It seems Democrats in Congress are on the verge of passing another major bill. As reported in the New York Times today, its “a question of when – not if – according to Senate Democrats.” With most Republicans still plugging their ears and covering their eyes and ignoring the pressing problems facing this country, every Democratic vote is critical as 60 votes are necessary to prevent a filibuster in the Senate.
Senator Maria Cantwell had previously voiced her opposition to the bill because she was concerned that not enough was being done to address the financial risk of loosely or unregulated financial instruments like derivatives which had helped to contribute to the recent financial crisis.
Now the New York Times reports that:
Senator Maria Cantwell, Democrat of Washington, who originally opposed the regulatory overhaul, announced that she would support the final version. The move came after she received a letter from the Commodity Futures Trading Commission about provisions relating to new regulation of derivatives, the complex financial instruments that were at the heart of the 2008 crisis. Ms. Cantwell had been concerned about potential loopholes but said she was reassured that the bill would impose a tight regulatory framework
Final passage will still depend on several Republican votes appearing and probably a temporary replacement Senator being appointed to fill West Virginia’s Senate seat held by Senator Robert Byrd who recently died.
The seat will be filled with a temporary appointment until a special election is held in November to fill the remaining two years of Byrd’s term.
One glaring omission from the bill is the lack of oversight for car dealers by the proposed Consumer Protection Agency in the bill. It is unfortunate because after buying a house, cars are one of the major expenses of US households. This would have been a popular item with consumers. .
Washington State Democratic Senator Maria Cantwell joined with Wisconsin Senator Russ Feingold to oppose ending debate on the Senate’s sweeping financial reform bill. As reported in the New York Times, they were the only two Democrats to oppose further debate and were joined by 39 Republicans. Two Republicans, Maine’s Senators Snowe and Collins voted to end debate.
Senator Cantwell strongly supports the legislation but believes it needs to be strengthened. As the New York Times notes:
Ms. Cantwell, in a floor speech after the vote, said she was mainly fighting for a vote on an amendment to tighten proposed rules for the trading of derivatives, the complex instruments that were at the center of the economic crisis.
Her proposal would make it illegal to enter into a derivatives contract that had not been cleared through an exchange, other than contracts specifically exempt from the law. It would also empower regulators and investors to stop or undo a derivatives deal if banks knowingly violated the trading requirements. …
“If you don’t have a regime of exchange trading and clearing you will have money seeping into the continuation of a dark market,” she added.
Ms. Cantwell said she would also like a vote on another amendment she proposed, with Senator John McCain, Republican of Arizona, that would restore the Glass-Steagall Act, which maintained a firewall between commercial banking and investment banking from the 1930s until it was repealed by Congress in 1999. In a statement, Mr. Feingold said he favored restoring that firewall.
Republican opposition to financial reform was obvious by the subsequent action of Senate Republicans. Senator Reid blamed the Republicans, not Senator Cantwell or Feingold, for stalling the legislation.
Senator Dodd agreed and to show the opposition of the Republicans, he returned to the Senate floor and asked for unanimous consent to vote on the proposed amendment of Senator Cantwell. The motion was defeated when Republican Senator Shelby of Alabama objected.
Republicans continue their strategy of opposing Democratic action on legislation, believing this contributes to the Republicans chances of gaining seats in Congress. They hope that the public does not see that the Republican stalling tactics are the primary reason Congress is not addressing our Nation’s problems in a timely fashion. Sooner or later the public is going to see beyond the Republican noise machine and Democrats will prevail.
Senator Cantwell is to be commended for her efforts to strengthen this legislation. She is acting in the public interest and showing leadership. Her amendments are reasonable and vital ones to address serious problems in the financial markets. Washington State can be proud of Senator Cantwell’s leadership on this issue.
