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Saturday, September 22, 2018

A Deal with China: Did the Vatican Lose Its Soul?

In September, 2018, the Vatican and the Chinese government reached “a provisional deal” that would end “a decades-old power struggle over the right to appoint bishops in China.”[1] In regard to the power struggle itself, the deal “would mark a major victory for China.”[2] In regard to spreading Catholicism globally, the Vatican stood to gain both in terms of souls and money. Protestantism had been spreading fast in China, whereas the number of Catholics at the time was 10 to 12 million.[3] The question is therefore whether the Vatican ceded too much for the promise of access to the world’s most populous nation.

1. Jason Horowitz and Ian Johnson, “China and Vatican Reach Deal on Appointment of Bishops,” The New York Times, September 22, 2018.
2. Ibid.
3. Ibid.

Expansion at Volkswagen: Minimizing Risk in E.U.?

It is perhaps common among gigantic corporations, such as the major automobile manufacturers, to assume that current profitability is likely to be augmented by expansion. Economies of scale are presumed to outpace diseconomies as even a large company expands. At a more basic level, it is generally assumed that if a company is not expanding, it is necessarily facing its downfall. The notions of equilibrium and steady state are fundamentally at odds with the more, more, more mantra of mammon. Accordingly, it can be asked whether efforts to strengthen a company’s equilibrium are more in line with long-term profitability. The very expression, strengthening an equilibrium is étranger or foreign to business parlance.

The full essay is at "Volkswagen in 2012: Minimizing Risk in the E.U."

John Kerry: An American Politician

Just after President Barak Obama announced that he would nominate Sen. John Kerry of Massachusetts to be the U.S. Secretary of State, the E.U. Secretary of State (Minister of Foreign Affairs), Catherine Ashton, welcomed the prospect of working with Kerry. Whether she knew it at the time or not, she would be working with an American politician. After all, Kerry had already run for the American presidency. To be sure, he was not taking up the foreign affairs post to build his resume. I believe he genuinely wanted the job. The problem is, is trying to please all the people all the time, a politician's patina (or deeper?), best in foreign affairs? In this essay, I focus not on this question, but, rather, on the patina itself in the case of John Kerry so the underlying problem behind the question of fit with foreign affairs can be more transparent to the wider public.

U.S. President Obama nominates U.S. Sen. John Kerry to be U.S. Secretary of State.    Reuter
The full essay is at: "An American Politician."

Friday, September 21, 2018

Preparing for the U.S. Presidency: Build a Resume

How should an aspiring candidate for President of the United States go about attaining that esteemed office?—an office whose occupant was regularly referred to as “the leader of the free world” when part of that world was behind an iron curtain. Mitt Romney spent six years of his life campaigning for the job only to lose it to an incumbent whose record on “pocket-book issues: was mixed at best. Perhaps it is possible to want something too much. Fortunately, a more substantive alternative is also possible.

Hillary Clinton as U.S. Secretary of State.           
The full essay is at "How to Prepare to be President of the United States: Build a Resume."

Luring Business: “Job Creators” in Texas

As of December 2012, Texas was giving out more financial incentives—mainly in the form of tax breaks and subsidies—to business than was any other American state. The government was handing out around $19 billion annually, while at least $80 million was being spent in the U.S. overall, according to the New York Times. Although at the time Texas had half of all the private-sector jobs created in the U.S. during the preceding decade, the Times points to “a more complicated reality behind the flood of incentives.” It cannot simply be assumed that good jobs will be created.

The full essay is at "Luring Business to Texas."

China or USA: Which Will Rule Trade?

The Association of Southeast Asian Nations (ASEAN) announced at its meeting in November 2012 that it would host negotiations among its members on “a sweeping trade pact that,” according to the New York Times, “would include China.” The trade agreement would include not only the ten countries that are in the association, but also six other countries that have free-trade agreements with the association. In addition to China, those countries include Australia, India, Japan, New Zealand and South Korea. Half of the world’s population would be included in the pact. Notably absent is the United States. This is no accident, as the Obama administration’s own proposal for an eleven-nation Trans-Pacific Partnership excludes China. In other words, the contending proposals may be more about a “control battle” between two contending empires—the United States and China—than anything else. Moreover, which proposal succeeds could say something about whether China succeeds the United States as the hegemonic super-power of the twenty-first century.
Barack Obama and Wen Jiabao: A contest of wills at the East Asia Summit in 2012.   Jason Reed/Reuters

The ECB as the E.U.'s Bank Supervisor: States in the Driver's Seat

Although the establishment of a federal regulator of major banks in the E.U. was as yet not approved by the European Parliament or ratified by the governments of states using the euro as well as any other states opting in, the European Council of Ministers signed off in December 2012 on an amendment that would give the European Central Bank authority over banks that have at least €30 billion in assets, make up more than 20% of their state’s economic output, or operate in at least two states (i.e., interstate banking). At the very least, three banks per state would come under the central bank’s oversight. Other banks would remain the responsibility of state regulators. This is an interesting “working out” of federalism, distinctively European-style.
German Finance Minister Wolfgang Schäuble at the E.U. Council of Ministers discussing the bank supervisor amendment.     WSJ
The full essay is at "The European Central Bank."

