Another Day In Iraq

Here is but one photograph of the aftermath of a street bombing. You'll find more at Inside Iraq.

The photo on the left is of a pushcart, "which is used to carry fruit and vegetable carried tens of wounded people. Its the most popular ambulance in cases like these. It is handy and can carry more than one person. This cart will carry fruit and vegetable again soon."

Indulgent Parent

I've been impressed by the auto task force's 'disciplining' of GM and Chrysler. It is so different from its actions towards the financial industry. There, it is like the indulgent parent of a spoiled brat, "Here's some money. Let me know when you want more."

Your Plan Sucks

That's what Obama's auto task force said to GM. Sales projections are too rosy. The plan to take care of the pensions will not make it past 2014. The Chevy Volt will never make money. The market believes that GM makes lower quality cars. Cash flow projections are unrealistic.

But the task force does think the company is viable. But first, Wagoner is out. Then most of the board of directors have to go. And who knows who will be left.

Bankruptcy anyone?

Partner or Go Bust

That's the word to Chrysler from Obama's auto industry task force. Frankly, I'm surprised but pleased that the task force seems to have accepted reality. Here are two excerpts from their report courtesy of The Wall Street Journal.

"Independent financial analysts and industry experts are nearly unanimous in their views that, to be competitive in the decades to come, auto companies will need to transform their processes and products to improve efficiency, reduce costs and offer a higher-quality, more fuel-efficient fleet," the task force said. "These transformations will require substantial investment that Chrysler – according to its own plan – is not capable of making. Therefore, the Administration does not believe that on its own, Chrysler can achieve the scale or depth of product mix necessary to compete in the 21st century global auto market."

"Given the magnitude of the concessions needed, the most effective way for Chrysler to emerge from this restructuring with a fresh start may be by using an expedited bankruptcy process as a tool to extinguish liabilities," the task force said.

PACS and the Bailout

A friend of mine has an interesting idea with regard to our representatives in Congress and elsewhere. Norm's premise is that the collective wisdom and judgment of the average person is superior to that of the average Congressman or Senator. So, he asks, why don't we pick our representatives by lottery, much as we pick people to sit on a jury? I think he has a point. The following video provides a good example of what has happened with our present system which sees the same people being re-elected year after year. Would a Congressman selected by lottery be so stupid or greedy as to accept a contribution from BofA so that he could build up his war chest for the next election?

Visit msnbc.com for Breaking News, World News, and News about the Economy

Breaking its own laws

Israeli officials seems to have little trouble breaking international laws when it comes to Palestine or the West Bank. Maybe it's an anathema towards all law as they freely break their own laws.

As you may suspect the primary issue in this matter is the settlements. Settlements in the West Bank are to receive no funding from the government, or so the government said four years ago. Well, that is not the case with an "outpost' near the settlement of Eli. The government is building a road from Eli to the outpost. And they're building it over private land owned by Palestinians, who, need I say, have had exactly zero say in the matter.

Maybe the ratings agencies were not crooks?

A very interesting article in Economist's View raises the question as to whether the complexity of the securities being rated was the reason for credit agencies screwing up so badly in the current debacle. I can understand that the difficulty of understanding what supported the securities was great, but why were the vast majority of them rated AAA? That defies reason.

Take it back

Over the past few years the integrity of medical journals has come into question based largely on articles the journals have published, said articles having been written by a doctor who was being paid by the manufacturer of the product which was the subject of the article. At least one of these journals, that published by the AMA, has gotten upset by the criticism, so upset that they have crossed the line.

The current case concerns Dr. Jonathan Leo, who wrote a letter to to a British medical journal critical of an article that had been published in JAMA, the journal of the AMA. That article was written by someone who had a "financial relationship" with the manufacturer of the product featured in the article.

The editors of JAMA did not like this and asked Dr. Leo to retract the article. When he refused, the editors went to Dr. Leo's boss, who also refused. Dr. Leo also asserts that he was told that he would be barred from JAMA for life unless he retracted. You gotta wonder!

"A very, very active process"

That's how in 2007 the Chief Credit Officer of AIG described the company's risk management process. At that point in time he said that credit-default swaps were "a business that we have been really involved with from the very inception." Last week, Mr. Liddy, the current CEO of AIG, told Congress, "We had risk-management practices in place. They generally were not allowed to go up into the financial-products business."

Who is describing reality? I think it must be Mr. Liddy because just about all of the company's risk management big-wigs are still employed by AIG despite the enormous losses the company has sustained largely because of their poor risk management process and practices.

Inertia is a very strong force, especially with regards to the higher-ups in large public companies.

Another Reason to End the War on Drugs

Okay, so the DEA is wasting our money by chartering planes for the Director when they have plenty of planes available. The war has only increased violence and corruption, weakened our security, wasted untold amounts of money, etc. The DEA seems to have a mission to find ways to waste our money, particularly if they can do it under the guise of national security. Witness the latest fiasco of the aviation division of the DEA. They bought three untested planes that for some reason had been grounded by another agency. After ten months of 'operation' the DEA has grounded the planes and is trying to sell the parts.

The DEA purchase of these plans was not part of the normal budget; it was part of the classified budget, the budget under which the CIA and who knows who else operates. There is no real review of this budget, yet it is not our smallest budget by any means. An interesting question is who decides what goes into this classified budget. The planes were to be used for drug surveillance. Should they be part of the classified budget?

Will the market continue to rise?

Despite the rise in the market in the past few days since the official announcement of "Geithner's Plan", I remain skeptical of the plan's success, particularly with regards to the pricing of the toxic assets and the administration's unwillingness to let capitalism work.

A rising market does not necessarily mean that banks will actually lend nor companies hire. In the 21st century, by and large, the market reflects the 'beliefs' and opinions of people who are gamblers at heart. Overall, they are not looking at the long term effects of their investment; it's a question of whether the stock will rise tomorrow or next week, not whether the company behind the stock will be here ten years from now.

Why Geithner Should Go

Joan Vennochi of the Boston Globe does not have a warm regard for Timothy Geithner as our Secretary of the Treasury. Basically, she feels that he pleads ignorance too often, e.g, with regard to his non-payment of taxes and his lack of knowledge re the AIG bonuses. On this latter point Vennochi in the following excerpt from her column demonstrates quite clearly that any sensible person would have doubts as to the veracity of the latter claim.

