June 2009 Archives

200 Congressmen from Exxon vote to destroy planet

Paul Krugman writes:

212 representatives voted no [on legislation to fight global warming]. A handful of these no votes came from representatives who considered the bill too weak, but most rejected the bill because they rejected the whole notion that we have to do something about greenhouse gases.

And as I watched the deniers make their arguments, I couldn’t help thinking that I was watching a form of treason — treason against the planet…

Representative Paul Broun of Georgia [declared] that climate change is nothing but a “hoax” that has been “perpetrated out of the scientific community.” …[T]o believe that global warming is a hoax you have to believe in a vast cabal consisting of thousands of scientists — a cabal so powerful that it has managed to create false records on everything from global temperatures to Arctic sea ice.

Yet Mr. Broun’s declaration was met with applause.

Even worse, this bill is a sham. It will barely make a difference. It rearranges the deck chairs on the Titanic. Yet 200 Congressmen consider it a draconian measure attacking a non-existent problem.

Posted by James on Jun 29, 2009

20-year health insurance senior executive: "They... dump the sick"

The former chief corporate spokesman of health insurance giant Cigna — and, before that, Humana — is speaking out… against his former employer and industry.

Wendell Potter says he was seduced by money into supporting immoral practices: “When you have a nice job in Liberty Place and you have a nice home on the Main Line, you can lose perspective on how most of America lives… I got very accustomed to living the lifestyle of a corporate executive.”

Potter says he thought he was engaged in a noble practice: “Many of us [at Cigna] have always felt that we were doing the right thing, helping people who had insurance. The problem is that most of us can’t see the forest for the trees.” That’s sadly true in so many fields. People in the mortgage industry writing or packaging or rating lousy mortgages convinced themselves their actions were OK. People working in the defense industry convince themselves building weapons is important work because we must defend our country, even if those weapons are likely to be used abroad in wars of choice.

Potter’s conscience flared when “I saw there was a ‘Healthcare Expedition’ going up to Wise, Va., which is a few miles away. That’s a coal-mining area… [I saw] Hundreds of people in a county fairground, lined up, in the rain, to get free medical care — that was being provided in the animal stalls.”

So Potter testified to Congress yesterday:

I saw how they confuse their customers and dump the sick—all so they can satisfy their Wall Street investors.

I know from personal experience that members of Congress and the public have good reason to question the honesty and trustworthiness of the insurance industry. Insurers make promises they have no intention of keeping, they flout regulations designed to protect consumers, and they make it nearly impossible to understand—or even to obtain—information we need…

The industry’s charm offensive — which is the most visible part of duplicitous and well-financed PR and lobbying campaigns — may well shape reform in a way that benefits Wall Street far more than average Americans…

To help meet Wall Street’s relentless profit expectations, insurers routinely dump policyholders who are less profitable or who get sick. Insurers have several ways to cull the sick from their rolls. One is policy rescission. They look carefully to see if a sick policyholder may have omitted a minor illness, a pre-existing condition, when applying for coverage, and then they use that as justification to cancel the policy, even if the enrollee has never missed a premium payment. Asked directly about this practice just last week in the House Energy and Commerce Committee, executives of three of the nation’s largest health insurers refused to end the practice of cancelling policies for sick enrollees. Why? Because dumping a small number of enrollees can have a big effect on the bottom line. Ten percent of the population accounts for two-thirds of all health care spending.1 The Energy and Commerce Committee’s investigation into three insurers found that they canceled the coverage of roughly 20,000 people in a five-year period, allowing the companies to avoid paying $300 million in claims.

They also dump small businesses whose employees' medical claims exceed what insurance underwriters expected. All it takes is one illness or accident among employees at a small business to prompt an insurance company to hike the next year’s premiums so high that the employer has to cut benefits, shop for another carrier, or stop offering coverage altogether—leaving workers uninsured. The practice is known in the industry as purging. The purging of less profitable accounts through intentionally unrealistic rate increases helps explain why the number of small businesses offering coverage to their employees has fallen from 61 percent to 38 percent since 1993, according to the National Small Business Association. Once an insurer purges a business, there are often no other viable choices in the health insurance market because of rampant industry consolidation…

Purging through pricing games is not limited to letting go of an isolated number of unprofitable accounts. It is endemic in the industry…

Insurers often refuse to tell customers how much of their premiums are actually being paid out in claims. A Houston employer could not get that information until the Texas legislature passed a law a few years ago requiring insurers to disclose it. That Houston employer discovered that its insurer was demanding a 22 percent rate increase in 2006 even though it had paid out only 9 percent of the employer’s premium dollars for care the year before…

The collective medical-loss ratios of the seven largest for-profit insurers fell from an average of 85.3 percent in 1998 to 81.6 percent in 2008. That translates into a difference of several billion dollars in favor of insurance company shareholders and executives and at the expense of health care providers and their patients.

