Monday, August 31, 2009

All Together Now! (A look at new millennial globalization at work...)

DDB London created a spot for Budweiser to air on Irish TV. (An interesting enough proposition, if you think about it!)

Pix showcase the vibrant American city of Chicago as seen from the El train.

Music is a very fun remake of a Beatles classic done by The Hours.

Add it all together and what do we have? A British ad agency selling an American brew to an Irish audience using images of Chicago....

Check it out...

The Guardian story details the complexity of the shoot (50 hours of production during a freezing November week in Chicago! Coordinating the speed of the El train with the lyrics of the tune and the movements of multiple actors! And provides you a link to the spot.)

What I love most - the glimpse it gives of a city I love....



Friday, August 28, 2009

Peeking into "...the Pursuit of Happiness"

I absolutely love Maira Kalman's work, the latest of which you can find here.

A rich stew bubbles in the American melting pot, even today.

Thursday, August 27, 2009

Financial innovation - with a dash of celebrity to spice things up!

We open today by paraphrasing The Terminator's Sarah Connor:

"Come on. Do I look like the mother governor of the future? I mean, am I tough, organized? I can't even balance my checkbook!"

Arnold Schwarzenegger, governor of the beleaguered state of California, is tough, no question about that - he's the Terminator, for Christ's sake - but he is certainly having enormous and well-publicized problems balancing the checkbook of the state he runs.

What's a governor like Arnold going to do? Apparently he's borrowing an innovative financial tactic from another Sarah in his life - Sarah Palin - he's selling things on eBay.

(Of course there was no end of controversy about Palin's claims to have sold the state's plane on eBay, but that's another story for another time...)

According to Money Central on msn.com, the Governor is autographing automobiles to sell on eBay, in an attempt to close the deficit gap. Used cars. (Maybe he got a deal on all the clunkers now clogging the lots.)

eBay - the future of financing in government! That's innovation we can bank on, for sure!

Here's to hoping that Arnold has more luck selling used cars and office furniture with eBay than Sarah had with her plane.

For more, see below...

California unloads on eBay
Posted on MSN's MoneyCentral on Aug 26 2009, 12:44 PM by Kim Peterson

How bad are times for California? So bad that Gov. Arnold Schwarzenegger is now autographing used cars to sell online.

Oh yes, it has come to this. The state, in desperate need of cash, is cleaning out its storage and putting items up for sale on eBay (EBAY), Craigslist and other places, The Los Angeles Times reports. And with a signature from the Governator, maybe those things will bring in a little more cash.

A 2002 gold Ford Focus with some 108,000 miles on it, for example, had Schwarzenegger's autograph on the visor and was going for $2,125 on eBay. The state will hold a two-day auction for other items starting Friday in Sacramento.

There are other deals to be had, the Times reports. Some are unclaimed items, or stuff that has been confiscated by law enforcement. A 10-carat gold ring. Earrings. On Craigslist, seven wood coat racks going for $5 each.

You can read more about the "Great California Garage Sale" by clicking on the state's site here. And the items on eBay are listed right here.

I might be persuaded to buy this $30 office desk if Schwarzenegger personally carried it into my house and repainted it. And the way things are going, he just might agree to do to that.

Wednesday, August 26, 2009

"The dream shall never die..."

But the liberal lion died, proving once again that Ted Kennedy was mortal like the rest of us.

He lived an eventful life, full of grief and error and tragedy and love. He was the youngest of nine in a large, wealthy family, a pampered baby who grew up to be a very spoiled, undisciplined young man who achieved the near impossible task of getting kicked out of Harvard for cheating.

He was blessed with a father who worked tirelessly to acquire power for his sons. As a young man, Ted Kennedy did his best to destroy his career, but he was lucky enough to be able to eventually get his career on track, becoming one of the most influential senators in America.

His life was full of cancer as well. Cancer struck down the lion, but not after he worked tirelessly to help two of his children overcome cancer as well.

My most enduring memory of Ted Kennedy is from ten years ago. The body of his nephew, John Kennedy, Jr., had been found and a boat was waiting to take the Senator out to sea, where JFK, Jr.'s small aircraft had been located. My memory is from a video, taken from a plane hovering over the boat. The senator was rushing to get on the boat, rushing to the discovery of yet another dead Kennedy.

As the survivor, he'd assumed the responsibility for all those many Kennedy deaths and it was a responsibility he did not shirk. When JFK, Jr.'s remains were found, Ted Kennedy raced off to claim them.

If you've never experienced grief, you cannot understand how it undermines you. You cannot imagine how it wrecks rational thought, destroys stability. Kennedy lived in a minefield of death. A brother and a sister who died in plane crashes. Two brothers, assassinated. A nephew, dead of a drug overdose. Two nephews, dead as a result of accidents.

An endless list of personal tragedy that received full coverage from the media. A terrible burden for even the strongest man.

Of course, Kennedy is famous for running away from death as well. He carried the ghost of Mary Jo Kopechne with him until he died. He characterized his behavior at Chappaquiddick that night as "indefensible."

And it was.

But in the end, he faced the demons that could have destroyed him and soldiered on, a relentless advocate for the "common man." In the days of Reagan, when government was the source of all our ills, Ted Kennedy advocated for health care reform, an act that seemed insane at the time.

In his brilliant speech at the 1980 Democratic National Convention, he defined what American liberalism was, in the age of Reagan. It is fitting to end this tribute to the liberal lion with his own words from that iconographic speech. Here are some select quotes:

"My fellow Democrats and my fellow Americans, I have come here tonight not to argue as a candidate but to affirm a cause.

I am asking you to renew the commitment of the Democratic Party to economic justice.

I am asking you to renew our commitment to a fair and lasting prosperity that can put America back to work...."

A little later, he defines the number one priority of our economic policy:

"Let us pledge that we will never misuse unemployment, high interest rates, and human misery as false weapons against inflation.

Let us pledge that employment will be the first priority of our economic policy.

Let us pledge that there will be security for all those who are now at work, and let us pledge that there will be jobs for all who are out of work; and we will not compromise on the issues of jobs.

