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There are big crowds at stores across Illinois today, with people rushing to buy new government-labeled Energy-Star refrigerators, dishwashers, washing machines, air conditioners, and freezers as part of the “Cash for Appliances,” program. Anyone that purchases a qualifying appliance gets an automatic and immediate 15% discount from Uncle Sam, who has set aside $300 million for this initiative, $6.5 million of that here in Illinois. To make the deal even sweeter, anyone willing to trade in an old appliance gets an extra $75 rebate. Similar to the “Cash for Clunkers,” program that dealt with automobiles, a good way to understand this program is by thinking of it as, “Cash for Kitchen Stuff.”

Given the state of the economy the last few years, retailers are excited about this program, because any business at this point is good business. Robert Bevilacqua, the CEO of Grant’s Appliances in Chicago, optimistically expects a very profitable weekend. Bevilacqua said, “we are kind of forecasting about four times the amount of business through the weekend.”

Many retailers, including Sears, are slashing prices even more, in an attempt to maximize the number of shoppers at its stores before the money runs out. Recently, this program was employed in Arizona and Iowa, and the interest was so great, the money was gone within a few hours.

Several pro-immigrant grassroots organizations today announced plans for major demonstrations across the country on May 1 that will focus on immigrant workers’ rights and comprehensive immigration reform. Washington, Los Angeles, Chicago, Dallas and Milwaukee are among the cities that expect large rallies.

May 1 has long been a day for immigration protests, starting in Los Angeles more than 10 years ago, according to Maria Elena Durazo of the Los Angeles County Federation of Labor. Organizations participating in the rallies, including Service Employees International Union (the largest union for immigrant workers), Mexican-American Coalition for Immigration Reform and Center for Community Change, expect this year’s demonstrations to bring together thousands of protesters like in previous years, especially when the stakes are so high.

During a conference call this morning, organizers pointed out that Arizona’s Senate bill 1070, recent immigration raids in Phoenix and Tucson and the 287 (g) program are just some examples of what’s heating up the immigration debate.

From a Center for Community Change press release today:

The grassroots organizations are escalating because President Obama has yet to deliver on his promise to move immigration reform, the Senate has yet to deliver on its promise to produce a bill, and DHS has yet to deliver on its promise to focus on arresting bad actors instead of terrorizing ordinary immigrants. The time for making promises has run out.  The time for concrete action has arrived.  We demand action from the President, Congress and DHS by May 1:

• Sens. Schumer and Graham must introduce a bill
• Congress and the President must pass comprehensive immigration in 2010
• The President must end rogue enforcement at ICE and enact policies that keep families united

Economics blogger Bradford J. DeLong has posted a plea for national governments (hat tip, FT’s Energy Source) to act on climate change after the Copenhagen talks fell apart.

DeLong apparently is not one of those who believes that Copenhagen could actually turn out to be a success.

DeLong has a simple, four-point plan that cuts right to the heart of the issue. The first and second suggestions are plausible but politically difficult. The third and fourth proposals will not fly, now or ever. See them after the jump.

– Pour money like water into research into closed-carbon and non-carbon energy technologies in order to maximize the chance that we will get lucky—on energy technologies at least, if not on climate sensitivity.

– Beg the rulers of China and India to properly understand their long-term interests

– Nationalize the energy industry in the United States.

– Restrict future climate negotiations to a group of seven—the U.S., the E.U., Japan, China, India, Indonesia, and Brazil—and enforce their agreement by substantial and painful trade sanctions on countries that do not accept their place in the resulting negotiated system.

Peter Scoblic, the executive editor of the New Republic magazine, will soon become a senior policy adviser on the Senate Foreign Relations Committee. Scoblic’s a nuclear weapons expert — he came to TNR seven years ago from Arms Control Today and wrote an excellent book, U.S. vs. Them, tracing the history of nuclear weapons policy in post-World War II ideological debates. Accordingly, his first big job is helping the Senate ratify the New START nuke-reduction treaty with Russia, although his portfolio will extend to security issues beyond just nuclear weapons.

Full disclosure: I worked for Scoblic for a bunch of years at the magazine, and while saying this now represents a conflict of interest, his arrival on the committee staff will be very welcome news for arms controllers and very unwelcome news for opponents. Should the committee chairman, John Kerry (D-Mass.), end up succeeding Hillary Rodham Clinton as secretary of state, it wouldn’t be surprising if Scoblic helped negotiate the next arms-reduction treaty after New START.

