Same Old, Same Old Reverence for Big Banks

Gretchen Morgenson gives what she calls a Cliff Notes version of last week's report by the Financial Crisis Inquiry Commission. Some highlights of her article:

Richard Spillenkothen, head of supervision at the Fed until 2006, attributed its reluctance (to challenge the banks) to “a desire not to inject an element of contentiousness into what was felt to be a constructive or equable relationship with management.”

On Page 264, the report lays out Citigroup’s silence about the ticking time bombs it had shoved off its balance sheet but that would soon have to be repatriated, generating enormous losses. A spokeswoman for Citigroup said that it was a different company today, and that it had overhauled its risk management and bolstered its financial strength.

We already know, of course, that our government moved mountains to help the banks during the crisis. But the report adds to our understanding of events by describing how the Treasury Department changed the tax code to benefit banks acquiring weaker institutions. Never mind that the Constitution allows only Congress to write tax rules.

I.R.S. Notice 2008-83 came out of nowhere on Sept. 30, 2008, the report noted on Page 371. It removed existing limits on the use of tax losses that could be taken by a bank when it acquired a troubled institution. The change appeared just as Citigroup was mounting its $1-a-share bid for Wachovia.

“The terrible thing that happened,” said William K. Black, a former fraud investigator in the savings-and-loan crisis who is a professor at the University of Missouri-Kansas City School of Law, “was that the F.B.I. got virtually no assistance from the regulators, the banking regulators and the thrift regulators.”

“Unless and until an institution such as Citigroup is either broken up, so that it is no longer a threat to the financial system, or a structure is put in place to assure that it will be left to suffer the full consequences of its own folly,” he said, “the prospect of more bailouts will potentially fuel more bad behavior with potentially disastrous results.”

ElBaradei for President?

I really feel like a dope when it comes to Egypt. I know so little about the country. ElBaradei has been considering a run for the presidency for a year at least, as this video shows.

A couple of other nuggets from the video:

• 30% of Egyptians over the age of 10 are illiterate
• 40% of Egyptians live below the poverty line
• It is just about impossible for ElBaradei to run for the office under the rules of the constitution.

Will I ever eat escargot again?

Escargot are one of my favorite foods at French restaurants. However, after reading Tim Flannery’s review of “The Sound of a Wild Snail Eating” by Elizabeth Tova Bailey in the NY Review of Books, I may stop eating them.

Bailey became interested in snails when she was laid low by a mysterious disease and could do very little while she lay in bed most of the day. A friend brought her violets among which was a single snail. That snail had a positive influence on Bailey’s approach to her health problems. From the review you can see why, as snails appear to be fascinating creatures.

For example, the snail would not touch sandy soil that was placed in the flowerpot residence of the snail. It wanted the sand gone and its old soil back. It was able to move over mosses without bending them. It practiced good grooming.

Bailey’s readings revealed other fascinating facts:

“they possess a sword-like tongue with around 2,640 teeth. Their tentacles, she learned, have eyes at their tips and are expressive of mood, either drooping with dismay or becoming turgid with alertness. The Chinese characters for “snail” read as “slime cow”—and slime, as Bailey writes, “is the sticky essence of a gastropod’s soul.” When a snail wants to move it secretes “pedal mucous,” which the ripple of its foot muscle momentarily transforms from solid to liquid, so aiding its progress. So adherent is the substance that the nineteenth-century naturalist E. Sandford showed that a snail can hoist fifty-one times its own weight up a window blind using its pedal mucous. But pedal mucous is just one of many kinds of slime snails produce. If harmed, snails can even secrete a medicinal slime that will protect them from infection.”

Most interestingly, there are not male and female snails. All snails are hermaphrodites, i.e., each snail has both male and female characteristics so that all snails can fertilize themselves if they so choose. Bailey’s snail produced over 100 baby snails.

The Gecko Doesn't Get It

Geico has been featuring a gecko in its tv advertising for a while. Sure, it's different and the gecko is cute. However, the pitch, as I recall, is mainly about price; Geico is cheaper than other companies is the claim. Price, however, will only take you so far if you want to build a company for the long haul. You need to provide quality customer service as well. And, based on a recent conversation with Geico staff, that is something Geico lacks.

Here's today's experience in seeing why this country is in decline.