Last night the King County Democrats unanimously passed a resolution asking Washington State’s two Senators to become co-sponsors of legislation requiring US Senate candidates to join the electronic filing era of campaign disclosure. Below is the text of the resolution:
Resolution in Support of S 482 requiring electronic filing of campaign disclosure information by U.S. Senate candidates
WHEREAS the U.S. Senate still does not require filing its campaign finance forms electronically; and
WHEREAS this hinders and delays the ability of the public to have timely access to important campaign finance data; and
WHEREAS the transfer of data to electronic form for filing would save taxpayers $250,000 a year according to the Campaign Finance Institute; and
WHEREAS S 482 – the Senate Campaign Disclosure Parity Act has been introduced by Senator Feingold in February 2009 to require that all Senate candidates file designations, statements and reports in electronic form; and
WHEREAS candidates for the House of Representatives, President and Political Action Committees already file electronically; and
WHEREAS 41 other Senators are currently co-sponsors of this legislation; and
WHEREAS Washington State has been a leader in campaign finance disclosure statewide and nationally with the passage of I-276 in 1972; and
WHEREAS Washington State requires electronic filing for all candidates raising over $10,000; and
WHEREAS candidates filing for President who raise over $100,000 are already required to file monthly reports
THEREFORE BE IT RESOLVED that the King County Democrats urge Senator Patty Murray and Senator Maria Cantwell to become co-sponsors and work for passage of S 482 in time for next year’s U.S. Senate elections and that they sponsor an amendment requiring monthly reporting as is done for Presidential candidates and in Washington State.
Join with the King County Democrats and urge Senator Cantwell and Senator Murray to co-sponsor S 482 and work for its passage. You can e-mail them here:
Dear Senator Patty Murray and Senator Maria Cantwell:
Thirty-seven Senators currently are co-sponsors of S 482 – the Senate Campaign Disclosure Parity Act. The bill requires candidates for US Senate “to file designations, statements and reports for campaign financing in electronic form.”
Both candidates for the US House of Representatives and for President file electronically. The Senate should join them in using the miracle of computers and electronic transmission of data.
I am surprised that you are not a co-sponsor of this bill and urge you to join as a co-sponsor. Washington State was a leader in campaign finance disclosure and still is.
Please add your support to S 482. The public deserves to have campaign finance reports available in a timely fashion.
It is both a waste of taxpayer dollars to send paper reports that need to be re-entered for filing and an unnecessary delay in the public’s right to know in a timely manner who is contributing to campaigns.
I also urge you to work to amend the bill to require monthly campaign reports like we have in Washington State for most candidates. Only reporting campaign contributions and expenditures every 3 months deprives the public of timely disclosure they have a right to know.
May 25, 2009
Maybe Senators Patty Murray and Maria Cantwell are angling for the endorsement of the Seattle Times next time they’re up for election. They are certainly not working for most of the citizens in Washington State when they voted last week to raise the Federal estate tax exemption for the very wealthy.
Senators Murray and Cantwell joined forces with all 41 Republicans and 8 other Democrats in a Senate vote that would remove $91 billion over ten years from the Federal budget. As the blog Working Life said, “Ten Senate Democrats Lose Their Minds, Vote for Estate Tax Cut”
“Now, c’mon, this is entirely absurd. We already have the widest gap between rich and poor in many generations. Republicans (and some Democrats) are trying to cut the Administration’s proper and wise investments in infrastructure and wise energy efficiency programs. And, in the midst of all that, the Senate does what? Votes to cut the estate tax (which effects only the richest Americans) thanks to the votes of ten Senate Democrats. This is the definition of insanity.”
As the New York Times notes today in an editorial entitled “Guarding the Family Fortune” :
“…as the unemployment rate hit a 25-year high and nearly one in 10 Americans was receiving food stamps, 10 Democrats in the Senate joined all 41 Republican senators to cut estate taxes for the wealthiest families….With economic pain and suffering on the rise, how do the senators justify a big tax cut for multimillionaires?”
Who are the other Senators joining this Reagan/ Bush era philosophy of trickle down economics – that you can’t do enough to help the wealthy because they keep the county growing? They are Senators Lincoln Blanche (Arkansas), Max Baucus (Montana), John Tester (Montana), Evan Bayh (Indiana), Mary Landrieu (Louisiana), Ben Nelson (Nebraska), Bill Nelson (Florida), and Mark Pryor (Arkansas).