There are many ways insurers keep their customers in the dark and purposely mislead them—especially now that insurers have started to aggressively market health plans that charge relatively low premiums for a new brand of policies that often offer only the illusion of comprehensive coverage.

An estimated 25 million Americans are now underinsured for two principle reasons. First, the high deductible plans many of them have been forced to accept—like I was forced to accept at CIGNA—require them to pay more out of their own pockets for medical care, whether they can afford it or not…

Secondly, the number of uninsured people has increased as more have fallen victim to deceptive marketing practices and bought what essentially is fake insurance. The industry is insistent on being able to retain so-called—benefit design flexibility so they can continue to market these kinds of often worthless policies. The big insurers have spent millions acquiring companies that specialize in what they call—limited-benefit plans. An example of such a plan is marketed by one of the big insurers under the name of Starbridge Select. Not only are the benefits extremely limited but the underwriting criteria established by the insurer essentially guarantee big profits. Pre-existing conditions are not covered during the first six months, and the employer must have an annual employee turnover rate of 70 percent or more, so most of the workers don’t even stay on the payroll long enough to use their benefits. The average age of employees must not be higher than 40, and no more than 65 percent of the workforce can be female. Employers don’t pay any of the premiums—the employees pay for everything. As Consumer Reports noted in May, many people who buy limited-benefit policies, which often provide little or no hospitalization, are misled by marketing materials and think they are buying more comprehensive care. In many cases it is not until they actually try to use the policies that they find out they will get little help from the insurer in paying the bills.

The lack of candor and transparency is not limited to sales and marketing. Notices that insurers are required to send to policyholders—those explanation-of-benefit documents that are supposed to explain how the insurance company calculated its payments to providers and how much is left for the policyholder to pay—are notoriously incomprehensible. Insurers know that policyholders are so baffled by those notices they usually just ignore them or throw them away. And that’s exactly the point. If they were more understandable, more consumers might realize that they are being ripped off.

Posted by James on Jun 25, 2009

"78% of bankruptcy filers burdened by healthcare expenses were insured"

The L.A. Times reports on a new study by Harvard researchers:

The [Harvard] study found that medical bills, plus related problems such as lost wages for the ill and their caregivers, contributed to 62% of all bankruptcies filed in 2007. On the campaign trail last year and in the White House this year, Obama had cited an earlier study by the same authors showing that such expenses played a part in 55% of bankruptcies in 2001.

Medical insurance isn’t much help, either. About 78% of bankruptcy filers burdened by healthcare expenses were insured, according to the survey, to be published in the August issue of the American Journal of Medicine.

“Health insurance is not a guarantee that illness won’t bankrupt you,” said Steffie Woolhandler, one of the authors, a practicing physician and an associate medical professor at Harvard.

“Lots of health insurance comes with big co-payments, deductibles and uncovered services,” she said. “So you can be insured and still end up with big bills. At the same time, even if you have good insurance through your employer, you can lose it if you get sick and can’t work.”

Most people who filed medical-related bankruptcies “were solidly middle class before financial disaster hit,” the study says. Two-thirds were homeowners, and most had gone to college.

Medical costs in America are totally absurd. And our system of rationing healthcare by wealth is insane.

Posted by James on Jun 04, 2009

Are 99.99% of human beings lemmings?

Joe Nocera writes about hedge fund manager Jeremy Grantham’s rant against the efficient market hypothesis, which claims stock prices rationally embody all available information and reflect the best possible estimate of each share’s true value. A corollary of the efficient market hypothesis is that no one can systematically beat the market.

Grantham says the efficient market theorem is wrong because institutional constraints and risk aversion prevent money managers from acting even when they know market prices have become totally insane. Yale economist Robert Shiller — who predicted both the 2000 stock market crash and the housing market crash — said that he made a presentation before the market collapse to (I believe) a major investment bank. Afterwards, a powerful money manager at the bank told him his speech had scared him deeply and convinced him absolutely but that he wouldn’t and couldn’t invest any differently because he’d get fired. This story meshes with this point in Nocera’s article:

The efficient market theoreticians always assumed that smart market participants would force stock prices to become rational. How? By doing exactly what they don’t do in real life: take the other side of trades if prices get out of whack. Their ivory tower view reflected an idealized market that simply doesn’t exist.

The hypothesis and its corollary have strong — but far from complete — empirical support. Most professional money managers — esp. mutual fund managers — perform significantly worse than market indexes, but a few investors — like Buffett and Grantham — have tremendously outperformed market averages for decades. Picking stocks that outperform the market is very hard, yet Grantham argues that asset markets go quite mad — as with the stock market bubble of 2000 and the housing market bubble of this decade — in ways that make it really easy for smart investors to grab free money.

