'X-Men': New look at Wolverine and Beast

The casts of the original X-Men trilogy and 2011’s X-Men: First Class team up for May’s highly anticipated X-Men: Days of Future Past. “It’s not a reboot because there’s some of the same characters and same actors,” says Bryan Singer, who previously directed the 2000 original and 2003’s X2. “But it’s also not a conventional sequel—I call it an inbetweequel.”

Wolverine (Hugh Jackman) is sent back to the 1970s by future Professor X (Patrick Stewart) and Magneto (Ian McKellen) to stop a cataclysmic event. There, he must help young Xavier (James McAvoy) reunite with his foster sister, Raven (Jennifer Lawrence), and best pal, Erik/Magneto (Michael Fassbender). As Singer teases, “These are very big emotional stakes as well as, you know, cool giant robots and superpowers.”

 For more exclusive first looks at 2014's biggest projects, pick up the latest Entertainment Weekly on stands Friday. 

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Small Business: A Misunderstood Beast (The Motley Fool)

Last month, Jay Goltz reflected on his status as a small-business owner. "Over the last 33 years, my business and I have been through numerous recessions, and this is the first time I have seen so much attention given to small businesses," he wrote in The New York Times. "It feels both flattering and insulting, comforting and unsettling, honest and disingenuous."

You probably know what he's talking about. "Everyone here knows that small businesses are where most new jobs begin," President Barack Obama said while pitching his jobs bill before Congress.

"Small businesses create millions of jobs in America, and President Obama has failed them," presidential candidate Mitt Romney wailed.

That's the new theme: If you want to gain fans, praise small business. If you want to destroy an opponent, say they're against small business. In any case, use the words "small business," and you'll win someone's heart.

Most of this is warranted. About half of all private-sector jobs come from a company with fewer than 500 employees. Most new jobs do indeed come from small businesses.

But dig a little deeper, and you'll see how misunderstood the small-business chant can be.

A new paper (link opens PDF) by two University of Chicago economists titled "What Do Small Businesses Do?" dug through the data to separate talking point from fact. What they found might be surprising to everyone except the Jay Goltzes of the world: The vast majority of small businesses are far from economic haymakers, neither creating significant jobs nor engaging in innovation.

"Most small businesses have little desire to grow big or to innovate in any observable way," the paper writes. "Very few small firms report spending resources on research and development, getting a patent, or even copywriting or trade marking something related to the business (including the company's name). Furthermore ... nearly half of all new businesses report providing an existing good or service to an existing market."

As for job creation: "Most firms start small and stay small throughout their entire lifecycle." Industries that attract the greatest number of small businesses actually have below-average job-creation prospects.

Why the disconnect between perception and reality? It boils down to what we think an average small business is. The perception is that most start with a lightning-bolt idea, exploit it, turn it into a company, and attempt to grow that company into a blossoming enterprise like Google (Nasdaq: GOOG - News) or Microsoft (Nasdaq: MSFT - News). Reality is a little different. The average small business is more like a laundromat. Someone takes an existing idea, moves into a market already occupied by competition, hires three workers, and remains a three-person shop for its entire existence.

This isn't a slam against small businesses. They're a big part of the economy, provide vital services, and employ huge numbers of people. Those who go out on their own deserve incredible praise. But if the goal is to grow the economy, create new jobs, and innovate for the future, small businesses shouldn't necessarily be the center of attention.

Instead, the majority of job growth comes from new businesses. The distinction is subtle but important: Most new businesses are small, but most small businesses are not new. The only time the laundromat created jobs was during its founding days. And there's a good chance it will eventually go out of business. As a group, small businesses destroy just as many jobs as they create.

Meanwhile, a study by the Kauffman Foundation found that from "1980-2005, nearly all net job creation in the United States occurred in firms less than five years old." Furthermore, "Of the overall 12 million new jobs added in 2007, young firms were responsible for the creation of nearly 8 million of those jobs." Age, not size, is what's important.

As for innovation, the same subtle difference arises: Most innovation happens in small companies, but most small companies don't innovate.

Who does innovate? What's important is who doesn't even try to, and that's most small businesses. "The vast majority of small business owners do not expect to grow, report not wanting to grow, never expect to innovate along observable dimensions, and report not wanting to innovate along observable dimensions," the University of Chicago study says. Those who aspire to do something new -- rather than someone old, albeit on their own -- are a small niche even among the small-business community. There is, in a sense, a difference between an entrepreneur and a small-business owner.