Reporting by The Wall Street Journal and The New York Times establishes the following chronology:

AIG cited the bonus retention plan in a public filing in early November. Geithner, then president of the Federal Reserve Bank of New York, was involved in major AIG matters until he recused himself around the time of his Nov. 24 nomination as Treasury secretary.

Some lawmakers raised the matter of AIG bonuses at a December hearing. Over the next weeks, AIG officials briefed lawmakers about the retention bonuses. On Feb. 28, Treasury Department staff were briefed on AIG matters, including the bonuses, by the New York Federal Reserve Bank.

On March 3, Geithner was asked directly about the bonuses at a House Ways and Means Committee hearing.

During that hearing, Representative Joseph Crowley, a Democrat from New York, asked what could be done to stop AIG from paying $160 million in bonuses.

Geithner responded by saying executive pay in the financial industry had gotten "out of whack" in recent years. He promised to do something about it when companies getting taxpayer bailouts were involved.

The bonuses were front-page news on March 15. Geithner eventually said he would take "full responsibility" but insisted he did not learn of the bonuses until March 10. A Treasury Department spokesman later said Geithner "was not aware of the timing or full extent of the contractual retention payments or other bonus programs until his staff brought them to his attention on March 10." It took until March 20 for Geithner to confirm that his department pushed Dodd to write the budget loophole into the economic stimulus plan.

The president has made it clear Geithner is his guy. What he has never made clear to the American public is why.

Obama stood behind Geithner when his then-nominee said he didn't pay his taxes because of some misunderstanding of the tax code. Now Obama is standing behind Geithner when he says he didn't know about the AIG bonuses because he didn't fully understand what his staff was negotiating.

The president is now asking American taxpayers to trust Geithner's plan to help buy up so-called toxic assets, as well as to expand the government's authority to take over troubled corporations like AIG. (my emphasis)

That's asking for a lot of trust. So far, on a personal level, Geithner has done little to show taxpayers he deserves it. But Obama continues to praise him, and even said in a "60 Minutes" interview that he would reject Geithner's resignation, if offered.

A market rally boosts Geithner's stock when it comes to pleasing Wall Street. But it shouldn't erase the honesty question for Main Street.

A Treasury secretary who trims the truth on any level is a liability. But Obama is sticking with his investment, out of loyalty, stubbornness, or both.

There has been plenty of time to figure out who knew what about the AIG bonus formula and when they knew it. If the full calculation doesn't get Obama angry, it should.

Things are better?

I haven't looked at the Inside Iraq blog for quite a while. This is a blog written by Iraqi journalists working for McClatchy and it can be tough to take. For example, the most recent entry, Gone with the Wind, is one journalist's cry of despair, despair at the evil of Saddam and despair at how awful things have gone since our invasion. The previous entry, Country of Orphans, recounts the condition of orphans in Iraq today. The author claims that of the 3,000,000 orphans in Iraq today only 469 "are living under the care of the state". These numbers are hard to prove , but I suspect that one could fairly easily prove this number - 2,000 dinars. That's how much the government provides monthly for the care of each orphan in state orphanages. 2,000 dinars is worth $1.50. Conversely, the monthly salary of some officials approaches $40,000 a month.

Surging where?

Iraq is having a very hard time integrating the Sons of Iraq, the Sunnis the U.S. bribed to attack Al Qaeda, into the Iraq army. Thus far, only 5,000 Sons have paying jobs in the army. And, with Iraq having a hard time paying its existing forces because of the drop in the price of oil over the last year, the remaining 95,000+ Sons will have a hard time becoming members of the army.

Another candidate for dumbest Congressman

The last one was Lynn Westmoreland of Georgia. He did not know the ten commandments. Today's nominee is Gary Elkins of Texas who asked, "What's Medicaid? I know I hear it ... I really don't know what it is. I know that's a big shock to everyone in the audience, Okay?"

Miron lays it on the line

Jeffrey Miron makes what is probably the shortest but most complete case for legalizing drugs I have read. Perhaps, our current economics situation will smarten us up as did the Great Depression smarten up our ancestors, who overturned Prohibition.

It's JP Morgan's Turn

It seems that they want to spend $120,000,000 for two new luxury planes and another $18,000,000 to make sure the planes are parked in a 'green' hangar. Naturally, they would say that TARP money is not being used.

The hangar deal is especially problematic as they'll be pushing out the current tenant of the hangar.

Tone deafness permeates this industry. Here's what the chairman of JP Morgan said recently, "When I hear the constant vilification of corporate America I personally don't understand it."

It's a start

Whether they did it because they were ashamed or afraid, some AIG employees have returned their bonuses. A total of $50,000,000, or just shy of one-third, has been returned. Of course, on the other side, twenty employees quit because of the brouhaha.

We shall see

The market is up almost 500 points on the day of the official announcement of Geithner's plan to rescue the banking industry. What will happen tomorrow or, more importantly, over the next few and more months? I remain skeptical but really hope Geithner's got it right.

$800,000,000 down the drain

$800,000,000 is what we're spending in Afghanistan the war on drugs. Our new ambassador, Richard Holbooke, thinks this is wasted money. He said, "It is the most wasteful and ineffective program I have seen in 40 years in and out of the government."

Plus, the drug, Roundup Ultra, we use to kill the other drugs opium etal, is not exactly helping those who breathe it in. 'Reported symptoms in humans include elevated heart rate, digestive difficulties, increased risk of miscarriage in pregnant women, severe lung irritation, dizziness and heart palpitations."

Some wars are not worth fighting.

We are not out of the woods

and we may have a heck of a lot more difficulty getting out. Paul Krugman actually despairs that we will succeed if we implement Geithner's current plan. The plan seems to violate some of the principles espoused by Joseph Stiglitz, another Nobel prize winner, in an article a few weeks ago in which he issued caveats re recovery options.

My concern, at this point when all that's been revealed is not 'official', is probably overly cynical. The plan relies on Wall St. types setting the value of the banks' bad assets via an auction of some sort. We would be co-investors with the private people but the bulk of the transaction (80%?) will be a loan from us. If the value placed on these bad assets by the privates is reasonable, they will make a barrel of money, we will make some. If the value is wrong, they will lose their investment (which I've read is on the order of 3% of the total) and we would lose ours (which is 97% of the investment).

The preceding risk-reward ratio is bad enough. But from what we've seen recently with regard to the ethics of Wall St. types, what prevents the bidders at these auctions from conspiring to set prices to minimize the possible loss to them? After all, we are putting up most of the money yet they will get a disproportionately larger share of the profits that may occur.

