Consumer Safety Chief Leaves a Small Agency With Bigger Powers

By the end of her four-year term, which came to a close on Friday, she can say that she has presided over a significant increase of the agency’s powers. And Ms. Tenenbaum, 62, has not been shy about using them. The agency recently leveled its highest fine ever — $3.9 million — against Ross, the discount retailer, because it continued to sell what the commission said was defective children’s clothing, even after warnings from the agency.

She and the safety commission also waded into one of the most contentious topics in the sports world: protecting football players from head injuries. The result was the Youth Football Brain Safety initiative, which called for the replacement of youth league helmets with safer models paid for by the National Football League, the National Collegiate Athletic Association and the N.F.L. Players Association.

“I just felt like it was something that needed to be done,” she said.

But before she could make much headway on issues, Ms. Tenenbaum had to persuade consumer advocates that she would work for them while reassuring manufacturers that the agency would not be unfair in carrying out its new powers. It was a difficult juggling act that some industry officials say Ms. Tenenbaum has managed to pull off.

“What I was most glad about is that she treated us and others in the industry as a resource, rather than the enemy,” said Carter Keithly, president of the Toy Industry Association. “We didn’t agree on everything, but she was always fair.”

For the Youth Football Brain Safety initiative, the N.C.A.A., the N.F.L. and the players association kicked in a total of $1 million to pay for the helmet replacements. “The support of Chairman Tenenbaum and the C.P.S.C. played an important role in making our helmet replacement initiative a reality,” Roger Goodell, the N.F.L. commissioner, said in a statement. “We really appreciated her personal involvement and the agency’s in the work to make our game better and safer.”

Yet the commission under Ms. Tenenbaum’s leadership has not been exempt from criticism. Some of the biggest complaints followed the decision by agency lawyers to hold Craig Zucker, the chief executive of the company that made Buckyballs, liable for the recall of the magnetic children’s toy, even after the company was dissolved. Manufacturers have argued that holding an individual responsible for a widespread, and expensive, recall sets a disturbing example, and would discourage companies from being open in their dealings with regulatory bodies.

Ms. Tenenbaum said she could not comment on the case because it was continuing.

The Consumer Product Safety Commission, one of the smallest agencies in government, was created in 1972. With a budget of about $120 million and 530 employees, the agency annually monitors more than 15,000 imported and domestically made products. Before Ms. Tenenbaum took the reins, it had been increasingly criticized in the light of deaths and injuries that critics said were the result of the agency being too close to the industries it regulated.

Ms. Tenenbaum, a lawyer, had no product safety experience when she was nominated for the job by President Obama. She had come up through the Democratic ranks in South Carolina, a state dominated by Republicans, serving as a legislative staff member as well as the state’s superintendent of education. In 1994, she ran an unsuccessful primary campaign for lieutenant governor, and 10 years later lost to Jim DeMint, a Republican, in the race to replace Ernest Hollings, a Democrat who was retiring, in the Senate.

Before her arrival at the safety commission, the Bush administration had sought to ease what it considered costly rules that placed unnecessary burdens on businesses, and the agency’s budget was largely gutted. Staff was cut and safety initiatives were stalled or dropped.

In 2007, a Washington Post investigation found that Nancy Nord, who was then the agency’s acting chairwoman, and her predecessor, Hal Stratton, had taken dozens of industry-sponsored trips that were paid for in full or in part by trade associations or manufacturers of products that were regulated by the agency. Ms. Nord said the trips were legal.

U.S. Retailers Offer Safety Plan for Bangladeshi Factories

The proposal calls for the retailers to inspect the estimated 500 factories that the American companies use within 12 months, and then develop plans to fix any substantial safety problems that are found, one official involved in the planning said.

Under the effort, called the Alliance for Bangladesh Worker Safety, the participating companies would contribute money — from a modest amount up to $1 million a year, depending on the level of business each does in Bangladesh. This would create a total fund of $40 million to $50 million during the plan’s five years.

While details of the proposal have yet to be fleshed out, it differs from the European-dominated plan in the way the participants take responsibility for safety violations. The Europeans pledge to ensure that there are funds to fix serious fire and building safety problems in any of the factories they use in Bangladesh.