These are not simplistic pledges. Simply put, they are the heart of our tradition, and they have been the soul of our Party across the generations. It is the glory and the greatness of our tradition to speak for those who have no voice, to remember those who are forgotten, to respond to the frustrations and fulfill the aspirations of all Americans seeking a better life in a better land.

We dare not forsake that tradition...."

He makes note of what we can learn from FDR:

"We must not permit the Republicans to seize and run on the slogans of prosperity. We heard the orators at their convention all trying to talk like Democrats. They proved that even Republican nominees can quote Franklin Roosevelt to their own purpose.

The Grand Old Party thinks it has found a great new trick, but 40 years ago an earlier generation of Republicans attempted the same trick. And Franklin Roosevelt himself replied,

'Most Republican leaders have bitterly fought and blocked the forward surge of average men and women in their pursuit of happiness. Let us not be deluded that overnight those leaders have suddenly become the friends of average men and women.'"

He discusses the task of leadership...

"It is surely correct that we cannot solve problems by throwing money at them, but it is also correct that we dare not throw out our national problems onto a scrap heap of inattention and indifference.

The poor may be out of political fashion, but they are not without human needs. The middle class may be angry, but they have not lost the dream that all Americans can advance together.

The demand of our people in 1980 is not for smaller government or bigger government but for better government. Some say that government is always bad and that spending for basic social programs is the root of our economic evils. But we reply: The present inflation and recession cost our economy 200 billion dollars a year. We reply: Inflation and unemployment are the biggest spenders of all.

The task of leadership in 1980 is not to parade scapegoats or to seek refuge in reaction, but to match our power to the possibilities of progress."

On the future of our economy...

"So this year let us offer new hope, new hope to an America uncertain about the present, but unsurpassed in its potential for the future.

To all those who are idle in the cities and industries of America let us provide new hope for the dignity of useful work. Democrats have always believed that a basic civil right of all Americans is that their right to earn their own way. The party of the people must always be the party of full employment.

To all those who doubt the future of our economy, let us provide new hope for the reindustrialization of America. And let our vision reach beyond the next election or the next year to a new generation of prosperity. If we could rebuild Germany and Japan after World War II, then surely we can reindustrialize our own nation and revive our inner cities in the 1980's."

On Reagan's tax cuts...

"The tax cut of our Republican opponents takes the name of tax reform in vain. It is a wonderfully Republican idea that would redistribute income in the wrong direction.

It's good news for any of you with incomes over 200,000 dollars a year. For the few of you, it offers a pot of gold worth 14,000 dollars. But the Republican tax cut is bad news for the middle income families. For the many of you, they plan a pittance of 200 dollars a year, and that is not what the Democratic Party means when we say tax reform.

The vast majority of Americans cannot afford this panacea from a Republican nominee who has denounced the progressive income tax as the invention of Karl Marx. I am afraid he has confused Karl Marx with Theodore Roosevelt ­­ that obscure Republican president who sought and fought for a tax system based on ability to pay. Theodore Roosevelt was not Karl Marx, and the Republican tax scheme is not tax reform."

His views on health care reform...

"Finally, we cannot have a fair prosperity in isolation from a fair society. So I will continue to stand for a national health insurance. We must not surrender ­­ We must not surrender to the relentless medical inflation that can bankrupt almost anyone and that may soon break the budgets of government at every level. Let us insist on real controls over what doctors and hospitals can charge, and let us resolve that the state of a family's health shall never depend on the size of a family's wealth."

In 1980, when Ted Kennedy spoke those words, he appeared Quixotic, a man tilting at windmills while riding directly into very powerful head winds. He had become a man completely removed from the political fashion of the time.

Nearly 30 years later, it is astonishing to see how prescient Kennedy was....

"I have seen too many, far too many working families desperate to protect the value of their wages from the ravages of inflation.

Yet I have also sensed a yearning for a new hope among the people in every state where I have been.

And I have felt it in their handshakes, I saw it in their faces, and I shall never forget the mothers who carried children to our rallies.

I shall always remember the elderly who have lived in an America of high purpose and who believe that it can all happen again.

Tonight, in their name, I have come here to speak for them. And for their sake, I ask you to stand with them. On their behalf I ask you to restate and reaffirm the timeless truth of our Party."

We still hope for a fair shake, a decent job and a future we can believe in. And on this day, when we acknowledge the loss of Ted Kennedy, it seems as good a time as ever to restate and reaffirm the timeless truth Kennedy spoke of in 1980...

"For all those whose cares have been our concern, the work goes on, the cause endures, the hope still lives, and the dream shall never die."

Tuesday, August 25, 2009

Links with a focus on health care reform...

Some interesting links on a widely discussed topic...

Whole Foods CEO John Mackey's controversial WSJ Op-ed piece

(Confess that I started laughing when I read the Maggie Thatcher quote he opens with...

"The problem with socialism is that eventually you run out
of other people’s money.”

Same could be said of bankers and their utilization of OPM.)


BusinessWeek story on the uproar caused by Mackey's op-ed (Story ends by noting that shares of Whole Foods had risen 27 cents.)

A primary care physician talks about the pressures he faces on the job, which include a diminishing salary and the ongoing need to educate patients about why an expensive test is not immediately needed....

Story in the LA Times on how the insurance companies have gained the upper hand in the reform.

"'It's a bonanza,'" said Robert Laszewski, a health insurance executive for 20 years who now tracks reform legislation as president of the consulting firm Health Policy and Strategy Associates Inc."

ABC's This Week's discussion on health care reform, with George Will, Robert Reich, Paul Krugman, Mike Frumm and George Stephanapoulos. (Watch this through to the end and you'll see Paul Krugman bring good old Christian terminology ["today's economy is purgatory"] into the economic debate.)

Simon Johnson and James Kwak write about the hypocrisy inherent in opposing the public option while supporting Medicare.

Monday, August 24, 2009

An end of life discussion...

So this was how it was supposed to happen - my father would not feel pain; he would not feel agony; the end would come swiftly and relatively easily, probably around Thanksgiving.