It worked in Iraq, didn't it?

Then, the use of private contractors should work in Afghanistan. That's Gates hope. There are now more than twice as many contractors than troops in that country. Only 3,847 are armed, but a mere 9 of these have U.S. passports. 'Administrative support' is being provided by a London company for a fee of $993,000.

Be thankful we have a modern army.

A Spokesman for the Iraq War

Bruce Miller of The Blue Voice alerted me to the following comments by Thomas Friedman. They could have come from GW or one of his acolytes.

It's a secret world

It's often the case that when disasters occur, important details are revealed to the public for the first time. You'll agree that these are disastrous times for the banking industry and we have learned much about the way banks work over the past few months in particular.

Today's juicy little detail is about loans to insiders, i.e., executives, directors and the directors' companies. Now there is no law that says a bank cannot loan money to these insiders. However, there is a regulation that says the bank does not have to reveal the details, who got what why. It would be nice to know this information when we own part of the banks. For example, Bank of America doubled its loans to insiders in the third quarter of 2008, when the debacle began to escalate in intensity. You have to wonder why this occurred when credit for your company was drying up, not expanding. One of the reasons for the S&L failure of the late last century was loans to insiders. Can it happen now?

Here is a list of the banks who lent the most to insiders. See any familiar names?

JPMorgan Chase, New York, $1.48 billion

Wachovia, Charlotte, N.C., $747 million

M&I Marshall & Ilsley, Milwaukee, $644.4 million

Bank of America, Charlotte, $624.2 million

Northern Trust, Chicago, $523.5 million

Union Bank, San Francisco, $499.3 million

BB&T, Winston-Salem, N.C., $493.8 million

Commerce Bank, Kansas City, Mo., $467.9 million

Regions Bank, Birmingham, Ala., $444.3 million

Comerica Bank, Dallas, $391.5 million

3 Troubled Entities

Congress, the media, Wall Street honchos. Enough already. Let's start doing what you're paid to be doing.

Congress spends most of its time trying to get re-elected. Okay, the auto executives have no sense of modesty. But, is their flying down to DC worth more than one 5-minute harangue? Shouldn't Congress be analyzing the companies' plans for salvation? Yes, AIG was arrogant in spending our money on bonuses to the people who wrecked the company. But, why was the company allowed to pay its counterparties in full although the underlying investments were still solid? Why can't the financial products division be isolated so that it no longer continues to infect the entire company?

Is Congress really the cause of the media's devotion to trivialities? Are all opinions equal and deserving of equal play? Is economics the reason for the preponderance of 'reality' shows on television? Are the arts dead? How can a tv network devote months of daily coverage to the death of one girl in the Caribbean? Do the "pundits" demonstrate anything but the ability to be rude and the ability to yell? How often does one hear reasoned analysis of our current situation? Why does the media remain so insular and chauvinistic?

Okay, Wall Street may have always been a different world. But it has really become divorced from planet earth in this century. When did it become necessary to pay retention bonuses every year? Is it really necessary to pay brokers so much money? Shouldn't the stockholders get some of the profits? Whatever happened to investing for the long term? Should they have spent fortunes investing in securities hardly any of them understood? Why are they upset and threatening to take their marbles because the majority owner - us - starts to exert a modicum of control?

It is the first day of spring. I should relax.

Makes Sense to Me

It's obvious that the war on drugs is a failure of catastrophic proportions. Legalizing drugs in the same way we have legalized tobacco and alcohol would save us money by eliminating the costs of this war and would likely make for a safer world (until we find the next financial thing to quarrel over). An assemblyman from California has another advantage of legalizing one drug, marijuana - the state could tax it as it taxes alcohol and tobacco and, in today's economy, we can use all the tax revenue we can get.

Aaron Houston makes a good case for a domestic marijuana industry here. In addition to the advantages cited above, legalization should put a big damper on Mexico's drug cartel.

Interpreting the law

Here's another example of judicial logic. Pepper spray is one of the verboten weapons of modern warfare. Yet, a judge has ruled that's it's perfectly okay for naval recruits to be sprayed in their eyes as part of their training. The judge felt that the Navy knew what was right for its recruits and decided the risk was worth it.

More is needed

The Institute for Policy Studies wants to reform corporate pay practices that are unfair. Among their suggestions are:

• Limit the compensation of executives of companies that have taken our money.
• Make the $1,000,000 limit of tax deductibility of executive compensation a reality.
• Value stock options on their grant date, not their exercise date.
• Unlimited tax deductibility of deferred executive compensation.

They also feel that in awarding contracts the government should favor companies with responsible pay practices.

Computer Security

Any determined, smart person, given enough time, talent and effort, can attack just about any computer that is tied to the Web today. More and more people are trying it or the existing cadre of cybersnoops is getting better. The Center for Strategic and International Studies estimates that government and private computer networks were breached 37,000 times during fiscal 2007, compared with 24,000 break-ins the previous year; attacks on federal computer systems more than doubled in 2007. How many of us have had to get a new credit card because someone has stolen our card data? There have been so many breaches of company networks that the stories are buried on page 17 of the newspaper; they are no longer top news.

Yet, we don't have very many people entering the field. We produce 50 - 60 computer security doctorates in this country every year and more than half of them go back to their home country. I'm not saying that only those with Phds in computer security can produce the next generation of secure networks. Many of the major advances in computer technology have been made by people without advanced degrees and by people without degrees. I am saying, as I have for quite a while, we need to do something about the small number of students involed with the sciences.

"I get the new reality......

and I'll make sure Citi gets it as well," so said Vikram Pandit, Citicorp CEO, when he canceled the order for a new company jet just a few months ago. Now we learn that his office and that of his lieutenants is being remodeled at a cost of millions of dollars. This has alarmed most of the media and, if you read only the headlines, it does sound over the top for the company that Citi has become.

But looking below the headline, one learns that the headlined cost of $10,000,000 is based on an estimate by an unidentified source, who has tripled the Citicorp estimate of $3,200,000. Then, if Citi's statement on the matter is to be believed, “Senior executives in our corporate headquarters are moving from two floors to smaller, simpler offices on a single floor,” the company’s statement said. “Based on estimates made when the project was initiated, we expect to generate savings in the next few years well in excess of the project costs.” The statement goes on to claim that there will be a $20,000,000 savings over the life of the lease. If the statement is true, there are sound business judgements being made in this case.