The takeaway from all of this is that our current policies to grow the economy, create jobs, and spur innovation might be aimed at the wrong crowd. "Often subsidies targeted at increasing innovative risk taking and overcoming financing constraints are focused on small businesses," says the study. "We believe that these targets are better reached through lowering the costs of expansion, so they are taken up by the much smaller share of small businesses aspiring to grow and innovate."

Will that happen? It's moving in the right direction. Obama's jobs bill proposes specific incentives for companies that expand payrolls. Still, most of the proposals are blanket measures that shower money on businesses that, as the study shows, don't even want to expand. We're expecting a lot from small businesses that openly admit that we shouldn't expect much.

As Jay Goltz would say, that's flattering and insulting, comforting and unsettling, honest and disingenuous.

Check back every Tuesday and Friday for Morgan Housel's columns on finance and economics.

Fool contributor TMFHousel. The Motley Fool owns shares of Microsoft and Google. Motley Fool newsletter services have recommended buying shares of Google and Microsoft. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Obama's Millions for Fannie, Freddie Execs. But Who's Counting? (The Daily Beast)

NEW YORK – The Obama administration's approval of $34.4 million for six top officials, with little or no market guidance, is raising new questions about the inner workings of the failing mortgage giants. John Solomon and Julie Vorman, of the Center for Public Integrity's iWatch News, report.

Over the last two years, the Obama administration has approved a whopping $34.4 million in compensation to the top six executives of the financially troubled Fannie Mae and Freddie Mac mortgage giants, and lacks the necessary protections to ensure such compensation is even warranted.

The largesse flowed to the six executives even though the two companies they run struggle to staunch billions of dollars in losses, remain in government conservatorship, and must compensate taxpayers for assuming the companies’ liabilities during the mortgage crisis. To compensate taxpayers, Fannie and Freddie are tapping Treasury Department funds to pay required 10 percent dividends each quarter to the U.S. government.

“The need for effectiveness, integrity, and transparency in [the Federal Housing Finance Agency's] programs and operations cannot be overstated,” said Inspector General Steve Linick, a former Justice Department prosecutor confirmed by the Senate last year to watch over federal housing programs. “Fannie Mae and Freddie Mac have received almost $154 billion in taxpayer funding to support the still-fragile housing market. In addition, they own or guarantee about $5.4 trillion in residential mortgage obligations.”

Fannie and Freddie, which support the housing market by buying mortgages from banks, were on the brink of collapse in September 2008 when they were taken over by the government. As conservator, the FHFA oversees operations at Fannie and Freddie as Congress works on a new housing finance blueprint that will decide the fate of the two companies.

Linick is the government’s newest watchdog for federal fraud, waste, and abuse. The FHFA’s inspector general post was created last year by Congress, and the office's first semiannual report to Congress included some details of executive compensation at Fannie and Freddie.

Linick said the FHFA rejected his recommendation that it test and independently verify the annual pay packages, which are set by the boards of Fannie and Freddie and approved by the agency in consultation with the Treasury Department.

The FHFA “lacks key controls necessary to monitor the enterprises’ ongoing executive compensation decisions under the approved packages,” the inspector general wrote. “FHFA has neither developed written procedures to evaluate the enterprises’ recommended compensation levels each year, nor required FHFA staff to verify and test independently the means by which the Enterprises calculate their recommended compensation levels.”

Further, the agency "lacks independent testing and verification of the Enterprises' submissions in support of executive compensation packages," the report said.

An FHFA spokeswoman told iWatch News the agency had no immediate comment. A Treasury Department spokeswoman did not respond to a request for comment.

The FHFA has defended executive pay at Fannie and Freddie in the past by saying the salaries were necessary to recruit and retain talented executives who can run big, complex companies.

The current head of Fannie Mae, while still highly paid by average American workers' standards, is earning significantly less than the $14.4 million package Daniel Mudd had as chief executive in 2006 during the peak of the housing market.

The high pay is also important to offset the short-term nature of the jobs at Fannie and Freddie, which would be phased out of business under proposals from both Republicans and Democrats, the FHFA told the inspector general this year. In a March 29 letter to the inspector general, the FHFA said under its management, Fannie and Freddie are paying an average of 40 percent less to employees than before 2008.