Exaggeration on the U.S. Economy “Going Over the Cliff” after the Financial Crisis of 2008

As the U.S. Government faced down its own deadline in 2012 before the Bush tax cuts would expire and across-the-board budget cuts would commence, the Federal Reserve, which had been struggling to prop up the economy by buying bonds and keeping interest rates low, would, according to the Chairman, Ben Bernanke, be largely powerless to do more in the face of a recessionary policy on taxes and spending. "We cannot offset the full impact of the fiscal cliff," he said of the Fed. "It's just too big." That he had written a doctoral dissertation on the Great Depression and had specialized on it as a professor at Princeton lends a lot of weight to his judgment on the matter. However, he had also managed to be re-appointed to the Fed and thus knew how to play the game. In the case of the automatic budget cuts, major power-brokers, specifically in the military industrial complex, had a lot riding on Congress and the White House making a deal that would obviate the cuts in defense spending. The chairman of the Fed could have been carrying their water.
Ben Bernanke, Chairman of the Federal Reserve, in front of the lights.   Reuters

Honeywell’s David Cote: Carrying the Water in Washington

In the midst of the talks in Washington in 2012 to avoid the so-called fiscal “cliff” with a bipartisan deal, the Wall Street Journal reported that David Cote, the CEO of Honeywell, a $48 billion “industrial giant,” was at the time “the business executive most in the middle of the fiscal-cliff debate.” The Senate Finance Committee Chairman Max Baucus (D., Mont.) said, "People on both sides of the aisle are sending messages through Dave. He's become an active participant.” For a sitting CEO to have ensconced himself so deeply among the power-players in Washington did not come controversy-free. Even though his company had a vested interest that a deal be reached, the matter of his involvement raises larger implications, positive as well as negative.
David Cote, CEO of Honeywell. Civic duty or getting "his people" back in line in Washington?       Bloomberg News
 The full essay is at "Honeywell's CEO in Washington."

Saturday, September 15, 2018

Occupying Wall Street

At the “Occupy Wall Street” protest in Washington, D.C., a man was preaching the Gospel as protesters pleaded with him to stop. While I suspect that the hackneyed secular/progressive vs. right-wing Christian dichotomy is reflected in this dynamic, the protesters may also have been “policing” the contours of their movement as anti-corporate and anti-Wall Street. Yet one of the pleading protesters was holding a sign, “Create Peace,” which does not really get at the anti-business theme. Another of the protesters pleading with the evangelical had a bongo drum handing down from around his neck, which could suggest that he would be out for any left-wing protest. Still another protester, perhaps from the peace movement, held a sign “2 Wars equals = Deficits!” Even morphing into a protest against the horrendous debt of the U.S. Government would miss the mark on the anti-corporate, anti-Wall Street target.

The full essay is at "Occupying Wall Street."

A Syrian Offensive: Taking on International “Enforcement” of Human Rights

In Geneva on November 28, 2011, the Independent International Commission of Inquiry on Syria presented its report, which had been requested by the UN Human Rights Council. According to the report’s summary, the “deteriorating situation in the Syrian Arab Republic prompted The Human Rights Council to establish an independent international commission of inquiry to investigate alleged violations of human rights since March 2011.” The Commission interviewed 223 victims and witnesses. The Commission was able to document “patterns of summary execution, arbitrary arrest, enforced disappearance, torture, including sexual violence, as well as violations of children’s rights.”One might suppose that the Syrian government would have been seeking to placate the international organization and other governments.

The full essay is at "Taking on International Enforcement."


Neil MacFarquhar and Nada Bakri, “Syria Calls Arab League Sanctions ‘Economic War.’” The New York Times, November 28, 2011. 

Protest Movements 101

David Johnston of Reuters opined on October 7, 2011, the Occupy Wall Street “protests show signs of sparking a major change in U.S. politics by creating common ground among people with wildly divergent views. The key to their significance will be whether they foster a wholesale change in political leadership in 2013 or whether Americans return a vast majority of incumbents in both parties at all levels of government.” But are “wildly divergent views” really represented, and did the movement translate dramatic camera-ready protest parades and sit-ins into grassroots work to get specifically anti-corporate candidates past the primaries and into office in 2012?  I contend that from the get-go, the Occupy Wall Street movement set itself on a trajectory antithetical to being able to answer both of these questions in the affirmative. In so doing, the movement’s “non-leaders” sowed the seeds of the movement’s demise—or at the very least of being relegated as partisan and thus contained as a sub-part in the system.

The full essay is at "Protest Movements 101."

Police Against Protesters: Sadism or Politics?