In April, I attended a Grantham speech… one of the funniest speeches — and certainly the most sardonic — I’ve ever heard. Grantham claimed that everyone his hedge fund had been listening to had predicted the current crash! Grantham called it something like “the most anticipated total surprise of all time.”

I hope some day someone (Michael Lewis?) explains the complete disconnect between public information sources and the hedge fund crowd gossip. Grantham, Shiller and others did know the crash was coming. Why was the vast majority of America — including all the business TV shows, Congress, the president, the SEC, the rating agencies, and even the Federal Reserve — taken by surprise when a mortgage-and-finance industry that has very accurately been described as “a House of Cards” collapsed?

Nocera suspects the public was fooled because even most “smart” people are really shockingly ignorant:

I called Burton G. Malkiel, the Princeton economist [and] author of “A Random Walk Down Wall Street,” surely one of the greatest popularizers of any academic theory that’s ever been written…

“I do think bubbles exist,” he said. “The problem with bubbles is that you cannot recognize them in advance. We now know that stock prices were crazy in March of 2000. We know that condo prices were nuts.”

I thought to myself: if a smart guy like Burton Malkiel had to wait for the Internet bubble to end to realize we had been in one, then maybe Mr. Grantham has a point after all.

Posted by James on Jun 06, 2009

"Centrists" and "moderates"

Nothing better illustrates how pathetic our corporate media is than its constant use of the terms “centrist” and “moderate” for conservative Democrats in Congress. On issue after issue, these “centrists” and “moderates” are far to the right of the average American.

Paul Krugman’s article today nails it:

Voters, [polls say], strongly favor a universal guarantee of [health] coverage, and they mostly accept the idea that higher taxes may be needed to achieve that guarantee. What’s more, they overwhelmingly favor precisely the feature of Democratic plans that Republicans denounce most fiercely as “socialized medicine” — the creation of a public health insurance option that competes with private insurers…

The real risk is that health care reform will be undermined by “centrist” Democratic senators who either prevent the passage of a bill or insist on watering down key elements of reform. I use scare quotes around “centrist,” by the way, because if the center means the position held by most Americans, the self-proclaimed centrists are in fact way out in right field.

What the balking Democrats seem most determined to do is to kill the public option, either by eliminating it or by carrying out a bait-and-switch, replacing a true public option with something meaningless…

Whatever may be motivating these Democrats, they don’t seem able to explain their reasons in public.

Thus Senator Ben Nelson of Nebraska initially declared that the public option — which, remember, has overwhelming popular support — was a “deal-breaker.” Why? Because he didn’t think private insurers could compete: “At the end of the day, the public plan wins the day.” Um, isn’t the purpose of health care reform to protect American citizens, not insurance companies?

Posted by James on Jun 22, 2009

Global warming legislation all hot air

The Guardian’s George Monbiot lays bare the hollowness (and unfairness) of global warming legislation being debated in D.C.:

Like the UK’s climate change act (pdf) the US bill calls for an 80% cut by 2050, but in this case the baseline is 2005, not 1990. Between 1990 and 2005, US carbon dioxide emissions from fossil fuels rose from 5.8 to 7bn tonnes.

The cut proposed by 2020 is just 17%, which means that most of the reduction will take place towards the end of the period. What this means is much greater cumulative emissions, which is the only measure that counts. Worse still, it is riddled with so many loopholes and concessions that the bill’s measures might not offset the emissions from the paper it’s printed on…

There are mind-boggling concessions to the biofuels industry, including a promise not to investigate its wider environmental impacts. There’s a provision to allow industry to use 2bn tonnes of carbon offsets a year, which include highly unstable carbon sinks like crop residues left in the soil (another concession won by the powerful farm lobby). These offsets are so generous that if all of them are used, US industry will have to make no carbon cuts at all until 2026.

Like the EU emissions trading scheme (ETS), Waxman-Markey would oblige companies to buy only a small proportion (15%) of their carbon permits. The rest will be given away. This means that a resource belonging to everyone (the right to pollute) is captured by industrial interests without public compensation. The more pollution companies have produced, the greater their free allocation will be – the polluter gets paid.

…[T]he bill actually waters down current legislation, by preventing the Environmental Protection Agency from regulating coal-burning power stations. If the new coal plants planned in the US are built, it’s hard to see how even the feeble targets in this bill can be met, let alone any targets proposed by the science.

So, basically, Congress is planning to pat itself on the back for passing legislation that lets America continue doing business-as-usual for another decade or two, Earth be damned. Sounds like business-as-usual in D.C. — home of faux populists serving their corporate overlords — too. Give the bill a popular title and pretty cover page and let the lobbyists write the other 1,200 pages (the actual length of this bill).