The Hill is eagerly awaiting the full text of the proposal by Sen. Blanche Lincoln (D-Ark.) to regulate derivatives. The legislation reportedly requires most derivatives to be processed through clearinghouses and for investment banks to house “swap desks” outside the bank, or otherwise to lose access to the Federal Reserve’s discount lending window and F.D.I.C. deposit insurance, among other provisions.

To discuss the proposal, I spoke with Robert Litan, a senior fellow at the Brookings Institution and the vice president for research and policy at the Kauffman Foundation. He recently published a paper offering optimal policy solutions to regulate derivatives without over-dampening the market.

I’d be interested in your reaction to the derivatives proposal put forward by Lincoln. It hasn’t actually been released yet, but we have some details about it the general ideas. What do you think thus far?

I have a couple reactions. If I had my druthers, I wouldn’t force derivatives onto clearinghouses and exchanges. I’d use capital charges as an incentive to get companies to use them instead.

I have a section in my recent paper that argues that regulators aren’t the best judge as to what should be cleared and not. But Lincoln’s proposal, as well as the Dodd and House bills, have mechanisms to force things onto clearinghouses and exchanges. There has been some criticism of the proposals from the other side, but I’m not sure that Republicans support the incentive-approach either. Maybe they’ve made the the political calculation that this is what’s necessary. But, if I were writing the bill, I’d be using capital charges rather than requirements.

The second point is that she wants to cut off the derivatives desk and put it outside the bank. I worry about that, because it is possible, not necessarily certain, but possible that you could seriously crimp the market before it gets going. That is because one of the reasons end users deal with banks for derivatives trades is that they treat them as too big to fail. The reason, if you’re a company making a swaps deal, that you go to Goldman Sachs is that you think that they are going to honor that contract, no matter what happens. But if rather than going to Goldman Sachs, you’re going to an affiliate, you might think again. And that means that on aggregate we might end up with less derivatives traffic.

The counterargument to that is that when, say, Bank of America sets up a derivatives affiliate, the counter-party might assume that the affiliate is part of the too big to fail organization and nothing changes. That’s likely. But if that is the case, there’s a presumption that we’ll end up bailing out the affiliates. That means, there would have been no point to moving the derivatives portions out of the banks to begin with. Maybe what that’s what Congress wants to do. But I’m nervous. It really could disrupt legitimate derivatives activity.

Finally — again, if I had my druthers — I’d put in more emphasis on incentives for clearing and trading. I don’t think the bills touch it at all. I haven’t looked closely enough and the fine print, and I’m not sure we even know yet. But it seems the bills don’t touch it at all. Right now, prices for derivatives in question, those are end-of-the-day prices. They aren’t actual prices. They’re just averages from the day before. So, we have little pricing transparency in this market. And I’d want the regulators to have more authority to push for much more frequent reporting of transaction prices. It is conceivable that the authorities could push dealers to do that — but I don’t know if it will assure us that we’ll get real-time pricing. That’s absolutely critical.

Right — and presumably on the buy-side, purchasers of derivatives, would want more pricing information via exchanges or clearinghouses, rather than over-the-counter deals, too. Say you’re Cargill, or some other company that purchases a lot of derivatives. Wouldn’t you presume that the pricing information will drive your costs down, even if the regulations require you to put some capital up?

I think the buy side would love that transparency. Right now, if you’re Caterpillar, you rely entirely on the price quoted from the bank or from the day before. You can’t go look up the price on a Bloomberg terminal. You can see what the average price was yesterday — but that really isn’t a price.

The next day is a new day. Things change. So, when you call your broker, they say, “Well, I’ll get back to you.” Or, “Here’s the price, but it’s not a firm price. Give us your business and we’ll confirm the price to you, and we’re promising we’re getting you the best possible deal.”

