Saturday, January 31, 2009
Reminders of the Past
Saul Landau reminds us of the Irgun, the Zionist terrorists active in Jerusalem before 1948, and chides Tzipi Lvini for referring to Hamas as terrorists when her father was a member of the Irgun. Further, he asserts that Israel helped Hamas when it was starting as Israel was looking for a counterweight to Arafat and the PLO.
Keeping Secrets
In the current NY Review of Books, Garry Wills asserts that the fundamental legal case, U.S. v. Reynolds, which is used as the basis of many security claims by our government is, in fact, based on a lie by our government. In the four years, 1977-2001, the government cited this case sixty-two times as justification for withholding evidence from the courts. Yet, no less a legal scholar and Solicitor General than the late Erwin Griswold wrote, "It quickly becomes apparent to any person who has considerable experience with classified material that there is massive overclassification, and that the principal concern of the classifiers is not with national security, but rather with governmental embarrassment of one sort or another."
The Reynolds case concerned a crash of an Air Force Plane in 1948 in which nine died, five soldiers and four civilians. The widows of three of the civilians sued the Air Force and, as one would expect, their lawyer asked for a copy of the Air Force report on the accident. The request was never granted as the Air Force argued all the way to the Supreme Court that the report contained classified information. Rather than proceed when the Supreme Court sent the case back to a lower court, the Air Force settled with the widows for almost as much as the widows were asking; there was an important proviso that the widows would release all claims against the government.
Although the case continued to be cited as precedent, the report was never released to the public until in 1996 the Clinton administration decided to declassify documents determined originally to be restricted, as the Reynolds report was. Enter two people and the Internet.
Michael Stowe established a web site, Accident-Report.com, which, for a fee, offered copies of the reports recently declassified. At about the same time, the daughter of one of the civilians who had been killed in the crash, Judy Loether, was trying to find out information about her father whom she had never met. Stowe and Loether connected and the report became public.
And, as Griswold wrote, the accident report was covered up because it demonstrated incompetence on the part of the Air Force. There were no heat shields for the engines, thus the engines overheated and this was the primary cause of the accident. Also, escape routes were blocked or very difficult to use.
Yet, the Reynolds case is still used to deny us the right to know just what our government is doing to protect its arse.
The Reynolds case concerned a crash of an Air Force Plane in 1948 in which nine died, five soldiers and four civilians. The widows of three of the civilians sued the Air Force and, as one would expect, their lawyer asked for a copy of the Air Force report on the accident. The request was never granted as the Air Force argued all the way to the Supreme Court that the report contained classified information. Rather than proceed when the Supreme Court sent the case back to a lower court, the Air Force settled with the widows for almost as much as the widows were asking; there was an important proviso that the widows would release all claims against the government.
Although the case continued to be cited as precedent, the report was never released to the public until in 1996 the Clinton administration decided to declassify documents determined originally to be restricted, as the Reynolds report was. Enter two people and the Internet.
Michael Stowe established a web site, Accident-Report.com, which, for a fee, offered copies of the reports recently declassified. At about the same time, the daughter of one of the civilians who had been killed in the crash, Judy Loether, was trying to find out information about her father whom she had never met. Stowe and Loether connected and the report became public.
And, as Griswold wrote, the accident report was covered up because it demonstrated incompetence on the part of the Air Force. There were no heat shields for the engines, thus the engines overheated and this was the primary cause of the accident. Also, escape routes were blocked or very difficult to use.
Yet, the Reynolds case is still used to deny us the right to know just what our government is doing to protect its arse.
Friday, January 30, 2009
Who Do You Believe?
The Inspector General of DOD says that body armor failed tests to determine how well they blocked bullets. Yet, some of these vests are being used today in Iraq and Afghanistan. The Secretary of the Army says the Inspector General is wrong. But, the Secretary does recall 16,000 sets of body armor.
