__ The Senate Financial Overhaul Bill __ For Consumers, It’s a FinReg Flop!

 

On April 19 I wrote an article critical of an amendment proposed by Senate Durbin to the Senates’s FinReg bill which would have capped the interest rate ceiling on consumer loans at 36%. Senator Durbin said that he tried to pick an interest rate high enough that even the biggest banks could not object.  Guess what?  They objected.    

Senator Durbin did not get his way with his 36% interest rate cap.  What the American public got instead was a kick below the consumer belt by Senate Republicans.    According to Reuters, the Senate  gave a 35 -60 thumbs-down vote on the Senator Sheldon Winehouse amendment, that could have put the brakes on predatory consumer loan lending.  What the Senate did for consumers was to let the large national banks, which do most of the credit card business in the United States, continue to be allowed to charge basically any rate anywhere that they wanted.  Their rate limitations, to the extent that there will be any, will largely be determined by the laws of corporate friendly Delaware and South Dakota which, essentially, have no interest rate limitations for consumer loans.  States will not be allowed to set their own interest rate caps within their states on lending done by national banks.

I haven’t looked at the analysis of the Senate vote, but I think I can safely stick my neck out and say that the 60 votes were overwhelmingly Republican ones.  If they want to vote their conscience for special big banking interests, then so be it.  But voting against an issue that gives the states more regulatory rights doesn’t quite jibe with the Republican Party line – that is, unless it is convenient to do so.  The Winehouse vote just confirms that the Republicans use state’s rights’ issues only when it is politically expedient (Bush-Gore comes quickly to mind).  I guess that there isn’t a constitutionally based principle in their bodies when it goes against their Wall Street buddy-banks.  It’s sickening. 

 Unless the House of Representatives does something drastic in the reconciliation process (don’t get your hopes up), the die is cast.  Of course, that means that we can look forward to endless TV commercials; mail solicitations will start rolling again; and people will continue to get fleeced.  But according to 60 Senators, that’s OK.  In fact, not was it only OK, they pressed the button that will make it happen.

I wouldn’t count on increased disclosure on credit card statements to do much of anything to alter the consumer loan landscape.  You don’t have to put in capital letters on the front of someone’s credit card statement that they will likely get in financial trouble.  They already know it.

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THE KAGAN CHRONICLES

President Obama has appointed an eminently well-qualified nominee in Elena Kagan to be the next Justice on the United States Supreme Court.  It is a bit odd that she has had aspirations her entire life to become a member of the Supreme Court yet, for some reason, chose a career path where she has never actually been a judge.  One cannot help but wonder why her career has meandered in so many directions, but I am sure we will get an answer during the nomination hearing.  No doubt there will be many questions and musings on the matter.  At this point, I guess it would be better to stay curious and refrain from judgment.

The last 5 failed nominations to the Supreme Court were all made by Republican Presidents. Nixon had failures with Clement Haynsworth and Harold Carswell primarily because of the nominees’ tracks records with respect to civil and women’s rights.  Reagan had a notorious and somewhat unexpected  failure with Robert Bork for two reasons – his advocacy of constitutional originalism and his role as acting Attorney General in the firing of Archibald Cox in the Saturday Night Massacre.  Reagan also had a failure with Douglas Ginsberg, whose name was withdrawn, after he confessed to having smoked some dope back in his student days.  And, finally, George W. Bush had a failure with Harriet Miers when it was widely determined that, in addition to having never been a judge, she was simply unqualified for the position.

With media scrutiny so intense since the days of LBJ, one wonders why the vetting process for High Court nominees has been so poor.  One would naturally think that a Supreme Court nomination is an act that the Office of the President would want to spend some considerable time planning – for example, similar to national disaster relief contingency plans.  On the other hand, maybe that is exactly why it doesn’t work so well.   Judging from the national responses to 9/11, Katrina, New Orleans, and various other calamities, the Executive planning process has not worked so well there either.  On the other hand, maybe a nomination is a different planning animal entirely.  It could be that until the spotlight is truly on someone, you just never know what is going to happen – either from within or from beyond.

