National News

SIB spells a way for financiers to do social good

Marketplace - American Public Media - Mon, 2014-07-21 02:00

Governments and non-profits struggle with shrinking tax revenues and donations, and the lack of funding puts social programs in jeopardy. A new movement tries to fill that gap with money from banks.

The twist? The people providing this money aren't donors; they're investors, and they stand to make a profit on social services. That’s why the first attempt at what’s called a social impact bond in America is being closely watched by scholars, bankers, and politicians alike.

The bond involves the incongruous pairing of one of the world’s best-known banks with one of New York's most notorious prisons. Goldman Sachs is lending $9.6 million to fund an educational program on Rikers Island for 16-18 year old offenders.

The program aims to change the young inmates' way of thinking, with the goal of enabling them to make the choices that will ensure they don’t get locked up again. But they face grim statistics -- About half are likely to be back in prison within a year after getting out.

This high recidivism rate carries high costs for the young offenders, their families, and their communities. It’s also alarmingly expensive for New York City to keep them in prison. That’s where the social impact bond comes in, becoming profitable only if the city saves substantial money through a reduction in re-incarceration attributable to the education program.

If the program leads to a 10 percent reduction in recidivism, Goldman recoups its investment. If the reduction in recidivism is greater than 10 percent, Goldman profits.

“Goldman doesn’t earn any return unless the city reaps significant savings on the decrease in recidivism,” explains Andrea Phillips, a vice president at the bank’s Urban Investment Group. (Not all of Goldman’s money is technically at risk. Bloomberg Philanthropies is kicking in $7.2 million to guarantee part of the loan. That has drawn critics, who say it prevents this social impact bond from being a pure test of using private capital for social good.)

The basic case for social impact bonds is they risk bank money instead of taxpayer dollars. A key worry is that it’s a bad and untested idea to mingle services for the poor with bank profits. 

“I understand the discomfort with that,” says Susan Gottesfeld, associate executive director at the Osborne Association, a non-profit operating the program at Rikers. “But I feel that it’s not only government’s job, not only non-profit’s job to make sure that our society’s working. And if banks who make lots of money are interested in using that money to make something possible that otherwise would not be, we’re very open to that.”

Gottesfeld says she often hears from other non-profits asking for advice on how they can strike bank deals of their own.

This program will ultimately be judged by what it can do for young people like Louis Rivera. He now works near Coney Island, far better waters than those around Rikers Island, where he did time for attempted burglary. He says the program helped him turn himself around, and what he learned showed him how to give his two year old son Landon a better future.

“I wanna teach him that life doesn’t have to be that for him,” Rivera says. “Regardless of where you come from, because life’s not about the things you go through it’s about the choices you make when you go through them.”

Independent analysts are evaluating the program’s impact, with a report expected next year. If it’s a success for the city and Goldman, expect to see many more banks, governments, and charities buying in to social impact bonds.

Young adults choose to save cash instead of investing

Marketplace - American Public Media - Mon, 2014-07-21 02:00

Amanda Moffitt is 30, so she was just getting settled when the economy tanked.  

“It was 2008, so there was a lot of concern about the stock market and what could possibly happen to your money when you invest it,” Moffitt says. 

And, it turns out, that attitude has stuck among young adults.  

“They are the most risk-averse group,” says Greg McBride, vice president and chief financial analyst at Bankrate. Its new survey shows that once those under 30 actually have some money to save, they’re very cautious.  

“They prefer cash by a 3-to-1 margin over the stock market, for money they’re not going to need for at least 10 years,” he says. 

That could be too conservative of a strategy, since savings accounts don’t keep up with inflation. 

“Kind of gets us back to that Depression mindset of hiding cash under the mattress,” says David Weliver, editor of moneyunder30.com. Part of the whole problem is choice overload. 

“The thousands of investment choices, and all the conflicting advice out there. A lot of it is they sit tight and do nothing,” Weliver says. 

As for Amanda Moffitt, she’s wised up. She’s working to become a financial planner.

So where should millennials be investing?

We've heard the mattress is not the way to go, and saving accounts aren't much better. Young people may also simply be intimidated by the vast array of choices, or worried they don't have enough money on hand to make investing worth it. Nonsense.

We've dug back into the Marketplace archives to find some of the best advice we can offer for young (or otherwise new) investors. To start, here's a quick personal finance cheat sheet.

    • More on mutual funds: Many mutual funds offer "quick and easy" plans aimed at first-time investors, but easy doesn't always equal better. Marketplace Money explains.
    • What if I have a bunch of retirement funds? If you have a few different retirement plans, we have some tips to juggle them all.