The day after several marches and rallies by the “Occupy Wall Street” movement in New York City, The New York Times reported that “two dozen people were arrested at a Citibank branch on LaGuardia Place on trespassing charges. Some witnesses said that the protesters had tried to leave but were locked inside by bank employees. ‘They were trying to leave, but they wouldn’t let them,’ said Meaghan Linick, 23, of Greenpoint, Brooklyn. She said one woman who had been inside and left was forced back inside by police officers. Citibank, in a statement, said the protesters ‘were very disruptive and refused to leave after being repeatedly asked, causing our staff to call 911.’ The statement continued, ‘The police asked the branch staff to close the branch until the protesters could be removed.’” The Times report does not mention whether the protesters were existing Citibank customers trying to close their accounts. The report does refer to this at a Chase bank. “Earlier, about a dozen protesters entered a Chase branch in Lower Manhattan and withdrew their money from the bank while 300 other people circled the block, some shouting chants and beating on drums. The former Chase customers, who declined to reveal how much they had in their accounts — though a few acknowledged it was not much — said they planned to put their money into smaller banks or credit unions.’ The more resources we give to small institutions, the more they’ll be able to provide conveniences like free A.T.M.’s and streamlined online banking so they can compete with the larger banks,’ said Hannah Appel, 33, a postdoctoral fellow at Columbia University.” The report does not indicate whether the former customers were arrested.

The full essay is at "Police as Aggressors."

                                       Anthony Bologna of NYPD pepper-spraying protesters following his orders

Climate Seasons and Astronomy Confused: A Societal Blind-Spot

In the Northern Hemisphere, in the Northern E.U. and U.S., it is ludicrous to claim that winter begins not until December 21st. If we go by the claim, the Christmas season is in the fall—joined by Halloween (and Thanksgiving in the U.S.). Similarly, September sports autumn cooling off rather than three more weeks of summer. In many areas, leaves turn fall colors well before September 21st. As a matter of fact, “Climate scientists define summer as the three months from June 1 through August 31st.”[1] Why, then, do meteorologists on television, at least in the U.S.—that vaunted superpower—announce that fall officially begins on September 21st. They even show “fall begins” on the day of the 21st on the week of weather. Similar, the fools show “winter begins” just four days before Christmas, on the winter solstice. That solstice is in the winter—not the beginning of it.
The full essay is at "Weather Seasons and Astronomy."

1.Doyle Rice, “Can’t Sleep on It: Nights Are Hottest on Record,” USA Today, September 7, 2018.

Wednesday, September 12, 2018

The Franchise: A Flawed Arrangement

The franchise arrangement combines the reach (and efficiency) of central advertising with the ability to respond to local differences. I suspect that the benefit from local flexibility is typically overdrawn, such that the value of the franchise arrangement itself is overstated. Meanwhile, the downside in local autonomy is, I suspect, understated. That downside includes the propensity to engage unethically based in part on lack of character-virtues and on the accurate perception of weak accountability within the franchise arrangement. The downside also comes into greater play than perhaps is realized because management on the local level can be rather bad in quality (from a managerial standpoint). In other words, slim pickings with regard to managerial talent can be a factor at the local level. Without mechanisms of accountability from “higher up,” front-line managers can get away with an astonishing amount of bad (and unethical) managing.

The full essay is at "The Franchise Agreement as Flawed."

Tuesday, September 11, 2018

7 Billion People Worldwide in 2011: Catholicism's Humanae Vitae Compromising or Protecting Human Life?

According to the Huffington Post, “Amid the millions of births and deaths around the world each day, it is impossible to pinpoint the arrival of the globe's 7 billionth occupant. But the U.N. chose on October 31, 2011 to mark the day of that occupant's arrival with a string of festivities worldwide, and a series of symbolic 7 billionth babies being born.” I contend that the milestone is nothing to celebrate; rather, it should have served as a wake-up call for us all, lest the species continue undaunted to maximize itself right out of existence. Both the slope and its relative abruptness, evident in a historical perspective, ought to have given us all pause in our assumption that our species would necessarily go on without either self-regulation or a drastic correction from nature. 

                                            Source: UN Population Division

Monday, September 10, 2018

Paul Volcker on the Market and Regulation

Paul Volcker, former Chairman of the Federal Reserve, may strike the conventional "wisdom" as an oxymoron regarding the market mechanism and government regulation. I contend that he could have taught that "wisdom" a lesson or two.

Just the Facts: Empirical Social Science Overplayed

Tilburg University in the E.U. is known to have an emphasis on empirical studies in the social sciences (including business). With this bent, the university is typically considered to be closer to the American academic tradition than that of Europa. So when Dr. Diederik Stapel, a psychology professor at Tilburg, acknowledged to having committed academic fraud in several dozen published articles in academic journals, the academic status of empirical research itself was thrown into question. Experts point out that Stapel “took advantage of a system that allows researchers to operate in near secrecy and massage data to find what they want to find, without much fear of being challenged.” Indeed, it is rare even for peer-reviewers of potential articles to demand to see the raw empirical data supporting a given study’s conclusions. According to Dr. Jelte Wicherts, a psychology professor at the University of Amsterdam, the problem of data being misused by the scholars who collect and analyze it is widespread in the discipline of psychology.

The full essay is at "Empirical Social Science."