It is true that there will be a sub-zero refrigerator, “premium grade” millwork, blast-proof window film and "soft seating" installed. That is somewhat over the top but when one looks at past Citigroup offices with their fireplaces, zen gardens and fish tanks, the planned offices seem somewhat declasse.

Let's get back to Pandit's claim of getting the new reality. He does not yet understand the fish bowl in which he and the company are operating. He needs to be more open. He needs to understand that the public has a very different view of the world and the accoutrements that should fall to corporate bigwigs than he does. The media needs material that people will read or watch or hear. Corporate greed is the hot topic of early 2009; anything smelling of that will be broadcast to the world immediately. The details and reasons for spending money do not matter. The media wants the headline that will grab the audience. Pandit needs to do a much better job of explaining in advance how he is spending our money.

More, More, More

The House Ways and Means Oversight Subcommittee has done some review of the top 23 recipients of TARP funds. The committee claims that 13 of these companies owe federal taxes; two of them owe more than $100,000,000 each. The other eleven owe a total of $28,000,000.

To receive the TARP funds each company had to confirm it owed zero taxes. What's one more little white lie.

Please don't leave

Fannie Mae is another company that needs to retain the best and the brightest. So, naturally, it has to pay them money to stay as well as money to do their jobs. Can you quarrel with paying the COO a 'retention bonus' of $611,000? Heck, his regular salary is only $616,000.

And because there are so many jobs available in the financial field and so few people to fill them, we need to pay the COO almost three times more this year than we paid him to stay last year ($260,000).

Did I read that the company was on its way back to profitability? Only in the tea leaves. In reality, that day is far, far away.

A Comment on Our World

The following chart from the Wall Street Journal lists a few CEOs who have done well personally although their companies did not.

Read the Contract

Lawrence Cunningham, a Georgetown Law School professor, has a brief primer on abrogating contracts in today's NY Times. His basic point is that there are many reasons for abrogating a contract, but you can't do anything unless you read the contract and know the circumstances surrounding it. How did our lawyers determine the AIG contracts were unbreakable?

Controlling a Company

In the world of the small corporation, with which I am familiar, you need to own 50.1% of the stock to control the company. The world of the mega-corporation is a lot different. I've seen cases where as little as 7% of a company's stock gives you control. Then, there are the companies with two classes of stock where the percentage needed for control could be even less. Why don't we control AIG? We own 80% of the stock.

We're not going to take it anymore

On a day when even my closest friend, who has almost zero interest in most economic matters, is trying to start a protest march on AIG comes this good idea from Bill Black, one of the main people in resolving the S&L crisis, and three other heavy hitters.

Remember that this is a firm that is 79.9 percent owned by the United States government. It is therefore quite possible to abort this outrage, by decisive exercise of public authority. Within existing law, there is more than one way to do it. But a direct solution is readily at hand: Firstly, the U.S. trustees in charge of the firm must immediately instruct the corporate treasurer to make no payments of any bonuses. They also need to order him to issue stop-payment orders on any checks that fly out the door at the last minute, as with Merrill Lynch. Then the trustees need to split off the derivatives unit from the rest of the firm and separately incorporate it. This step leaves AIG's other businesses free to operate as usual. If the recipients of the bonuses refuse to waive them, then the derivatives unit should at once be thrown into bankruptcy, terminating all obligations to pay them. Right now, press reports suggest that the firm's top management waited until the last minute to inform the government of what was happening. AIG CEO Edward Liddy, accordingly, should be asked to resign at once, for the sake of public confidence and to send a clear signal that gaming the system is unacceptable. It is also past time for an investigation of the validity of AIG's past accounting and securities disclosures and its executive compensation program by the Office of Thrift Supervision, the Securities and Exchange Commission, and the FBI.

And Glenn Greenwald demolishes the 'sanctity of the contract' argument:

As any lawyer knows, there are few things more common - or easier -- than finding legal arguments that call into question the meaning and validity of contracts. Every day, commercial courts are filled with litigations between parties to seemingly clear-cut agreements. Particularly in circumstances as extreme as these, there are a litany of arguments and legal strategies that any lawyer would immediately recognize to bestow AIG with leverage either to be able to avoid these sleazy payments or force substantial concessions.

Since the contracts are secret and we're apparently just supposed to rely on the claims of AIG and Treasury Department lawyers, it's impossible to identify these arguments specifically. But there are almost certainly viable claims to be asserted that the contracts were induced via fraud or that the bonus-demanding executives themselves violated their contracts. Independently, it's inconceivable that there aren't substantial counterclaims that AIG could assert against any executives suing to obtain these bonuses, a threat which, by itself, provides substantial leverage to compel meaningful concessions. Many of these executives were, after all, the very ones responsible for the cataclysmic losses.

The only way a company like AIG throws up its hands from the start and announces that there is simply nothing to be done is if they are eager to make these payments. One might expect AIG to do so -- they haven't exactly proven themselves to be paragons of business ethics -- but the fact that Obama officials are also insisting that nothing can be done (even while symbolically and pointlessly pretending to join in the populist outrage over these publicly-funded "retention payments") is what is most notable here.

Legal strategies aside, just as a business matter, one of the first things which every compnay in severe distress does is go to its creditors, explain that it cannot make the required payments, and force re-negotiations of the terms. That's as basic as it gets. To see how that works, just look at what GM and other automakers did with their union contracts - what they were forced by the Government to do as a condition for their bailout. Obviously, if a company goes into bankruptcy, then contracts to pay executive bonuses are immediately nullified, but the threat of bankruptcy or serious financial distress is, for obvious reasons, very compelling leverage to force substantial concessions. And the idea that, in this economy, AIG executives (of all people) will be able simply to leave and go seek employment elsewhere unless they receive their "retention bonuses" (even assuming that's an undesirable outcome) is nothing short of ludicrous.

The Voice of Experience

The pope has wide experience in and deep knowledge of communicable diseases. Therefore, he must be listened to when he speaks of a disease that has devastated at least 22,000,000 Africans. That disease is HIV/AIDS. Here are the pope's words on the use of condoms as a preventive, "You can't resolve it with the distribution of condoms. On the contrary, it increases the problem."

Making a deal with the devil?

Marc Ash is really upset at the Congress. Gee, I can't imagine why he feels it is useless and corrupt. What particularly angers him today is the redrafting of foreclosure negotiations, which Ash feels should be crafted for the benefit of the consumers, not the banks. Yet, the Senate is negotiating the legislation with the banks.

