Relevant and even prescient commentary on news, politics and the economy.

Bachmann-Perry Overdrive, the Snag, and Other Notes

The real story of Michelle Bachmann’s “win” in the Iowa straw poll (not to be confused with the Iowa primary) isn’t that she got just over 4,800 votes—it’s that she paid for 6,000, proving at least 1,200 Iowa straw pollers are smarter than most of the reporters covering her “win.”

Late to the party mention: The Kauffman Institute’s Blogger Survey results are here (I hope).

The people who rant about 51% of Americans “paying no income taxes” are strangely silent about the fact that more than two-thirds of corporations don’t pay any—and they aren’t subject to Social Security or Medicare/Medicaid taxes either.

More Dr. Seuss is good, though “newly enhanced Seuss illustrations” sounds suspiciously like a step beyond even the later collaborations, such as The Butter Battle Book.

Robert (at least on his FB feed) is trying desperately to be nice to Matt Yglesias. I’m not, since Matt “I’ve never attended a public school so I know what’s wrong with them” Y. continues to fool himself about “the need for education reform” and refuses to pay attention to the research that shows most of those “reforms” his hedge-fund buddies are championing have been tried and failed. Jersey Jazzman does the heavy lifting here and (especially) here, while Bruce Baker notes the core of the Charterist argument.

Want a clear explanation for why people become writers or, if they don’t write well enough, bloggers? Jason Albert in, of course, Slate explains his own ego.

(The idea that maybe we need a third category of uncreative typist—Slate columnists—rises up when they try to make an economic argument without understanding sunk costs. But giving them any more pageviews would be a violation of the Douthat Rule.)

Tags: , , , , Comments (7) | |

Legacy Merrill Lynch employees better hope BofA doesn’t declare bankrutcy before late June

A correspondent notes CJR found a good scoop by the FT:

Merrill Lynch paid out about $4 billion in bonuses just days before Bank of America took it over, the Financial Times says this morning.

What raises the eyebrows is the timing: Merrill paid its bonuses before the year was even up, “an unusual step” because bonuses in past years weren’t paid until late January or early February.

But, of course, by then, the bonuses would have been under the auspices of Bank of America, since that deal closed 1 January 2009.*

My favorite pull quote combines issues of corporate governance, moral hazard, and risk (mis)management:

The timing is notable because the money was paid as Merrill’s losses were mounting and Ken Lewis, BofA’s chief executive, was seeking additional funds from the government’s troubled asset recovery programme to help close the deal.

Merrill and BofA shareholders voted to approve the takeover on December 5. Three days later, Merrill’s compensation committee approved the bonuses, which were paid on December 29.

I’ve never been a believer in Ken Lewis’s alleged skills as a banker—his wins have been ones of sewlf-admitted collusion, while his “free market” purchases have generally been abject failures, the cost savings more than lost in knowledge failures—and this specific instance looks as if he got played badly.

If BofA paid or is paying retention bonuses as well, Lewis should be terminated with extreme prejudice and the entire BofA board should be removed by the shareholders.** It’s not as if (it is filled with crack financial wizards.):

[T]he Bank of America board, whose ranks include the mayor of Spartanburg, S.C.; a retired general, Tommy R. Franks; and the former chairman and chief executive of Lowe’s….

*BofA, memory serving, pays its bonuses in early February—but one somehow suspects that the question would not have been about the timing of the payments.

**I was going to say “with pitchforks, if necessary,” but that might be taken as extremism, since we’re not talking about civilians.

Tags: , , , , , , Comments (0) | |

Because this worked so well last time…

Via Drs. DeLong and Black, the WaPo reports that this version of the S&L crisis will repeat the mistakes of the last one:

Instead of giving each company a big capital infusion upfront, the government could make quarterly injections as the companies’ losses warrant, the sources said. This would be an attempt to minimize the initial cost of the rescue. [emphasis mine]

And why are they doing this? Who gets protected while the hemorrhaging continues?

The value of the companies’ common stock would be diluted but not wiped out, while the holdings of other securities, including company debt and preferred shares might be protected by the government.

So who are the major individual holders of the stock? Why, the directors of the company, the five of whom listed hold over 2.1 million shares.

That is, the same people who were tasked with ensuring that the company was well run—and have failed miserably at it—are being saved by the form of the bailout, while the cost—again, judging by the lessons of the slow-motion S&L meltdown—will be increasing for the taxpayers.

The next time someone asks me if I believe in “free-market capitalism,” I’m going to ask if they believe in the Easter Bunny.

Tags: , , , Comments (0) | |

Labor’s fighting back

Seems Colorado wants to change to a “right to work” state. They have been trying for at least a decade. Funny phrasing. I always thought I had a right to work. You know… pursuit of happyness, freedom and all. What does it mean for me if I have no right to work? Would I need to have permission to say, clean my toilet? Or feed myself? Or help you shovel the snow from your steps? So, I guess some in labor have finally woken up to the mind game of such laws which manifests as lower wages.

Labor now has a couple of measures of their own:
Initiative 62: Just cause for employee discharge.
The definitions of just cause:

a. Incompetence;
b. Substandard performance of assigned job duties;
c. Neglect of assigned job duties;
d. Repeated violations of the employer’s written policies and procedures relating to jobperformance;
e. Gross insubordination that affects job performance;
f. Willful misconduct that affects job performance; or
g. Conviction of a crime involving moral turpitude.
h. filling of bankruptcy by the employer or;
i. simultaneous discharge or suspension of ten percent or more of the employer’s work force in Colorado

I know, start firing away about the need to not tie the bosses hands so tight, free markets in labor…etc, etc, etc. Personally, I see this as a step toward moving labor from an identity of “commodity”. Besides, the labor department has been against labor for about 8 years now.

Ah, but this one is the one that I find interesting especially as we have discussed the need for holding the top of the companies responsible, initiative #74:

(1) A business entity is guilty of an offense if:
(a) The conduct constituting the offense consists of an omission to discharge a specific duty of affirmative performance imposed on the business entity by law; or
(b) The conduct constituting the offense is engaged in, authorized, solicited, requested, commanded, or knowingly tolerated by the governing body or individual authorized to manage the affairs of the business entity or by a executive official acting within the scope of his or her employment or in behalf of the business entity.
(1.5) AN EXECUTIVE OFFICIAL IS GUILTY OF AN OFFENSE IF THE CONDUCT CONSTITUTING THE OFFENSE CONSISTS OF AN OMISSION TO DISCHARGE A SPECIFIC DUTY OF AFFIRMATIVE PERFORMANCE IMPOSED ON THE BUSINESS ENTITY BY LAW AND THE EXECUTIVE OFFICIAL KNEW OR REASONABLY SHOULD HAVE KNOWN OF THE SPECIFIC DUTY TO BE PERFORMED.

They do provide a defense for those charged. They just have to have reported the offense prior to being charged. They have to blow the whistle first! Just imagine what it would take to keep an entire board and the officers mum now that the individual won’t be protected unless they blow that whistle. How much would you gamble that just one (it only takes one) would not tell?

There is an even tougher version of this initiative # 57:
This one goes a step further and allows a Colorado citizen to file suit against the company or it’s executive officials. Any awards after expenses goes to the government agency THAT IMPOSED BY LAW THE SPECIFIC DUTY TO BE PERFORMED BY THE BUSINESS ENTITY. It’s a means to prevent frivolous actions.

So, if this passes they will have required by law that every executive official has a duty to be the whistle blower and they will have enabled every citizen to be the cop.

Nothing like competition in the market place…is there? Think some in Colorado are learning from the right’s play book on how to get voters to the polls?

Tags: , , Comments (0) | |