Under the American plan, there is talk of “shared accountability” – the companies would work closely with the factory owners, the government of Bangladesh and various governments and aid agencies to figure out ways to finance safety improvements. If serious safety problems were found at a factory, the plan’s director would inform the Bangladesh government, the factory owner and what the group calls the factory’s “worker participation committee,” a group to be elected by a factory’s workers.

The American retailers plan to develop a common safety standard for the factories by October and to create a clearinghouse to share information among themselves about which factories have been approved for production and which need safety improvements. One retail executive said the American companies would pledge $100 million in loans and other financing to upgrade safety in Bangladesh’s apparel industry.

The 70 companies in the European-dominated effort announced details of their plan on Monday, saying they would have all of the factories they use in Bangladesh inspected within nine months and would have remediation plans developed for those with safety problems. They pledged “to ensure that sufficient funds are available to pay for renovations and other safety improvements.”

Bangladesh is the world’s second-largest apparel exporting nation, after China; Europe buys about 60 percent of its exports and the United States around 25 percent.

The chief executives in the alliance made a joint statement Wednesday, saying: “The safety record of Bangladeshi factories is unacceptable and requires our collective effort. We can prevent future tragedies by consolidating and amplifying our individual efforts to bring about real and sustained progress.”

The beginning of the American effort was announced in May, as Walmart, Gap and other American retailers felt pressure to act because the European-dominated accord was gathering momentum and because of the outcry to do more to ensure safety after 1,129 workers died in a factory building collapse in Bangladesh in April.

The plan announced Wednesday includes J.C.?Penney, Carter’s and the Children’s Place and was reached with the help of the Bipartisan Policy Center and two former United States senators from Maine, George Mitchell and Olympia Snowe.

Supporters of the European-dominated plan, known as the Accord on Fire and Building Safety in Bangladesh, have pre-emptively criticized the American plan, saying it would achieve less in improving safety because the companies have made a less ambitious commitment to finance safety upgrades. Several American companies have joined the European-dominated plan, including Abercrombie & Fitch and PVH, the parent company of Calvin Klein and Tommy Hilfiger.

Critics have faulted the American effort for not including the views of unions or workers in their plan. The Bipartisan Policy Center had invited several labor rights groups to attend a meeting to give their views, but the labor groups boycotted, seeing the American effort as one that was undercutting the European-dominated plan.

Today's Economist: Lessons of the Great Recession: How the Safety Net Performed

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Second Thoughts on Safety of Avandia Stir a Dispute

Three years ago, in one of the more notable drug-safety scandals in recent history, the diabetes drug Avandia was all but banned from use in the United States after researchers found that thousands of people had heart problems after taking it. Today, it is a drug of last resort for people with diabetes who are so sick that a heart attack is worth the risk.

But now, in a highly unusual move, the Food and Drug Administration has decided to reopen the case on Avandia and will ask a panel of experts this week whether the agency must reconsider the restrictions on the drug.

That is just one of several options before the advisory committee, but lifting the limits would amount to a major policy reversal and could be a huge victory for the drug’s maker, GlaxoSmithKline. Avandia was once a top-selling drug, reaching more than $3 billion in sales in 2006 before controversy flared. It could also help rewrite one of the most embarrassing chapters in the F.D.A.’s recent history.

But critics, like Dr. Steven Nissen, the well-known Cleveland Clinic cardiologist who was the first to sound a public alarm about the drug, say it is far too dangerous to use in diabetes treatment. He said an analysis of more than 50 studies linked Avandia to an elevated risk of heart attack; one study linked the drug to more than 47,000 cases of heart attack, stroke or heart failure from 1999 to 2009.

Dr. Nissen and others contend that the F.D.A.’s decision to revisit the drug is more about saving face than protecting patients. “The efforts to whitewash this entire affair is really an unacceptable misuse of their regulatory role,” Dr. Nissen said. He added that he would be “horrified” if the panel were to recommend that the restrictions be removed. “The evidence against this drug is overwhelming,” he said.

Dr. Janet Woodcock, the F.D.A.’s top drug official, said the two-day meeting that begins on Wednesday was convened to weigh a review she requested in 2010 of an earlier clinical trial that Glaxo itself had conducted. Past findings were riddled with questions, she said, and the agency has an obligation to try to answer them.

“I made the decision last time about Avandia, and it’s not that it was an open-and-shut case,” she said in a phone interview. “What we’re trying to do here is resolve that uncertainty as much as we can with all the available data.”