Sunday, September 9, 2018

Greed Eclipsing Ethical Awareness

Lest it commonly be assumed that greed facilitates or results in unethical policies out of conscious choice, I submit that a focus on maximizing revenue can eclipse even the recognition of a policy being unethical. To the extent that this is so, correcting for unethical policies in business (and government) is more difficult that typically thought. I have in mind as a case in point the policies of bars regarding karaoke singing. 

The full essay is at "Greed Eclipsing Ethical Awareness."

Tuesday, September 4, 2018

Nike Takes a Controversial Stand on NFL-Player Protests: A Foray into Unnecessary Risk

“Nike became Nike because it was built on the idea of rebellion,” Jemele Hill, a sports journalist wrote. “This is the same company that dealt w/ the NBA banning Air Jordans. They made [Michael] Jordan the face of the company at a time when black men were considered to be a huge risk as pitch men.”[1] Just days before the 2018-2019 NFL football season got underway, Nike threw “its weight behind one of the most polarizing figures in football, and America: former San Francisco 49ers quarterback Colin Kaepernick.”[2] He had been a leader in the black players’ movement to protest, by kneeling during the national anthem, the recurring abuse of power by police. The element of financial risk in Nike’s decision to include Kaepernick in an advertising campaign brings up the question: should businesses take sides on political issues—particularly, on contentious ones?

1. Nathaniel Meyersohn, “Nike Takes Sides, Tapping Colin Kaepernick for New ‘Just Do It’ Ad,” CNN Money, September 4, 2018 (accessed same day).
2. Ibid.

Wednesday, August 22, 2018

Justice’s Last Resort: Accountability in the Roman Catholic Church Sex Scandals

A pattern of deeply violent acts of power-aggrandizement, followed by the efforts of “organizational men” to cover up the atrocities in the interest of the organization and even the offenders at the negligent expense of the offended, cannot but have ripple effects, or make waves, once the stories are revealed to the public. It is sad, very sad, when an offending institution, or “club,” refuses to enforce accountability on its offending functionaries—members of the club. In early August, the Pennsylvania Attorney General’s office released to the public an 884-page report finding that six Roman Catholic dioceses in Pennsylvania had covered up sexual abuse—molestation and even rape—by 301 “predator priests” over 70 years in the twentieth century.[1]

1. Hayley Miller, “Indiana Priest Beaten Unconscious, Allegedly Told ‘This Is for All the Little Kids.” The Huffington Post, August 22, 2018.

Saturday, August 18, 2018

On Leaving Coal Emissions to the States: Implications for American Federalism

With the transportation (i.e., fuel) and power (i.e., coal) sectors accounting for a majority of the carbon emissions in the U.S., according to the EPA, the Trump administration’s moves to freeze his predecessor’s fuel efficiency standards and relax pollution rules for power plants needing renovation put at risk the declining trend of emissions in 2018. The implications for climate change (e.g., hotter summers) were stark, according to Janet McCabe, who had been Obama’s EPA air chief.[1] The Trump administration’s proposal to allow the states, including West Virginia, to set their own rules for regulating coal was, according to the New York Times, “the administration’s strongest and broadest effort yet to address what the president has long described as a regulatory ‘war on coal’.”[2] An implication is that carbon emissions from coal in the U.S. would likely increase as a result, even though large states like California and New York could be expected to tighten the rules. The interesting point about turning the regulations to the states revolves around federalism. Constitutionally speaking, should the states regulate the carbon emissions from coal?

The full essay is at "States Regulating Coal."

1. Lisa Friedman, “Trump’s Plan for Coal Emissions: Let Coal States Regulate Them,” The New York Times, August 18, 2018.
2. Ibid.

Tuesday, June 19, 2018

On the Methodist Complaint against U.S. Attorney General Jeff Sessions on an Immigration Policy

Assessing whether a Christian denomination’s formal discipline is being used for religious or politically-ideological purposes is fraught with difficulty. Certain governmental policies, such as genocide, clearly violate Christian teaching, such that government officials charged with implementing such policies could legitimately be sanctioned on religious grounds without it being thought that a political or partisan difference is the actual basis of protest. As the harm to others in a given policy lessens, the specter of ideological opposition as the actual motivator increases as a possibility. In 2018, 640 United Methodists filed a complaint to their church charging U.S. Attorney General Jeff Sessions with having violated the Church’s Book of Discipline, its code of laws and social principles, on account of the alleged “child abuse, immorality, racial discrimination, and ‘dissemination of doctrines contrary’ to those of the United Methodist Church.”[1] Sessions had been tasked with implementing the U.S. immigration policy of separating children from their parents at the border. At the time of the complaint, over 2,000 children of illegal aliens were being held by the U.S. Government as their parents were being prosecuted.

The full essay is at "Methodist Complaint on Immigration."