The advice and consent process that we have all come to be so familiar with, particularly since the Bork days, could best be described as an iterative and monotonous one and not purely a contentious one.  The process never seems to get re-scripted; it just seems to be re-played over and over.  The Senate Judiciary Committee questioning process itself has been honed to almost a precise formulaic set of questions – many probative, some just plain annoyingly unanswerable.  In the former group we can expect interrogatories on judicial activism, legislative power,  due process, the Establishment Clause, and federalism with respect to the Commerce Clause and the 14th amendment.  In the latter, we will hear probings about gay rights, abortion, campaign financing, and other constitutional issues likely to be confronted by the Court now or in the near-term.  Bottom line is that the nominee needs to be well-prepared in constitutional theory and case-law, show a calm and even judicial temperament, and show some signs of just being oneself  (but not overly so).

Luckily for this nominee, the Senate has been (and continues to be) overwhelmed by financial matters of immense proportion.   Having been through the throes of the financial meltdown, TARP, auto manufacturer bailouts, health care reform, and the synthetic derivative mess with Goldman Sachs and the investment banking bunch, the nomination process might be a welcome relief for the Senate to take a break to do something that it knows how to do.  To say that financial oversight has not been the strong suit of the United States Senate is not an understatement.  That has been fully confirmed during the recent hearings of the Senate Permanent Subcommittee on Investigations.  On the other hand, it could cut the other way for nominee Kagan.  Some of the Senate’s other political problems might roil over to her hearing.  Let’s hope that will not the case.

Just for fun, how about some predictions:

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_________WIND FARMS_________ Seemed like such a great idea until they showed up near my house

 

Actually, they haven’t shown up near my house — but near enough.  And the place where they have shown up has severely strained my sensibilities.

67 of these monster wind towers have shown up on a beautiful stretch of farmland in Logan County, near Lincoln, Illinois, not far from Springfield, and the view to my eye is sickening.

The best that I can describe them is vexatious to the spirit.

You can see the wind turbines littered along either side of Route I-155 on what has always been a stunning, scenic view.  Ordinarily, there is not much aesthetic value in driving along on the roads of central Illinois.  It is usually so flat and monotonous that  driving any distance at all can be quite tedious.  For example, I have always considered the drive on I-72 from Springfield, Illinois to Champaign, Illinois one of the most boring stretches of land in the Midwest.  The 90 mile trip would put a cup of coffee to sleep.  It is a flat corn-and-soybean-scape that can dull the senses in about 30 minutes. 

The drive from Springfield to Lincoln has always been a little different from the typical road trip around here, and a great deal  more interesting.   For example, there is the fairly dramatic landscape feature of the community of Elkhart, Illinois.   The community is built upon a an unusually large hill that has a distinct visual appeal along with a rich history.  It also sits aside old U.S. Route 66, as most of this section of the newer road does.  The most beautiful part of this 30-mile stretch of road from Springfield to Lincoln, however, is the dramatic fall and rise of the land to a vantage point that is just short of spectacular.  As a child, I always dreamed that someday I would be able to buy a piece of land that would be perched atop this vista and it would enable me to see all the storms and tornadoes approaching for miles.  This description is not to mistake this property for the grandiosity of Yosemite, the Grand Tetons, or Sequoia National Park, but for central Illinois, the horizons don’t get any better than this.

So where is this giant wind farm placed?  It is scattered across the very land that is the most spectacular.  For my money, the sheer number of these wind towers has aesthetically ruined this area.

Surprisingly though, many of the people who actually live in this area, including many that were born and raised on this land, do not share my opinion.  Quite the opposite, it seems that their testimonials are by and large positive.  As described  in a very good February 6, 2010 article http://www.sj-r.com/carousel/x655690726/So-far-so-good-for-people-near-Logan-County-wind-farm by Chris Dettro in the State Journal Register, most people living on or near these wind turbines find them soothing, almost hypnotizing.  They describe them as more quiet than the wind itself.  Stress reduction, problem-free, good for the community, good for the tax base, and on and on . . .  are their narratives.

These land owners are also quite well compensated with payments for use of their land.  I am not sure to what degree the compensation factor influences their opinions, but if they are happy about their compensation, it would be hard to expect them to be negative about the turbines.  After all, so long as the towers are innocuous or so long as they just eventually became part of their almost invisible world, much as a new barn or silo might, it is probably to hard to argue with them.   It is hard to say when you don’t actually experience it like they might actually experience it on a day-to-day basis.