That leads to the next question, which is the end user-exemption. It seems that’s going to be a big fight. I know the Caterpillars of the world don’t want to go onto central clearing now — they don’t want to pay for it. My view is that if you had significant capital charges on non-cleared derivatives, that would induce the dealers to try to get these transactions into clearinghouses, and it would induce the buy side. Because if dealers have to have substantial capital behind buy-side trades, they want the transactions to become standardized and go through clearinghouses, and it will be cheaper for the buy side. I’m not that sympathetic with the broad end-user exemption. I think they ought to go through central clearing. But that is not something that the Lincoln or Dodd bill seems to do now.

Still, we just don’t know enough details. The details are really important. But right now, the buy side seems to want out. They don’t want to have to post collateral. But we’ll know more on that.

As it is now, I agree, and I’m confused as to why there is so much end user opposition to this bill. You would think that firms would want to pay less for these deals even if it meant putting up capital.

Absolutely. If we get central clearing, that is a predicate to exchange trading, which will necessarily reduce the spread and bring prices down. That is the logic. You have to ask: Why is it that some of the big guys don’t recognize that?

I only have a couple theories — I don’t know for sure. One theory is that they just don’t trust or don’t believe the regulatory process will bring us to that brand new world of exchange trading. They do not trust it will happen, and therefore are more comfortable with the world as it is. Then, if exchange trading does happen, they do not believe there will be a compression in the spreads, contrary to all of financial history. The stock market shows us that spreads massively narrow when exchange-trading is put in place. So, they just don’t trust or believe this is going to happen, for some reason.

Another theory is that in effect they’re doing the dealers’ bidding, and the dealers have enormous incentives to keep the current system under place as well as leverage over their clients. My understanding if that you’re a big buy-side user, you don’t spend time a lot of time shopping between Goldman Sachs, J.P. Morgan, Morgan Stanley. You just have your favorite dealer. In a world of non-transparency, the world the derivatives market is in right now, the way I understand it, if you try to call four or five dealers, to shop around, none give you a real price. They might quote you an indicative price. If you commit, then they give you pricing information.

So, since now, you have a favored dealer, you’re worried that if you come out in public and say you want clearinghouses or exchange trading, until that is in place, you are concerned that you will offend your dealer, and you aren’t going to get good terms. Because, as it is, buy a derivatives contract, it isn’t like walking into WalMart and looking at the sticker price. Maybe, if you take a public policy position contrary to your dealer, you might not get that favored treatment.

I have no basis for making those claims, I’ll note. Those are just plausible, rational explanations.

Then, there’s a third reason which makes the most sense. And that is — well, it makes sense in the short run. There is a classic collective action problem here. Nobody wants to pay to make the system safer for everybody. It’s like taxes. I don’t want to pay for defense, I want you to pay for defense. If I can get you to pay, then, I get a free ride.

So, as it is, since these companies might be getting good deals now. Their costs will go up at the beginning when they have to start posting collateral. If the system evolves over time, we’ll get to that nirvana with clearinghouses and lower spreads. But if these companies are just thinking about the short term, they might oppose the change. That’s a short sighted but semi-rational thought process. And it’s just people acting in their own interests.

The Securities and Exchange Commission is taking action against Goldman Sachs for misrepresenting securities the bank created and sold to investors. The suit (.pdf) is civil, so you won’t see any bankers in orange jumpsuits here, but it is significant. The action marks the first time the SEC has accused a major Wall Street bank of fraud involving securities related to the housing bubble. Does the SEC have a case or is this just a feel-good political move on the part of the regulator? That depends on the evidence it has accumulated.

Here’s the New York Times’ report of the facts:

According to the complaint, Goldman created Abacus 2007-AC1 in February 2007, at the request of John A. Paulson, a prominent hedge fund manager who earned an estimated $3.7 billion in 2007 by correctly wagering that the housing bubble would burst.

Goldman let Mr. Paulson select mortgage bonds that he wanted to bet against — the ones he believed were most likely to lose value — and packaged those bonds into Abacus 2007-AC1, according to the S.E.C. complaint. Goldman then sold the Abacus deal to investors like foreign banks, pension funds, insurance companies and other hedge funds.

But the deck was stacked against the Abacus investors, the complaint contends, because the investment was filled with bonds chosen by Mr. Paulson as likely to default. Goldman told investors in Abacus marketing materials reviewed by The Times that the bonds would be chosen by an independent manager.