As the Center on Budget and Policy Priorites states:
“This proposal is both fiscally irresponsible — it would pave the way for a significant increase in long-term deficits and debt — and unnecessary to protect small businesses and farms, nearly all of which are already exempt from the tax under the 2009 estate tax rules, which President Obama has proposed to extend. The amendment also would lead to significant reductions in charitable contributions, while benefiting only the wealthiest 0.28 percent of estates.”
As the NY Times editorial cited above states:
“Under today’s estate tax, which is retained in both the House version of the budget and in President Obama’s version, 99.8 percent of estates will never owe any estate tax. That’s because the tax applies only to estates that exceed $7 million per couple or $3.5 million for individuals, and a vast majority of American families are not and never will be that wealthy. “
It seems to me that Senator Murray and Senator Cantwell are missing the larger picture. Washington State voters recently voted to retain the state estate tax to help fund schools. With the increased concentration of wealth in a very small percentage of the population, it’s time for the wealthy to give back some of the money they made thanks to benefits of the US economic system that made it possible. After all, they can’t spend it after they’re dead. But they can do whatever they want with it while they’re living.
Dropped from the US Senate Bill passed last Thursday to reduce the alternative minimum tax that would have affected millions of taxpayers, was a provision that allows Washington State taxpayers to deduct their sales tax from their Federal income tax. Washington taxpayers will still be able to deduct 2007 sales taxes but not their 2008 sales taxes, because the current deduction will expire this year.
“As the senators wrangled over the AMT on Thursday, they dropped a provision that would allow residents of Washington and seven other states to continue deducting their sales taxes from their federal income tax.
Without that provision, residents will be able to deduct sales taxes when they file their 2007 federal income taxes in April. But then the tax deduction would expire.
Sens. Patty Murray and Maria Cantwell, both Democrats, and Rep. Brian Baird, D-Vancouver, had been pushing bills to make the sales-tax deduction permanent, or at least extend it two more years.
Lawmakers from Washington and the seven other states with sales-tax deductions will try to pass a quick fix later this month or in January, a spokeswoman for Cantwell said.”
We’re not talking peanuts here. An analysis released by Senator Cantwell’s and Representative Brian Baird’s office notes that:
“The Congressional Research Service estimates that Washington state taxpayers who itemize and who claim the sales tax deduction will realize tax savings of more than $557 million.[iv] In 2005, 37 percent of the nearly three million tax filers in Washington state chose to itemize, and 83 percent of those itemizers claimed the state sales tax deduction.[v] That year, the $2 billion that Washington state taxpayers claimed in tax deductions translated into $557 million in tax savings that went right into the pockets of Washington state residents. Congressional Research Service estimates indicate that each Washington state taxpayer who used the state sales tax deduction saved an average of $600 in 2005.”
The fact is that states which have a state income tax can deduct this on their Federal income tax. Washington state has no income tax. As Cantwell’s office notes:
“In most states, taxpayers who claim itemized deductions on their federal income tax returns can claim a deduction for state income taxes paid. The purpose of this deduction is to prevent the double taxation of funds that are used to finance state services. However, from 1986 until 2004, residents of eight states that have no income tax but which finance their state services using a sales tax, were denied a Federal deduction for these state taxes. In 2004, Congress passed legislation to temporarily restore the deduction for state and local sales tax, thus restoring parity in the federal Income tax code for residents in those states without an income tax. Unless legislation is passed to extend this deduction, it will expire at the end of 2007.” …
“Without the state sales tax deduction, non-income tax states would be able to deduct only 36.6 percent of the state and local taxes they pay, all of which comes from property taxes. States with an income tax, by comparison, would be able to deduct 56.1 percent.[vi] This means that taxpayers who file in states with an income tax can expect to save substantially more than those who reside in the states without state income taxes. In 2004, Deductions from state and local income tax claimed on federal income tax forms totaled $202.3 billion.[vii] “
If Cantwell, Murray, Baird and the rest of the Congressional delegation are not successful in re-enacting the state sales tax deduction on Federal income tax returns for next year, the overall tax burden on Washington taxpayers will go up.
