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Thursday, September 29, 2016

Fraud in Selling Sub-Prime Mortgage-Based Bonds: Beyond Accountability

“In December 2011, the S.E.C. publicized its civil securities fraud charges against top executives from Fannie Mae and Freddie Mac for understating their exposure to subprime mortgages, which resulted in the government taking them over.”[1] Robert Khuzami, then the head of the S.E.C.’s enforcement division, said at the time that “all individuals, regardless of their rank or position, will be held accountable for perpetuating half-truths or misrepresentations about matters materially important to the interest of our country’s investors.”[2] Pursuing even senior ranks has the air of fairness economically as well as in terms of the dictum, no one is above the law. So much for words; how about the accompanying deeds?

The full essay is at "Fraud in Selling Sub-Prime Bonds."


1. Peter Henning, “Prosecution of Financial Crisis Fraud Ends With a Whimper,” The New York Times, August 29, 2016.
2. Ibid.

Tuesday, September 27, 2016

Facebook’s Zuckerberg Donates $3 billion to Medical Science: Some Major Implications

Facebook’s CEO, Mark Zuckerberg, and his wife, Priscilla Chan, announced in September, 2016, that they would invest more than $3 billion during the next decade to build tools that can facilitate medical research on diseases. The first outlay of funds ($600 million) would create a research lab of engineers and scientists from the area’s major research universities.[1] “This focus on building on tools suggests a road map for how we might go about curing, preventing and managing all diseases this century,” Zuckerberg said at the announcement.[2] Moreover, the couple had previously announced a year before that they would give away 99% of their wealth over their lifetimes through the Chan-Zuckerberg Initiative in the areas of education and healthcare. I would like to point out a few implications that may not be readily apparent.

The full essay is at "Zuckerberg Donates $3 Billion."



1. Deepa Seetharaman, “Zuckerberg Fund to Invest #3 Billion,” The Wall Street Journal, September 22, 2016.
2. Ibid.

Monday, September 26, 2016

As the World Turns: A Troublesome Widening Gap Between Progressives and Traditionalists

In his last speech to the U.N.’s General Assembly in September, 2016, U.S. President Barak Obama pointed to a world more prosperous yet with political and security crises.[1] He called this combination a paradox arising from globalization—the converging of political, economic, and social systems around the world made possible by advances in technology. I contend that globalization is not the primary cause of the massive changes going on in some societies but not others (and in parts of a given society), hence Obama’s diagnosis and prescription fall short. In short, parts of some societies, and some societies as a whole were going through massive, deep changes that were reinforcing the tendency of traditional forces to resist and stay put. It is the widening of the gap, both within some societies and between them that is the real cause of the strife.

The full essay is at "A Troublesome Widening."



1. Carol E. Lee, “Obama Urges Course Shift for World in Conflict,” The Wall Street Journal,” September 21, 2016.

Thursday, September 22, 2016

Russian Electoral Fraud: A Threat to Constitutional Governance

In spite of Ella Pamfilova’s appointment in March, 2016 to “clean house and oversee transparent, democratic elections,” . . . “a statistical analysis of the official preliminary results of the country’s September 18 [2016] State Duma elections points to a familiar story: massive fraud in favor of the ruling United Russia party.”[1] “The results of the current Duma elections were falsified on the same level as the Duma and presidential elections of 2011, 2008, and 2007, the most falsified elections in post-Soviet history, as far as we can tell,” physicist and data analyst Sergei Shpilkin said to The Atlantic.”  In 2008, Shpilkin estimated that United Russia actually won 277 seats in the Duma instead of the constitutional majority of 315 that it was awarded.[2] This means that Putin’s party could unilaterally amend the Russian constitution. From a constitutional standpoint, either the hurdles in the amendment process are too low or the election fraud has been so massive the entire form of government is impaired.

The full essay is at "Russian Electoral Fraud."



1. Valentin Baryshnikov and Robert Coalson, “12 Million Extra Votes for Putin’s Party,” The Atlantic, September 21, 2016.
2. Robert Coalson, “Russia: How the Kremlin Manages to Get the Right Results,” Radio Free Europe, March 7, 2008.

Wednesday, September 21, 2016

Tech Industry Self-Regulation: Sufficient to Handle the Ethics of A.I.?

Five of the world’s largest tech companies—Google’s Alphabet, Amazon, Facebook, IBM, and Microsoft—had by September 2016 been working out the impact of artificial intelligence on jobs, transportation, and the general welfare.[1] The basic intention was “to ensure that A.I. research is focused on benefiting people, not hurting them.”[2] The underlying ethical theory is premised on a utilitarian consequentialism wherein benefit is maximized while harm is minimized. The ethics of whether the companies should be joining together when the aim is to forestall government regulation is less clear, given the checkered pass of industry self-regulation and the conflict of interest involved,

The full essay is at "Tech Industry Self-Regulation."

[1] John Markoff, “Devising Real Ethics for Artificial Intelligence,” The New York Times, September 2, 2016.
[2] Ibid.