The idea is that Goldman structured securities that were designed by an interested manager to go bad, but didn’t represent them that way to investors. If the facts of the case are proven to be accurate as depicted above, then it should be very easy for the SEC to prove fraud. Cherry picking bad assets and selling them to investors who thought they were chosen by an “independent manager” is illegal.

Up to now, Goldman has been arguing that it was just making markets in regard to the securities it created and sold that went bad. That isn’t generally fraud. Investment banks are free to unite buyers and sellers of securities — so long as they don’t misrepresent what they’re selling. But if it worked with a hedge fund to intentionally create a garbage fund and misrepresented that to investors, then that is fraud.

Yet suing Goldman is a slam-dunk for headline grabbing. This point raises the question: is it just a lucky coincidence that the SEC chose the investment bank most demonized by the media to finally sue? It’s plausible that many banks engaged in questionable behavior as the housing market began to sink in 2007, so it’s curious that the SEC chose to sue Goldman, and only Goldman. There is some chance that the SEC has a weak case, but looks to enjoy some public praise for finally appearing to crack down on Wall Street’s much-criticized actions during the housing market’s collapse.

So if the evidence described above is there, then the SEC should succeed. But even a win here won’t necessarily open the floodgates to lots more lawsuits. This could be an isolated situation where Goldman misrepresented how the securities were designed. If, in fact, an independent manager had chosen the assets in question, then there would be no case.

(Nav Image Credit: Wikimedia Commons)

It’s possible the market is overreacting to this Goldman Sachs (GS) news, but considering how complacent the market had become, and how out-of-the-blue these charges are, this is causing quite a shock to the market.

The Dow is off nearly 140…

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A few days ago someone turned to me and began, “I bet you get asked this all the time….”

I knew exactly what was coming next.

“So, what’s your favorite restaurant?”

I do get asked this question often, and I never have a great answer. I love Bacchanalia, but that’s more a birthday and anniversary kind of restaurant. Kyma is great, but it has a certain high-gloss ambiance that doesn’t necessarily match my standard wardrobe or attitude. I have a bunch of Korean, Vietnamese and Japanese joints I really like. When I impetuously spend more money than I should on dinner, that usually means sushi.

Usually, though, I will say Cakes & Ale or Pura Vida Tapas — the two restaurants that my wife and I like to steal away to when we can go out for a nice dinner that won’t necessarily mean a three-digit bill. They are both small, personable, chef-run and have menus that change often. We know that we can walk into either place, peruse the …

Bank of America reported $3.2 billion in first-quarter earnings, almost entirely on the strength of bond and stock trading on Wall Street. If you’re looking for evidence of a top-heavy economic recovery, consider these two statistics. BofA made $7 billion from trading revenues on Wall Street alone. It also lost $36 million on all non-investment banking profits, including $2.1 billion lost in the housing market. Total loans continue to decline, and nearly 13% of credit card balances were deemed uncollectible. Investing in Wall Street, where stocks are up 70 percent in a year, is a winner. Collecting from Main Street, where broad unemployment has stopped growing at 17 percent, is a loser. Ladies and gentlemen, your recovery.

The Wall Street Journal write-up has a good summary of the bank’s big quarter. One thing that might go under-reported is that the once vilified merger with Merrill Lynch is (to use a Tiger-ism) paying off huge, quickly. The $50 billion merger cost Bank of America $15 billion in write-downs in the last quarter of 2008. It cost both CEOs their jobs. The deal was a scandal wrapped in fraud wrapped in ignominy. But in hindsight, it might have helped to save the financial sector and it’s keeping Bank of America in the black.

Merrill’s investment banking ops are central to BofA’s profitable global banking sector. Profit from the global banking and markets units, which includes the
Merrill Lynch investment banking operations, rose $709 million, to $3.2
billion. Merrill is now expected to consistently generate up to 30 percent of Bank of America’s profits, and if the investment scene continues to outpace the housing market and consumer demand and small business optimism, that percentage could be even higher in the short term.

