Posts Tagged ‘Barack Obama’

The World’s Hardest Problem: Harvard Prof’s Plan for Saving the Financial System

February 14, 2009

Now that Obama has pushed through a stimulus package, his administration has to crack a much tougher nut: Putting the banking system on sound financial footing and re-opening the credit markets.

We all know that TARP I has not worked out as planned. Yes, it averted a total catastrophe. But the banks are still not lending that much and the credit markets remain closed to all but the most stable companies. Our capitalist system remains a giant clogged artery in need of major bypass surgery.

So far, I have not heard any great ideas that could help solve this incredibly complex challenge. And there is no consensus emerging around how to get the banks to sell off the hundreds in billions in toxic assets clogging their balance sheets–unlike the stimulus program, which was a far easier problem. CNBC’s Dennis Kneale just floated an idea from an unnamed stock trader to turn the toxic assets into exchange traded funds.

But yesterday I got an email from Harvard touting a new plan and paper from Harvard Law School professor Lucian Bebchuck. His proposal to establish a “significant number of competing funds that will be privately managed and dedicated to buying troubled assets – not on creating one, large public-private aggregator bank” is the best idea I have yet to hear.

I think it has a shot at working because it designed to introduce much more competition in the market for these distressed securities–unlike one single “bad bank” that would only inject a limited amount of competition.

One myth about the current financial crisis is that there is no market for these troubled assets. That is just not true. Some of the smartest hedge fund managers in the world are trawling through these assets and scooping them up for super-cheap prices. Hedge fund kingpin John Paulson, for example, believes some of the best investment opportunities in 2009 and 2010 are in distressed mortgages.

So there is a market. It just needs to be far far bigger and more active and liquid so the majority of these assets can be bought and taken off the balance sheets of the banks. Bebchuck’s plan to use public money to create 25 or so new subsidized but privately run and financed funds designed to purchase these assets just might be able to spur the creation of that market.

“Establishing competing funds, I show, is necessary both to securing a well-functioning market for troubled assets and to keeping costs to taxpayers at a minimum,” writes Bebchuck.

“Each new fund will be partly financed with private capital, with the rest coming (say, in the form of non-recourse debt financing) from the government’s Investment Fund planned by the Treasury. One important element of the proposed design is a competitive process in which private managers seeking to establish a fund participating in the program will submit bids as to what fraction of the fund’s capital will be funded privately.

The government will set the fraction of each participating fund’s capital that must be financed with private money at the highest level that, given the received bids, will still enable establishing new funds with aggregate capital equal to the program’s target level. Overall, I show that the proposed design will leverage private capital to the fullest extent possible and will provide the most effective and least costly mechanism for restarting the market for troubled assets.”

Click here to read the entire paper.


Why the Stimulus Bill Discounts Broadband

January 27, 2009

BusinessWeek just published my analysis of why broadband has so far been dissed by Washington in the stimulus bill. Good news is I got top Obama tech policy advisor Blair Levin to talk to me about the topic and explain what’s been going on behind the scenes. Here’s the top of the story.

Why the Stimulus Bill Discounts Broadband
Congress is concerned that technology spending may not create jobs as quickly as traditional investments

By Spencer E. Ante

Barack Obama made sophisticated use of technology during his run for the White House. And throughout his campaign, the BlackBerry (RIMM)-addicted candidate stressed the transformative power of technology, making a high-profile promise to provide high-speed Internet access to all Americans.

But when the House unveiled a preliminary version of the economic stimulus plan, crafted with some input from President Obama’s advisers, the amount of money allocated for broadband Internet development was much lower than experts had anticipated. In the $825 billion proposal, only $6 billion was aimed at broadband, far short of the $12 billion to $30 billion that industry experts estimate it would cost to wire the nation. The House bill allocated the same amount of money to weatherizing the homes of low- and moderate-income people.

The stimulus proposal still has to make its way through the Senate and may be changed substantially before it’s signed by the President. But many in the tech industry are contemplating some tough questions: Why did broadband get slighted? Will the technology get more government funding in the future? And does the debate over broadband foreshadow how the technology community will be treated in the future by the Obama Administration?

More Money in the Future?