That's what we were told by the doctors the summer after I graduated from college. My father had kidney cancer - and had been born with just one kidney, which had complicated the treatment. When remission ended and the cancer returned, my father made the decision not to pursue aggressive treatment to prolong his life. He'd watched his beloved wife die of cancer ten years earlier and saw no point in extending the agony that comes with dying of such a disease.

I was the oldest of three girls. My father was a widower. My two younger sisters went off to college a week after that initial "end of life discussion" and my father and I were left alone to contemplate the end of his life.

For some months, it was as the doctors had told us. Not too much pain or discomfort. A growing weakness. A need for periodic blood transfusions for a reason I can no longer remember.

Thanksgiving came and went. We celebrated with extended family. It was a hopeful time - we gave thanks and hoped we'd celebrate yet again with my father the next year. Hope dies last, when dealing with end of life issues. At least for me.

And then the pain came. His kidney - what was left of it - began to fail. His body retained fluids. His legs began to swell and itch horribly. He could not sleep. He could not rest. He would vomit before he could reach a toilet. He felt his illness was a horrible burden for me. I felt horrible only because there was nothing I could do to alleviate his suffering.

As time passed, we had additional "end of life discussions" with our doctor. And the predictions of a pain-free demise shifted when the pain came. We started talking about pain relief and true end of life issues.

Once, near the end, I showed up at the hospital and discovered my father was no longer himself. He had become shrouded in a cancer-fueled haze of pain. I left the room, sobbing with grief. The doctor told me that I should just turn around and leave - to curtail the visit - so that I would not think things I would regret later.

I did not curtail the visit. And as I sat next to the dying man, I thought all those things the doctor thought I might regret. I hoped for my father's death that night. I fervently, with all my heart, wanted the end of his suffering, which meant his death.

And I do not regret that at all. I've never regretted those thoughts. Ever. There comes a point when wishing life on a terminal patient is one of the worst tortures you could wish for.

End of life counseling is nothing I'd wish on anyone - but it's something that most of us will experience at some point in our lives - either because of our own health issues or the health condition of someone we love. I was young when I had my first "end of life" chat with a medical practitioner. And in my experience, it was not just one discussion. It was an ongoing dialogue that evolved as my father's disease evolved. And only nine months passed between the first end of life conversation and the end of my father's life.

With all this attention focused on health care reform, I find myself agreeing with Charles Krauthammer that perhaps now is a time for a reasonable discussion on end-of-life issues.

But does Congress really need to establish mandated guidelines for this? Apparently yes, as outlined in section 1233 of HR 3200. Is this truly a reasonable way to frame these discussions? Having Congress define the terms?

No, plain and simple. End of life issues are horribly personal and should take place between patient, family and physician. Congress should not be involved in any way at all.

For Congress to set up a five-year plan for end of life chats between doctor and patient is to suggest that physicians don't have these end of life counseling sessions right now, because it's not mandated by Congress. Because there is no box to check on the insurance form. Because physicians won't engage in such discussions unless Congress requires them to do it.

Adding a little "end of life counseling" box to the insurance invoicing form is not reform of any kind. It is an admission that there is no health care in America unless it's first defined as a billable expense. And that there's nothing done by physicians unless it falls within the regulations defined in the hefty health care reform bill that perhaps someday will be passed.

And that is nothing but a prescription for disaster.

When "understanding" goes awry....

According to the WSJ, BoA attorneys today filed statements in court that made clear their perspective on the $3.6 billion in Merrill Lynch bonuses that were paid out just one day before it was absorbed by BoA:

"Bank of America Corp. said Monday it did not mislead shareholders about its approval of billions in Merrill Lynch & Co. bonuses before a merger of the two firms, noting that it was "widely understood" that Merrill would award year-end compensation and the bank never told investors it had prohibited such payments.

Bank of America said Merrill disclosed its intention to pay bonuses in separate federal filings throughout 2008.

The new statements were made in a filing to federal Judge Jed Rakoff, who has refused to sign off on a $33 million settlement of a Securities and Exchange Commission civil lawsuit targeting the bank for what it disclosed about the bonuses before a December shareholder vote. The SEC said proxy documents sent to investors in November 2008 show Merrill wouldn't pay year-end bonuses without Bank of America's consent, while a separate document never distributed to shareholders shows Bank of America approving up to $5.8 billion.

Merrill's compensation committee approved $3.6 billion in bonuses three days after shareholders blessed the deal, and Merrill employees received their payouts one day before the merger closed. The bonuses sparked outrage on Main Street in light of Merrill's $27.6 billion in losses for all of 2008 and the $45 billion in government aid awarded to Bank of America...."

Let's reminisce about those days once again... execs at a company that lost $27.6 billion in 2008 and received $45 billion in government aid were the recipients of billions in bonuses that were not disclosed to shareholders before they signed off on the merger.

What's not to understand?

It is always interesting when a "widely understood" matter becomes the source of significant controversy. Seems like the desire of BoA to think the bonus scheme was "widely understood" does not necessarily make it so.

In January 2009, the bonuses were not at all understood by NY Attorney General Andrew Cuomo, who decided to investigate the payments.

Earlier this month, the SEC did not see eye-to-eye with BoA on this matter, charging that the bank had mislead shareholders about the bonuses. Rather than fight the SEC on this matter, BoA has agreed to pay $33 million to settle the matter, without admitting or denying fault - an expensive way to deal with a "widely understood" matter that few outside of Wall Street really understood.

But we'll see what Judge Rakoff has to say on this - according to this NY Times story, the judge is thirsty for more details on the deal:

"Nearly a year after its deal to purchase Merrill Lynch, Bank of America is still on the defensive.

In a court filing on Monday, Bank of America said it had acted properly when it did not disclose details about Merrill’s bonuses in advance of a shareholder vote on the merger. And, the bank said it believed its view would prevail in court if the matter were put to test, The New York Times’s Louise Story reported.

A United States District Court judge in New York, Jed S. Rakoff, demanded two weeks ago that the bank and the Securities and Exchange Commission provide a better explanation of its settlement over the bank’s failure to disclose the bonuses. The S.E.C. is also expected to file a memorandum on Monday.

