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Analysis, background reports and updates from the PBS NewsHour putting today's news in context.

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    WESTMINSTER, Calif. -- The end of unemployment checks for more than a million people on Saturday is driving out-of-work Americans to consider selling cars, moving and taking minimum wage work after already slashing household budgets and pawning personal possessions to make ends meet.

    Greg and Barbara Chastain of Huntington Beach, Calif., put their two teenagers on the school lunch program and cut back on dining out after losing their T-shirt company in June following a dispute with an investor. They've exhausted their state unemployment benefits and now that the federal extensions are gone, unless they find jobs the couple plans take their children out of their high school in January and relocate 50 miles east where a relative owns property so they can save on rent

    "We could let one of our cars go, but then you can't get to work - it's a never-ending cycle," 43-year-old Greg Chastain said while accompanying his wife to an Orange County employment center. He said they eventually may try their luck in a less expensive state like Arizona or Texas if he can land a manufacturing job there.

    The end to the five-year program that extended benefits for the long-term jobless affected 1.3 million people immediately and will affect hundreds of thousands more who remain jobless in the months ahead. Under the program, the federal government provided an average monthly stipend of $1,166.

    While the Obama administration and Democrats in Congress want to continue the program, the extensions were dropped from a budget deal struck earlier this month and Republican lawmakers have balked at its $26 billion annual cost.

    The end of the program may prompt a drop in the nation's unemployment rate, but not necessarily for a good reason. People out of work are required to look for work to receive unemployment benefits. As benefits disappear, some jobless will stop looking for work out of frustration and will no longer be counted as unemployed.

    The trend has already emerged in North Carolina, which started cutting off extended benefits in July. The state's unemployment rate went down - from 8.8 percent in June to 7.4 percent in November- even though the number of North Carolinians who said they had jobs rose only slightly in that time.

    The North Carolina evidence is consistent with the theory that ending benefits will cause some unemployed to drop out of the workforce, said Michael Feroli, an economist at JP Morgan Chase.

    That's what Fed chairman Ben Bernanke meant when he said this month that the end of extended benefits "will bring the unemployment rate down, but for ... the wrong reason."

    Some unemployed people said the loss of benefits might drive them to take minimum wage jobs to get by until they can find work at their skill level and in their field.

    Richard Mattos, 59, of Salem, Ore., has been out of work since March, when he was laid off as a case manager at a social services organization. Without the unemployment income, Mattos said he and his wife will have enough money for one month's worth of bills. Almost every day, he visits employment centers run by the state of Oregon or Goodwill Industries International.

    "I don't know what we're going to do," he said. "We could end up homeless because of this."

    Since 2008, the federal program paid out benefits to the unemployed after their 26 weeks of state benefits ran out. At its peak, the program offered up to 73 weeks of federal benefits - which are typically offered during periods of high unemployment - to the long-term jobless.

    James Sherk, a labor policy analyst at the conservative Heritage Foundation, said ending the extensions could induce workers to take jobs they might have overlooked initially. Extended unemployment benefits can give workers "a false sense of how much time they have before they have to start broadening their net to less than ideal positions," he said, adding that the labor market, while not ideal, is stronger and continues to improve.

    In November, the country's unemployment rate fell to a five-year low of 7 percent, but is still above the 5 percent to 6 percent rate that would signal a normal job market. And long-term unemployment remains a problem for the economy as nearly 4.1 million Americans have been out of work for six months or more.

    Deborah Barrett, a 57-year-old resident of Newport, R.I., is one of them. She was laid off from her management job in accounting in February and has sent out hundreds of resumes since. She said doesn't know how she'll get by without the federal assistance.

    "It's petrifying," she said. "Unfortunately, I don't believe my story is very unique."

    Laura Garay, 57, pawned her jewelry, withdrew retirement funds and relied on support from friends after losing her paralegal job in May, the same month she was diagnosed with lymphoma.

    Her monthly $1,700 in unemployment covers her house payment in Westminster and the cost of maintaining her health insurance to cover a barrage of exams and radiation therapy.

    Garay said her illness set back her job search, but as long as she's healthy, she'll work at just about anything to get back on her feet and avoid being jobless for too long.

    "You don't find a job in two weeks, you don't find a job in three week.

    By Amy Taxin and Christopher S. Rugaber, Associated Press. Associated Press writers Jonathan J. Cooper in Salem, Ore. and Erika Niedowski in Providence, R.I. contributed to this report.

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    WASHINGTON-- The new year brings the big test of President Barack Obama's beleaguered health care law: Will it work?

    The heart of the law springs to life Wednesday, after nearly four years of political turmoil and three months of enrollment chaos. Patients will begin showing up at hospitals and pharmacies with insurance coverage bought through the nation's new health care marketplaces.

    The course of 2014 will show whether Obama can get affordable care to millions of people in need, without doing intolerable damage to the 85 percent of U.S. residents who already were insured.

    Lots of Americans are nervous.

    Will their new coverage be accepted? It's a concern because insurers have reported problems with the customer information they've gotten from the government, including missing data and duplication.

    How many more people will see old individual plans that they liked canceled? Will a flood of newly insured patients cause doctor shortages? Will businesses respond to the law by ditching their group plans or pushing more health costs onto workers?

    About three-fourths of people who face changes to their job-based or other private coverage in 2014 blame the health law, a recent AP-GfK poll found. Yet the trend of employers trimming costly health benefits predates the law that critics dubbed "Obamacare."

    Many people should benefit immensely.

    People previously locked out of individual insurance by high prices or pre-existing health problems can get coverage to stave off the threat of medical bankruptcy. More low-income workers will come under Medicaid, in states that agreed to expand the safety-net program. Middle-class families without workplace coverage can get tax subsidies to help pay for their insurance. How much patients like the new plans, and whether they can afford the co-pays and deductibles, will become clear as they start visiting doctors.

    The new year also launches the most contentious aspect of the law: the mandate that nearly everyone in the U.S. have health coverage, or pay a fine.

    All this will unfold during the super-heated politics leading to November's midterm elections.

    Republicans and Democrats will jostle all year to influence the public's assessment of changes to American health care not matched since Medicare and Medicaid were launched nearly a half-century ago.

    Some dates - and moving parts - to watch in 2014:


    -Coverage begins. Many low-income Americans who didn't qualify for Medicaid in the past can use it now. People who signed up for private insurance in a state or federal marketplace by Dec. 24 (or later in some states) and have paid their first premium are now covered, too.

    -Coverage begins for workers at companies that have signed up for new small business plans through the marketplaces, also called health care exchanges.

    -Coverage lapses for people whose existing plans were canceled, if they haven't signed up for a replacement or received an extension. At least 4.7 million people got cancellation notices, despite Obama's promise that Americans with insurance they like could keep their old plans. Obama recently gave insurance companies the option of extending old plans for existing customers for a year, but only where state insurance commissioners give their OK.

    -The clock starts on the "individual mandate." Nearly all U.S. citizens and legal residents are required to have "minimum essential coverage" for most of 2014, or pay a penalty. Most people already are insured through their jobs, Medicare, Medicaid, or military coverage and so don't need to do anything.

    -Insurance companies are no longer allowed to turn away people in poor health or kick customers out of plans when they get sick.

    -Women and people with pre-existing conditions pay the same rates as healthy men in the new plans. The law also limits how much more insurers can charge older people.

    -New insurance plans can't put an annual dollar limit on care, or require individuals to pay more than $6,350 in out-of-pocket costs per year.

    JANUARY 10

    Payment due. In most cases, marketplace customers who signed up by Dec. 24 have until now to pay the first month's premium and get coverage for their January medical bills. Major national insurers agreed to accept payments 10 days into the month because of technical troubles plaguing online enrollment at HealthCare.gov. But buyers should check early with their insurance companies - some may not honor the grace period. A few states running their own marketplaces are granting even more time. Those who miss their deadline can get coverage starting Feb. 1.

    JANUARY 31

    -A temporary program for people denied coverage because of poor health ends. Tens of thousands of Americans with serious illnesses such as heart disease and cancer were in the special program and needed new coverage for 2014. The Pre-Existing Condition Insurance Plan, originally set to expire Dec. 31, was extended one month to help sick people whose enrollment was stymied by HealthCare.gov computer crashes.

    -Some people could lose coverage for a prescription they've been taking. The Obama administration urged insurers to temporarily let customers keep filling prescriptions covered by a previous plan, but not their new one, through January.


    -The patched-up health care website will face a major test if too many people rush to sign up in the final days of open enrollment. Watch for a possible return of rampant crashes and error messages.

    -On the other hand, low enrollment signals another danger. The law's design relies on younger, healthier enrollees to offset the cost of older and sicker consumers. If the numbers stay low, it's likely that enrollees will be disproportionately people with more expensive medical needs, putting a financial strain on insurers. The White House set a goal of 7 million sign-ups for private coverage. More than 1 million had enrolled by Dec. 20, Obama said.


    MARCH 31

    -Last chance for open enrollment through the federal marketplace or 14 states running their own exchanges. Late March enrollees will be covered beginning May 1. (It's possible the administration could decide to extend open enrollment, if major website problems resurface and interfere with sign-ups.)

    -This is the deadline for most people to get coverage to avoid a fine. The Obama administration says, however, that those whose existing health insurance was canceled because of the Affordable Care Act will be exempt from the penalty. People who lose coverage during the year can go without for three months before facing a penalty.

    -The enrollment deadline doesn't apply to people signing up for Medicaid or the Children's Health Insurance Program, based on income. People can apply for those programs at any time and coverage begins at once.

    -The March 31 deadline also won't stop those who need to sign up later in 2014 because of a "qualifying life event." The events include things like getting married, having a baby, or leaving a job that provided insurance. Qualifying events trigger a special enrollment period lasting 60 days.

    APRIL 15

    No worries yet. Those who go without insurance won't owe penalties until federal taxes are due in 2015 for the previous year's income. Tax returns filed in 2015 will include health insurance information; insurers will send notices to confirm that taxpayers were covered in 2014. People who bought plans in the marketplaces and received either too little or too much in premium subsidies during the year also will square things with the IRS in April 2015.


    The midterm elections will be yet another referendum on the health care law passed in March 2010 with no Republican support. Obama will still be in the midst of his final term, however. So even if Republicans emerge with control of both chambers of Congress, they will still face two more years with Obama in the White House to veto attempts to undermine his signature law.


    Open enrollment for 2015 begins. Americans can sign up for insurance or switch to a different plan. And they'll see what rate increases are in store for the coming year.


    The extension ends today for people who were able to keep their old individual plans for an extra year, even though the coverage wasn't up to the law's minimum standards.

    COMING IN 2015

    Jan. 1: Large employers - those with more than 50 employees - that don't offer health plans face a possible tax penalty. The penalties are designed to discourage businesses from dropping their existing health plans, although some have already begun to do so.

    Jan. 15: Open enrollment for 2015 ends.

    April 15: Penalties for individuals who weren't insured in 2014 kick in. The penalty is $95 or 1 percent of income, whichever is higher. It goes up in later years. The IRS can deduct the penalty from a taxpayer's refund.

    COMING IN 2018

    So-called "Cadillac health plans" offered by some employers come under a new tax. It hits plans that spend more than $10,200 per worker or $27,500 for a family. Most job-based coverage isn't that generous, but corporate executives get such plans, and so do some workers in jobs with strong union contracts. Some companies will pass the tax on to workers and others may trim employee benefits to avoid it. * By Connie Cass, Associated Press*

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    JOHN CARLOS FREY:  Errol Joseph had lived his entire life in the lower ninth ward of New Orleans. He was raising his own family in the same house he grew up in.  In August 2005, Hurricane Katrina changed all that.

    ERROL JOSEPH: This was our master bedroom … we had a utility room over here, and over here was like a storage and a pantry.

    JOHN CARLOS FREY:  Like all residents of the Lower Ninth Ward he and his wife and two kids were forced to evacuate. 

    ERROL JOSEPH: We couldn't get back into this area and you had the military police with the assault rifles telling' that's as far as you can go.  You couldn't go in your house.

    JOHN CARLOS FREY:  So he moved with his family to Baton Rouge, Louisiana, before returning to a different New Orleans neighborhood, where he now rents.  Still this 63 –year-old contractor longs to return to the house he grew up in, but eight and a half years after the storm his house is still a shell of what it was. 

    ERROL JOSEPH:  Sometimes I want to cry, but I’m all cried out.

    JOHN CARLOS FREY:  Joseph’s story is hardly atypical.  The lower ninth ward had a population of 14,000 before the storm struck but now it’s only 3,000, according to the latest census. And though construction is under way on a new school, a fire station and a community center, most of the neighborhood looks much the way it did immediately after the storm surge sent a 20 foot wall of water into this community.  Today the community is still littered with destroyed homes, vacant lots and there are practically no grocery stores or other businesses here. 

    ERROL JOSEPH:  We-- as kids, we were here.  And now, there's nobody down here.  But I want to be here.  I love this land. 

    JOHN CARLOS FREY:  Though city officials declined our repeated requests to talk about the rebuilding of the Lower Ninth Ward, they sent us a document detailing how the city directed federal funds between 2010 and 2013.   More than $900,000 million dollars was allocated for the Lower Ninth Ward for infrastructure projects like road reconstruction, parks and recreational facilities, and the building of that community center and fire house.  It’s an amount similar to, and sometimes greater than, investments made in other neighborhoods where many more residents have returned.  Now, some question whether that money was worth it and if the Lower ninth should be rebuilt at all.

    9th Ward construction

    MARK DAVIS: So I don't think there's any prospect of it becoming what it was.  The conditions just aren't there. 

    JOHN CARLOS FREY:  Mark Davis is the director of Tulane law school’s institute on water resources law and policy.  He’s helped shape policy that affects neighborhoods like the lower ninth ward. 

    MARK DAVIS:  It's not just a matter of moving back.  You have to actually reestablish the entire framework on which the community was built.  And when you-- if you have no place to shop, how do you move there?  You know, you don't have a hospital.  You have really one school.  The-- things that actually become necessary to develop a neighborhood-- and attract people back aren't currently present.

    JOHN CARLOS FREY:  If the Lower Ninth Ward was built basically and solely on emotion and passion for restoring what was there, you are saying that that's not sustainable.

    MARK DAVIS:  No.  It's not sustainable any more than my desire to be 25 again. 

    JOHN CARLOS FREY:  Controversy over which New Orleans neighborhoods should and shouldn’t be rebuilt started just months after the storm, when in early 2006 what is known as a “green dot map” was unveiled by city hall.  The map had green dots on neighborhoods in low lying areas that urban planners thought should be considered for future parks instead of full scale redevelopment, infuriating residents of those areas.  The lower ninth ward was one of those neighborhoods. 

