."
A commitment to a national infrastructure bank could also provide a positive spark to financial markets and encourage investment, he said.
The bank would supplement federal spending on infrastructure by promoting private-sector investment in projects of national or regional significance. The private sector currently provides only about 6 percent of infrastructure spending.
Supporters, which range from the Chamber of Commerce to the AFL-CIO, say pension funds, private equity funds and sovereign wealth funds have hundreds of billions of dollars ready to be invested in low-risk infrastructure projects.
It's better than having pension fund money go to Treasury bonds, Likosky said. "It's really about changing our approach; we're in tough economic times and we will be for a while. We have to make sure the money we have goes further."
The Kerry bill would require $10 billion in start-up money from the government to get the first loans going and cover administrative costs. The bank would be government owned, run by a board of directors, independent of any federal agency and self-sustaining after the initial expense. Public-private partnerships, corporations and state and local governments would be eligible for the loans.
The bank's directors would pick which projects to finance based on an analysis of costs, benefits and revenue streams, such as from tolls or fees, for repaying the loan. Once the terms of the loan, including interest rates and fees to cover risk, are set, the Treasury Department would disburse the loan.
Urban projects would have to be at least $100 million in size, rural ones $25 million. The infrastructure bank's loan could cover no more than 50 percent of a project's costs.
"There is going to be a revenue stream for payback and therefore the project is going to stand on its own because it will be a good enough project to attract private-sector funding," said Sen. Kay Bailey Hutchison of Texas, one of several Republican co-sponsors of the Kerry plan.
Supporters estimate the bank could set up as much as $160 billion in government loans over a decade and anchor as much as $650 billion in projects.
In the House, Rep. Rosa DeLauro, D-Conn., has a similar bill that relies on $25 billion in start-up money and makes use of bonds as well as loans to stimulate construction projects. Both Kerry and DeLauro would cover transportation, water and energy projects.
DeLauro would also include communications projects. She says her bill is modeled after the European Investment Bank, which has been financing infrastructure projects for 50 years and last year invested more than $100 billion.
Obama, in his 2012 budget proposal, envisioned spending $30 billion to start an infrastructure bank within the Transportation Department that would provide grants as well as loans to transportation projects.
That idea drew opposition from the House Transportation Committee chairman, Rep. John Mica, R-Fla. He said in a recent article in the congressional newspaper Roll Call that it would be better to increase help for existing state infrastructure banks "rather than increasing the size of the bloated federal bureaucracy, as some advocate, by creating a national infrastructure bank."
Kerry pointed to a 2009 American Society of Civil Engineers report that said $2.2 trillion needs to be spent over five years to bring the nation's roads, bridges and water systems up to an adequate level. He said Congress needs to both pass a new highway bill and agree on alternatives like the bank.
"If we can leverage $650 billion and get money going in the transportation bill, we can begin to nibble away at the problem," Kerry said.
Gold Coins: The Mystery of the Double Eagle
by Susan Berfield
Friday, August 26, 2011
Source: Bloomberg Businessweek
How did a Philadelphia family get hold of $40 million in gold coins, and why has the Secret Service been chasing them for 70 years?
The most valuable coin in the world sits in the lobby of the Federal Reserve Bank of New York in lower Manhattan. It's Exhibit 18E, secured in a bulletproof glass case with an alarm system and an armed guard nearby. The 1933 Double Eagle, considered one of the rarest and most beautiful coins in America, has a face value of $20—and a market value of $7.6 million. It was among the last batch of gold coins ever minted by the U.S. government. The coins were never issued; most of the nearly 500,000 cast were melted down to bullion in 1937.
Most, but not all. Some of the coins slipped out of the Philadelphia Mint before then. No one knows for sure exactly how they got out or even how many got out. The U.S. Secret Service, responsible for protecting the nation's currency, has been pursuing them for nearly 70 years, through 13 Administrations and 12 different directors. The investigation has spanned three continents and involved some of the most famous coin collectors in the world, a confidential informant, a playboy king, and a sting operation at the Waldorf Astoria in Manhattan. It has inspired two novels, two nonfiction books, and a television documentary. And much of it has centered around a coin dealer, dead since 1990, whose shop is still open in South Philadelphia, run by his 82-year-old daughter.
