Tuesday, March 31, 2009

Is the U.S, Treasury turning itself into a hedge fund, just like AIG did?

Robert Samuelson has an interesting perspective on p A17 of the Monday March 30, 2009 Washington Post, “Geithner’s Hedge Fund”. These like an ironic play on AIG’s piggybacking a gigantic hedge fund on top of itself.

Sanuelson goes on to give a “math test” (or perhaps an “It’s Academic”) example with a fictitious stock..

He goes on to discuss cycles of leveraging and deleveraging, the latter of which is better known in history textbooks as “panics”. So Timothy Geithner tries to brake the deleveraging with “slight” releveraging. It’s like treating insulin shock with sweets. He goes on to give another math test example. I guess this article could provide some material for this years algebra SOL’s.

As for the president’s firing of the GM president, I remember that back in 1984, GM bought EDS and H. Ross Perot was on the board. If he were still there, I can’t believe that GM would be in this mess.

Monday, March 30, 2009

Government forces GM chairman out; Chrysler, GM get brief extension

Stocks are down moderately on Monday morning (March 30) after another “Sunday night massacre” – this time, the Obama administration has apparently forced GM chairman Wick Wagoner to resign, over a weekend, as part of its deal to let GM continue on life support for sixty more days. Chrysler must merge with Fiat in thirty days, and the government will guarantee new car warranties for consumers. Orderly chapter 11 bankruptcies apparently are still on the table.

A typical media story is by Sheryl Gay Stolberg and Bill Vlasic on the front page of the March 30, 2009 New York Times, “U.S. moves to overhaul ailing automakers”, here.

Originally, according to the terms of the Bush administration bailout in December 2008, the companies had until March 31, 2009 to restructure and demonstrate viability. Time was up!

Why not let them fail, sell the pieces to other companies (including foreign companies) and retool factories in Michigan and Ohio (the hardest hit areas) to make electric cars and hybrids, but under new ownership? It seems to me that a lot of the renewable energy car industry needs to be located in the upper Midwest, where the job losses are, as well as California, where it has started.

Sunday, March 29, 2009

Economic stimulus, regulation, bailouts, TARP -- and the Constitution

Linden Blue and Herbert London has a Commentary on p B3 of the Washington Times, Sunday March 29, “Hazards rooted in Sept. 11: Long-term loss of liquidity, market elasticity,” here. The online link has a graphic picture reminding us what the Pentagon looked like on 9/11.

The writers argue that the Bush Administration was justified in cutting taxes loosening controls and in encouraging Greenspan to lower interest rates because the economy was flat on its back in the fall of 2001. (I remember that we got the rebate from the first Bush tax cut in August 2001). The writers are critical of Sarbanes-Oxley, which may be flawed. But what they miss is that we needed some handle on asymmetry and “systemic risk” although I understand the neo argument that labeling companies as “systemic risks” may have the reverse psychological effect (and “anti moral hazard”) of getting them to take even more risks in the future. But, really, what AIG did (with the credit default swaps) makes no sense in the insurance world; you don’t pay off multiple parties for the same policy and break the idea of insurable interest. Regulation should have stopped this.

I, going back to the mid 1990s, had some “conflict of interest” issues myself that in some vague sense parallel Sarbanes. They were perhaps more existential conflicts than real ones, but they caused real issues. I could say that if everyone had followed the same concerns, messes like AIG would have been prevented. Yet I still had a couple major slips, as in 2005 with the school system (discussed elsewhere in my blogs). Back in 2003, I wrote a certification test for a training company on business ethics, and a couple of the questions (that stirred the most interest) were about “conflict of interest.”

Then George Will, on p A15 of The Washington Post, gives us “Bailing Out the Constitution” link here and points out “The Vesting Clause of Article I says, "All legislative powers herein granted shall be vested in" Congress. All. Therefore, none shall be vested elsewhere.” Congress can't simply give away its explicit powers to the Executive Branch! What happens is somebody brings a lawsuit on this idea? Will mentions Freedom Works (which pits itself against “Move On”) with this article on the unconstitutionality of TARP and the bailouts.

Saturday, March 28, 2009

Virginia Senator points out that incarcerating non-violent drug users exacerbates law enforcement crisis

I knew a stand-up comic in Minneapolis who worked in the coffee business, and his favorite like was “stay out of jail.”

Senator Jim Webb (D-VA) has a major article in this weekend’s (March 29, 2009) Parade Magazine, “Why We Must Fix Our Prisons” here.

Webb says that one out of 31 adults in the United States is in prison, jail, or supervised release. It’s higher for males and for African Americans. This is much higher than for Japan or for European countries.

Why does this happen? Webb says the problem is that we incarcerate non-violent drug users. This is an enormous waste of resources and actually turns people into criminals.

Webb also provides an explanation of how drug cartels from Mexico and Colombia recruit gangs to distribute hard drugs, and are responsible for some of the extraordinary violence in American cities and suburbs. He discusses Phoenix in particular. His explanation of this process follows that of Anderson Cooper on CNN 360 covering the Juarez drug war crisis, which he says has spread to cities away from the border like Tucson.

Webb comes short, however, of advocating the libertarian solution of decriminalizing private drug use. Harry Browne, Libertarian Party candidate in the 1990s, always said “we must end this war on drugs.”

The film “Collateral Damage” (dir. Andrew Davis) was delayed in release by 9/11 but depicts drug lords (Colombian in the film) as actually the biggest security threat to the United States. But this may only because of the circularity of our drug laws.

Webb’s own page is here. He says he has introduced a bill to overhaul the nation’s criminal justice system, and also has introduced paid parental leave for federal employees.