American people are inventive, innovative, and problem-solving people.  Deep down, I believe that most of us want to manage our energy needs in a smarter way that lessens damage to the planet.  I think American people want to embrace new ideas, new technology, and other measures which will continue to sustain the scarce resources that we have.  It’s unclear for our society about what to do next, however.  Should it be solar, wind power, nuclear again, a judicious combination of what we now have, or some other admixture of current resources along with attempting the novel?  The world is definitely at a crossroads now as to what is the next, best development, and how to pay for it?  Perhaps wind power is part of the solution.  Or, perhaps, it is too early to tell.

I continue to wonder, “Are we really thinking these things through, or are we in a frantic, semi-contrived survival mode where, not only now but in the future, we risk looking like a decrepit Siberia?  After all the cellphone towers, mega-watt transmission towers, and giant wind turbines have gone by the wayside for improved power-creating and transmission technology, will we be left with nothing but a horrific landscape?

I hope not.  Green needs to be more than that.

                          Montmartre: the Quarry and Windmills
                                           Oil on board, 1886
                               Van Gogh Museum, Amsterdam

Even through the eyes and brush of Van Gogh, windmills are ugly.

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My Tribute to the Philosopher, C. D. Broad My Tribute to the Philosopher, C. D. Broad

  Charlie Dunbar Broad                   Charlie Dunbar Broad

According to The Strangest Man ,  a biography about the great theoretical physicist, Paul Dirac, one of Dirac’s greatest early teachers was the philosopher, C.D. Broad.  According to  The Strangest Man , a biography about the great theoretical physicist, Paul Dirac, one of Dirac’s greatest early teachers was the philosopher, C.D. Broad.

Aside from being a fairly influential philospher, Broad was, and is, known as a extremely lucid writer.  Aside from being a fairly influential philospher, Broad was, and is, known as an extremely lucid writer.

According to Dirac’s biographer, Graham Farmelo, “C. D. Broad was a wonderfully idiosyncratic lecturer.    According to Dirac’s biographer, Graham Farmelo, “C. D. Broad was a wonderfully idiosyncratic lecturer.  He always appeared with a carefully prepared script, and he read every sentence twice, except for the jokes, which he delivered three times.  He always appeared with a carefully prepared script, and he read every sentence twice, except for the jokes, which he delivered three times. . . .  Trenchency was one of his strongest suits.  Trenchency was one of his strongest suits.”

For those of you not familiar with Broad, I would like to quote, what I consider, some of his more precious statements.  For those of you not familiar with Broad, I would like to quote, what I consider, some of his more precious statements.

I have an extreme dislike for vague, and oracular writing; and I have very little patience with authors who express themselves in this style.  I have an extreme dislike for vague, and oracular writing; and I have very little patience with authors who express themselves in this style.  I believe that what can be said at all can be said simply and clearly in any civilized language or in a suitable system of symbols, and that verbal obscurity is almost always a sign of mental confusion.  I believe that what can be said at all can be said simply and clearly in any civilized language or in a suitable system of symbols, and that verbal obscurity is almost always a sign of mental confusion.

I tend naturally to take a somewhat gloomy view of the world and its inhabitants; and I have a particular horror of all attempts to argue from what ought to be, or what we should like to be, to what is or will be.  I tend naturally to take a somewhat gloomy view of the world and its inhabitants; and I have a particular horror of all attempts to argue from what ought to be, or what we should like to be, to what is or will be.

I also intensely dislike and profoundly distrust all strong group emotions. (I think that this may be an excessive reaction against an unacknowledged tendency to feel them rather strongly.)  I also intensely dislike and profoundly distrust all strong group emotions. (I think that this may be an excessive reaction against an unacknowledged tendency to feel them rather strongly.)

I am fundamentally sceptical, and I feel no confidence in any elaborately reasoned system of metaphysics.  I am fundamentally sceptical, and I feel no confidence in any elaborately reasoned system of metaphysics.  Even when I cannot put my finger on any definite flaw in it, there is a still small voice within me which whispers “Bosh!”  Even when I cannot put my finger on any definite flaw in it, there is a still small voice within me which whispers “Bosh!”  A great deal of so-called sccpticism is simply a particular kind of dogmatism which leads men to reject all alleged facts which do not come within the sphere of recognized science.  A great deal of so-called sccpticism is simply a particular kind of dogmatism which leads men to reject all alleged facts which do not come within the sphere of recognized science.