Blair Levin, a former senior official at the Federal Communications Commission, was a top technology policy adviser on the Obama transition team. In an interview with BusinessWeek, he says that more money could be allocated to broadband in the future. “Did we leave the door open to additional money?” asked Levin. “I think the answer is the door is open and should be open.”

Levin and other technology leaders say there are several reasons that broadband got less money than expected in the stimulus bill. For starters, there is no track record of the federal government funding broadband networks. That made it harder to garner support for a larger subsidy in a Congress trying to accommodate numerous claims from more established constituencies. “When it comes to building roads, that is a clear government project,” says Levin. “Building rural broadband is clear, too. But with other parts of broadband there is not a consensus.”

There’s also an information gap. There are no clear, comprehensive data on which regions need broadband investment, which fueled concerns that it would be difficult to spend money quickly and wisely. “We were concerned that the money would be used effectively and appropriately,” says Levin. “You have to have the strategy before you determine where the money is sent.”

Then there were economic questions. While most economists acknowledge that communications boosts the productivity of the economy over time, there are concerns about the job-creation potential of broadband investment in the near term—the primary objective of the stimulus package. Some economists have noted that compared with some other infrastructure projects, such as road or bridge construction, broadband construction would not generate as many jobs. It takes many more people to build a four-lane highway than to dig a trench and lay a fiber-optic cable. Other economists have pointed out that a lot of the equipment that goes into the network is manufactured overseas—further diluting the employment gains in the U.S. economy. Many telecom components such as computer chips are also manufactured in other countries.

Read the rest of the story here.

Feds Broadband Bill Disappoints Nearly Everyone

January 17, 2009

Last night, BusinessWeek published a story I co-wrote with my colleague Arik Hesseldahl about the broadband stimulus measures contained in the $825 billion stimulus package released by the House Democrats. The story, Broadband Bill Disappoints Nearly Everyone, is already generating a heated debate on my Facebook page so I thought I’d post the beginning of it here to see if anyone wants to add to the discussion.

Broadband Bill Disappoints Nearly Everyone
Critics say there’s not enough money in the bill and that distributing funds through grants instead of tax credits will hamper job creation

By Spencer E. Ante and Arik Hesseldahl

The initial stab by the U.S. government to promote high-speed Internet access has something to disappoint nearly everyone.

Most communications companies and consumer advocacy groups say the $6 billion in broadband stimulus measures contained in the House Democrats’ $825 billion economic recovery package are a good first step. But they warn that the money won’t be nearly sufficient to meet incoming President Barack Obama’s objective of providing affordable high-speed Internet access to all U.S. households.

“I was incredibly impressed how quickly the House moved,” says Shirley Bloomfield, senior vice-president for federal relations at Qwest Communications (Q), a Denver-based communications provider that serves 14 Western states. “They’ve got some good concepts. But $6 billion is not going to get you to ubiquitous broadband.”

Communications providers and various advocacy groups have pegged the cost of creating universal broadband in the tens of billions of dollars. A December 2008 report by the Free Press, an organization devoted to reforming the media, estimated that a broadband infrastructure development program would cost $44 billion over three years. Similarly, the Information Technology & Innovation Foundation (ITIF), a Washington (D.C.) think tank, projected that providing Internet service to much of the unserved territories in the U.S. would cost about $12 billion. “It’s definitely not enough money,” says Robert Atkinson, founder of the ITIF.

Read the rest of the story here.

Obama Names Transition Teams, Taps a VC as Tech Lead

November 16, 2008

On Friday Nov. 14, President Elect Barack Obama announced a flurry of appointments of individuals who will help him manage the transition to a new administration. The Agency Review Team will complete a thorough review of key departments, agencies and commissions of the United States government, as well as the White House, to provide the President-elect, Vice President-elect, and key advisors with information needed to make policy and personnel decisions prior to the inauguration.

The list includes teams that will review all of the major agencies and cabinet level departments, including the Securities and Exchange Commission, Department of Homeland Security, Department of Justice, and Department of Energy, among others.

The teams will begin their efforts today, and will ensure that senior appointees have the information necessary to complete the confirmation process, lead their departments, and begin implementing policy initiatives immediately after they are sworn in.

Among the more interesting picks was Tom Wheeler, a venture capitalist, entrepreneur and former President of the National Cable Television Association. Wheeler will head up the team responsible for overseeing review of the science, technology, space and arts agencies.