Tuesday, September 20, 2016

On the Difficulty of Ethical Leadership after a Breach: The Case of Wells Fargo’s CEO

On September 20, 2016, U.S. Senators questioning Wells Fargo’s CEO, John Stumpf in the Senate’s Banking Committee “seemed unmoved” by his “attempts to explain why more senior bank executives had not been tied to the widespread illegal sales activity.”[1] Bank employees may have opened as many as two million accounts in customers’ names without those customers’ knowledge.[2] Senator Elizabeth Warren, a Massachusetts Democrat, “said the illegal sales were a big driver of Wells Fargo’s success as one of the nation’s most profitable banks.”[3] She called on Stumpf to give back a large portion of his compensation, resign and be criminally investigated. I contend that giving back some of his compensation and resigning from the bank would have been necessary for the CEO get past the scandal in being able to be a credible and trustworthy ethical leader. That the bank’s board acted independently from its chairman, the CEO, a week later in taking back $41 million of his compensation and $19 million of the stock grants from Carrie Tolstedt, who had led the bank’s retail banking division (and cancelled any bonus for either official) does not lend the CEO any renewed credibility.[4] Rather, the action made the bank’s board members look like they were trying to do what was necessary, given the CEO’s underperformance during the Senate hearing.

The full essay is at "Difficulty of Ethical Leadership."



1. Michael Corkery, “Illegal Activity at Wells Fargo May Have Begun Earlier, Chief Says,” The New York Times, September 20, 2016.
2. Ibid.
3. Ibid.
4. Stacy Cowley, “Wells Fargo to Claw Back $41 Million of Chief’s Pay Over Scandal,” The New York Times, September 27, 2016.



Thursday, September 15, 2016

On the Meaning and Value of Leadership: Formulating a Social Reality as a Vision

I submit that leadership is the formation of a vision and persuading other people to adopt it. From this standpoint, leadership is distinct from management—the latter taking the vision as a given and going from there to formulate strategy and implement it as policies. In short, a vision is open to leaders to change but closed to managers, who must take a vision as a given.

Regarding a leader’s vision, I contend that it contains meaning and values held together in a social reality; hence the breadth of a vision. Two scholars insist that a leader works to shape and interpret situations out of what has previously remained implicit or unsaid, guiding by common interpretation of reality via vision through foresight, hindsight, a world view, depth perception, peripheral vision, and revision. The social reality in a vision is thus deep as well as broad, reaching even the subconscious level of the human mind. To the extent people have bought into the leader's social reality, the leader has led.

The full essay is at "Meaning and Value of Leadership"

What Fabricating Dumb Lies Says about a Corrupt Public Official and Corruption Itself

You would think that a prime minister of a country would not cover an accusation of corruption with ludicrous lies. For one thing, the lies easily made transparent by fact-checking journalists would reflect back on the statement of innocence itself. Just being accused in public should prompt carefully thought-out lies because the failure to sustain the lies would naturally cause people to conclude that the corruption charge is valid. The connector here is bad character, plus the assumption that it is easy to obviate charges of corruption. This assumption itself may indicate that the office-holder believes that corruption is widespread—and from this belief can come the assumption that it is easy to get away with taking money benefitting the office-holder and spouse. The conduct of Malayia’s prime minister Razak Najib and his wife Mansor Rosmah between 2008 and 2015 bear out my thesis.

The full essay is at "Fabricating Dumb lies."

Wednesday, September 14, 2016

Corporate Money in Politics: Undue Influence and Conflicts of Interest

Indications of “the pervasive influence of corporate cash in the democratic process, and the extraordinary lengths to which politicians, lobbyists and even judges go to solicit money” can be seen in sealed but leaked court documents in Wisconsin.[1] This glimpse in to the real money-game in business and government shows just how much corporate money is in play. “The files open a window on a world that is very rarely glimpsed by the public, in which millions of dollars are secretly donated by major corporations and super-wealthy individuals to third-party groups in an attempt to sway elections.”[2] In addition, the files show just how easy it is for public officials to deny having been subject to conflicts of interest. The combination of a lot of money and the ability to get away with exploiting a conflict of interest is toxic to a viable representative democracy (i.e., a republic).

The full essay is at "Corporate Money in Politics."



[1] Ed Pilkington, “Leaded Documents Reveal Secretive Influence of Corporate Cash on Politics,” The Guardian, September 14, 2016.
[2] Ibid.

Monday, September 12, 2016

Exposing Bottom-Feeder Management: Business Schools to the Rescue?

I submit that the management being taught at American business schools does not take into account just how bad some managements actually are. Although I suspect that most of them are at the lower-levels of management, bottom-feeders can achieve some height, organizationally speaking. I don’t believe business-school faculties know just how bad “bottom-feeder” management actually is, or at the very least such management is tolerated rather than triggering a wholesale renovation of the managerial skills being taught. My aim here is to spark efforts to extend managerial science to proffer tactics oriented to correcting even the worst cases. In short, managerial science needs to reach a certain sordid managerial mentality in order to expunge it from even those businesses.

The full essay is at "Exposing Bottom-Feeder Management."