"The 1933 Double Eagle is one of the most intriguing coins of all time," says Jay Brahin, an investment adviser who has been collecting coins since he was a kid in Philadelphia. "It's a freak. The coins shouldn't have been minted, but they were. They weren't meant to circulate, but some did. And why has the government pursued them so arduously? That's one of the mysteries."
The story begins just after the inauguration of Franklin Roosevelt on Mar. 4, 1933, in the midst of the Great Depression. Thousands of banks had already gone under as people panicked and withdrew their gold and other deposits. As the gold supply—much of it kept at the Federal Reserve Bank of New York—dwindled, the country faced possible insolvency. On Apr. 5, Roosevelt issued Executive Order 6102, which prohibited the hoarding of gold and required citizens to exchange their gold coins for paper currency.
It was Roosevelt's distant cousin, Theodore, who had commissioned the sculptor Augustus Saint-Gaudens to design a high-relief $20 gold coin in the early 1900s. Teddy Roosevelt wanted an American coin that matched the beauty of the ancient Greek ones, and Saint-Gaudens completed the work just before his death from cancer in 1907. On one side is an image of Liberty, a figure reminiscent of a Greek goddess, hair flowing, olive branch in her left hand, torch in her right. On the other is an eagle in midflight, the sun rising behind it.
The Mint had produced the Saint-Gaudens Double Eagles almost every year since 1907, and 1933 was no different. By May, as the gold recall was under way, the Mint finished pressing 445,500 of the coins. None were issued. Instead the coins, weighing nearly 15 tons, were put into 1,780 canvas bags and sealed behind three steel doors in Philadelphia Mint Vault F-Cage 1. Only two were thought to have been saved, and they were sent to the Smithsonian.
In January 1934, Congress passed the Gold Reserve Act, which allowed the President to nationalize, in effect, the gold held by the Federal Reserve and increase the price of an ounce. This in turn devalued the dollar, which was supposed to stimulate the troubled economy. The director of the Mint then ordered all the nation's gold coins to be melted into bars. The bars would be kept in the newly constructed Fort Knox. The task was enormous: It wasn't until early 1937 that the Philadelphia Mint sent its $50 million worth of coins, including the 1933 Double Eagles, to the furnace.
Around this time, a 41-year-old Philadelphia jeweler named Israel Switt offered several 1933 Double Eagles to some of the most prominent coin dealers and collectors of the day, according to Secret Service documents since made public. Switt sold one, now Exhibit 18E, to a Texas dealer who then sold it to King Farouk of Egypt for $1,575. A royal representative in the U.S. requested an export license for the coin and, unbeknownst to the Secret Service, the Secretary of the Treasury issued one on Feb. 29, 1944.
That same month, Stack's, the rare coin dealer in New York, announced an auction for another Double Eagle. It wasn't until early March, though, that the Secret Service heard about the sale and realized that some of the coins had been taken out of the Mint. King Farouk's Double Eagle had already been delivered to him in Cairo by diplomatic pouch. Agents confiscated the second coin before Stack's could sell it and launched the investigation that continues today. "The government has been fanatical about seizing and destroying these coins," says Robert W. Hoge, curator of North American coins and currency at the American Numismatic Society. "They're famous because the government has been seizing them since the 1940s."
The first phase of the Secret Service investigation would trace 10 1933 Double Eagles to Switt, a reclusive jeweler and coin dealer who, like so many in this story, believed the coins possessed talismanic powers. His only child, Joan Langbord, who worked with him until his death in 1990 at age 95, told the Philadelphia Inquirer that her father "could be obnoxious or irascible. If he didn't like you, he'd throw you out." His business philosophy, she said, was that "the customer was never right; he was always right."
"You must understand the Philadelphia thing," says Brahin. "I'm from there, so I can say this: The dealers were crafty, they would do anything to get an edge. If you don't know that, you don't have the right amount of cynicism to analyze the story."
In Switt's statement to the agents, his only official pronouncement about the coins, he said that he didn't have any records of where, when, or how he had obtained the Double Eagles. But he claimed that he did not buy them from any employees of the Mint.
Nonetheless, after a 10-month investigation, the Secret Service concluded that it was more likely than not that Switt was the fence for a corrupt Mint cashier. In 1945, the Justice Dept. wanted to press charges, but by then the statute of limitations had run out.