Of course this would increase citizen pressure for tax reform in Washington state. A state income tax coupled with a reduction in sales taxes and property taxes would both produce a less regressive state tax system and also allow for the ability of Washington State taxpayers to deduct their state income tax from their Federal income tax.
A state income tax is a fairer tax than sales taxes and property taxes which you have to pay whether you are working or not, whether you are retired or not and whether you have any income or not. But you only pay an income tax if you have income.
see also: Washington State Income Tax Makes Sense
Senate Bill 223, the Senate Campaign Disclosure Parity Act, is a simple bill only several sentences long. It would increase accountability of campaign disclosure to the public by requiring that candidates for the US Senate timely file their campaign finance reports electronically the same as candidates for the US House and candidates for President currently do.
Some 40 Senate members are sponsors of this bill, including Senators Hilary Clinton, Russ Feingold, Barack Obama, John F Kerry, Ron Wyden, Barbara Boxer, Joseph R Bidden, Jr, Dianne Feinstein, and Christopher Dodd to name a few. Conspicuously absent are Washington State Senators Patty Murray and Maria Cantwell.
This week a third attempt to move the bill was stopped by Republican Senator John Ensign who filed an unrelated amendment that had not been discussed with a hearing. The amendment originated from the office of Republican Senator Mitch McConnell. It was to require outside organizations filing ethic complaints to disclose their donors. Previously McConnell was involved in holding up the bill and would not disclose who had put a hold on the bill. It seems he had. The amendment needs a separate hearing and is an attempt to stop S 223 from being passed.
Currently in this electronic age, the Senate remains back in the pre-computer and Internet days, filing the campaign paperwork by paper, which then has to be added back to the computer network for filing with the FEC or Federal Elections Commission. The result is a significant time lag in the availability of the public to see the disclosure reports.
As the Campaign Finance Institute reports “All S.223 would do is require Senate candidates and party committees to take information they already are required to collect and disclose, and which they already keep for their own files in electronic format, and send it on to the Secretary of the Senate as an electronic file. Instead, Senate committee now print the same information out on paper and the Federal Election Commission has to keypunch it all over again, at a cost of hundreds of thousands of dollars and months of wasted time.”
Washington state candidates have filed forms electronically for a number of years.
One major reform missing however in the Federal legislation is that currently campaigns reports are only filed every 3 months. Washington State for years has had monthly reporting of campaign finance reports. The public deserves better accountability and more timely disclosure than every 3 months. The Federal reporting should also be monthly.
You can contact Senator Patty Murray and Senator Maria Cantwell by clicking on their names. Send them an e-mail urging that they join S 223 as co-sponsors and help to get this needed disclosure measure passed. Urge they support monthly reporting also.
Senator Maria Cantwell and other Democrats need your vote and deserve your vote today. It’s time to have a Congress that deals with real issues not those of Republicans who have shown they will do anything for corporations and multi-millionaires and prefer to spend time critiquing one’s ability to tell a joke rather than discuss solutions to Bush’s Iraq quagmire.
The national Republican noise machine and the wimpy media that can’t think for itself caused most Democrats and others to cut and run from John Kerry after he supposibly messed up the telling of a joke.
In Washington State Republican Mike McGavick, Cantwell’s opponent, chimed in by joining the bandwagon of people willing to continue swiftboating tactics on Democrats. They speak of civility yet their actions speak otherwise.
The question today is how many voters will see through all the smokescreens and deceptions and manipulations and voter suppression efforts and dirty campaigning and decide to just walk away from Republican candidates like McGavick.
Because that is what this election is about – choosing which party you trust that has your best interests at heart and is straight forward in addressing the tough issues America face today – like getting out of Iraq or catching Osama bin Laden.
Republicans like Senate candidate Mike McGavick were so desperate for an issue to give them traction that they hypocritically resorted to literary and drama criticism. Somehow they thought that attacking John Kerry’s joke telling ability was a campaign issue that voters would get excited about. The whole point was to take peoples minds off of Iraq.
Was Senator Kerry’s joke telling ability really a campaign issue?