Finishing Sixth Is Not Too Shabby
That is, if you're an investment banker. In 2008 these bankers received bonuses totaling $18.4 billion. This is the sixth highest amount of bonuses in history. Does this really make sense when, in 2008 these firms lost almost twice that? Furthermore, we're talking only cash bonuses here. Who knows what stock options were given?
The overriding question is where the money to pay the bonuses came from. If you lose $33 billion, can you afford to pay $18.4 billion? I guess you can if the money comes from we suckers, the taxpayers.
The overriding question is where the money to pay the bonuses came from. If you lose $33 billion, can you afford to pay $18.4 billion? I guess you can if the money comes from we suckers, the taxpayers.
Thursday, January 29, 2009
A Theme Park?
This is not a joke. See William Easterly for a few trenchant comments on this 'invitation' to a UN event.
Where the Money Will Go
The largest share (one-third) of the proposed House stimulus will go for tax cuts. This doesn't seem like the smartest way to get the economy moving.
Wednesday, January 28, 2009
Valuing Junk
If we establish a bank to buy the toxic assets on the books of many of our financial institutions, who is the Solomon that will establish a value for them? And, equally importantly, will this result in the banks actually lending money?
We have implemented a variant of this with Citibank and BofA. Has this helped our economy?
At some point all we'll be doing is printing money. Maybe my kids will be using $100 billion bills to buy lunch.
We have implemented a variant of this with Citibank and BofA. Has this helped our economy?
At some point all we'll be doing is printing money. Maybe my kids will be using $100 billion bills to buy lunch.
Do it the Swedish Way?
At least when it comes to our very troubled, if not dying, banking industry. That's the advice of Joe Stiglitz. No matter what has been done, there has been very little (just about no) increase in lending. The banks are just sitting on our money. Well, 'sitting' may not be the right word. Some are buying planes, others having parties or paying bonuses to those who got the banks in trouble.
Sweden decided that if a bank couldn't rise money privately, the state would take it over provided it was, in fact, salvageable. Then, instead of running the bank for the executives, the bank would be run for the benefit of the country. Loans would actually be made. Parties would stop. Planes would not be bought.
Sweden's approach worked well. Eventually, the banks returned to private ownership.
Clearly what we're doing has not worked. It's time to change the game.
Sweden decided that if a bank couldn't rise money privately, the state would take it over provided it was, in fact, salvageable. Then, instead of running the bank for the executives, the bank would be run for the benefit of the country. Loans would actually be made. Parties would stop. Planes would not be bought.
Sweden's approach worked well. Eventually, the banks returned to private ownership.
Clearly what we're doing has not worked. It's time to change the game.
Tuesday, January 27, 2009
Zero Shame
Citibank, the company we have lent $45 billion to and whose $306 billion in bad investments we have backstopped, will be taking possession of a $50,000,000 jet to ferry its leaders.
If each commercial flight cost $2,500, the leaders could take 20,000 flights for the initial cost of this plane. Then, add in the costs of running this plane - pilot, fuel, airport fees, etc. - and maybe you want to sell your stock in Citibank.
If each commercial flight cost $2,500, the leaders could take 20,000 flights for the initial cost of this plane. Then, add in the costs of running this plane - pilot, fuel, airport fees, etc. - and maybe you want to sell your stock in Citibank.
Should they be fired?
The Associated Press recounts the status of a few banking executives whose bank has gotten some of our money:
_JPMorgan Chase & Co., which invested billions in subprime mortgages, has the same leadership team, led by CEO James Dimon. Dimon made about $28 million in 2007. The company is shedding about 10 percent of its investment bank staff._Cleveland-based KeyCorp, which ran subprime lending subsidiary Champion Mortgage until late 2006, received $2.5 billion in bailout money. Its chairman and CEO, Henry Meyer, has been in charge since 2001. Jeffrey Weeden, the company's chief financial officer, and Thomas Stevens, the administrative officer who oversaw the risk review group, have been on the job for years.
KeyCorp has been cutting jobs over the past two years, including 200 announced this month at a Tacoma, Wash., call center. A company spokesman said the bank was too busy preparing its earnings report to answer questions about whether taxpayers should have confidence in the company's management.