Update: May 25, 2009

The Washington Post has a very upsetting story by Jerry Markon, front page, "Threats to Jurors, Prosecutors Soaring" today, link here. According to the end of the story, one judge said that he has stopped mentioning publicly that he has children...Judges now think everything is on the Internet." Judges who have tried certain kinds of cases or prosecutors who have pursued them will not travel to certain countries. Certainly this matter jeopardizes our whole system of civil liberties, openness and free speech.

Another disturbing story by Aaron C. Davis appeared in The Washington Post as a local story Wednesday May 27, 2009, "Vigilance Is Urged To Avert Robberies: Home Invasions Have Doubled In Pr. George's", link here. Police report that in some areas people are moving into cheap motels to launch crime sprees, during bad economic times.

Thursday, March 26, 2009

Obama holds Internet town hall; Geithner proposes super-regulation of all "asymmetric" financial institutions

President Obama held an Internet Town Hall today (Thursday, March 26, 2009), slightly over one hour in length. Over 10000 questions had been submitted (to the "Open for Questions").

The most popular question seemed to be about legalization of marijuana “to stimulate the economy” and the president said that this was not a good idea, yet the question must have been appreciated to be chosen.

There was a major question about employment of returning veterans, especially those that had been affected by the stop-loss policy and made several tours (a policy which is ending).

The White House Blog entry for the debate is here. Good show from our first "Geek President". (Again, I remember an English teacher at a Fairfax County high school who tells students, "relax, your first boss will probably be a geek", from Bill Gates's advice.)

The Treasury Department offered a press release today about the need for “super oversight” over all large financial institutions, including hedge funds and insurance holding companies, that can provoke “systemic risk.” AIG, after all, provided the perfect example of corporate asymmetry.
The link is here.

The CSPAN video link for Secretary Timothy Geithner’s remarks on total oversight to the House is this (about two hours).

Picture: crowd for a television pilot ("Washington Field"), on Potomac River; Barack Obama is "the man who wasn't there", for the movie take, at least. See TV blog for March 25.

EPA recommends halting some mountaintop mining permits; Obama administration may stop practice altogether

The Environmental Protection Agency has sent letter to the US Army Corps of Engineers in Huntington W Va recommending that at least two permits for mountaintop strip mining be denied. The link for the letters is here.

The coal industry maintains that the administration is putting thousands of high paying and usually union jobs at risk.

A blog entry by Marianne Lavelle and Aaron Mehta, “Has mountaintop mining peaked” appeared on Center for Public Integrity website yesterday March 25, 2009, link here. The story was circulated by email this morning by the Center.

Robert F. Kennedy Jr. has an op-ed on p A15 of The Washington Post today, “Hope in the Mountains”, link here . According to Kennedy, the Obama administration has indeed issued a moratorium on mountaintop mining permits. This confirms a "rumor" stated Tuesday here.

There is a site called “The Mountaintop Removal Road Show” with a stunning slide show here.

The picture above (Martin County, KY) is in Wikimedia Commons and was released for public use by the owner (named Flashdark: “permission is granted” is written on Wikipedia), but comes from that site. The closest mine that I have seen personally to this site is in Inez, KY (in 1972) (a town in that county).

As far back as 1970, the media was warning about strip mining, that one day could remove perhaps a couple thousand feet of mountains ridges. Some ridges have been shaved by over 1000 feet, with Midwestern-like land resulting after reclamation. A representative from Kentucky said “my beautiful state is being destroyed”.

Tuesday, March 24, 2009

Congress introduces National Service bill (includes environmental work); Obama administration near curb on some strip mining

Congress is considering the “Generations Invigorating Volunteerism and Education Act” HR 1388, and it has been placed on the calendar. This bill is essentially a "national service" act with carrots but no sticks. The govtrack reference is here. The bill was introduced by Carolyn McCarthy (D-NY) on March 9, 2009. The New York Times has an editorial March 24 “Expanding National Service” on p A24, link here.

The bill attempts to raise the number of volunteers from 75000 to 250000 and offers a stipend of about $5300, similar to a Pell Grant. There will also be a program for those over 55 years old. The positions include mentoring, but also include energy efficiency and environmental cleanup.

The March 29 Time has an op-ed by President Obama "Building a New American Era Needs Your Service: A New Era of Service Across America" here. There is a picture in which Obama lends a hand at Sasha Bruce Youthwork in Washington on Jan. 19.

Regarding the environment, there are stories floating (as on ABC World News Tonight) that the Obama administration will soon restore more restrictions on “mountaintop removal” in strip mining for coal. Apparently Obama will roll back Bush's relaxation of stripping rules in December 2008. Specific references will be supplied when available.

Picture: Mountaintop removal from Wikimedia (public domain -- go to Wikipedia article on "mountaintop removal"), believed to be in southern W Va. I visited the area in 1999 but public highways do not lead to views of the mine; they may be seen from the air from flights around Charleston W Va.

US birthrate in 2007 surpasses historic "Baby Boom" rate.

Mike Stobbe has an AP story, “What a Concept: 2007 Births Surpass Baby Boom”, on p F4 (“Health”) of the March 24, 2009 Washington Post. Curiously, I could not find the story online (or at the AP site), but I found a similar story by Stobbe from AP, dated March 18, “U.S. Births in 2007 break baby-boom-era record” here.

The United States has a fertility rate of 2.1, which means that it just about replaces its population, with Hispanics having a higher rate. A lot has been written recently about lower fertility rates in some western European countries, Russia and Japan, threatening the so called “demographic winter”. Does "baby boom" (or "baby boomlet") mean "baby boon"?

An important point is that birth rates are higher when economic times are good or thought to be good (more the case in 2007). The rate will probably drop in 2008. Domestic birth rates dropped during the Great Depression.