I am almost wholly devoid of religious or mystical experience.  I am almost wholly devoid of religious or mystical experience.  This is combined with a great interest in such experiences and a belief that they are probably of extreme importance in any theoretical interpretation of the world.  This is combined with a great interest in such experiences and a belief that they are probably of extreme importance in any theoretical interpretation of the world.

Is there is joke here somewhere?  Is there a joke here somewhere?  Is there a joke here somewhere?

No. No. No.

 

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—– SENATOR RICHARD DURBIN —– JUST CALL ME MR. PERFECT 36

  

Mr. Perfect "36"

 “By a ‘silly’ theory I mean one which may be held at the time when one is talking or writing professionally, but which only an inmate of a lunatic asylum would think of carrying into daily life….It must not be supposed that the men who maintain these theories and beliefs are ‘silly’ people. Only very acute and learned men could have thought of anything so odd or defended anything so preposterous against the continual protests of common sense.”       C.D. Broad

I woke up fresh today, grabbed the early morning newspaper, started sipping my orange juice and nibbling my lightly buttered toast, when I was startled, not by a knock on the door, but by a story about Senator Richard Durbin’s news conference yesterday.  The article  in the Senator’s hometown newspaper, The State Journal Register in Springfield, Illinois, stunned me.  In it, 

 http://www.sj-r.com/top-stories/x1042540416/Durbin-to-introduce-bill-aimed-at-banks                                                                                                                                                                                  

 Senator Durbin said that he has introduced language into an amendment on a financial reform bill that would put a ceiling on interest rates.  He is quoted as saying, “I tried to take a number I considered to be so high that even the biggest banks couldn’t argue with it.  I said we couldn’t have an interest rate over 36 percent. . . . I think we ought to have an absolute limit.” 

Please tell me that I’m dreaming. 

After I caught my breath, I sat down to think about interest rates a bit.  That’s not a fun thing to do on an early Monday morning.  For starters, any discussion of interest rates leads directly into the abyss of laws covering the subject.  And, of course, laws covering interest rates can be complicated state or federal ones, depending.  Suffice it to say that I am not a lawyer and immediately disclaim anything here that might be construed as legal advice.  I neither offer nor suggest any legal advice, and recommend that you consult with a licensed attorney if you need or want such services. 

Now, back to just after my morning orange juice.  On the face of it, I think it fair to say that, in the United States, interest rates can vary from ZERO to, say, (um, Senator Durbin) 36%.  If you toss into the interest rate computations the rates of the pay-day loan outfits, pawn shops, and the title loan gang, you most assuredly have situations where the APY is higher than 36%.   Whatever the Senator’s legislative intent, to offer interest rate ceiling legislation to which no bank would object is, to put it mildly, surely usurping the voices of his constituents.  I mean, who in the world can conceive such a thing other than someone almost incomprehensibly out-of touch.  To me, his premise is just staggering. 

What if one begins the discussion of interest rates with the premise of “fairness” and not the premise that “no bank can to object to a ceiling of 36%”?  How then does the dialogue proceed if reasonable people of all ilk can begin with an attempt to decide what a fair interest rate might mean?  Might that be the place to start a discussion?  Surely that is a better alternative than what the Senate Majority Whip has pulled from his hollow hat? 

So, what is fair?  I doubt that there is an answer to that.  Maybe “fair” is a just place to start a discussion.  Or maybe, it’s just a concept to keep in the background when discussing rate ceilings because, after all, aren’t loan arrangements entered into voluntarily?  Well, of course, they are; but that spirit of volunteerism can lead to bad places. 

When I was a much younger man, I picked up a copy of a personal financial management sort of book.  I do not recall the author.  I seriously doubt that it was a best-seller.  I recall it being a patronizing thing – warning one away from the financial dangers-that-be out there in the cruel world.  At the time, I imagined that this book was written by a very boring person with a very boring life – a classic nerd, if you will.  However, there was one bit of advice he gave which jumped off the page and seemed directly aimed at me.  He wrote, “Don’t ever buy a consumable item with anything other than cash.  That way, you’ll never end up paying for something long after it has been used.”   That made perfect sense to me.   Maybe you, too? 