Republicans nationally turned up the right wing noise machine. As usual the media which loves to have “controversy” did their bidding – even when the controversy was contrived and artificial. The lap dog media, loving car crashes and fires and any type of controversy, followed willing and became Republican attack dogs themselves by giving the huge attention they did to this Republican diversionary tactic.
They joined a very orchestrated crowd attack by the Republicans and it worked. Senator Kerry became persona non grata – again a slickly run campaign attack about a mangled joke became an issue that took everyone’s attention off of the Bush Administration’s failures in catching Osama bin Laden and the failure of the war in Iraq. Bush and Rove succeeded beyond their dreams.
The media once again was cleverly manipulated to do the Rove’s bidding. Bush mangles language all the time. He is socially inept and late night comedians are always supplied with lots of video clips and Bush speeches to laugh at. So why was the media so quick to do the Republicans bidding and get off covering real campaign issues?
If the issue was jokes, then was it a joke that 103 Americans were killed in Iraq last month? Or was it a joke that Republicans like Mike McGavick were still fumbling around trying to find something to talk about? What is the joke that the main justification for being in Iraq is being answered with the statement that we must support the troops?
In a recent ad McGavick attacked Cantwell for changing her position on Iraq from 3 years ago. Should she have kept her head buried in sand like Bush has done in Iraq?
McGavick’s solution. “Beat the Terrorists. Partition the country if we have to and get our troops home, in victory” Besides partition the country – isn’t that cut and run – beat the terrorists is supposibly what Bush has been doing the last 5 years. Stay the course.
As part of his plan to beat the terrorists, McGavick decided to use a botched joke is part of his plan to sell his lack of a plan on what to do in Iraq. Republicans are using political jutisui to turn the Democrats criticism of the Republicans back on them.
Bush’s campaign attack is now asking where is the Democratic plan to win? That’s just turning the question back on itself. That’s just trying to take attention off his failures. Where is Bush’s plan? Oh right its stay the course but we’re not calling it that.
And that’s all Mcgavick’s position is on Iraq also. “Beat the Terrorists ….bring the troops home, in victory” His partition the country is just what’s likely to happen on its own.
So it was informative that lobbyist and insurance man Mike McGavick joined the Bush Republican chorus on attacking Kerry. Same swiftboating by Republicans as before. I don’t find any mention on McGavick’s website of his having served in the military yet here he is “defending the troops” from “troop hater” foreign war veteran John Kerry.
What is wrong with the main stream media that it made what Kerry said an issue? What is wrong is that they joined the Republican strategy of making “waving the flag” and “supporting the troops.” the patriotic thing over waging a just war or facing the reality of the hornet’s nest Bush stirred up in Iraq.
Supporting the troops was only really a clever way for Bush and Rove to create another can’t lose issue – like supporting motherhood issues which are falsely packaged in can’t lose names like supporting ‘healthy forests’ or supporting ‘clear skies.’ That may be clever marketing by former corporate types scattered around the Bush Administration but pooh is still poop even if you call it something else.
How the hell are you really “supporting the troops” if you don’t face the reality that the troops are engaged in a quagmire of a civil war that a botched effort by Bush helped create. That’s where the outrage should be directed because even when Kerry stumbled over his Bush joke, he was still right.
The reality is that the military is a place that recruits people who haven’t gotten a good education. If they had a better choice, do you think they would give it up to go to Iraq to spend their days worrying about being blown apart everytime they leave their base?
What is wrong with saying that? It’s the emperor has no clothes. The media in joining the Republican attack on John Kerry showed that they are still unwilling to face the reality that they need to deal with the issues, not whether someone didn’t tell a joke the way they had written it out on a piece of paper.
The media became Republican lapdogs when they did the bidding of a bunch of right wing fanatics desperate to justify an unnecessary war looking for scapegoats on the other side when they joined the once again swiftboating of Kerry. They should be ashamed of themselves.
Our country is being run by a bunch of nuts who have been able to use the absurd logic that we are supporting our troops by keeping our mouth shut about whether we should even be there. Its not a joke that the mainstream media types spent so much time over a joke made by a past candidate rather than dealing with the real issues involved.