In general, a more robust birth rate may help reduce the crisis in providing for the aged in the future, but so could keeping people able to work (and employers willing to employ them) longer.

Monday, March 23, 2009

Geithner has op-ed in WSJ; stocks soar but economists still mistrustful of The Banks, The Street

Treasury Secretary Timothy Geithner has a major opinion piece on p A15 of the Wall Street Journal today, “My Plan for Bad Bank Assets”, link here. The summary is “the private sector will set prices. Taxpayers will share in any upside”.

Geithner opens his piece by acknowledging the personal suffering resulting from “letting our financial system take on irresponsible levels of risk.” Toward the end he says that we need 21st century regulation, not outmoded and misleading rules from the 20th Century. Regulation needs to ensure that investors can understand the risks that are being taken, but he says investors still need to accept some risk, and right now, shell shocked, they will accept none. Regulation is like the rules of baseball. The home team can determine the distances to the outfield fences, but the basic rules have to be the same.

Stocked soared on Monday as Geithner announced the plans to help removed bad assets, and as housing numbers improved.

However, Paul Krugman and James Galbraith have called Geithner’s plan “dangerous” and will leave Americans in debt, holding paper essentially work nothing for years, a Yahoo! Finance story says, along with a video, here. The Henry Blodget story also says that the banks are “massively corrupted” and comes from the Business Insider, here.

Picture (baseball "analogy" to "rules"): Griffith Stadium, Washington, around 1958; model boyhood stadium for board game, around 1957.

Sunday, March 22, 2009

U.S. should require mandatory individual health insurance, major columnist says

Today, Sunday March 22 2009, The Washington Post ran an analysis by Ruth Marcus, “Crunch Time for Fixing Health Care,” link here.

Marcus argues several points, but the one that stands out is accepting the idea that the federal government should follow the model of Massachusetts and make some kind of y health insurance mandatory for all individuals. She argues that this is a compromise point: both unions and insurance companies and even employers as a whole favor it. Mandatory health insurance might help American manufacturers become more competitive in the long run.

So, then, “I am my brother’s keeper.” The healthy will help pay for the costs of those unlucky enough (or imprudent enough, or both) to be unhealthy. Marcus urges a kind and gentle implementation with modest penalties, but it will be hard to structure.

She mentions automating medical records – I think this is a big issue, personally, with coordinating prescriptions and other procedures – but also mentions that deciding what to cover will become a big political boondoggle. We already have a lot of experience with this painful area with Medicare, where we struggle with end-of-life extension and treatments.

That brings up a big point about how medicine is evolving. With all the talk of healthful lifestyles, diet, smoking cessation, and cancer screening, there is still a major portion of medical experience with patients who will require a lot of care and personal attention. I look back on the experience with HIV and AIDS and see that there has indeed been tremendous progress in not only extending life but in getting people back to work and in control of their own lives. We have not had the same kind of progress with the elderly, however. And we have many invasive and radical treatments, such as transplants, that depend on the sacrifice of others, especially family members.

Social conservatives will inevitably figure this out – that family “unit cohesion” is going to have an effect on what treatments can be covered under universal coverage plans. The demographics of today’s society, in the West, do not bode well. Although Bill Clinton maintained, recently on CNN LKL, that Canada has been able to cover essentially everything (in a single payer environment) while waiting lists can be long.

She takes a middle road on letting employers use pre-tax dollars to cover employees, saying that there could be caps.

Saturday, March 21, 2009

Chesapeake Bay old "resort" towns face the effects of climate change

Sea levels are rising, albeit slowly, and noreasters are wearing away beaches along Chesapeake Bay in Maryland, according to a detailed front page article in the Washington Post on Thursday, March 19, 2009. The article shows a map of the town of Deale, in southern Anne Arundel County (Annapolis is on the north end), with a shaded area of beach that has been lost.

Some towns assess property owners or spend money to rebuild beaches. The Atlantic Ocean floor has actually fallen, but water levels rise nevertheless with glacial melt and probably climate change.

Many of the towns, some of which I visited today, have privatized all of the beach area, with narrow roads, some of them private, and homes right on the Bay. Often there are no public areas. The towns, Deale for example, appear to have been built as resorts by previous generations, perhaps back in the 1920s.

At a local sports bar, with its Windows XP Home server (feeding the HD broadcasts) showing through cabinets, people acknowledge the publicity the area is getting in the global warming debate. Will the likes of someone like Anderson Cooper descend when filming another installment of “Planet in Peril”? Or perhaps Professor Al Gore himself?

The Post reference link is here. The title of the story is “Eco-Bills Come Due at Bay's Beaches; Region Pays Dearly For Climate Change In Erosion, Abatement”.

The photo here is mine,at an inlet in Deale (and I made some others that I will use). The Post online article has three additional photos (which see) in a slide show.

Thursday, March 19, 2009

AIG's Liddy grilled by Congress; Obama makes statement on AIG

Well, everybody (and not just Ali Velshi on CNN) is hopping mad about the AIG (American International Group) bonuses. Rep. Charles Rangel will introduce legislation to tax them at 91%, which was the top tax rate during the Eisenhower years.

The CSPAN video (3 hours and 54 minutes) of testimony of AIG GEO Edward Liddy, at the House Financial Services Committee, headed by Rep. Paul Kanjorsku, with all the pink demonstrations outside, can be viewed here. He was “impressed” (like a sailor before the War of 1812) into federal service at $1 a year after the collapse so cannot be one of the "culprits of the collapse"; but, despite assurance that “we do not intend to harass you”, “we” did.

Liddy indicated that employees receiving more than $100000 in bonuses were being asked to return part of the bonuses. Barney Frank criticized the employment contract structure, saying “heads we win, tails we break even” when the public loses.