Finally, if you're sick of reading, your mate Paddy Hirsch has a number of "Whiteboard" videos explaining index funds, ETFs, compounding and more.

Gamers, want to win $10 million dollars?

Marketplace - American Public Media - Mon, 2014-07-21 02:00

People like to watch other people play video games. They like it so much that tournaments for competitive gaming — or e-sports as it's known — are packing stadiums and offering multi-million dollar prizes.

They're also getting the attention of the likes of ESPN, which televised the "International Dota 2" Championships in Seattle over the weekend, with winners soon to be announced.

Tickets to "Dota 2" sold out in an hour at the 17,000 seat Key Arena, and millions of people were expected to watch the games on ESPN2, ESPN3 and online.

Erik Johnson is with Valve, the company behind "Dota 2."

"This is a huge amount of fun for us, we're all fans and we get to kind of show off a little bit, put on a big show for everybody," says Johnson.

"Everybody" includes hordes of young men ages 18 to 34, a group advertisers love.

Nicholas Taylor, who teaches digital media at North Carolina State says cable tried airing gaming championships in 2008, but the timing was wrong. That's not the case anymore.

"As it may have been, a shot in the dark, let's put it that way, for ESPN six years ago, is now probably a pretty sure bet in 2014 and going forward," says Taylor.

ESPN says it hasn't committed to any other e-sports coverage. But, Taylor says, the sport is so big, it's going to happen.

McDonald's, KFC hit by food scandal in China

Marketplace - American Public Media - Mon, 2014-07-21 02:00

McDonald’s and KFC's parent company Yum! Brands apologized to Chinese consumers over concerns that a supplier of theirs was selling expired chicken and beef to fast food chains.

Chinese regulators have shut down the supplier, Shanghai Husi Food Company, which is owned by OSI Group, an American food supplier based in Aurora, Illinois that has an annual revenue in the billions of dollars. The Shanghai supplier also provided food to Pizza Hut, Papa Johns, and Starbucks. 

Sunday evening, a local television news program in Shanghai aired a report that showed workers at the supplier’s plant repackaging chicken and beef products that had gone past their expiration dates. The report stated workers also hid crates of expired beef from inspectors sent by McDonald’s.

Foreign fast-food chains typically earn more trust among Chinese consumers who believe the chains will have better hygiene than local eateries, so the question Chinese consumers are asking now is: what about the rest of these brands’ suppliers?

"I think we will come to a point where the large brands – KFC, McDonald’s, Starbucks, and others – will have to start just like Nike and Apple did, showing who their suppliers are and releasing reports about the quality of each one," says Richard Brubaker, founder of Collective Responsibility, which helps multinational companies in China with corporate social responsibility.

Brubaker says all of the companies involved in this particular scandal will need to begin doing unannounced inspections at their suppliers in China, and they’ll have to be more transparent about their supply chains to regain the trust of not only Chinese consumers, but the trust of investors, too.  

 

Legal Battle Looms Over Florida Congressional Districts

NPR News - Mon, 2014-07-21 01:15

A judge ruled that maps for two congressional districts were drawn in a way that violates the state constitution. But can maps be redrawn in time for the midterm election three months away?

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In Asheville, N.C., Summer Vacation Lasts Just A Few Weeks

NPR News - Mon, 2014-07-21 01:15

Can year-round school spell the end of the "summer slide" for disadvantaged kids?

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Rubio: Small Government Can Help Fix Economic Inequality

NPR News - Mon, 2014-07-21 01:15

The Florida Republican, with one eye on the White House, tells NPR's Morning Edition that there's a role for government to play in opening access to higher education and job training.

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Big Data Peeps At Your Medical Records To Find Drug Problems

NPR News - Mon, 2014-07-21 01:15

It's been tough to identify the problems that only turn up after medicines are on the market. An experimental project is now combing through data to get earlier, more accurate warnings.

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The Youth Unemployment Crisis Hits African-Americans Hardest

NPR News - Mon, 2014-07-21 01:15

Hidden economic forces like job-specific segregation are keeping young minorities out of the job market.

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Next To Silicon Valley, Nonprofits Draw Youth Of Color Into Tech

NPR News - Mon, 2014-07-21 01:15

Programs like Hack the Hood try to help young people in Oakland, Calif., find a gateway into the high-tech industry — and out of "dead-end" jobs.

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Jobs, like water, always seem to run downhill

Marketplace - American Public Media - Mon, 2014-07-21 01:00

Did you hear the one about the American furniture factory that was able keep jobs in America despite intense competition from low-wage China?