Judge Rakoff said the bank’s $33 million settlement with the commission seemed “strangely askew,” and he questioned the S.E.C.’s decision to charge the bank at the corporate level rather than individual executives.

The judge requested that Bank of America supply the names of people who decided last year to not disclose the bonuses. He said he wanted to know the “who, what, where” behind the creation of the bank’s proxy statement, the document provided to shareholders before they voted on the merger.

“I cannot ignore issues of responsibility,” Judge Rakoff said at the hearing on Aug. 10. “Was there some sort of ghost that performed those actions?”
The bank did not detail which of its directors or executives were involved in the proxy disclosure decisions. It did, however, name the law firm that represented it during the merger proxy, Wachtell, Lipton, Rosen & Katz. nd the bank said that Merrill Lynch’s firm was Shearman & Sterling. The bank also listed the names of the directors on Merrill’s compensation committee and pointed out that the S.E.C. did not claim that the bank acted with intention or in a reckless manner.

Merrill’s $3.6 billion in bonuses have been scrutinized in Congressional hearings this summer as well as in documents released by the New York attorney general. And Judge Rakoff said in his hearing that the bonuses seem to have been essentially paid using taxpayer money, since Bank of America had received $45 billion in bailout funds.

The bank said it was important to focus on the issue of disclosure of the bonuses, rather than their size.

“This case is not about the decision by Merrill Lynch’s board to award the incentive compensation that it did,” the bank’s lawyer, Lewis J. Liman, wrote. “Bank of America recognizes that decision has been the subject of controversy.”

Bank of America spent most of its memo on the defenses it would make in court. The bank said there was no false or misleading information in the proxy. And the bank accused the S.E.C. of seizing on “a single sentence fragment” for the accusations.

Furthermore, the bank pointed to Merrill’s financial statements, which showed last fall that money was still set aside for compensation at similar levels to the previous year, even after the merger was announced. The bank also said shareholders would have known of the bonuses because several media outlets wrote about them in general terms in advance of their payment.

Two legal experts wrote affidavits to accompany the bank’s filing, and both said the bank acted appropriately in its disclosure. One, Morton A. Pierce, the chairman of Dewey & LeBoeuf’s mergers and acquisitions group, was paid for his memo. The other, Joseph A. Grundfest of Stanford Law School, wrote his memo on a pro bono basis because he was concerned the S.E.C. would have a hard time settling future issues if Judge Rakoff does not approve its deal with Bank of America.

The S.E.C. is expected to file its memo to the judge by the end of the day. Then both parties will have two weeks to respond to each other’s filings. If Judge Rakoff does not approve the $33 million settlement, then the S.E.C. will probably drop the case, renegotiate the settlement amount or take it to court."

Here's a link to the 35 page brief, if you're so inclined: BoA filing PDF

The Atlantic has a story that defines the BoA defense of the bonuses as "bizarre."

Sunday, August 23, 2009

Coke, Cash, Clunkers... Daily Show takes it all on...

You'll be humming a little Eric Clapton after watching this Daily Show clip...

The Daily Show With Jon StewartMon - Thurs 11p / 10c
Good News/Bad News - America's Recession
www.thedailyshow.com
Daily Show
Full Episodes
Political HumorHealthcare Protests



As Clapton says...

"If you got bad news
and you want to kick the blues
Cocaine..."

The answer to kicking the recession blues is right there in your pocket, apparently!

Saturday, August 22, 2009

On Health Care... and its reform

Death panels.

Rationing.

Morality.

This is what we talk about when we talk about health care reform. The conversation seems to have veered in a direction that takes us further away from reform and closer to chaos.

The simple truth is that the health care system we have today is unsustainable. We cannot continue to afford steep increases in the cost of health care.

If we focus our efforts on adding more people to a broken system, health care will bring us all to bankruptcy sooner, rather than later.

As one who is self-insured, I've got a huge stake in the health care debate surging across the country right now. To me, the issue is not really an issue of morality, nor should it be reduced to a conversation about providing health care to the uninsured.

It's about fixing a broken system that touches each and everyone of us at different points in our lives.

Birth requires health care. For most of us, dying takes us into the health care system as well. And at numerous points along the way, we visit doctors, receive vaccines, acquire broken bones that need mending, fill prescriptions for antibiotics and other medications.

All of us require health care.

(Which makes me wonder why a for-profit insurance program would be used to pay for something like health care. Insurance traditionally is used to protect against unlikely disasters - but health care is used by everyone throughout our lives.)

And today in America, the cost of health care has been rising significantly faster than the cost of living. The for-profit, employer-provided insurance programs we have to pay for health care no longer work efficiently and cost-effectively.

Millions of Americans fall outside of the protection of a large employer, and thus, insurance is difficult to obtain for all but the healthiest people.

We can stick our head in the sand, and ignore the issue.

Or we can make inflammatory claims in the hopes of hijacking reform away from any workable solution.

Or we can engage in a rational discussion on how to fix the system.

Rationality seems far removed from the debate I see today. Which makes me think that true reform is even further removed from reality.

Tuesday, August 11, 2009

On Compensation After the Demise of the Gilded Age....

This story about the hurdles catching the heels of anyone interested in reining in Wall Street pay had me thinking about compensation.

According to that story in yesterday's NY Times, Wall Street has not long endured life without the reward of the "guaranteed bonus." (In fact, I doubt it's endured even a second without such a perk.)

Though unemployment has grown exponentially in the last year, though the recovery is looking to be a "jobless" one for those outside of Wall Street, the investment bankers who've been propped up and well-fed at the trough of TARP are planning a lot of "ironclad, multimillion-dollar payouts – guaranteed no matter how an employee performs."

Guaranteed no matter how the economy performs.

And, as we saw last winter, guaranteed by the feds no matter how the company performs.

