Wednesday, December 7, 2011

A day that will live in infamy

Seventy years ago, the Japanese bombed Pearl Harbor, igniting a force that changed history.

Though it's a movie about the European theater of World War II, I think of that lovely quote near the end of Saving Private Ryan, when the mortally wounded Captain Miller leans in to Private Ryan as he whispers his last words... "Earn this."

Those are words that should inspire all of us.


Wednesday, November 16, 2011

Showers of doubt and shame

In 1998, a boy came home from school one day with wet hair. His sharp-eyed mother noticed. A conversation was had.

And Jerry Sansdusky first fell into the sightlines of the law.


You can find this described in the state of Pennsylvania's grand jury presentment about the Sandusky criminal investigation. This is the story of Victim 6.


In 1998, Sandusky was still coaching for the Penn State Nittany Lions. In 1998, Sandusky was a highly respected, very successful man who devoted a great deal of free time to The Second Mile, a charity he founded to help "at-risk" youth. 

In the case of Victim 6, there was a lengthy investigation by University Police. But the case was closed "after then-Centre County District Attorney Ray Gricar [who vanished without a trace in 2005] decided there would be no criminal charges."


However, the mother of Victim 6 decided to have a couple of conversations with Sandusky, conversations that local detectives had eavesdropped on. According to the grand jury presentment, the conversations were about the wrongness of showering naked with young boys:
"The mother of Victim 6 confronted Sandusky about showering with her son, the effect it had on her son, whether Sandusky had sexual feelings when he hugged her naked son in the shower and where Victim's 6's buttocks were when Sandusky hugged him.
 [Asking a man about the sexual feelings he has for her child while showering naked with him is not a question any mother expects to be asking a highly respected icon of the community! Just saying!]

The grand jury presentment continues....

Sunday, November 13, 2011

On the McQueariness of our Morality

When he was 28 years old, Mike McQueary walked into the Penn State locker room one evening and saw a man raping a ten year old boy.

It wasn't just any man. It was McQueary's former coach, Jerry Sandusky.

And it wasn't just any victim; it was a naked, young boy.

Now McQueary is a big man. A former Penn State quarterback. A man who had played at Penn State during Sandusky's tenure as a Penn State football coach.

So on this night, McQueary sees his old coach (who had "retired" three years earlier, a year after a janitor reported seeing Sandusky performing oral sex on a child) naked in the showers raping a child. Here's what the grand jury report says about this incident:

Saturday, October 15, 2011

Niall Ferguson: the Ann Coulter of Harvard

Niall Ferguson has a post in the Daily Beast in which he lambasts the Occupy Wall Streeters for blaming "big business" for our ills, rather than the real culprits, which (in his mind) are the Baby Boomers.

For Ferguson, a Harvard professor, it's easier to point a finger at a generation, rather than at the highly compensated Ivy League grads on Wall Street, whose fiscally unsound business practices dragged our economy into a sewer. Here's Ferguson, on the protestors:

"Yet if I were a young American today, occupying Wall St. would not be my objective. Just reflect for a minute on the unbridled economic mayhem that would ensue if the protesters actually succeeded. The headline “Goldman Sachs Under Control of Hip Teenage Revolutionaries” would be the last straw for an already fragile economic recovery."

Ferguson feels the protesters need to shift attention away from Wall Street and focus on Boomers - the source of our ills today is the Boomers' profligate spending, their upcoming age-related illnesses and their inability to die inexpensively after a long and expensive life.

Myself, I am not aware that the goal of OWS is for teens to takeover Goldman Sachs. I was under the impression they wanted Wall Street to clean up its act, not for Lloyd Blankfein to capitulate to those not old enough to drink legally.

But for a Harvard professor, it's easier to be glib and facile and point the finger a a particular generation, rather than examine the serious business flaws within our financial sector (the sector that required an astronomical bailout to "protect" the economy from failing in 2008). Generational discord is Ferguson's snappy retort to those protesting the fraud and corruption of Wall Street.

By doing so, he's become the Ann Coulter of Harvard, a media hound willing to say anything to get attention. Because, after all, it works. Which is not at all "way cool..."

Friday, September 9, 2011

In Memoriam: The Bright Sky, Obscured....

An impossibility becomes possible; it has been a decade since 9/11/01, the day that shook our world. Ten years have passed since the planes pierced the Twin Towers in Manhattan. Ten years since the Pentagon was hit. Ten years since ordinary people wrestled with mad men flying a plane over a field in Pennsylvania.

No one who was alive that day will forget it. I will never forget it. On that September day, ten years ago, the sky over Chicago was as bright a blue as the sky seen in New York. Bright, cloudless, breathtakingly blue. A sky and a day full of the beauty of autumn.

But halfway across the continent, planes like bombs flew into the towers. Red and black flames licked the white buildings. The towers collapsed and the dust swirled like thick, black smoke, choking life out of the glorious day.

And the dark cloud blotted out the bright sky. The beautiful day darkened into early night. Hatred begat a violence that was beyond the imagination of all of us. A hatred so strong it enabled men to transform planes into powerful missiles pointed at the heart and soul of our nation. A hatred so overpowering that it put ordinary citizens in the sight lines of a war we didn't know we were waging.

Monday, June 27, 2011

Hank Paulson takes on a new role...

Just what students of public policy need... lessons from Henry Paulson.

He's apparently joining the University of Chicago's Harris School of Public Policy Studies for a five-year stint as a senior distinguished fellow.

Curious as to the lessons he'll pass on to his students - the need for extreme leverage ratios (as he preached when CEO of GS) or the urgent need to bailout those institutions whose leverage ratios gutted their businesses (as he preached when US Treasury Secretary).

Does paying out $250K over 4 yrs really bring "huge" returns?

David Leonhardt has a post on the NY  Times Economix blog, talking about the "huge" returns that come from earning a college degree. (You can link to his longer piece in the Sunday Review here.)

My children are small - we're focused on the elementary school education right now. But my beloved niece is in high school - she's just turned onto that road that will determine her future. And college most definitely is in that future of hers.

But what kind of college? Her parents (my sister and brother-in-law) just attended a presentation by Northwestern University, and learned that starting next fall, a year's worth of education at NU will set you back $60,000 a year. 60,000 bucks per annum.

Sixty thousand dollars a year.

Forgive the repetition, but that figure astonishes me.

Multiply that times four and you discover that you'll be paying out nearly a quarter of a million dollars for the highly desired NU education. (I have twins and shudder to think of our tuition bills a few years from now...)

And this is in a time when the median household income is about $50K.

So is it worth it?

Sunday, June 26, 2011

How's this for a lede?! From Harvard Law School no less...

In an article called Too Big to Fail or Too Big to Change, Harvard Law School starts with a bang...
"Two and half years removed from the worst financial crisis since the Great Depression, the investing public has grown increasingly frustrated with the lack of criminal prosecutions of, and absence of truly significant fines levied against, the senior executives and companies responsible for igniting the subprime meltdown."
Good point! Jail the crooks who dragged the economy off the cliff. But that would require a system backed  by ethics and law, not greed and corruption. And that would require BIG CHANGES in America....

Sunday, June 19, 2011

The market has vanished.

An opportunity knocked. We're moving cross country to pursue it.

Which means we need to sell a house.

The first time we sold a house, many, many years ago, we sold without a broker to friends of friends. That house never went on the MLS at all. And both parties walked away very happy. Last time we sold a house, seven years ago, we sold it by owner for close to the asking price in less than three days. That was then. 

This is now. And what we've discovered - the market for homes has vanished completely. There are no buyers at all.

We are motivated sellers. We've priced our home competitively. Yet let me repeat: there are no buyers. And if you look at market metrics, for several years now, the supply of homes for sale far exceeds the number of buyers. Within any given month, there are several hundred homes for sale, and just a handful of sales.

That's grim news if you've signed the contracts and are moving cross-country in a couple of months. The one bit of green we see - the market for renters is apparently robust. And at least we're not under water with the mortgage.