"We continue to review the comparability estimates of consultants hired by the Enterprises and their compensation committees. And we also review comparability data that we have purchased independently," FHFA chief economist Patrick Lawler said in the letter.

Republicans said the new report added to their concerns about Fannie and Freddie.

“Fannie and Freddie are government-sponsored enterprises, not government-sponsored enrichment programs. As long as they are backstopped by U.S. taxpayers, executives should be compensated on par with government officials. If these executives want to earn Wall Street paychecks, they should work on Wall Street,” Darrell Issa (R-CA), chairman of the House Oversight and Government Reform Committee, said in an email to iWatchNews.

Charles Grassley of Iowa, the top Republican on the Senate Judiciary Committee, said there was no attempt by FHFA to justify the high pay. "It makes you wonder whether the conservatorship is accomplishing anything on behalf of taxpayers," Grassley said in an email.

Another senior Republican, House Financial Services Committee Chairman Spencer Bachus of Alabama, recently introduced legislation that would suspend existing compensation packages for top executives at Fannie and Freddie. The bill, which was approved by a subcommittee on a 27-6 vote, would also put all Fannie and Freddie executives on the much lower federal payscale used by Ginnie Mae, the government-owned corporation that guarantees payments on mortgage-backed securities.

The current head of Fannie Mae, while still highly paid by average American workers' standards, is earning significantly less than the $14.4 million package Daniel Mudd had as chief executive in 2006 during the peak of the housing market.

Fannie Mae Chief Executive Michael J. Williams received a compensation package totaling $9.3 million in 2009 and 2010, according to a March report by the FHFA inspector general. That figure includes an annual salary around $900,000, a similar amount in long-term incentive awards each year, plus $2.9 million in annual deferred pay. All three types of compensation are paid in cash.

Fannie Mae’s chief financial officer, David M. Johnson, was paid $4.6 million in 2009 and 2010. The company’s general counsel, Timothy Mayopoulos, had a compensation package of $4.5 million for the two years, the inspector general said.

At Freddie Mac, Chief Executive Charles Haldeman had a two-year compensation package totaling $7.8 million in salary, incentive awards, and deferred pay. Freddie’s chief financial officer, Ross Kari, was paid $4 million and its general counsel, Robert Bostrom, took home $5.2 million, according to the inspector general.

Although none of the men were named in the report, the compensation packages were identified by each executive’s title.

Fannie and Freddie have long been criticized by Republican lawmakers, who blame the mortgage giants for the financial crisis.

An iWatch News story in January, however, found that Fannie and Freddie didn’t take as many risks and played a secondary role to Wall Street in the mortgage meltdown. Government data show mortgages financed by Wall Street from 2001 to 2008 were more than four times more likely to be seriously delinquent than mortgages backed by Fannie and Freddie.

Another source of complaints about the two companies – known as “government-sponsored enterprises” although they once traded on the New York Stock Exchange – is the soaring legal expenses of their former executives.

In February, the Republican-led House Oversight and Government Reform Committee questioned some $160 million in legal fees that taxpayers have footed since 2008 for former executives of Fannie and Freddie. FHFA’s acting director, Edward DeMarco, told lawmakers then that the government was obligated to pay legal fees to defend the former officers in lawsuits, but blamed court delays and a large amount of litigation for running up the bills.

Fannie itself is still losing money, although losses have narrowed in recent quarters. But to pay the required dividends to the U.S. government, it must borrow additional money each quarter from the Treasury Department. For the first quarter of 2011, Fannie reported a net loss of $6.5 billion, and said it will have to pay about $10 billion in dividends this year to the U.S. government.

Freddie, meanwhile, managed to report net income of $676 million for the first quarter, a big improvement from its $6.7 billion loss in the year-ago period.

Freddie paid a quarterly dividend of $1.6 billion to the U.S. government in the first quarter of 2011, and said it will owe $6.5 billion in dividends to the government for all of 2011. Freddie also said it “expects to request additional draws” from the Treasury Department in the future, mostly to pay dividends owed to the government.

On Wednesday, DeMarco told a House subcommittee that he would not ask for a cut in the hefty 10 percent dividend rate the two companies are required to pay. “Even if the dividend rate were reduced, the Enterprises would have to overcome a significant number of hurdles to exit from conservatorship without further legislative action,” DeMarco testified.