[JURIST] US President Barack Obama on Thursday ordered Department of Health and Human Services (HHS) Secretary Kathleen Sebelius to expand the rights of patients and non-related visitors in hospitals that receive funding from Medicaid and Medicare. The rules that Obama asked HHS to establish are designed to ensure that hospitals respect the rights of patients’ advance directives, such as designating visitors and powers of attorney, and that visitors may not be denied rights for discriminatory purposes. Obama requested that HHS:
ensure that hospitals that participate in Medicare or Medicaid respect the rights of patients to designate visitors. It should be made clear that designated visitors, including individuals designated by legally valid advance directives (such as durable powers of attorney and health care proxies), should enjoy visitation privileges that are no more restrictive than those that immediate family members enjoy. You should also provide that participating hospitals may not deny visitation privileges on the basis of race, color, national origin, religion, sex, sexual orientation, gender identity, or disability.Gay rights group the Human Rights Campaign (HRC) welcomed the order as an “important step to protect the visitation and healthcare decision-making rights of lesbian, gay, bisexual and transgender (LGBT) people.”Obama pledged during his presidential campaign to make expanding gay rights a priority of his administration. Last month, US Defense Secretary Robert Gates announced changes to the enforcement of the controversial Don’t Ask, Don’t Tell policy to make it more difficult to expel openly gay service members from the military. Obama has made clear that repealing the policy is a top priority for his administration, pledging to end it in October and reiterating his commitment in the State of the Union address. In August, a bill aimed at banning workplace discrimination motivated by an employee’s sexual orientation or gender identification was introduced in the US Senate. The Employment Non-Discrimination Act (ENDA), if passed, would protect employees from discriminatory hiring and firing practices, and from segregation or classification on the basis of sexual preference or gender identity.

Lovely tribute in the Times to the Great Bear of Locktown.

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Race is a complicated subject in American political life. It is no less so in college admissions.

For decades, the U.S. Supreme Court has struggled with the issue of race in higher education. Its historic 1978 decision concerning affirmative action programs in college admissions generated six opinions. The deciding vote, cast by Associate Justice Lewis F. Powell Jr., held that the University of California could use affirmative action in admissions to achieve a diverse student body — but that using strict racial preferences to arrive at such diversity was unconstitutional.

According to recent research by a student at the Harvard Graduate School of Education (HGSE), admissions staffs and students at many colleges and universities continue to struggle with the topic. While both groups consider a diverse campus an important quality that enhances the learning environment, the results suggest that neither is sure how to determine such diversity.

A mother of four who worked for years as a lawyer specializing in business issues, Theresa Kaiser also has strong ties to education and admits to a “love and curiosity for learning.” Her father is a college professor, and for years she owned a school teaching English as a second language.

But it was her work as a volunteer in the guidance counselor’s office of her children’s high school, and her experience helping her daughters apply to college, that piqued her interest in higher education, in particular the college application process.

“Seeing how you identify race on a college application immediately seemed inaccurate to me,” said Kaiser, who has an adopted brother from a biracial family. “How can Americans express who they are by checking a few boxes?”

As part of her yearlong master’s program in higher education at HGSE, Kaiser decided to explore the subject and try to answer the question: “How do people identify anymore?”

The results were revealing, indicating that heritage, behavior, genetics, and physical appearance are all parts of a complicated racial picture.

For her project, Kaiser developed an online survey that asked students from three public universities how they would racially classify themselves. She also created a second survey to gauge what criteria college admissions offices consider in their efforts to achieve diversity.

According to Kaiser’s research, a majority of students said they considered their biological or genetic heritage the most important factor when classifying themselves. The second-most important factor was physical appearance, and the third was cultural or social behavior.

Of the three schools that responded to Kaiser’s survey, two considered an applicant’s diversity based on cultural or social behavior the most valuable.

Additionally, 86 percent of respondents felt it was important to have a racially diverse student body, yet only 26 percent thought race should be considered in the admissions process.

“I was completely surprised that students identified themselves based on their biological makeup, but almost all of them most valued cultural ethnicity on campus,” said Kaiser.

While Kaiser acknowledges the need for further, more comprehensive research, she thinks her preliminary findings suggest that “perhaps students don’t believe that race as identified on college applications is identifying the type of diversity they find most rewarding.”

Similarly, she said her work indicates that diversity means different things to different universities, and that schools aren’t necessarily “getting the type of diversity they want from the application form.”

During her research, Kaiser also looked at DNA testing, a process that more people are turning to in an effort to determine their genetic heritage. In her paper, she cited the work of a teacher in Florida who had his students test their DNA as part of a class assignment. The majority of the students considered themselves white and of European descent, but the results showed that almost all of the students had mixed backgrounds, which included American Indian, African, and Asian genes.