    While the map was scrapped amid the uproar, the message was clear… redevelopment should focus on areas with the best chance for recovery, Not neighborhoods like the lower ninth, which once had the highest percentage of black homeownership in the nation.

    But there are those who are committed to rebuilding the lower ninth ward as it once was.  Laura Paul runs lowernine.org, a non-profit committed to rebuilding the homes of as many former residents as possible. 

    JOHN CARLOS FREY:  What's this place going to look like that would satisfy you?  I mean, what-- what would be here where you finally say, "Okay, my work is done."

    LAURA PAUL: Our work will be done-- when we stop getting calls from people saying, "I want to get back in my house."  And that's not happening yet // We have a lot of people who would love to get home and have no resources.

    JOHN CARLOS FREY:  With private donations and volunteer labor, Paul has restored over 60 homes, including 54-year-old Eula White’s, who moved back six years-ago.   Like many lower-ninth residents we talked to, White says she always knew she would come back…

    EULA WHITE: I had an attitude about coming back.  I had an attitude.  And I think I really did.  I was, like, this is where I grew up at.  This is where I want to be.  And I'm determined I'm a going to get there.

    JOHN CARLOS FREY:  what I see when I come here are all of the empty lots.  I still see some houses that need repair.  I see abandoned buildings.  I see churches that are boarded up?

    EULA WHITE:  And all o' those things that you see are real.  But I see hope.


    EULA WHITE:  Whenever I see a lot that's scraped down and getting' ready to build a home I see hope.   And I'm not going to ever let anybody take my hope away from me.

    JOHN CARLOS FREY:  White says that her grown children, who have settled elsewhere in New Orleans, don’t understand why she’d return to a neighborhood that’s still in such bad shape.

    EULA WHITE:  They don't understand.  They was, like, "There's more to life than just the Lower Ninth Ward."  I said, "Maybe for you.  But not for me."  And that's just how it is.

    JOHN CARLOS FREY:  But Professor Marc Davis says that Eula White’s children are emblematic of why so few residents have actually returned. 

    MARK DAVIS:  It is too long for many people.  I think when you're settled somewhere, your kids are in school, you have found a new doctor, you are-- you are eight years older, it makes it that much harder to pick up and come back. 

    JOHN CARLOS FREY:  The neighborhood continues to have a high crime rate and some worry it might not be safe from another big storm either. 

    JOHN CARLOS FREY:  But would you say that the Lower Ninth Ward is now safe?

    MARK DAVIS:  I think it's safer.  And I think that's the most you can say nearly any place that I can imagine, here or elsewhere.  There is not a community where you don't live at risk.

    JOHN CARLOS FREY:  But other neighborhoods in New Orleans are thriving in a way that the lower 9th ward hasn’t.  Terri north is CEO of Providence Community Housing, a non-profit associated with the Catholic Church that is helping to rebuild homes in Treme.  Providence Community housing has built 517 new homes there and Treme now has an occupancy rate of more than 60%, compared to 30% in the lower ninth ward. 

    9th Ward destruction

    TERRI NORTH: It is a fully populated neighborhood.  It is not like what you saw in the Ninth Ward or in other places that-- where, you know, small percentages of people weren't able to return and rebuild. 

    JOHN CARLOS FREY:  While Treme and the lower ninth ward have received similar amounts of money from the government during the past four years, Treme, which borders the city’s famed tourist destinations, like the French Quarter, has benefited from private investment.   The lower ninth ward, on the edge of the city, hasn’t. 

    JOHN CARLOS FREY: Is it worth finding resources to reinvest in the Lower Ninth Ward?  Is it worth bringing that kind of community back like it used to be?

    TERRI NORTH:  No.  I mean, you know, just being honest with you-- when it comes down to it, when you're trying to attract business and private investment, it's dollars and cents.

    JOHN CARLOS FREY:  Do you think that the Lower Ninth Ward will ever look like Tremé? 

    TERRI NORTH:  I'm afraid not.  I'm afraid not.  I wish it would. I wish it would, but I'm afraid not.

    JOHN CARLOS FREY:  But for those who want to return to the lower ninth ward, despite all its problems,  Errol Joseph’s says his story is a cautionary tale.

    ERROL JOSEPH:  I get mad.  I wake up in the middle of the night just mad.  I don't have no recourse that I can go to complain or appeal this thing to.

    JOHN CARLOS FREY:  Joseph, a contractor by trade, says he couldn’t get a permit to rebuild until 2009, only to be told then by state inspectors that he didn’t have the right paper work.  He insists he did.  Now he’s says he’s waiting for yet another inspection on his home while the newly constructed frame of the house he built is starting to rot away and supplies sit in storage.

    ERROL JOSEPH:  I've got windows-- vinyl windows.  I don't know if they're going to be warped.  I've got ceramic tile.  I don't worry about that.  I've got Brazilian floors.  I've got paint.  I've got insulation.

    JOHN CARLOS FREY: You're ready to go?

    ERROL JOSEPH:  I've been ready to go.  I've got all kind of plumbing fixtures, cabinets.  And my frame rotted out. 

    JOHN CARLOS FREY:  Joseph and many other residents here feel that the Lower Ninth Ward was left out of the massive efforts underway to rebuild New Orleans...  and that they were even discriminated against, while white communities and neighborhoods around the historic French Quarter were rebuilt. 

    JOHN CARLOS FREY: You said 98% or 99% Black?

    ERROL JOSEPH:  Yeah.

    JOHN CARLOS FREY:  Is that a part of it?

    ERROL JOSEPH:  Well, I think Ray Charles and Stevie Wonder could see that.  They—can see it—

    They can see what's going' on, and both of those people are blind.  They can see what's going on if it's all black. 

    JOHN CARLOS FREY:  In October 2010 a judge did rule that a federally funded housing program designed to assist homeowners affected by Katrina discriminated against black homeowners in low income neighborhoods, like the lower ninth ward.  That’s because the payouts were based on home values.  Errol Joseph says that meant many people like him didn’t get nearly enough to cover the cost of rebuilding. 

    JOHN CARLOS FREY: I got to ask you why you even keep doing' it?  I mean, are you going to finish this house?

    ERROL JOSEPH: I don't even know.  You know, it's better things to die for than nothing'. 

    You know, I don't have my neighbors whereby I can holler at this one, holler at that one.  Here, the girl on the corner, her mother died.  Six months later, her dad died. 

    JOHN CARLOS FREY:  You're pointing to a bunch of empty lots, you realize--

    ERROL JOSEPH: That's right.  That's right.  You don't know where all of these people are.  This-- this was a thriving community.

    JOHN CARLOS FREY:  But you say you've done all of this work and gone through all of this pain and suffering because this is your home?

    ERROL JOSEPH: This is my home.  There's a difference between house and home.  I hear people all the time saying I built a home.  You can’t build a home.  This home has to grow with love, heart, feelings.

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    Dubai ushered in the New Year by blasting away the old world record for largest fireworks display. The display, which launched more than 500,000 fireworks over six minutes and spanned 60 miles of the Dubai coast, was seen by more than 1 million people around the city.

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    pedal pubIn which state can you now go on a bar crawl using a "pedal pub"? Photo by Flickr user Sonja Stark

    More than 40,000 new laws were enacted in 2013, thousands of which took effect at the stroke of midnight, according to the National Conference of State Legislatures.

    How well do you know the new laws of 2014? Take our quiz to find out.


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    By Doug Dachille

    The careless lending practices in peer-to-peer lending may be a harbinger of greater problems to come in our financial system. Photo by Chris Hondros/Getty Images.

    The stock market had an incredibly good run in 2013: The Standard and Poor's 500 Index closed Tuesday up 30 percent for the year, far surpassing the 7.3 percent it was expected to climb.

    But as we examined in our Making Sense segment on the market's recent highs, there are plenty on Wall Street who are leery of their apparent good fortune. Wall Street money manager Doug Dachille wasn't shy about calling the market overstimulated. And he identified a new bubble, whose risky lending practices, he wrote on the Business Desk, could be symptomatic of greater troubles for the financial system.

    Dachille, trained as a medical doctor before founding First Principles Capital Management, warned about investors carelessly lending to borrowers over the Internet in so-called peer-to-peer lending. But the feedback Dachille received on that first post troubled him; not enough people were aware of the loan risks.

    Doug Dachille: Last month on the Business Desk, I wrote about the newest bubble: peer-to-peer lending over the Internet. Although still relatively small, the peer-to-peer lending bubble shares many of the hallmark signs of the bubbles that undermined our financial system in 2008. I'm worried that the careless lending in this Internet phenomenon may be a harbinger of bigger problems to come in our financial system. The post received a number of comments which merit responses so that folks can be better educated about the potential loan risks and be aware of additional factors they should consider when making these loans. I was particularly concerned with one commenter who indicated that 25 percent of his retirement savings were invested in peer-to-peer loans.

    If we learned anything from the financial crisis it's that investors need to take full accountability for performing appropriate due diligence when making investments. At a minimum, they should carefully read all documentation and offering prospectuses and independently assess the validity of any third-party data, such as credit ratings, which may be used in the investment decision process.

    Investors also forgot during the period leading up to the financial crisis that the utility of historical loan performance and asset price data is limited; only looking in the rear view mirror is as unsafe for driving an investment decision as it is for driving an automobile.

    MORE FROM DOUG DACHILLE: The LIBOR Scandal: Not that Big a Deal?

    Performing this kind of due diligence is not always easy. Increasingly, the risk factors outlined in financial prospectuses resemble the daunting list of risk factors described on medication labels. Given the length of the list of risks disclosed, most consumers have become completely desensitized to them, with many no longer reading the risks at all. Since it is difficult for the typical consumer of medications and financial products to distinguish which risks are the most likely and require serious consideration from those that are remote but simply included to reduce legal liability, the entire risk factor section becomes white noise. Only highly trained physicians can read a package insert for a medication and quickly determine the relevant and important risk factors. The same can be said for financial prospectuses.

    The LendingClub was the first peer-to-peer lender to register its offerings with the U.S. Securities and Exchange Commission. A careful review of the LendingClub prospectus should cause investors to question the reliability of the credit ratings it designates for the borrowers. Investors should wonder, is offering a specific-rated borrower a lower interest rate really justified?

    According to the April 30, 2013, LendingClub Prospectus, in order for a borrower to qualify for a loan, the prospective borrower must have a minimum FICO score of 660. (This credit score is obtained from a standard third-party consumer reporting agency, and a report from any of the major consumer credit reporting agencies should be reliable.) Additional qualifications for the borrower include having a debt-to-income ratio (excluding mortgage) below 35 percent. The calculation of the debt-to-income ratio is based upon the prospective borrower's debt reported by a consumer reporting agency and income that is stated by the borrower, which is unverified by LendingClub unless otherwise noted.

    It appears that only a limited number of borrowers have their stated income actually verified. Here is an excerpt of the relevant section from page 15 of the LendingClub prospectus describing its verification process for borrower-supplied information:

    Information supplied by borrower members may be inaccurate or intentionally false and should generally not be relied upon.

    Borrower members supply a variety of information that is included in the borrower Member Loan listings on our website and in the posting reports and sales reports we file with the SEC. Other than as described below, we do not verify this information, and it may be inaccurate or incomplete. For example, we do not verify a borrower member's stated tenure, job title, home ownership status or intention for the use of loan proceeds, and the information borrower member's [sic] supply may be inaccurate or intentionally false.

    Unless we have specifically indicated otherwise in a loan listing, we do not verify a borrower member's stated income. For example, we do not verify borrower member paystubs, IRS Forms W-2, federal or state income tax returns, bank and savings account balances, retirement account balances, letters from employers, home ownership or rental records, car ownership records or any records related to past bankruptcy and legal proceedings.

    In the limited cases in which we have selected borrower members for income or employment verification, for the nine months ended December 31, 2012, approximately 60.1% of requested borrower members provided us with satisfactory responses to verify their income or employment; approximately 10.2% of requested borrower members withdrew their applications for loans, and approximately 29.7% of requested borrower members either failed to respond to our request in full or provided information that failed to verify their stated information, and we therefore removed those borrower Members' Loan postings.

    LendingClub assigns 35 loan grades to each borrower loan request based upon the borrower's FICO score and LendingClub's "proprietary scoring model." How accurate can this model be to generate 35 unique credit scores for borrowers when, with the exception of FICO, LendingClub doesn't verify the accuracy of borrower attributes important to prospective loan performance, such as current income?

    While LendingClub doesn't provide many specifics about what factors into this model, it appears that results are primarily driven by the historical loan performance of the borrowers. How reliable a predictor of future loan performance is a model that does not adjust historical loan performance for verified changes in current employment status and income levels? Stability of employment and income are critical to prospective loan performance. Therefore, verified employment status, employment tenor and income are important borrower attributes to consider when assessing the likelihood of historical borrower loan performance as a forecast of future performance. Yet, these attributes are not always verified for LendingClub member loans.

    LendingClub admits that when it attempts to verify stated borrower information, it cannot do so for approximately 40 percent of the sample borrowers. Is it possible that 40 percent of the proprietary credit scores are inaccurate? Since it is rare for a borrower to provide stated information that makes him appear less creditworthy (especially when he believes the information will not be verified), is it not possible that 40 percent of the credit scores may overstate the true creditworthiness of the borrowers, resulting in the offering of a loan interest rate that is too low?

    It's not the concept of peer-to-peer lending to which I object. My main concern is the execution of the lending process, as compared to other types of lending such as credit card debt. The higher interest charged on credit card debt is based upon the fact that credit card loans are unsecured with limited credit underwriting. Generally, the underwriting is limited to credit bureau information and FICO scores. Since the credit card companies don't know much about the borrower, there is minimal fine-tuning of the interest rate charged on traditional credit cards based upon borrower specifics.

    Certainly, as more information about borrowers is obtained, the risk premium attributable to the unknown should adjust accordingly.

    Probably the most important piece of borrower-specific information needed to fine tune the interest rate charged on an unsecured loan is the debt-to-income ratio. Obtaining independently verified borrower income, in combination with credit bureau reports and other independently verified borrower attributes, should result in improved credit underwriting with a reduction in the risk premium implicit in the interest rate on a credit card. Therefore, a business model where lenders offer unsecured loans at reduced interest rates to borrowers who provide verifiable income and other relevant attributes makes sense. But the lower rates peer-to-peer lenders offer don't seem to be based on verified data.

    The concern I have with the current execution of peer-to-peer lending is that the intermediary companies are giving investors the impression that they are conducting greater underwriting on the borrowers than they actually are. It's this impression of stringent underwriting that can lead lenders to offer reduced rates to these borrowers.