Seven years later, in 1952, King Farouk was deposed and sent into exile in Monaco. The generals leading the new Republic of Egypt decided to auction off his belongings, including his renowned gold coin collection. It contained 8,500 pieces; one was the 1933 Double Eagle. Sotheby's won the right to hold the auction in Cairo in February 1954. As soon as U.S. Treasury officials saw the catalog for the Palace Collection of Egypt, as it was called, they asked the Egyptians to pull the coin from the auction and return it to Washington. At the last minute, the Double Eagle in Lot 185 was withdrawn. Then it disappeared.
Four decades later, Stephen Fenton, the chairman of the British Numismatic Trade Assn. and a coin dealer himself, says he got hold of the 1933 Double Eagle by way of an Egyptian jeweler whose client had ties to the military. "I was buying quite a few coins out of the Farouk collection," Fenton says by phone from his London auction house, St. James. "This came along, and it was quite nice. It did have an aura."
Fenton bought the Double Eagle for $210,000 and arranged to sell it to an American dealer named Jasper Parrino for $850,000. On Feb. 7, 1996, Fenton flew from London to New York on the Concorde and checked into the Hilton. The next morning, he recalls, he tucked the coin into a plastic envelope, put it in his shirt pocket, pulled on a new black cashmere sweater, and hopped into a taxi to the Waldorf Astoria. "It was a routine deal," he says.
He went up to a corner suite on the 22nd floor and presented the coin to Parrino, who had already arranged to sell it to Jack Moore, a dealer from Texas, for $1.65 million. Moore had brought along a coin expert of his own. As this expert examined the coin, Fenton began to suspect trouble. "His hands were shaking quite a lot," says Fenton. "I thought he might try to steal it. I was afraid someone was going to come bursting into the room with guns. Well, they did."
Moore had contacted the Secret Service and helped them set up an undercover operation. Fenton and Parrino were thrown to the floor by gun-wielding agents who had been waiting in the room next door. "I had an out-of-body experience," says Fenton. "I felt like I was on top of the wardrobe watching. It was like a movie. Then the coin just vanished."
Fenton faced criminal charges of "conspiring to convert to his own use and attempt to sell property of the United States." He hired a trial lawyer, Barry H. Berke of Kramer Levin Naftalis & Frankel, who was able to get those charges dropped fairly quickly. "Then it was a straight fight for the coin," says Fenton. "I thought: The government has two of them [in the Smithsonian]. Why do they want mine? The only people who think the pursuit of these coins is worthwhile is the government. Everyone else thinks the government should have better things to do with its time and money."
After five years of legal wrangling and just four days before the case was scheduled to go to trial in the U.S. District Court in Manhattan, Fenton and the Justice Dept. came to an unusual agreement: The coin would be auctioned off and the proceeds split between them. That was in late January 2001. The coin was taken from the Treasury vault at 7 World Trade Center and put in Fort Knox. Then came the terrorist attacks on September 11. "If the coin had been left where it was, it would have been destroyed," says Fenton.
In February 2002, the Mint announced the auction of the "fabled and elusive 1933 Double Eagle twenty dollar coin" at Sotheby's on July 30. "The storied coin has been the center of international numismatic intrigue for more than 70 years," said Mint Director Henrietta Holsman Fore in the press release. Afterward the coin would become the only 1933 Double Eagle "now or ever authorized for private ownership."
Then the publicity campaign began. Matt Lauer wore white cotton gloves to hold the coin on the Today show. The New York Times ran a large photo of it. Sotheby's, working with Stack's, produced a 56-page catalog titled The Golden Disk of 1933: Only One.
The Only One was displayed at the Long Beach Coin, Stamp & Collectibles Expo, the Federal Reserve Bank of New York, and Sotheby's. "The Mint police and New York City police escorted it back and forth every day to a depository at West Point in an armored car," says David N. Redden, the auctioneer for Sotheby's. "It was fantastic. That made it look wildly important. The government treated it as a national treasure, which it is, in a way. It wasn't going to disappear on their watch. It had already disappeared once."
The auction took place at 6 p.m. in front of a standing-room-only crowd. The coin was in a bulletproof glass case to the right of the auctioneer. The Mint director was there. So were Fenton, Berke, and the assistant U.S. attorney. Redden opened the bidding at $2.5 million. Six minutes later his hammer went down: An anonymous buyer had purchased the 1933 Double Eagle for $6.6 million (a 15 percent buyer's premium brought the price to $7.59 million). It was nearly twice as much as anyone had ever paid for a coin.