One of my co-workers was involved in an auto accident while on company business. Geico holds the policy on the other person involved in - and the cause of - the accident. Since I'm the one who deals with our insurance agent, I got a call from Geico yesterday when I was hiding at home because of the storm. When I returned the call today, my caller was not in but her machine said she would call back within two hours and, if she failed to do so, I should call her supervisor. Problem #1: the supervisor was not in when I called three hours later.

Geico called today when I was in a meeting. I returned the call but hung up after the phone rang 20 or so times. Problem #2.

I called Geico again and pressed "1" when told that would get me to the Claims department. The person there tried to connect me with my caller. I hung up after waiting 3 minutes. Problem #3.

Once more into the breach. This time I asked to speak to the person in charge of Claims. The one who took my call was not at the "right level" to deal with this. I could only speak to a "supervisor". Problem #4.

The speaker also was not at the right level as she refused to transfer me to someone up the chain. Problem #5.

Would I buy a policy from Geico? They were a much more human company when they bought my software 25 years ago. I'm surprised that Buffett tolerates such shoddy and second-rate "performance".

Another Word on the "Settlements"

Do I have to qualify "settlements" with "Israel"? The UN Security Council will soon be considering a resolution condemning the settlements in the Occupied Territories. A mixed crew of people feel that the U.S. should take a stand on this resolution and have sent a letter to the President. The letter begins:

In light of the impasse reached in efforts to revive Israeli-Palestinian negotiations, and as the United Nations Security Council (UNSC) moves to consider a resolution condemning Israeli settlements in the Occupied Territory, we are writing to urge you to instruct our Ambassador to the United Nations to vote yes on this initiative.
The time has come for a clear signal from the United States to the parties and to the broader international community that the United States can and will approach the conflict with the objectivity, consistency and respect for international law required if it is to play a constructive role in the conflict's resolution.

Do you see anything wrong with this point of view?

A Military Man Says "Cut the Defense Budget"

That's what Colin Powell said on Sunday. Why don't our leaders see that significant cuts (more than the $78 billion Gates is talking about) in defense will very quickly reduce the deficit? Here's a quote from Powell "When the Cold War ended 20 years ago, when I was chairman [of the Joint Chiefs of Staff] and Mr. Cheney was secretary of Defense, we cut the defense budget by 25 percent. And we reduced the force by 500,000 active duty soldiers, so it can be done."

It makes a lot of sense to me.

Only 11 a day

That's 11 civilians killed every day in Iraq last year. The total of civilian deaths in 2010 were the lowest in years. There were only 4,036 average Joes killed in 2010. In 2007 there were about 20,000. By 2009 the number was down to 4,680. Yes, the numbers are coming down, but it is true that 11 people a day died - and did not die peacefully in their beds - before their time. Eleven people who are no longer part of a family. Eleven people who may have been contributors to this world. Was our Iraq adventure worth it?

Moving Along Sensibly and Pragmatically.

Elizabeth Warren has already hired over 100 people to man the Consumer Finance Protection Bureau. She has to hire another 700 - 900 by July. One sweet appointment she has made is a woman named Holly Petraeus. Ms Petraeus, who happens to be the wife of a general in the news, will head the Office of Servicemember Affairs, which is responsible for protecting military people from predatory lending. Ms Warren is also addressing the interests of the business community by hiring the current head of the Fed's consumer affairs division. The Chamber of Commerce is also adopting a "wait-and-see" posture.

A good start!

Birds Falling Out of the Sky

This year began with birds falling out of the sky. Now scientists think they have found the reasons for this. The Arkansas blackbirds were disturbed by fireworks and crashed into buildings. The Louisiana birds were startled by a cold front and flew into wires. But, the scientists also point out that this is a tempest in a teapot. Some estimate that in the fall migration 20 billion birds are flying around this country; a few thousand is an almost infinitesimal percent of this total. The American Bird Conservancy, which clearly has an agenda, claims that 2 billion birds die each year due to a combination of man's work and cats, who in the Conservancy's opinion kill 530,000,000 birds a year.

Frankly, I doubt the numbers the Conservancy puts forward. But I don't doubt the US Geological Survey's assertion that the January bird fall-out is not an "end of days" matter; it happens often. In a typical year the Survey receives 167 notices of bird fall-out.