"The on-the-record comment I would make is that we declined to comment even though we'd like to, because we don't have time," spokesman Bill Murschel said.
_Capital One Financial Corp., one of the nation's biggest credit-card providers, dove into the risky mortgage business when it bought GreenPoint Mortgage in 2006. GreenPoint made exotic loans to borrowers without verifying income or credit scores, then sold those loans to investors.
A year later, Capital One shuttered GreenPoint, cutting 1,900 jobs. CEO Richard Fairbank and his top executives were not among them. The company received about $3.5 billion in bailout money.
Monday, January 26, 2009
Another KGB Killing
It certainly seems as though Russia has reverted to the days of the KGB. Every few months another vocal dissident is killed. The latest is Stanislav Markelov, a lawyer and human rights advocate. A journalist, Anastasia Baburina, with whom he was walking was also killed. Baburina worked for the Novaya Gazeta, which is not a good place to work if you write articles questioning the government, as the staff is gradually being whittled down through murders.
Shooting for the moon
William Easterly takes Robert Zoellick, president of the World Bank, to task for asking for too much.
Over the past few days Zoellick has had op-eds in the NY Times and the Financial Times. The articles argue for $6 billion more for foreign aid from the U.S. Easterly contends that Zoellick, in having an extensive laundry list of projects, is really not being realistic and upfront. Easterly's primary concern with foreign aid money is that it is well-spent.
His conclusion about Zoellick's proposals:
Over the past few days Zoellick has had op-eds in the NY Times and the Financial Times. The articles argue for $6 billion more for foreign aid from the U.S. Easterly contends that Zoellick, in having an extensive laundry list of projects, is really not being realistic and upfront. Easterly's primary concern with foreign aid money is that it is well-spent.
His conclusion about Zoellick's proposals:
If you are not accountable for promises, if you try to do everything and focus on nothing, and if you obsess about aid money raised rather than results achieved, haven’t you already told us that the money will not be “well spent”?
Sunday, January 25, 2009
Wishing Obama Fails
You can find fault with Obama. You can hate him. But how can you want him to fail?
Another Interactive map
The Center for American Progress shows where a good portion of the House's stimulus plan will go. They couldn't figure out all of the distribution, but they've taken care of about two-thirds. The map shows the distribution by state. The backup data lists the areas to be supported - energy, infrastructure, education, etc. See what your state will be getting if the House version becomes the final one.
Saturday, January 24, 2009
See where the first $200 billion went
The Wall Street Journal has a fascinating chart and equally fascinating list showing which banks got how much of the TARP money so far. I hope you can access it.
The only one of the Massachusetts banks I recognized was State Street. That doesn't mean much, as I had never heard of OneUnited before either. How many of the nine Mass. banks were 'healthy' as defined by TARP?
The only one of the Massachusetts banks I recognized was State Street. That doesn't mean much, as I had never heard of OneUnited before either. How many of the nine Mass. banks were 'healthy' as defined by TARP?
The British Sense of Humor?
These are photos of road signs in England. I'm sure we have similar names in this country, but the NY Times hasn't decided to write about them. Some others listed: Crapstone, Ugley, East Breast, North Piddle, Spanker Lane, Crotch Crescent, Titty Ho, Wetwang, Slutshole Lane, and Thong.
Friday, January 23, 2009
Making Money
CEOs of large public companies are, in many cases, more skillful at making money for themselves rather than the company. This ability is demonstrated when they first take on the job, while they are performing it and when they leave it. And it is about leave-taking that I'd like to speak today.
While some CEOs have trouble with math, some of them have learned a great deal about present value (i.e., what a dollar I will receive in the future is worth today). They know that when interest rates are high, then the present value of a dollar is less than when interest rates are low.
Companies calculate the brass' pension based on an interest rate, how long the boss may live, the salary of the boss, how long he's worked there, etc. Many of these factors can be quickly established; two cannot - the interest rate to use and when the boss will die. Hence, the company has to use its best judgment on these two rather important factors.