    The sections highlighted above from the LendingClub prospectus should raise doubts in the mind of investors. If the underwriting process used by peer-to-peer lending companies provides no greater and more reliable borrower credit information than that obtained by traditional credit card companies, then lenders need to question why they are offering reduced risk premiums to these borrowers. If you, as a lender, are going to offer a borrower a lower rate than another unsecured loan alternative, you need to be certain there is sufficient verifiable credit information to justify the rate reduction.

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    Sean Azzariti of Denver made the first purchase of recreational marijuana under the new law at 3D Cannabis Center in Denver. Photo by RJ Sangosti/The Denver Post via Getty Images

    It's a new day in Colorado; 2014 kicked off with customers lining up across the state to buy marijuana at licensed retailers. Although Coloradans voted to pass a law legalizing marijuana in November, Jan. 1 marked the starting date for state approved venders to sell marijuana for recreational use.

    The new industry comes with new regulations. Residents of Colorado are allowed to purchase up to 1 once of pot, whereas visitors are limited to a quarter of an ounce. All buyers must be over 21 years of age and the purchased product cannot be transported across state lines.

    Recently, Denver International Airport announced it would outlaw marijuana possession on its grounds to avoid conflict with the federal law that prohibits possession of the drug.

    To cover the news and culture surrounding the new law and marijuana culture, the Denver Post launched the blog The Cannabist. On Wednesday, the staff will be live blogging as recreational marijuana shops open for business across the state.

    Tune in to the NewsHour Wednesday night for an update on the rollout of the new law.

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    Hilda Abraham of Dumfries, Va., receives information about the health care reform law. Photo by Jahi Chikwendiu/The Washington Post via Getty Images.

    Starting Jan. 1, central provisions of the Affordable Care Act kick in, allowing many uninsured Americans to afford health insurance. But the landmark law still faces heavy opposition from Republicans and from a public that remains skeptical the law can improve health care coverage while lowering its cost.

    The law has already altered the health care industry and established a number of consumer benefits. It will have sweeping ramifications for consumers, state officials, employers and health care providers, including hospitals and doctors.

    However, HealthCare.gov, the federal website that is managing enrollment in 36 states, has been plagued by electronic problems that botched the Oct. 1 rollout of the health law's online marketplaces, or exchanges. The problems frustrated potential enrollees and gave Republicans new fodder for their argument that the law was doomed to fail. After hundreds of hardware and software fixes, federal officials have said that the site works for the "vast majority of users," but some problems remain.

    Here's a primer on where the law stands now and how it might change.

    I don't have health insurance. Under the law, will I have to buy it? And what happens if I don't?

    You have until March 31 to enroll in health insurance before you are subject to the law's tax penalty for not having coverage. For individuals, the penalty would start at $95, or up to 1 percent of income, whichever is greater, and rise to $695, or 2.5 percent of income, by 2016. For families this year the penalty is $285 or 1 percent of income. That will grow in 2016 to $2,085 or 2.5 percent of household income, whichever is greater. The requirement to have coverage can be waived for several reasons, including financial hardship or religious beliefs.

    Last month the administration decided to waive the individual mandate penalty for 2014 for some people in the individual insurance market whose plans were being canceled. Under the law's "hardship exemption," these consumers are also eligible to buy "catastrophic" coverage policies, which have lower premiums and higher deductibles than other plans that comply with the law.

    I get my health coverage at work and want to keep my current plan. Will I be able to do that? How will my plan be affected by the health law?

    If you get insurance through your job, it is likely to stay that way. But, just as before the law was passed, your employer is not obligated to keep your current plan and may change premiums, deductibles, co-pays and network coverage.

    The law has already made several changes to employer-sponsored insurance. For example, plans generally now ban lifetime coverage limits and include a guarantee that an adult child up to age 26 can stay on her parents' health plan. More than 3 million young adults have been able to stay on their parents' plan due to this provision, according to administration figures.

    What other parts of the law are now in place?

    Starting Jan. 1, insurers will not be allowed to deny you coverage based on a pre-existing medical condition or place annual limits on medical coverage of essential health benefits, which include prescription drugs and hospitalization.

    You are likely to be eligible for some preventive services such as breast cancer screenings and cholesterol tests, with no out-of-pocket costs.

    Health plans can't cancel your coverage once you get sick -- a practice known as "rescission" -- unless you committed fraud when you applied for coverage.

    The law earlier barred insurers from denying coverage to children with pre-existing conditions.

    Insurers have to provide rebates to consumers if the companies spend less than 80 to 85 percent of premium dollars on medical care.

    Some existing plans, if they haven't changed significantly since passage of the law, do not have to abide by certain parts of the law. For example, these "grandfathered" plans can still charge beneficiaries part of the cost of preventive services.

    If you're currently in one of these plans, and your employer makes significant changes, such as raising your out-of-pocket costs, the plan would then lose its grandfathered status and have to abide by all aspects of the health law.

    I want health insurance but I can't afford it. What will I do?

    Depending on your income, you might be eligible for Medicaid. Before the health law, in most states non-elderly adults without minor children didn't qualify for Medicaid. But now, the federal government is offering to pay the cost of an expansion in the programs so that anyone with an income at or lower than 138 percent of the federal poverty level, (about $16,000 for an individual or $32,500 for a family of four based on current guidelines) will be eligible for Medicaid.

    The Supreme Court, however, ruled in June 2012 that states cannot be forced to make that change. As of last month, 25 states and the District of Columbia have chosen to expand Medicaid.

    What if I make too much money for Medicaid but still can't afford to buy insurance?

    You might be eligible for government subsidies to help you pay for private insurance sold in the state-based insurance marketplaces, also called exchanges.

    These premium subsidies will be available for individuals and families with incomes between 100 percent and 400 percent of the poverty level, or about $11,490 to $45,960 for individuals and $23,550 to $94,200 for a family of four (based on current guidelines).

    If you earn less than 100 percent of the poverty level and live in a state that does not expand the Medicaid program, you generally cannot qualify for a subsidy to purchase coverage. However, you are also exempted from the penalties for not having insurance.

    Will it be easier for me to get coverage even if I have health problems?

    Insurers are now barred from rejecting applicants based on health status.

    I own a small business. Will I have to buy health insurance for my workers?

    No employer is required to provide insurance. But starting in 2015 -- a one-year delay from the previous date of 2014 -- businesses with 50 or more employees that don't provide health care coverage and have at least one full-time worker who receives subsidized coverage in the health insurance exchange will have to pay a fee of $2,000 per full-time employee. The firm's first 30 workers would be excluded from the fee.

    However, firms with fewer than 50 people won't face any penalties.

    In addition, if you own a small business, the health law offers a tax credit to help cover the cost. Employers with fewer than 25 full-time workers who earn an average yearly salary of $50,000 or less can get tax credits of up to 50 percent this year.

    Citing technical difficulties, in late November the Obama administration announced a one-year delay in the debut of the online marketplace for small businesses, called the Small Business Health Option, or SHOP. Until the SHOP exchange is fully operational in November 2014, small business owners can apply for coverage through the mail, over the phone or with a broker or insurance agent.

    I'm over 65. How does the legislation affect seniors?

    There is no need for you to enroll in the health law's exchanges. Medicare is not part of those exchanges.

    But the law does make other changes to Medicare.It is narrowing a gap in the Medicare Part D prescription drug plan known as the "doughnut hole." That's when seniors who have paid a certain initial amount in prescription costs have to pay for all of their drug costs until they spend a total of $4,550 for the year. Then the plan coverage begins again.

    That coverage gap will be closed entirely by 2020. Seniors will still be responsible for 25 percent of their prescription drug costs. As of late November, more than 7.3 million seniors and people with disabilities who hit the doughnut hole have saved $8.9 billion on their prescription drugs, according to the Centers for Medicare & Medicaid Services.

    The law also expanded Medicare's coverage of preventive services, such as screenings for colon, prostate and breast cancer, which are now free to beneficiaries. Medicare will also pay for an annual wellness visit to develop or update a plan to prevent disease or disability.

    According to CMS, in 2012 an estimated 34.1 million beneficiaries took advantage of Medicare's coverage of preventive services with no cost-sharing.

    The health law reduced the federal government's payments to Medicare Advantage plans, run by private insurers as an alternative to the traditional Medicare. Medicare Advantage costs more per beneficiary than traditional Medicare. Critics of those payment cuts say that could mean the private plans may not offer many extra benefits, such as free eyeglasses, hearing aids and gym memberships, that they now provide.

    Will I have to pay more for my health care because of the law?

    It depends. Younger people who often paid less for health insurance before the health law may pay more for coverage. Older people may pay less because there are tighter rules governing how much more insurers can charge based on age. People who could not afford insurance before may now be eligible for subsidies to cover the cost of premiums -- and possibly out-of-pocket costs as well. Individuals who purchased insurance before may pay more because the law's "essential health benefits" require that more services be covered.

    Opponents say the law's additional coverage requirements will make health insurance more expensive for individuals and for the government. Even supporters of the law acknowledge its steps to control health costs, such as incentives to coordinate care better, may take a while to show significant savings.

    There are also some new taxes and fees. For example, starting last year, individuals with earnings above $200,000 and married couples making more than $250,000 paid a Medicare payroll tax of 2.35 percent, up from 1.45 percent, on income over those thresholds. In addition, higher-income people faced a 3.8 percent tax on unearned income, such as dividends and interest.

    Starting in 2018, the law also will impose a 40 percent excise tax on the portion of most employer-sponsored health coverage (excluding dental and vision) that exceeds $10,200 a year and $27,500 for families. The tax has been dubbed a "Cadillac" tax because it hits the most generous plans.

    In addition, the law also imposes taxes and fees on several major health industries. Last year, medical device manufacturers and importers began paying a 2.3 percent tax on the sale of any taxable medical device to raise $29 billion over 10 years. An annual fee for health insurers is expected to raise more than $100 billion over 10 years, while a fee for brand name drugs will bring in another $34 billion.

    Those fees will likely be passed onto consumers in the form of higher premiums.

    Has the law hit some bumps in the road?

    Yes. The Oct. 1 launch of healthcare.gov was marred by technical problems that frustrated millions of consumers and gave Republicans on Capitol Hill fresh material for another round of hearings and charges criticizing President Barack Obama's signature domestic policy achievement. Some Democrats have urged the administration to delay the law's individual mandate, citing the website's woes. After a series of repairs, officials have said that the website is working for the "vast majority of users."

    When millions of Americans who buy coverage on the individual market began to learn that their current health plans would not be offered in 2014 because they did not comply with the health law's new requirements, Obama had to apologize for his oft-repeated statement "if you like your health plan you can keep it."

    With some Americans still having difficulty in late December trying to sign up for coverage that starts Jan. 1, administration officials asked insurers to give people more time to pay for coverage beginning Jan. 1. Insurers said that people who enroll by Dec. 24 can pay as late as Jan. 10.

    Problems with healthcare.gov have helped keep early enrollment well below government estimates, but administration officials have said they expect sign-ups to continue to intensify before open enrollment closes March 31.

    Are there more changes ahead for the law?

    Republicans are expected to continue their efforts to defund or repeal the health law and convene additional oversight hearings to highlight the law's problems as Congress gears up for the 2014 midterm elections.

    It's also possible that some of the taxes on the health care industry, which help pay for the new benefits in the health law, could be rolled back due to pressure from affected groups. A repeal of the tax on medical devices was part of last fall's debate over funding the federal government and raising the federal debt ceiling but was not included in the final deal. Medicare's actuary has predicted that the law's payment reductions to hospitals and other providers may not withstand heavy political lobbying on Capitol Hill.

    Meanwhile, the Independent Payment Advisory Board (IPAB), one of the most contentious provisions of the health law, is also under continued attack by lawmakers. IPAB is a 15-member panel charged with making recommendations to reduce Medicare spending if the amount the government spends grows beyond a target rate. If Congress chooses not to accept the recommendations, lawmakers must pass alternative cuts of the same size.

    Some Republicans argue that the board amounts to health care rationing and some Democrats have said that they think the panel would transfer power that belongs on Capitol Hill to the executive branch. In March, the House voted to repeal IPAB. The Senate did not consider the measure.

    Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.

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    The Beatles in 1965. Photo courtesy of the Michael Ochs Archive/Corbis

    You might be surprised to learn that all of the The Beatles' BBC performances were not well archived.

    In fact, Kevin Howlett, a BBC radio producer and the co-producer of a new Beatles album "On Air: Live at the BBC, Volume Two," said that they were practically nonexistent.

    "I first investigated this material way back at the end 1981 and you could discover all the paperwork related to the Beatles radio programs, what songs they covered, but finding the tapes, that was another matter."

    Howlett recently published a book to accompany the new album, "The Beatles: The BBC Archive" and stopped by the NewsHour to speak with chief arts correspondent Jeffrey Brown about his work.

    On Wednesday's broadcast of the PBS NewsHour, you can watch the full conversation, but for now, a sneak peak: below are some images from Howlett's book along with quotes from the interview.

    The Beatles performing for their 15 part series broadcast called "Pop Go The Beatles" in 1963. Photo courtesy of Getty Images

    "This is very early days for The Beatles. It's 1963; they haven't broken internationally, but they're gathering momentum in the UK. It's their breakthrough year and they're desperately trying to make it and they'll do anything to appear on the BBC."

    In February 1964, The Beatles jumped in the ring with Mohammed Ali. Photo courtesy of Getty Images

    "They're really going for it. There's no question of going back and doing it again.They have to get it right so you get that wonderful feeling of 'This is it boys, lights on don't make a mistake cause it will go out on air like that.'"

    The Beatles shake hands with the host of the Ed Sullivan Show in February 1964. Photo courtesy RB/Staff

    "They had a great influence on the way that British people got into American Rhythm and Blues and discovered Motown."

    In October 1965, The Beats pose with their MBE, or Members of the Most Excellent Order of the British Empire, medals. Photo by Rolls Press/Popperfoto/Getty Images

    "The Beatles were absolutely vinyl fanatics."

    The Beatles performed for their "Top of the Pop" live appearance in June 1966. Photo by Redferns

    "The BBC in those days had a monopoly on broadcasting ... it was a very kind of formal institution and The Beatles really shook it up."

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    HARI SREENIVASAN: January 1 brought new calls for brotherhood, new leaders and something new at the day's most famous parade, all of this in the hours after the world welcomed the new year.

    In city after city, the arrival of midnight triggered celebration in the opening moments of 2014. Crowds in London, New York, and Chicago braved the cold to catch extravagant displays of fireworks, some camping outside for hours before midnight.

    It was warmer in Key West, Florida, where the annual Drag Queen Drop saw a renowned female impersonator descend in a massive high-heeled shoe.

    When New Year's Day arrived, Pope Francis addressed the throngs in St. Peter's Square, at the Vatican, urging brotherhood and an end to bloodshed.