Hopefully today the American voters will show the Republicans you can’t fool all of the people all of the time. I think Democrats are going to win big today. They are tired of Republican lies and deception. It’s time to deal with real issues, not joketelling.
Mike McGavick’s campaign for US Senate has degenerated into a joke. I kid you not. McGavick is calling on his opponent Democratic – US Senator Maria Cantwell – to apologize for Senator John Kerry’s inability to tell a joke.
I really don’t think this campaign is about who can tell a joke better. But apologizing that’s something else.
So if we’re down to the apologizing phase of the campaign, let’s forget the jokes Mike. Are you ready to apologize for a few things your chosen party, the Republicans, and Congress and President Bush have done that really matter to Washington voters? Things like:
-falsely involving us in an unnecessary war in Iraq
-not finishing the war in Afghanistan
-creating more terrorists worldwide, making us less secure
-increasing the tax burden on future generations
-not raising the minimum wage
-using earmarks to pay for pet projects
-weakening the U.S. Constitution
-giving huge tax breaks to the wealthiest and token tax breaks to the rest of us
-increasing the cost of student loans and college education
-selling out to corporate interests on environmental issues
-supporting oil companies’ interests over consumer interests
-opposing efforts to decrease global warming
-opposing making cars and trucks more fuel efficient
-not working to make us energy independent
-drafting legislation behind closed doors
-unethically accepting money from corporate lobbyists
-working to divide our country rather than bringing us together
-supporting drug company profits over helping seniors on low budgets
-creating a world hostile to US interests
-not working for affordable healthcare
-pushing to reduce the security of social security
-letting legislation expire to make the polluter pay
-trying to sell off public lands to private interests
-trying to turn social security over private interests
The list could go on and on, but I think you get my point.
And by the way Mike your Iraq ad is rather pathetic, criticizing Cantwell and saying your plan is to “Beat the terrorists, partition the country and get our troops home , in victory”
Yes Mike that is some plan. Why don’t you talk to your Leader and tell him to “beat the terrorists.” He hasn’t made much headway has he?
Any other ideas Mike?
Washington’s Republican candidate for Senate, Mike McGavick, likes to toot his horn about turning around Safeco – his campaign website talks repeatedly about his leadership and experience. McGavick in his KING 5 debate with Senator Maria Cantwell specifically made a point about turning Safeco around.
However, prior to Safeco, McGavick worked for CNA Financial Corporation in Chicago for about 6 years. CNA Financial Corporation is a large insurance company in Chicago that is owned 90% by the Loews Corporation.
The media has paid very little attention to McGavick’s time at CNA Financial. Yet I think there is more to McGavick’s story than we have been told.
From McGavicks website:
“In 1995, Mike went to work for Chicago-based CNA Financial Corporation. He held a number of positions and was responsible for developing CNA’s e-commerce strategy. Soon, however, CNA tapped Mike’s problem-solving leadership, naming him president and chief executive officer of the company’s largest operating
Mike’s professional career is testament to his leadership abilities. It’s also a testament to Mike’s unwavering focus on what real leadership is: taking responsibility and solving problems.”
O.K. well lets look a little closer.
McGavick worked for CNA Financial through 2000. It was announced in late Jan. 2001 that he had been selected to head up Safeco. But what happened at CNA Financial Corporation while McGavick was there and after he left?
In an official announcement written for the May 7, 2003 annual meeting there is an interesting graph that states the following:
STOCK PRICE PERFORMANCE GRAPH
The following graph compares the total return of the Company’s Common Stock, the Standard & Poor’s 500 Composite Stock Index (“S&P 500″) and the Standard & Poor’s Multi-Line Insurance Index for the five years ended December 31, 2002. The graph assumes that the value of the investment in the Company’s Common Stock and for each Index was $100 on December 31, 1997 and that dividends were reinvested.