Ash asks, "What could be more corrupt than asking banks that have been bailed out by the American taxpayer - expressly to address their loses from mortgage failures - if they approve of a foreclosure bill that would in turn bailout the taxpayer/homeowners themselves?"

I told you he was a man of principle

Gov. Mark Sanford of South Carolina has refused stimulus finds connected to unemployment benefits. Now he wants to use his state's share of the stimulus to pay down some of the state's debt. How this would stimulate the state's economy is not a question addressed by the governor. The stimulus legislation does not allow it, but the governor is persistent and will try again. Would his time not be better spent trying to bring down the state's 10.4% unemployment rate?

And to top it off

It's obvious that AIG does not give one fig about our money. I learned today that they paid the credit default swap claims in full even though the claims stemmed not from a default on the insured securities but because AIG's credit rating was lowered.

One would think that if it were your money, you would try to negotiate a lower payment as the underlying security is still good. Apparently, AIG did not consider that as it was our money, not theirs. I wonder how much influence can be attributed to the fact that one of the parties paid in full was Goldman Sachs, Paulson's former firm.

Geithner should resign and we should sue AIG. It is true - truth is stranger than fiction.

Not nice reading for a Sunday morning

In 2006, President Bush allowed the Red Cross to interview fourteen 'high-value detainees' at Guantanamo and publish a confidential report of their interviews. Mark Danner was able to get a copy of that report. Danner's article in the New York Review of Books is harrowing. Here is the table of contents of the report:

Contents
Introduction
1. Main Elements of the CIA Detention Program
1.1 Arrest and Transfer
1.2 Continuous Solitary Confinement and Incommunicado Detention
1.3 Other Methods of Ill-treatment
1.3.1 Suffocation by water
1.3.2 Prolonged Stress Standing
1.3.3 Beatings by use of a collar
1.3.4 Beating and kicking
1.3.5 Confinement in a box
1.3.6 Prolonged nudity
1.3.7 Sleep deprivation and use of loud music
1.3.8 Exposure to cold temperature/cold water
1.3.9 Prolonged use of handcuffs and shackles
1.3.10 Threats
1.3.11 Forced shaving
1.3.12 Deprivation/restricted provision of solid food
1.4 Further elements of the detention regime

And here is the report's conclusion:

The allegations of ill-treatment of the detainees indicate that, in many cases, the ill-treatment to which they were subjected while held in the CIA program, either singly or in combination, constituted torture. In addition, many other elements of the ill-treatment, either singly or in combination, constituted cruel, inhuman or degrading treatment.

What have we become?

It is even worse, much worse

The Wall Street Journal has more information on the AIG bonuses. The number is $450,000,000 and - you won't believe it - this is being paid to the staff of the financial products group, the group that caused the implosion of AIG. What in the Lord's name is going on?

AIG claims that they are contractually obligated to pay this enormous sum. Well, I guess their lawyers are as inept as their financial people. They're telling us that bonuses are due even though the company has for all practical purposes gone belly up. I have a great deal of difficulty understanding this.

And then these greedy bastards are paying out another $121,500,000 in incentive bonuses. Incentives for what? To continue to manage this company totally into the ground? To stay because there is such a demand for their services in a financial climate where layoffs are happening every day?

Liddy, the board and the rest of their cronies should accompany Mr. Madoff to jail.

I know that I shouldn't get excited. After all, it's less than a half percent of the $173 billion we've given them so far. Note that 'so far'. They'll be back at the trough soon.

How else can they retain the best and the brightest?

"We cannot attract and retain the best and brightest talent to lead and staff the AIG businesses -- which are now being operated principally on behalf of the American taxpayers -- if employees believe that their compensation is subject to continued and arbitrary adjustment by the U.S. treasury," was the response the chairman of our company, AIG, to Geithner's request that millions of dollars in bonuses be renegotiated by AIG.

This is the company that has been so successful that they've needed $170 billion of our dollars to stay afloat. Shame has vanished from their world.

Another Man of Principle

Gov. Rick Perry of Texas stands with Gov. Mark Sanford of South Carolina in rejecting some of the stimulus funds. Perry, like Sanford, does not like funds for the unemployed because it will require changes in state law that, once accepted, will be well nigh impossible to change.

As with South Carolina, Texas does have a problem with unemployment in that its laws are such that only twenty percent of the unemployed receive benefits. Perry's principles are more important than providing benefits to the other 80%.

Your chance to win $420 billion

It's been over a month and still no details from Geithner and stll the Treasury is short-handed. Maybe following SNL's 'suggestion' may be as useful as Geithner's way.

Suspicion can pay off

The Texas town of Tenaha is apparently not doing too well. Many stores and companies have gone out of business. They don't seem to have enough money to fix a broken window in Town Hall. So, it looks like they've turned to a state asset-forfeiture law to beef up the town's coffers.

This law allows police, should they stop you for a possible violation, to present you with two choices - sign a document turning over all the possessions you have on you and in your car to the town or be charged with a crime, the crime varying between a traffic offense to drugs. Of course, just about all of the people charged under this law are out-of-towners.

You should know that Tenaha is a small town near nothing. It's not a place where things move fast. So, if you protest your innocence and refuse to sign over your assets, you may have to return often before your case is heard. Many people weigh their options and decide to turn over their watches or money or jewelry or...

Perhaps Governor Perry should not reject all of the unemployment money the federal government wants to give Texas. He might be able to give some to Tenaha, which might result in the town not having to resort to shady practices to pay their bills.

Marking Time

That's the conclusion that the European Union came to with regard to the ten-year campaign against drugs by the UN. They found no real difference in the world-wide drug problem over the ten years from 1998 to 2007.

The head of the UN Commission on Narcotic Drugs acknowledged at least one change - a rise in crime. That rise has led to El Chapo, a Mexican drug lord, making #171 on the Fortune list of billionaires. Malcolm Forbes must be rolling in his grave.

How much money has been wasted on the war on drugs?

Principle above all

South Carolina will be getting $8 billion in stimulus money. Its governor, Mark Sanford, controls $700,000,000, or less than 10%, of this. Sanford, ever mindful of the needs of his state, has decided not to accept this $700,000,000 even though unemployment in South Carolina is over 10%. He is convinced that this money is bad as it will increase the federal deficit and create unrealistic expectations in the state's citizens.

I'm sure he'll have no trouble explaining this decision and the rationale for it to his constituents and the nation when he runs for President in 2012, assuming he survives his next election.