Don’t we all wish that we all followed that advice?  Well, no.  Life wouldn’t have been nearly as much fun – or dreadful, at times.  Let’s just move on here and admit that we are a consumer-driven society in a consumer-driven world and what makes the wheels of innovation and progress go round is the ability for the consumer to borrow.  Take away credit, the wheels come off, the cart crashes, and we all are trapped under a big immoveable object with total loss of all mass and momentum.  The United States has about 2.5 trillion in outstanding consumer debt.  Consider, too, that Americans charge over 2 trillion dollars per year on the over 180,000,000 million credit cards out there.  Whew! that’s a lot of plastic.  Take that away and I don’t think anyone knows what would happen other than total economic collapse. 

So, we’re all stuck with credit.  Consumers are stuck with the lenders.  The lenders are stuck with the legislators.  And the legislators are stuck with the consumers.   That is, the legislators are supposed to be stuck with the consumers.  Unfortunately, Senator Durbin, it looks like we’re stuck with you instead of the other way around.  Maybe something is amiss here. 

Let’s discuss real interest rate ceilings for a bit.  As a citizen of Illinois, if I were to loan money to a friend or a neighbor, or some other entity, I would be subject to my state’s usury laws.  According to information provided at http://www.usurylaw.com/state/ the interest rate ceiling that I would be permitted to charge is 9%.   If I were to charge more than that, I would be violating the State law.  Further, if I engaged in practices in which I had established a pattern of charging more than twice my State’s limit of 9%, in other words 18%, I might be subject to Federal RICO statutes, and that might very well be a felony.  In street vernacular, I would be considered a loan shark if I charged more than 18% to my neighbor or friend. 

Ah, but Senator Durbin wants a Federal law for financial institutions, apparently of all types, to be subject to an interest rate ceiling of double what would be a Federal felony in his own state for a person or other entity regulated by his own State’s usury laws.  I read that the Illinois usury laws also are applicable to amounts owed in civil judgments.  But the Senator wants to legislate by Federal law an interest rate ceiling for financial institutions that is 4 times the amount permitted by his own state for civil judgments.  Apples and oranges, the Senator might say.  I say not. 

I have my own hollow hat and my idea on what is a fair interest rate ceiling.  I think the big banks might not like my number, and might want to argue with it. 

My number is 12% APY 

What do you think? 

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115,000,001

I created my first blog, Funk University, about one month ago.  Strange as it may seem, I really do not remember why I decided to do so.  Blogs have never been popular reading for me.  I only regularly read one blog, Paul Krugman’s Conscience of a Liberal  in the New York Times.  He seems to be one of the very few intelligent economic voices out there.   I like to follow him so as not to get dumbed down by the likes of so many of the clueless.  He can also be quite funny.  Further, he suffers no fools nor other Nobel laureates.

Since Funk U was to be a new thing for me, I decided to do a little research on what blogging really is or, at least, is supposed to be.   In the process of trying to make that determination, I stumbled upon a an eye-opening number.  I discovered that 115,000,000 blogs had already been created.   I was at once dumbfounded by all of the reading material/opinions/photos/stories that I have, apparently,  been missing.  Then again, I am certain that I have missed more than 99.99% of all books written – even though I am equally certain that I have read more books than 99.99% of the average roomfull of book editors.

While I continue to blog away (about one post every other day), I continue to look for that second blog that will truly interest me.  Further, I will consider my blogging a success if I find at least one person who continually finds what I have to say interesting enough to return regularly.

Ok, maybe more than one person.  I think I’m past that.

Stay tuned.

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Published in: on April 8, 2010 at 10:36 pm  Comments (4)  
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__________TOP FIVE LINES________ To Use at Your Next Party

You can’t stop people from being stupid.

     One of my late clients laid this gem on me about 20 years ago.  I’ve used it hundreds of times since.  I could have used it thousands of times.  It’s always applicable.  Lately, it’s been handy for use in economic “bubble theory” discourse. 