Tuesday, June 12, 2018

Ethical Leadership in the Roman Catholic Church: The Case of the Chilean Abuse Scandal

Leaders taking an ethical stance, even en masse, may find themselves risking their very positions, including the associated perks. In May, 2018, “all Chile’s 34 [Roman Catholic] bishops offered to resign en masse . . . after attending a crisis meeting with [Pope Francis] over allegations of a cover-up of sexual abuse” in the South American state.[1] The pope could have accepted all of those resignations. Instead, he accepted the resignations of three Chilean bishops, including Juan Barros of Osorno, Cristian Cordero, and Gonzalo Garcia, a month later. The ethical leadership, I submit, was not evinced in the pope’s decision to get rid of the three sordid clerics, but, rather, in the other bishops who had been willing to take a stand even at great personal loss. Indeed, the pope admitted he had made “grave mistakes” in the Chilean sexual abuse scandal. Had he been guilty of protecting his friends?

The full essay is at "Christian Leadership." 

See: Christianized Ethical Leadership, available at Amazon

[1] Reuters, “Pope Francis Accepts Resignation of 3 Chilean Bishops Following Sex Abuse Scandals,” The Huffington Post, June 11, 2018.

Judge Allows ATT Purchase of Time Warner: Vertical Integration Escapes Anti-Trust Objection

Typically horizontal mergers, as when one company merges with another that makes similar products, have trouble when it comes to anti-trust, restraint of trade, objections. The go-ahead of the ATT merger with Time Warner in mid-2018 suggests that vertical combinations, such as when distributor buys a content-creator, survive on anti-trust grounds. Even if trade is not restrained, another problem is present—that of conflicts of interest. Anti-trust law is oriented to preventing restraint of trade rather than such conflicts. Accordingly, just because the ATT merger survived on anti-trust grounds does not mean that a regulatory gap did not exist at the time.

Slovak Resistance to Expanding the E.U. Bailout in 2011

Richard Sulik, Parliament Speaker of the Slovakian legislature, argued that the only real solution to the debt crisis in the E.U. was rigorous enforcement of the E.U. regulations on budget deficits and public debt. He had been particularly angered by his state, the second poorest in the E.U., having to bail-out a richer state that had consistently violated the E.U. regulations. Additional debt, he insisted, was not a way out for the PIGS. Slovakia, after all, had to adhere to strict limits on everything from budget deficits to inflation rates in order to be able to adopt the euro. “Now when I see what is being allowed for Greece and Italy, it really makes me angry,” Sulik admitted. “We have to pay because of this double standard. It’s a real injustice.” Indeed it was. Bailing out Greece so the state would not default effectively rewarded that state government for profligate spending and tax avoidance in violation of the E.U. regulations.  

The full essay is at "Slovak Resistance."

Balancing Budgets: Italy vs. Wisconsin

In what could be dubbed a tale of two states, Scott Walker of Wisconsin bragged about bringing the budget into balance without raising taxes while Silvio Berlusconi broke his pledge not to raise taxes in order to balance his budget for 2013. Walker relied on spending cuts and constricting the collective bargaining of government employees, while Berlusconi agreed to a package of tax increases, spending cuts and fewer labor protections to make up for $76 billion (54 billion euros) by 2013. The tax increases include raising the value-added tax from 20 to 21 percent and imposing a “solidarity tax” of 3 percent on state residents who earn more than $420,000 (300,000 euros). The latter tax would run through 2013. At a news conference in August, 2011, “Berlusconi acknowledged that he had pledged never to raise taxes, but that the attention of world markets had forced him to do so.” Was breaking his pledge a vice or a virtue?

The full essay is at Balancing Budgets

Was U.S. President Obama the Antichrist?

In the twentieth century, Christian apocalypticism thought it saw the end of days in the midst of baleful signs, including historical biblical criticism, the return of the Jews to the Holy Land, evolutionary science, and the United Nations. In the United States, the consolidation of power in the federal government at the expense of federalism (and, theoretically, liberty as well) was apocalyptically taken as a precursor to the end. According to Matt Sutton, “As the government grew in response to industrialization, fundamentalists concluded that the rapture was approaching.” The trajectory, in other words, was viewed as headed toward a global super-state under the thumb of a seemingly benevolent ruler. Franklin D. Roosevelt’s “consolidation of power across more than three terms in the White House, his efforts to undermine the autonomy of the Supreme Court, his dream of a global United Nations and especially his rapid expansion of the government confirmed what many fundamentalists had feared: the United States was lining up with Europe in preparation for a new world dictator. This “leader would ultimately prove to be the Antichrist, who, after the so-called rapture of true saints to heaven, would lead humanity through a great tribulation culminating in the second coming and Armageddon.”

The full essay is at "Was Obama the Antichrist?"

A Trader Dreamed of Economic Collapse

Call it over-confident bravado or perhaps a lapse into utter transparency; trader Alessio Rastani’s comments on BBC give the rest of us a glimpse of the power behind the world’s thrones and how prone “the system” is to collapsing without a sufficient force geared to the viability of the system itself. In other words, it is amazing that the financial/governmental systems go on without more attention to them as systems rather than to micro self-interests. One might ask whether powerful self-interests are sufficient to keep the system from hitting the rocks. Apparently the answer is yes, though this is astonishing nonetheless. It is like a car somehow making its way down the street with one person in the car looking at pedal, another at the steering wheel, and still another at the speedometer. It is amazing if the car does not crash, yet somehow it managing to stay on the road.