And when I was thinking about compensation, I starting thinking about something a very wise man said not too long ago about Wall Street compensation:

"...We should apply basic standards to how we compensate people in our industry. The percentage of the discretionary bonus awarded in equity should increase significantly as an employee’s total compensation increases. An individual’s performance should be evaluated over time so as to avoid excessive risk-taking. To ensure this, all equity awards need to be subject to future delivery and/or deferred exercise. Senior executive officers should be required to retain most of the equity they receive at least until they retire, while equity delivery schedules should continue to apply after the individual has left the firm."

Can you guess who dropped these pearls about applying "basic standards" to how Wall Street compensates people in the biz?

Lloyd Blankfein, CEO of Goldman Sachs, in an op-ed piece that appeared in the Financial Times last February.

I have to say that I like developing Wall Street compensation models that take into consideration an employee's performance over time - I like the idea of the "deferred exercise" of a bonus. The idea of the "guaranteed bonus" seems to go against the grain of what Blankfein recommended last winter.

So in light of Blankfein's views on applying "basic standards" to compensation, the fact that Goldman is on track for passing out record bonuses this year, the year of the bailout, is a plot twist I did not expect this narrative to take. The Wall Street Journal describes the current backdrop against which these bonuses are displayed:

"The resurgence [of Goldman Sachs] has been the topic of much banter. It comes at a sensitive time as lawmakers scrutinize Wall Street pay packages in the wake of the financial crisis. The bonuses for bankers and traders are blamed for encouraging the kind of risk taking that led to the financial crisis. As a result, the government was forced to pony up billions of dollars in aid for the country's financial firms, including Goldman."

Of course, salaries are traditionally negotiated within the privacy of the company that is paying the salaries. It is an expense for the company, a hefty one at that.

But when compensation takes place at companies receiving "two or more federal bailouts," the public has been inserted into the process. Like most people, I wish the public had not been inserted into the business of finance - I wish the financiers had managed their businesses significantly better in the last decade so that the federal government wouldn't have felt compelled to rescue the sector last fall.

But what's done is done - the financial sector (and Goldman Sachs) received any number of different bailout options - the direct TARP loan, the indirect AIG payment, the loan guarantees and the warrants and TALF, that "lifeline to the asset-backed securities market, in which consumer loans, commercial-real-estate loans and other debt are bundled into securities and sold to investors" (as defined by the WSJ.)

Thus, we care far more about these bonuses this year than at any other time. So are these Goldman bonuses going to conform to the ideas Blankfein recommended last winter?

Doesn't really seem like it. Seems like Goldman's bonuses are to be paid out as swiftly as Paulson was able to shovel TARP funds out the door last fall. (A "land-speed record," he called it.)

For a company so recently the recipient of one of the most massive federal welfare programs in decades to award such bonuses to its employees - in a time of high unemployment and continuing economic uncertainty, there's nothing long-term about handing out such rewards. They're getting bonuses based on their ability to maximize profit last quarter, which they did by continuing to risk big in an environment that is now openly propped up and supported by the feds.

Last February, it appeared Lloyd Blankfein was passing on wisdom he'd learned from the crash - the idea that how Wall Street compensates employees could be improved.

In April, 2009, he made further refinements to his ideas in a speech he gave to the Council of Institutional Investors' spring meeting:

"Compensation should encourage real teamwork and discourage selfish behavior, including excessive risk taking, which hurts the longer-term interests of the firm and its shareholders.

We also believe it is important to set forth specific guidelines on how we compensate in our industry.

– Compensation should include an annual salary plus deferred compensation, which is appropriately discretionary because it is based on performance over the entire year.

– The percentage of compensation awarded in equity should increase significantly as an employee's total compensation increases.

– For senior people, most of the compensation should be in deferred equity. Only the firm's junior people should receive the majority of their compensation in cash.

– As I mentioned earlier, an individual's performance should be evaluated over time so as to avoid excessive risk taking and allow for a "clawback" effect. To ensure this, all equity awards should be subject to future delivery and/or deferred exercise over at least a three-year period.

– And, senior executive officers should be required to retain the bulk of the equity they receive until they retire. In addition, equity delivery schedules should continue to apply after the individual has left the firm.

At Goldman Sachs we believe attracting and retaining the best people is vital to our effectiveness and that incentives are an important element in that process. But we also recognize that, misapplied, they can also encourage excess. As an industry, we need to do a better job of understanding when incentives begin to work against the social good rather than for it and take action to redress the balance."

In July, Goldman Sachs notified the nation that they've set aside more than $11 billion for bonuses this year.

Lloyd Blankfein talks a good talk. Clearly, he knows that misapplied incentives can encourage excessive risk taking that can topple the economy.

But when it's all said and done, his actions show he favors rewarding risk far more than acting on behalf of "the social good." Because paying out billions in bonuses as a reward for the profits made during one quarter by a firm that has been the beneficiary of some of the most extraordinary corporate welfare programs in American history is simply a continuation of the risky business as usual that destroyed our economy.

And even Lloyd Blankfein at one point saw the error of continuing down that road.... but not today. Goldman's gilded age continues, even as the country continues its rot.

Monday, August 10, 2009

The Unbearable Visibility of the Poor...

When the homeless become the subject of an article in the WSJ, poverty is an issue that is getting greater attention these days.

"Cities tolerate homeless camps," is the headline of the WSJ story, and it offers a glimpse into life at tent cities in Nashville, Tampa, Sacramento and other urban areas:

"Last summer, police [in Nashville] responding to complaints about campfires under a highway overpass found dozens of homeless people living on public land along the Cumberland River.

Eviction notices went up -- and then were suspended by Nashville Mayor Karl Dean, a Democrat, who said housing for the homeless should be found first.

A year later, little has been found -- and Nashville, with help from local nonprofits, is now servicing a tent city, arranging for portable toilets, trash pickup, a mobile medical van and visits from social workers. Volunteers bring in firewood for the camp's 60 or so dwellers."

According to the story, vagrancy is developing an aura of permanence in today's America, thus the need for these homeless camps:

"A church in Lacey, Wash., near the state capital of Olympia, recently started a homeless camp in its parking lot after the city changed local ordinances to permit it. The City Council in Ventura, Calif., last month revised its laws to permit sleeping in cars overnight in some areas. City Manager Rick Cole said most of the car campers are temporarily unemployed, "and in this economy, temporary can go on a long time."

