Leadership at Goldman Sachs: Mice or Men?

Inevitably, with any focus comes the opportunity cost of the benefits that could have come from alternative agendas. Put another way, a sustained focus on particular trees means losing the benefits that go with looking at the forest as a whole. One might ask whether Wall Street bankers, even those in lofty positions, are too focused on marginal differences even as the bankers stay away from operational oversight. Goldman Sachs, being led by a former trader, may have been a case in point as 2012 succumbed to 2013.

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

Should Iceland Be a State in the E.U.?

Is a state’s strategic interest simply the sum total of political and economic expediency? In the case of Iceland becoming a state in the E.U., the suspension by the Icelandic government of talks that began after Iceland’s banking sector took a major hit in 2008 may have been a political means of countering the “tough competition” from parties that have been skeptical about the sovereign state joining the Union. With parliamentary elections coming up, the parties in the government did not want to be found wanting on the unpopular side of a major question.

The complete essay is at Essays on Two Federal Empires.

Bank of America: Taxpayers Subsidize a Wrong

According to the New York Times, money paid to “settle a company’s actual or potential liability for a civil or criminal penalty is not deductible.” However, if the payments are meant to be remedial rather than a penalty, they are deductible. In effect, such payments are subsidized by the American taxpayer. The question of whether this arrangement should be changed can be approached as an ethical problem.

The full essay is at "Essays on the Financial Crisis."

Banking Lobby Extracts Benefits from Consumer Protector

Turning lemons into lemonade: that could aptly characterize the strategy of the banking lobby as the Consumer Financial Protection Bureau (CFPB) was promulgating a broad set of mortgage rules that were announced in January 2013. Rather than merely seeking to minimize more onerous standards, the industry sought to insulate itself as much as possible from getting sued by borrowers. Ignoring the rather obvious self-interest of the banks, the new regulators accepted the bankers’ claim that the legal protection was necessary for the banks to be willing to produce mortgages.

The full essay is at "Banking Lobby."

Mistrust in Business: A Nietzschean Critique

In his commentary on the loss of trust in business, government and society, Michael Wolff laments to decline of trust through what he calls “consumer history.” As trust can be maintained with little or no further cost once established, Wolff is perplexed as to why more business practitioners, politicians and even religious functionaries do not rush to fill the gap.

The full essay has been incorporated into (or swallowed up by) On the Arrogance of False Entitlement: A Nietzschean Critique of Business Ethics and Management, available in print and as an ebook at Amazon.

On the Political Power of Nuclear Power: Japan's Radioactive Plutocracy

Reversing his campaign pledge to reduce Japan’s reliance on nuclear power even as he had just been elected as prime minister of Japan in 2012 (Tepco’s nuclear power-plant meltdown having occurred in 2011), Shinzo Abe announced that he would have more nuclear reactors built in Japan. “They will be completely different from those at the Fukushima Daiichi nuclear power plant,” he said in a television interview.[1] Adding a silver lining on to a rather gray, radioactive cloud, he said, “With public understanding, we will be building anew.”[2] This change in policy is dramatic, for the previous administration--that of Yoshihiko Noda—had sought to phase out nuclear power in Japan by 2040. In fact, Abe’s own party, the Liberal Democratic Party (LDP), had in its platform the goal “to establish an economy and society that does not need to rely on nuclear power.”[3] That the shift took place within the LDP suggests a shift in its power-dynamics, with the pro-nuclear sub-faction astonishingly having gained the upper hand over its rival while memories of the tsunami-triggered meltdown were undoubtedly still fresh.

The full essay is at "On the Political Power of Nuclear Power"

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1. Hiroko Tabuchi, “Japan’s New Leader Endorses Nuclear Plants,” The New York Times, December 30, 2012.

2. Ibid.

3. Ibid.

Mario Monti: Succumbing to Power?

He was supposed to have been reluctantly pushed into briefly stepping in as prime minister in Italy to push austerity measures through the state legislature.  According to Deutche Welle, “The 69-year-old former European Commissioner was appointed to lead Italy’s government . . . to restore Italy’s finances following Berlusconi’s departure.” The technocrat was not supposed to so interested in power that he would want to stay on. At the end of December 2012, Mario Monti announced that he would lead a centrist group of politicians against the Democratic Party and Berlusconi’s People of Freedom party in the upcoming election.  Had the former bureaucrat “found religion” in some political cause, or had he developed a taste for power? If the latter, we might ascribe the motive to the human propensity to resist giving up power willingly.

  Mario Monti at the European Commission. A launching point for Italian politics?    (source: nytimes.com)

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

Averting the "Fiscal Cliff": A Solution Overlooked

With just days to avert the beginning of automatic, across-the-board cuts in the U.S. federal budget and the end of the Bush tax cuts and payroll tax reductions, President Obama met with Congressional leaders at the White House following a brief respite over Christmas. The discussion was doubtless on what could pass Congress in time. The U.S. Secretary of the Treasury was also attending, so the upcoming debt-limit could also have been part of the discussion. It could be argued that the perspective itself at the meeting must have been too narrow—too small—even though the crisis demanded leadership.

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

José Manuel Barroso: Picking Romania’s Government?

On December 9, 2012, Romanian voters approved of the coalition of the then-current Prime Minister Victor Ponta, by a two-thirds majority. However, because Ponta had been in a bitter political feud with President Traian Basescu—Ponta’s coalition tried and failed to impeach the president—it was not clear that the president would nominate Ponta for prime minister even though that post must be approved by the parliament. Basescu did wind up nominating Ponta. The interesting point here is that President Barroso of the European Commission publicly waded into the choice on behalf of Ponta. 

 Prime Minister Ponta of Romania: Propped up by Barroso?           exclusivnews.ro

The full essay is at Essays on the E.U. Political Economy, which is available at Amazon in print and as an ebook.

Pot in Colorado: Getting High on American Federalism

On November 6, 2012, Colorado’s citizens approved with a 55% majority a marijuana-legalization measure that allows residents over the age of 21 to possess up to an ounce. The measure also allows for the commercial growing and selling of pot. More than a month later, the government of Douglas county in Colorado passed a law prohibiting companies from growing or selling cannabis. Meanwhile, the U.S. law continued to make the growth, sale, possession or use of pot illegal. Over all, it would seem to be a case of federalism as a pretzel of sorts, all twisted up into itself. This case study can be used to point to a more perfect union in terms of federalism.

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

Is a Stronger E.U. in America’s Interest?

Is a stronger E.U. necessarily in the interest of the U.S.? According to Ed West of the Telegraph, “it’s not clear whether a united Europe would necessarily be more pro-American, automatically siding with the US against the rest. European countries have their own interests with regards the Middle East, Africa and China, which often don’t coincide with America’s, and on a range of world issues European public opinion is fairly hostile to America, decades of American military protection having inspired not gratitude, but resentment. Britain is something of an anomaly in Europe, popular opinion being unusually hostile to the EU and warm to America.” This passage can be taken to task on at least two points.

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

A British Referendum on the E.U.

Legislators can make the task of getting instructions from the popular sovereign, the people, unduly difficult. In November 2012, the Florida legislature confronted its people with several proposed constitutional amendments written in legalese that even some lawyers found difficult to navigate through. The next month, Boris Johnson and Liam Fox of Britain pressured their state’s legislature to put forth a referendum that, unlike that of Florida, would present the people with a clear choice.

The flags of Florida and the United Kingdom. 

   

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

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.