Maryland Business

It’s been an on-the-one-hand-on-the-other-hand kind of week for anyone trying to get a handle on the state of our economic health.

It started with word from the Cambridge, Mass.-based National Bureau of Economic Research that the recession — the longest the U.S. had endured since World War II — had ended in June 2009.

Oh, really? As the Associated Press dryly pointed out, Americans are still struggling with a 9.6 percent unemployment rate, meager wage gains, struggling home values and sales, and a foreclosure plague that shows little sign of slowing.

And on that note, there was plenty of real estate news this week — none of it very good. Sales of previously occupied homes crept up in August, but not enough to keep the summer from being the slowest for sales in a decade. New home sales were actually worse in August — the second-slowest pace on record. One economist called it “a pitiful performance.”

On the other hand, home construction is up 25 percent from the bottom in April 2009. But on still another hand, it is 74 percent below the peak in January 2006.

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Cloverleaf President Kelley Rogers testifies at a Racing Commission meeting last year

Today’s story on the potential end of Rosecroft Raceway contained a lot more back story and details than any conscionable reporter could include in a daily news story.

But that’s what the Internet is for, right? If you’re interested in more, here it is:

I have to say, the judge’s opinion denying the sale of Rosecroft to Greenbelt-area developer Mark Vogel was a pretty enlightening window into his attitude about this case. After laying out Rosecroft’s debts and sale plan to Vogel, Judge Paul Mannes turned to the objectors.

“The opponents to the motion are competitors of the Debtor for the gambling dollar, so the court takes the high-minded tone of their objections relating to the public interest and the racing industry with a grain of salt. The court believes that they would not be disappointed in the least were CEI [Cloverleaf Enterprises Inc.] to disappear from the scene, so that they would not have to share any portion of the Maryland gamblig dollar with them.  … [But] the requirement of good faith does not require that they act in selfless disinterest.”

I asked Alan Foreman, the general counsel for the Maryland Thoroughbred Horsemen’s Association (one of the objectors) about this statement. Here’s his response:

“If we wanted to put Rosecroft out of business and recapture them, we wouldn’t have agreed to the 2006 agreement,” he said, referring to an agreement between Rosecroft and the Maryland thoroughbred industry that authorized the track to take bets on thoroughbred races for a fee of $5.9 million a year.

A year ago, Cloverleaf president Kelley Rogers appeared before the Maryland Racing Commission and said Rosecroft was refusing to make its payments because it could no longer afford them as its annual handle had declined significantly. The commission pulled the track’s thoroughbred simulcast signal and the two breeds have been at a standstill ever since.

Moving on, Mannes also notes Rosecroft is planning to close its backstretch facilities next month, so horses for Rosecroft’s planned race days later this year would have to be trucked in from another location.

“If [the sale is] not approved, the proposition is that the Debtor will run out of money and the enterprise will crater. That may well be the result. But who benefits from the proposed transaction? Certainly not the unsecured creditors as the sale will only produce funds to pay a portion of the administrative expenses and … a small portion of the unsecured claims that are assumed by the prospective purchaser. The [standardbred] horsemen might have the benefit of nine racing days, but with the closing of the backstretch facilities on May 1st, who will be around to benefit from that short racing schedule?

“What the Debtor did here is to decide, at the time of the filing of the case, that it would sell out to Mr. Vogel. To that end, it negotiated an agreement that precluded the marketing of its assets to anyone else.”

On Monday, Vogel said he didn’t know why the judge said that, other than his efforts to pass a bill allowing poker tables at Rosecroft may appear to the judge as being more focused on alternative gaming.

“I’ve always looked at the number one goal as live racing,” he said. “My purchase price guarantees live racing at least until slots money comes in.”

So now that I’ve laid all this on you, it’s quite possible you might be more confused than ever about what’s really happening. Welcome to covering horse racing in Maryland …

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Ever wonder how your bank can afford to hand over gift cards, iPods or even a wine tasting in Napa through its rewards cards?

Well, apparently putting your John Hancock on an electronic signature pad when you make a purchase instead of tapping in your PIN, allows the card companies to charge the retailer more. That fee gets redirected to the bank to pay for your rewards among other items, and it’s the reason why you only get points if you sign.

When you sign your name for a purchase the bank makes an average of 75 cents for every $100 you spend, more than double the fee for putting in your secret code, according to Andrew Martin’s article in New York Times.

Critics say that Visa and, to a lesser degree, MasterCard, don’t play fair by luring banks to issue more debit cards through higher fees charged to retailers.

