January 23 2012

Hostess and Chapter 11

posted by Mac

Say it aint so. Hostess Brands cutting the fat (its high costs) by heading back into bankruptcy protection for the second time in less than a decade.

The company has been battling rising labor costs and increased competition. More importantly, however, the 87-year-old company has to deal with the health-conscious Americans that favor yogurt and energy bars over the dessert cakes and white bread they consumed 30 years ago. In fact, according to reports, last year 36 percent of Americans ate white bread in their homes, down from 54 percent in 2000. Meanwhile, about 54 percent ate wheat bread, up from 43 percent in 2000. And consumption of healthy snacks is growing too. There just isn’t a whole lot of healthy benefits from Twinkies and Ding Dongs….who knew?

In Hostess' Chapter 11 filing on Wednesday, the company said its rivals have combined and expanded their reach, heightening competition in the snack space. Hostess' competitors range from Bimbo Bakeries, which makes Entenmann's baked goods, and McKee Foods, which make Little Debbie snack cakes. It also faces competition from larger food makers like Sara Lee and Kraft Inc. To make matters more difficult for the company, Hostess employees are unionized while most of its competitors aren't. As a result, Hostess has high pension and medical benefit costs.

Who knows if they will emerge from Chapter 11. The move to healthier foods may be too much to overcome. Sad day.

January 16 2012

Constitutional Issue or Politics as Usual?

posted by Allie

During law school, I sat through my fair share of constitutional law discussions.  In fact, nearly every class I took during law school had some sort of constitutional component, even if it was minor. So imagine my surprise when the headlines for the last couple weeks have discussed a constitutional term that I had never heard of – recess appointments! 

President Obama is receiving criticism from many Republicans for making appointments while Congress is in recess.  The most controversial appointment was naming Richard Cordray as the first director of the Consumer Financial Protection Bureau.  This appointment comes after months of a standoff between the President and the Senate concerning the nomination.  Originally, consumer advocate, Elizabeth Warren, had been considered for the top post at the agency she had a large part in creating; however, because her appointment was unlikely with the current makeup of the Senate, President Obama moved on to Richard Cordray.  (Side note: Senate Republicans clearly didn’t want Elizabeth Warren taking charge of the new consumer agency.  Do you think they’ll be happier with her as a fellow Senate member? Ha.)

In order to finally name Cordray as Director and get the Consumer Financial Protection Bureau up and running, President Obama exercised his power under the recess appointment clause and named Cordray to the post without the Senate.  The recess appointment clause provides that “The President shall have Power to fill up all Vacancies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of their next Session.” 

The biggest issue with Obama’s recent appointments stems from the Republicans' claim that the Senate was not in recess at the time the appointments were made.  Instead, because the Senate was conducting “pro forma” sessions, there was no recess going on therefore Obama did not have the authority to make the appointments. 

Now, I don’t think you have to graduate from law school to question these pro forma sessions.  Nearly every Senator is out of D.C., gone for the holiday season.  Sure, the Senate may have had a junior Senator strike the gavel to begin the pro forma session, but he did so to an empty chamber. 

I don’t want to belittle any legitimate argument concerning Separation of Powers and the Constitution, but I’d like to wager the guess that the American public does not care about this current debate.  The Consumer Financial Protection Bureau was formed, whether Senate Republicans like it or not, and holding up the appointment of its Director is merely an attempt to repeat history and undo the creation of the agency.  The 2012 election is months away, and those newly elected wouldn’t even take office until January 2013.  Can you honestly believe that you could hold out on appointing Cordray for another year?  Well, for now, Obama’s Justice Department as given the green light to the appointment.  The irony of the whole thing is that even if Senate Republicans were able to stall the appointment past the 2012 election, it’s now possible that Elizabeth Warren could have a seat in the Senate come 2013.  Karma?