Moderate Muslims

For a couple of years now, I've been wondering where the moderate Muslims are. They don't appear to be in Saudi Arabia as they've just decided it's okay to whip a 75-year-old widow and sentence her to four months in jail for 'mingling with young men', one of whom was a nephew of her dead husband.

According to a former Islamist terrorist, "Scholars in the most prestigious Islamic institutes and universities continue to teach things like Jews are "pigs and monkeys," that women and men must be stoned to death for adultery, or that Muslims must fight the world to spread their religion." Many of the 'crimes' that are punished in Islamist governments are also in the texts of other religions but these other religions have moved on. He urges Islam to move on and join the modern world.

A Funny World

Citibank says it's had two profitable months - if you forget about taxes and special items, that is - and this triggers a 5.8% increase in the Dow? This makes sense to you? This is a company that is trading at less than the billions we have loaned them. This is a company whose losses on CDS today are $140.3 billion, but it only has $108 billion in reserves.

This happened on a day when it was reported that the loss risks from derivatives from the five largest banks increased 49% in the 90 days ending 12/31/08.

We really want to believe.

An Educated Guess

David Warsh thinks that there may be movement towards a restoration of something like the Glass-Steagal Act. And he thinks Paul Volcker is trying to move us in that direction, which would lead to breaking up some of the dinosaurs.

Fix the problem

Barry Ritholz has an excellent comment today re nationalizing the banks.

Most of the talk against nationalizing the banks (or more accurately the failing banks) worries that such a move would destroy people's confidence. Ritholz defines reality, "Let me make sure I understand this: We have lost 4 million jobs in about a year, the S&P500 had its first quarter ever where profits were zero, the government has given away trillions of dollars in ill advised corporate bailouts, credit remains frozen, the housing market is still in the crapper, and the stock market is down by more than 50%, with the Bear market losses now about $11 trillion dollars — and nationalizing the banks is whats going to undermine confidence?"

He concludes:

Classical economics made a fundamental error in its key conception of Human Beings, treating them as perfectly rational. It now compounds that error by utterly misunderstanding Confidence.

Fix whats broken, namely the financial system. When that’s repaired, confidence will improve.

Serving Time

Every day hundreds of teachers in the New York City school system do not go to a classroom to teach. They go to a 'rubber room', a room where they simply sit around all day but still draw their full salary and benefits. Teachers are assigned to this room because they have been accused of something; it could be touching students, being late too many times or having too many parking tickets. The operative word is 'accused'; the accusation could be a student getting back at a teacher. Once accused the teacher must wait for the school's justice system to hear the case; that may be in a month or in years.

This seems to be quite draconian and costly (over $50,000,000 a year). Does it make sense?

An Unused System

If you survive long enough or are large enough, your company will do business with someone that, in retrospect, you should have avoided. Our government is no different; people will try to stiff it. When a government agency decides that it no longer wants to do business with a company for valid reasons, the agency must enter the company's name and information on what is called the Excluded Parties List System (EPLS). This makes sense, given the size of our government. But, as the GAO has discovered, the system does not work very well.
Some examples:

In July 2005, the Department of the Army debarred a German company and its president after the president violated German law and attempted to ship dual use aluminum tubes, which can be used to develop nuclear weapons, to North Korea. In the debarment decision, the Army stated that because the president “sold potential nuclear bomb making materials to a well-known enemy of the United States,” there was a “compelling interest to discontinue any business with this morally bankrupt individual.” Despite this debarment, the Army chose to continue to award the company task orders and paid it over $4 million during fiscal year 2006. Although the Army told us that it was legally obligated to continue the contract with the company, in fact several options were available for termination. It is not clear if the Army considered these options because the officials we spoke with were not sure of the exact circumstances surrounding the decision and there was no contemporaneous documentation related to the case.
• In April 2006, the Department of the Navy suspended a company after one of its employees sabotaged repairs on an aircraft carrier by using nonconforming parts to replace fasteners on steam pipes. If these pipes had ruptured as a result of faulty fasteners, those aboard the carrier could have suffered lethal burns. However, less than a month after the suspension, the Navy awarded the same company three new contracts because a contracting officer failed to check EPLS to verify the company’s eligibility.
• GSA suspended a construction company in September 2006 after its president opened fraudulent GSA surplus-property-auction accounts using fictitious social security numbers so that he could continue to do business with GSA while his original account was in default for nonpayment. The Department of the Interior attempted to check the contractor’s eligibility in EPLS prior to making several awards to the company, but the exclusion was not revealed because GSA did not enter the company into EPLS until October 2006, more than a month after the suspension began.
• The Department of Health and Human Services (HHS) debarred an individual in April 2003 for 5 years after he pleaded guilty to Medicare fraud. Because HHS did not debar the individual’s company, he transferred ownership of the company to his wife in an attempt to continue receiving Medicare reimbursements. After HHS objected to this arrangement, he then sold the company to a neighbor. Two years later, citing financial difficulties, the neighbor sold the business back to the original owner’s wife. The wife admitted to our investigators that she then legally changed her last name to her maiden name to avoid “difficulties” in using her husband’s name. Using this scheme, the couple received Medicare payments for the remaining 3 years of the husband’s debarment.

The problem seems to be that few pay attention to the system and, thus, either do not report bad companies, report incomplete information or do not search the lsit when a contract is to be awarded.

Reporting is inadequate

The Domestic Policy Subcommittee does not have kind words to say about Treasury's oversight of the TARP. I know that this issue is no longer news, but the subcommittee, of which Kucinich is chair, points out that only 20 of the 317 recipients of TARP funds report monthly and those that do report need not supply many details.

Reality Intrudes Again

Every so often you'll see an article entitled, "100 Best Companies to Work For." I think Fortune Magazine publishes such a list annually. Being naive, I expected that Fortune would have come up with these companies through some research. Well, I was wrong.

The Fortune List and, I suspect, many others are complied by an organization that goes by the name "Great Place to Work Institute". The co-founder, Robert Levering, is the co-author of the Fortune list. You can get on the list by nominating yourself and completing a form to measure your employees trust index (at least 400 employees complete a 15 minute survey) and an audit of your culture (as seen by you). Last year 353 companies applied for the 100-member list.

I wonder how confidential the employee survey is and what feelings they have about being asked to complete a survey as to their trust in the company. The culture audit gives the company ample opportunity to tell its story. An article in the Columbia Journalism Review raises many questions about some of these stories.