President Obama’s remarks (March 18) about the A.I.G. bonuses were published as a transcript in the New York Times today, link here. Obama was critical of a culture and compensation that rewarded the creation of paper wealth rather than real wealth.

Obama's comments seem to match what Barbara Liviat wrote in the "10 Ideas that Are Changing the World" in the March 23 Time, "Jobs Are the New Assets", link here. No longer is it morally acceptable to expect to "sit" on wealth and accumulate it without "working" or "producing" -- that is suddenly too bourgeois. Instead of "jobs" I would have inserted the word "career". A social conservative like Phillip Longman would probably write "human capital" or "family". Later in the issue of Time is an article on the resurgence of "Calvinism."

While Congress looks at extending the punitive tax to other companies being bailed out (including Fannie and Freddie) Some Republicans are saying that a tax on bonuses borders on unconstitutional use of taxation powers. Some people affected were not highly compensated. The next time some party in some unrelated situation attracts public wrath, we will impose a punitive tax on them. Maybe it will be me because I didn't "pay my dues" as some people see things!

Wednesday, March 18, 2009

GM CEO supports gas tax to restore $4 a gallon gasoline price

David M. Dickson has a provocative story in the Wednesday March 18 Washington Times, reporting that General Motors CEO Rick Waggoner now advocates a stiff federal gasoline tax to boost the everyday price of gasoline to $4 a gallon. In some countries in Europe it’s $8 (when I rented a car in France in 1999, it was about $6 a gallon for diesel). Presumably his tax would vary and go down when the price of oil raises so that the total cost stays constant.

Waggoner believes that the tax would incentivize Americans to buy fuel-efficient and hybrid cars. Nevertheless, credit problems, and financing for unemployed or retirees dependent on social security would become obvious problems with such a plan. So would the burden on those living in rural areas and driving long distances. McCain had talked about that during the presidential debates.

The story, “Gas tax hike looks good to GM chief” is here.

Tuesday, March 17, 2009

Short selling "price test rules" are controversial again

Back in the 1990s, among “amateur” day traders, “selling short” was talked about as a kind of entertainment, like going to Vegas without leaving your computer (when broadband wasn’t as well established). But on Wall Street and in pondering the current crisis, it’s dead serious stuff.

The media reports that the SEC wants to consider (when it meets April 8) restoring the “uptick rule” (as part of “short sale price test rules”). Today (March 17, 2009), Binyamin Applebaum and David Cho have a Washington Post Business Section (soon to go!) story on p D1, “Betting on Bad News: Short Sellers Again Targeted as Bank Shares Stay Low”. The link is here.

Short selling on financial stocks was stopped for about a month after the house of cards collapsed in September 2008, propelling us into a “brave new world”. Critics still say that it is harmful.

I had a conversation with a someone employed by a “moderate” think tank Sunday afternoon at a reception, about all the bailouts and the general impression by many like John Stossel that they’re “bull”. He said that the basic problem is that Wall Street insiders could construct financial products that even professional investors could not understand. I said, how can you insure something (like a CDO) that you don’t have insurable interest in – and have no collateral for – how could that even have been legal. He said, maybe it shouldn’t be. But it’s a transparency problem, not an insurance (anti-selection) problem (CDS) in the usual sense. Yet, it seems that Wall Street created products that short sellers had every short term incentive to destroy, however indirectly. Jim Cramer was saying that already in August 2008. Generally, with more transparent securities and companies, short selling provides a healthful counter-incentive to prevent securities from becoming over valued.

Of course, with some our past bubbles, as with the Dot com bubble, short selling didn’t control irrational exuberance. The Bubble and bust were probably more a social phenomenon. We just couldn’t predict reliably how people would behave in a world with a new topology.

Monday, March 16, 2009

Financial crisis hits school districts hard, especially in those funded by property taxes

Greg Toppo and Jack Gillum have an important front page story in USA Today, March 16, 2009, “Tide turns against schools as home foreclosures rise: with tax-base slipping, districts face deep cuts”, link here. The online and print versions have a social studies “map exercise” showing the relationship between school district budgets and property taxes in the 50 states, followed by the article. In states with heavy dependence in property taxes and with heavy foreclosures, school districts are in serious trouble with employee and teacher layoffs.

Even in relatively less scathed districts, like Fairfax County VA, there have been severe budget cuts, reduction in some programs, and hiring freezes.

In one school district in Florida, high school kids raise fish to sell to raise money for the school, using a science lab and aquarium built during the real estate bubble.

The economic crisis threatens the ability to hire teachers in the future when the economy recovers, as college students and career-switching adults will be less willing to invest money in certification. This is a serious problem, worthy of addressing as part of the “economic stimulus.”

Sunday, March 15, 2009

D.C. HIV rate hits 3%; H5N1 pandemic fears may be overblown; Metro safety issues

There are at least three important stories regarding public health or safety this morning, Sunday March 15, 2009.

First, on page B03, The Washington Post runs “5 Myths About Pandemics” by Philip Alcabes. The link is here. The general tone of the argument is that past is not prologue. The conditions that led to the 1918 Spanish flu pandemic probably will never occur again. H5N1 seems to be remaining in the sphere of animal-to-human transmission, not human-to-human. Tuberculosis is rarely transmitted in public spaces, despite the alarmist measures taken by public health officials, as with the 2007 passenger and the forced lung surgery. SARS, while arising suddenly, was relatively easily kept from spreading overseas from China.

What is more likely is that some new, bizarre disease will come out of nowhere. Maybe the best predictor of what could happen in the future really is you sci-fi horror films, like last year’s “Blindness” (from Brazil) and “Quarantine”. Keep paying attention to those new horror novels in supermarkets, and skim the web for the really innovative self-published horror. One of these imagined scenarios will happen some day.

