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Saturday, June 11, 2011

Goldman Sachs' Excesses Enabled Greek Debt

He who has the gold makes the rules.  I suspect this is the operating mantra at Goldman Sachs even after the bank’s near-death experience (when Solomon Bros stock was taking a hit, Blankfein knew his bank could be next).  As it turns out, the bank was involved in enabling Greece to stealthily spend beyond its means. According to The New York Times, in 2001, just after Greece was admitted to Europe’s monetary union, Goldman helped the government quietly borrow billions, people familiar with the transaction said. That deal, hidden from public view because it was treated as a currency trade rather than a loan, helped Athens to meet Europe’s deficit rules while continuing to spend beyond its means. Additionally, in late November, 2009— three months before Athens became the epicenter of global financial anxiety — a team from Goldman Sachs arrived in the ancient city with a very modern proposition for a government struggling to pay its bills, according to two people who were briefed on the meeting. The bankers, led by Goldman’s president, Gary D. Cohn, held out a financing instrument that would have pushed debt from Greece’s health care system far into the future, much as when strapped homeowners take out second mortgages to pay off their credit cards.

The full essay is in Cases of Unethical Business, available in print and as an ebook at Amazon.com.  


Stakeholder Management: Part III (Fiduciary Duty)

“A growing number of business experts advocate adjusting the conventional view of a company’s purpose—to generate wealth for its stockholders—to a more holistic view that recognizes that business doesn’t operate in a vacuum. Everything a business does affects someone somewhere—not just the stockholders—and those other someones deserve consideration from every business that affects them” (Bowie, p. 14).



Stakeholder Management: Part II (Nietzsche)

Nietzsche contends that modern ethicists seek to impose their Thou Shalt Not in order to dominate the strong out of weakness. The normative subterfuge used by these new birds of prey masks their hypertropic (exaggerated) instinct to dominate. Whereas the strong naturally dominate, the weak who feel compelled to do so must resort to subterranean means in order to beguile the strong into renouncing their native strength. Imagine, for example, a wan-looking business ethicist in a small academic office trying to dominate Donald Trump, Bill Gates, or Warren Buffet, for instance. Nietzsche wonders how in the hell the strong ever got roped into being ashamed of their strength by the sordid moralists whose instinct to dominate is somehow immune from such shame.

Stakeholder Management: Part I (Profit-Seeking)

The Johnson & Johnson Credo says in part, “We believe our first responsibility is to the doctors, nurses, and patients. . . . Our final responsibility is to our stockholders. Business must make a sound profit” (Bowie, p. 18). Final here does not mean last but not least; nor does it mean first among equals. Instead, this credo, which I contend is tailored for marketing purposes, denies the residual profits feature of commercial property rights. To place a cap on profit such that the residual can go to stakeholders without the majority and minority owners’ approval is to violate property rights in favor of redistribution.

The full essay is at "Stakeholder Socialism."

Friday, June 10, 2011

Word-Games Obfuscating Scottish Secession

Following the Scottish National Party’s victory in the Scottish regional elections in Britain (typically used as synonymous with United Kingdom), the question of whether the E.U. state of Britain would or should be partitioned received a lot of press. Plenty of word-games were in the mix. “Scottish National Party” alone is problematic, as Scotland is not recognized as a nation or a nation-state, as it is in Britain. If a specific cultural identity alone is sufficient to connote national, then the word should not be used to refer to a polity being a sovereign country. Incidentally, referring to Scotland as a country is misleading, as the region is not sovereign. Even Britain, being a semi-sovereign state in the E.U., is only a country (and nation) if Virginia and California are so as well, as they are also semi-sovereign states in a union. 

The complete essay is at Essays on Two Federal Empires.

Wednesday, June 8, 2011

Prerequisite to the Financial Crisis of 2008: Federalism Deconstructed & Deregulation

Weakening federalism in the name of preemptive deregulation played a major role in enabling the financial crisis of 2008. Specifically, Carter’s Depository Institutions Deregulation and Monetary Control Act of 1980 abolished Regulation Q (over time), which had limited thrifts’ deposit interest rates, and preempted “the many state usury laws that placed a ceiling on mortgage and credit card rates.” 


The complete essay is at Essays on Two Federal Empires.

Tuesday, June 7, 2011

Industry Undoing European Federalism: The Case of Cookies

In 2010, the EU Parliament passed a law to protect internet users from invasive “cookies,” which track computer usage at the expense of privacy. The 27 E.U. states had to implement the directive, but as this involved discretion, the business sector feared at the time that the states “might interpret the law differently, creating a nightmare of conflicting standards.” In other words, business can be intolerant toward federalism.

The full essay is at "Essays on the E.U. Political Economy," available at Amazon. 

Scotland as a New E.U. State

In early May 2011, “the Scottish National Party (SNP) won 69 out of 129 seats in the Scottish Parliament, with about 45 percent of the vote, up by more than 12 percentage points. Their three main rival parties — Labour, the Conservatives and Liberal Democrats  — all lost ground,” according to msnbc.com.

The complete essay is at Essays on Two Federal Empires.


                         David Cheskin (AP)
  

Monday, June 6, 2011

On the Arrogance of Power: Greenspan, Rubin, and Summers


Over two years after the financial crisis of 2008, a commentator on Fox News said that the banks should not stop the foreclosure process because that would not be good for the free market. He said that people who cannot afford their houses should lose them. Another commentator remarked that there was still too much government in the financial sector. This, according to the commentator, is “the problem.” It is particularly striking that Alan Greenspan’s stark admission to a U.S. House committee in 2008 that the deregulated laissez faire market paradigm contains a fundamental flaw was lost on the two commentators. In May 2011, House Speaker Boehner charged that business is over-regulated. This comment too is remarkable given Greenspan’s realization. In general, if we as a society disown our own lessons, history is destined to repeat itself.
The full essay is at "Greenspan, Rubin, and Summers."