They Just Don't Get It

Instead of letting the matter die on its own, the Catholic Church, in the person of Cardinal Giovanni Battista Re who is the church's point man in Latin America, is publicly backing the excommunication of the mother and the doctors who were responsible for the abortion of twins being carried by a 9-year-old who was impregnated by her stepfather.

In Cardinal Re's view nothing else matters but that "the twins had the right to live" and that was taken from them. The girl's health, her rape had no bearing on the matter. God's law, as interpreted by the Cardinal, was violated.

Questions for Mr. Geithner

The Congressional Oversight Panel on the Treasury's actions to get us out of our current situation has in its latest report a few questions for Mr. Geithner (my emphasis):

There are many questions that we believe must be addressed in coming weeks, but we ask you to focus your attention on one immediate issue. Treasury has not explained how its financial stabilization programs fit together to address the problems that caused this crisis. This failure to connect specific programs to a clear strategy aimed at the root causes of the crisis has produced uncertainty and drained your work of public support. Financial institutions, businesses, and consumers will not return to healthy investment in the economy if they fear that the federal government is careening from one crisis to another without an intelligible road map.

For these reasons, we ask that you provide answers to the following questions about
Treasury’s current views and the approach outlined in the Administration’s recently-issued Financial Stability Plan. Please answer each question in detail and please indicate the economic or other evidence on which your each answer rests:

1. What do you believe the primary causes of the financial crisis to have been? Are those causes continuing? How does your overall strategy for using Treasury authority and taxpayer funds address those causes?
2. What is the best way to recapitalize the banking system? How does your answer
relate to your assessment of the causes of the financial crisis?
3. What is your view of the economic status of the American consumer and the
amount that constitutes a healthy debt burden for the consumer? The Consumer
and Business Lending Initiative and elements of the Homeowner Affordability
and Stability Plan are designed to restart consumer purchases of homes and
automobiles, but the success of these programs depends on the ability of
consumers to absorb more debt. Has Treasury developed any data to determine
whether consumers can shoulder the additional debt to power these initiatives?

The report begins with some interesting comments about our detailed knowledge of the mortgage situation.

To develop this report, we explored the available data and discovered how little is known about the current state of mortgage performance across the country. The ability of federal banking and housing regulatory agencies to gather and analyze this data is hampered by the lack of a nationwide loan performance data reporting requirement on the industry. Consequently, there is no comprehensive private or government source for accurately tracking loan delinquencies and loss mitigation efforts, including foreclosures and modifications, on a complete, national scale. No federal agency has the ability to track delinquencies and loss mitigation efforts for more than 60 percent of the market. Existing data are plagued by inconsistencies in collection methodologies and reporting, and the numbers are often simply unverifiable. Worse still, the data that are collected are often not the data needed for answering key questions, such as, what are causing mortgage defaults and why loan modifications have not been working. The United States is now two years into a foreclosure crisis that has brought economic collapse, and federal banking and housing regulators still know surprisingly little about the number of foreclosures, what is driving the foreclosures, and the efficacy of mitigation efforts. The Panel endorses a much more vigorous plan to collect critical foreclosure data.

Granted Geithner has only been at the job for a short time, but he was head of the NY Fed and should be more aware of the issues. And, of course, there is the issue of staffing the Treasury, which is going very slowly. Geithner needs help, but does he acknowledge it? Why isn't the Economic Recovery Advisory Board involved more? Has the board even met? There is talent and experience there and we can use all of that that we have.

Why not bankruptcy for GM?

Life could be better for it and its suppliers. For one thing and an important thing, management would likely change and it is doubtful that new management could be worse. Mark Roe, who teaches bankruptcy at Harvard Law, suggests that bankruptcy may be the best thing for GM because, at last, it would force the company to finally try to resolve its fundamental problems with regards to labor, legacy costs, operations and the dealer network.

It's unlikely that bankruptcy would turn off suppliers, as vital suppliers are among the first that the judge orders to be paid. And settling with bondholders is a lot easier in bankruptcy as it's much more difficult for a few bondholders to scuttle a deal when GM is in Chapter 11.

Pushing the limits in Gaza

Amnesty International thinks that Israel went overboard in Gaza by destroying many buildings that did not pose a threat to their forces. They are joined by an Israeli group, Breaking the Silence, that gathers testimony from Israeli soldiers. One member of this group said, "From the testimonies that we've gathered, lots of demolitions - buildings demolished either by bulldozers or explosives - were done after the area was under Israeli control."

Many of the buildings were destroyed by mines that were planted and detonated after Israel had gained control of an area and, thus, the buildings were no longer dangerous to the Israelis.

A Pleasant Surprise

I am not a supporter of the Clintons, but I have to acknowledge that Hillary is starting out quite well. She may actually have pressed a real reset button with Russia as the foreign ministry is "cautiously optimistic" as it "expects good results" from the meeting. Perhaps Medvedev will pass on his joyous spirits - due to his three dogs winning nationalk titles - to the foreign minister.

Inviting Iran to the upcoming conference on Afghanistan is also another smart move.

May she continue in this vein.

Abortion is always wrong

So says a Brazilian archbishop. It does not matter if the 'mother' is 9 years old and was raped by her stepfather. It does not matter if the girl's life was at risk. It does not matter that abortion is allowed in Brazil in cases of rape and risk to the mother. All that matters is that an abortion was performed. Therefore, all participants - except the girl - are excommunicated. I'm really glad someone is still standing tall for the church.

What's more expensive.....

a share of GM common stock or a spark plug for a Chevrolet? My father would never believe it but GM closed at $1.81 today after the auditors questioned its ability to continue as a going concern. Heck, it's lost money for years now, it has a negative net worth and it's running out of cash. It doesn't look like salvation is around the corner. A spark plug is more expensive than a share of GM stock.

Ed Glaeser has an excellent article as to why we should stop pouring money into the Big Three. Trying to save an industry whose day has passed (at least in its current form) is not a good thing. Ask Japan, Ask Europe. We need innovation to effectively compete today and that is seldom found in behemoths. It's the little guy with the big idea we need today.

As I said last month. Millennia ago, the dinosaurs may have been thought too big to fail, but they did and the world moved on. It was a different world, but it absorbed the loss. Some species throve because there were no more dinosaurs.

A Unique Selling Proposition

For years cities and towns have turned to debt collectors to collect unpaid parking tickets. It may make financial sense, but, by and large, it's quite obvious who is dunning you (Do you get the feeling that I have a little experience in this area?) and why and sometimes you can even agree that you owe the money and so you pay it.