But I remain absolutely stunned at the absolute absence of the housing market. 

What our financial sector did to the housing market is unconscionable. They maxed out the housing market with leverage - as is their habit - and then got bailed out when the market collapsed.

For people like me, however, those who got the 30 yr fixed mortgage we could afford - we're screwed. Totally and completely screwed by "the market." Which was totally and completely manipulated and destroyed by our financial sector. 

And there's no bailout for us.

Thursday, June 9, 2011

Stop the ego trip! Newt's team wants to get off...

Apparently Newt Gingrich's top campaign team members resigned en masse, frustrated to work with a man who'd rather vacation with his wife than hit the campaign trail.

He's alienated the House Republicans by trashing Paul Ryan's "Prosperity" plan. He's alienated those who believe the marriage contract is binding, and not something to be tossed aside (especially when the wife is in the hospital being treated for cancer.) He's alienated working class Republicans with his half million dollar loan from Tiffany's.

And now he's alienated the top tier of his campaign staff.

I myself will never understand the enormity of the Newtonian ego, nor what props it up, seeing as a reality-check would pop it faster than a pin. But what passes for reality on Main Street seems but a strange dream to those in DC. Thus Newt remains a candidate in name only, a man with no hope of winning at all.

Tuesday, June 7, 2011

The parade of penises must stop!

So not only is Anthony Weiner lumbering under an unfortunate moniker, he chose to display his very own weiner for all to ponder on Twitter, of all places. He says he won't resign over this. However, he should be fired for being one of the stupidest people in Congress these days.

Just a few weeks ago, the Terminator's revelation that he fathered a "love child" some years ago with a household employee who just retired after two decades of service to the Schwarzanegger family terminated his marriage to Maria Shriver.

And then the sperm of the head of IMF has been found on the clothing of a cleaning woman at the hotel he was visiting. She's accusing him of sexual assault. He's apparently saying she wanted it. Because all women who clean hotel rooms for a living are eager to suck the dicks of powerful men they've met just prior to scrubbing out the bathtub. Or so the theory goes.

And before all this, we had the US government spending millions to bring us the Starr Report, which, in its quest to uncover the ills of Whitewater, discovered only a semen-stained blue dress. Concurrently, there was Newt Gingrich sneaking around on wife #2 as he loudly chastised his president for the sexual indiscretions with the blue-dress wearing intern. Then there was Senator Larry Craig, the anti-gay crusader who was found tap-tap-tapping his way in a bathroom stall to get him some (male) sexual satisfaction.

And the list goes on and on.

The 24/7 tabloid news media has no shortage of sex scandals of the rich and powerful to share with the world. And that is a huge problem in America. For when we are dealing with significant crises, the men in power are pondering not the problems, but where to stick their penis.

Can't they just keep it zipped up?!

Monday, June 6, 2011

Disturbing stats from NYT's Economix blog...

A recent Economix column has a chart comparing this recession against others we've experienced. And guess what? This one's pretty bad!

Unemployment has risen to 9.1%, thanks to the tepid movement on new jobs in May. Under-employment remains high. And the numbers of those who've "dropped out of the employment market" is large as well. Here's what Economix has to say about it:
"Since the downturn began in December 2007, the economy has shed, on net, about 5 percent of its nonfarm payroll jobs. And that does not even account for the fact that the working-age population has continued to grow, meaning that if the economy were healthy we should have more jobs today than we had before the recession.....
There are now 13.9 million workers who are looking for work and cannot find it; the figure nearly doubles if you include workers who are part-time but want to be employed full-time, and workers who want to work but have stopped looking."
If you add it up, it looks like 20% of our work force is without a decent job.

Clearly, it's a bit of a fiction to view the 9.1% figure as the national "unemployment rate," given how many people are not being properly utilized in the labor market, but that's how we do it here in America; we charge blindly into that dark night!

Saturday, May 28, 2011

Once again, Peggy Noonan shows off her delusional mental state...

Peggy Noonan has written some wonderful speeches in her day, but her columns in the WSJ are so married to ideology as to be fiction, rather than commentary. Here I express my alarm that such a prominent conservative voice pointed the finger of blame for the BP oil spill at Obama, instead of at BP, the hugely profitable, multi-national corporation that made the error-ridden business decisions leading up to the spill.

Today, Noonan's word of the day is "unsustainable."
"The American establishment, on both sides of the political divide, is admitting as never before that we are in an existential challenge. And this is progress. It was not always so! It wasn't so two years ago."
As Noonan acknowledges, many Americans outside of the "American establishment" recognized back in 2008 that it was time for a change - that the challenges facing America were severe, painful and absolutely needed to be addressed. That it's taken the "establishment" some years to catch on is a symptom of the blindness facing our leaders today.
"Elected officials began to get the message. Now they've got it. Our spending and debt are—and it is interesting that this is the first great buzzword of the new decade— 'unsustainable.'"
So who does Noonan feel is the savior of our  nation?

Thursday, May 26, 2011

Brad Delong (and other economists) are asking the wrong question

Since the economy crashed in 2008, Brad Delong has periodically wondered how the small losses seen recently in the securitized mortgage market have added up to the worst recession since the Great Depression. He's got such a post over on his blog today.

I am not an economist. But my big post-crisis question isn't how "a $2 trillion impulse in lost value of securitized mortgages has set in motion a financial accelerator that we do not understand at any deep level but that has led to ten times the total losses in financial wealth of the impulse."

My big question is: when did we become so dependent on debt at every level of our economy - consumer, banking, government? In 2008, leverage became the only pillar of our economy that was left standing, apparently, until it, too, crashed.

Brad Delong recognizes a key fact: "You need money to buy stuff. If you don't have money, you can't buy stuff--and so when you are short of money you cut back your spending because you must and so build your money balances back up."

For decades, our consumer-driven economy has been driven by consumers with shrinking budgets to work with. For me, the equation for our current crisis is thus:
Stagnant wages + rising health care costs + astronomical tuition that most consumers can pay for only by acquiring massive debt = consumers hanging on by a thread.
Add on a massive housing bubble, where the biggest asset for most Americans became a financial bomb that blew up their net worth = consumers terrified of losing everything + consumers who've lost everything.
Then add on a financial sector that proves beyond a shadow of a doubt to be corrupt and incompetent (all at once! And led by our best and brightest too, scores of Ivy-educated men who used their intelligence and training to create instruments of "innovation" that turned out to be weapons of mass destruction) and you've added the vivid and powerful emotion of panic into the recipe, which brings the cauldron of crisis to a boil. 
The problem, as I see it, is not in the numerical smallness of the loss. It's in the pervasiveness of the corruption that runs throughout our entire financial system. It's in the income inequity we've seen develop in the last quarter of a century. It's in the capture of our elected officials who cater to the lobbyists and not the voters.

In 2008, our financial sector failed. Capitalism in the most powerful nation on earth failed in 2008. Our entire banking system exists today only because of a massive and very costly federal welfare program. We privatized profit and socialized the losses of the biggest banks in America.

That's a terrible, horrible, no good very bad problem that cannot be summed up by a labeling it a "$2 trillion impulse."

Economists focused on numerical sums will never see this. And that's a big contributor to the "crisis in economics" that Delong has been also pondering.

DUH!!!

NPR reports that consumers who are squeezed at the pump have pulled back on spending in other areas. The result is being felt on the economy.
"High gasoline prices, government budget cuts and weaker-than-expected consumer spending caused the economy to grow only weakly in the first three months of the year."
Thanks to NPR for pointing out the obvious - that higher gas prices cut into money consumers would rather spend elsewhere.

That's why the corporate leaders who feel that squeezing as much out of their employees for as little as possible are remarkably short-sighted. A consumer-driven economy needs consumers with funds to spend.

So dip into the profit goody bag and start giving employees much-deserved raises. Hire new talent to fill key positions. (There's a lot of talent looking for a compatible work hook-up right now, FYI.)