Don’t ever get into a fight with the Chinese.  Why?  They’ll just keep coming over the hill.

     My father presented me with this maxim during the Vietnam War era.  As a WWII Navy vet, who served in the South Pacific, he experienced his fair share of unrelenting Japanese Kamikaze attacks.  Knowing that the Chinese were supplying Ho Chi Minh in Vietnam gave him the ugly imagery of unending Chinese manpower eventually overcoming our American troops. 

     While we probably don’t think about vast numbers of Chinese soldiers and their hoard of military supplies today, we do have the rather unpleasant thought of Chinese goods overwhelming our economy.  .  . and unending balance of trade deficits with them.  Just a different form of Tsunami.

The masses are asses and they get what they deserve.

     This is a corollary, of sorts, to the “being stupid” quote above.  I heard this one about 35 years ago from a new acquaintance, who asked me what my major was in college.  When I told him “political science and philosophy,”  he responded that he had taken one political science course in college and that was plenty.  Then he went on to say that his political science professor told the class that if you never remember anything else from this class, at least remember this.  And, he did.  And, so have I. 

God loves fools and Democrats.

     Again, this one came from the same late client, who gave me the ‘being stupid” statement.  I have never heard anyone else use it.  Maybe it needs to be rehabilitated and and reestablished in our vernacular.  Why?  Because if God loves everyone, then who are the fools?

For every person who voices a complaint, there are 40 silent people who have the same complaint.

     I used to love to read a samll series of paperbacks in the 1980’s that were entitled, “Rules of Thumb.”  I don’t know how correct these rules were or whether they were based on  a hypothetico-deductive model.    I never actually cared.  The rules were entertaining, and some just resonated as universally true.  This one comes in handy, not so much at a party, but when you’re complaining to a customer service representative about the junky product or service that you’ve just received from their company.  When you quote them this line,  for some reason, your problem tends to get solved in a way that is usually pleasing.

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Published in: on April 3, 2010 at 6:36 pm  Leave a Comment  

NCAA FINAL FOUR BASKETBALL – MOUNTAINEERS ARE BOUND TO WIN FOR ONE BIG REASON

                            OK, I really don’t know which final four coach is going to guide his team to victory, but I know who I’m rooting for.

The guy in the sweater. 

 He’s the only one who knows what to wear to a basketball game.

How many male fans wear suits to a basketball game?  Most guys don’t even wear a suit to regular religious services.  Likely they’ll just wear a nice dress shirt and some  casual or dress slacks to church.  It’s out of the realm of anyone’s mind that they would look to their wardrobe before a basketball game – even a bigtime college game – and think, “You know, I think this is an occasion for my Armani.”

So, what is it with these coaches?  Of course, they can all afford the finest tailored threads.  After all, their salary packages are stratospheric.  Maybe all the money went to their heads, or they just want to look nice (read, be noticed) for the TV cameras.  Maybe they just want to stand out as “a very important guy” in the gym.  Or maybe, they’re just nuts. 

There are other guys on game day that also wear suits – the assistant coaches and all the other guys in the coaching entourage that so much as carry a clipboard.  I’m sure that they have their marching orders.  Surely it’s bad sartorial etiquette for the head coach to wear a suit and the head recruiter wear khaki.

Funny thing, though – I have never ever seen a picture of a basketball coach wearing a suit at practice.  Maybe that’s because, “We’re talkin’ ’bout practice, man. Not da game.  We’re talkin’ practice. Practice.  We’re not talkin’ ’bout da game.  We’re talkin’ ’bout practice.  Practice.”  (Thank you, AE for the best narrative ever heard in the history of sport – and also the truest)

I’ve always liked Bob Knight.  Sure, he’s got his foibles but the man always wore a sweater to coach a basketball game.  Of course, it wasn’t always a perfect fit, but you could count on him to walk out on the court sweatered in the bright color of his team.  Now, that’s a coach who knows damn well what he’s doing.  It wasn’t  about GQ with Bob Knight.  It was about his  coaching the game. 

Unfortunately, the suit-wearing basketball coach pandemic has spread to the junior college, high school and, even, elementary school ranks.  Will the YMCA, Boys and Girls clubs, and pick-up games be next?  You keep watching with me, will you?