STOCK PRICE PERFORMANCE GRAPH:
————————–1997 — 1998– 1999 — 2000 — 2001 — 2002
CNA FINANCIAL CORP…..100 — 94.52–91.44–91.00–70.13–61.55
S&P 500 INDEX …….100 –128.58–155.63–141.46–124.65–97.10
Thus $100 invested in CNA Financial Corporation between 1997 and 2002 became worth $61.55 while the same $100 invested in the S&P Multiline Insurance Index was worth $130.53
That doesn’t exactly sound like a company you’d want to invest in. And this was the company Mike McGavick worked for from 1995 through 2000. Maybe there’s more to the story about Mike McGavick’s time at CNA Financial than he’d like us to know.
One place to start is to look at what Mike McGavick actually did at CNA Financial. The story isn’t quite as usually told. McGavick was not the CEO at CNA Financial as has sometimes been said. See as just one example Seattle Times 4/17 2006 which erroneously lists him as “President, chief operating officer, CNA Financial, 1995-2000″
McGavick’s exact position in CNA changed over time, but he was on a senior management team starting in July 1997. He headed up the largest division of CNA Financial – the commercial insurance division, starting in 1997. As such he was the COO of the CNA division entitled Agency Market Operations.
As The National Underwriter in 2002 noted,when he left CNA Financial his “ most recent position prior to Safeco was as head of Agency Market Operations”
The 1999 CNA Financial Report to shareholders noted that CNA conducted its operations at that time through 7 separate units of which Agency Market Operations was one. The others were Specialty Operations, CNA Re, Global Operations, Risk Management, Group Operations and Life Operations.
In looking up Loews Financial Statements I came across the following in their 2003 Financial Report:
“Much of Loews’’s attention in 2003 was directed towards CNA, which made great progress in restoring and realigning its balance sheet to reflect claims development on policies written before 2001. CNA conducted a thorough review of its reserve base over the course of much of the year, which resulted in two significant charges in 2003. While this outcome was certainly undesirable, it represented a committed, genuine initiative to create a profitable commercial property-casualty insurance company. In support of these efforts, Loews lent its financial strength to the capital plan that CNA devised to augment its statutory surplus. In total, Loews invested $1.1 billion in CNA during the fourth quarter of 2003… “
Sounds like McGavick left an unprofitable company that had lots of problems that were the result of policies at least partially written during the time McGavick was with the company. Was McGavick just leaving a bad situation? What role did he have in creating or trying to solve the situation mentioned in the 2003 financial report?
In the 1999 CNA Financial Report released in March of 2000 McGavick gives the following perspective on his job at CNA Financial:
“Could you tell us about your efforts in commercial middle markets?
MCGAVICK: First of all, we are aggressively getting off accounts that have been unprofitable. Where we can’t find a solution that is acceptable to us, we are getting off the risk. Secondly, and a much more difficult task, is getting adequate price on business that we want to retain. Usually, this is business that many companies would like to have. We have steadfast resolve in getting an adequate price, even in this business. In 1999, we did not renew nearly $750 million of commercial premiums on a base of $3.4 billion as we worked through critical underwriting and pricing initiatives.
It is also important to look at the quarter-to-quarter trend. In middle-market business, as we work to attain rate adequacy, average price increases were 2 percent in the first quarter, 6 percent in the second quarter, 8 percent in the third quarter and 9 percent in the fourth quarter. Retention has been holding steady in the 70 to 75 percent range throughout the year.
You increased prices in commercial middle markets and still produced an underwriting loss. Has anything really changed?
MCGAVICK: When you look at the fundamentals of our book of business, we are in a much better position now than at the start of 1999. At that point, we were coming off two quarters of price decreases – 0.5 percent in the third quarter of 1998 and 1 percent in the fourth quarter – and these rolled over into our 1999 operating results. Now we are sitting on four consecutive quarters of necessary price increases that reached 9 percent in the fourth quarter, and we expect these actions will work their way into our results for 2000.”
The following 1997 through 2000 figures are from media release.
The 2001 through 2005 net income figures from the The 2005 Annual Report of CNA Financial Corp.( page 2 ).