One of the most important elements of this team is the FCC Review Team. Obama picked two well-known tech policy experts, Kevin Werbach and Susan Crawford. Both are long-time net neutrality fans, reports Wired.

Former Democratic FCC Commissioner Henry Rivera was the Obama campaign’s first choice to lead the FCC review team. But the Wall Street Journal blog Washington Wire reported that when his name was leaked, Democratic telecom attorneys complained about the pick.

Rivera’s firm, Wiley Rein LLC, is close to the current Republican-controlled FCC. FCC Chairman Kevin Martin came to the agency from the firm, as did several of the lawyers he picked to help him run the agency. So instead, Rivera was named a co-chairman of the committee reviewing candidates for the National Science Foundation instead

Here are the bios of Werbach and Crawford..

FCC Review Team Leads
Susan Crawford is a Professor of Law at the University of Michigan, teaching communications law and internet law. She was a partner with Wilmer, Cutler & Pickering (now WilmerHale) until the end of 2002, when she left to become a legal academic. Ms Crawford recently ended her term as a member of the Board of Directors of ICANN.

Ken Werbach is an Assistant Professor of Legal Studies and Business Ethics at The Wharton School, University of Pennsylvania, and the organizer of the annual Supernova technology conference ( His research explores the legal and business dynamics of information and communications technologies. Formerly, he served as Counsel for New Technology Policy at the FCC during the Clinton Administration. He has also edited Release 1.0, a renowned technology newsletter, and founded Supernova Group, a technology analysis and consulting firm.

Barack Obama’s Flickr Set

November 9, 2008

Some folks have said that without the Internet Barack Obama could not have won the election. Others have opined that the election of 2008 signaled the Internet’s flowering as a campaign force.

I agree with both of those statements. And here’s another way the Net has altered politics. For the first time, we get to see up close and personal photographs of the president elect moments before and after he wins the election and gives his acceptance speech. How appropriate that the photographer, David Katz, published the 82 photos on Flickr, one of the most innovative and successful offspring of the social media movement. Check out the photo stream here.


He Blinded Me with Science: Barack Obama Talks Science & Technology Policy

September 7, 2008

If you haven’t checked out, you probably should. A group of ordinary Americans got together last fall and called for a presidential debate about the future of science and technology. On September 5, Barack Obama answered the 14 questions that scientists collectively came up with. Although John McCain has not answered the questions yet, the Web site said he will.

I come away impressed with Obama’s policy positions, which was a bit of a surprise. I’m definitely ready for regime change in America, but when I listen to Obama it’s not clear to me that he understands the genius of the American economy–which is our entrepreneurial spirit.

Sometimes, Obama sounds so populist and anti-corporation that it worries me. I fear that he’ll fall back on the same old tired Democratic ideas of worrying more about redistributing wealth than creating new wealth. But having read Obama’s detailed answers to these important questions, I feel as if his real policies are more pro-growth and pro-entrepreneur than the change-centric rhetoric found in his spellbinding speeches.

Among the highlights in his answers:

* Ensuring that the U.S. continues to lead the world in science and technology will be a central priority for my administration

* My administration will increase funding for basic research in physical and life sciences, mathematics, and engineering at a rate that would double basic research budgets over the next decade.

* As president, I will launch a Service Scholarship program that pays undergraduate or graduate teaching education costs for those who commit to teaching in a high-need school, and I will prioritize math and science teachers. Additionally, my proposal to create Teacher Residency Academies will also add 30,000 new teachers to high-need schools – training thousands of science and math teachers.

* My proposals for providing broadband Internet connections for all Americans across the country will help ensure that more students are able to
bolster their STEM achievement.