The full essay is at "Economic Collapse."

Bank of America: Downsizing From Smallness

Three years after the near-meltdown of Wall Street in September 2008, Bank of America announced that 30,000 jobs would be eliminated. That amounts to nearly 10% of the bank’s total work force. Over all, BOA was planning to cut $5 billion in annual expenses. The reason is transparent: continued losses stemming from the bank’s acquisition of Countrywide in January 2008 in spite of the fall of the U.S. real estate market and the related losses on sub-prime mortgage-backed CDOs. What could Ken Lewis have been thinking? At least in the case of his acquisition of Merrill Lynch, which was agreed to in principle in September 2008, the investment bank had already sold its $30 billion of toxic assets for over $7 billion in July 2008.

The full essay is at "Bank of America."  

Friday, June 8, 2018

Is Modern Banking Fundamentally Flawed?

Jamie Dimon, CEO of JP Morgan Chase and board member of the New York Federal Reserve (a banking regulatory body), advocates not only that financial regulation reform is not necessary, but also that deregulation is the best course for the American financial sector. Meanwhile, JP Morgan lost $2 billion in an effort to reduce risk. President Obama quickly pointed out that if one of the smartest bankers in the room can preside over such a massive loss, then a deregulated financial sector would likely present us with an unacceptably high level of risk to the entire financial system (and economy). Elizabeth Warren suggested that relying on bankers to regulate themselves would not reduce the systemic risk. The alternative would seem to be strengthening financial regulation, even though—according to Sen. Dick Durbin—“the banks own Congress.”

The full essay is at " Banking as Flawed."

Market or Government: Which Should Reduce Systemic Risk in the Banking Industry?

If the five largest banks—JP Morgan, Bank of America, Citigroup, Goldman Sachs, and Morgan Stanley—are too big to fail and yet substandard operationally on account of their respective complexities (e.g., investment banking added to commercial banking), might it be that the market-based decisions of investors will relegate the giants, which by the way had price-to-book value ratios of between .37 to .77 in May 2012, thereby solving the problem of systemic risk?

Toronto Police as Aggressors at G-20 Summit

Police employees “ignored basic rights,” jailed people illegally, used excessive force and escalated violence at protests surrounding the G-20 meeting in Toronto in 2010, according to the Office of the Independent Police Review Director. The report could lead to charges against police employees and strengthen the hand of civil lawsuits filed against the police department. Because the police employees acted with an attitude of impunity, anything less than stiff prison sentences would be insufficient as a deterrent.

Thursday, June 7, 2018

The 2012 U.S.Trade Deficit: An Analysis

Coming in at 2.7% of GDP, the U.S. trade deficit fell to $107.5 billion in the third quarter of 2012—down 9 percent from the second quarter’s $118.1 billion, which was 3% of the economy at the time. The current account includes merchandise, services, and investment flows. The surpluses in services and investment were out-done by the deficit in merchandise to produce the overall trade deficit. According to the New York Times, the “improvement in the current account in the third quarter reflected a decline in the deficit on goods and a small increase in the surplus on services, led by a gain in foreign earnings made by financial services, insurance and professional services provided by companies in the United States. The surplus on investment earnings narrowed to $50.8 billion, down from $52.1 billion in the second quarter.” Most of the decline in the deficit on goods reflected a decline in the foreign oil bill, according to Paul Ashworth at Capital Economics.
Analysis is at "2012 U.S. Trade Deficit

ICE Bought NYSE: Profiting from the Rules?

“Tell me what the rules are, and I’ll make money with them.” This statement, made by Jeffrey Sprecher of Intercontinental Exchange, captures well the attitude that business practitioners should have toward government regulation in a republic. That is to say, businesses should be regulation-takers rather than makers. For the regulatees to make regulation to which they themselves would be subject is an oxymoron, or contradiction in terms. At the very least, it involves a conflict of interest. At the macro level, business as “regulation-maker” effectively turns a democracy into a plutocracy. Accordingly, the strategic use of regulation should pertain to the use side, rather than the regulating side. Crafting regulations—essentially dictating them to legislators or regulators—in order to make money from them takes the strategic use of regulation too far.
 The full essay is at "Profiting from the Rules on Wall Street."

Wednesday, June 6, 2018

The U.S. Military in Iraq: Were Human Rights Ignored?

Philip Alston, a United Nations human rights official, warned the U.S. Government in 2006 that he had received information indicating that Iraqi reports of American troops executing an Iraqi family were true. Five of the victims were children five years old or younger. According to Alston, the troops “entered the house [after a 25 minute gun battle], handcuffed all residents and executed all of them.” He noted that the troops attacked the house in part because they suspected that the family was involved in the killing of two American troops earlier in March, 2006. If this is true, both the vengeful attack and the subsequent investigation by the U.S. military, which concluded that the report of the execution was false, demonstrate what can go wrong when conflicts of interest are ignored.