If business leaders want to sell their product, they need to make sure America's got consumers with money to put towards consumption. And by consumers, I mean the broader market beyond just the high-paid folks in the C-suite.

And if the GOP wants to continue to assert that stopping the only spender in town (the government) from spending is the best way to jump start the economy, good luck fellas! Way to remain blind to the evidence! Their "big idea" is not showing much traction today.

Wednesday, May 25, 2011

The man who wrote "Forever Young" just turned 70

If Bob Dylan turned 70 yesterday, it means the one time I saw him live in concert was ten years ago.

[A decade! It's flown. The baby I left with his grandparents so I could see Dylan perform heads off to middle-school next year...]

Ten years ago, Dylan was celebrating his 60th birthday by performing at state fairs (an odd choice of venue for the Greenwich Village poet of the Boomer generation). It was 2001, the same year Madonna was wandering the world on one of her widely publicized mega-tours, a huge show with numerous moving parts, you know, a show full of dancers, choreography, music and fog.

And then there was Dylan, playing in Springfield, IL. In August. At the State Fair.

It was a crowd of about 10,000. Not quite a full house, but close. The scent of clove cigarettes mingled with the odor of manure. As the sun began to set, we wandered from a draft horse competition to the racetrack where Dylan would be performing. 


[This was the pre-9/11 world we were living in. Bush was most likely on vacation (he spent a great deal of his first year in office on vacation, it seemed.) Cheney was mixing it up with reporters who wanted to know which oil execs had influenced his oil policy. Cheney's stock answer was that it was none of America's business. 



Just weeks later our world would crash down around us.]


That sultry night in August, Dylan strode on stage with his band, and never stopped singing until the show was done. His set list included a rousing version of All Along the Watchtower (one of my favorite Dylan songs) and a powerful rendition of Masters of War.

He said nothing at all to the audience. It was about his music. Only the music. 

When it was done, he walked off stage and onto the bus that would take him to another State Fair.

What he left with his audience - indelible memories of a man hard at work at a craft he loved more than anything else. No glitz. Certainly no glamor. Just the music and the master.

Though Dylan's shows can be unpredictable, the show he put on at the Illinois State Fair in 2001 was incredible.

Here's one of the first music videos ever created: Dylan playing Subterranean Homesick Blues...


And here's on older Dylan, dressed in a shiny gold shirt, growling out the tune "Forever Young" - accompanied by the Boss...



Springsteen-Dylan "Forever young" by betterday

Friday, May 20, 2011

A Master at Work



One of my girls was reading Easter Parade. Felt compelled to show her this, one of the greatest dance scenes ever filmed.

Ronald's not the reason why...

Though I applaud the physicians of America for going after the obesity epidemic (according to the Centers for Disease Control, 17% of children and adolescents are obese), lining up Ronald McDonald in their sights isn't exactly the right target.

More than 500 physicians have signed a letter to McDonalds, asking the corporation to retire Ronald. As reported in the WSJ, the letter says:
"The letter, slated to run in the form of full-page ads in six metropolitan newspapers around the country on Wednesday, acknowledges that 'the contributors to today's (health) epidemic are manifold and a broad societal response is required. But marketing can no longer be ignored as a significant part of this massive problem.'"
(It's looking more and more like marketing is the answer AND the problem!)

Thursday, May 19, 2011

To Scott Walker - where's the love, dude?!

Apparently going after teachers and unions isn't enough for Wisconsin Governor Scott Walker. He's now focusing his attention on banning the hospital visitation rights of same-sex couples.

Here's what the Milwaukee Journal Sentinel has to say:
Madison - Gov. Scott Walker believes a new law that gives gay couples hospital visitation rights violates the state constitution and has asked a judge to allow the state to stop defending it.
Who goes to see dying patients in the hospital? Only those who really love them. So why Wisconsin's governor wants to ban the dying from receiving visits from a loved one is beyond me. But then again, understanding the rabidly conservative mindset is beyond the scope of my imagination.

Wednesday, May 18, 2011

Here's the Harvard Business Review, on the marketing of one's soul...

Let's just say I'm a little skeptical of what they're teaching over at Harvard. That's because so many of those who were nurtured and educated in the Ivy League later went on to develop "innovation in finance" that caused our economy to drop off a cliff back in 2008.

But I'm always curious to hear what Harvard has to say about key topics, and was highly intrigued when this eye-catching headline, Don't Sell Your Soul, Market Itcame across my Twitter feed.

Turns out it's a post by Dan Pallotta about building up the "philanthropy" market. According to this article:
"Most people want to help others. Their lives would feel incomplete without this connection to humanity. We can tap into this human desire by marketing compassion with the same rigor as we market luxury cars."
(Highlighting is Pallotta's, not mine.)

Which I guess is a good idea, though now I see images of sleek cars snaking their way across challenging terrain, not starving children who need to be fed or offered polio shots for free.

One thing I don't understand - who'll pay for this marketing? In business, marketing departments are paid for and funded by income generated by the commodity they are selling. So who pays for the marketing budget of a philanthropy? Are we going to divert funds from those who need the particular charity and instead flow that funding into marketing campaigns? For what purpose?

Who is Paul Ryan?

[Yes, there is the intentional hint of Ayn Rand in the headline, for those who are wondering. Because why not evoke John Galt when talking of Paul Ryan?] 

But it's a fair question to ask - this "who is Paul Ryan" question, since he seems to have seized control of the GOP's platform of late.

He's so out in front of the curve that Newt Gingrich, a man who aspires to be the GOP nominee for president, slammed Ryan's Medicare reform plan, which has been adopted by the GOP-dominated House. Referring to the Ryan plan, Gingrich said he was "against a conservative imposing radical change." [Why do I believe that Newt's campaign is not long for this world?]


A Product of America's Dairyland
What we know about Ryan: that he comes from Wisconsin - a Midwestern state with an economy that wears its cheesehead proudly. Yes, there's a mix of agricultural, industrial and dairy in its economy, but Wisconsin brands itself as "America's Dairyland" right there on its license plates. Its largest city, Milwaukee, is bordered less by suburbs and more by farmland, a strong contrast to the miles upon miles of suburia that ring Chicago.

I live not far from the Wisconsin border - and whenever I cross over into Wisconsin for a visit, I always marvel at the roads. To this Illinoisan, Wisconsin seems to take care of its infrastructure. At least on the surface. Their public pension plan, deemed by Pew Research as one of the most fiscally responsible in the nation,  is still underfunded and has come under strong attack by Scott Walker, the state's Republican governor.

Ryan sits in the congressional seat once occupied by Democrat Les Aspin. He hails from the state that once gave us Senator Joe McCarthy and today is presided over by Walker, who is actively shaping state government into a very conservative mold.

Wisconsin is Midwestern, proud of its heritage as a dairy producer and relatively ignored by national media. [Until recently - when was the last time you saw tweets about any state's Supreme Court elections?! Way to grab the national focus, Cheeseheads!].

And obviously there are great passions that run through some of its political leaders, Ryan included.

Wednesday, May 11, 2011

30 + years of Newt bombs

Fasten your seatbelts - the war for attention in 2012 has begun!

Newt Gingrich is apparently taking his contract with America seriously once again. He's running for the nation's highest office. He's not one to let serving divorce papers to a woman undergoing cancer treatment stop him from such a noble pursuit.

Mother Jones has pulled together some Newt bombs - utterances made by Gingrich over the last 30+ years. Let's take a look! And let's consider if a man with this rhetorical history should serve as the leader of the world's most powerful country...

