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Saturday, May 12, 2018

On Leveraging the U.S. Debt Ceiling: How the Market Mechanism Handles Trust

On May 9 2011, U.S. House Speaker Boehner insisted “on trillions of dollars in spending cuts, and no tax increases, as the price for rounding up enough votes to allow more borrowing and prevent the country from defaulting on its debt,” according to the Huffington Post. The Ohio Republican had “said failure to increase the borrowing limit [in the summer of 2011] would trigger a financial disaster for the United States and the world.” On May 12th in Congressional testimony, Ben Bernanke, chairman of the Federal Reserve Bank, cautioned against using raising the debt ceiling as leverage for getting a particular partisan policy-prescription on federal spending enacted into law. Richmond Fed President Jeffrey Lacker had told Reuters, “I do share the chairman’s concern that going up to the edge and playing chicken on the debt ceiling is not a wise strategy.”

The full essay is at "Leveraging the U.S. Debt Ceiling."

Strategic Thinking Beyond the Business Plan

“When smart people came up with ideas for well-conceived business opportunities, we said go for it. As always, organizational charts, management consultants, and business plans played virtually no role in any of this. My own strategic thinking I did mostly while showering or shaving.”

—Alan C. Greenberg, former Chairman and CEO of Bear Stearns

The full essay is at "Strategic Thinking Beyond Plans."

The Financial Crisis of 2008: On the Role of Negligence Breaching Fiduciary Obligation

Roger Lowenstein laments that “New York Times columnist Joe Nocera lamented that ‘Wall Street bigwigs whose firms took unconscionable risks … aren't even on Justice's radar screen.’ A news story in the Times about a mortgage executive who was convicted of criminal fraud observed, ‘The Justice Dept. has yet to bring charges against an executive who ran a major Wall Street firm leading up to the disaster.’ In the same dispassionate tone, National Public Radio's All Things Considered chimed in, ‘Some of the most publicly reviled figures in the mortgage mess won't face any public accounting.’ New York magazine saw fit to print the estimable opinion of Bernie Madoff, who observed that the dearth of criminal convictions is ‘unbelievable.’ Rolling Stone, which has been beating this drum the longest and with the heaviest hand, reductively asked, ‘Why isn't Wall Street in jail?’”
Lowenstein interprets these sentiments as implying “that the financial crisis was caused by fraud; that people who take big risks should be subject to a criminal investigation; that executives of large financial firms should be criminal suspects after a crash; that public revulsion indicates likely culpability; that it is inconceivable (to Madoff, anyway) that people could lose so much money absent a conspiracy; and that Wall Street bears collective guilt for which a large part of it should be incarcerated.”
Lowenstein argues that “(t)hese assumptions do violence to our system of justice and hinder our understanding of the crisis. The claim that it was ‘caused by financial fraud’ is debatable, but the weight of the evidence is strongly against it. The financial crisis was accompanied by fraud, on the part of mortgage applicants as well as banks. It was caused, more nearly, by a speculative bubble in mortgages, in which bankers, applicants, investors, and regulators were all blind to risk. More broadly, the crash was the result of a tendency in our financial culture, especially after a period of buoyancy, to push leverage and risk-taking to the extreme.”
Lowenstein also ticks off a loose monetary policy (i.e., extremely low interest rates), unaccountability at Fannie Mae and Freddie Mac, weak financial regulation, and an overconfidence in “risk management” methods in arguing that we should not be reductionist in ascribing the crisis to fraud alone or even primarily.  



The Electoral College Electing the U.S. President: A Check on Excess Democracy at the Empire Level

As a delegate in the U.S. constitutional convention, Governeur Morris stated on July 19, 1787 that the proposed National Executive (i.e. the U.S. President) should be “a firm guardian of the people and of the public interest.” (1)  Given this role, Morris maintained that it “cannot be possible that a man shall have sufficiently distinguished himself to merit this high trust without having his character proclaimed by fame throughout the Empire.” (2)   In other words, presiding requires a requisite credibility or stature that may be difficult to find in a territory on the scale of an empire.

The full essay is at "The Electoral College."

Friday, May 11, 2018

Malignant Narcissism in the Porn Industry: A Case of Flaccid Industry Self-Regulation

In early February, 2011, the Los Angeles city council voted unanimously to draft an ordinance that would require condoms to be used on the set of every pornographic movie made within city limits. “We can’t keep our heads in the sand any longer,” City Councilman Bill Rosendahl said. “These people should be using condoms. Period.” According to the New York Times, the "city law would be the first to impose safety standards specifically on the pornographic film industry, which has largely been allowed to police itself." Until the late 1990's, the industry went unregulated. On the heels of lawsuits filed against production companies by several actresses who had contracted H.I.V., the industry created the Adult Industry Medical Healthcare Foundation in 1998. The nonprofit clinic was financed by contributions from production companies and offered STD tests for the talent. Producers agreed not to hire performers who had not been tested within thirty days. Even though the county health department accused the industry's self-regulation of failing to protect the talent and their sexual partners, the production companies claimed that the system worked well. “This has been working for years,” said Steven Hirsch, founder of Vivid Entertainment. “If we saw people getting sick, we would go to mandatory condoms.” However, STDs remained rampant among pornographic film performers. Rates of chlamydia and gonorrhea are seven times higher than those in the general population.  Taking Steven Hirsch's own statement, it could be argued that waiting until an actor looks sick to require him to wear a condom is a bit like waiting until the horse has left the barn. “Testing just acts as a fig leaf for producers, who suggest that it is a reasonable substitute for condoms, which it is not,” said Michael Weinstein, president of the AIDS Healthcare Foundation.