Actually, regarding the tuberculosis issue, Scientific American has a Feb. 2009 article by Clifton E. Barry and Maija S. Cheung, "New Tactics in the Fight Against Tuberculosis," here. The March 2009 version in print also has a similar article.

Then Jose Antonio Vargas and Daniel Fears have a headline story in The Washington Post about the District of Columbia population: “HIV/AIDS Rate in D.C. Hits 3%:Considered a 'Severe' Epidemic, Every Mode of Transmission Is Increasing, City Study Finds”. The link is here. Although male homosexual transmission seems to still be the leading mode, heterosexual transmission and i.v. drug abuse are catching up quickly and will probably overtake, bringing the District into a pattern like that found in sub-Saharan Africa. In Washington, 7% of African-American men are infected, 4% of African-Americans as whole, and 1.4% of whites. It is true that among more affluent populations, life spans have increased enormously with antiviral drug treatments, making HIV a chronic but manageable disease. Side effects of the drugs (especially protease inhibitors) are serious but have become more manageable, too.

In several wards with the highest rates of HIV, 60% had never been married, and about that percentage had incomes under $10000 a year.

All of this is reported while the Whitman Walker Clinic faces budget cuts and layoffs and facility closings.

One other noteworthy safety problem has occurred this weekend: there have been two deaths with passengers on the tracks of the Metro. Generally officials don’t like to give out a lot of details or speculation. Maybe the DC Metro needs to consider installing plexiglass safety panels like those found in many stations in London and Paris.

March 18, 2009

The Washington Post today has an editorial on p A12, "From Bad to Worse: The HIV/AIDS epidemic is ravaging the District", link here.

Saturday, March 14, 2009

Unemployment benefits and debit cards: unemployed hit with bank fees to get their money

CNN has reported this morning (March 14) that in some (up to 30) states, people are getting their unemployment benefits with debit cards, and being charged bank fees to withdraw cash, check their balances, or even complain.

Banks have not been willing to discuss this practice with the press, and neither have state regulatory officials in some cases (such as in Pennsylvania). The moral question is whether banks receiving TARP money should be allowed to get away with this practice.

There are many news stories; a typical story is in the Dallas Morning News Business section, March 6, 2009, link here.

The CNN report is here.

The National Consumer Law Center has a white paper (PDF) Feb. 25, 2009, “Protections Needed for Prepaid Payroll, Unemployment Benefits, Child Support, and Other Prepaid Payment Cards” here.

Friday, March 13, 2009

DC teachers, assaulted by students, are scrutinized for "classroom management"

When I was substitute teaching, “classroom management” was an issue with younger or lower income students, leading to problems. Today (Friday March 13) The Washington Post has a front page story by Bill Turque, “Disorder in a Merged D.C. School; Teachers Alleging Attacks by Youths Find Themselves Scrutinized”, link here. The specific problem has to do with the temporary housing of a ninth grade trade academy in Ronald H. Brown Middle School in NE Washington. Teachers have been assaulted, as by having books thrown at them, but teachers who refer too many students to principals are put on 90 day performance improvement programs.

Apparently these were regularly licensed teachers, whose performance, nevertheless, comes under scrutiny under Chancellor Michelle Rhee’s “tougher performance standards” for teachers.

In northern Virginia, substitute teachers, hired often with no education experience or licenses, sometimes experience classroom management problems and get “banned” (with “Do Not Send” or “Do Not Use” letters) from schools and eventually fired under the “three strikes” rules.

In a speech Tuesday President Barack Obama called for tougher standards with probationary periods for teachers.

But classroom management problems sometimes occur because low income male students do not perceive the teacher to be an “eligible” authority figure according to the values and culture of their world.

To answer the comments (which see), please see the July 25, 2007 entry on my main blog a detailed account of my own problems with discipline in northern Virginia, here. The "three strikes" rule is explained in more detail in the Dec 13, 2006 entry on this blog (see the "substitute teachers" label below).

The Substitute Manual of the Fairfax County Public Schools explains the "do not send" or "three strikes" rule on p 6, link here (PDF). The actual personnel regulation is 4311, and is explained in Section VIII at this link.

Picture: Gunston Middle School, Arlington VA (one place where I subbed, 2004-2007)

Thursday, March 12, 2009

Madoff goes right to jail, but fibbies might be the biggest beneficiaries of his Ponzi Scheme

Bernard Madoff did not pass Go today, as he went right to the Metropolitan detention center (no $200 collection!, a 60 sq ft cell) in Manhattan after pleading guilty to 11 counts of fraud in United States v. Bernard L. Madoff. He will not have a Parker Brother's trademarked game of Monopoly in his cell, and he may go to maximum security prison after sentencing if he gets over 25 years. He is already 70 years old. Dr. Phil had called him a “sociopath.” The Dow actually jumped about 100 points as Madoff was led away from his stolen life of luxury to a jail cell, for the rest of his life, probably.

The DOJ web page with the details for his pleadings today were posted here.

CNN Money has a Special Report “Madoff Mess” special report “I knew this day would come”, here.

Andrew Lerman has a shocking “theory” in the ("Deal Book") New York Times Blogs today arguing that the federal government is the largest “beneficiary” of the Madoff mess, here. Libertarians will love this. So will Ben Stein.

The New York Times today has a front page story by David Segal, “Financial fraud rises as target for prosecutors: response to public ire; states press mortgage cases – hints that U.S. may join in” link here. Although one must have intended to do wrong to be prosecuted (supposedly), federal and state prosecutors may be able to user “zero tolerance” notions in wire fraud laws to consider almost any email communication (held by discovery requirements) a crime. Many prosecutions might occur at the state level.