1978 In an address to College Republicans before he was elected to the House, Gingrich says: "I think one of the great problems we have in the Republican party is that we don't encourage you to be nasty. We encourage you to be neat, obedient, and loyal and faithful and all those Boy Scout words." He added, "Richard Nixon…Gerald Ford…They have done a terrible job, a pathetic job. In my lifetime, in my lifetime—I was born in 1943—we have not had a competent national Republican leader. Not ever."
1983 "If in fact we are to follow the Chamberlain liberal Democratic line of withdrawal from the planet," he explains, "we would truly have tyranny everywhere, and we in America could experience the joys of Soviet-style brutality and murdering of women and children."  
1985 Upset with Democrats' foreign policy stance, Gingrich observes, "Adolph Hitler must somewhere be burning in hell, wishing he had lived two generations later, so he could manipulate Americans instead of Englishmen."
1985 "I have an enormous personal ambition. I want to shift the entire planet…I just had breakfast with [administration officials Richard] Darman and [David] Stockman because I'm unavoidable. I represent real power."
1988 "I spent a fair length of time trying to come to grips with who I was and the habits I had, and what they did to people that I truly loved. I really spent a period of time where, I suspect, I cried three or four times a week. I read Men Who Hate Women and the Women Who Love Them and I found frightening pieces that related to...my own life."
1989 He explains to the Washington Post why he fights with his second wife, Marianne: "It's not even that it matters to me. It's just the habit of dominance, the habit of being the center of my staff and the center of the news media." 
1994 He sums up his political philosophy: "People like me are what stand between us and Auschwitz. I see evil all around me every day." 
2011 Secular-socialists give way to atheist-Islamists: "I am convinced that if we do not decisively win the struggle over the nature of America, by the time [his grandchildren are] my age they will be in a secular atheist country, potentially one dominated by radical Islamists and with no understanding of what it once meant to be an American." His spokesman later clarified that Gingrich meant either Islamists or atheists would take over America, not both. 
There's plenty more over at Mother Jones. Check it out...

Tuesday, May 10, 2011

When following the leader could lead to corruption...

I think it is safe to say that Goldman Sachs is one of the leading investment banks in the United States today - if not the leading bank. Our financial sector has become so shrunken, who else could rival the golden boys for the title of America's Greatest Bank? Perhaps JPMorgan Chase, but as I understand it, they're weighed down by the debt-laden consumer side of banking.

That's why it is incredible that the nation's leading bank is so very busy this year fending off corruption charges. Sad for the nation when the leading financial institution is alleged to be acting corruptly in multiple instances.

So they put aside journalistic ethics for a moment

Whoopsie! Lots of egg on lots of faces when the glowing tributes made by many Chicago journalists about the outgoing King Mayor of Chicago ended up in a furniture ad.

After the shit hit the fan, many of the journalists had themselves removed from the promotional video.

And the furniture company ended up apologizing for not being more clear about the purpose of the video. (Journalists believed it to be a gift to Mayor Daley, not an ad to be broadcast on TV with the furniture company's name prominently displayed.)

Hat tip to the very best tweeter of all time - Roger Ebert... if he's not on your twitter feed, he should be!

Sunday, May 8, 2011

A career trajectory rivaling the Rock's for oddity...

Mitch Marrow has been on the ride of a lifetime, with a career that rivals the Rock's (Dwayne Johnson > The Rock > The Tooth Fairy) for twists and turns.

Marrow started in the Ivy League, graduated to the NFL, transitioned to Wall Street and has now left the big leagues for a gig babysitting dogs.

His mother is his partner.

Here's the WSJ story with all the details...

When it comes to torture, Bush/Cheney/Rummy can't have it all...

Paul Krugman's NY Times blog post, "Shadow of the Torturers," is a painful reminder of inconvenient truth that all Americans not molded in the model of John Wayne had to confront back in the days of Bush-Cheney: we became a country that openly endorsed torture as a national security measure.

It is interesting to note that those who endorsed the use of torture during the war on terror were also those who did anything they could to get out of serving their country during the war on Viet Nam.

In the late 1960s, when the Viet Nam war was raging, GW Bush - son of an authentic war hero - joined the National Guard, not active military duty, and in the early 1970s, apparently went AWOL and failed to fulfill his National Guard commitments.

As a young man in the 1960s, Dick Cheney pulled any string available to get out of the draft, and in return, received five draft deferments. Though eligible to serve his nation as a soldier in a time of war, he chose instead to stay home.

The two men grew up to become leaders of the most powerful nation in the world. In their roles as leaders of a nation devoted to liberty and freedom, they endorsed and employed the use of torture on military noncombatants.

Today, some of those Bush administration policy makers rue Obama's decision to move away from the use of waterboarding and other "enhanced interrogation techniques."

Saturday, May 7, 2011

Technology: Helpful or Harmful?

Mark Thoma posts a 70 minute video of a panel of experts looking at the impact of technology on the noggin.

Like Thoma, too distracted to watch the entire thing right now, but I urge you to watch the opening. It's hilarious.

"The F***ing Epic Twitter Quest of @MayorEmanuel"

For those intrigued by fusion of twitter and Rahm Emanuel's recent and successful quest for the top spot in Chicago, Dan Sinker's "The F***ing Epic Twitter Quest of @MayorEmanuel is available for pre-order.


Thursday, May 5, 2011

Pointing to an unusual suspect for the increase in unemployment claims

Troubling unemployment figures this week - according to a widely quoted AP story, it looks like new unemployment applications have hit an 8-month high. This elevates fears that the "recovery" has hit a bump in the road, which could mean anemic hiring patterns this spring.

According to the story, New York is to blame - specifically, their schools:
"A Labor department spokesman blamed much of the increase in unemployment applications on an unexpected spike from New York. More school systems than usual closed for spring break last week. That resulted in 25,000 layoffs. The department didn't anticipate the closures when making seasonal adjustments, the spokesman said.

Huh? Schools closing for spring break resulted in 25K layoffs? The Labor department did not realize that spring break in NY would require seasonal adjustments? Is it a "layoff" when hourly workers stay home for the week of spring break?

Anyway, in this "recovery," a spike in unemployment claims is not good, no matter what the reason.

Wednesday, May 4, 2011

The advantages of size and might, as revealed by the Easter egg hunt...

A large crowd clusters near the glass doors. All are gathered together on this morning via the annual ritual known as the Easter brunch, celebrating the epic Christian holiday that commemorates resurrection and rebirth.

Outside, it is a sunny but chilly spring morning. Inside, the room is full of people preparing for the Easter egg hunt. Little girls dressed in pretty dresses. Boys wearing button down shirts and khaki pants. Adults happy with the knowledge that spring has (hopefully) arrived.

All of the children are eager for the impending hunt. They cluster near the door for easy access to the patio outside. They see bright plastic eggs splash vibrant color on the beautiful green lawn. The excitement builds. You can hear the murmur of children wondering when it will start.

And finally, the moment all the children have been waiting for arrives. The doors open - and the crowd spills out past the patio and onto the well manicured lawn where the eggs lay in plain view.

Only the eagerness has turned into a frenzy. Younger children are getting pushed around by the bigger children. In the adults who watch, a worry tickles the mind - that the race for the eggs may get ugly. The stampede may result in a trampled child. That the lovely Easter morning may turn tragic.

Tuesday, May 3, 2011

A quick look at consumer leverage

Two posts in the blogosphere caught my eye this morning - both focusing on consumer leverage.

Calculated Risk points us to a Federal Reserve press release noting the "April 2011 Senior Loan Officer Opinion Survey." Opinions are good, but the release also seems to indicate there is data showing banks are easing standards and terms on loans for both businesses and consumers. Especially consumers:
"...And the net fraction of banks that reported having become more willing to make consumer installment loans rose to its highest level since the first half of 1994."
The whole mortgage-backed thing is kind of in the toilet right now, along with home prices, but this info from the Fed indicates banks are willing to lend to consumers without requiring a home to serve as collateral for the loan.

My initial response was cautious optimism. Perhaps the investment the nation  had made in the banks (via TARP, etc.) was finally paying off with bankers now investing in consumers.

Then I saw this post from Paul Krugman. And my optimism was shattered once again. He's got a chart that shows a sharp upward shift in consumer leverage starting in 2001. As corporations were deleveraging, consumers were leveraging up. According to Krugman, "it's now standard to focus on household leverage as a key part of what went wrong in 2008."