Clearly, people have lost more than their credit rating as a result of the mortgage crisis.

And not every city is as nice as Nashville.

Over in the NY Times, Barbara Ehrenreich, author of Nickel and Dimed and other non-fiction books, asks the question: is it now a crime to be poor?

Ehrenreich points to a new study that lists cities like Los Angeles and San Francisco that have initiated bans on begging, food sharing and other "crimes" linked with poverty:

"The viciousness of the official animus toward the indigent can be breathtaking. A few years ago, a group called Food Not Bombs started handing out free vegan food to hungry people in public parks around the nation. A number of cities, led by Las Vegas, passed ordinances forbidding the sharing of food with the indigent in public places, and several members of the group were arrested. A federal judge just overturned the anti-sharing law in Orlando, Fla., but the city is appealing. And now Middletown, Conn., is cracking down on food sharing."

Food sharing is a crime; granting mortgages to people who cannot afford them, just a big oops that comes also with a sizable commission for the unscrupulous mortgage broker.

These are strange times in America. Strange times.

Party with your helmets on!

People appear giddy with joy that July saw the loss of only 250,000 jobs. Here's how the US News & World Report characterized the news:

"Finally, some good news for the nation's long-suffering job seekers: Employers cut just 247,000 jobs last month, the smallest payroll slice since last August, the Labor Department reported today."

(Not sure myself why finding out that nearly 250,000 people are also now looking for jobs would make the "long-suffering job seekers" so happy...)

Econbrowser's take on the report is not quite as happy, pointing to a key issue with the loss of so many jobs:

"But the problem is, if a traditional economic recovery had actually begun in June (8 weeks after the April peak in claims), the number of people with jobs should have increased in July rather than fallen by another quarter million."

Yes. To Econbrowser, the loss of hundreds of thousands of jobs is a concern, not a celebration. And here's more glumness out of Econbrowser:

"The BLS only counts you as "unemployed" if you both (1) don't have a job and (2) have taken active steps within the last 4 weeks to try to find a job. According to the household survey from which the unemployment rate is constructed, there were 155,000 Americans on net who quit or lost their jobs in July but didn't immediately look for a new job, so those people newly without jobs don't contribute positively to a higher unemployment rate. And 267,000 Americans who reported themselves to be unemployed in June still weren't working in July but had also stopped actively looking for a job, so they're no longer counted as unemployed. That last development is the reason the unemployment rate went down. But given the current environment, it's hardly appropriate to interpret the fact that many people have simply stopped looking for jobs as reflecting an improving economy. Unless we get much better employment reports in September and October than we did in August, the unemployment rate is sure to climb back up.

Rising unemployment could mean more foreclosures and bankruptcies, putting new stress on financial institutions. Calculated Risk notes that even the increases we've already seen put us above the "more adverse scenario" from the recent stress tests."

So Econbrowser's advice? If you're going to celebrate the July jobs report, do so with helmet on. We've not dodged the bullet just yet...

See below for a link to BLS report for July 2009.

BLS July 2009 jobs report


Saturday, August 8, 2009

Blago as party favor - and not the political kind..

I know the people who work at Optimus, a commercial editing house in Chicago. They're hard working people, good people. They've worked very hard to build and maintain a successful business in a tough market during a difficult economic time.

But they have horrible party planners, choosing as they did, to bring in disgraced governor Rod Blagojevich to entertain the revelers.

I liked it better back in the day when disgraced politicians slunk off to the Siberia of self-imposed isolation.

Richard Nixon comes to mind...

Maybe - just maybe - this is Blago giving us a rehearsal of his next act - Jailhouse Rock?

Here's a REAL entertainer giving us some Jailhouse Rock of his own... (FULL DISCLOSURE - I'm an Elvis fan, so comparing Blago to Elvis gets me riled up good.)



Here's the story in full...

"Blagojevich shakes, rattles, rolls as party pro

Two men known in part for their hair stepped out from the back of a white Hummer limousine Friday evening a block from the Magnificent Mile.

The towering one with the flowing locks bore a striking resemblance the male model and romance-novel coverboy Fabio.

The other, according to a voice over a loudspeaker, was "the governor of rock and roll!"

Former Illinois Gov. Rod Blagojevich made an appearance tonight at an annual street party thrown by a video production company. All told, according to people in the crowd of about 200, Blagojevich stayed at the gathering for about 20 to 30 minutes, shaking hands, joking around and having his picture taken with surprised revelers.

Then there was the song.

Reports from the audience differed as to which Elvis Presley tune the former governor performed.

"Don't Be Cruel," said one partygoer.

"Treat Me Right," said another.

According to Blagojevich's publicist, Glenn Selig, the song was, in fact, "Treat Me Nice."

Efforts began in earnest in recent weeks to find a surprising musical guest for the party, which celebrates the anniversary of the founding of Optimus, a video production company at 161 E. Grand Ave., said the company's president, Tom Duff.

Optimus' "people" called the indicted former governor's "people" and a deal was cinched. Duff confirmed that Blagojevich was getting paid for the performance, though he declined to say how much. Selig, the publicist, said "a portion" of the proceeds would be donated to Gilda's Club, an organization that provides support for cancer patients.

Duff said the stretch-SUV picked Blagojevich and his entourage up at the Grand Avenue Red Line station at about 6:45 p.m. They arrived about five minutes later and Blagojevich, after shaking a few hands and posing for several camera phones, was hustled into the studio.

At 7 p.m., attention focused on a loading dock facing out to the crowd on St. Clair Street just south of Grand Avenue. The rolling door on the dock sat in the lowered position like a curtain. Moments later the door was raised, and out came Blagojevich.

The noted Elvis admirer performed just the one song that lasted about five minutes. At some point he flipped up his collar and unbuttoned the top few buttons on shirt. He even injected Presley's kicks and hip gyrations into the performance, attendees said.

Blagojevich was practicing all through the week at home and came to Optimus in recent days to sing against a backing track, which he also used in tonight's performance, Duff said.