Immediately afterward, Mint Director Fore held a ceremony on the auction floor to make the Double Eagle legal tender. "In order to monetize it, somebody had to pay $20," says Redden. "So I stepped down from the podium and gave her $20. The Mint makes a big distinction between coins that are monetized and those that are not. Two Double Eagles are in the Smithsonian, but they're not monetized. To the government, they're curiosities, not currency."
The buyer, who according to Redden is an American interested in no other coins but this one, never brought the Double Eagle home. He lent it to the American Numismatic Society, which has displayed the coin at the Federal Reserve Bank of New York ever since.
"I wanted to end with everybody happy, and everybody was. One of these coins is in the marketplace, and that's very important," says Fenton. "I was absolutely thrilled—and exhausted. It felt strange that it was all over."
Except it wasn't.
Two years after the auction, Joan Langbord and her son, Roy, an entertainment executive in Manhattan, called Berke, who had represented Fenton and the Farouk coin, with startling news: They said they had found 10 1933 Double Eagles. The coins had been wrapped in tissue and plastic, put in a gray paper bag from the department store John Wanamaker—which closed in 1995—and placed at the bottom of safe deposit box No. 442 at a Wachovia Bank in Philadelphia. Langbord had inherited the safe deposit box from her mother and said she had thought it contained only jewelry. No one in the family, she later testified, knew how the coins had gotten there. The Langbords, through Berke, declined to comment for this story, citing ongoing litigation.
According to legal documents, the Langbords, hoping they could make a deal similar to Fenton's, asked Berke to contact the Mint. On Sept. 15, 2004, Berke met with Mint attorneys at the Secret Service offices in Brooklyn to discuss the situation. A week later, Roy Langbord, accompanied by Berke, opened the safe deposit box and handed over the Double Eagles to the government for authentication. The coins did not come back.
In June 2005, Berke was summoned to meet the Mint's attorneys in Washington. There they informed him that the 1933 Double Eagles were indeed authentic. But this time the Mint refused to offer any monetary settlement. Instead, the lawyers said the government was keeping the coins, and that they were already in Fort Knox. Berke protested, unsuccessfully. In August 2005 the Mint issued a press release announcing it had "recovered" 10 more 1933 Double Eagles.
"I was surprised," says Sotheby's Redden. "It was a little awkward. The Double Eagle had been billed by the Mint as unique." And not just by the Mint but by Sotheby's, too. "I called the buyer, who said: 'Do I have to buy those, too?'"
He hasn't had the chance. For months the Langbords sought the return of the coins, compensation from the government of $40 million, or the initiation of forfeiture proceedings. The government insisted it was not required to do anything. In December 2006 the Langbords took the matter to the courts. Three years later, Judge Legrome Davis of the Federal District Court of Philadelphia ruled that the government had to show it had a right to keep the coins.
This July, eight years after the Langbords say they found the coins, the trial to get them back began at a Philadelphia courthouse, just blocks from the family store on Jewelers Row.
Joan Langbord, dressed simply in a tan pantsuit and costume jewelry, took the stand the morning of July 19. She was occasionally teary. She was also sharp-minded, plain-spoken, and slightly irritated. Describing the store, she said: "It looks like a junk shop. But expensive junk. It looks the way it did when my father ran it. His chair is still in the store." Only the first floor of the four-story building is open to those who walk in off the street.
Records introduced at the trial show she had visited the safe deposit box many times between 1996 and her discovery of the coins in 2003—including the day before the Sotheby's auction. She said she made the visits to select pieces of her mother's jewelry to sell to a longtime customer and that she never noticed the Wanamaker bag at the bottom. It was only when the box warped and had to be drilled open, she said, that she realized the coins were there. The safe deposit box was shown at the trial: It was about the size of a violin case.
After Langbord testified, the judge called for a lunch break, and she and her other son, David, went to the store. It's still called I. Switt & Ed Silver, though her name and that of her business partner are also in gold letters on the front door. She walked in briskly and got right on the phone about a business matter, pointedly ignoring visitors. The old wood and glass counters were filled with jewelry, silver candlesticks, watches, figurines. A cash register from the 1930s sat on another counter. Yellowing family photos hung askew on the wall next to a 2009 Philadelphia Inquirer article about the gold coins.