So it seems like the opportunity for consumers to leverage up once again is a double-edged sword. Do we want consumers to become even more indebted and leveraged? Seems not the way to go. The answer seems to lie in boosting salaries of American consumers, not just their ability to borrow. Here's hoping we see wage increases in the recovery we're supposed to be experiencing. But that may prompt the Fed to issue other releases, warning of the dangers of inflationary wage increases...

Monday, May 2, 2011

Reflections on the death of Osama Bin Laden

If you are old enough to remember 9/11/01, it is a day seared into memory. Bright flames flickering against white walls. Fingers of fire illuminating a deep and overwhelming hatred of our country. Thick, black smoke choking out the sun. Ash-covered survivors expressing terror and shock. The silence that comes when all forms of flight are grounded.

Above all, the grief. The tear-stained burden of grief assumed not just by the families who lost a loved one that day, but by millions of us who witnessed the devastation. Grief on a massive level. The kind of national grief we are unaccustomed to experiencing in America.

Osama Bin Laden was given credit for creating the monstrous rubble of 9/11. His will was done that day, the day that thousands of Americans died in the attacks.

The insanity of the attack was what struck me most. It was astonishing to learn that people were possessed of the kind of hate that could cause them to fly planes into buildings, bring down the World Trade Centers, turn the Pentagon into flames, create a black hole in a Pennsylvania field, exterminate thousands of Americans and kill a little girl on her way to Disney.

Last night, President Obama announced that Osama was dead. The man who was rumored to be living in Afghan caves was hiding out in a compound located in a resort town in Pakistan just a mile from the Pakistan military academy.


[How did we not know that?! How is it possible for the world's most wanted man to hide out in plain sight like that? And how can we possibly consider Pakistan an ally?!] 


Thursday, April 28, 2011

When God's work requires building walls, not bridges

A story in Mother Jones points us to the historian favored by the GOP elite (Gingrich, Bachmann, Huckabee), a man named David Barton. Here's how MoJo describes him - as a...

"...Republican activist and minister who founded WallBuilders, a for-profit evangelical outfit that works to inject religion into politics. Barton holds some pretty unconventional views, and in the past he has spoken alongside fringe figures like Holocaust deniers and white supremacists. Among other things, he claims that Jesus would oppose the capital gains tax and the minimum wage; that global warming is "self-correcting"; and that the nation's homeland security apparatus has been infiltrated by members of the Muslim Brotherhood. He also contends that the separation of church and state is a perversion of the Founding Fathers' intention to create a Christian nation."
Let's just say Barton and I are not likely to be invited to the same parties.

Here's what Mike Huckabee says about Barton:
"I just wish that every single young person in America would be able to be under his tutelage, and understand something about who we really are as a nation," Huckabee said. "I almost wish that there would be…a simultaneous telecast, and all Americans would be forced—forced at gunpoint, no less—to listen to every David Barton message, and I think our country would be better for it."
Leave it to a Republican to bring guns into a discussion of religion!

Wednesday, April 27, 2011

As WalMart is my witness, consumer budgets are stretched thin...

WalMart didn't reach the number one spot on the Fortune 500 list by being wishy-washy in its offerings. No, the company has seen incredible success because it lives up to its brand promise every day by offering consumers the opportunity to Save money. Live better. Since it first opened its doors in 1962, the world's biggest retailer has fueled company growth by consistently offering low prices to its customers.

Today, WalMart is struggling. The company has seen seven consecutive quarters of declining sales.

In an article in the Wall Street Journal, Mike Duke, WalMart's CEO, says that for the WalMart consumer, "there is more pressure today than a year ago," and notes that rising gas prices are impacting the consumer's ability to purchase other goods, like those sold at WalMart.

What does it say when a company known for its focus on cost-conscious consumers is struggling? That too many people are finding it very hard to make ends meet in America.

Here's the story:

On the failure of "the invisible hand" to influence our financial sector

In Alan Greenspan's book, The Age of Turbulence, one of the issues he explores is the failure of economic populism in Latin America. Here are his thoughts:
"The dictionary defines 'populism' as a political philosophy that supports the rights and power of the people, usually in opposition to a privileged elite. I see economic populism as a response by an impoverished populace to a failing society, one characterized by an economic elite who are perceived as oppressors. Under economic populism, the government accedes to the demands of the people, with little regard for either individual rights or the economic realities of how the wealth of a nation is increased or even sustained."
So in Greenspan's view as a self-described Libertarian Republican, economic populism comes to life in "failing societies" that have significant income inequality and are dominated by an economic elite. And in Greenspan's mind, it is not the government that can make the required changes to address the failures of the society; it is the markets that are the key to reducing failure.

Our own economy is a mixed economy, market-driven, but with government policy and regulation developed to counterbalance the very real excesses of the markets. Though it is mixed, the US economy is not driven by the visible hand of a government acting as an economic populist, but is instead an economy that predominantly looks to the invisible hand of the markets to address and resolve economic failure.

Or at least, so I thought. 

Tuesday, April 26, 2011

My questions for Ben's first press conference

Yves Smith at Naked Capitalism has issued a crowd-sourcing call for questions we'd like Ben Bernanke to answer at the first ever press conference by a Fed chairman. Here are somethings I'd like to know...

1) How much has the Federal Reserve spent on acquiring toxic assets from banks since their collapse?

2) How has absorbing the toxic assets of banks helped the residents of Main Street?

3) What benefit does the US gain from having investment banks considered "bank holding companies"?

4) How has becoming a "bank holding company" changed the behaviors of investment banks in ways that have created stability for the US economy? Or has it simply allowed them to continue to engage in risky business activities backed by the full faith of the US government?

5) Does the fear of inflation lead the Fed to develop policies that discourage wage increases?

6) Do you see a time in the near future when the banks in our financial sector will be force to deal with the consequences of their own losses - even if it means bankruptcy for the company - without federal support to prop up their operations?

7) What, for you, are the key lessons of the Lehman bankruptcy, and how can we use those lessons to help us wean the American financial sector from its dependence on the Fed?

8) Do you see the possibility of having a financial sector able to stand alone without Federal support when times get tough or are we permanently wedded to bailing the TBTF banks?

9) Does Dodd Frank go far enough to ensure we'll get a financial sector that can exist without federal bailouts and support when they take risks too big to succeed?

10) If you knew then in 2008 what you know now, would you allow bankers at banks requiring massive federal bailouts to used tax dollars to pay for bonuses? Do you feel that protecting bankers from the consequences of their failure is the correct approach to protecting the American economy?

Friday, April 15, 2011

Numbers lie - AKA Why Mike Konczal is wrong about housing lock

Mike Konczal of Rortybomb has a long post with many graphs that he feels prove housing lock is "not a major part of this crisis."

 He's wrong. Housing lock exists now; it is a problem; and it will continue to be a problem until people get their heads above water once again. Now how that will happen, I'm not sure at this point. But that millions of people are trapped in houses that cost less today than the value of their loan remains a big issue for many reasons. Though I am not an economist, nor do I have charts to display, I will explain some of the flaws of his argument.

Wednesday, April 6, 2011

The scariest sentence ever seen in the WSJ

Lots of hullabaloo over Paul Ryan's op-ed piece in the Wall Street Journal, you know, the one with the headline that reads: The GOP Path to Prosperity.

Given how devoted the GOP is to their very rich base, I shudder to think about how they define prosperity. And since their path prior to this has led to much of the nation being placed on rickety life boats in danger of being swamped by the wake of the big yacht sailing majestically away on rising tides, I don't have much hope this path will be built for the likes of me.

But the scariest sentence ever seen in the WSJ is not found in Ryan's op-ed piece. Doesn't mean his piece isn't scary - it's actually very scary to think we will get rid of this massive post-recession deficit by apparently gutting Medicare for those of us not old enough to need it right now.  