“A dollar is no longer a dollar in this country,” said Mallory Duncan, senior vice president of the National Retail Federation, a trade association. “It’s a Visa dollar. It’s only worth 99 cents because they take a piece of every one.”

Merchants are stuck paying the fees, or else they risk losing sales from customers who swipe plastic at an increasingly high rate. (Debit is set to supplant cash as the most common form of payment by 2012, according to the Nilson Report, an industry newsletter).

Some quietly fight back by not accepting credit or debit cards — I’ve seen this mostly in restaurants and nail salons. On a recent trip to Home Anthology, a vintage furniture store in Catonsville, I noticed a sign at the register that asks customers to please use PINs when they swipe debit cards to cut down on their costs.

Lots of other retailers direct you to enter your PIN when you make a purchase, only grudgingly allowing you to sign by hitting the “cancel” button. I almost always go that route so I can rack up the points to get my “free” night at a hotel or flight.

When merchants do pay those fees, it sounds like the price of whatever you’ve purchased is padded to cover the debit signature or credit card purchases. Looks like those rewards aren’t free after all.

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$23.7 trillion is a lot of money.

But before you get all upset about the potential price TARP cop Neil Barofsky said it could cost the federal government to bailout the financial system, you’ve got to see the conditions it would take to reach that sky-high cost.

Barofsky, the special inspector general for the Troubled Asset Relief Program known as TARP, wrote in prepared testimony for a Tuesday appearance before a House committee that support costs could reach $23.7 trillion, but his accompanying report noted that the estimate was pretty overstated.

According to analysis from The New York Times, here’s a list of some of the more outlandish things included in that number:

• maximum cost of programs that have been canceled or never got off the ground
• every home mortgage backed by Fannie Mae or Freddie Mac does into default
• all homes are worthless
• every bank in America fails with assets worth nothing
• Treasury would default on securities purchased by the Federal Reserve system

To get his $23.7 trillion figure, Barofsky added all the Federal Reserve programs at $6.8 trillion and determined the TARP program could end up costing $3 trillion.

Barofsky then added $4.4 trillion in other possible Treasury programs, $2.3 trillion in F.D.I.C. guarantees of deposits and $7.2 trillion from various mortgage-related programs

Even if the estimate was correct, the report acknowledges that double counting could come into play where more than one federal agency has provided guarantees for the same companies.

Treasury Department spokesman Andrew Williams called the figures “distorted.”

“These estimates of potential exposures do not provide a useful framework for evaluating the potential cost of these programs,” Williams told Bloomberg News. “This estimate includes programs at their hypothetical maximum size, and it was never likely that the programs would be maxed out at the same time.”

Williams said the government has spent $2 trillion so far, which kind of sounds puny when you think about Barofsky’s potential $23.7 trillion.

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A judge denied Cloverleaf Enterprises Inc. its request for an immediate restoration of Rosecroft Raceway’s simulcast signal Thursday, a move that may indicate a tough road ahead for Cloverleaf’s $20 million law suit against the thoroughbred industry.

After three days of hearings — slightly unusual for this stage in the game — a judge found Cloverleaf failed to prove any of its claims and denied its request for a temporary restraining order to restore its simulcast signal for thoroughbred tracks.

Alan Foreman, the attorney for the Maryland Thoroughbred Horsemen’s Association (one of the 16 defendants in the $20 million suit) said Thursday’s ruling put Cloverleaf on shaky ground.

“We still have a hearing on a permanent restraining order but unless they pull a rabbit out of a hat, they’re going to have a tough time getting any injunctive relief,” he said.

He noted that rather than pay its debt to the thoroughbred industry, Cloverleaf’s choice to spend more than $500,000 on legal fees and $25,000 on Redskins tickets was irresponsible.

“You hardly look like a company that’s suffering irreparable harm when you’re doing that,” Foreman said. “They made an agreement and they decided to renege on that agreement. They created this.”

When asked about the tickets, Kelley Rogers, president of Cloverleaf, said that was contract made by the previous management (Rogers has been at the helm for about two years).

“We had no knowledge of that until we got a certified letter from the Redskins saying they were going to sue us if we didn’t pay for the tickets,” he said. Rogers said the company has tried unsuccessfully to sell the tickets.

He also said he had spent the last year trying to negotiate a new simulcast deal with the thoroughbred industry and had just gotten fed up. He said he remains undeterred by the ruling Thursday.

“This was round one in what’s going to be a 15-round fight for the standardbred industry,” Rogers said.

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First, a disclaimer: I don’t send marketing emails on behalf of The Daily Record, so if any of my complaints sound familiar, please – contact our marketing person.