On day five of the trial, U.S. Mint officers brought the 10 Double Eagles into the courtroom. They had been hand carried by Mint police on a flight from Kentucky to Philadelphia and stored in a vault at the Philadelphia Mint overnight. The coins, spread out against a blue velvet background in a secured glass case, were placed in front of the jury. They walked slowly past the coins. Fifteen minutes later the Double Eagles were on their way back to Fort Knox.
Assistant U.S. Attorney Jacqueline Romero argued that documents from the Philadelphia Mint and the Secret Service investigation of the 1940s showed that no 1933 Double Eagles legally left the Mint. And, she said, every single coin that had been found could be traced to Israel Switt. She also discussed the government's long pursuit of the coins: "Why do we care? We auctioned one off. You saw the certificate of monetization. We know how Fenton got his coin. He's not Israel Switt. The coins and bills you have in your wallets carry the full faith and credit of the U.S. government. It means something. The government protects its money from thieves and swindlers. We have to care on principle. If we don't, we are done. We are absolutely done."
Berke countered that the Mint records are nearly 80 years old and ill-kept, and all the witnesses interviewed by the Secret Service are dead. He also said that in the confused first weeks after Roosevelt asked people to return their gold, it was still possible to exchange bullion for coin at the Philadelphia Mint. This "window of opportunity" in the spring of 1933, he argued, could well have been how Switt obtained the Double Eagles. "The government desperately wants these coins," he said. "But the government can't always get what it wants."
After eight days of testimony, the jury found otherwise. The Langbords are expected to appeal the verdict. Meanwhile, more 1933 Double Eagle gold coins may still be hidden away. "There has always been talk of others," says Armen Vartian, the lawyer for the Professional Numismatists Guild. Hoge, the U.S. coin expert, says: "It's not impossible that more are out there. I haven't seen them. But it wouldn't surprise me."
Source: Bloomberg Businessweek
Friday, August 26, 2011
Source: Bloomberg Businessweek
How did a Philadelphia family get hold of $40 million in gold coins, and why has the Secret Service been chasing them for 70 years?
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| Double eagle coin - Enlarge |
"The 1933 Double Eagle is one of the most intriguing coins of all time," says Jay Brahin, an investment adviser who has been collecting coins since he was a kid in Philadelphia. "It's a freak. The coins shouldn't have been minted, but they were. They weren't meant to circulate, but some did. And why has the government pursued them so arduously? That's one of the mysteries."
The story begins just after the inauguration of Franklin Roosevelt on Mar. 4, 1933, in the midst of the Great Depression. Thousands of banks had already gone under as people panicked and withdrew their gold and other deposits. As the gold supply—much of it kept at the Federal Reserve Bank of New York—dwindled, the country faced possible insolvency. On Apr. 5, Roosevelt issued Executive Order 6102, which prohibited the hoarding of gold and required citizens to exchange their gold coins for paper currency.
It was Roosevelt's distant cousin, Theodore, who had commissioned the sculptor Augustus Saint-Gaudens to design a high-relief $20 gold coin in the early 1900s. Teddy Roosevelt wanted an American coin that matched the beauty of the ancient Greek ones, and Saint-Gaudens completed the work just before his death from cancer in 1907. On one side is an image of Liberty, a figure reminiscent of a Greek goddess, hair flowing, olive branch in her left hand, torch in her right. On the other is an eagle in midflight, the sun rising behind it.
The Mint had produced the Saint-Gaudens Double Eagles almost every year since 1907, and 1933 was no different. By May, as the gold recall was under way, the Mint finished pressing 445,500 of the coins. None were issued. Instead the coins, weighing nearly 15 tons, were put into 1,780 canvas bags and sealed behind three steel doors in Philadelphia Mint Vault F-Cage 1. Only two were thought to have been saved, and they were sent to the Smithsonian.
In January 1934, Congress passed the Gold Reserve Act, which allowed the President to nationalize, in effect, the gold held by the Federal Reserve and increase the price of an ounce. This in turn devalued the dollar, which was supposed to stimulate the troubled economy. The director of the Mint then ordered all the nation's gold coins to be melted into bars. The bars would be kept in the newly constructed Fort Knox. The task was enormous: It wasn't until early 1937 that the Philadelphia Mint sent its $50 million worth of coins, including the 1933 Double Eagles, to the furnace.
