How to Beat the Rap, HSBC Style

In HSBC’s settlement with the U.S. Government, the bank has to pay $1.9 billion—about half a quarter’s profit—but avoids criminal charges. The New York Times quotes government officials who said they were hesitant to indict the bank because formal charges could mean bankruptcy, which in turn could roil the financial system itself owing to the bank being too big to fail. That is to say, one of the advantages of being TBTF is apparently that of effective immunity from criminal charges.

 The full essay is in Cases of Unethical Business, which is available at Amazon.

SEC Goes After Chinese CPA Firms: Beyond Diplomacy

The Securities and Exchange Commission brought an administrative proceeding against the Chinese affiliates of five major CPA firms, including the “Big Four,” in 2012. Chinese companies had raised billions of dollars on American (and Canadian) exchanges only for the share prices of the companies to plummet due to questions about bookkeeping and disclosures. The SEC alleged that the CPA firms in China refused to hand over documents in connection with the investigation of alleged accounting frauds at nine Chinese companies. The SEC maintained that firms that audit U.S.-traded companies must follow U.S. law, and the Sarbanes-Oxley Act requires foreign audit firms to hand over documents about U.S.-listed clients at the SEC’s request. SEC Commissioner Luis Aguilar said that the investigations “have been hampered by the lack of access to relevant documents.” For their part, the CPA firms in China (affiliates of American-based CPA firms) pointed out that their audit papers are treated like state secrets in mercantilist China, and that the auditors could therefore be imprisoned for handing the material over a foreign government without permission from the Chinese state. 

The full essay is in Cases of Unethical Business, available at Amazon.com.  

Bailouts Without Stimulus: E.U. Policy on Spanish Banks

Directly and indirectly, the housing bust that began in 2007 put “the bailout” on the map in the lexicon of industrial policy both in Europe and North America. Whereas in the U.S., few restrictions were placed on the recipients, the E.U.’s first €37 billion ($47.9 billion) for Spain’s banking sector required the four major state banks “to make sharp cuts in their balance sheets and payrolls,” according to the Wall Street Journal. Bankia, the largest of the banks to be bailed out, planned to cut its number of employees by more than 6,000, close more than 1,000 branches, pass on any further real-estate lending, and reduce its assets by €50 billion as the bank focuses on retail banking—getting back to the knitting, as it were. Presumably the bankers were not allowed to grant themselves bonuses as a condition of the bailout. If so, it would differ appreciably from the U.S. bailout of Wall Street banks.

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

Bad PR and Bad Banking: BOA

How to do bad PR: Announce plans to raise fees effecting low-income customers, then pull back, wait a year, then announce such plans again, then pull back yet again. This sort of PR strategy gives rise to headlines such as, “Bank of America Backs Down on New Fees.” The Wall Street Journal could have added, “yet again.” Besides the obvious PR downside to announcing unpopular fees—and on one’s least well-off customers—is the implication of weakness or vulnerability in repeatedly backing down. In the animal kingdom, Bank of America would not exactly be the alpha male lion. Rather, the bank would be one of the other males, which may or may not get to reproduce.

                                          
The full essay is in Cases of Unethical Business, available at Amazon.com.  

The Filibuster: States' Rights or a Partisan Ploy?

Before 1917, senators could filibuster only by talking continuously on the U.S. Senate floor. There was no mechanism to stop them. Such filibusters were rare until entering World War I was debated. In 1917, the Senate passed its first “cloture” rule, whereby two-thirds of the Senate could cut off debate and force a final vote. Between that year and 1971, no two-year session of Congress had more than 10 such votes. Even so, in 1971 the rules were changed to allow other legislation to be taken up during a filibuster—relieving a senator of having to continuously talk to maintain one. Making it easier to filibuster quickly led to the predictable result of more filibusters. In the 93^rd Congress (1973-74), the number of cloture motions jumped to 31, from an average in the 1917-1971 period of two per Congressional session. In 1975, the number of votes needed to stop a filibuster was lowered from 67 to 60. However, this change did not curtail the use of the device, as it is rare for a party to control 60 votes out of 100 in the U.S. Senate. By 2010, the average number of cloture motions per two-year session had risen to 129, which suggests that the filibuster had become more typical in how senate business was to be conducted. In effect, legislation and even executive business, such as confirming presidential nominations, needed a supermajority (60 out of 100) in the upper chamber of Congress.