Go, Mountaineers, with one caveat.  Every once in a while, Huggins shows up at a game looking like . . .  oh, no!!

When Being Greedy Trumped Being Smart – Where Were the Geniuses? –

In the midst of the financial meltdown, everyone desperately looked for advice from someone who might actually know what to do to extricate the world from looming horrific economic catastrophe.  Unfortunately, no such person surfaced.  However, after the worst was averted, many luminaries surfaced with a proliferation of books and articles.   The all-knowing served up various dishes that were flavored by various bits of,  “I told you so,” to “Nobody saw this coming.  Nobody.”

That there was no economic superstar who, by near universal acclamation,  could be relied upon to find a way out of the quagmire seems, in many respects, odd.    After all, there was no shortage of  living Nobel Economics laureates, several of whom had predicted such a catastrophe.   Further, the government overflowed with advisors at all levels but, apparently, no go-to guy or gal.  Instead, the government seemed to be stuck with the dry-heaving Secretary of the Treasury, Henry Paulson, and his missives to quickly develop an action plan that could be sold to Congress.

Warren Buffet, on  the night before the House vote on Paulson’s first 3-page vague bank bailout proposal, stated on the Charlie Rose show that he had full confidence in Hank Paulson to steer the ship during this bubble crisis.  And  being assisted by Tim Geithner and Sheila Bair added to his confidence on Paulson being able to get the job done.  Contrary to Buffet, many were skeptical about a former Goldman Sachs CEO playing the part of honest broker.  To this day, serious questions about the mindsets and motives of the players handling the crisis remain unanswered.    Joseph Stiglitz in his recent book, “Freefall,” has revealed some of the more salient conflicts-of-interest, which occurred before, during, and after the debacle.  Suffice it to say here that the political and financial inter-relationships of many of the key players were fraught with ethical dilemma.

The dilemmas persist.  Most of the key men and women involved in creating the problems, hiding them, and ineptly trying to solve them are still in place.  Most of the investment bank CEO’s are still working at their old jobs.  Most of the decision-makers who precipitated the crisis are still in power in the government – in elected capacities, appointed positions, or as advisors.   Other than being sullied in the press and, occasionally in public, most of these people haven’t missed a beat.  One of the major reasons cited for their being able to save their skins is that they are the best we have – that, without their immense talent, the financial world would be adrift and rudderless.

Is the American public being traduced?

I decided to do a little economic thought experiment to put to the test my hypothesis that honest, unacquisitive world-class financial talent should exist somewhere on the grid.    Enamored by the little models and graphs of the modern-day economist (apparently, it is difficult for an economist to get anything published without some mathematical modeling), I decided to build a graph – entirely subjective, of course.  I am not a scientist, an economist, or even a Cargo Cult Scientist, as Richard Feynman described people who write goofy things and then make them look like science with hard math and statistics.   I am simply presenting an annotated scatter-point graph with my subjective data points and names.    It was created for one purpose – to make one think about people and greed, particularly so-called smart and/or influential people.   

Brinks Robbers – They found the vault, cash and coins – but damn, got caught!

Average Joe – Works, keeps a neat wallet, can use an ATM, and watches TV.

Einstein – Lived modestly.  Today, would not insist on granite countertops and stainless steel  appliances.

Gandhi – Salt, strikes, and sit-downs demonstrated his enormous financial insight.

Obama – Financial knowledge derived from advisors; well-above-average personal ambition.

Nobel laureates – We’re talking just the economists here. 

Christ – Chased the money changers.  Selfless.

Volcker – Greed is a funny thing.   A little too tight with Wall Street.

B. Gates – Always trying to innovate, but must protect turf.  Greed wins by 4 lengths.

Blankfein – Substitute any investment banker CEO here.  All out gaming the system.

Buffett – Natural-born financial genius.  $ 5 billion Goldman Sachs loan – ugh!  Surely he could have bequeathed his vast fortune to someone other than B. Gates.

Madoff – 40+ years as a broker-dealer, investment guru, working with and under the nose of government regulators. 

So, what’s to be gleaned from the graph, if anything? 

One  noticeable feature of the graph is the mid-to-upper-left void.  From that I suppose one could deduce that being greedy, but not astute, leads to something less than prominence – perhaps, business failure, poverty, or likely, jail. 