A World Eschew: National Sovereignty Eclipsing Climate Change

U.S. President Obama announced after he left the UN global climate conference at Copenhagen in 2009 that five major nations—the United States, China, India, Brazil and South Africa—had together forged a climate deal. He called it “an unprecedented breakthrough” but acknowledged that the agreement was merely a political statement and not a legally binding treaty and might not need ratification by the entire conference.  Essentially, it was merely a statement of the five countries’ respective goals, as if someone had announced, “I want to lose ten pounds.”   The political statement did not meet even the modest expectations that leaders set for this meeting, notably by failing to set a 2010 goal for reaching a binding international treaty to seal the provisions of the accord.  Nor does the plan firmly commit the industrialized nations or the developing nations to firm targets for midterm or long-term greenhouse gas emissions reductions.



The U.S. Senate: What Is It Really?

In 1928, the Senate stopped the bill that would have given WWI vets their bonus then rather than in 1946.  Mass protests for weeks by thousands of vets on the U.S. Capitol may have swayed the U.S. House, but the Senate was undaunted: passage of the bill would be economically disasterous. Such a scenario is exactly what the delegates in the U.S. constitutional convention in 1787 would have predicted.  They designed the House to reflect the passions of the people, and the Senate as a check on such passion where it is intemperate.   Looking back at Shays’ Rebellion in Massachusetts, the delegates feared excess democracy.  No supporter of the Senate, Madison nonetheless points out that “a numerous body of Representatives were liable to err also, from fickleness and passion. A necessary fence against this danger would be to select a portion of enlightened citizens, whose limited number, and firmness might seasonably interpose against impetuous councils” (Madison’s Notes, p. 194).

The full essay is at "The U.S. Senate."

On the Virtue of a Constitutional Moment: Reassessing the American System of Government

A constitutional moment engaging the citizenry is urgently needed with respect to the system of government in the United States. In short, the citizenry should decide, as a people, whether to revert back to a federal system or to make the political consolidation that has ensued official. If the latter, Alexander Hamilton's suggestion that the states be districts of the US Government, whose energy he thought could not directly extend to the outer reaches of the empire (i.e., into the wilderness of states distant from the seat of the U.S. Government). This was Hamilton's view in the U.S. Constitutional Convention; his writings eventually published in The Federalist Papers were meant to sell the proposed constitution rather than to give his own proposal. His own view may have come to pass, though through incremental Congressional encroachment on the turf of the governments of the several states and concurring U.S. Supreme Court assuaging (or enabling) doctrines.  I submit that this process of change over many years has eventuated in a gap between the system of governance as it is and as it is to be constitutionally.  Whereas some people argue that we must revert back to the constitution following a "strict" construction, I believe we the people, as a people, should commence a constitutional moment of heightened attention and debate concerning whether we want centralized consolidation (i.e., no states), decentralized consolidation (i.e., states as districts), or federalism (which entails dual sovereignty and a balance of power between the general government and the governments of the states).  I believe the latter is the best suited for an inherently diverse empire-scale political union, but that the people reach a decision is the important point now.  For otherwise, we will continue to live a lie--to claim to be a federal system while actually being consolidated: essentially flying with  bad instruments. 

The full essay is at "Reassessing American Government."

Duplicity in International Affairs and Eclipsed Democracy: The Case of Afghanistan

Abdullah Abdullah withdrew on November 1, 2009 from the runoff election in Afghanistan.   Interestingly, Hilary Clinton and a spokesman for President Karzai characterized Abdullah’s withdraw in virtually identical terms—namely, as “his personal decision.”  Such a stance makes sense because both the American Government and Karzai had an interest in the Afghan electoral process being perceived as legitimate.   It is interesting, however, that the identical interpretation was instantly available to the press.   Perhaps U.S. Senator John Kerry had urged Karzai to agree to the runoff by telling him of a secret deal between the American Government and Abdullah that would have Abdullah pull out with a statement affirming the legitimacy of the electoral system.   That is, I wonder if the U.S. senator promised Abdullah something that essentially short-circuited the electoral process.  Karzai would look like a statesman without having to risk losing power, and Abdullah would get something rather than a probable election defeat.  The US would get stability in a Karzai government without having to worry about another controversial election. As it turned out, Abdullah did not keep to the script; he denounced the continued corruption in the continued occupants of the Karzai-hired electoral commission (a blatant conflict of interest for any electoral body, to be sure).   Also, the runoff itself was cancelled.  Was this part of the deal?  If so, the deal I suspect took place was very well hidden, or subterranean in nature and intention.

Afghani Electoral Fraud in 2010: A Precursor to the Protests in the Middle East?

The UN’s Electoral Complaints Commission recommended in 2009 that Afganistan’s Independent Election Commission invalidate 210 polling stations where the ECC found “clear and convincing evidence of fraud.”  The IEC in turn announced a run-off election because Karzai no longer had over 50% of the vote.  MSNBC reported that “the Karzai-influenced election commission may refuse to call for a runoff.” CNN reported that Karzai and Abdullah were trying to “cut some sort of deal” on a coaliation government that would have obviated, or skirted, a run-off.  Such a compromise would have been woefully inadequate from the standpoint of democratic process.

The full essay is at " Afghani Electoral Fraud."