"He was waffling between two different songs" before settling on "Treat Me Nice," he said.

Joe Dejulius, who came to the party in a fuzzy full-body dog suit, "was like 'No way!' " when Blagojevich arrived.

"I couldn't believe it," said Dejulius, 27, of his reaction to Blagojevich's arrival. "He was great. He called me his 'hound dog' when I had my picture taken with him. See?"

Indeed, the small screen on Dejulius' digital camera showed the former governor of Illinois, teeth bared in a huge grin, sidled up beside a grown man in a brown, floppy-eared dog outfit.

As for the large blond man who arrived with Blagojevich, attendees said he stood to the side of the loading dock during the performance, just another spectator.

Asked whether it was the Italian beefcake, the ex-governor's publicist said: "No, I'm sure it was [Blagojevich's] friend who happens to look a lot like Fabio. He knows Fabio, but no, it wasn't Fabio."

--Andrew L. Wang"


Friday, August 7, 2009

Even with the Benefit of Hindsight ... Who Knew?

Hindsight, they say, is 20/20 - but who today can say they KNEW last fall that Goldman Sachs would rake in tons of money since becoming a bank holding company?

Certainly not me. I absolutely cannot brag about my prescient vision in this matter. I totally believed that when they transformed from high rolling investment bank to boring but regulated bank they'd be scaling down the risk, and thus, the scale of their profits. Here's how Goldman characterized the shift in a press release:

“'While accelerated by market sentiment, our decision to be regulated by the Federal Reserve is based on the recognition that such regulation provides its members with full prudential supervision and access to permanent liquidity and funding,' said Lloyd C. Blankfein, Chairman and CEO of Goldman Sachs."

I bought the story that regulation would provide "prudential supervision." So did the Wall Street Journal:

"With the move, Wall Street as it has long been known -- a coterie of independent brokerage firms that buy and sell securities, advise clients and are less regulated than old-fashioned banks -- will cease to exist. Wall Street's two most prestigious institutions will come under the close supervision of national bank regulators, subjecting them to new capital requirements, additional oversight, and far less profitability than they have historically enjoyed."

The NY Times was in rare agreement with the WSJ on this topic:

"The move alters one of the models of modern Wall Street, the independent investment bank, soon after the federal government unveiled the biggest market intervention since the New Deal. It heralds new regulations and supervision of previously lightly regulated investment banks, as well as an end to the outsize paychecks that helped shape the image of the chest-thumping Wall Street banker."

Bloomberg felt similarly:

"The change may lead to less risk-taking by the companies and possibly lower pay for their employees."

"Far less profitability."

"End to the outsize paychecks."

"Less risk-taking... and possibly lower pay..."


When looking at Goldman's move to bank holding company last fall, the financial analysts all seemed to sing a song of caution.

Thus, we were all surprised when Goldman's huge second quarter profits were announced recently. ABC News noted that the profits caught people off-guard, "vastly surpassing analyst predictions of a $2 billion profit."

The LA Times noted: "burnishing its reputation as Wall Street's premier banking firm, Goldman Sachs Group reported a record quarterly profit that topped expectations and underscored the speed with which the firm has rebounded from last year's financial crisis."

Apparently, analysts last fall failed to pick up on a crucial statement Blankfein made in his press release: how becoming a bank holding company would give the firm "access to permanent liquidity and funding..." - which leaves them the freedom to risk big with OPM, knowing the feds will be there to tidy things up, should their bet go bad.

With one of the most profitable quarters on record, Goldman has truly spun gold out of the bust. Becoming a bank holding company is anything but "boring" when Goldman is involved.

Thursday, August 6, 2009

Snapshot of the Nation - on Page One of the WSJ...

Front page of the Wall Street Journal today had two stories that offer a vivid picture of where we are today as a nation.

The first story, above the fold, tells the story of the fee bonanza Wall Street firms are experiencing, thanks to the work involved on the AIG breakup. The lawyers and bankers on the job "could collect nearly $1 billion for IPOs and advice..."

The second story, below the fold, talks about how the "tide" has turned for Proctor & Gamble, with the company reporting an 18 percent loss in 4th quarter profits. The loss is attributed to the fact that "sales of their premium-priced brands shrank amid tightened consumer budgets."

So in some stores, P&G has launched "Tide Basic" - a cheaper version of their popular laundry detergent "that the company freely admits isn't 'new and improved'" and lacks some of the capabilities of the full-strength product. According to the WSJ:

"It's very existence is one of the most telling signs to date of how the sour U.S. economy is forcing mass marketers to shift course."

The launch of a non-premium detergent was an agonizing decision, apparently, but one P&G felt forced to make, given the terrible market conditions out there beyond Wall Street. A product that was "never about price" suddenly had to deal with consumers who cared only for pinching pennies.

Boom and bust - going hand-in-hand in America.

Tuesday, August 4, 2009

"Good-bye to all that..."

Harry Patch died last week in England. It was the expected outcome for a man of 111.

But it is a notable death because with Harry Patch goes the last living memory of trench warfare experienced nearly a century ago during The Great War - known now as World War 1.

This story on CNN.com is a wonderful summary of Patch's life. He was a plumber before and after his stint in the trenches. He saw some of the worst warfare man has ever experienced:

"He fought and was seriously wounded in Ypres, Belgium, in 1917 at the Battle of Passchendaele, in which 70,000 of his fellow soldiers died -- including three of his close friends."

That's a placid little sentence to describe the slaughter of 70,000 men. A horror Patch refused to talk about until he turned 100 years old.

Here's a YouTube video that shows some photos and film footage from the Battle of Passchendaele:



You can hear the survivor's voice in this video shot at Passchendaele about two years ago - here, Patch expresses his opinion that "war is a calculated and condoned slaughter of human beings."



With living memory of that terrible war now extinguished completely, it is up to those of us who never experienced it to make sure we never forget the slaughter that happened nearly a century ago.

So I turn to two writers of that generation to help remember it. Robert Graves, an English writer, tried to excise the demons of trench warfare in his memoir, Good-bye to All That.