[Can we really say, as Ryan does, that Medicare has a flawed incentive structure that "rewards states for adding to the rolls?" Or are states adding to the rolls because demographically, the Boomers have reached the age needed to join the plan? And how do private insurers - the ones who refused to cover the elderly in the 1960s - feel about adding an influx of elderly patients to THEIR rolls?]

Scary stuff, yes. But that scariest sentence ever in the WSJ is in another story about the Ryan plan, bearing the headline: New Proposal Hits Old Hurdles of Budget Math. 

And that sentence I find so frightening is:
"The hope is that competition among private insurers will yield hitherto-unrealized efficiencies." 

Monday, April 4, 2011

Finding Walker at the intersection of ideology and corruption

With no managerial experience, no college diploma and two drunk driving convictions to his credit, there seems to be little that would recommend Brian Deschane for an $81,500 managerial job in the Wisconsin state government.

Especially in today's politically charged environment, what with Governor Scott Walker looking to shed kazillions from the government budget by slashing education and other social services and going to battle over the state's pension funds for government employees.

So it's a surprise to learn that the anti-big government, "let's trim the budget" governor of Wisconsin has hired Brian Deschane for that $81,500 managerial job.

What's Brian's key qualification? He's the son of a lobbyist who gave big to the Walker campaign.

Think he got this job on his own merits? If you do, I've got some CDOs for you that will without a doubt give you a big return on your investment...

Friday, March 25, 2011

Have we learned enough in the last century?

Buzz Potamkin at Naked Capitalism takes a look at the 100th anniversary of the Shirtwaist Fire. And realizes that we've not grown as much as we could have in the last 100 years - at least in terms of protecting workers. In this post, he reminds us of some business-driven catastrophes that have happened in this millennium...

Thursday, March 24, 2011

"Someone like you"

This woman has incredible pipes. Here's Adele at the 2011 Brit awards...

An event noted for its striking use of color...

The American Enterprise Institute for Public Policy Research is hosting a lecture on "the state of white America."

Once I picked my chin off the floor, I  wondered if the red-staters in the audience will don brown shirts for this rally around the white folk...


Wednesday, March 23, 2011

Questioning the morality of a $54.5 million pay package

Ford's gearing up for upcoming negotiations with the United Auto Workers by offering Alan Mulally, Ford's CEO, stock options in the company worth $54.5 million.

And that's just a piece of Mulally's package. According to the Chicago Tribune, "his full compensation package has yet to be disclosed." 


UAW president Bob King is outraged:

Tuesday, March 22, 2011

Let's go Dutch!

WSJ has an interesting story today about ING's CEO's decision to "give up his €1.25 million bonus for 2010, in a bid to allay public anger on his reward for steering the bailed-out Dutch financial-services company back into a profit last year."

Now the way that quote is written suggests some kind of communist uprising from people who are anti-business - that "the people" don't want smart people to be rewarded for bringing a company "back into profit."

That's not true, actually. "The people" just don't want leaders of bailed out companies that are still on the dole to get bonuses. I hear that over here in America a lot, but no one ever seems to listen to those complaints.

So what we have with ING is something completely unimaginable in America. Not only do Dutch citizens get angry over what they perceive to be unfair and unreasonable bonuses to bankers, the bankers actually listen to them!

And check out this nugget:

Monday, March 21, 2011

A remarkable shift in consumer spending habits

The NY Fed has an article seeking to answer the question "Have consumers been deleveraging?"


And according to the story, the answer is a dramatic "yes."

Here's a quote:
"Between 2000 and 2007, consumers’ borrowing added an annual average of about $330 billion to the cash they could spend; by 2009, consumers were diverting $150 billion away from potential spending in order to reduce the debts they had built up. This represents a remarkable $480 billion reversal in cash flow in just two years."

That IS a remarkable change in spending habits! The NY Fed is not clear whether this is by consumer choice or by design:
"A remaining issue is whether this deleveraging is a result of borrowers being forced to pay down debt as credit standards tightened, or a more voluntary change in saving behavior. There is evidence on both sides of this question."
 It's probably a little of both, from what I'm seeing. But in the science of economics, there seems a compulsion for the "either, or" scenario.



Saturday, March 19, 2011

The gift that doesn't keep on giving...

Back in 2008, when our economy was in the midst of its nose dive, Warren Buffet stepped in and gave Goldman Sachs a shot in the arm with a $5 billion "investment" in the "bank holding company."

At the time, Buffet was quoted in the Guardian as saying::

"Five years from now, ten years from now, we will look back at this period and we will say you could have made some extraordinary buys.

"The American economy over a period of time will do very well, and people that own a piece of it will do very well."

At that time, he also praised Goldman Sachs for being "an exceptional institution" with an "unrivaled global franchise, a proven and deep management team and the intellectual and financial capital to continue its track record of outperformance."

Back then, Buffet's investment boosted confidence in the markets and calmed the markets.

Today, Buffet has proved to be right about the "extraordinary buys" to be had back in 2008. He was certainly right about characterizing Goldman Sachs as an "exceptional institution."

But he's proving wrong about how people who invested in those "extraordinary buys" would "do very well."

Tuesday, March 15, 2011

The "powers that be" better watch out...

Parents are beginning to get mad...

I live in Illinois, a state on the brink of financial disaster, a state that is looking to shed billions of dollars from its budget. In its quest to shed those billions, it's floating the idea that school districts now must be consolidated from almost 900 districts to 300.

This idea of consolidation has sparked a lively dialogue in my community. And from what I see is that parents and (unionized) school employees are united in what we don't want to see happen. We don't want more kids in the classroom. We don't want less teachers. We don't see the value of cutting art, physical education and music from the curriculum.

What we want is for our children to have access to the best education we can provide.

What I'm also beginning to hear from fellow parents of school-aged children are questions about the current national focus on pumping billions into our financial sector while our schools are beginning to starve for funds.

What is a society that rewards bankers as it penalizes children?

Friday, March 11, 2011

A snapshot of all that is wrong with healthcare in America

If you've ever been to a neonatal intensive care unit (NICU), you know the pain, terror, hope, fear, grief and love that can be found there. This is where premature babies are nurtured and cared for, a place where you can find diapers the size of big bandaids, a place where medicine can work incredible miracles. Sometimes, it's a place where tiny babies take their first and last breath.

It's a place you hope you never have to be.

There is a drug that can help prevent premature birth. It's a progesterone shot administered weekly, and it's been used for years to help families stay out of the NICU.

In 2003, a study sponsored by the National Institute of Child Health and Human Development showed these weekly injections "resulted in a substantial reduction in the rate of recurrent preterm delivery among women who were at particularly high risk for preterm delivery and reduced the likelihood of several complications in their infants" (as reported in the New England Journal of Medicine.)

This week, the shot costs about $10 to $20 a dose. Next week, thanks to KV Pharmaceuticals and the FDA, a single dose will now cost $1500.

What happened?

Wednesday, March 9, 2011

Newt's "come to God" moment, nicely timed...

He's been divorced twice. Served the divorce papers to the first wife when she was in the hospital being treated for cancer. Then married a second time to the woman he'd had an affair with while married to the first.

Then he dumped wife #2 for a woman 23 years younger than him. It was an affair he conducted right around the time he was putting the heat on Bill Clinton for his affair with Monica Lewinsky...

Three marriages into his life, Newt Gingrich is now a convert to Catholicism (in 2009). The church that will excommunicate parishioners if they remarry after divorce.

(Though I guess if you pay the annulment fee, you can pretend the first marriage was a figment of your imagination. Apparently, annulments are booming in the US.)

What's even worse than Newt's three marriages? According to the Chicago Tribune, he's apparently now blaming his infidelities on his love of country. Here's how he's quoted in the Chicago Tribune:

"There's no question at times of my life, partially driven by how passionately I felt about this country, that I worked far too hard and things happened in my life that were not appropriate," Gingrich said.

"What I can tell you is that when I did things that were wrong, I wasn't trapped in situation ethics, I was doing things that were wrong, and yet, I was doing them," he said. "I found that I felt compelled to seek God's forgiveness. Not God's understanding, but God's forgiveness."