As late as June 2008, I actually got a call from a “bank” to take a job supervising people selling these mortgages, when I have no experience in this. What does one make of this? I did decline. I didn’t need sophisticated models to suspect this was a house of cards.

States (at least Missouri) entertain random drug testing of teachers

On Thursday, March 12, The Washington Times, in an apparently exclusive story by Vaishali Honawar, reports that the Missouri (The “Show-Me” state) legislature is considering requiring teachers to undergo random drug testing. It was not clear whether the testing would include substitutes. The title of the article is “Teacher reps fight random drug tests; schools adopt policy for safety”, link here.

It is not unusual for schools to require tests when there is cause (unusual teacher or student behavior), but random drug testing might lead to constitutional 4th Amendment challenges, although they are common in the military and some law enforcement jobs (other public sector jobs, that is). Some districts require a drug test at entry, along with other health tests, like tuberculosis exposure screening. (I don’t think HIV screening is done anywhere.)

Private employers were often doing random drug testing as recently as the early 1990s, but have tending to back down.

Drug testing may run into problems with false positives (heavy second-hand exposure to marijuana might rarely cause a reaction (as in someone else’s closed car or at a party), and nasal decongestants could cause positive tests for amphetamines) and false negatives (some novel substances are not detected). Employees under threat of random testing might have to be careful about accidental second hand exposure or use of non-prescription patent medicines, and even certain foods or herbs. Marijuana can be detected in the body for up to 30 days. Some tests, like hair tests, which could be invasive, can detect cocaine use any time in the past few years. Sometimes life insurance companies require hair tests before issuing large policies. Positive tests (like EMIT) can sometimes be checked by more specific tests (like chromatographs).

Wednesday, March 11, 2009

Overpopulation or low birth rate? Which really is our problem? Do we need to terraform other planets soon?

Are Chris Hedges and Philip Longman on opposite poles of the population debate?

Maybe not exactly, but on March 8, 2009 Chris Hedges has a grim story in Truthdig “We are breeding ourselves to extinction,” here sent out today by Alternet.

It’s not hard to imagine his argument: continued overpopulation will increase carbon levels more and reduce available fuels and finite resources, leading to wars, famines, and destruction of the planet.

OK—you say – look at the JPL/NASA photo here from Mars – man will have to terraform Mars, and maybe Venus, Europa and Titan, for more living space.

But the more nuanced argument is that advanced societies consumer much more resources per person than do primitive cultures, and the resource overuse problem occurs as less developed countries compete to catch up, as is the case with China now, for example.

Furthermore, shrinking populations will not be able to support their elderly unless – and this is a big unless – people stay healthy much longer and employers keep them working much longer.

But the “demographic winter” argument from the right wing, so much focused on the fertility implosion of much of Europe and Russia, seems ultimately more a concern about political and even religious control. It is, after all, an “old” argument.

(The JPL picture of Mars comes from Wikimedia commons.)

Tuesday, March 10, 2009

World has lost $50 trillion in "Phantom-Zone" wealth; bonds are still risky; Credit it tightening again; too many zombie companies around?

The Washington Times led off this morning (Tuesday March 10) with a headline story “World loses more than $50 trillion: shrinkage equals year of output” by David Dickson. I seem to recall that the entire potential “term life” market was $40 trillion in some Primevest spiel back in 2003. The culprit is too much consumption based on too much debt, with assets simply built out of debt. The link is here. Hello World!

Monday (March 9, 2009), Liz Rappaport and Serena Ng ran a front page story in the Wall Street Journal, “New fears as credit markets tighten up”, link here. The concern was that LIBOR is rising, (reference site) as well as the TED-spread. It sounds like the credit markets have spells of angina pectoris and could benefit from coronary bypass surgery -- join the David Letterman Zipper Club.

The real significance of the story seemed to be weak bond prices, which affect ordinary investors and retirees who had thought they were “safer” in bonds. Junk bonds may be as “safe” as higher rated ones again, and many of those even in stable companies have fallen in value even though they are paying.

Then Bank of America president Kenneth D. Lewis wrote a piece “Some myths about banks: Nationalization would undermine confidence in the financial system” on p A19 of the Monday WSJ, here. Lewis writes that “the companies that did the most to cause this mess are gone” but then what about AIG? It’s still there. Ali Velshi on CNN is always saying that nationalization is not really nationalization; it’s just government buying up preferred stock and sometimes common shares, and driving out the senior debt.

Monday, March 09, 2009

Relative small number of "failures" spread to global collapse

So, how can this be? We have a global financial collapse, based on the failure of a small number of companies, triggered by foreclosures of homes mostly in relatively few counties around the country at first.

Monday morning, March 9, Anthony Faiola reports in the Washington Post (front page), “U.S. Downturn Dragging World Into Recession: Report Says Global Economy Will Shrink for First Time Since 1940s,” link here.
The report is from the World Bank, but the closest story that I could find is by David M. Theis, “Crisis Reveals Growing Finance Gaps for Developing Countries: Research shows poorer countries are short of $270- $700 billion for 2009”, link here.

Today, Adam Shell in USA Today has a story, “Stock market recovery likely will be years in the making”, here, as he points out that it took the market 25 years and a World War to recover from the Great Depression (maximum drop of 89%). And in August 2001, my employer had paid a motivational speaker at a sales conference to predict a 35000 Dow by 2005!

But on Friday March 6 Bard Heath had reported “Mortgage collapse started in few areas: Half of foreclosures in only 35 counties”, link here. The article has maps that highlight Southern California, Arizona, Colorado, Florida and Michigan.