The full essay is at "Human Rights in a Military Occupation."

Does a Supermajority Undercut Constitutionalism?

How “extreme” can a legislative supermajority get in its legislation? Can constitutional safeguards act as a check where a legislative supermajority can enact amendments at will? A judiciary protecting the rights of individuals as well as a people against over-reaches by a government is limited by constitutional provisions presumably set in stone yet actually in erasable parchment. Complicating an answer, the term extreme may be applied to a piece of legislation by one person and refused by another. I come from a medium-sized city in the Midwest, where extreme has been thought to apply to commuting to work by bicycle. Where a pathological fear of change grips a town, you don’t have to go far to find someone proscribing something or other as too extreme At the level of the U.S. governmental institutions, one political party might deem universal health insurance through extant private insurance companies as extreme—tantamount to demonic European socialism—while another party might view continuing to use private insurance companies as merely reformist rather than extreme. A supermajority can take advantage of such a difference in descriptive judgments to argue that a significant constitutional change is actually a minor change and thus not worth worrying about. 

How “extreme” can a legislative supermajority get in its legislation? Can constitutional safeguards act as a check where a legislative supermajority can enact amendments at will? A judiciary protecting the rights of individuals as well as a people against over-reaches by a government is limited by constitutional provisions presumably set in stone yet actually in erasable parchment. Complicating an answer, the term extreme may be applied to a piece of legislation by one person and refused by another. I come from a medium-sized city in the Midwest, where extreme has been thought to apply to commuting to work by bicycle. Where a pathological fear of change grips a town, you don’t have to go far to find someone proscribing something or other as too extreme At the level of the U.S. governmental institutions, one political party might deem universal health insurance through extant private insurance companies as extreme—tantamount to demonic European socialism—while another party might view continuing to use private insurance companies as merely reformist rather than extreme. A supermajority can take advantage of such a difference in descriptive judgments to argue that a significant constitutional change is actually a minor change and thus not worth worrying about. 

The full essay is at "Supermajority and Constitutionalism."

Thursday, May 31, 2018

Google Executives Evaded Jail Time in Brazil: Is Business Too Powerful?

In late September 2012, the Brazilian state police detained the head of Google’s operations in the state after the company’s management failed to act on an electoral judge’s order to remove videos from its YouTube site criticizing a candidate in a rural county election. Separately, a judge ordered Google to remove a religiously-offensive video, which had sparked riots in the Middle East, within ten days or face fines. Google’s lawyers claim that the company is not responsible for what users upload. Earlier in the year, Brazil’s government threatened the head of Chevron’s operations there with arrest and passport-confiscation after a small leak occurred in the company.

The full essay is at "Are people in international business above national laws?"

The U.S. Supreme Court: Too Much Ideology in Jurisprudence?

Should the electorate in a republic be able to remove Supreme Court justices due to their past decisions on particular cases? Can this basis be distinguished from removing a justice for judicial incompetence? One thing is clear: the general public does not have the technical expertise to perform a “supervisor’s evaluation” on a judge. Obviously, anyone can see that someone who skips work on a regular basis is not fit for the job, but this is different than evaluating a job by the technical criteria of the profession. Distinguishing between a particular decision and general judicial approach, for example, is more difficult. Moreover, it can be difficult to balance the rights of popular sovereignty (i.e., rule by the people) against the rule of law without respect to majority opinion.

The justices of the U.S. Supreme Court in 2012.

The full essay is at "Ideology Twisting Legal Reasoning."

Wednesday, May 30, 2018

Schindler’s List

In German-occupied Poland during World War I, Oskar Schindler spent millions to save 600 Jews from the death camps. In the 1993 film, Schindler’s List, the gradual transformation of the luxuriant capitalist is evident as the film unfolds. At the end,  he comes to an emotional realization as to the worth of money as compared with human lives. He realizes that had he not spent so lavishly, he could have saved even more lives. He realizes, in effect, his selfishness that had blinded him even to the obvious severe suffering of the Jews around him. The story is thus not simply that of greed giving way to compassion. 

The full essay is at "Schindler's List."

Questioning Universal Basic Income

The gist of basic income is that a government “distributes cash universally. As the logic runs, if everyone gets money—rich and poor, the employed and the jobless—it removes the stigma of traditional welfare schemes while ensuring sustenance for all.”[1] The “logic,” I submit, is flawed even if the basic idea is solid.

The full essay is at "Universal Basic Income."

1. Peter S. Goodman, “Inequality? California City Is First in U.S. to Try,” The New York Times, May 30, 2018.

Monday, May 28, 2018

Free Speech in the E.U.: Criminalizing Denials of Genocides

While the world continued to look on—like an impotent rich man who cannot afford Viagra—as a genocide was taking place in Syria (i.e., the systemic killing of a group—in this case, of pro-democracy demonstrators), France’s state senate approved a bill on January 23, 2012 criminalizing the denial of officially recognized genocides, which according to the state includes the Nazi Holocaust and the Turkish killing of Armenians beginning in 1915. In the twenty-first century, fining people and putting them in prison for not wanting to remember things so horrible evinces the same kind of nationalist thinking that had led the twentieth to be the bloodiest century. In contradistinction to that decadent century, turning a new leaf following the Arab spring in the twenty-first is a far better strategy.