The world looked very different when the Great War began. "Those were the days," Graves noted, "in which officers had their swords sharpened by the armourer before sailing to France."

Here, he gives his reasons for signing up for the War:

"I had just finished with Charterhouse and gone up to Harlech, when England declared war on Germany. A day or two later I decided to enlist. In the first place, though the papers predicted only a very short war - over by Christmas at the outside – I hoped that it might last long enough to delay my going to Oxford in October which I dreaded."

The war was not over by Christmas. It was not over the following Christmas either. It dragged on relentlessly for four years and for four years, the brave young men of Europe were slaughtered by the millions.

In Graves' memoir, the military officials of Britain seemed akin to Rumsfield - going to war with the army they had, not the army they wanted, replete with faulty equipment:

"Gas had become a nightmare. Nobody believed in the efficacy of our respirators, though advertised as proof against any gas the enemy could send over. Pink army forms marked 'Urgent' constantly arrived from headquarters to explain how to use these contrivances: all were contradictory. First, the respirators were to be kept soaking-wet, then they were to be kept dry they they were to be worn in a satchel, then, again, the satchel was not to be used."

The war took a terrible toll:

"I realized how bad my nerves were when one day, marching through the streets of Litherland on a Battalion route-march, I saw three workmen in gas-masks beside an open man-hole, bending over a corpse which they had just hauled up from a sewer. His clothes were sodden and stinking; his face and hands, yellow. Waste chemicals from the munitions factory had got into the sewage system and gassed him when he went down to inspect. My company did not pause in its march, so I had only a glimpse of the group, but it reminded me so strongly of France that, but for the band-music, I should have fainted."

Graves was wounded in the war. However he, unlike many of his peers, lived to tell of his experience of war.

The "war to end all wars" ended before F. Scott Fitzgerald, the American muse who made his name writing about the Roaring 20s, was sent over to fight in it. But like many men of his generation, the vivid reality of the war stayed with him until he died. His thoughts on the war were incorporated into his novel, Tender is the Night. Here, years after the war, the protagonist, Dick Diver, is visiting the pastoral area that had once been the western front in France:

"This western front business couldn't be done again, not for a long time. The young men think they could do it but they couldn't. They could fight the first Marne again but not this. This took religion and years of plenty and tremendous sureties and the exact relation that existed between the classes. The Russians and the Italians weren't any good on this front. You had to have a whole solid sentimental equipment going back further than you could remember. You had to remember Christmas and postcards of the Crown Prince and his fiancee, and little cafes in Valence and beer gardens in Unterden Linden and weddings at the Mairie, and going to the Derby, and your grandfather's whiskers..."

It was a war that destroyed the world that preceded it. As FitzGerald wrote in Tender is the Night, "'All my beautiful lovely safe world blew itself up here with a great gusto of high explosive love.'

The most horrifying realization today is that we've not at all said "good-bye to all that." War and all its brutality continues its destructive path through the lives of millions on numerous fronts throughout the world. As Harry Patch's memories of war are relegated to history, new memories of the torments of modern war are made each day.




Monday, August 3, 2009

Hilarious story on the gleam that comes from tarnish...

"Tarnished Citigroup looks like it could shine again!"

That's the bold claim made by the headline writer over at the WSJ today. And why not? Cit's a group that's been pounded over the last few years. Stock prices down 50 percent this year (and compare that to the rise in Goldman and JP Morgan Chase stocks this year!)

Apparently, the folks in the know are now thrilled about Citi because "it has put concerns to rest about its viability and capital adequacy."

But there's just one catch... and it's not Catch-22.

It's a lack of profit. The article offers this bit of info, for purposes of clarity:

"A caveat: unlike most of its key rivals, Citigroup isn't profitable now and may not operate in the black next year either."

And that's what I find so funny about this story.

Who cares about profit when the stock price is a good deal and the feds have signaled their desire to prop up the bank at all costs? The tarnish that comes from performing poorly is nothing at all to consider when there's a bargain stock to be had for the portfolio.

In today's market, a company without profit is such a deal. Buy Citi! Buy now!

Using Monty Python to enhance the business of American business...

Todd Mintz has a great story in Focus, a trade publication for business execs on the business lessons we can learn today from taking a look back at Monty Python.

The men of Monty Python were brilliant satirists, but who knew their business acumen could be applied today when developing branding, marketing, sales and corporate strategies?

Some lessons include:

On branding:

"Well, before he went he left a note with the company, the effect of which was how disappointed he was with your work and, in particular, why you had changed the name from Conquistador Instant Coffee to Conquistador Instant Leprosy. Why, Frog?"

In the quest to be new and innovative, brand managers sometimes feel the need to tinker with success (think “New Coke”). Their ego gets the better of their judgment and they push forth ideas they think are creative but are unsuccessful in the marketplace. The end result is that revenue tanks. If brand is strong, don’t mess with it; just adjust the peripherals in order to increase sales and industry share.

On sales:

"Ah well, this is your free dead Indian, as advertised.
-I didn't see that in the adverts
-No, it's in the very small print, you see, sir, so as not to affect the sales."

A good way to irritate customers is to offer “disagreeable” terms and conditions that they don’t learn about until their transactions have already been completed. Sure, the customer might have “consented” and the vendor might end up collecting the additional revenue. However, this same customer will bombard customer service with angry calls, tell all of his or her friends about your company's poor policies and post hate messages on the Internet. It’s always more cost effective to generate repeat business from existing customers than acquire new customers, so companies should treat their patrons well.

On the new millennial career path:

“I didn't want to be a barber anyway. I wanted to be a lumberjack.”

Many successful people have had rough starts to their careers. They’ve switched jobs multiple times until they found their calling — and once that happened, they excelled. However, if you stick to a career path that you don’t like, you will ultimately have incredible personal and professional dissatisfaction. Do what you’re passionate about, and you should be able to figure out how to make a living from it.

Mintz lists 20 lessons in all we can learn from the Monty Python crew - for more on applying the wisdom of Monty Python to modern American business, click here.