The F.D.A. typically follows the recommendations of its advisory panels. While experts said widening access to the drug would be unlikely, many found it puzzling that it was even under consideration. The process and its outcome are likely to be among the most closely watched drug-safety cases in recent years.

Avandia’s troubles began in 2007, eight years after it was approved by the F.D.A., when Dr. Nissen published evidence showing that the drug raised the risk of heart attack by more than 40 percent. A Senate inquiry ensued, and the episode exposed what many said were serious gaps in the agency’s oversight of prescription drugs. It has reshaped the regulatory landscape for diabetes drugs at a time when the number of people with the disease is exploding: companies are now required to show that new drugs do not hurt the heart.

An estimated 26 million Americans have diabetes, a difficult disease to treat that often requires patients to try a variety of drugs. Spending on diabetes medications totaled $22 billion in 2012, according to IMS Health. The drug Januvia and a related drug, Janumet, both made by Merck, were the best-selling oral diabetes drugs in 2012, with combined global sales of $5.7 billion.

In 2010, European regulators removed Avandia from the market, and its use was severely restricted in the United States. That year, the F.D.A. ordered an outside review of Glaxo’s clinical trial, which had lasted six years and whose results were published in 2009.

It is that review, conducted by researchers at Duke University, that experts are being asked to consider this week. According to a preliminary summary posted on Glaxo’s Web site, the review found previously unreported cases of heart complications and deaths, but not enough to change the Glaxo trial’s conclusions that Avandia did not significantly raise the risk of cardiovascular harm. However, some outside experts have said that the Glaxo trial was seriously flawed. Some also question the independence of the Duke review, which was paid for by Glaxo.

Clothing Retailers Pressed on Bangladesh Factory Safety

Nathan Weber for The New York TimesA protest at a Gap store on Thursday in Chicago, in response to the disaster in Bangladesh.

A wide spectrum of government officials, investors and religious groups are warning major retailers like Walmart, Benetton and Gap that they could face financial repercussions from consumers, damage to their stock value or sustained public protests if they do not adopt stricter garment manufacturing standards.

With the death toll rising above 1,000 two weeks after an eight-story factory building collapsed in Bangladesh, organizations and officials say they have been growing impatient with American and European retailers and apparel brands because only two companies — PVH, the parent company of Calvin Klein and Tommy Hilfiger; and Tchibo, a German retailer — have signed onto a binding agreement on safety standards for factories. That agreement would commit companies to allow independent inspections of the apparel factories they use, to terminate business at factories that do not quickly correct violations and to underwrite needed safety improvements. For example, many garment factories in Bangladesh lack basic means for workers to flee in case of fire — specifically fire escapes and smokeproof enclosed staircases.

Avaaz, a human rights group, has collected 875,000 signatures on a petition urging Gap and H&M to sign on to the plan to commit to fire safety improvements at Bangladesh factories. New York City’s comptroller, John C. Liu, who oversees city pension funds owning more than five million Walmart shares, is warning the company that it risks damage to its public image unless it does more on factory safety in Bangladesh.

And the Rev. Seamus P. Finn, representing shareholders from the Catholic organization Missionary Oblates of Mary Immaculate, has been circulating a letter among religious organizations — groups that control more than $100 billion in assets — to express displeasure with the nation’s retailers. He says the retailers have not done nearly enough to improve workplace safety for the more than three million garment workers in Bangladesh.

“What happened in Bangladesh is a game-changer because of the gravity of the situation and the tremendous loss of life,” Father Finn said. “People are really coming to life about this and saying, ‘We need to do something.’ ”

Not just Western retailers are encountering more pressure after the April 24 collapse of the Rana Plaza building outside Dhaka, the Bangladeshi capital. The nation’s government — known for lax building code enforcement — has suddenly grown tougher, closing 18 factories for safety violations. Three of those factories were run by the Nassa Group, the country’s largest clothing exporter, which counts Walmart and Sears among its customers. Last weekend, the government also announced it would hire hundreds of additional factory inspectors.

The United States government has also been pressing Bangladesh and the apparel manufacturers there over safety. In January — two months after the Tazreen factory fire in Bangladesh killed 112 workers — the United States trade representative notified Bangladesh that Washington might withdraw, suspend or limit that country’s trading privileges. The trade representative was responding in part to a complaint that the A.F.L.-C.I.O. filed, asserting that the Bangladesh government had worked in concert with its apparel manufacturers to suppress labor unions.