    POPE FRANCIS, leader of Catholic Church (through interpreter): It's time to stop. It would be good for us to stop on this road of violence and look for peace. Brothers and sisters, what on earth is happening in the hearts of men? What on earth is happening in the heart of humanity? It is time to stop.

    HARI SREENIVASAN: And from papal appeals to political debuts.

    MAN: Please welcome the 109th mayor of the city of New York, Bill de Blasio.


    HARI SREENIVASAN: New York City welcomed its new mayor, Bill de Blasio. He delivered his inaugural address at City Hall, calling for a progressive approach to tackle New York's inequality crisis.

    MAYOR BILL DE BLASIO, D-New York: To tackle a challenge this daunting, we need a dramatic new approach, rebuilding our communities from the bottom up, from the neighborhoods up.

    HARI SREENIVASAN: De Blasio is the first Democrat to hold the office in 20 years. He succeeds Michael Bloomberg, who left office after 12 years.

    And in Detroit, Mike Duggan inherited a bankrupt city as its 71st mayor, pledging to bring the broken metropolis back on its feet.

    Elsewhere, it was, as ever, a day packed with parades and football. In Pasadena, California, the nationally televised Rose Parade attracted hundreds of thousands of spectators, but this time with a twist. A gay Los Angeles couple exchanged wedding vows on a float that was sponsored by the AIDS Health Care Foundation.

    College football fans were treated to a televised smorgasbord of six bowl games, starting this morning and going well into the night. But some around the world celebrated in more daring ways. Hundreds of brave swimmers in the Netherlands and Germany took a New Year's Day plunge in freezing waters. And, in Rome, a group of daredevils jumped off a bridge into the icy Tiber River.

    Part of President Obama's health care law didn't kick in as scheduled today. It's the mandate that some church-affiliated groups provide coverage for birth control. Late last night, Supreme Court Justice Sonia Sotomayor blocked the requirement, at least temporarily. She acted on an appeal by a Catholic nuns organization in Denver. Sotomayor gave the government until Friday morning to respond to her order.

    In Iraq, President Nouri al-Maliki used New Year's Day to appeal for an end to months of violence. He urged Sunnis to join his Shiite-led government in battling al-Qaida militants. But new trouble erupted as gunmen stormed police stations in several cities. The United Nations estimated today more than 7,800 civilians were killed in 2013, as violence spiked across Iraq. Of those deaths, more than 660 occurred in the month of December alone.

    Negotiators from South Sudan's warring sides have arrived in Ethiopia to begin peace talks. The goal is to end an ethnic conflict that has already killed more than 1,000 people. At the same time, South Sudan's president declared a state of emergency in two provinces. Meanwhile, fighting raged for another day in the city of Bor. It's a gateway to the capital, Juba, just 75 miles away.

    Russian President Vladimir Putin visited Volgograd today, site of two bombings that killed 34 people earlier this week. Putin arrived in the southern Russian city before dawn. He left flowers at a makeshift shrine near the scene of one of the blasts and he also visited some of the 65 wounded still hospitalized.

    PRESIDENT VLADIMIR PUTIN, Russia (through interpreter): The abomination of these crimes committed here in Volgograd doesn't need any additional commentary. No matter what motivated the criminals' actions, there is no justification for committing crimes against civilians, especially against women and children.

    HARI SREENIVASAN: Putin met with security officials as well. He said they will focus on how to protect the rest of the country during the Winter Olympics in Sochi next month.

    The year has begun with two major hacking incidents. There's word of a breach at the popular photo-messaging app Snapchat. Reports said it involves phone numbers and user names for up to 4.6 million accounts. The website SnapchatDB claimed responsibility, and said it wanted to show Snapchat it's lax about security.

    Hackers also hit the official blog and social network accounts for Skype, the video calling service. A group identifying itself as the Syrian Electronic Army posted messages urging an end to online surveillance.


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    HARI SREENIVASAN: A new state law takes effect in Colorado today, making it the first state to let anyone over 21 walk into a shop and legally buy recreational marijuana.

    They lined up in Denver today for the state's first legal retail sales of recreational marijuana. The first customer at the 3D Cannabis Center was Sean Azzariti, an Iraq war veteran. He appeared in a TV ad saying pot would alleviate his post-traumatic stress disorder.

    SEAN AZZARITI, Iraq War veteran: I couldn't be happier. It's a huge stepping stone for other states as well. It's a huge honor, to say the least.

    HARI SREENIVASAN: Colorado voters approved recreational marijuana on a ballot initiative in 2012. Opponents argued the industry will lead to an increase in drug abuse and crime. But legalization advocates say sales will help generate revenue.

    MASON TVERT, Marijuana Policy Project: I'm confident that these businesses will perform and will be good examples of how we can regulate marijuana.

    MAN: Got some legal weed.

    HARI SREENIVASAN: Under the law, buyers must be at least 21 years old. They may not use marijuana in public, drive under the influence, or take it out of the state. Pot also remains illegal under federal law. With that in mind, Denver International Airport has banned the substance.

    WOMAN: This space is shared by federal agencies. We have TSA here. We have FAA. It's illegal on the federal front, and so it just makes sense for us to also participate and comply with that rule.

    HARI SREENIVASAN: Washington State will implement its own legal marijuana industry later this year. 

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    HARI SREENIVASAN: For more on how the new pot law is being rolled out and received, we turn to Ricardo Baca, who is the first ever marijuana editor at The Denver Post. He is also editor of The Cannabist, the paper's Web site devoted to the subject.

    So, Mr. Baca, first off, what's the difference? Yesterday, I could get a prescription. I could go into a dispensary in Denver and get it. Today, how significant is this shift?

    RICARDO BACA, The Denver Post: It's massive when you really think about it. And people really showed out in droves.

     It was such a trip to drive around the city and just check out the different scenes at the different shops, you know. Almost 40 of these shops opened throughout the state today. So wherever you went, you always found a line of some sort. Maybe it was 10 people right as they were getting opened and in some cases hundreds of people.

    HARI SREENIVASAN: So how different is a dispensary vs. a retail store? Or are some doing both?

    RICARDO BACA: Yes, actually, in order to do retail pot right now in Colorado, the law dictates that you actually have to have done medical pot.

    So the only people who are doing retail right now are the people who have done medical, and in many situations they're doing it in the same location.

    HARI SREENIVASAN: So we listed some of the regulations. But what are still in place to make sure that this doesn't get into the hands of children or that it's not trafficked across state lines?

    RICARDO BACA: Yes, you know, the packaging for retail pot has been a very big issue.

    Whatever you buy, it has to come into this -- it comes in a sealed bag, as well as, if you are buying edibles, they have to be more clearly marked as medicine, as adult content, so kids will hopefully know that they're not supposed to be able to touch that.

    In terms of it crossing state lines, it's just -- it's an ongoing issue that I know the state patrol of Colorado and all of the surrounding states are taking very seriously.

    HARI SREENIVASAN: And what sort of enforcement is there likely to be? Is the TSA likely to check people's bags as they come into the airport for pot?

    RICARDO BACA: You know, we certainly have been reporting on that story as well in the last week. And it's fascinating seeing the stickers go up on the DIA doors saying it's not welcome anywhere, because, previously, it was legal, and it was OK to have pot inside the airport, so long as you didn't go through security.

    So in terms of how hands-on the TSA agents will be, you know, that remains to be seen.

    HARI SREENIVASAN: So is it true that each individual is entitled to buy up to an ounce if they are a state resident per day? Isn't that an enormous amount, past personal consumption?

    RICARDO BACA: It is an enormous -- it is a very large amount.

    And if you have an out-of-state license, you can purchase up to a quarter-ounce, or a passport, you can get a quarter-once still. And there is some controversy related to that, because if you -- say -- it's completely unregulated in the sense that they're not keeping track of your driver's license. So if you wanted to get an ounce at this shop and an ounce at the next shop and an ounce at the next shop, you can, because it's basically like walking into a liquor store.

    They're not checking your -- they're checking your I.D., but they're not dictating what exactly you purchased. They're not keeping tabs.

    HARI SREENIVASAN: So you mentioned -- you mentioned a little of this, but how widespread is this? I know there is an area in Denver. You have sort of affectionately termed it Broadsterdam off of Broadway.

    But are there communities around the state who are choosing not to have these retail stores or dispensaries in their areas?

    RICARDO BACA: There are, yes.

    The state law leaves it up to the local municipality. So that part is interesting, when you look at the cities, the county that allow it and the cities and counties that don't. In fact, we had a really fascinating piece in The Post just a couple weeks ago about one of the university towns up in Northern Colorado. It's Greeley.

    And, you know, after prohibition through the mid-'60s, you couldn't buy liquor anywhere in Greeley. So at that time, residents of Greeley went into a neighboring very small town called Garden City to get their liquor. Now Greeley is not allowing any pot whatsoever. And in order to get medical or recreational, you have to go over to Garden City again. History is repeating itself in Northern Colorado.

    HARI SREENIVASAN: All right, I want to ask you a little bit about The Denver Post's decision to put you in this slot, to actually have a team covering this.

    What is the function of having a marijuana editor or this separate section on the site?

    RICARDO BACA: Yes, the whole idea is, we have covered marijuana as a news topic since it was legalized medically in 2000 and the dispensary boom in 2009.

    But now that it's been recreationally legal for a year and now that shops are opening, we wanted to be able to be a part of the largest cultural conversation. So, basically, we wanted to be able to hire a pot critic and have that person talk about different strains and edibles and products from a very educated point of view.

    We have a woman writing recipes for us, soups, cakes, cannabutter, all of that kind of stuff. So, we're out there just talking about this as a part of our culture. It's not unlike, you know, going out and buying a nice Malbec. You buy that Malbec maybe to relax with, to cook with, to maybe get silly with.

    And it's the same thing with weed now in Colorado.

    HARI SREENIVASAN: And so is there a concern that having this much coverage ends up looking like advocacy for or against a particular law or legalization?

    RICARDO BACA: There's certainly outside concerns. But we're confident in our journalistic integrity and approach. And we're taking it very seriously.

    HARI SREENIVASAN: All right, Ricardo Baca, thanks so much for joining us.

    RICARDO BACA: Thank you so much.

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    HARI SREENIVASAN: One of the new regulations in California centers on the effort to limit the amount of flame retardants in furniture. This is an issue of particular concern to parents of young children.

    ADRIENNE CLEM, mother: Oink, oink.

    MAN: Oink, oink.

    MAN: That's right.

    HARI SREENIVASAN: Silicon Valley tech workers Adrienne and Jeremy Clem are the proud parents of 18-month-old Vivienne and expecting their second child next month. They have spent a lot of time researching baby gear, and one of their main concerns was finding products without flame retardants, chemicals which slow the ignition of potentially flammable materials like textiles and plastics.

    ADRIENNE CLEM: This is a nursing pillow without flame retardants. I did find it online just after doing a lot of searching. I was very actually surprised that it was hard to find products without them.

    HARI SREENIVASAN: Flame retardants were added to upholstered furniture and other household products starting in the mid-1970s to prevent house fires. But what seemed like a good idea came with a downside.

    A number of studies have linked flame retardants to human health concerns such as cancer, neurological impairments and fertility problems. Some flame retardants have been banned by the federal government for health concerns. Others have been phased out voluntarily by manufacturers. But many remain in use today.

    Worried about the possible health risks, the Clems recently purchased a $2,700 flame-retardant-free sofa from Ekla Home, one of the few manufacturers in the U.S. which makes naturally flame-resistant furniture using materials like wool.

    ADRIENNE CLEM: For me, the peace of mind knowing that my children aren't going to be exposed to these toxic flame retardants was enough to pay a bit of a premium on a sofa.

    ARLENE BLUM, University of California, Berkeley: You probably have flame retardants in your couch, your chair, your office chair, if you have a baby, strollers, high chairs, nursing pillows, little baby positioners, car seats.

    HARI SREENIVASAN: Arlene Blum is a visiting scholar in chemistry at the University of California, Berkeley, and has been leading the charge to get flame retardants out of homes.

    She's the founder of the Green Science Policy Institute, which studies chemicals in consumer products. And one of the first products she tested came from her own home.

    ARLENE BLUM: This is a cushion from my couch that was in our home for many years, until, when I started doing this work, we analyzed for flame retardants. This couch, the foam was 5 percent penta. There are only 22 chemicals that have been globally banned, with 150 countries agreeing under the Stockholm Convention. Penta is one of those 22. I threw away the furniture, but I saved the cushion for research.

    HARI SREENIVASAN: Blum, who has scaled many of the world's highest peaks and was the focus of a documentary about a group of women climbers, is also known for her success efforts in the '70s to remove a suspected cancer-causing flame retardant from children's pajamas. Now she's turning her sights on furniture. 

    ARLENE BLUM: The chemicals are continuing coming out of the couch and they're heavy. They drop into dust. And then you get some dust on your hand, eat a French fry would be the classic, and they end up in your body. Toddlers who crawl in the dust of course have high levels.

    HARI SREENIVASAN: Blum and other concerned advocates have been pushing for state legislation to get rid of the chemicals, efforts which have been defeated after multimillion-dollar lobbying by flame retardant manufacturers, lobbying efforts that included paying a retired burn surgeon who repeatedly testified about infants that died of burns because there were no flame retardants to protect them.

    In an award-winning investigative series, The Chicago Tribune dug into his testimony and found that there were no such cases, and that the doctor's false testimony only supported retardant manufacturers. Following that series and after mounting pressure from the public and scientific community, California Governor Jerry Brown decided to act.

    In November, he announced changes to the state's furniture flammability standards, an act that didn't require legislative approval. Products will no longer have to withstand a 12-second open-flame test. Instead, they will be required to past a smolder test that furniture manufacturers can meet without adding flame retardants to their products.

    MARCELO HIRSCHLER, fire safety consultant: Flame retardants have saved lives. No question there.

    HARI SREENIVASAN: But not everyone is happy about the change. Marcelo Hirschler is a fire scientist in Mill Valley, California, and a consultant for the flame retardant industry.

    He thinks it's a mistake to take flame retardants out of extremely flammable furniture.

    MARCELO HIRSCHLER: The amount of heat in an upholstered sofa is enough to burn down your entire house. We need to do something to prevent the flammability of the products that we're sitting on. Flame retardants are an excellent tool when used appropriately.

    HARI SREENIVASAN: And Hirschler says even though the overall number of home fires and fire-related deaths have gone down dramatically, due in part to new building codes, fire alarms, and fewer people smoking, upholstered furniture remains a fire hazard.

    MARCELO HIRSCHLER: We're killing over 600 people a year from fires caused by upholstered furniture. So we're killing a lot of people. The revision, that is a disaster. That is going to cause a lot more fire fatalities and fire incidents.

    HARI SREENIVASAN: But not all who battle fire agree.