Thursday, September 8, 2016

Politics over Finance at the Vatican: The Status Quo Vanquishes a Reformer

Late in 2015, Cardinal Pell hired PricewaterhouseCoupers to conduct a comprehensive audit of the Vatican’s finances. Beforehand, he had hired McKinsey to do a review of assets; that company found a total of €1.4 billion (about $1.6 billion) “tucked away” off the books.[1] Other church officials, led by Cardinal Pietro Parolin, the Secretary of State, let Pell know that the audit wouldn’t happen. This was a setback for the financial overhaul that Pope Francis had charged Pell with wide authority to do a thorough job. That pope had been given the mandate to clean up the Curia, as the last pope had resigned amid allegations of “cronyism, inefficiency and corruption.”[2] So why did Pope Francis take Parolin’s side in scrapping any audit even though that pope had given Pell the o.k. to have it done?

The full essay is at "Politics over Finance at the Vatican."



[1] Francis Rocca, “Vatican Finance Chief Runs into Resistance,” The Wall Street Journal, September 8, 2016.
[2] Ibid.

Going to Extremes for Economic Growth: Low Interest-Rates as Unfair and Unwise

Is moderate monetary policy better than going to the extremes? The same can be asked of fiscal policy. Moreover, is a hypertrophic urge to prompt economic growth as if it were an end in itself better than seeking an economic equilibrium? Generally speaking, systems in equilibrium are more stable than those that include a schizogenic, or limitlessly maximizing, variable. An example of the latter is the population growth of our species relative to the equilibria otherwise established by the ecosystems in which we live. A desire for economic growth is a maximizing variable in a political economy. So too is the related practice of taking monetary (and fiscal) policy to an extreme. If the desire is great enough and the related policies extreme enough, the equilibrium of a political economy can be punctured with systemic risk increasing as does the instability of the system. I contend, therefore, that moderate government and central bank policies are preferable to going to the extremes. Here, I address monetary policy.

The full essay is at "Going to Extremes."

Tuesday, September 6, 2016

Brazil’s Rousseff Impeached and Removed from Office: A Case of Partisan Politics?

Dilma Rousseff was impeached and removed from office at the end of August, 2016. The state’s senate voted 61-20 to convict her on charges that she used illegal bookkeeping maneuvers to hid a growing budget deficit.[1] Her defense that she did not enrich herself through public office—that she did not steal public money for her own account—can be regarded as an attempt to deflect the legislators from the existing charges.[2] Only 56 legislators were necessary for a two-thirds majority. Given the problems of hyperinflation and fiscal mismanagement, including a growing public debt, her offenses were “deemed an impeachable crime.”[3] Although Brazil was hardly the only country where the chief executive has sought under political pressure to make a budget deficit look smaller than it actually was, enforcing deterring consequences even just in this case is laudable—while other, partisan motives, detracted from the vote’s legitimacy.

The complete essay is at "Partisan Impeachment in Brazil?"


1. Paulo Trevisani and Reed Johnson, “Brazilian President Rousseff Ousted,” The Wall Street Journal, September 1, 2016.
2. Ibid.
3. Ibid.

Saturday, September 3, 2016

Apple Owes Back-Taxes in the E.U.: Blame Ireland or Apple?


The European Commission issued a formal decision on August 30, 2016 that the state of Ireland “recoup roughly €13 billion ($14.5 billion) of unpaid taxes accumulated over more than a decade by Apple, Inc.”[1] The decision “shows companies could be on the hook for past behavior and potentially be handed big bills for allegedly unpaid back taxes.”[2] E.U. law “forbid companies from gaining advantages over competitors because of government help.”[3] This applies both the federal government and the state governments, so the law could be better stated as, “No state government shall help companies gain advantages over their competitors.” Presumably Ireland’s government made the offer of help, rather than Apple getting that government to comply with the company’s wishes. If so, the state government rather than the company should be held responsible. Put another way, if Apple’s board and management considered the Irish offer to be legitimate at the time, Apple should not be held to pay the back taxes; rather, the state government should pay a penalty to the Commission.


The full essay is at "Ireland or Apple?"


[1] Natalia Drozdiak and Sam Schechner, “$14.5 Billion Irish Tax Bill,” The Wall Street Journal, August 31, 2016.
[2] Ibid.
[3] Ibid.

Thursday, September 1, 2016

Going Off-Shore, Dodging Sanctions, and Laundering Money: The World of the Richest of the Rich

On April 3, 2016, 2.6 terabytes of data—more than 11.5 million documents—leaked from Panama’s law firm, Mossack Fonseca. The documents show that the firm “helped heads of state, oligarchs and celebrities launder money, dodge sanctions and avoid taxes.”[1] Over 40 years, 214,000 offshore shell companies in 200 countries implicate individuals including the family of Syrian President Bashar Assad, and that of British Prime Minister David Cameron, several friends of Russian President Vladimir Putin, and Icelandic Prime Minister Sigmunder Gunnlaugsson; financial institutions implicated include UBS, HSBC, and Société Générale.[2] I contend that the markets themselves had been tilted in the interest of the greater power (i.e., the rich), so systemic rather than incremental or piecemeal efforts would be necessary to solve the problem.

The full essay is at "Going Off-Shore."