“There are serious concerns in Bangladesh related to freedom of association, worker safety and other issues,” a senior official in the trade representative’s office said on Friday. The trade representative’s office says it will decide in June whether to take action against Bangladesh, although under esoteric trade rules, any penalties could not be directed against that country’s apparel industry.

The most visible pressures that retailers have faced are street protests, including one in Barcelona, where demonstrators wore shirts with fake blood stains to protest Mango, Benetton and other retailers. In the United States, university chapters of United Students Against Sweatshops have helped organize a series of demonstrations this week against Gap in Boston, Los Angeles, New York and Washington to press it on factory safety.

Rail Safety Law Doesn't Pre-empt Common Law Damage Claims, Panel Rules

A divided panel of the U.S. Court of Appeals for the Third Circuit has ruled that the Federal Railroad Safety Act doesn't pre-empt the common law claims brought by a Delaware County mall against railroad giant CSX.

Big Depositors Seek a New Safety Net

The accounts losing the insurance are used by businesses, municipalities and other entities like nonprofits that are willing to forgo any interest in order to have immediate access to their large pools of cash.

These accounts hold about 20 percent of all deposits in United States banks. Starting Jan. 1, only $250,000 in each noninterest bearing account will be backed by the Federal Deposit Insurance Corporation.

Now a scramble is under way to make sure these customers do not withdraw large sums out of banks, particularly community banks that have benefited from the guarantee. Because a depositor is barred from spreading out $1 million into four accounts within the same bank, many smaller banks are turning to a handful of specialized cash-management firms that can split up deposits into multiple $250,000 chunks and distribute them among a network of banks, each of which can insure $250,000.

One firm doing this parceling work, Reich & Tang, has had an influx of 25 new banks in the last few weeks sign up for the program, a 20 percent growth. Deposits managed by another firm, StoneCastle Cash Management, have surged to roughly $3 billion from just over $2 billion in September. “Interest has picked up dramatically,” said Joshua Siegel, managing principal of StoneCastle.

The end of the unlimited insurance, known as the Transaction Account Guarantee, is the latest twist in the government’s effort to scale back its support for the financial system, and the banking industry’s effort to mute the impact of the new lower limits.

Many analysts assume that even with the end of the government guarantee, the vast majority of the deposits will remain in the banks because the government will continue serving as some sort of backstop for most of the $1.5 trillion.

For small banks, there are programs like Reich & Tang’s, with the government fully insuring the scattered deposits. For the nation’s largest banks, there is a widely shared assumption that the government would be forced to provide a backstop to protect depositors in a crisis, as it did in 2008.

“Implicitly or explicitly, most of this money is going to still be guaranteed,” said Bruce Hinkle, an executive with Farin & Associates, a consulting firm that works with banks.

The unlimited guarantee was created in the depths of the crisis by the Federal Deposit Insurance Corporation, in order to stop a migration of customers from smaller banks to larger ones that were viewed as less likely to fail.

Most individual savers keep their money in interest-bearing accounts, where since the crisis the insurance coverage was raised to $250,000 from $100,000. Some families have gotten around the insurance limit by dividing money into separate $250,000 accounts under the names of different family members.

Firms like Reich & Tang will do this more systematically for wealthy clients. The end of the unlimited guarantee for corporate and municipal depositors is set to significantly increase business at these firms.

Mr. Siegel, managing principal of StoneCastle, which runs one of the largest programs, said he had seen a tenfold increase in interest from community banks in the last month. Begun in 2011, the service, called the Federally Insured Cash Account program, distributes large deposits throughout a network of roughly 500 banks.

StoneCastle and other firms make money by charging banks a small percentage of any deposits they distribute, generally less than 0.2 percent.

Frederick L. Cannon, a bank analyst at Keefe Bruyette & Woods, says that the expansion of the practice from wealthy individuals to corporate customers makes the F.D.I.C.’s limits toothless and exposes the government to more risk if banks fail in the future.

“You want these limits so there is some kind of market discipline on these banks,” said Mr. Cannon. “If I were on the F.D.I.C. board, I would be concerned about this.”

This article has been revised to reflect the following correction:

Correction: December 30, 2012

An earlier version of this article misidentified the federal insurer of bank deposits. It is the Federal Deposit Insurance Corporation, not the Federal Deposit Insurance Company.