    Retired San Francisco firefighter Tony Stefani:

    TONY STEFANI, San Francisco Firefighters Cancer Prevention Foundation: My overall view of flame retardants is, they are not necessary.

    HARI SREENIVASAN: Stefani is a survivor of a rare form of kidney cancer and president the San Francisco Firefighters Cancer Prevention Foundation. He worries about his fellow first-responders, who rush into fires where the chemicals are released.

    TONY STEFANI: When we go into a building on fire, we're faced with a real toxic mess.

    And these flame-retardant chemicals off-gas both furans and dioxin, which have been proven to cause cancer. We definitely feel that there is a link. We have had a lot of firefighters that have succumbed to brain cancer, colon cancer, forms of blood cancers like multiple myeloma, non-Hodgkin's lymphoma.

    HARI SREENIVASAN: In fact, several recent studies have found elevated levels of flame retardants in firefighters' blood, and the profession has higher cancer rates than the general public, although a direct link between the two has not be made.

    TOM OSIMITZ, North American Flame Retardant Alliance: The studies I have seen don't lead me to cause -- any cause for alarm with regard to exposure to humans.

    HARI SREENIVASAN: Tom Osimitz is a toxicologist who chairs the Science Advisory Committee of the North American Flame Retardant Alliance, which represents manufacturers. He says many of the health concerns about flame retardants are overblown.

    TOM OSIMITZ: In many of these studies, there is a lot of confounding variables, exposures, whether it's prenatal exposure to alcohol, stress, noise, all other types of agents people are exposed to.

    If you take those into account and you look broadly at the bio-monitoring studies that have been done, there's less than a convincing correlation, in my mind, between the presence of a chemical in the body and actual adverse effect.

    HARI SREENIVASAN: The state's new regulations, which kicked in January 1, are expected to have a ripple effect throughout the country. That's because furniture manufacturers in other states generally adhere to California's standards. Industry representatives expect it will take about six months for flame-retardant-free furniture to become readily available in stores.


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    HARI SREENIVASAN: We turn now to politics.

    Judy Woodruff recently recorded this conversation on the origins of the split between the political left and right.

    JUDY WOODRUFF: Now a look at our current political divisions through a historical lens.

    Yuval Levin is a founder and editor of the quarterly journal "National Affairs." His new book, focused on the giant thinkers of the late 1700s, is called "The Great Debate: Edmund Burke, Thomas Paine, and the Birth of Right and Left."

    Yuval Levin joins us now.


    YUVAL LEVIN, "The Great Debate: Edmund Burke, Thomas Paine, and the Birth of Right and Left": Thank you very much for having me.

    JUDY WOODRUFF: So why did you think it was necessary to go back, what, over 200 years...


    JUDY WOODRUFF: ... to these great thinkers, writers, who disagreed over the French Revolution...


    JUDY WOODRUFF: ... to help us understand more about what we're going through today?

    YUVAL LEVIN: Well, this is a book about the roots of our political differences.

    It's easy looking at our politics now to take for granted the left and the right. We have always had a broadly conservative party in our politics, a broadly progressive party. They have always been at each other's throats, and it's easy to just assume that that is what our political discourse looks like.

    This book says, rather than take it for granted, let's think about what it is, and where it comes from and why. And one good way to do that is to think about the first real instance of the recognizable left-right divide, which we find in an intense ideological debate that was taking place in Britain and in America at the end of the 18th century, in a period that we identify with the American Revolution and the French Revolution.

    But it was also about a struggle to define the free society, a struggle about the tension between progress and tradition that is still very much with us, but that can be difficult to discern beneath the intense debates about particular policy questions that our politics are about.

    JUDY WOODRUFF: Why this debate, though, this particular -- there were others who were writing...


    JUDY WOODRUFF: ... who were thinking. Why these two men, Burke and Paine.

    YUVAL LEVIN: In a way, the back looks at the broader debate that gripped Anglo-American politics at the time by looking through the eyes of these two very prominent and very interesting participants in the debate.

    Edmund Burke is thought of as one of the fathers of modern conservatism. Thomas Paine is one of the fathers of modern radicalism. And they engaged one another. The important thing about it for seeing it as a debate is, they were contemporaries, they knew each other, they exchanged letters, and, especially importantly, they exchanged public writings, essays that tried to answer one another.

    So, it is a real debate. They ask questions and answer questions. And they get to something like the bottom of what the real differences are between an outlook that we would now identify with the left and with the right.

    JUDY WOODRUFF: Well, it's unfair to ask you this because you spend the entire book, over 200 pages, looking at it.


    JUDY WOODRUFF: But -- but if you had to boil it down, what would you say is the essence of the disagreement?

    YUVAL LEVIN: Yes. Yes.

    One way to think about the essence is, you start out looking at a world that is filled with both successes and failures, good and bad things. Are you struck first by what is working and you want to build on that and are grateful for it, or are you struck first by what is failing and are outraged by it and want to uproot it and try to start over?

    Burke and a lot of conservatives after him is first struck by what is working, because he begins with very low expectations of human beings. He thinks we're fallen creatures, we're very limited in our abilities. And so he's amazed by anything that works at all, and wants to build on it, rather than try to uproot society and fix problems in a radical way.

    Paine thinks, there is no excuse for failure, things should work better, and that means that, when we see a society in which injustice reigns, we have to start from scratch and in a radical way change things.

    JUDY WOODRUFF: Of course, today's conservatives, in many ways, the shoe is on the other foot...


    JUDY WOODRUFF: ... because they look at what is going on and they want to make some radical changes.


    JUDY WOODRUFF: They think government has gotten too big in this country.


    JUDY WOODRUFF: And they want to do some radical things to change it.

    YUVAL LEVIN: In a lot of ways, that's true. And the book gets at that as well.

    So one way to understand that is a lot of the differences between left and right now are disagreements about the liberal welfare state, about a set of governing institutions established in America in the middle of the 20th century that themselves embody a certain kind of liberal outlook.

    They exist in pursuit of an egalitarian ideal, and they try to achieve it by applying technical knowledge to society, by empowering experts. And one of the big differences between Burke and Paine is the difference about what kind of knowledge is really available to us to solve social problems.

    Paine says society should seek to apply scientific knowledge, technical knowledge to address our problems. Burke says society is much too complicated to be amenable to those kinds of technical solutions, and instead we should try to use social knowledge, dispersed knowledge that we can really only access through the institutions that exist between the individual and the state, the families, civil society, markets, to try to make the best of knowledge that society as a whole possesses, rather than any specific group of experts.

    That difference about what kind of knowledge we can have is really crucial to a lot of disagreements between left and right, especially economic disagreements. It's absolutely at the heart of the health care debate, for example.

    JUDY WOODRUFF: Do you think that holds -- that is a dispute that holds up today, with all that we have learned, with all that's changed in the political system?



    There's still a basic disagreement about whether you solve social problems by using dispersed knowledge, by using markets to gather up people's preferences and knowledge, or whether you solve it by putting the right experts in charge and giving them the power to make their expertise matter.

    I think, if you think about the left and right in the health care debate, that is a big part of the difference between how conservatives and liberals want to solve the problems we have.

    JUDY WOODRUFF: Of course, what we're looking at today, though, is in many instances, the two sides have disagreed, not just over health care, they have disagreed over economic policy, over immigration policy.

    And the result has been they fail to come together at all, to even engage in a debate. They just -- we end up having dysfunction, gridlock, whatever word you want to use.

    What would Paine and Burke think about that?

    YUVAL LEVIN: There's a lot of truth to that.

    And it is one reason to write a book like this now. We live in a moment now where the two parties are ideologically coherent in a way that they haven't been in a long time. We really have not only a Republican and Democratic Party, but a conservative and liberal party. Our parties used to be divided along regional lines or over specific issues like race.

    Now Democrats are more liberal than they have been in a very long time, Republicans are more conservative than they have been in a very long time. And I think we can learn from the Burke-Paine debate what an actual constructive debate between left and right looks like.

    One thing conservatives could learn is Burke's disposition to policy. That is, conservatives, he says, should want to solve public problems before they get so big that they invite more radical solutions. So, he was a reformer. He wanted to be engaged in governing, in a way that today's right doesn't do enough of.

    JUDY WOODRUFF: And you're saying they're not -- they're not -- they haven't done that?

    YUVAL LEVIN: Yes. There is a kind of recoil from the particulars of governing, from policy, in a lot of the rhetoric on the right. And they would do well to think about policy.

    JUDY WOODRUFF: And what about on the left?

    YUVAL LEVIN: I think the left could learn from Thomas Paine that the greatest oppressors of the poor and the weak in human history have been their governments. This was a strongly held view of Paine's. He was worried about the dangers of public power.

    And I think the left in America today as much too cavalier about consolidating power and expanding the power of the government. And they could learn the essential importance of limiting, constraining, channeling that power for the very purposes that they want to serve through politics.

    JUDY WOODRUFF: What do you say -- what do you say, Yuval Levin, to people who -- this is all very interesting, and it's important and it's important to know about history...


    JUDY WOODRUFF: ... but today we have problems that are -- that affect real people's lives, whether it's immigration policy, and what happens to people who are suffering, whether it's health care, budget decisions...


    JUDY WOODRUFF: ... that -- that what you have done is interesting, but it doesn't really apply to what we're dealing with now?


    Well, one of the reasons to look to history when you think about public policy is that our society in a certain sense has always been arguing about the same kinds of questions. What does it mean to be a free society? How do we find a balance between order and liberty, between progress and tradition? We still face those questions now.

    And so the way that they have been faced by very wise people in the past can be helpful. And not only that, but you can learn about how to -- about the roots of your own beliefs and your own arguments by looking at history in ways that are difficult to do in the intensity of the moment now. So to can help calm down our disagreements a little bit and let us think about what it is we are actually disagreeing about.

    JUDY WOODRUFF: And still stay connected to the human beings whose those policies affect?

    YUVAL LEVIN: Exactly. Politics is always about reality. It's always about people. It's always about solving problems. It can't be understood as a pure abstraction, as philosophy. It's not philosophy.

    But it has to be informed by world views that have to do with what we want our society to be.

    JUDY WOODRUFF: Yuval Levin, the book is "The Great Debate: Edmund Burke, Thomas Paine, and the Birth of Right and Left."

    Thank you very much.

    YUVAL LEVIN: Thank you very much.



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    MONA ISKANDER: Twenty-two-year-old Robert Covington spends a lot of his time at the New Haven Adult Education Center. He dropped out of high school when he was 17 and now he’s trying to make up for lost time.

    ROBERT COVINGTON: It’s not 3.5…I made mistakes when I was younger.  And I just-- I want to be able to better myself.  Become a better man and this starts here with your education. 

    MONA ISKANDER: Covington has passed the science, social studies, writing and reading sections of the General Educational Development exam -- or the GED -- the nationally recognized high school equivalency test. Now he’s practicing geometry problems so he can pass the math section. He’d like to start community college early next year.

    ROBERT COVINGTON: So I have to pass it. Yeah.  Fingers crossed. 

    MONA ISKANDER: Many like him across the country are rushing to take the GED now because this January a new version of the test will roll out, and about 40 states, including Connecticut, are expected to use it. The test will be more rigorous, will cost more in some states and only be available online.

    MONA ISKANDER: And if you need to take it over in the New Year, then what?

    ROBERT COVINGTON: I'm just going to have to take it over.  Start from square one.

    RANDY TRASK: What we're doing is absolutely the most monumental change we've made in our GED testing service history. I think what we're doing is complicated. It's confusing. It's worrisome. But we're absolutely convinced that what we're doing is the right thing for learners.

    MONA ISKANDER: Randy Trask is the president of the GED testing service, the for-profit company that’s developing the new exam. The GED was created in 1942 for returning veterans who dropped out of high school to serve in World War II and was run by the non-profit American Council on Education.

    RANDY TRASK: And in the 70 years since then, our test takers have evolved quite a bit.  But we now have more than 19 million people that have earned their second chance at a high school credential by way of the GED test.

    MONA ISKANDER: The GED has been an important tool for high school dropouts and immigrants to make inroads into higher education or to secure better jobs. About 700,000 people take it every year, but only about 36 percent of those who pass the GED, enroll in a two or four year college… compared to 66 percent of high school grads who enroll. And overall, those with a high school equivalency degree earn less than those with a regular high school degree.

    MONA ISKANDER: Trask says figures like that compelled the Council in 2011 to partner with Pearson, an education services company. They formed a joint venture under the name GED Testing Service – and hired Randy Trask to overhaul the GED.

    MONA ISKANDER: What is it that was lacking in the old exam?

    RANDY TRASK: If you think about what we've been testing historically, we've been testing knowledge.  And what employers are telling us and what colleges are telling us is it's less about the knowledge and more about being able to use what you know to demonstrate critical thinking skills and solve real-world problems. 

    MONA ISKANDER:  Trask says in order to keep up with the times, the test going forward will only be administered by computer. It’ll be more rigorous to reflect new academic standards that high schools in many states have already adopted to prepare students for college or the workforce.

    RANDY TRASK: Take math, for example. Can you use that to solve a problem that's interesting to the employer. For example, can you go in using some basic algebra to adjust pricing-- for-- a store?  It's the application of the knowledge that becomes much more important than the original knowledge we-- tested.

    MARY MCNERNEY: I was definitely a naysayer initially, a skeptic.  And-- I felt, "What are they thinking?" "How do we know it's a present tense verb?"

    MONA ISKANDER:  Mary McNerney is a GED instructor at the New Haven Adult Education Center. Today, the lesson is on using correct verb tenses. 

    MARY MCNERNEY: I was worried.  I was thinking, "Oh, my God.  (Are my students really going to pass this test?"  And then, it's the use of a computer.  You know, for a lot of the young people, no problem; they're happy it's on a computer.  For the people in their 40s, 50s, 60s, they're, "Oh, my God.  It's another obstacle."

    MONA ISKANDER: One of her students is 56-year-old Roosevelt Barnes. He dropped out of high school to join the military. He then worked as an electrician. But lately, he says, finding work has been hard. Now he needs to pass the GED exam to go to community college.  He wants to eventually open an auto repair business.

    MONA ISKANDER: So you've been taking classes here, and you found out that the new test will actually be administered by computer -- was it intimidating at first?

    ROOSEVELT BARNES: Yes.  Because I'm computer illiterate and now since I’m doing the classes and stuff, they also have computer training. 

    MONA ISKANDER:  This has pushed you to learn more?

    ROOSEVELT BARNES: Yes.  Uh-huh.

    MONA ISKANDER:  And while the state of Connecticut has embraced the new GED exam, education officials just one state over in New York have serious reservations about it.

    MONA ISKANDER: So your reaction was what?

    KEVIN SMITH: Too far, too fast. 

    MONA ISKANDER: Kevin Smith is the Deputy Commissioner for Adult Career and Continuing Education for New York State.  He agrees the exam needed to adapt to a changing world, but he says the new version threatens to leave too many people behind.