Memories of Canada

We lived in Canada from 1994 to the beginning of 2002. I thought of Canada when I read this article in the Boston Globe. The article reports on finding a man's body in a snow bank on Revere Beach. This is the first time I've heard of such an occurence in the Boston area. However, in Canada this happened in Ottawa just about every other year we lived there. Usually, the body of an old person would be found near a bus stop in March when the snow banks would begin to melt.

Another event that I had never experienced in the States but occurred more than once in our years up north was the separation of a truck wheel from the truck body as the truck moved down the highway.

How Not to Sell Insurance

Maybe I should have given this post the title of "How to Sell Insurance" as I'm going to be talking about Met Life, perhaps the #1 insurance company in the U.S. If, in fact, they are #1, this is a title that they will lose over the next few years if they continue their current policies re customer service. Let me give you an example of their inept customer service.

I called my "agent" on the telephone number listed on my most recent invoice. Of course, they only accept calls between 9 and 4, you know, normal business hours. I followed the rules and called at 11:30. There was no agent assigned to my account at that telephone number. I should call Customer Service.

Customer Service happened to be a robot with supposed voice recognition abilities. Unfortunately, it did not have common sense abilities. So, I ran through several menus before I realized I should press 0 (I am getting old). Although I had to prove who I was (address, telephone, 4 digits of SSN, date of birth) because I had the temerity to be calling Met Life, the person I spoke to was able to handle my request.

Howsomever, I was so upset by the robot that I asked to speak to the customer service person's supervisor. Apparently, the Customer Service person was too low on the corporate ladder as the only way that I had a chance of speaking with her supervisor was if the CS person made a request and the person on the next rung deigned to honor that request.

Being stubborn, I asked for the telephone number of the home office (which, I know, is readily available) and was told that I could not have it as it was an internal number.

What are the odds Met Life will still be around by 2021?

America is still #1

That is if you read the top international journals in psychology. In these journals most of the subjects come from the U.S. So, the question becomes - how representative of mankind are the subjects reported on in these journals.

It looks as though they are not as representative as the psychologists would like us to believe. Tests not catalogued in these academic journals seem to say that we Westerners are a lot different from other residents of the planet. We are more individualistic and competitive. We tend to perceive space differently. In many ways, we are WEIRD - Western, Educated, Industrialized,Rich and Democratic.

He's Back!

Baby Doc, Jean-Claude Duvalier, returned to Haiti yesterday. He's been gone since 1986. The question is whether the people of Haiti are so disillusioned with the efforts of their current leaders that they would swing to Baby Doc, who did his part in ruining the country, and put him back in power.

Changing Times

As I was beginning the process of packing up to move, I came across this short piece that my wife wrote for a class at Wellesley College. It certainly brings up a lot of memories. I thought I'd share it with you. Our daughter and her husband now have three children.

Changing Times
by Catherine DeVito

When my only daughter, Victoria, announced she would be married this coming June, I assumed she wanted a traditional wedding. Over the past year of planning, all my assumptions have been called into question. She would like the wedding to reflect her and her future husband’s values and lifestyle, or as she put it 'to make her own statement’.

The couple’s love of the outdoors, fishing, camping and hiking is reflected in the theme of the wedding. They chose to have the ceremony on the lawn of a rustic country inn, overlooking a lake close to where they live in Connecticut. It is a halfway point between his family in New York and hers in Boston. The ceremony will be nondenominational, performed by a Unitarian minister. For the past few months they have been gathering readings and hope to write parts of the ceremony. This exercise has led them to define and question some of their religious beliefs and in some ways to cement their relationship.

Since the inn is small and it is a three hour trip for most guests, only the immediate family and a few friends will be able to attend. This will contribute to the feeling of intimacy and informality that they want. Instead of the traditional gown, the bride chose a long, white dress with fresh flowers for her hair. Not only are the invitations environmentally correct but the menu will accommodate the vegetarians among us. Much to my chagrin and my husband's delight, this wedding also is characteristic of my daughter’s sense of thriftiness. Since she was a young child, she could see through to what was excessive and what was necessary.

When I was married, we had what is called a traditional wedding. This means a church and ceremony near the bride’s home with guests going to a hotel, restaurant or hall for the reception. We were married at the Mt. Carmel Church, where all of my relatives were married. We hardly questioned the wedding script, or even the priest’s instructions, which were in keeping with the time.