There is another, smaller void toward the lower right.  This seems to be a lonely place occupied by only the Nobel laureates in Economics.  I should think that if we are looking for financially knowledge and adept people, who have academic ambition superseding financial and/or political ambition, we may have found who we need to solve some of the complex macroeconomic problems that confound us. 

Next time, no – maybe still this time – let’s do more than listen to the commentary from that lower right quadrant.

 

 

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Published in: on March 30, 2010 at 10:58 pm  Comments (1)  

Senator Durbin . . . Your Answer, Please?

In the fall of 2005, after the Senate Judiciary Committee had approved John Robert’s nomination to the Supreme Court by a vote of 13 to 5,  I became curious as to why the senior Senator from my State of Illinois had cast one of the “no” votes.  I decided to send a letter of inquiry to the Senator via his website to find out.  I was 55 years old at the time with this being my first letter to any elected official about any subject. 

I had watched a considerable part of the confirmation hearing and thought that Roberts had handled the process quite well.  It was fairly obvious that he was quite a conservative nominee, but I did not think that should matter much.  He was as qualified as anyone in the United States, even though he was fairly young for a Supreme Court nominee.    Somewhat naively, I believed that the vote for his approval, whether in committee or in the full Senate should be based on merit and temperament rather than political drift.   

 I carefully composed my letter and hit the “send” key.   I received a timely, well-written response from the Office of the Senator, and it was more than I had expected.  Although the letter had the readability and content of a plain-vanilla reply written for general purposes, it was quite thoughtful and seemed genuine.  Actually, I was pleased to have received any response at all.   Even though I suspected that the letter had been written by a junior staffer, it seemed to have been well-reasoned and, possibly, honed by the Senator himself prior to distribution.   All and all, I was satisfied with his response even though I thought his vote went the wrong way.  4  years later, I am not so sure.  Maybe I made a rookie mistake.  Who knows?  I suspect that it is too early to tell.

It took quite awhile before I wrote another letter.  I drafted the next one to Senator Durbin several months ago.  I don’t recall much of the specific language, but the gist of my letter centered around the Senator’s whereabouts in the health care debate.  I had read his statements on his website, but I was curious as to why his public profile on the topic was so low.    This was the period when Baucus and his gang of an indeterminate number ran the health care show (seems like eons ago, doesn’t it?).  Was Senator Durbin, as Majority Whip, staying out-of-the-way until final vote tally time, getting ready for the big-whip, or what?  Anyway, I thought that I might make a rather general inquiry as to his involvement in the process.

It was about 3 weeks later that I received a reply.  OK, a little tardy, but it was a response.   It was also, disappointingly, quite general and bland.  I remember thinking that it wasn’t much better than a grammatically correct high school term paper.  I gave it a grade of C+.  It would have been a B- had it been delivered a little more promptly.  The letter had not really delivered anything other than the most general of platitudes.  Disgusted with this response, I figured that I was done writing letters to my Senator – that is, until I read a short piece by the economist, Paul Krugman.

This is the piece that inspired me to write letter # 3 to Senator Durbin:  http://krugman.blogs.nytimes.com/2010/02/05/the-senate-becomes-a-polish-joke/

My letter of inquiry was fired off almost the instant that I had finished reading the Krugman article.  I wanted to know what Senator Durbin’s opinion was, if he had one, on the Krugman piece.  Was the Senate indeed becoming a joke where, like in 17th century Poland, any Senator could stand up and scream, “No,” and the whole process would come to a halt?  It seemed a fair enough question.  After all, this was a question from a liberal citizen from Springfield, Illinois, to a liberal Senator from Springfield, Illinois (I believe we even had the same barber in the 1970’s) about a piece written by a liberal economist?  This would just be three ordinary, middle-age guys comparing notes, right?  Wrong.

It’s been about 5 weeks now, and not a peep.  Maybe the interns are on break . . . . 

5 years – 3 letters – 2 replies – 1 still in draft form??

(Update May 12, 2010 : A full 2 months since my original inquiry and still no reply.  I think it’s safe to assume that I can stop waiting.  Not a bit surprised though.  I believe that I can safely infer that the Senator’s Office only replies to mail inquiries that are convenient or self-serving.)