    MONA ISKANDER: One of the concerns you had is  the new GED test is going to be-- administered by computer only.


    MONA ISKANDER: But isn't  it important to push people into the digital realm? 

    KEVIN SMITH: Absolutely.  We would call that an aspirational goal for us and for the test taker.  For the test taker who has little access to basic computing skills, or little knowledge of basic computing skills, it's one more point or one more barrier to their ability to demonstrate their skills.  There are too many barriers already and we need to break those barriers down one at a time. 

    MONA ISKANDER:  And even if New York State wanted to use the new GED exam, he says practical considerations would make it impossible. 

    KEVIN SMITH: Equally important, our infrastructure to provide that test exam by computer is negligible. 

    MONA ISKANDER:  Smith also says the cost of administering the new exam is prohibitive since it would rise from $60 to $120 per test taker in New York.  Costs vary and some states subsidize a portion of the exam, but by law, New York would have to pay for all of it.

    MONA ISKANDER:  At least eight states have opted not to use the new GED exam at all and are planning to use an alternative, including New York which has hired another education service company – CTB/McGraw-Hill, a competitor of the GED testing service. Its test will be offered online and on paper and the level of difficulty will increase gradually over three years.

    MONA ISKANDER: Do you think that this is doing a disservice at all to New Yorkers not to be part of  what most other states are doing?

    KEVIN SMITH: No, I don't.  No, I think quite the opposite.  I do-- I think it's doing a service to New Yorkers. This is a much slower, more appropriate phase-in to the new exam, the new standards, than we are led to believe will occur in those other 40 states utilizing the GED exam.

    MONA ISKANDER: We've talked to people who say the test was not working as it was.  But maybe the changes should have been a little bit slower-- incremental.  What do you say to that?

    RANDY TRASK: Well, I say change is hard.  We have to keep focusing on the fact that-- that it's really not about-- a credential.  This isn't-- a feel-good ending.  This is about getting people into jobs that they can-- be less vulnerable to economic downturn. And so we're doing no one any favors if we don't in fact make sure that these adults are equipped with exactly what they need to compete for these higher-skilled, higher-wage jobs.

    MONA ISKANDER:  Trask points out that the cost of the new GED includes online resources to find out about jobs and training programs.

    Back at the New Haven Adult Education Center, Mary McNerney says she’s come to embrace the mission of the new GED test and she’s up for the challenge.

    MONA ISKANDER: Are you concerned that some people may not be up to speed by next year?

    MARY MCNERNEY: If I have any concerns that some people will not be ready this year-- which, many are not-- I believe, in my heart, that the majority of them will be able to work through the curriculum to eventually get their GED.

    MONA ISKANDER:  As for Robert Covington, he took the remaining section of the exam last weekend. He could find out if he passed as early as next week.

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    JUDY WOODRUFF: Now to a closer look at one of the favorites for this year's Peace Prize, Malala Yousafzai of Pakistan.

    Our own Margaret Warner spent time with the young activist in Washington this afternoon, and begins with this report.

    MALALA YOUSAFZAI, Human Rights Activist: Let us pick up our books and our pens. They are our most powerful weapons.

    MARGARET WARNER: Spending her 16th birthday as no one else ever has, this Pakistani student captivated the world when she spoke at the United Nations three months ago.

    MALALA YOUSAFZAI: One child, one teacher, one book and one pen can change the world. Education is the only solution, education first.


    MARGARET WARNER: And in March, she became the youngest-ever nominee for the Nobel Peace Prize.

    Malala Yousafzai's call to educate girls began in 2009 in what once had been Pakistan's vacation paradise, the Swat Valley. Just 11, she began writing a blog for BBC Urdu about life under the ultra-conservative Taliban, who had taken over Swat.

    Encouraged by her father, a girls' school owner and activist himself, she raised her voice against the Taliban's brutality and its ban on girls' education. With the release of a New York Times documentary that year, she became a media celebrity in Pakistan and beyond, but her work drew the ire of those who opposed her message.

    And a year ago this week, as the 15-year-old was riding home in a school bus with her friends, a Taliban gunman boarded the bus and shot her in the head. The injuries were life-threatening. She was unconscious for days. But once flown to the U.K. for surgery and rehabilitation, she made a remarkable recovery.

    Boys and girls from Pakistan and around the world rallied to her side and her cause, proclaiming, "I am Malala." She now goes to school in the U.K., where she lives with her family. But the awards kept coming and the demands to speak.

    MALALA YOUSAFZAI: We can fight war through dialogue, peace and education.

    MARGARET WARNER: And she's now on the road promoting her just-released book, "I Am Malala."

    In the face of the world's praise, some back in Pakistan are more skeptical.

    MOHAMMAD ATEEQ, Student (through interpreter): All this recognition may be good for her internationally. It may be good for her family. But we have not benefited from it. Neither has Swat gained from it in any way.

    MARGARET WARNER: But she continues speaking and raising money to bring education to more girls around the world, despite renewed death threats against her from the Taliban.

    I spoke to the young activist leader earlier today.

    Malala Yousafzai, thank you for joining us.

    Tell us what inspired you, at such a young age, to start speaking out for girls' education in really such a dangerous environment.

    MALALA YOUSAFZAI: First of all, my father inspired me, because he's a great father, but as well, he is a great social activist and women's rights activist.

    At that time, when Swat -- the beautiful valley -- was suffering from terrorism, he spoke -- he spoke out. And he spoke for women's rights, because at that time, more than 400 schools were blasted, girls were flogged, people were slaughtered, markets were closed. There was ban on women to go to market. Girls were not allowed to go to school. And in that hard situation, he inspired me, because he spoke. And that's what I learned from him.

    MARGARET WARNER: Did you ever think, though, that your outspokenness, and the fact that you became a media star in Pakistan, would make you or your family a target?

    MALALA YOUSAFZAI: I think being -- living in such a hard situation when there are terrorists and they slaughter people every night is still hard -- is still a threat.

    So it's a better idea to speak out for your rights and then die. I prefer that one. So that's why we spoke at that time. We said, one has to speak. Why are we waiting for someone else? The governments were not taking an action. The army was not taking a good action. So that's why we said that we will speak out for our rights. This is what we can do, and we tried our best.

    MARGARET WARNER: So now, you've been forced, of course, to leave Pakistan. You've become this international symbol of bravery and of speaking up for girls' education. But what has happened to the girls you left behind? What is their situation?

    MALALA YOUSAFZAI: The girls who are in Pakistan and in Swat, especially, it's really hard for them to go to school. There are so many reasons.

    Many girls do not go to school because of poverty. Some girls can't go to school because of the child labor and child trafficking. Some parents don't send their children to school, because they don't know its importance at all, and some girls don't go to school because of the cultural norms and taboos. So there are still many issues that are stopping girls to go to school.

    MARGARET WARNER: Why do you think the Taliban -- what is their vision of Islam that makes them so opposed to girls' education? And, if so, can you really change that and can you change that culture just by educating girls?

    MALALA YOUSAFZAI: The first thing is that the Taliban have misunderstood Islam.

    They have made it -- they have never studied Islam deeply. I think they have not read Koran, even, because in Islam it is said that it is the right of every girl and every boy to get education, to get knowledge. Islam says about equality, there's no difference between a man and a woman. Islam tells us to respect each other, don't judge either other on the basis of religion.

    So I think the terrorists have forgotten that. They only remember jihad and fighting. So I think they must read Koran first. They must learn from it first and then they say. So that's why -- they are just misusing the name of Islam for their own personal benefits.

    MARGARET WARNER: There has been a backlash against you. Some Pakistanis say you've shamed their country, or that you're an agent of Western interests who want to undermine Pakistan, or Islam. How does that make you feel, when you're out here fighting this fight?

    MALALA YOUSAFZAI: The first thing is that it's one's right to express his feeling or her feelings.

    When I look at the group that speak against me in Pakistan, or anywhere, it's a very small group, a very tiny group. I must look at the millions of people. I must look at the support of people who raise the banners of "I am Malala" and who are still supporting me.

    So, I think I must not lose hope, and I must not look at the small group. Rather, I should see those millions of people who are praying for me and who are supporting me in my cause of education.

    MARGARET WARNER: Now, there was a new threat issued against you just this week from a Taliban spokesman, who said, essentially, if she keeps speaking out like this, he said, we will target her again and attack whenever we get the chance.

    Do you feel you're still in danger, even living abroad?

    MALALA YOUSAFZAI: I think the Talib did not threaten me. He just reminded me the threats, that, remember.

    MARGARET WARNER: Is there a difference?

    MALALA YOUSAFZAI: The thing is that they have already threatened me when I was in Swat, and then later on they attacked me.

    But the thing is, that now I'm living a second life. And God has given me this new life for the cause of education, and I believe that even death is supporting the cause of education, even death does not want to kill me, so how can those Taliban kill me then?

    And I think that I must not be afraid of death. First, I might have been before this attack, but now if even they threat me, I'm not afraid of any threat. I have seen death already. So now I'm more powerful. Now I'm more courageous. And I will continue my campaign.

    MARGARET WARNER: Now, do you get to go to school yourself anymore with all these public appearances? Do you have any semblance of a normal life in England?

    MALALA YOUSAFZAI: I go to school in a car because it's far away.

    And, yes, it's true that when I go to a market, when I go to a park, people just gather around me, and they want to talk to me. They want to have picture with me. Some people want autograph.

    But it's the love of people, and I think it's just a great honor for me that now people -- now I can reach people.

    MARGARET WARNER: There was a lot of anticipation this week, the last few weeks that you, the youngest ever Nobel Prize nominee, were going to win today, and it went elsewhere.

    What was it like -- what did it feel like, first of all, to have all of those expectations, and is it a letdown not to have won?

    MALALA YOUSAFZAI: If we just forget about the decision that was taken about the Nobel Peace Prize, I think people gave me their prize. They nominated me.

    And that is the great prize for me. If I get an award, if I get a paper, it does not matter, because when I look at the prayers of people and their support and how much they love me, I think that is the biggest prize that I have ever received. And then I have a prize in my mind that -- for which I will struggle, for which I will do the campaign, and it is the prize that is the award to see every child to go to school. And I will serve my whole life for that, for that is the prize that I want to get in my life. And I think Nobel Peace Prize committee -- the decision they have taken is the right decision, because I need to work a lot.


    MARGARET WARNER: Malala Yousafzai, thank you so much.

    MALALA YOUSAFZAI: Nice to talk to you.

    MARGARET WARNER: It's a great honor to meet you.

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    What could be so dangerous about this furry little guy? Some children's products like this have been treated with flame retardant chemicals that make them harder to burn, but may be harmful for humans. Photos by Cat Wise

    Like many families at this time of year, my husband and I were up late one recent night packing up diapers, bottles, toys, clothes and all the necessary "kid gear" for a long road trip with our two sons to visit my parents. One thing I wanted to make sure I didn't forget was a soft headrest for my four-year-old. It's shaped like a little dog and he loves it. As I pulled it out of the drawer, I noticed something I hadn't seen before, a tag that read: "This article meets the flammability requirements of California Bureau of Home Furnishings Technical Bulletin CA 117. Care should be exercised near open flame or burning cigarettes."

    I hesitated ... should I put this well worn pillow back in the car?

    As I've learned over several months of reporting, Technical Bulletin 117 -- also known as TB117 -- is the California regulation that was put in place in the mid 1970s that required upholstered furniture, which is highly flammable, to withstand a candlelike flame for 12 seconds. It was a well intentioned regulation to prevent house fires and save lives. But the consequences of TB117, nearly forty years later, have been the subject of a big debate here in California, and some now say that the rule has done more harm than good.

    That's because in order to pass the 12-second flame test, many manufacturers added chemical flame retardants to the foam inside household products like couches and upholstered chairs, and children's products like changing pads, nursing pillows, car seats and nap mats. And there is a growing, though still relatively small, body of scientific research that suggests chemicals in some flame retardants may be harmful for humans.

    One of the top scientists looking at flame retardants and human health is University of California Berkeley epidemiologist Brenda Eskenazi. She and her colleagues have linked flame retardants to fertility problems, lower birth weights, and lower cognition and attention in school age children. Most of her research has been done on a class of flame retardants called PBDE's which were widely used in furnishings and electronics until 2005, but have been phased out in recent years by manufacturers. Eskenzi says she will soon start studying flame retardants currently being used in household products. "We know virtually nothing about the flame retardants that have been used more recently except in animal studies," she said.

    So how do flame retardants end up in our bodies? Arlene Blum from the Green Science Policy Institute explained the process during an interview for the PBS NewsHour broadcast which aired Wednesday. She says the chemicals are constantly coming out of the upholstered furniture as dust particles. "And then you get some dust on your hand, eat a French fry, and they end up in your body." She added that the chemicals are so heavy they fall to the ground where toddlers tend to crawl and then put their hands in their mouths.

    The chemicals from flame retardants used in furniture enter the atmosphere as dust that could settle in your home.

    With all this in mind, I decided to have a few furnishings from our home tested: a diaper changing pad I bought in 2009 on Craigslist, a couch from Scandinavian Designs (pictured above) we purchased in 2004, and an Ikea chair we got in 2009 that we keep in the nursery. In order to get a small foam sample from our couch, we had to turn it upside down and cut open a panel along the bottom. It was much easier to snip some foam from the changing pad and chair cushion. I sent the samples to Graham Peaslee, a Professor of Chemistry at Hope College in Michigan who collaborates with Arlene Blum and her team. After several weeks, he sent me back the results:

    The chair in my son's nursery and our couch contain a flame retardant called chlorinated Tris and PDBE's were found in the diaper changing pad. In an email, Professor Peaslee wrote that we have flame retardant chemicals present in the 2 to 5 percent range by weight in our foam samples. "This is very typical of commercial flame retardants added to polyurethane foams," he wrote. To put that in some context, Peaslee found that our couch cushion foam contains 5 percent chlorinated Tris, which means that we could have about a pound of the chemical in our sofa. The result from our sofa is consistent with a recent study that came out by researchers at Duke University.

    I had anticipated there would be flame retardants in some of the things I sent in -- after all, manufacturers have been required to to meet flammability standards for decades and many have done this by adding these flame retardant chemicals. But I was still a bit taken back by the results.

    The flame retardant found in our couch and chair, chlorinated Tris, was banned in baby pajamas in 1977 due to health concerns and it was recently listed as a cancer-causing agent by the State of California. It is being phased out of some foam products, but it has been widely used in furniture foam for years, and it remains in many older furnishings like ours. And the flame retardant in our changing pad has been shown by Eskenazi and others to have potential health impacts, especially worrisome for children.