Our parents planned the reception, which was given in celebration, for family and friends. These included distant relatives and people I had never met. It was held at a lovely country club, very similar to the grounds at the inn, but it could have been anywhere or any place, as far as I was concerned, as long as my husband was there.

My bridal gown was truly beautiful, with a long train, in heavy silk and delicate pearl beading. I felt as wonderful as I am sure Victoria will feel in her simple dress. The most striking similarity between my wedding and Victoria's is our shared anxiety, excitement and sense of commitment, to a new life with another person. I can see myself in her, although it was thirty years ago. I now share a
closeness with her that was not there before.

As I now look back at my wedding, I realize, aside from the physical differences there is a fundamental change in values this wedding is reflecting. In my time it was reflecting my parent's values. Not only was I younger than my daughter bur I had thought less about the meaning of marriage and accepted my parent's decisions. This cultural change reflects a generation less tied to tradition and more committed to personal fulfillment.

Duke and the Dark Side of 21st Century Ferninism

Caitlin Flanagan does not think highly of Duke. Here are a couple of quotes from an article in The Atlantic:

something ugly is going on at the university—a mercenary intensity that has been gathering strength for the past two decades, as the institution made the calculated decision to wrench itself into elite status by dint of its fortune in tobacco money and its sheer ambition. It lured academic luminaries—many of them longer on star power than on intellectual substance—built a fearsome sports program, and turned its admissions department into the collegiate version of a head-hunting firm.

profoundly anti-intellectual, it’s a university whose thoughtful students are overshadowed by its voraciously self-centered ones.

Her ire seems to have been exacerbated by the appearance on the Internet of a "thesis" by one Karen Owen, a graduate of Duke. This "thesis" recounts sexual experiences Owen had with Duke students, mainly athletes. Flanagan seems to be quite upset that the format of the thesis is a PowerPoint presentation which violates all of the rules and conventions of PowerPoint.

Having been a young man in the mid-twentieth century when getting to second base was considered as a major achievement, I must confess that I was a little surprised at how easy it appears to go all the way in the 21st century. However, I'm not sure how pleasurable the experience was as both parties seem to be totally drunk at the time. In several cases the sex was quite rough as Owen writes about the times she was bruised the morning after.

Flanagan does not consider the ease with which Owen was able to have sex a good thing in that she sees Owen as basically servicing men's needs "no matter how mundane or humiliating."

The binge drinking occupies a large section of the article. She cites a study that claims that the rate of alcohol abuse by college-age girls has quadrupled since 1970 while the boys are going at the same rate as they did in 1970.

If Flanagan is correct, I'm glad my kids are beyond college age, but I worry about my grandchildren.

How to Keep Qualified People

Tim Kane believes that our military is losing its best officers because it just does not know how to manage people. He bases his argument on a survey of West Point graduates he conducted recently. His respondents, which were graduates of West Point going back to 1989, overwhelming stated that half or more of "the best officers leave the military rather than serving a full career." The reason in Kane's view is that the military is a very bureaucratic organization. People are promoted not on merit but simply according to the rules.

For example, Kane cites the example of John Nagl, a leading Army thinker. Nagl, who helped write the new Field Manual, retired as a lieutenant colonel after serving 20 years. He had not made full colonel and he could not make general until he had served 22 years. Kane quotes another leading Army thinker, Paul Yingling, "It is unreasonable to expect that an officer who spends 25 years conforming to institutional expectations will emerge as an innovator in his late forties."

Kane does have a point. However, in my opinion he has too much faith in the management of our "leading" companies, such as Citicorp. He seems to believe that management of many of these companies is, in fact, really qualified and capable. Recent events have not proved him right.

Party Platforms

Courtesy of the Nieman Watchdog Blog:

Plank 10.11 of the Iowa Republican Party platform says, “We believe public university, college and school buildings should not restrict possession of firearms by those legally possessing a concealed carry permit, as this endangers our children.”

Brave New World

Should we have children? Will they be normal? These are questions every married couple asks at some point. Up to now they could easily answer the first question but not the second. In the latest medical journal there is a claim that the second question can now be answered through DNA testing. Today for $400 you and your wife can be tested for hundreds of genetic mutations that would put your child at risk.