How can an event in a relative small number of areas and relatively few companies (AIG)bring down the world economy completely? Because we had built up a credit bubble (and Ponzi Scheme) not bolstered by increased real wealth. We pretended to have collateral for "debt obligations" when we had none, and issued insurance ("credit default swaps") in direct violation of all insurance fundamentals (including insurable interest). It just took one pin prick to blow it up. And lots of people were hired to go out and sell this scheme and make quotas. Are we all equally guilty? David Callahan had predicted all this in his 2004 book “The Cheating Culture” of extreme capitalism. Or call it “market fundamentalism” as George Soros terms it. What we created was the financial equivalent of a malignant melanoma.

Sunday, March 08, 2009

Are families waiting too long to have kids?; study Longman/Gray "Family-Based Social Contract"

Today (March 8, 2009), the “Sunday Read” in The Washington Times featured the first of a two-part series (on p 15), “American family needs some help”, link here.

Wetzstein starts with a Census Bureau finding that as “baby boomers age” there are fewer families with kids under 18 at home. The link for the Census Bureau report is here, Feb. 25, 2009. That is based on another Census report, "Families and Living Arrangements", here.

She goes on to discuss Philip Longman’s work (“The Empty Cradle”) on “demographic winter” problems and lower birthrates, put puts particular emphasis on the fact that many families simply postpone having children too long because of economic pressures and our cultural demand that people be perfect before they have kids. “The country deeply values its educated, moral, socially competent (and taxable) young workers, but barely acknowledges the people who created, nurtured, loved and invested in these young workers for 20 years.” I have to admit that I picked up on the attitudes as a teenager even as far back as the 1950s. She also goes on to discuss the biological strikes against families who wait too long.

It’s already pretty easy for me to predict how the second half of the series will go.

Update: March 15, 2009

Wetzstein's second part is called "U.S. needs a pact based on family" on p14 of the Washington Times Sunday Read on March 15. They are based on a paper by Phillip Longman and David Gray, mentioned below.

Some of her (or "their") suggestions already happen. Many universities do welcome married couples. No problem there. Nurturing professions like nursing are growing and will have to pay more. There will be more attention paid to the pay of teachers of younger children -- the market will force that.

The essay does hit hard (as does the paper she cites). Our culture sometimes does look at children as "liabilities." She notes toward the end that "friends" lifestyles leave bigger environmental impacts than large families (although that could be disputed) and writes, quoting Philip Longman and David Gray, "The next social contract must recognize both the changing nature of families, and the increasing dependency of all Americans on the investments parents and other nurturers make in the well-being of the next generation." Otherwise "America is living beyond its means."

Later Sunday, I found the original source by Phillip Longman and David Gray, "A Family-Based Social Contract" by the A Publication of the Next Social Contract Initiative, from the New American Foundation, in PDF format, here. Look especially at p. 10. The authors are critical of Elinor Burkett's characterization of "pro-family policy" as "affirmative action for parents" in her 2000 book "The Baby Boon: How Family-Friendly America Cheats the Childless". The authors say that such comments fail to take into account on how we all depend on the "quality and quantity of other people's children" and later write that "childlessness breeds dependency", partly because of the growing problem of eldercare (although that is also arguably related to the need to keep people able to work and employers willing to employ them longer).

Another related idea that used to pop up is the "family wage", such as in Senator Henry Hyde's "Mom and Pop's Manifesto" in Policy Review back in 1994.

So, I guess I have to just say it. That means "people like me" must submit ourselves to the culture created by the marital sexual intercourse of others.

Friday, March 06, 2009

Wealthy private investors jawboned to join in bailout, with trillions

The Obama administration will invite wealthy investors to enter government-private partnerships to provide more money to loosen consumer lending and stimulate rehiring of people into jobs, The Washington Post reports on the front page today, Friday, May 6. The title of the story is “U.S. to Invite the Wealthy to Invest in the Bailout,” link here.

An obvious idea would be to target the partnerships to the most troubling areas, like the auto industry, perhaps to answer auditors’ concerns that GM will not be able to meet the benchmarks to stay in business by March 31.

The idea seems motivated by conservative and libertarian suggestions that the private sector should do as much as possible to help itself. The idea could make a huge difference in how much additional public debt is passed on to succeeding generations by all these bailouts.

Thursday, March 05, 2009

ExxonMobil holds analysts' meeting online, discusses financial crisis, pensions, energy outlook

ExxonMobil held its 2009 Analysts meeting today at the New York Stock Exchange. The main link for the slides is here. The meeting was open to the public through a broadband link on its website.

The three hour meeting was made to sound very optimistic, with reports of great efficiencies in exploration and a rosy picture for long term growth. The downturn was sometimes seen as an “opportunity.” Even so, XOM shares were falling Thursday morning as oil prices fell after China failed to come through with its economic stimulus plan.

The company discussed selling some of its retail outlets, refineries and pipelines to other “branded” companies.

The company believes that demand for oil will recover very strongly, particularly in Asia, by 2012, and suggests that prices may rise again sharply in about three years.

The presentation discussed the increase in domestic and international use of natural gas, as with the Pickens Plan. Natural gas demand will grow much faster than coal and demand, and can affect share price, a concept not yet well understood in the stock market.

The defined benefit pension deficit was addressed, and the company’s answers were a bit nebulous. The speaker discussed the Pension Protection Act of 2006 and said that the company would have to do more funding this year. He did not make specific comments on changing allocations, but obviously equities may have performed very poorly, and retirees may be living longer and drawing pensions longer than had been originally expected.

The company said that it has changed its cash placement quickly because of the global financial crisis, and the “counterparty risk”. It also discussed the credit risk, and said that it has experienced few credit defaults. It says it started paying attention to credit default swaps as long as 18 months ago.