I was just talking to newspaper reporter Beth Macy about her new book “Factory Man,” the story of a fierce American furniture tycoon named John Bassett III who went on a mission to China to see where all his furniture jobs were going.

His detective work paid off: In China, he learned a piece of information that turned out to be a powerful tool that kept his factory in Virginia open, his people employed, and an Appalachian town thriving. Macy reveals Bassett’s weapon of choice in this battle against offshoring and I’d hate to spoil it here.

That said, moving jobs to spots where labor is cheaper and unions are weaker is a process that has endured in the US labor market throughout the last quarter century. Talking to Macy, I was struck by the sense that outsourcing never seems to come to rest. Jobs move, then move away again.

Staying with the furniture business for a moment, let’s consider New England (something I like to do as a New Englander). As Macy points out, New England used to be a major hub for furniture manufacturing. A lot those jobs went to the Midwest, but only for a while.

John Bassett’s grandfather and grandmother came along early last century, looked carefully at those Michigan furniture factories and figured out a way to move the work south, to North Carolina and Virginia. They brought manufacturing efficiencies that helped ensure the success of the new factories. What also helped was the tendency of people in Appalachia to work cheaper. 

Then, when China got most-favored nation trade status and joined the World Trade Organization in 2001, the jobs moved to China, Mr. Bassett’s heroic efforts became an exception to a rule.  

Yet the jobs are not staying in China, Macy points out. Many companies have moved on to the current center of the furniture universe: Indonesia, where wood is available and labor is cheaper still.

Late in the book, Macy writes about flying to Indonesia and talking with a local furniture sample engineer. Macy asks him if he ever spared a thought for the Appalachian furniture makers his Indonesian operation replaced (no, he doesn’t). But then the engineer volunteers something he does worry about: the future of his own factory. 

“I worry about someone somewhere else, somewhere cheaper will start to make furniture, and that will be that for us,” Macy quotes him as saying.

Where could furniture companies find labor cheaper than in Indonesia? Maybe sub-Saharan Africa some day, then offshore further still to the island of Madagascar, for instance. Regardless, at some point the whole world will be globalized and companies will not find a cheaper place to find workers to build furniture, or where a worker could feel secure.

Yet I wonder if that is not the final fate of offshoring at all. Once the world economy runs out of cheaper and cheaper labor, you know who will get the work? Not humans, but machines. There will be robots to do the work of building furniture. Technology, not geography, is probably what lies at the very end of the offshoring food chain. 

Appreciating James Garner: TV's Best Unhero

NPR News - Sun, 2014-07-20 12:41

James Garner, star of classic TV shows Maverick and The Rockford Files, died Saturday at age 86. TV critic Eric Deggans says he pioneered playing a new character: the "unhero."

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When Defending Your Writing Becomes Defending Yourself

NPR News - Sun, 2014-07-20 11:33

When the subject of race comes up in his MFA writing workshop, author Matthew Salesses says, it usually feels traumatic — a burden personal to writers of color.

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45 Years Ago, Armstrong Took His 'One Small Step'

NPR News - Sun, 2014-07-20 08:40

On July 20, 1969, Apollo 11's Lunar Module, Eagle, touched down in the moon's Sea of Tranquility, marking humankind's first journey to another world.

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Kicking The Can Down The Road: A Habit That's Hard To Kick

NPR News - Sun, 2014-07-20 07:47

Congress can't come up with an agreement to pay for road repairs and construction over the long haul, but like a road crew filling a pothole, they do seem to have a patch at hand.

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Kicking The Can Down The Road: A Habit That's Hard To Kick

NPR News - Sun, 2014-07-20 07:47

Congress can't come up with an agreement to pay for road repairs and construction over the long haul, but like a road crew filling a pothole, they do seem to have a patch at hand.

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James Garner Of 'Rockford Files' And 'Maverick' Dies At 86

NPR News - Sun, 2014-07-20 06:48

Garner was known for wise-cracking, tough-guy characters who were not afraid to bend the rules. NPR's Arun Rath talks with biographer Jon Winokur about the actor's prolific career.

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R.J. Reynolds Vows Appeal Of $23 Billion Cancer-Death Verdict

NPR News - Sun, 2014-07-20 06:21

The nation's No. 2 tobacco manufacturer was slapped with the whopping punitive damages award in the death of a 36-year-old man of lung cancer in 1996.

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As Polar Icebox Shrinks, Infectious Pathogens Move North

NPR News - Sun, 2014-07-20 06:14

Science writer Chris Solomon tells NPR's Arun Rath that global warming has caused an influx of new diseases in animals that could eventually spread to humans.

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