Agency Market Operations saw net income (loss) figures of :
1997————–($326 million) loss
1998—————($54 million) loss
1999————–($201 million) loss
2000————– $110 million
They list the following net income (loss) figures as a whole for CNA Financial:
1998————- $228 million
1999————-($172 million) loss
2000————$1,182 million * see note below
2001————($1,605 million) *restated loss
2002 ————–$163 million *restated
2003———– ($1,417 million) *restated loss
2004—————$425 million *restated
The year 2000 deserves special note “…this significant increase in net income is attributable largely to realized gains on our superb Global Crossing and Canary Wharf investments…” SEC info
The year 2000 for CNA Financial as a whole showed a good profit on paper but when you look at the next three years it disappears. As noted, this increase was due mainly to investments separate from daily operations. If you add all the earning from 1998 to 2005, CNA Financial Corporation shows a cumulative loss of close to a billion dollars or $932 million to be more exact. If you exclude 2004 and 2005 as years beyond correcting for 1990’s losses, the loss becomes ($1.611 billion) after the input of funding by Loews.
Remember McGavick headed up Agency Market Operations since 1997 through 2000. In 1999 looking at the income from premiums of $4,799 million and investment income of $686 million and comparing it with the income of $13.282 billion for CNA as a whole, the sector that McGavick headed up brought in $4.799 billion or 36% of the total revenue.
Yet Agency Market Operations that year recorded a loss of $202 million. In 2000 with similar revenues it only recorded a $100 million gain after McGavich’s leadership for 4 years. Agency Market Operations did not contribute much to the income gain in 2000.
After McGavick left to join Safeco in Jan 2001 , the CNA Financial Corporation in 2001 underwent significant restructuring and Agency Market Operations disappeared as a division and as a separate entity that one could individually break out for an on-going income (loss) comparison. What was McGavick’s job no longer existed as such in the reorganization.
As noted in Loews 2001 10 – K report filed 3/08/2002 Loews reduced its seven operating groups to five – “Standard Lines, Specialty Lines and CNA Re (these groups comprise the Company’s Property-Casualty segment); Group Operations and Life Operations.” The group entitled Ageny Market Operations , that McGavick had headed, ceased to exist as such.
“CNA underwent significant management changes, strategic realignment and restructuring in the second half of 2001. These management changes as well as the strategic realignment and restructuring have changed the way CNA manages its operations and makes business decisions; and therefore, necessitated a change in CNA’s reportable segments.
The changes made to CNA’s reportable segments were as follows: (i)Commercial Insurance and CNA Excess & Select (formerly included in AgencyMarket Operations) and Risk Management Operations, were combined into Standard Lines; ….”
In Loews 2003 Annual Report they note that
“Over the course of the last two years, CNA has been replatformed, re-positioned, re-taffed, and re-underwritten. It has demonstrated unparalleled initiative and resolve in coming to terms with its past, all in an effort to lift any and all clouds of uncertainty as it works to become a strong, focused, and profitable commercial property-casualty insurance leader. Although the nature of the insurance business is to take calculated risks, which from time to time can imply a volatile earnings profile, CNA believes that its recent actions have positioned it to perform at a high level in the years ahead.”
One could speculate that McGavick in late 2000 saw the writing on the wall and decided it was time to get a new job. As noted in the same report above there is this further discussion of CNA’s reorganization in 2001 after McGavick left :
CNA’s organizational structure was streamlined and its infrastructure costs were reduced. From 2001 to 2002, roughly $200 million in annual operating expenses were eliminated, while cost reductions to bring overhead in line with the current size of the company are still ongoing. Selective staff reductions were made at the same time that high-caliber managers and technical underwriting professionals were recruited through investments in compensation plans and training and development programs.”
It definitely seemed like an opportune time for McGavick to move on in Jan 2001. Maybe he had no choice considering the circumstances. You’ll have to ask him.
To cover myself in case I made a mistake or two in interpreting this information cited above I give the following excuse. Sid Cato of Cato Communications made the following statement in a news release reviewing the best and worst company annual reports.:
CNA Financial, “an insurance company regardless of what it calls itself.” He said that traditionally its annual “is awful. As it is this year.” he said CNA “more than once” has made his list of world’s worst reports. Its ’98 product, he said, contains “precious little of substance.”
Feel free to comment.
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