The complete essay is at Essays on Two Federal Empires, available at Amazon.

Non-Tariff Barriers to Trans-Atlantic Trade

Karel De Gucht, the E.U. trade commissioner, said in late November 2012, “There is now, for the first time in years, a serious drive towards an E.U.-U.S. free-trade agreement.” The office of his counterpart, Ron Kirk, the U.S. trade representative, indicated that a high-level working-group consisting of Europeans and Americans was working on “how best to increase U.S.-E.U. trade and investment.” The sticking point concerned non-tariff barriers, such as different regulatory standards.

The complete essay is at Essays on Two Federal Empires, available at Amazon.

Karel De Gucht, the E.U. Trade Commissioner, advocating a free-trade pact with the U.S.  (Reuters).

Steve Jobs: The Sad Truth about Visionary Leadership

According to Joe Nocera, Steve Jobs was not a consensus-builder but a dictator. Lest it be objected that this disqualifies him from being admitted to the “true leader” hall of fame, Nocera hints at an explanation for why visionary leaders may not be all that touchy-feely after all. Nocera suggests that Jobs was a dictator because he “listened mainly to his own intuition.” He “never stopped relying on his singular instincts in making decisions” on Apple products. This makes complete sense, as his sense was singular. 

Steve Jobs at Apple. Is it the vision or charisma that accounts for the focus on such pictures?   Getty

The full essay is in On the Arrogance of False Entitlement: A Nietzschean Critique of Business Ethics and Management, which is available at Amazon.

Mexico’s Name-Change: A United States No Longer?

Shortly before leaving office, Mexican President Felipe Canderón sent to the Mexican legislature a proposal to amend the state’s constitution by renaming the country “Mexico,” from the “United Mexican States.” His rationale was that Mexico didn’t need “a name that emulates another country and which none of us Mexicans uses on a day-to-day basis.” Indeed, the emulation evinces a category mistake in that it treats what was province in an empire, that of New Spain, as an empire.

                                   Mexico's head of state, Felipe Calderon, who proposed the name-change.  

The full essay is at Essays on Two Federal Empires, available at Amazon.

Moody’s: Statist France Lagging in the E.U.

Bashing the French in a major article on their lack of business competitiveness, the Economist was the target of la colère en Paris in November 2012. Just after the magazine’s warning that France could be the next danger-zone for the euro due to relatively high labor costs and unemployment, Moody’s cut the state’s rating to Aa1 from Aaa and kept a negative outlook on the rating. Moody’s cited the state’s economic weakness and the risks to the finances of the state government “posed by” France’s “persistent structural economic challenges.” In this way, Moody’s analysis dovetails with that of the Economist. Both pointed to a sort of impotence in French industrial policy. Moody’s decision excluded factors from the broader debt crisis in the E.U., focusing instead on the French government’s continued “reliance on borrowing to finance generous social-welfare programs” even as businesses in the state were laying-off employees. In other words, Francois Hollande had not gone far enough in his policies to make a dent in the state’s deficit as well as the downward trajectory of French competitiveness in the E.U. Meanwhile, deteriorating economic conditions in the E.U. were effectively closing the window of opportunity on even a one-party government being able to enact substantive reform. I contend that the gap between what the Socialist party could do, given its absolute majority in the legislature, and what it was actually doing contributed to the criticism.