If DNA testing becomes more widely used, it “could blow the whole racial piece away, as more and more could check at least one box on the application form, and likely more than one,” said Kaiser. “It could really render race identification useless over time.”

While much more work needs to be done on the topic, Kaiser is hopeful she can continue to study this area and help to shape an important dialogue.

“Maybe,” she said, “we can find a better way to define diversity.”

There’s been a lot of indignant chatter about how Goldman Sachs had been selling investors long positions that they were short on, and how this represented a conflict of interest, or something.  This rather fundamentally misunderstood the role of a market maker, which is, after all, to take the other side of the trade.

On the other hand, if the SEC complaint filed today holds up, these complaints will turn out to have a certain . . . truthyness . . . to them:

The hedge fund, Paulson &Co., paid Goldman $15 million to create the CDO in early 2007, when the U.S. housing market and related securities were beginning to show signs of distress, the SEC complaint said.

According to the SEC, Goldman Sachs failed to disclose that Paulson played a significant role in selecting the CDO’s portfolio, but the firm then bet against it by entering into a credit-default-swap transaction with Goldman to buy protection on certain layers.

As a result of that bet, Paulson made about $1 billion, SEC said.

“Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party,” said Robert Khuzami, Director of the SEC’s Division of Enforcement.

One wants to be cautious about saying that Goldman Sachs is definitely guilty.  Financial crises produce immense political pressure for securities regulators and attorneys general to go head-hunting, and the cases often turn out to be weaker than they seem once the defense gets a chance to speak.  The case against two Bear Stearns hedge fund managers, for example, turned out to hinge on horrific-sounding quotes that had very clearly been ripped out of a context that totally changed the implications. Which just goes to show how heavy the pressure is on prosecutors to make these cases. 

But it certainly sounds as if the SEC has the goods here.  Felix Salmon has gone through the pitchbook, and pronounces it free of any indication that a third party with a strong economic interest in the transaction was picking the securities to be included.  I will be interested to hear the defense rebuttal.  It should, at the very least, be entertaining.

Was anyone hurt by it?  That’s less clear–at that point, the market still had a bit of froth left, and people might well have bought the securities if Paulson’s interest had been disclosed.  But that doesn’t matter.  It’s hard to imagine anyone making an argument that Goldman didn’t have an obligation to disclose this information–and the fact that they failed to disclose seems to indicate that Goldman, at least, thought that the information would adversely impact the sale price.

I suspect this case will get a lot of public traction.  At this point, what galls people is not so much the stupid behavior that led to the bailouts, but the blatant self-dealing that seems to have gone on.  Unfortnately, much of that self-dealing is not actually illegal . . . so when we find an example that is legally actionable, the public and the court system are bound to jump on it with both feet.

Here’s one potential way to take advantage of the panic towards Goldman Sachs shares right now, if you think it is overdone and in the end Goldman will survive for the most part. Goldman Sachs January 2011 $130 put options have spiked to about $10. This means that if you were to sell them, you’d collect $10 of premium.

If Goldman falls below $130 during the next year, you’ll be forced to own the shares, but your cost will be about $120. Thus this would be a bet that Goldman shares remain a good deal at $120, even despite the recent allegations. If Goldman doesn’t break $130, you walk away with $10 of premium income, which comes to 8.33% of premium vs. the $120 you have exposed (value at risk) in the trade.

There might be other options dates that work better, such as more near-term ones which will be more aggressive, but as shown in the chart below, Goldman hasn’t been down to $120 in quite awhile. Most likely it won’t get back there, and if it does, it will only be temporary. Don’t forget, Warren Buffett’s Goldman warrants had conversion rights at $115, so he seemed relatively confident that the shares could go much higher than this, which they did, and as they will probably remain in the long-term.

Note: The author does personally not own Goldman shares, nor Goldman options, but investors he speaks with may. Far more work needs to be done here, this is just a lead, not an investment recommendation. All details here should be checked for accuracy and everyone must do their own due diligence.

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While you’re planning your weekend, I want you to consider skipping the ballgame/movie/park. Instead: strap on a helmet, sit on an airbag, and deploy it as your friends watch and laugh. Faceplant? No, no. That’s a neckplant you’re watching. More »

Musical alum Neil Patrick Harris is headed to the halls of McKinley High to chop it up with the singing stars of FOX’s high school hit, Glee.

