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

America’s governance mind: FUBAR

by divorced one like Bush
UPDATED: Jim Watt  Remember him?

If you did not see it, go watch this weeks Bill Moyers Journal.  Part 2 is here.

From the second part we get all we need to know about where we’re going regarding government for, of and by the people and how little regard there is at the top for the seriousness of such a declaration and its implementation in perpetuity.

BILL MOYERS: Let me show you something that Ben Bernanke said to the annual meeting of economists earlier this week, last Sunday, I think it was.

BEN BERNANKE: The best response to the housing bubble would have been regulatory, not monetary. Stronger regulation and supervision aimed at problems with underwriting practices and lenders’ risk management would have been a more effective and surgical approach for constraining the housing bubble than a general increase in interest rates.

DAVID CORN: Whoops.

BILL MOYERS: Whoops what?

DAVID CORN: Well, now he’s saying what a lot of us said earlier? That we should have had better regulation, you know, rather than just fiddling with interest rates?…

BILL MOYERS: You have a great chart in your story in “Mother Jones” on that.

DAVID CORN: I mean, my favorite one that I wrote about, and I don’t know him personally. He could be a great guy. Never even met him. I tried to interview him, but he wouldn’t consent. Mark Patterson. He’s the chief of staff for Timothy Geithner, the Treasury Department Secretary. He was a lobbyist for Goldman Sachs. What did he do as a lobbyist for Goldman Sachs? He lobbied against a bill in the Senate to restrain it was a very modest bill, to restrain CEO compensation.

Basically, gave shareholders the right to say, “We think you’re paying them too much.” It wasn’t even mandatory. It wouldn’t even cut back pay. He you know, Goldman Sachs would have none of that. He lobbied against that bill. Who authored that bill? Barack Obama, when he was a Senator. So, the guy who fought Barack Obama on CEO pay, an issue that Barack Obama says he cares about. And I believe he does. Is now running the Treasury Department for Tim Geithner. I mean, this really doesn’t make a lot of sense to me.

Yeah. Makes no sense to me either. In fact, the only mind that can make sense of such dichotomy in purpose and intent is a schizophrenic mind.

UPDATE
In responding to a comment by Guest who I assume is Cantab (we forget to check our sign-in names, Oh well), I mentioned James Watt.

Jim Watt’s experiences during and after his term as Secretary of the Interior is the perfect book end to Mark Patterson mentioned above. Back when Jim boy was Secretary, he got his ass booted. Sure, he created some messes. He was after all, the prototype for what we have in our administrative offices of our government.

From Wiki:

For over two decades, Watt held the record for protecting the fewest species under the Endangered Species Act in United States history… According to the environmental groups, Watt decreased funding for environmental programs,[5] restructured the department to decrease federal regulatory power,[5] wished to eliminate the Land and Water Conservation Fund (which had been designed to increase the size of National Wildlife Refuges and other protected land),[5] eased regulations on oil[5] and mining[6][5] companies, and favored opening wilderness areas and shorelands for oil and gas leases.[5]…In 1983, Watt banned The Beach Boys from playing a Fourth of July concert on the National Mall in Washington, D.C., saying that rock concerts drew “an undesirable element”; the group had played each year on the Mall on the Fourth of July from 1976 to 1981.

But, unlike Bush’s Metal of Freedom winners, Watt’s got booted. Sure, it took this to do it:

A public controversy erupted after a speech by Watt on September 21, 1983, when he said about his staff: “I have a black, a woman, two Jews and a cripple. And we have talent.”[13] Within weeks of making this statement, Watt submitted his resignation letter.[13][14]

but at least it was done. Not now though. Such countervailing, diametric behavior is apparently immune to public desire.

Worse though, is the loss of memory when people acted up-front. Jim Watt’s never hide his ideology. Also is the loss of memory of what justice used to mean in America:

In 1995, Watt was indicted on 25 counts of felony perjury and obstruction of justice by a federal grand jury.[15] The indictments were due to false statements made to a grand jury investigating influence peddling at the Department of Housing and Urban Development, which he had lobbied in the mid to late 1980s. On January 2, 1996, as part of a plea bargain, Watt pleaded guilty to one misdemeanor count of withholding documents from a federal grand jury. On March 12, 1996 he was sentenced to five years’ probation and ordered to pay a $5,000 fine and perform 500 hours of community service.[16]

Now we call it “politicizing government”.

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QOTD: There are Shareholders and then there are Share Holders

The Epicurean Dealmaker notes that the stock market “game” is irrevocably rigged against the individual investor, and the best thing anyone can do is realise that is so:

I believe [Leo E. Strine Jr, vice chancellor of the Delaware Court of Chancery]’s analysis should conclusively disabuse participants in the current debate over financial regulatory reform of two related notions….The second is the canard that all public shareholders are alike, and they all share the same interests and motivations.

Realizing that the second of these is false, and that Fidelity Investments and SAC Capital do not have the same investment timeframe and objectives as Aunt Millie or even the Ohio Teachers Pension Fund, would have a highly salutary effect on the beliefs and behavior of truly long-term shareholders.

If nothing else, getting Aunt Millie to realize she is the only one in the shark tank without a safety cage should do her a world of good. [emphasis mine]

Read the whole thing, as well as Mr. Strine’s piece in the NYT’s DealBook that inspired it, for a glimpse of the soft, white underbelly of corporate governance and management.

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Possibly a Great Paper.

I subscribe to too many RSS blog feeds. So everyone once in a while one pops up and I think, “Should I drop this”?

And so it is with Evolutionary Economics, which occasionally seems like a self-parody of what would happen if you recited Economics 101 cant with an added, even-less-scientific, “evolutionary psychology” glean to it.

However, they occasionally publish interesting work, such as this.

And then there’s the paper they describe as “in Japanese.” Unfortunately, they mean Hiragana script, which thoroughly defeated my efforts in the early 1990s. And while Babel Fish is willing to try, the result is less than encouraging:

ら哲学者や為政者を解放した。また,顕示選好理論によれば,個人の選択を観察すれば,
そのような行動が導かれる効用関数が存在する。効用の個人間比較が問題にならない状況

becomes

…[a]nd others the philosopher and the administrator were released. In addition, according to revelation preference theory, if selection of the individual is observed, the use function where that kind of conduct is led exists. The circumstance where comparison between the individuals of use does not become problem

which has a few verb problems, I suspect.

Anyone want to read and translate and do a guest-post about this one?

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Game, Set, and Match

DeLong body-slams Mankiw.

Especially like this:

Mankiw: The CEA website should also post a notice about CEA internships, as we had during my tenure as CEA chair, so students can find out how to apply.

DeLong: “Let me, for one, state that I am very glad that Christie Romer has been too busy since her confirmation a week ago Wednesday night to set up procedures for hiring interns. When setting up and posting procedures on the hiring of interns is the most valuable first use of a CEA chair’s time, there is indeed cause for alarm: it would be a sign that the president is like George W. Bush, who would rather not have had any economic advice at all.”

I note for the record that the CBO sent out their Summer Internship application notice on January 27th.

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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.

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