Changes in real GDP in the state of France. A general downward trend-line is apparent.     
Source: World Bank

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

House of Commons Undercuts Cameron on E.U. Budget

In 2012, David Cameron of Britain “suffered his first major House of Commons defeat” in governing  “when some in his party failed to back his position on the budget negotiations and urged him to secure deeper cuts” in the pending 1 trillion euros E.U. budget for 2014-2020.  Although Cameron had stated he would veto the European Commission’s proposal to increase the overall E.U. budget by 5% annually for the seven-year period, he did not support cutting the federal budget. Because the vote in his state legislature for cuts in the federal budget was non-binding, the governor was free to ignore it in the European Council, where the state governments are represented. The European system of public governance suffered from at least two major weaknesses here.

The complete essay is at Essays on Two Federal Empires, available at Amazon.

 David Cameron representing his state at the E.U.  (AFP/Getty)

States Pull Ahead of E.U. on Syria: A Compromised Foreign Policy?

In November 2012, the New York Times reported that the European Union was offering “crucial support for the new Syrian political opposition,” which the E.U. referred to as the “legitimate representative for the Syrian people.” The E.U. stopped short of “conferring full diplomatic recognition” to the new group—the National Coalition of Syrian Revolutionary and Opposition Forces—even though one of the E.U.’s states, France, had conferred such recognition one week earlier, and another state, Britain, would soon do likewise.

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

The U.S. Producing More Oil: A Panacea or Obstacle?

The International Energy Agency projected in 2012 that a shale-oil boom would catapult the United States over the state of Saudi Arabia as the world’s largest oil producer by 2020. In the words of the Wall Street Journal, the global energy map was “being redrawn by the resurgence in oil and gas production in the United States.” Although the United States would benefit in the period from the trajectory, the drawbacks should not be ignored. In fact, the trend could be harmful in the long term if preparedness for a world without oil is put off as a consequence.

The entire essay is at "The U.S. Producing More Oil."

Women on Corporate Boards: Britain vs. the E.U. Justice Commissioner

In 2012, women made up 13.7% of board positions in large listed companies in the E.U., and 15% for nonexecutive board positions, according to The Wall Street Journal. In the U.S., according to Kay Koplovitz of USA Network, the number of women on corporate boards had been stalled at more or less 15 percent for over ten years. Whereas in the U.S., people would look at Congress to enact a uniform inter-state standard or else leave the matter to individual corporations, the E.U. has other alternative means, such as the directive. That device relies on the state governments to decide on the penalties as well as enforcement against violators of the E.U. law. Even though the Commission could take a state refusing to implement a directive to the European Court of Justice, the “cost” of the flexibility in the state-based implementation is a possible dilution in the law’s aims being achieved throughout the E.U. rather than just in a few states. Put another way, even as the ideological diversity within the empire-scale union is accommodated, advocates of more female representation on corporate boards may be disappointed as some states give non-complying companies only a slap on the wrist.

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

Divergent Fiscal Policies in the E.U.

States on divergent fiscal paths can test the flexibility of an empire-scale union, particularly if it is relatively new and still developing. Simply having different industrial/agricultural make-ups can put states at odds with each other. That the richer states can use fiscal policy to become even richer, while the policies imposed on poorer states may aggravate their fiscal conditions, can mean that the economic distinctions between states can become an increasing problem in a federal system, even given the allowances enabled by federalism itself (e.g., by the principle of subsidiarity). 

The complete essay is at Essays on Two Federal Empires, available at Amazon.

Romania’s Monetary Policy in Federal Europe

Sometimes monetary policy and federalism can interact in interesting ways. To grasp a particular relation, such as that of Romania in the European Union, it is first necessary to keep in mind that monetary policy is not federalism and vice versa. An anti-federalist, for example, might have an incentive to conflate the two concepts out of a desire to deny the existence of a federal system already underway.

The complete essay is at Essays on Two Federal Empires, available at Amazon.

      Romanian currency.     Source: banknotes.com