Two Tiers Fiscally in the E.U.: Too Simplistic

The main question regarding E.U. reforms oriented to preventing state governments from being overburdened with debt has been stated by Stephen Castle of The New York Times as follows: “Is the euro more in need of Germanic fiscal stability or the growth and stimulus policies that France traditionally champions?”[1] I contend that there are bigger fish to fry that unfortunately have gone largely unnoticed.

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

1.  Stephen Castle, “In Debt Crisis,Reminders of Disputes in Euro’s Founding,” New York Times, August 18, 2011. See also Nathalie Boschat and Gabriele Parussini, “France, Germany Push for Sanctions,” Wall Street Journal, August 18, 2011.

Fraud at S&P: A Conflict of Interest

By the summer of 2011, the U.S. Government had brought relatively few cases against large financial institutions for their roles in the financial crisis of 2008. For instance, the government investigated Washington Mutual and Countrywide without taking any further action in spite of reports of “liars’ loans.” In the case of the three major ratings agencies, the business model “is riddled with conflicts of interest, since rating agencies might make their grades more positive to please their customers. Before the financial crisis,“banks shopped around to make sure rating agencies would award favorable ratings before agreeing to work with [one of the agencies].”[1] In spite of accounts of the agencies’ mixing of business and ratings, the Dodd-Frank law of 2010 retained the issuer-pays business model while putting the agencies on the same legal liability level as accounting firms. 


The full essay is at Institutional Conflicts of Interest, available in print and as an ebook at Amazon.

1.  Louise Story, “Justice Inquiry Is Said to Focus on S&P Ratings,” The New York Times, August 18, 2011. 

Congressional Earmarks: A Personal Conflict of Interest

Congressman Darrell Issa (R-Calif.) runs his local district office down the hall from where he runs his businesses worth hundreds of millions of dollars. According to the New York Times, his “dual careers” evince a “meshing of public and private interests rarely seen in government.”[1] While advocating for business in Congress, he split his holding company into separate multibillion-dollar businesses, started an insurance company, and retained a financial interest in his automobile-alarm business. At least some of his actions in government have made him richer.[2] Most notably, he secured Congressional earmarks for road widening and other public works projects that runs his local district office down the hall from where he runs  that he owns in his district. For example, earmarks that he arranged made possible the widening of a busy road in front of a medical plaza that he bought for $10.3 million. To be sure, his constituents applaud the easing of traffic, but what if the money would otherwise have been spent to relieve more severe congestion elsewhere? Even if no worse instances existed, that the congressman’s constituents benefitted from the street-widening does not mean that his action was ethical.

The full essay is at Institutional Conflicts of Interest, available in print and as an ebook at Amazon.

1. Eric Lichtblau, “Helping His District, andHimself,” New York Times, August 15, 2011.

2. Ibid.