Before nominated by President Barack Obama to the FHFA inspector general job, Linick was a respected career federal prosecutor who oversaw the Justice Department’s National Procurement Fraud Task Force and also was involved in pursuing contract fraud cases related to the wars in Iraq and Afghanistan.

John Solomon is executive editor of the Center For Public Integrity.

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An Empty Offer From the Super-Rich (The Daily Beast)

NEW YORK – It’s easy for Mark Zuckerberg to say he’s "cool" with raising income-tax rates. Because it won’t affect him. In this week’s Newsweek, Gary Rivlin takes on America’s phony tax martyrs.

It drives economist Bruce Bartlett crazy every time he hears another bazillionaire announce he’s in favor of paying higher taxes. Most recently it was Mark Zuckerberg who got Bartlett’s blood boiling when the Facebook founder declared himself “cool” with paying more in federal taxes, joining such tycoons as Bill Gates, Warren Buffett, Ted Turner, and even a stray hedge-fund manager or two.

Bartlett, a former member of the Reagan White House, isn’t against the wealthy paying higher taxes. He’s that rare conservative who thinks higher taxes need to be part of the deficit debate. His beef? It’s a hollow gesture to say the federal government should raise the tax rate on the country’s top wage earners when the likes of Zuckerberg have most of their wealth tied up in stock. Many of the super-rich see virtually all their income as capital gains, and capital gains are taxed at a much lower rate—15 percent—than ordinary income. When Warren Buffett talks about paying a lower tax rate than his secretary, that’s because she sees most of her pay through a paycheck, while the bulk of his compensation comes in the form of capital gains and dividends. In 2006, for instance, Buffett paid 17.7 percent in taxes on the $46 million he booked that year, while his secretary lost 30 percent of her $60,000 salary to the government.

“It’s easy to say ‘Raise taxes’ when you know you’re not going to have to pay those taxes,” Bartlett says. “What I don’t hear is ‘Let’s raise the capital-gains tax.’” Instead the focus has been on the federal tax rate paid by those with an annual income of $250,000 or more—the top 3 percent of earners. Bartlett argues that while raising taxes on the country’s richest individuals would go a long way in easing the debt crisis, it makes no sense to treat the professional making a few hundred thousand dollars a year the same as the Richie Rich set. Maybe it’s hard to muster sympathy for an executive pulling down $1 million a year. But ours is a tax system where a person in the top tax bracket (those earning more than $374,000 in 2010) pays a tax rate of 35 percent on the upper portions of his or her income (37.9 percent if you include Medicare), whereas a hedge-fund manager or mogul earning 10 or 100 times that amount pays less than half that tax rate.

When Warren Buffett talks about paying a lower tax rate than his secretary, that’s because she sees most of her pay through a paycheck, while the bulk of his compensation comes in the form of capital gains and dividends.

“America has two tax systems. Separate and unequal,” says David Cay Johnston, a bestselling author and columnist for Tax Notes, who has spent much of the past decade exposing ways the tax system favors the wealthy.

It wasn’t always this way. Until the 1990s, the capital-gains tax was 28 percent. The rate was lowered to 20 percent during Bill Clinton’s tenure—and, lo and behold, says Johnston, the tax rate paid by the country’s 400 wealthiest souls fell by the same 8 percentage points. When the second President Bush lowered the capital-gains tax another 5 points along with his other tax cuts, the country’s richest citizens saw their tax rate fall another 5.5 percent, Johnston says.

Obama recently proposed bumping the capital-gains rate to 20 percent for those earning around $250,000 a year or more. That increase, according to estimates by his budget team, would add $12 billion to the Treasury in 2014.

But many argue that a low capital-gains tax encourages investments in business, which in turn leads to greater job growth. Then there’s the perspective of conservatives such as Ryan Ellis, the director of tax policy at Americans for Tax Reform, who see the capital-gains tax as little more than a vehicle for double taxation. His argument goes that corporations have already paid a tax rate of 35 percent on their profits (at least theoretically), so why should an individual owning shares in that corporation pay additional taxes just because the stock price went up? Where Chuck Marr of the Center on Budget and Policy Priorities thinks the cap-gains rate should at least revert to 28 percent, to Ellis, the proper tax rate on a capital gain is zero.

“Any of these guys who don’t feel their taxes are high enough, I want to point out that they can make a contribution to the Treasury Department right at the Treasury’s website,” Ellis says. “They don’t have to advocate policies that would ruin the country’s economy just to assuage their guilt.”