Around this time, a 41-year-old Philadelphia jeweler named Israel Switt offered several 1933 Double Eagles to some of the most prominent coin dealers and collectors of the day, according to Secret Service documents since made public. Switt sold one, now Exhibit 18E, to a Texas dealer who then sold it to King Farouk of Egypt for $1,575. A royal representative in the U.S. requested an export license for the coin and, unbeknownst to the Secret Service, the Secretary of the Treasury issued one on Feb. 29, 1944.
That same month, Stack's, the rare coin dealer in New York, announced an auction for another Double Eagle. It wasn't until early March, though, that the Secret Service heard about the sale and realized that some of the coins had been taken out of the Mint. King Farouk's Double Eagle had already been delivered to him in Cairo by diplomatic pouch. Agents confiscated the second coin before Stack's could sell it and launched the investigation that continues today. "The government has been fanatical about seizing and destroying these coins," says Robert W. Hoge, curator of North American coins and currency at the American Numismatic Society. "They're famous because the government has been seizing them since the 1940s."
The first phase of the Secret Service investigation would trace 10 1933 Double Eagles to Switt, a reclusive jeweler and coin dealer who, like so many in this story, believed the coins possessed talismanic powers. His only child, Joan Langbord, who worked with him until his death in 1990 at age 95, told the Philadelphia Inquirer that her father "could be obnoxious or irascible. If he didn't like you, he'd throw you out." His business philosophy, she said, was that "the customer was never right; he was always right."
"You must understand the Philadelphia thing," says Brahin. "I'm from there, so I can say this: The dealers were crafty, they would do anything to get an edge. If you don't know that, you don't have the right amount of cynicism to analyze the story."
In Switt's statement to the agents, his only official pronouncement about the coins, he said that he didn't have any records of where, when, or how he had obtained the Double Eagles. But he claimed that he did not buy them from any employees of the Mint.
Nonetheless, after a 10-month investigation, the Secret Service concluded that it was more likely than not that Switt was the fence for a corrupt Mint cashier. In 1945, the Justice Dept. wanted to press charges, but by then the statute of limitations had run out.
Seven years later, in 1952, King Farouk was deposed and sent into exile in Monaco. The generals leading the new Republic of Egypt decided to auction off his belongings, including his renowned gold coin collection. It contained 8,500 pieces; one was the 1933 Double Eagle. Sotheby's won the right to hold the auction in Cairo in February 1954. As soon as U.S. Treasury officials saw the catalog for the Palace Collection of Egypt, as it was called, they asked the Egyptians to pull the coin from the auction and return it to Washington. At the last minute, the Double Eagle in Lot 185 was withdrawn. Then it disappeared.
Four decades later, Stephen Fenton, the chairman of the British Numismatic Trade Assn. and a coin dealer himself, says he got hold of the 1933 Double Eagle by way of an Egyptian jeweler whose client had ties to the military. "I was buying quite a few coins out of the Farouk collection," Fenton says by phone from his London auction house, St. James. "This came along, and it was quite nice. It did have an aura."
Fenton bought the Double Eagle for $210,000 and arranged to sell it to an American dealer named Jasper Parrino for $850,000. On Feb. 7, 1996, Fenton flew from London to New York on the Concorde and checked into the Hilton. The next morning, he recalls, he tucked the coin into a plastic envelope, put it in his shirt pocket, pulled on a new black cashmere sweater, and hopped into a taxi to the Waldorf Astoria. "It was a routine deal," he says.
He went up to a corner suite on the 22nd floor and presented the coin to Parrino, who had already arranged to sell it to Jack Moore, a dealer from Texas, for $1.65 million. Moore had brought along a coin expert of his own. As this expert examined the coin, Fenton began to suspect trouble. "His hands were shaking quite a lot," says Fenton. "I thought he might try to steal it. I was afraid someone was going to come bursting into the room with guns. Well, they did."
Moore had contacted the Secret Service and helped them set up an undercover operation. Fenton and Parrino were thrown to the floor by gun-wielding agents who had been waiting in the room next door. "I had an out-of-body experience," says Fenton. "I felt like I was on top of the wardrobe watching. It was like a movie. Then the coin just vanished."