The full essay is at "Free Speech Compromised in the E.U."

Extrapolating from the Arab Spring to Corporate Social Responsibility

Richard Branson, founder of Virgin Atlantic and a myriad of other companies, sees a natural extension or follow-through from the pro-democracy protests in the Middle East and North Africa to more corporate social responsibility. As much as I would like to think that the twenty-first century proffers a new world, I think we have to acknowledge the weight of the political, economic and social strictures that we have uncritically inherited.

The Russian Conscience on Human Rights in Syria

Russia’s foreign minister, Sergey Lavrov, warned on January 18, 2012, according to the New York Times, “that outside encouragement of anti-government uprisings in the Middle East and North Africa could lead to ‘a very big war that will cause suffering not only to countries in the region, but also to states far beyond its boundaries.’” A very big war, it would seem, with very big stick, would be the result of “outsiders” stepping in to protect the Syrian protesters from their own government. In fact, the Times reports that “Lavrov said Russia would use its position on the United Nations Security Council to veto any United Nations authorization of military strikes against the government [of Syria].” It made no difference to Lavrov that the United Nations, including the Secretary General, had “repeatedly called for Syria [to] end a crackdown on opposition demonstrators, which Arab League monitors say resulted in hundreds of deaths over the past month.” In other words, the U.N. was officially impotent in being able to act on the basis of its “demand” because one of its members has a veto.

The full essay is at "Russia on Human Rights."

Wednesday, May 23, 2018

The U.S. Federal Reserve as a Regulatory Agency

According to the Wall Street Journal, the Federal Reserve “has operated almost entirely behind closed doors as it rewrites the rule book governing the U.S. financial system.” The paper notes that this has been in sharp contrast to the trend at the Fed toward greater transparency in its interest-rate policies and emergency-lending programs. The complaint of a dearth of public meetings misses, however, not only the scripted nature of such displays, but also the more fundamental question of whether a central bank buffered from political pressure should play such a salient role as regulator. At the very least, the democratic deficit and a lack of accountability may be exacerbated by the Fed’s greater role as a regulator of banks—particularly after the major investment banks become commercial banks, and thus subject to the Fed’s regulations.

The full essay is at "The Federal Reserve as a Regulator of Banks: An Institutional Conflict of Interest."

Related books: 

Essays on the Financial Crisis

Institutional Conflicts of Interest

UN’s General Assembly as Nonbinding on Syria

According to the New York Times, “In a powerful rebuke to Syria’s government, the United Nations General Assembly voted overwhelmingly on [February 16, 2012] to approve a resolution that condemned President Bashar al-Assad’s unbridled crackdown on an 11-month-old uprising and called for his resignation under an Arab League peace proposal to resolve the conflict.” The reporter immediately undercuts his use of powerful by observing that the 137-12 vote (with 17 abstentions) is “a nonbinding action with no power of enforcement at the world body.” The “action” does represent “a significant humiliation” for Assad. I doubt very much if he felt humiliated. His UN ambassador “denounced the resolution as a politically motivated scheme to intervene in Syria by the Western powers and others who ‘would like to settle accounts with Syria.’” Altogether, the first two or three paragraphs of Gladstone’s article can be read in terms of logic as “X, not X.” Of course, the first X gets more attention, so the article gives the impression that the UN did something powerful when in fact the exercise was one of exposing the impotence of the world body.

The full essay is at "The Fecklessness of the UN."

Limiting Bank Size: Crude But Advisable

In February 2012, Tyler Cowen claimed in the New York Times that people across the political spectrum were “talking about splitting up America’s large banks.” At the time, I could discern no such talk, although this does not mean that it was not going on. As the Dodd-Frank financial reform law was being written in 2010, the option of splitting up banks like Bank of America, Goldman Sachs, and JP Morgan Chase was quietly but assiduously kept off the front burners. It is difficult to believe that the big banks would have relaxed in their efforts to relegate such threats in early 2012 as if the passage of the legislation in 2010 meant that more astringent options were no longer possible. In his article, Cowen includes some other questionable claims. Reading between the lines, he seems to have been “playing by the rules” in support of the big guys.

The full essay is at "Limiting the Size of the Big Banks."

Friday, May 18, 2018

Naked Royalty: Prince Harry and the Sun

In publishing naked pictures of Prince Harry on holiday in Nevada, the Sun in Britain ignored the warning from the press watchdog that had warned the Sun that it would be breaching a privacy provision in the state of Britain’s press code. That the warning followed an appeal to the Press Complaints Commission from St. James’s Palace, which is Prince Charles’s home and office in London, suggests that the warning came from “the firm” itself to protect one of its own.

A naked royal hits the newsstands in Britain.         Tony Melville/Reuters

The full essay is at "Privacy and the Press."