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An Empty Offer From the Super-Rich (The Daily Beast)

NEW YORK – It’s easy for Mark Zuckerberg to say he’s "cool" with raising income-tax rates. Because it won’t affect him. In this week’s Newsweek, Gary Rivlin takes on America’s phony tax martyrs.

It drives economist Bruce Bartlett crazy every time he hears another bazillionaire announce he’s in favor of paying higher taxes. Most recently it was Mark Zuckerberg who got Bartlett’s blood boiling when the Facebook founder declared himself “cool” with paying more in federal taxes, joining such tycoons as Bill Gates, Warren Buffett, Ted Turner, and even a stray hedge-fund manager or two.

Bartlett, a former member of the Reagan White House, isn’t against the wealthy paying higher taxes. He’s that rare conservative who thinks higher taxes need to be part of the deficit debate. His beef? It’s a hollow gesture to say the federal government should raise the tax rate on the country’s top wage earners when the likes of Zuckerberg have most of their wealth tied up in stock. Many of the super-rich see virtually all their income as capital gains, and capital gains are taxed at a much lower rate—15 percent—than ordinary income. When Warren Buffett talks about paying a lower tax rate than his secretary, that’s because she sees most of her pay through a paycheck, while the bulk of his compensation comes in the form of capital gains and dividends. In 2006, for instance, Buffett paid 17.7 percent in taxes on the $46 million he booked that year, while his secretary lost 30 percent of her $60,000 salary to the government.

“It’s easy to say ‘Raise taxes’ when you know you’re not going to have to pay those taxes,” Bartlett says. “What I don’t hear is ‘Let’s raise the capital-gains tax.’” Instead the focus has been on the federal tax rate paid by those with an annual income of $250,000 or more—the top 3 percent of earners. Bartlett argues that while raising taxes on the country’s richest individuals would go a long way in easing the debt crisis, it makes no sense to treat the professional making a few hundred thousand dollars a year the same as the Richie Rich set. Maybe it’s hard to muster sympathy for an executive pulling down $1 million a year. But ours is a tax system where a person in the top tax bracket (those earning more than $374,000 in 2010) pays a tax rate of 35 percent on the upper portions of his or her income (37.9 percent if you include Medicare), whereas a hedge-fund manager or mogul earning 10 or 100 times that amount pays less than half that tax rate.

When Warren Buffett talks about paying a lower tax rate than his secretary, that’s because she sees most of her pay through a paycheck, while the bulk of his compensation comes in the form of capital gains and dividends.

“America has two tax systems. Separate and unequal,” says David Cay Johnston, a bestselling author and columnist for Tax Notes, who has spent much of the past decade exposing ways the tax system favors the wealthy.

It wasn’t always this way. Until the 1990s, the capital-gains tax was 28 percent. The rate was lowered to 20 percent during Bill Clinton’s tenure—and, lo and behold, says Johnston, the tax rate paid by the country’s 400 wealthiest souls fell by the same 8 percentage points. When the second President Bush lowered the capital-gains tax another 5 points along with his other tax cuts, the country’s richest citizens saw their tax rate fall another 5.5 percent, Johnston says.

Obama recently proposed bumping the capital-gains rate to 20 percent for those earning around $250,000 a year or more. That increase, according to estimates by his budget team, would add $12 billion to the Treasury in 2014.

But many argue that a low capital-gains tax encourages investments in business, which in turn leads to greater job growth. Then there’s the perspective of conservatives such as Ryan Ellis, the director of tax policy at Americans for Tax Reform, who see the capital-gains tax as little more than a vehicle for double taxation. His argument goes that corporations have already paid a tax rate of 35 percent on their profits (at least theoretically), so why should an individual owning shares in that corporation pay additional taxes just because the stock price went up? Where Chuck Marr of the Center on Budget and Policy Priorities thinks the cap-gains rate should at least revert to 28 percent, to Ellis, the proper tax rate on a capital gain is zero.

“Any of these guys who don’t feel their taxes are high enough, I want to point out that they can make a contribution to the Treasury Department right at the Treasury’s website,” Ellis says. “They don’t have to advocate policies that would ruin the country’s economy just to assuage their guilt.”

Like The Daily Beast on Facebook and follow us on Twitter for updates all day long.

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