The company also said that it is looking for major business partnerships around the world, and will boost production (Wall Street Journal analytical story, by subscription, is here).

Rex Tillerson dismissed negative and pessimistic behavior in the stock market, however, saying it would increase capital spending, according to a Forbes story here.

Wednesday, March 04, 2009

Treasury Department publishes all of its bailout activities; getting through this!

Visitors may find it illuminating to look at the U.S. Treasury Department’s Emergency Economic Stabilization Act Page, here.

The page is segmented, with most of the links related to the Capital Purchase Program, which appears to link to contracts with about 100 institutions. Any one contract (such as Bank of America) is lengthy and detailed. Wells Fargo is listed, but not Wachovia, which has already been purchased by Wells Fargo but still operates relatively separately.

Citigroup, however, is listed separately under the Targeted Investment Program. AIG is listed as a “Systemically Failing Institution” (no kidding!), and there is a section for the Automotive Industry Financing Program, for GM, GMAC, and Chrysler.

Treasury has also set up a separate website called “Financialstability.gov” which starts out with a presentation of TALF, the Consumer and Business Lending Initiative.

Steven Pearlstein has an interesting perspective today (Wednesday March 4, 2009) at the bottom of page 1 of the Washington Post Business Section, “Debt Doesn’t Have to Be a Burden,” link here. The national debt, in relation to GDP, is still much less than it was after World War II, which was followed by an economic boom. Pearlstein says that it’s OK for government to spend more on infrastructural investments while private citizens get used to living within their means.

But it’s the way that the individual “sacrifice” is managed that is so politically dicey. Individualism, as we understand it now, is predicated on a money economy with some level of confidence and stability, so that individual “moral hazard” really means something. In times of breakdown or “historical mugging” as Richard Cohen wrote yesterday (Tuesday) on p A13, “History Roars Back” as he muses about Stefan Zweig and his “The World of Yesterday,” there is a tendency to force people back into socialization and unwanted interdependence, and arbitrarily and politically assign the levels of sacrifice in non-monetary ways. Wasn’t “the Cultural Revolution” the endpoint of that threat back in the 60s (in Communist China)? A desire to control one’s own life, normally a virtue (and a preventative for jealousy), becomes seen as selfish and “anti-people”. In my own coming of age, I’ve seen all this before. Back in the mid 1970s, when New York City had its financial crisis (while I lived in the Village during my “Second Coming”), there was talk of utter breakdown (“Ford to City: Drop Dead”). But we got through that as cooler heads prevailed, and New York boomed in the 1980s, to every one’s surprise.

On Tuesday night, on ABC Nightline, Britain's Prime Minister Gordon Brown called for a "Global New Deal" and international standards for (financial) regulation.

Maybe we can turn this around yet.

Tuesday, March 03, 2009

Designer babies? Brave New World?

Back on January 11, 1999 Time Magazine had run a story by Michael D. Lemonick, David Bjerklie, Alice Park and Thompson, “Designer Babies” with the quip “Parents can now pick a kid's sex and screen for genetic illness. Will they someday select for brains and beauty too?”, link here. (Yes, Time Magazine, your online content still seems to be “free”).

Today, there are major media reports that superficial traits like eye and hair color can be chosen for in vitro fertilization, or preimplantation genetic diagnosis, or PGD. A typical story dated March 2, 2009 appears in World Magazine (Christian Views) by Lynn Vincent, here.

Most of us remember Aldous Huxley’s “Brave New World” (1932), and conservative author George Gilder warned in his 1973 book “Sexual Suicide” followed by “Men and Marriage” in 1986, that one day man would want to give up all the uncertainty inherent in having babies “the natural way” and make only perfect people.

Ethicists have said that picking babies for superficial traits will counter the social progress in non discriminating against people for superficial appearance, although these matters do affect attractiveness in the minds of many people.

Sunday, March 01, 2009

A Free Market "Cultural Revolution": MCD holds its own

Michael Luo has a whimsical front page article on the Sunday (March 1, 2009) New York Times, “Forced down the job ladder, from executive pay to hourly wage,” link here. He talks about a former Fortune 500 security manager now working as a janitor.

This sounds like a “free market cultural revolution” to me, at least. Remember Mao Tse-tung made a lot in the 1960s of taking intellectuals from the city and putting them in the (Chinese) countryside, making them take turns as peasants or "proles". Absolute justice this was, claimed the lunatic Left in the early 1970s.

Back during the 1991-1992 recession, there was advice in magazines like U.S. News, “take grunt work”. The piece, as I remember, even had a graphic of a man with a mop. "Paying your dues", perhaps? Well, after my forced retirement at the end of 2001, I got a job calling for the Minnesota Orchestra (I found that job when I went out to the bars) for $6 an hour plus commissions. But I didn’t have to punch a time clock. But then I went to work for a debt collection agency in 2003, and for the first time in my life, actually punched a time clock, and officially became non-exempt. And I did “celebrity apprentice” fast food work at the Metrodome for AGCMCC a few times in 2003. I was “internal temperature” man for the hotdogs. I was fun only because of the company.

Back around 2002 or so, pundits were saying, anyone worth his marbles could earn $200000 a year peddling stuff. Yeah, like subprime mortgages. I got calls to sell those, and refused.

I recall, when visiting the outplacement company (Right Management) in suburban Minneapolis in early 2002, stopping for lunch at a McDonald's nearby and seeing seniors working there. Even then, this kind of thing was happening. It takes discipline to work a regimented, time-clocked job where you can't sneeze. Sometimes high school kids start at McDonald's and find out they will get yelled at. McDonald's (MCD) has held its own in the stock market during this crisis!