Apparently, in some counties there is a very different procedure if you issue a bad check, even a check for a small amount, e.g., $14. The district attorney, the chief prosecutor for the county, may turn the matter over to American Corrective Counseling Services (ACCS), a debt collector with a few new twists.

ACCS sends out a letter that looks like it came from the district attorney. One such letter went to a college student whose $92 check to the bookstore bounced due to a screwup which can occur if there is more than one person writing checks on the account; in this case her mother was also writing checks. The letter said that the student had "violated criminal statutes by issuing a bad check." She faced as much as a year in jail and a $2,500 fine unless she made good, paid an additional $215 in fees and spent a Saturday at a "financial accountability class." Being a trusting young person, she complied. However, ACCS had no authority to send such a letter. Yes, they had a deal with the DA, but the deal called for their involvement only if the check exceeded $100.

But even in those cases where the amount is greater than $100, one has to be concerned with behavior and actions which strongly imply that one is dealing with the legal authorities. It is very likely that collections are better when the debtor thinks the law is after him. Are the district attorneys acting honorably and legally by allowing their seal to be used by a private company?

The problem is more than impersonating an officer of the court. A case is begun when a merchant informs ACCS that it has received a bad check and has tried to contact the check writer. In many cases proof that contact has occurred can't be found. In some cases ACCS telephones people with a message like "Twentieth judicial, state’s attorney bad check restitution program. Our office has an official matter requiring your immediate attention." And, of course, there is no legal requirement to attend a course, for which you must pay.

This can be a lucrative business. The company has 300 people dunning for them and has convinced at least one VC to invest in them. It's lucrative enough to lobby Congress to exempt it from the Fair Debt Collection Practices Act.

The Beat Goes On

The Wall Street Journal won't let up, at least when it comes to compensation paid to Merrill Lynch people in 2008. Today, the Journal reports that 149 people received compensation (cash and stock) of more than $3,000,000. Eleven received more than $10,000,000. One was paid $13,000,000 although the unit he ran had negative net revenue (that's right, revenue, not income) of almost thirty-six billion dollars; a recipient of $39,400,000 ran a unit with negative revenue of only $28.1 billion.

It is true that the stock component of this compensation is now worth a fraction of what it was. It's still a lot of money for a company that went bust.

Intelligent Design

Arin Dube has an interesting analogy comparing the current bank situation with biological theories. He does not espouse natural selection (Darwinian liquidation) as it will take too long. He thinks our current approach (bailouts or zombies on life support) will eventually result in natural selection. So, the man from Berkeley espouses intelligent design or organized liquidation. It's tough but much better than the two other options.

Spending our money wisely

These are some of the projects our leaders deem worthwhile for our money:

• $1.7 million for pig odor research in Iowa;
  
• $6.6 million for termite research in New Orleans;
• $2.1 million for the "Center for Great Genetics" in New York;
  
• $1.7 million for a honeybee factory in Weslaco, Tex.;
  
• $333,000 for a school sidewalk in Franklin, Tex.;
  
• $207,000 for a tattoo removal program in Los Angeles;
  
• $143,000 for an online encyclopedia in Nevada;
  
• $951,500 for a "sustainable Las Vegas;
• $238,000 for the Polynesian Voyaging Society in Honolulu;
  
• nearly $10 million requested by a lobbying company, PMA Group, that was raided by the FBI over its campaign donations.

Brains vs. Emotions

For most of my adult life this country has been inordinately fond of the idea of putting people in prison no matter what the offense. As a result, we are #1 in the world in terms of our prison population per capita. Prisons cost us a lot of money, so much money that entrepreneurs have started their own companies to imprison people and get some of that money. Over the past quarter-century we have tripled our spending on prisons; that's more than what we've done in such unimportant areas as education and transportation.

A study by the Pew Center on the States urges us to re-think our approach to handling crime. The study advocates that we spend more of our money on community supervision (probation and parole) than we do currently. Now, a third of those under state or community supervision (in jail, on probation or parole) are in jail, yet we spend almost 90% of our corrections money on this one-third. This makes little sense when community supervision for those who have not committed violent crimes and who are also at less risk of flight or committing another crime is a lot cheaper and results in less recidivism.

As the economic decline worsens, we need to re-think many of our assumptions and practices rather than simply make the customary knee-jerk, emotional reaction.

Blackwater is now Xe

Blackwater Worldwide apparently thinks its heyday is over. And they may be right. The State Department will not be renewing any contracts. Iraq has thrown the company out. Employees are awaiting trial for manslaughter. The founder and CEO has resigned. They've fired a bunch of people.

Nothing seems to be going right, so they did the conventional thing - they've changed the name.

Going Green to the End

The object on your left is an 'ecopod'. It's the serious environmentalist's casket. This one is made of papier-mache and weighs forty pounds.

Our current burial practices - embalming, metal caskets, metal vaults - do use a lot of resources. And these practices were not those used when this country began. In those days, a dead body may have been wrapped in a blanket and placed in the earth, where it would eventually convert itself into the earth once more.

There is a movement in this country to return to a more natural way of burial. Will it catch on? There are now only eleven 'natural' cemeteries in this country, but the movement is young. Maybe one of us will be buried this way.

Who's watching the store?

That's one part of the question Martha Minow is asking about the stimulus. She's also asking whether there are enough trained, qualified and independent people doing the watching. She makes a very good point as all we have to do is look at Katrina, Iraq and the TARP to know that pumping so much money so quickly into the economy without a clear plan for monitoring how that money is spent is a recipe for disaster.

Minow is asking for much more than more government oversight. She wants the costs of monitoring the distribution of funds built into the stimulus. "Clarity about actual requirements, roles, and responsibilities is the central precondition so that each contracting arrangement specifies who is accountable to whom, for what, through what processes, by clear standards, and with specific consequences."

From Another Planet

Romeo Ogilve Montillano must be from another planet and doesn't understand how things work on Earth. Or, he believes that he is fated to be a policeman, so what if he had committed a crime.

Mr. Montillano was suspected of robbery in Chula Vista, CA. in December. Yet, in February he signed up for an examination to join the police force. On the day of the exam, he called the police station to tell them he was having car problems and might be late. He was actually being truthful and showed up by bus for the exam.

After being arrested, Mr. Montillano still didn't get it and asked if he would still be able to take the exam.When told that he could not, he then asked if he could re-apply and maybe take the test later.

Then, he got into his spaceship and left the planet.