On Friday, FOX unveiled a pair of images of the How I Met Your Mother star’s highly-anticipated guest appearance on the the award-winning series. NPH has been cast as Bryan Ryan, a former rival of Matthew Morrison’s Will Schuester.

Mark your calendars: Neil makes his Glee debut on an episode titled “Dream On” on May 18.

The Hollywood sign is in danger: The surrounding land is up for sale, and luxury homes may invade it soon. A non-profit trust is trying to stop this, but someone has another idea: Turn it into a hotel. More »

Bit.ly is healthy and growing, says John Borthwick of Betaworks, which created and then spun off the URL shortener, even despite the fact that it’s no longer the default shortener used by Twitter. The messaging service broke off its formerly close relationship with Bit.ly in December, and CEO Evan Williams told developers at the Chirp conference in San Francisco this week that it will be developing its own URL shortener. As Twitter has been moving in on features and services developed by outside companies — either by developing its own or by buying them, as it did with iPhone app Tweetie — concern has been growing about the fate of so-called “hole fillers” in the Twitter ecosystem, and Bit.ly’s name has routinely been mentioned as one of the doomed.

Borthwick, however, who co-founded Betaworks and has invested in and/or founded Twitter tools such as Summize (which was acquired by Twitter) and Tweetdeck, says in a blog post that Bit.ly “is growing and continues to scale” despite the fact that Twitter “pretty much stopped using bit.ly to shorten URLs on Twitter.com in December.” He says that Twitter.com now represents less than 1 percent of Bit.ly links that are shortened, compared with between 3 and 8 percent before the “transition” was made in December. Borthwick says that the relationship with Twitter worked well “during a period of hyper growth” but that both sides have effectively moved on. His blog post has the feel of someone writing a note to an ex-girlfriend after they have decided to break up and see other people:

We thank Twitter, everyone there, for the kick start it gave bit.ly. And we certainly hope we helped Twitter during a difficult scaling period.

Some have suggested that Bit.ly has been “screwed” by Twitter, but Borthwick describes this as “noise.” If the traffic numbers provided are accurate (and there’s no reason to believe they aren’t), it seems that Bit.ly has been able to leverage its close relationship with Twitter, and has sufficient scale and reach now that it’s no longer dependent on the social network for its business. Borthwick also says that the company’s Bit.ly Pro service, which recently launched a $995-a-month enterprise version, is growing rapidly.

Borthwick, who holds shares in Twitter as a result of the company’s acquisition of Summize, also talks about the somewhat tense relationship between Twitter and its ecosystem, saying:

Talk about holes and filling holes in platforms is misleading at best… Innovation — building great companies — is about finding, filling and even creating holes. But entrepreneurs shouldn’t — and most don’t — focus on filling holes in other people’s platforms — they should think about how to build great things — things that in 2010 may be bootstrapped on platforms but great products, products that people love, products that move people to organize their world differently, or to see the world differently.

When Twitter and Bit.ly created the relationship in early 2009, Borthwick writes that Bit.ly “knew this would be a short-term agreement — it was done to help Twitter scale and without a doubt it helped bit.ly scale.” However, the Betaworks partner says that when Twitter decided to stop using Bit.ly “the change was barely noticeable.” Twitter’s web site now accounts for less than half a percent of the Bit.ly links that are created or clicked on in a day, he says, and there are “other social platforms that are now larger than Twitter.com,” although he doesn’t name them (likely Facebook is a major contributor).

Borthwick says that last month there were 3.4 billion clicks on Bit.ly links, compared with 2.7 billion in February and 2.5 billion in January — and notes that on Wednesday the company passed a new milestone, that of 150 million Bit.ly links clicked in a single day. The company has also had 7,000 companies sign up for its Bit.ly Pro service, effectively a white-label product that allows web sites and other services to create their own URL shorteners. Publications that use the service include the New York Times, the Huffington Post, Foursquare, Pepsi and NPR.

Related content from GigaOM Pro (sub req’d): As Twitter Develops, Developers Quiver in Fear

Post and thumbnail photos courtesy of Flickr user Nathan Gibbs