Quotes come from an interview he gave to the Christian Broadcasting Network. One wonders just what he means when he says he "wasn't trapped in situation ethics." Does it make it better or worse to be trapped in "situation ethics?"

What does it all mean? That the 2012 season has begun. I myself am weary of politicians who try get good and Godly on us right around the time they decide to run for a big office.

Newt may have asked for God's forgiveness, but he's not gonna get mine. Any man who served divorce papers to a woman undergoing cancer treatment does not have the moral character we need in a president.

Articles you won't see promoted on www.newt.org include:

Politico's bit on Callista Gringrich (wife #3)

The Trib's story

WaPo's take on Newt's conversations about past indiscretions.

Thursday, March 3, 2011

When the real meets the virtual, laughter ensues

The real Rahm Emanuel met up the other day with the fake Rahm, Columbia College professor Dan Sinker, the man behind the @mayoremanuel twitter feed. According to the Trib, Real Rahm was in good humor and Fake Rahm was more than a bit nervous:

"Hi, honey, I'm home," the mayor-elect said as he extended his hand to Dan Sinker, the 36-year-old Columbia College journalism assistant professor whose @MayorEmanuel Twitter account became an online sensation before its anonymous author sent his protagonist into the cosmos the day after Emanuel was elected mayor. "Relax, man."

"I am so not relaxed," Sinker said with a laugh, the cheeks above his pointy salt-and-pepper beard having turned beet-red.

"You have tenure," Emanuel quipped. "Don't worry about it. I already called it in."

Real Rahm also suggested that he'd hook up Sinker with his brother, an agent at William Morris, "so I can get my $5,000 back."

When the laughs were done, the mayor-elect handed over a $5,000 check to Sinker's charity of choice - Young Chicago Authors, an after-school organization that teaches creative writing to Chicago Public School students. Chicago media personalities Dan Coe and Richard Roeper each kicked in $1000 and Causes.com promised to match the mayor-elect's $5,000.

Wanna donate?

Wednesday, March 2, 2011

A rose by any other name still smells as sweet...

That's why rebranding "too big to fail" (TBTF) institutions as "systemically important" doesn't really change the fact that they are still TBTF. In fact, due to consolidation and bankruptcies, these institutions are even bigger and more "systemically important" than in 2008.

I had never heard of "TBTF" until the crash of 2008, but apparently, the phrase had been bandied about at least since the 1984 collapse of Chicago's Continental Bank, a failure that motivated Ronald Reagan to abandon his free market principles and bail out the bank.

I myself prefer VoxEu's characterization of these institutions as "systemically risky." Let's use language that does not cloud the reality of our financial sector today. Is a "preowned" car any different than "used"? That's why I like "systemically risky." It does not obfuscate the fact that our financial system is as rickety (or even more rickety) than in 2008, when the sector collapsed in that terrifying global panic.

In 2009 testimony to Congress, Ben Bernanke shows he understands how the "systemically important" designation can lead to a risky identification with TBTF:

"Indeed, a more macroprudential focus is essential in light of the potential for explicit regulatory identification of systemically important firms to exacerbate the 'too big to fail' problem. Unless countervailing steps are taken, the belief by market participants that a particular firm is too big to fail, and that shareholders and creditors of the firm may be partially or fully protected from the consequences of a failure, has many undesirable effects. It materially weakens the incentive of shareholders and creditors of the firm to restrain the firm’s risk-taking, provides incentives for financial firms to become very large in order to be perceived as too big to fail, and creates an unlevel competitive playing field with smaller firms that may not be regarded as having implicit government support."

I know the Fed is working on developing resolution criteria to be used when a very large bank fails. But that doesn't change the fact that today's "systemically important" financial institutions remain as risky to our economy as the TBTF banks that dragged us off that cliff in 2008.

Some additional links:
A 2010 Mother Jones article on the influence of Wall Street lobbyists over regulatory legislation

FDIC 1997 report/book chapter on the failure of Continental Bank

Miami Herald article on Ben Bernanke's testimony before the Financial Crisis Inquiry Commission (09/03/10)

FCIC's report on the financial crisis

Politcal unrest in America, as shared with friends on Facebook

Facebook is interesting because you communicate with friends from all phases of your life. And if you're on Facebook, you know that certain topics and videos get shared by a variety of people from very different backgrounds.

Here's the political chit chat that's trending today with my Facebook friends:

A unionized public employee, a teabagger, and a CEO are sitting at a table. In the middle of the table is a plate with a dozen cookies on it. The CEO reaches across and takes 11 cookies, looks at the teabagger and says, 'Watch out for that union guy. He wants a piece of your cookie."

Not sure of the source of that joke, but to me, it's a sign that the out-of-balance compensation program we've got going on in America is beginning to simmer on the burner of public opinion. Hope we're not that frog, continuing to sit in increasingly hotter water until we boil to death.

So not everyone is happy with GM these days...

Two WSJ reporters, Evan Newmark and Dennis Berman, offer up some reasons to "hate GM."



Reasons to hate GM include:
— Falling share prices
— The recently profitable automaker operates in an industry "plagued by overcapacity"
— Incentive payments in US went up in 2010 Q4
— Rising price of oil a problem for an automaker dependent on the sale of its trucks
— A small competitor (Volvo) has just gotten a big backer (China)

Friday, February 25, 2011

A Bold Prediction Becomes a Happy Reality

About a year ago, the WSJ posted a story about a very, very bold prediction: the folks over at GM were predicting 2010 would be a "profitable year" for the company.

It was a very bold prediction because GM had not seen a profit since 2004. 2009 saw the forced exit of its leader, Rick Wagoner, a man who'd occupied various positions in the C-suite at GM for nearly 20 years. Under his leadership, GM ended up a recipient of a massive and unpopular government bailout, and then filed for bankruptcy soon after.

So for a company that had been so buffeted by terrible leadership and the headwinds of our grim economy, its prediction of profitability in 2010 seemed a bit of a reach.

But apparently, its predictions of success have become reality. According to a story in the Wall Street Journal, GM posted its "strongest annual performance in more than a decade" in 2010.

And a profit of $4.7 billion.

However, they're not out of the woods yet. Higher gas prices seem inevitable. They still have billions in unfunded pension obligations and the economy needs to continue to improve. But it's nice to see a Motor City icon having a comeback, at least in 2010.

Thursday, February 24, 2011

When the private sector places "undue burden" on government

If you need yet another reason to understand why healthcare reform is desperately needed, check out this story in today's Chicago Tribune with this alarming headline:

Illinois Blue Cross settles allegations that it denied sick kids coverage.

Here's what happened, according to the Trib:

"The cost of the medical care, which included so-called private-duty nurses for sick children and other ill patients, should have been covered by Illinois Blue Cross, but instead was shifted to Medicaid at a cost of nearly $12 million, prosecutors said. The claims were denied based on 'internal, undisclosed guidelines that were more restrictive than the language provided to patients in plan policy materials,' Madigan’s office said."

As a result of the lawsuit, the company will "pay $25 million to settle allegations that it denied coverage to sick children in need of nursing care by 'fraudulently' shifting their claims to Illinois’ Medicaid program, state and federal prosecutors said this morning."

The case against BCBSIL was initiated by the Illinois Attorney General's office after "years of complaints" from consumers. These are consumers with children who are seriously ill - in need of medical services that included at-home nursing.

Imagine that you are those consumers - imagine that you are a parent of a desperately sick child - and in addition to taking care of your seriously ill child, you are concurrently fighting your insurance company to pay for covered services.

Lisa Madigan, Illinois Attorney General, pulled no punches when talking about the settlement:

"'Blue Cross Blue Shield’s inappropriate denial of legitimate claims placed an undue burden on the state’s finances,' Madigan said in a statement. 'My office is committed to holding health care insurers accountable on behalf of the people of Illinois for this type of deception and fraud.'"