Fenton faced criminal charges of "conspiring to convert to his own use and attempt to sell property of the United States." He hired a trial lawyer, Barry H. Berke of Kramer Levin Naftalis & Frankel, who was able to get those charges dropped fairly quickly. "Then it was a straight fight for the coin," says Fenton. "I thought: The government has two of them [in the Smithsonian]. Why do they want mine? The only people who think the pursuit of these coins is worthwhile is the government. Everyone else thinks the government should have better things to do with its time and money."
After five years of legal wrangling and just four days before the case was scheduled to go to trial in the U.S. District Court in Manhattan, Fenton and the Justice Dept. came to an unusual agreement: The coin would be auctioned off and the proceeds split between them. That was in late January 2001. The coin was taken from the Treasury vault at 7 World Trade Center and put in Fort Knox. Then came the terrorist attacks on September 11. "If the coin had been left where it was, it would have been destroyed," says Fenton.
In February 2002, the Mint announced the auction of the "fabled and elusive 1933 Double Eagle twenty dollar coin" at Sotheby's on July 30. "The storied coin has been the center of international numismatic intrigue for more than 70 years," said Mint Director Henrietta Holsman Fore in the press release. Afterward the coin would become the only 1933 Double Eagle "now or ever authorized for private ownership."
Then the publicity campaign began. Matt Lauer wore white cotton gloves to hold the coin on the Today show. The New York Times ran a large photo of it. Sotheby's, working with Stack's, produced a 56-page catalog titled The Golden Disk of 1933: Only One.
The Only One was displayed at the Long Beach Coin, Stamp & Collectibles Expo, the Federal Reserve Bank of New York, and Sotheby's. "The Mint police and New York City police escorted it back and forth every day to a depository at West Point in an armored car," says David N. Redden, the auctioneer for Sotheby's. "It was fantastic. That made it look wildly important. The government treated it as a national treasure, which it is, in a way. It wasn't going to disappear on their watch. It had already disappeared once."
The auction took place at 6 p.m. in front of a standing-room-only crowd. The coin was in a bulletproof glass case to the right of the auctioneer. The Mint director was there. So were Fenton, Berke, and the assistant U.S. attorney. Redden opened the bidding at $2.5 million. Six minutes later his hammer went down: An anonymous buyer had purchased the 1933 Double Eagle for $6.6 million (a 15 percent buyer's premium brought the price to $7.59 million). It was nearly twice as much as anyone had ever paid for a coin.
Immediately afterward, Mint Director Fore held a ceremony on the auction floor to make the Double Eagle legal tender. "In order to monetize it, somebody had to pay $20," says Redden. "So I stepped down from the podium and gave her $20. The Mint makes a big distinction between coins that are monetized and those that are not. Two Double Eagles are in the Smithsonian, but they're not monetized. To the government, they're curiosities, not currency."
The buyer, who according to Redden is an American interested in no other coins but this one, never brought the Double Eagle home. He lent it to the American Numismatic Society, which has displayed the coin at the Federal Reserve Bank of New York ever since.
"I wanted to end with everybody happy, and everybody was. One of these coins is in the marketplace, and that's very important," says Fenton. "I was absolutely thrilled—and exhausted. It felt strange that it was all over."
Except it wasn't.
Two years after the auction, Joan Langbord and her son, Roy, an entertainment executive in Manhattan, called Berke, who had represented Fenton and the Farouk coin, with startling news: They said they had found 10 1933 Double Eagles. The coins had been wrapped in tissue and plastic, put in a gray paper bag from the department store John Wanamaker—which closed in 1995—and placed at the bottom of safe deposit box No. 442 at a Wachovia Bank in Philadelphia. Langbord had inherited the safe deposit box from her mother and said she had thought it contained only jewelry. No one in the family, she later testified, knew how the coins had gotten there. The Langbords, through Berke, declined to comment for this story, citing ongoing litigation.
According to legal documents, the Langbords, hoping they could make a deal similar to Fenton's, asked Berke to contact the Mint. On Sept. 15, 2004, Berke met with Mint attorneys at the Secret Service offices in Brooklyn to discuss the situation. A week later, Roy Langbord, accompanied by Berke, opened the safe deposit box and handed over the Double Eagles to the government for authentication. The coins did not come back.