* Specifically, I will implement a market-based cap-and-trade system to reduce carbon emissions by the amount scientists say is necessary: 80 percent below 1990 levels by 2050. I will start reducing emissions immediately by establishing strong annual reduction targets with an intermediate goal of reducing emissions to 1990 levels by 2020. A cap- and-trade program draws on the power of the marketplace to reduce emissions in a cost- effective and flexible way. I will require all pollution credits to be auctioned

* First, I have proposed programs that, taken together, will increase federal investment in the clean energy research, development, and deployment by $150 billion over ten years. This research will cover:
• Basic research to develop alternative fuels and chemicals;
• Equipment and designs that can greatly reduce energy use in residential and commercial buildings – both new and existing;
• New vehicle technologies capable of significantly reducing our oil consumption;
• Advanced energy storage and transmission that would greatly help the economics of new electric-generating technologies and plug-in hybrids;
• Technologies for capturing and sequestering greenhouse gases produced by coal plants; and
• A new generation of nuclear electric technologies that address cost, safety, waste disposal, and proliferation risks.

* Overseas, I will launch a Shared Security Partnership that invests $5 billion over 3 years to forge an international intelligence and law enforcement infrastructure to take down terrorist networks.

* I strongly support expanding research on stem cells. I believe that the restrictions that President Bush has placed on funding of human embryonic stem cell research have handcuffed our scientists and hindered our ability to compete with other nations. As president, I will lift the current administration’s ban on federal funding of research on embryonic stem cell lines created after August 9, 2001 through executive order, and I will ensure that all research on stem cells is conducted ethically and with rigorous oversight

Wiring the Democratic National Convention

August 28, 2008

Telecommunications is one of those industries that many people take for granted. People expect their phone lines, TVs and Internet connections to work. It’s only when they don’t that people raise a stink. The upside of this is that it reflects the increasing importance of communications. It’s becoming like air or water or oil, a vital resource that we can’t live without.

But at the Democratic National Convention, the normally invisible communications infrastructure was made visible. That’s because the normal pipes and wires would not be able to handle all the communications needs of the 15,000 members of the media that have descended on Denver this week. Making phone calls, broadcasting TV and publishing Internet content required the installation of 6,000 new voice and data lines. And for that, you can thank Denver-based Qwest Communications, which is wiring the DNC (and the Republican National Convention next week.)

The crazy thing is that Qwest had to donate $6 million in services to the Democratic National Committee to earn the right to become the “Official Telecommunications Provider” of the DNC.

Why would Qwest fork over a $6 million in-kind donation for such an honor? The answer is that the company is taking a modest but calculated risk that providing communications services to the DNC is a great marketing and branding event that could generate new contracts in its corporate and government lines of business–the main source of growth for the company. Already, Qwest is making money by charging thousands of media organizations thousands of dollars for their Internet and phone connections. But the real payoff could come down the line if corporate and government customers hire Qwest for more extensive work in the future.

“This really demonstrates the capacity of Qwest,” says Robert D. Tregemba, Qwest executive vice president of network operations. “The strategy was to showcase that piece.”

So far, the reviews have been positive. While some people have complained about poor Internet connections in Denver hotels and cafes, most journalists I spoke to said the DNC’s communications services have been working pretty well. Phone calls are going through, blog entries are posting and TV shows are going live without a hitch.

It’s a pretty impressive feat of engineering that the company has been preparing for over the last 18 months. Besides the 6,000 voice and data lines, Qwest built a network operating center in the bowels of the Pepsi Center, laid fiber optic cable underground in the parking lot to wire the media tents and power several cell phone towers, and installed data and voice ports for each state delegation on the convention floor.

The really tricky part: Several weeks ago Barack Obama announced he was moving his keynote speech from the Pepsi Center to Invesco Field, and Qwest has had to scramble to wire a totally new site at the last minute. We’ll see Thursday night if Qwest pulled off this minor miracle.

Another challenge was security. To protect the network and physical site, Qwest worked with the Secret Service. Qwest engineers told me they foiled one hacker yesterday who tried to break in to the convention network through the DNC Web site.

The 3,300 miles of fiber and 140 miles of copper and coaxial cable Qwest installed provide enough Internet bandwidth to support 180,000 homes with a 20 megabyte connection and phone service for more than 200,000 homes, according to R. Dayl White, a Qwest engineer who designed and oversaw the construction of the network.

And it all has to be taken apart in two days after the DNC closes. Doh!

Obama: Master of the Web?

February 16, 2008

In this week’s Digital Dish, BusinessWeek reporters Steve Baker, Heather Green, Catherine Holahan and Spencer Ante discuss the merits of News Corp’s dalliance with Yahoo! and how the Internet is helping to change the art of presidential campaigning.

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