Now then. I’ve been having some fun this summer – a little too much. A recent spate of “red tag” shopping Web sites (Gilt Groupe, RedTagCrazy.com, Rue La La) have eaten away at my discretionary spending, and it’s time to take matters into my own hands. I’m cutting them off at the source: my inbox. If the “too-good-to-pass-up” deals never get delivered – well, problem solved!

I started off my morning by unsubscribing to all the usual suspects – Target.com, RedTagCrazy.com, Payless Shoesource. Then a new enemy appeared: Ann Taylor Loft, tempting with “Everything Under $50″ and “Perfect Styles for the Holiday Weekend.” I had too much self-control at this point, and I hurredly clicked “unsubscribe.”

That’s when a choice appeared I’d never seen before.

“Inbox overwhelmed?” It asked politely. “You can stay informed of news and special offers…and still give your inbox a break. To receive only one LOFT email update a week, click ‘change frequency’ below.”

Not a bad idea there. I didn’t take ATL up on it – after all, I was on a mission – but I like where they’re going with this. Maybe once my new wardrobe’s worn out, I’ll invite them back into my inbox.

I know we have some marketing professionals who follow along, so I ask: Do clients usually find this approach successful? How many emails per week is too much? 2? 3? 5?

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When I was in college four short months ago, almost everyone I knew had a Facebook or MySpace account. If you didn’t have one (I was in this camp for a little bit), you felt like you were out of the loop on so many issues. Little did I know that outside of the land of academia, this still holds true.

Last night, Warschawski, a Baltimore public relations firm, hosted a “Martini Marketing Event” at Luckie’s Tavern in Power Plant Live, where social networking guru Peter Shankman spoke about the current state and future of social media.

If you’re not familiar with Shankman’s work, he is the founder and CEO of The Geek Factory and a go-to guy on marketing issues for CNN, Fox News and MSNBC.

The lecture was pretty eye-opening as Shankman talked about how prevalent social media has become. At one point, Shankman said “social media is life.” He asked the  attendees to raise their hands if they had a Facebook account, and almost every hand went up.

Shankman touched upon how our lives are constantly being watched/monitored — from cameras on traffic lights to somebody writing about your appearance on their personal blog.

Shankman also previewed some devices that are in beta right now — one of which is a video recording cell phone that can recognize faces in a crowd and tag them as such on Facebook.

It’s clear that for most Baltimore businesses, you either jump on the new media bandwagon or get trampled by the competition.

RICHARD SIMON, Multimedia Reporter

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Who do you blame for your economic problems?

The government?

The price of oil?

Foreign competition?

Society at large?

That’s where members of the middle class pointed fingers, according to a new survey by the Pew Research Center.

It found that many middle-class Americans say they aren’t better off than they were five years ago – but there’s no clear consensus on who (or what) is to blame.

Among people with household incomes between $40K and $100K, 26% said they hadn’t made progress in the last five years, and 28% said they’d fallen behind.

“It’s been a lousy run for the American economy and people feel it,” said Paul Taylor, director of Pew’s Social & Demographic Trends project and lead author of the study.

… Middle-class people also may be disproportionately feeling the pinch because they tend to borrow more heavily against their homes to support their lifestyles, Taylor said.

One of the most unifying findings isn’t surprising: nearly eight in 10 people said it’s more difficult to maintain their standard of living compared with five years ago.

Are you feeling this “pinch,” between the high cost of food and higher fuel prices? Or are middle class Americans just a bunch of complainers?

JACKIE SAUTER, Web Editor

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Through free lesson plans and glossy handouts, Deloitte LLP urges classrooms full of high school students to “consider a career you may never have imagined: working as a professional auditor.”

They’re right about the imagination part.

A story in today’s Wall Street Journal highlights how Deloitte, Lockheed Martin and other corporations are lending a helping hand to high schools, providing materials, computers and training for teachers – and “hoping to create a pipeline of workers far into the future.”

At first glance, it seems like a win-win; companies are fearful of a future labor shortage, and state education funding isn’t cutting it.

But critics say the line between academics and commercialism is being crossed.

What do you think?

JACKIE SAUTER, Web Editor

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The Fed’s decision Tuesday to slash the federal funds rate — the interest that banks charge each other on overnight loans — apparently was the biggest one-day move by the central bank in recent memory, the AP reports. The Fed cut the rate to 3.5 percent from 4.25 percent.

Below is the statement from the Federal Reserve.

The Federal Open Market Committee has decided to lower its target for the federal funds rate 75 basis points to 3-1/2 percent.

The Committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth. While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets.

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