In June 2005, Berke was summoned to meet the Mint's attorneys in Washington. There they informed him that the 1933 Double Eagles were indeed authentic. But this time the Mint refused to offer any monetary settlement. Instead, the lawyers said the government was keeping the coins, and that they were already in Fort Knox. Berke protested, unsuccessfully. In August 2005 the Mint issued a press release announcing it had "recovered" 10 more 1933 Double Eagles.
"I was surprised," says Sotheby's Redden. "It was a little awkward. The Double Eagle had been billed by the Mint as unique." And not just by the Mint but by Sotheby's, too. "I called the buyer, who said: 'Do I have to buy those, too?'"
He hasn't had the chance. For months the Langbords sought the return of the coins, compensation from the government of $40 million, or the initiation of forfeiture proceedings. The government insisted it was not required to do anything. In December 2006 the Langbords took the matter to the courts. Three years later, Judge Legrome Davis of the Federal District Court of Philadelphia ruled that the government had to show it had a right to keep the coins.
This July, eight years after the Langbords say they found the coins, the trial to get them back began at a Philadelphia courthouse, just blocks from the family store on Jewelers Row.
Joan Langbord, dressed simply in a tan pantsuit and costume jewelry, took the stand the morning of July 19. She was occasionally teary. She was also sharp-minded, plain-spoken, and slightly irritated. Describing the store, she said: "It looks like a junk shop. But expensive junk. It looks the way it did when my father ran it. His chair is still in the store." Only the first floor of the four-story building is open to those who walk in off the street.
Records introduced at the trial show she had visited the safe deposit box many times between 1996 and her discovery of the coins in 2003—including the day before the Sotheby's auction. She said she made the visits to select pieces of her mother's jewelry to sell to a longtime customer and that she never noticed the Wanamaker bag at the bottom. It was only when the box warped and had to be drilled open, she said, that she realized the coins were there. The safe deposit box was shown at the trial: It was about the size of a violin case.
After Langbord testified, the judge called for a lunch break, and she and her other son, David, went to the store. It's still called I. Switt & Ed Silver, though her name and that of her business partner are also in gold letters on the front door. She walked in briskly and got right on the phone about a business matter, pointedly ignoring visitors. The old wood and glass counters were filled with jewelry, silver candlesticks, watches, figurines. A cash register from the 1930s sat on another counter. Yellowing family photos hung askew on the wall next to a 2009 Philadelphia Inquirer article about the gold coins.
On day five of the trial, U.S. Mint officers brought the 10 Double Eagles into the courtroom. They had been hand carried by Mint police on a flight from Kentucky to Philadelphia and stored in a vault at the Philadelphia Mint overnight. The coins, spread out against a blue velvet background in a secured glass case, were placed in front of the jury. They walked slowly past the coins. Fifteen minutes later the Double Eagles were on their way back to Fort Knox.
Assistant U.S. Attorney Jacqueline Romero argued that documents from the Philadelphia Mint and the Secret Service investigation of the 1940s showed that no 1933 Double Eagles legally left the Mint. And, she said, every single coin that had been found could be traced to Israel Switt. She also discussed the government's long pursuit of the coins: "Why do we care? We auctioned one off. You saw the certificate of monetization. We know how Fenton got his coin. He's not Israel Switt. The coins and bills you have in your wallets carry the full faith and credit of the U.S. government. It means something. The government protects its money from thieves and swindlers. We have to care on principle. If we don't, we are done. We are absolutely done."
Berke countered that the Mint records are nearly 80 years old and ill-kept, and all the witnesses interviewed by the Secret Service are dead. He also said that in the confused first weeks after Roosevelt asked people to return their gold, it was still possible to exchange bullion for coin at the Philadelphia Mint. This "window of opportunity" in the spring of 1933, he argued, could well have been how Switt obtained the Double Eagles. "The government desperately wants these coins," he said. "But the government can't always get what it wants."
After eight days of testimony, the jury found otherwise. The Langbords are expected to appeal the verdict. Meanwhile, more 1933 Double Eagle gold coins may still be hidden away. "There has always been talk of others," says Armen Vartian, the lawyer for the Professional Numismatists Guild. Hoge, the U.S. coin expert, says: "It's not impossible that more are out there. I haven't seen them. But it wouldn't surprise me."
Source: Bloomberg Businessweek
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