    But does the mere presence of these chemicals in our home mean we should panic and throw everything out? Tom Osimitz, a toxicologist who chairs the scientific advisory committee of the North American Flame Retardant Alliance, which represents the chemical manufacturers, would caution against that. I spoke with Osimitz recently about flame retardants and health concerns during an interview for the NewsHour. Osimitz points out that chemical flame retardants provide an important fire safety benefit in products, and he says it's important to remember that exposure to a chemical, doesn't necessarily mean risk.

    "I think if you look at the CDC, the Center for Disease Control, which measures chemicals on a routine basis in blood," said Osimitz. "They'll point out quickly too that the mere presence of a chemical does not necessarily lead to you to conclude that there's an adverse effect, or even that it could eventually cause an adverse effect, so one has to be very careful looking at that, generally speaking."

    And Osimitz says that the flame retardants being used today are safer than the ones in the past and that it's important not to group all of these chemicals together. "There are two or three classic chemicals in the past that may have had some issues, but as everything gets better, and there's continuous improvement in chemical design -- design with reduced toxicity, increased biodegradation. Those are things that have been happening over the last decade."

    Still, now that I know what is lurking in some of the products in our home, I do wonder if I should I be concerned about my family's exposure to those chemicals, or be grateful that the chair, couch and changing pad might resist ignition if a fire breaks out. This is a dilemma that may confront others as we gain a better understanding of flame retardants and our daily exposures to them. But for now, I've decided to keep the beloved dog pillow hidden away.

    Read more:

    Calif. law change sparks debate over use of flame retardants in furniture

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    Watch Video | Listen to the Audio

    HARI SREENIVASAN: Finally tonight: Jeff Brown takes a look at a newly released C.D. of very early Beatles performances on BBC Radio, recorded in the days when almost no one in this country had even heard of them. 

    JEFFREY BROWN: In the early 1960s, when the rest of the world was just beginning to learn of the Beatles, they were already a sensation at home in Britain, propelled by live appearances and, for millions more, by radio broadcasts, a series of live-to-air performance on the BBC.

    Between 1962 and 1965, the Beatles performed 88 songs on the BBC, many of them multiple times in hundreds of radio broadcasts. In the worldwide Beatlemania that followed, those radio performances were largely forgotten in Britain and mostly unheard of in the U.S., until 1994, when the first collection of BBC recordings was released.

    Now a new album is out, this one capturing some 40 songs from those early radio broadcasts, including several never before available on record or disk. Many are by now long familiar Beatles standards delivered with the energy and verve of the live performances the young band was famous for.

    Others are covers of then lesser known American titles, R&B songs, country music, and early soul music. It's a playlist that illustrates the strong eclectic influences that helped shape what became known as the Beatles sound.

    Kevin Howlett, a BBC Radio producer, is co-producer of the new album and author of the companion book "The Beatles: The BBC Archives."

    Kevin, welcome to you, sir.

    So, everyone knows the Beatles, right? But this is a kind of unique setting and moment. In a nutshell, what's been captured here?

    KEVIN HOWLETT, "The Beatles: The BBC Archives": Well, the great thing about this is, it is an alternative recording history.

    We all know about the Beatles recording at Abbey Road Studios and making wonderful records. But here we have another alternative recording history, the Beatles at the BBC. And they did so many performances at the BBC, 275 between 1962 and 1965.

    JEFFREY BROWN: And this also represents a times that's maybe hard to imagine now, when the BBC played such a huge role in British life.

    KEVIN HOWLETT: Yes, the BBC in those days had a monopoly of broadcasting. There were just three national channels for the U.K. And that was all there was to listen to during the day. And we didn't have wonderful fast -talking American deejays, like the New York guys, Dan Ingram, Cousin Brucie, those kind of people.

    So it was a very kind of a formal institution. And the Beatles really shook it up.

    JEFFREY BROWN: So, they're already pop stars, but they're also extremely young. It's fascinating and kind of fun to hear them talking, as well as playing, their public personalities still forming, in a sense.

    KEVIN HOWLETT: Yes, this is very early days for the Beatles. It's 1963. They haven't broken internationally, but they're gathering momentum in the U.K.

    They're -- they're -- it is their breakthrough year, and they're desperately trying to make it. And they will do anything to appear on the BBC, because the BBC hardly played a record. You had to appear on the BBC and play live to get your music out there. So, the Beatles were determined to do that.

    JEFFREY BROWN: And these are, in fact, performances. They're not recordings.

    So part of the thrill of this is a kind of Beatles in the raw, right, playing even some familiar songs in different ways?


    The wonderful thing about this legacy is that it's the Beatles, and they're absolutely live most of the time, sometimes directly live on to the air, not even recorded in advance. And they're playing some very unusual material, cover versions that they did at Hamburg and in the Cavern Club in Liverpool.

    So you really see the kind of songs that they cut their teeth on. And you hear wonderful live performances. It really proves they were a fantastic live group. You know, they are really going for it. There's no question of going back and starting again. They have to do it right. And so you get that wonderful feeling of, this is it, boys, the lights on. Don't make a mistake, because it will go out on air like that.

    JEFFREY BROWN: You mentioned covers. There are a number of covers of songs by other people, many that never made it on to Beatles albums. So what do they tell you about the Beatles musical tastes and their influences?

    KEVIN HOWLETT: Well, the Beatles were absolutely vinyl fanatics. And in England at that time, you couldn't get ahold of American rhythm and blues. Motown records, for example, were never played on BBC Radio.

    So the Beatles sought these records out and covered them. And I think they had a great influence on the way that British people got into American rhythm and blues and discovered Motown and artists like Arthur Alexander.

    And -- and the rock 'n' roll favorites, of course we hear, Chuck Berry, Carl Perkins, but there are unusual performances of songs that you never heard on the BBC at the time.

    JEFFREY BROWN: And what about the process of collecting all this?

    I gather it involves some real detective work. This -- it is kind of amazing, but the BBC didn't keep a good archive of these sessions?

    KEVIN HOWLETT: Yes, I first investigated this material way back at the end of 1981.

    And you could discover all the paperwork relating to the Beatles radio programs, what songs they covered. But finding the tapes, that was another matter. There was just one out of 53 musical performances in the BBC archives. So I had to track them down from various sources.

    And over the years, 30-odd years, I have been doing that and trying to restore the Beatles BBC archive. And we're getting there. There are a few still missing. But we're very lucky to have this wonderful legacy now.

    JEFFREY BROWN: Kevin Howlett is the co-producer of "On Air: Live at the BBC Volume 2" and author of the companion book, "The Beatles: The BBC Archives."

    Thanks so much.

    KEVIN HOWLETT: Thank you.


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    Passengers stranded for more than a week in Antarctic ice were rescued Thursday by a Chinese helicopter. Raw video by AP

    Fifty-two passengers were rescued Thursday from a Russian research vessel stuck in the ice in Antarctica.

    After several failed attempts by numerous icebreaker ships to reach the stranded MV Akademik Shokalskiy, a helicopter that arrived with the Chinese icebreaker Xue Long ferried the scientists, journalists and tourists -- a dozen at a time -- several miles across the icy landscape to the Australian icebreaker Aurora Australis. The passengers will be transported via the vessel to Tasmania, with an expected arrival of mid-January.

    The research vessel had been stranded since Dec. 24 near Cape de La Motte, after strong winds surrounded it with pack ice. The ship had been on a planned monthlong voyage to study the east Antarctic environment as part of a centennial celebration of Australian geologist Douglas Mawson's survey. The 22-member crew, who say they were stocked for a long voyage, will stay with the ship until conditions allow it to move from its maroonment.

    Chris Turney, one of the scientists aboard the MV Akademik Shokalskiy, updated the rescue on Twitter and posted several videos via Vine:

    A stunning day. Hopefully we'll hear about the evacuation soon. #spiritofmawson Alok Jha https://t.co/ZQf2RXGKam

    — Chris Turney (@ProfChrisTurney) January 2, 2014

    Helicopter flying over to check out helipad. May be leaving in an hour! #spiritofmawson

    — Chris Turney (@ProfChrisTurney) January 2, 2014

    The Chinese helicopter has arrived @ the Shokalskiy. It's 100% we're off! A huge thanks to all. http://t.co/UcmHMaO2Gd#spiritofmawson

    — Chris Turney (@ProfChrisTurney) January 2, 2014

    The first of the helicopters to take us home. Thanks everyone! #spiritofmawson Alok Jha https://t.co/WawL6pQz9J

    — Chris Turney (@ProfChrisTurney) January 2, 2014

    Take off! second team gone. Looking good. #spiritofmawson Alok Jha https://t.co/wdrtEYbKPq

    — Chris Turney (@ProfChrisTurney) January 2, 2014

    We've made it to the Aurora australis safe & sound. A huge thanks to the Chinese & @AusAntarctic for all their hard work! #spiritofmawson

    — Chris Turney (@ProfChrisTurney) January 2, 2014

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    By John Weir Close

    John Weir Close tells the inside story of the development of the mergers and acquisitions movement in the 1980s -- a phenomenon that has ruled global commerce ever since. Photo courtesy of Flickr user Dan Nguyen.

    Paul Solman: "Since 1975, the US economy has been transformed in ways that are not yet well understood," wrote economics journalist David Warsh recently in his weekly Economic Principals column.

    "As it happens," Warsh continued, "I have been reading a book about one of the major engines of that transformation, the merger and acquisitions movement of the last thirty years. Not since Barbarians at the Gate and The Predators Ball have I enjoyed a book about Wall Street as much as A Giant Cow-Tipping by Savages: The Boom, Bust, and Boom Culture of M&A, by John Weir Close. (The title derives from a line attributed to Ted Turner to describe the merger of AOL and Time Warner)."

    Being a great admirer of Warsh, whose column I have long touted on this page and read devotedly, I contacted author John Close, book unseen, and asked him if he would adapt from his book something about the merger and acquisition movement for the Making Sense Business Desk. He was gracious enough to oblige us.

    John Weir Close: "This isn't giving me an erection."

    Joe Flom tossed the brief back across his desk with a scowl at his 20-something associate Stuart Shapiro.

    "I'm not surprised at your age," Shapiro said without missing a beat. Flom often used the erection remark to shock, intimidate and galvanize, but no one had ever answered him in quite the same way. "I just figured if the guy's going to be a bully, I can do it back. We got along well after that," Shapiro says 40-odd years later, noting with a smile that Flom was then around 50, the better part of two decades younger than Shapiro is now.

    They call themselves the Lucky Sperm Club. It is the 1980s and Shapiro is soon to be a member of the set of young lawyers at the rising firm of Skadden, Arps, Slate, Meagher & Flom who are fortunate enough to sit at the feet of Joe Flom, the guru of a generation, a gruff and slightly hunch-backed, recently obese, small man with both pitiable social insecurities and serene confidence in his prodigious intellect.

    Flom and his arch-rival and co-conspirator, Marty Lipton, are inventing modern mergers and acquisitions, or M&A, which, because of these two men, will soon become both a craft with a name all its own and a phenomenon that has ruled global commerce ever since.

    At Lipton's firm -- Wachtell, Lipton, Rosen & Katz -- a similar if unnamed group of young men is also ascending rapidly to top positions and growing ever richer, working directly and often virtually singled-handedly with powerful clients, with Lipton's genius always accessible. In all but name, the Lucky Sperm Club is rapidly spawning new chapters at other firms and banks around Manhattan and beyond as the emerging specialty gathers shape.

    M&A has a deceptively mundane definition. It means taking control of a company, with or without the consent of the executives running it. Since it is expensive to build a business from nothing, it is often seen as more profitable to take over what has already been built by others. In one stroke, you expand your business and eliminate a competitor. If you're purely an investor, you can keep the company or sell it off for profit. To gain control of a corporation in the modern era, you either offer to buy the stock from the existing shareholders or ask them to vote their shares in favor of your nominees for the board of directors, who, if elected, turn over the company to you.

    That's basically it. It sounds simple, and it is, but variations proliferate as fast as the human mind can invent them. M&A has grown rampantly in power and complexity to reach a global value of around $4.7 trillion at its recent highest point, more than the GDP of Germany, the fifth largest economy in the world. M&A has revolutionized corporate Earth and enriched the members of the guild as perhaps none of them ever imagined.

    As explored in my recent book, "A Giant Cow-Tipping By Savages," modern M&A has not been driven by Scottish immigrants in Pittsburgh or French Huguenots in the Hudson Valley capturing entire swathes of the nation's resources in the absence of government regulation. To the contrary, in the late 20th century, M&A was driven by two Jews, Marty Lipton and Joe Flom, who had simultaneous epiphanies about how to take advantage of new government regulation -- in other words, how to turn the rules into an instruction manual for transforming the buying and selling of companies into a profession in itself. But rather than seek to buy, sell or keep companies themselves, they became the Sherpas, interpreting regulatory maps and making up new law as they went along.

    As recently as the 1970s, Jews and all others not of the white Anglo-Saxon Protestant ascendancy were still excluded from any position of real power at the bar, on the bench, at banks and in boardrooms. America was still an agglomeration of ghettos: Italians knew Italians, Jews knew Jews, Poles knew Poles, Irish knew Irish, WASPs barely knew any of them existed and the Cabots spoke only to God.

    "When I came to New York in the '70s, the WASP aristocracy still reigned," the Lucky Sperm Club's Shapiro recalls. "You didn't see an Asian face above Canal Street. You didn't see a black face in a law firm unless it was the mailroom. You certainly didn't see an Hispanic face. Swarthy Italians and Jews? They were not people you dealt with."

    Yet again, as happened so often in their history, the Jews somehow found their own methods to carry them past such barriers, and once those blockades were destroyed, other demographics followed.

    But it was primarily Jews who first became expert in taking over companies against the will of their existing executives. The white-shoe law firms and elite investment banks found this simultaneously distasteful and tantalizing in the same way medieval merchants viewed the lending of money at interest. Both groups were discouraged from joining in one of the most profitable enterprises of their day: the old merchants by, among other things, an ecclesiastical ban on the practice of usury; the new lawyers, by the establishment's social codes of behavior. Again, the Jews found themselves in control of an industry that then perpetuated the stereotype: the omnipotent, venal Machiavellian, hands sullied by the unsavory. But the business of takeovers paid the rent. And then some.

    Yes, they were making money. And yes, that got the attention of the rest of Wall Street. But the takeover gang was also having fun. They were running through the streets wielding megaphones and announcing the revolution. They changed everything. Like West Indian slave revolts in the 1800s, which disrupted the fortunes of the likes of Jane Austen's Sir Thomas Bertram, the new M&A industry transformed public corporations -- the establishment's repositories of power and wealth -- into very public, very visible and very vulnerable sugar plantations open to all with the will, the intelligence, and sometimes, the personality disorders needed to gain entry.