CEOs have a built-in fear that the company cannot survive without them. If the company does fail, he and his pension are not protected by the government as you and I would be. The CEO becomes an unsecured creditor. Thus, believing that a bird in the hand is worth two in the bush, the CEO opts to take his pension in a lump sum when he leaves. And this is where his knowledge of present value, the company's judgment of his mortality and interest rates come into play.
If you're looking for a low interest rate in the world of pensions, what better source than the Pension Guaranty Benefit Corp. (PBGC)? It's a government agency that is charged with worrying about the pensions of we average Joes. Years ago they produced a formula to use to calculate a lump sum for a pension. The formula produces an interest rate that is almost always quite lower than the market rate. The PBGC uses it only on pensions whose lump sum is less than $5,000; further the agency itself says that the formula is outmoded. Yet, this is the formula used by some companies whose CEO decides to take a lump sum.
Let's use Hartford Financial Services as an example of what this means in dollars and cents. The company has recorded his pension benefits as $27,000,000 if he takes it over his remaining life. However, when they filed this pension information with the SEC under new regulations, the CEO will actually get $37,000,000 the day he leaves.
McKesson Corp. is a more egregious example of the stockholders getting screwed. Their CEO has a deal whereby he will be paid for more years than he will serve and for more money than he was actually paid (he'll be credited with 150% of his real bonus). Add in the interest rate assumption and you wind up with $84,600,000 should the 49-year-old retire tomorrow and get paid his pension as he walked out the door.
And, to really get my blood pressure up, today's mail brough news that my IRA lost 30% in the last few months.
While some CEOs have trouble with math, some of them have learned a great deal about present value (i.e., what a dollar I will receive in the future is worth today). They know that when interest rates are high, then the present value of a dollar is less than when interest rates are low.
Companies calculate the brass' pension based on an interest rate, how long the boss may live, the salary of the boss, how long he's worked there, etc. Many of these factors can be quickly established; two cannot - the interest rate to use and when the boss will die. Hence, the company has to use its best judgment on these two rather important factors.
CEOs have a built-in fear that the company cannot survive without them. If the company does fail, he and his pension are not protected by the government as you and I would be. The CEO becomes an unsecured creditor. Thus, believing that a bird in the hand is worth two in the bush, the CEO opts to take his pension in a lump sum when he leaves. And this is where his knowledge of present value, the company's judgment of his mortality and interest rates come into play.
If you're looking for a low interest rate in the world of pensions, what better source than the Pension Guaranty Benefit Corp. (PBGC)? It's a government agency that is charged with worrying about the pensions of we average Joes. Years ago they produced a formula to use to calculate a lump sum for a pension. The formula produces an interest rate that is almost always quite lower than the market rate. The PBGC uses it only on pensions whose lump sum is less than $5,000; further the agency itself says that the formula is outmoded. Yet, this is the formula used by some companies whose CEO decides to take a lump sum.
Let's use Hartford Financial Services as an example of what this means in dollars and cents. The company has recorded his pension benefits as $27,000,000 if he takes it over his remaining life. However, when they filed this pension information with the SEC under new regulations, the CEO will actually get $37,000,000 the day he leaves.
McKesson Corp. is a more egregious example of the stockholders getting screwed. Their CEO has a deal whereby he will be paid for more years than he will serve and for more money than he was actually paid (he'll be credited with 150% of his real bonus). Add in the interest rate assumption and you wind up with $84,600,000 should the 49-year-old retire tomorrow and get paid his pension as he walked out the door.
And, to really get my blood pressure up, today's mail brough news that my IRA lost 30% in the last few months.
The Lord Works in Mysterious Ways
The Lord wanted Mr. & Mrs. Pratt to move to Florida. So, he arranged for their bank to increase the Pratt's money by a hundred-fold. Mr. Pratt's deposit of $1.772.50 became $177,250 due to the workings of the Lord.
Praise be to the Lord!
Praise be to the Lord!
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