Arrest that bird!

That was the cry in Hayel, Saudi Arabia, last week. It seems that there was a vulture flying around the town wearing a bracelet that said "Tel Aviv University". Of course it had to be part of an Israeli plot to train vultures to spy on Israel's enemies. After an intensive investigation of the bird, the Saudi Prince has announced that the bird will be freed.

A Pinprick

That's what David Stockman, former Budget Director for Reagan, calls Gates' proposed budget cuts. He says, 

"It amounts to a failed opportunity to recognize that we are now at a historical inflection point at which the time has arrived for a classic post-war demobilization of the entire military establishment. The Cold War is long over. The wars of occupation are almost over and were complete failures -- Afghanistan and Iraq. The American empire is done. There are no real seriously armed enemies left in the world that can possibly justify an $800 billion national defense and security establishment, including Homeland Security."

I know memories are short but .......

I wonder whether Palin's presidential campaign has been irretrievably damaged by the events of the past weekend. I'd like to think so but, because memory is short, I still have a certain degree of skepticism. The fact that Palin is still talked about as a presidential contender despite her gaffes of the past two years makes me think that she will still be getting press as a potential leader of the free world in 2012.

The Army of God

Visit msnbc.com for breaking news, world news, and news about the economy

A Guaranteed Money Maker

That's the general and finance industry view of Facebook. True, it seems as though everyone under 50 is on Facebook. True, books have been written and movies made about Mr. Zuckerberg and friends. But is the company making money? The public does not know. I am not alone in questioning whether it is actually profitable.

Man can be very gullible. He believed Ponzi and Madoff. He "invested" in the dot-com mania at the start of this century. He is constantly looking for a miracle. Will those valuing Facebook at $50 billion make money on their investment?

Goldman Sachs does not have to worry about its investment as we taxpayers are backing it. You may remember that Goldman became a bank holding company in 2008. This status entitles them to borrow from the Federal Reserve, which translates to lower funding costs and, much more importantly, the strong likelihood - so strong it's virtually a certainty - that we will bail them out should their high risk ventures not work out.

We never learn. We're still in the Great Recession, which owes a lot to "guaranteed' money makers, and still are drinking Kool-Aid.

How do you measure poverty?

The Census Bureau is trying a new way. The current method does not count medical expenses, transportation costs and work expenses. If you do count these expenses, then you'd have to say that 1 of 6 Americans was living in poverty. That's a pretty high number for the leader of the free world.

Not a Fluke

That's the judgment of the president's commission studying the BP disaster of 2010. The commission says, "The blowout was not the product of a series of aberrational decisions made by rogue industry or government officials that could not have been anticipated or expected to occur again. Rather, the root causes are systemic and, absent significant reform in both industry practices and government policies, might well recur."

None of the major players - BP, Halliburton, Transocean - can feel that they were innocent. Nor can the Department of the Interior. They all screwed up. The important point - beyond making the residents of the Gulf reasonably whole - is whether it will happen again. Or, maybe the question is "when".

A Picayune Attempt at Budget Cutting?

Okay, Gates wants to cut the Pentagon budget. That's good news but it has to be tempered by the fact that this year's budget will be up over last year's. Plus, the cuts amount to only $78 billion and are spread over 5 years. That's only 14% of one year's non-war budget; it's less than 3% of the Pentagon budget which does not include our adventures in Iraq and Afghanistan. On the very next day after Gates' announcement we learn that more troops are being sent to Afghanistan.

We're still outspending everybody else combined - and by a wide margin

It's So Obvious

I've said more than once that we can cut the deficit very easily - reduce spending on defense. Nicholas Kristof seconds that opinion in today's NY Times.

He repeats the common, sensible arguments. We spend more on arms than every other nation in the world - COMBINED. We have 560 bases around the world, most of which we've had since the end of WWII in the last century. The population of DC - a fairly large metropolis - is less than the number of people with top secret clearance.

When will we smarten up?

Blackbird, Bye, Bye

2010 ended badly for hundreds of blackbirds in Arkansas. A thousand of them fell out of the sky as we greeted the new year. Authorities can't explain it yet. One theory is that they were hit by lightning bolts.

Update
Now the number is up to 4,000. Last week 83,000 dead fish were found also in Arkansas.