    M&A quickly divided itself into two separate but equally important gangs: the corporate acquirers who do the buying and the M&A advisers who show them how it's done. The former are the collectors. Like bower birds, who attract female mates with the colorful trinkets they gather to decorate their nests, these men began to collect compulsively: houses, wives, antique carriages, acres, books-by-the-yard, furniture, airplanes, companies. Dominant members of the species included Sir James Goldsmith, a British mogul with a secret terror of rubber bands who was reportedly the model for Sir Larry Wildman in the 1987 movie "Wall Street"; John Kluge, at one time the richest man in America after his breakup of Metromedia, who became infamous for his grisly pheasant shoot in Virginia; and Robert Campeau, known for bankrupting a swathe of North American department stores while fending off his own aging with the injection of fetal lamb brain cells.

    The M&A advisers -- the lawyers and bankers who actually do the work -- are like vervet monkeys, more highly evolved than bower birds. Clever and quick social animals with a strict hierarchy, they have a special alarm for each species of corporate raider or, depending on the kind of deal, each potential target. Flom and Lipton and the lesser members of their respective monkey troops were the instant, and only, experts to whom judges and fellow lawyers would come on bended knee for explication of their alarm calls, the takeover assault weapons and the defenses against raiders that they were creating on the backs of menus at the hottest restaurants in town.

    Skadden's Lucky Sperm Club adopted the Quilted Giraffe as its clubhouse -- at the time, the most celebrity-stuffed establishment in Manhattan. With sex in the bathroom and cocaine in the lost and found, the restaurant happened to track the same arc as early M&A from 1979 to 1990. And at Second Avenue and 50th Street, the Quilted Giraffe was also just six blocks from the offices of Skadden on Third Avenue. Along with the house red, Petrus and the Montrachet, the specialty was the "beggar's purse," an innocuous but seductive little crêpe confection bulging with beluga and crème fraîche, pulled into symmetrical creases by a drawstring of chives and topped with a gold leaf. It was the Proustian madeleine of the 1980s, typically $50 for each little morsel.

    One autumn night in 1985, three of the Lucky Sperms, Stu Shapiro, Morris Kramer, Don Drapkin, and their progenitor, Joe Flom, could be found at their usual table, enjoying Havana's finest, smuggled in from Geneva in white plastic boxes, each with its telltale gold-foil ring removed. By this time, our hitherto ostracized takeover lawyers had taken their rightful place among the clout merchants of the day. Mick Jagger and Jerry Hall were at table eight near the door. Ivan Boesky and Mike Milken had just left. Henry Kissinger had lumbered into his limo after a long drinking session. Woody Allen had dibs on table seven, as on other nights did Mia Farrow, Diane Keaton and Adnan Khashoggi. Warren Beatty was, as usual, at table six. There was Jacqueline Kennedy in her blue Chanel suit with Jayne Wrightsman. You could see Donald Sutherland, Annette Reed and Brooke Astor. You could never see Bernie Madoff, who always ordered in and always at lunch.

    Among the Lucky Sperm stars that night there was a certain air of schadenfreude. They were embroiled in their campaign to conquer Revlon for their client Ron Perelman and his company, known as Pantry Pride. Perelman at the time was an unknown adventurer and a serial acquirer.

    In 1985, M&A was exploding into maturity in the courts and boardrooms, and the Revlon war epitomized this sudden transformation of both commerce and culture. Few American corporations in the mid-1980s embodied glamour and power more thoroughly and with more fanfare than Revlon, a global brand brought to full flower by its former leader, the self-aggrandizing and self-tortured Charles Revson and then by Revson's hand-picked successor, Michel Bergerac, who ensured that the company was the commercial and cultural lodestar of the establishment.

    Bergerac created his own splendid court at Revlon's headquarters in the General Motors building, one of the most prestigious office addresses in the city. On the 49th floor, the Revlon rooms were done à l'Afrique. The walls were hung with heads of greater kudu and steenbok and the masks of the Urhobo, Bozo and Yoruba. The floors were covered with zebra and impala skins and dotted with elephants'-foot stools. It was a palace of the masters of all living things, the lords of all creation.

    "There was this sense that we are the nobility. And who is this -- you should excuse the expression -- Jew from Philadelphia ...Who is he to interrupt our garden party in our Fourth-Floor-of-Abercrombie-&-Fitch-decorated headquarters in the city's fanciest building with the best views of Central Park in New York?" says Stu Shapiro about the predominant attitude within the Revlon kingdom they were trying to acquire.

    "This Jew" -- Shapiro's client -- was Ronald Owen Perelman, salivating on his cigar, blurting out his ungrammatical fragments, daring to attack august Revlon, with its $2.3 billion in assets, from his perch atop a small, recently bankrupt Florida food chain with assets of barely $400 million. Perhaps most galling of all was the silly name of the upstart's company: Pantry Pride. The Revlon grandees called it "Pant-y Pride"; Ronnie was "Peril-man," pointedly pronounced in the French way by CEO Michel Bergerac so that it sounded like the name of a comic book super-villain.

    Ronald Perelman, with the omnipresent cigar, in his townhouse two years after shocking the business elite with his coup at Revlon. Photo courtesy of Rob Kinmouth/Getty Images.

    Revlon certainly had reason to feel impregnable, not only because of its size, but also because it had hired an army of the best New York M&A specialists who felt the same way: Arthur Liman leading a platoon from Paul Weiss, Marty Lipton of Wachtell and Felix Rohatyn in charge of a team from Lazard Frères. These advisers assured their client that they would never let Pantry Pride get its hands on Revlon. It was a lesson in how contempt and entitlement can fuel an arrogance that guarantees defeat.

    At first, only one member of the board of directors saw "Peril-man" for what he was -- a Drexel-fueled, Skadden-led, adrenalin-stoked existential threat to the Revlon status quo. That Revlon board member was Ezra Zilkha, the scion of an ancient Baghdadi-Jewish banking family. Zilkha understood that Mike Milken, who turned his team at the investment banking gadfly Drexel Burnham into a West Coast Wall Street from his X-shaped throne at Wilshire Boulevard and Rodeo Drive in Beverly Hills, was funneling borrowed money from bond buyers into Pant-y Pride, charging the borrower (Perelman) atmospheric interest rates but undamming an unstoppable surge of cash from investors looking for fat returns.

    Zilkha at first found allies on the board only in Lewis Glucksman, the legendary head of Lehman Brothers, and Aileen Mehle, the celebrated columnist who wrote under the name Suzy Knickerbocker. It would not be long before the entire Revlon board and management, and indeed, the wider establishment itself, became increasingly appalled at the savages about to slay their first mastodon.

    The fight had started with a knock at the door at Bergerac's townhouse by Ron Perelman on the night of June 14, 1985. He was soon shown the door. Bergerac would later say to an associate, "Can you imagine this guy, saying he's going to make me a rich man?" It may have been presumptuous, but it turned out to be true -- true, at least, that Perelman would make Bergerac a much richer man than he was already.

    Revlon wasted no time. It quickly put in a poison pill, an amendment to the corporate by-laws which would make it more expensive for any bidder to get more than a modest percentage of Revlon's shares, and it began buying back as many as 10 million of those shares to keep them out of a predator's grasp, using notes or debt instruments in exchange for the stock. Unbeknownst to Ron Perelman, Revlon also opened secret talks with Teddy Forstmann of Forstmann Little, which provided money to managements in return for partial ownership, about dividing up Revlon between them, which would leave nothing left for Perelman to buy.

    Again, Ezra Zilkha foresaw the future. He argued that the courts would see this arrangement as nothing more than a way to protect their own interests -- a new fence to keep the cow-tippers out of the milk-and-honeyed land of Revlon.

    When the Revlon board met on Oct. 3, 1985, to approve its deal with Forstmann, which would leave the incumbents largely still in charge, Zilkha was in Jerusalem at the King David Hotel, joining in the discussions by phone and urging Bergerac to kill the plan before it was too late. The calls were agonizingly long, four to five hours at a stretch, exacerbated by a rabbi telephoning Ezra in the midst of it all to press him for a donation to a worthy cause. "The rabbi would have the operator interrupt my New York connection so he could talk to me instead," Zilkha recalls with a smile. "As you know, rabbis can be very persistent."

    So can corporate raiders. On Oct. 9, after the board had joined hands with Forstmann, Arthur Liman of Paul Weiss convinced the three sides -- Teddy Forstmann, Ron Perelman and Michel Bergerac -- to come together to see if they could make peace. At around midnight, Perelman and his attendants were admitted to the Revlon sanctum, where they were seen as the revolting peasants. "I'll never forget those 20 or 30 guys coming off the elevators," Bergerac would later tell the writer Connie Bruck. "All short, bald, with big cigars! It was incredible! If central casting had had to produce 30 guys like that, they couldn't do it. They looked like they were in a grade-D movie that took place in Mississippi or Louisiana, about guys fixing elections in the back." Liman agreed: "What a scene. All the Drexels were in one room -- these guys with their feet up on Michel's tables, spilling their cigar ash on his rugs."

    Worse even than their manners, it would soon emerge, was their new bargaining tactic, which Perelman announced that night. He was simply not going to do anything but win.

    "We were sitting around in Perelman's office," one member of the team recalls, "which was in his townhouse in the 60s, filled with incredible art -- Modiglianis and Giacomettis, just unbelievable stuff -- and the deal was just kind of plunking along. Donny Engle and Leon Black [of Drexel] and [Skadden's] Don Drapkin and me. We were all talking strategy, and Drapkin suddenly had an idea. 'We'll raise them a quarter every time they bid,' Drapkin says. 'They won't be able to not sell to us because we'll raise them by the same amount every time. We won't care what it costs.'"

    Of course, a quarter was not just a quarter. It was an increase of 25 cents for every share Revlon had outstanding, around $30 million for each increase of two dozen-and-one pennies. It was not only intensely irritating for Revlon, this "nickel-diming" racket, as target advisers called it, but it was also a shrewd and raw unsheathed show of financial power, backed as Perelman was, implicitly, by Milken's return-hungry investors.

    And then Revlon sullied its own hands. As the Friday before the Columbus Day holiday approached, Revlon came before Justice Walsh, then a judge on Delaware's Court of Chancery. Its Forstmann alliance was under scrutiny. Would a Revlon deal with a leveraged buyout firm, in return for partial ownership of the company, be legal? The company assured the court that before any decision, no monies would change hands. Over the long weekend, the status quo would remain intact so that the judge could safely delay his ruling on the case until after the break. The judge, on Revlon's word of honor, agreed to postpone his decision until the Tuesday after Columbus Day.

    But over the weekend, Revlon removed from the corporate treasury not only a tranche of Revlon stock but also $25 million in cash -- all earmarked for Forstmann to compensate him if his deal with Revlon were to fall through. There was no reason to have done this other than to remove the assets from the reach of the court's orders.

    There is a little-used courtroom, more like an anteroom, off the Delaware Supreme Court chambers in Wilmington. The bench is large enough to seat all five judges, but the room is very small and very dark, and often very cold. It was to this place that then-Vice Chancellor Joseph Walsh, soon to move to the state's high court, summoned the two sides to the bar on Tuesday, Oct. 16, 1985. It was left to a Revlon adviser who had known nothing of his client's perfidy to face the cold ire of the judge who, learning of Revlon's removal of assets, quickly dismissed all of the company's pleas for succor.

    The coup de grace in Delaware's Supreme Court was triggered by Skadden's Stu Shapiro. He argued that the Revlon directors had decided to protect themselves by giving away even more to protect themselves -- in this case, money to the owners of Revlon's traditional debt (its bonds and notes). These debt owners were angry at Revlon's plans to borrow additional money to finance their defense against Perelman's takeover since this new debt would jeopardize the company, and therefore, its bondholders.

    Shapiro argued that the board members, facing not just bondholder anger but threats of lawsuits aimed at their own personal fortunes, had blinded them to their duty to get the best deal for the company's shareholders, the actual owners of Revlon. And, as they bought more and more Revlon stock, the owners were increasingly Ronald Perelman and associates -- investors whose loyalty was not to management or employees or the community, but to "maximizing shareholder value." It has been the maxim of corporate America ever since.

    When the court stripped away Revlon's defenses, such as the deal with Forstmann, there was nothing for Revlon to do but turn over the keys to the kingdom to the dreaded Perelman for $1.8 billion. The consolation prize was that $1.8 billion was, at the time, an astonishing fortune. Bergerac and friends would be rich after all, as Perelman had promised.

    After his oral argument triumph, Stu and his father (and fellow Skadden partner) Irving Shapiro were having a drink at the Rodney Square Club in Wilmington, co-founded by the elder Shapiro at a time in the not-so-distant past when Jews were not welcome in the city's other exclusive clubs. Renowned Delaware attorney A. Gilchrist Sparks III, Revlon's advocate, came over to their table to congratulate Stu on his performance. At that point, the court had not yet ruled, but Sparks knew it was to be Shapiro's day. It was fitting that a luminary in M&A, with an initial as a first name and a Roman numeral after his surname, would tip his hat to a Jewish lawyer at this club founded in response to discrimination after an M&A victory against an established elite.

    A devastated Michel Bergerac came to see Ezra Zilkha at 30 Rock just two hours after the Revlon board met for the last time before Ron Perelman and his team took over.

    "What has happened?" Bergerac said as he let himself down into a chair. "You have just made yourself $35 million with your golden parachute and the sale of your stock, Zilkha told his friend. It's November, Zilkha went on quickly. With me, you can talk any time, but it is almost tax season. I will call my Peat Marwick people for you. Go now and see how you can defer your taxes. "And that," Ezra recalls, "is exactly what Michel did."

    Revlon was a triumph for Stu Shapiro, who won one of the most important court victories in the history of mergers and acquisitions. For Drexel, it was one of the first and most successful junk bond takeovers of a major corporation. For Shapiro's mentor and adviser throughout the Revlon saga, Joe Flom, it was sweet vindication. A brilliant Harvard law student and a law review editor, now the leader of fearsome Skadden, the young Flom had been routinely turned down by the law firm mandarins of the day, sometimes even told that his "background" was the "problem."

    These old-line firms, among sundry other gatekeepers, from co-op board members to restaurant maîtres d'hôtel, could no longer stop Flom and his confreres, furious to succeed. "In the early '60s," Flom once remembered, "we were supposed to do an underwriting for a client, but when the client called his investment banker, he was told there were only seven [law] firms -- all old Wall Street firms -- qualified to do underwritings for the bank. So I figure... we've got to show the bastards that you don't have to be born into it."

    And that's just what they did. The control of corporate America was arguably democratized in the process. And shareholders, regardless of identity or motives, gained an upper hand they have yet to relinquish, almost three decades later.

    This entry is cross-posted on the Rundown -- NewsHour's blog of news and insight. Follow @paulsolman


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