Blue Cross denies the allegations that it engaged in "inappropriate conduct." Of course they deny the allegations. Because for an insurance company, diminishing claims payouts improves their medical loss ratio. So why not "fraudulently" deny coverage to sick children until a regulator cracks down on them for doing it?

Here's a link to the Illinois Attorney General's press release.

BCBSIL does not have a press release on this. However, in the Trib story, they offer this explanation for the situation:

"'This dispute began many years ago when we reviewed certain claims and determined that the benefits sought were not covered by the applicable insurance plans and policies,' Illinois Blue Cross spokesman Jack Segal said. 'These plans and polices determine which benefits are covered and which are not. Several years ago, in cooperation with the state attorney general, we expanded our explanation of benefits to ensure that our members understood what nursing benefits are covered under their plans.'"

But why would a company like BCBSIL pay out this $25 million settlement if they did nothing wrong? Has the Illinois Attorney General's suit inspired them to be nice and pay for services that were not covered?

Or is this yet another example of of a company privatizing profit and socializing loss?

Thursday, February 17, 2011

From the city that works to the city that shrinks...

As Richard M. Daley wraps up his reign, one thing is certain. The city's population shrank dramatically during his tenure. According to the 2010 census, Chicago's population is the lowest its been since 1920, the year Prohibition was enacted.

A key factor in the decline: black flight. The next mayor of "the city that works" may want to think about investing outside of the Loop - in ways that revitalize the neighborhoods. Education and affordable housing are two key areas to explore.

The population decline of Chicago is the most read story in the WSJ online edition today.

The Chicago Tribune and the Sun-Times also cover the story.

Friday, February 11, 2011

On the magical thinking coming out of Chrysler

If you watched the Superbowl, you probably saw the Chrysler ad (AKA one of two Eminem Superbowl ads.) If not, you can watch it here:



Beautifully filmed, beautifully edited, it's a love song to Detroit. Told by Eminem. And it starts with a question:

What does this city know about luxury?

And I've got some stats that indicate the answer would be "not much." The lead in a 2009 Wall Street Journal story goes like this:

They call this the Motor City, but you have to leave town to buy a Chrysler or a Jeep.

The Journal goes on to note that Borders had just closed its last Detroit store, and that Starbucks, "known for saturating U.S. cities with its storefronts, has only four left in this city of 900,000 after closures last summer." The story then points out that there are no national grocery stores in Detroit.

That was then, in 2009. What about now?

Well, the good news is that unemployment decreased in 2010 (according to preliminary data) to just 11.1 percent, down from 14.9 percent in 2009.

Still, an 11 percent unemployment rate is higher than the high national average and does not signify the return from hell mentioned in the Chrysler ad.

And Starbucks looks like it has reduced its Detroit offerings to just three stores in the metropolitan area. Those lucky few with the money to splurge on affordable luxuries will have more luck finding a Starbucks over the Canadian border in Windsor.

And what of Chrysler's presence in the Motor City? The company headquarters can be found in Auburn Hills, a Detroit suburb. Its CEO is Italian-born Sergio Marchionne, who also heads up Fiat, based in Italy. However, according to the Chrysler website, there IS a Chrysler dealer within the city limits!

But though Detroit has its very own Chrysler dealer, it remains, as the ad acknowledges, "no one's Emerald City." It is in fact a city still firmly situated in the hell of high unemployment, poverty and abandonment. In 2010, the Wall Street Journal ran a story about the latest hit to the city: black flight:

Today, frustrated by plummeting property values and high crime, many diehards have hit their breaking point. Their exodus is consigning borderline neighborhoods to full-blown blight and putting prime residential areas at risk.

When the black middle class abandons you years after the white middle class fled, what remains? Vandalism, poverty and blight. So when Eminem ends the ad with "This is the Motor City. And this is what we do," I really don't know what they mean. Because the Motor City is in terrible shape right now, even worse than our economy at large.

Which makes Chrysler's tag - "imported from Detroit" - all the more prescient. The film shows us Detroit as we once knew it, our Motor City, our Motown, the center of the American auto industry. But that once proud American city is fast becoming a third world entity in the middle of America, a place stricken by poverty and lack of leadership. The Chrysler ad that heralds the great American city of Detroit is also a reflection of our utter blindness to the reality of today's economy.

Let's hope Chrysler pulls its head out of the sand, puts its money where its mouth is, and invests wisely in its business and in Detroit. Let's hope that Chrysler can recover - thanks in part to its second federal bailout - and reclaim its once proud heritage as a great American auto manufacturer. Otherwise Chrysler's message, as conveyed by this very expensive Superbowl ad, is utterly meaningless.

Monday, February 7, 2011

Note to Fox and the NFL: TONE DOWN THE RHETORIC!

Yesterday, much to the disappointment of my young children (who wanted to watch Horton Hears a Who on FX), I commandeered the remote and switched over to the Superbowl pregame show. I realize the pregame show goes on for much of the day, but we switched over at 5pm (CST) - just in time to watch Colin Powell and someone from the NFL school us on the Declaration of Independence.

Huh? What's that got to do with football?

Why we needed such a civics lesson just moments before the start of Superbowl XLV, I'm not quite sure. The video was filled with stirring music, employed bunches of people (mostly men) to recite bits and pieces of the Declaration of Independence, used a range of locations as backdrop for the speakers, and included lots of people in military garb.

[It was at this time that my children demanded (unsuccessfully) a return to Horton Hears a Who.]

Yes, the Superbowl is part of the American fabric. Though I watch few football games throughout the year, even I make a point of watching the Superbowl. And this year, I forced my Horton-loving children to watch it as well.

But when we switched from Horton ("a person's a person no matter how small!"), to the Superbowl pregame show on Fox, we were expecting info on the two teams, not an over-the-top presentation of the Declaration of Independence.



The stirring recitation of the Declaration of Independence ends; we wonder at its inclusion in the pregame hype; and then Fox cuts to the Michael Douglas piece called The Journey.



I watch, astonished, at images of suffragettes and Iwo Jima and 9/11, and the space shuttle and Katrina, and wonder if the creators of that video REALLY want us to believe that the sacrifices of Americans on all the many "darkest days" we've experienced as a nation (the Depression, Pearl Harbor, 9/11, Katrina, etc. and so on) are simply stepping stones on the journey to Superbowl XLV. Did suffragettes march to gain the right to vote so men and women could sit down together to watch the Superbowl? Did Martin Luther King's dream include a match up between the Packers and Steelers in 2011?

Please, dear God, I hope not. Contrary to the message of the video, the Superbowl is NOT bigger than a football game. It is a football game. It is JUST a football game.

Which makes it entertainment. Mega-hyped entertainment. Fun, yes. Important at shaping the the future of our nation, no.

Despite what Fox and the NFL think, entertainment is not history. The events depicted in The Journey are simply far bigger, far more important and significantly more influential in our lives than whatever happened on the field during Superbowl XLV. The sacrifices that overpaid pro football players make to get to the Superbowl are pathetic and irrelevant when compared to the sacrifices our troops and citizens have made during our "darkest days."

And honestly, if the Superbowl takes us to one of those moments that is "bigger than football," please let us remember the words to the National Anthem!

Friday, January 14, 2011

Pros and cons of the financial-sector rescue...

Two interesting headlines in the WSJ: One headline says "J.P. Morgan Profit Jumps 47%."

The other reads: "New Hit to Strapped States."

So what is the new hit to the distressed states? Borrowing costs are on the rise. Here's an example of the duress states are feeling:

In Texas, J.P. Morgan Chase & Co. has taken control of a debt that it back-stopped in a 2001 deal that requires the public agency running the Houston Texans' football stadium to pay back a 30-year bond over the next three-and-a-half years.

"Think of having a 30-year mortgage, and then someone suddenly says you have to pay your house off in five years," said Janis Schmees, executive director of the Harris County Houston Sports Authority, which built the stadium. "That is pretty much our scenario." A representative for J.P. Morgan declined to comment.

What shows as profit for bankers exerts an extremely heavy burden on everyone else.