Posted by James on Jun 26, 2009

Google's sitting behind you and recording every webpage you visit

Almost anywhere you go on the Internet, Google is tracking and recording your web surfing:

A U.C. Berkeley report shows that most Internet users don’t understand web site privacy policies, and that major online businesses like Google Inc. freely gather data and share it with affiliated businesses via loopholes in those policies.

Using trackers called “web bugs,” third parties collect user data from many popular web sites, and sites often allow this, even though their privacy policies say they don’t share user data with others.

“Web bugs from Google and its subsidiaries were found on 92 of the top 100 Web sites and 88 percent of the approximately 400,000 unique domains examined in the study,” the authors found…

Although web sites may reassure visitors that “we don’t share data with third parties,” those third parties don’t include a company’s affiliates — Google (NASDAQ: GOOG), for example, has 137 subsidiary businesses…

“Users do not know and cannot learn the full range of affiliates with which websites may share information,” the report said.

Though many Internet users are familiar with “cookies” used to study their surfing habits, they are less familiar with so-called “web bugs,” which can’t be cleared out of a web browser, since they are part of a web site’s HTML code.

My blog is completely Google-spying free.

Posted by James on Jun 06, 2009

Healthcare for all, for free!

Congress and the president have gone to extreme lengths to ignore “single payer” healthcare plans and to exclude the many strong advocates for a “single payer” system from Congressional hearings.

Why?

Because it’s a debate they can’t win. And talking about it just shows people our “representatives” care far more about health insurance companies — who give them cash — than their uninsured constituents — who don’t.

Here are some conclusions from a 90-page June 1991 General Accounting Office (GAO) study:

If the universal coverage and single-payer features of the Canadian system were applied in the United States, the savings in administrative costs alone would be more than enough to finance insurance coverage for the millions of Americans who are currently uninsured. There would even be enough left over to permit a reduction, or possibly even the elimination, of copayments and deductibles, if that were deemed appropriate.

If the single payer also had the authority and responsibility to oversee the system as a whole, as in Canada, it could potentially constrain the growth in long-run health care costs. …[H]ealth care costs have risen at a dramatically slower pace in Canada than in the United States. The difference reflects Canada’s low administrative costs, controls on hospital budgets and on the acquisition of high-technology equipment, and fee controls for physician services.

Canadians have few problems with access to primary care services. There are more physicians per person in Canada than in the United States, and Canadians use more physician services per person than do US. citizens. Yet the cost of physician services per person in Canada was one-third less than in the United States.

It’s especially ironic that the GAO report says single-payer would constrain growth in health care costs. The Obama administration says (and most experts agree) controlling health care costs is essential to reducing government deficits in the future. We have a wonderful solution that would simultaneously lower government spending and provide universal health care.

Self-interested Washingtonians won’t even allow a debate precisely because it’s such a wonderful solution… for everyone except the powerful pharmaceutical and health insurance industries.

Physicians for a National Health Program provide excerpts from many similar studies, many showing that single payer can do even better than provide universal healthcare at no additional cost. Many studies show single payer would cover everyone AND save money.

Our “representatives” are forcing Americans to continue wildly overpaying for health insurance while completely unnecessarily keeping nearly 50 million Americans uninsured. Here’s proof:

Three months ago, House Majority Leader Steny Hoyer (D-Maryland) told single payer supporters that he would seek to get the CBO to score [calculate the cost of] single payer legislation (HR 676).

But Steny Hoyer backed off his pledge.

He never did get the CBO to score single payer.

Why?

Because it would show that under single payer, we’d pay what we are paying now – or less – and it would cover everyone.

Congress refuses even to present the facts honestly.

Posted by James on Jun 19, 2009

How can we solve global problems when we can't even fix America?

I want to share an interesting chat with an old friend (an economics professor who shall remain nameless since I haven’t asked his permission to post his words):

My friend emailed me:

When are we going to start treating this planet right? It is the only one we have. On a pessimistic note, it is not clear that our democratic etc. machinery can divert the big ship we are all in, heading for the rocks.

My reply:

I’ve been singing that song for 20 years. I long thought that it was just a matter of time till people realized how serious the problems were becoming and then they’d belatedly change their ways. But as I’ve come to better understand corporate and political and human nature, I’ve realized that vested economic interests exert so much political power that we could just be doomed. Change just isn’t likely to come quickly enough. We’ve gone decades and decades without national healthcare because the insurance and medical and pharmaceutical industries want to maximize profit and bribe Washington handsomely to let them continue.

My friend replied:

So that is the political “design” issue of our time: how can we respond to challenges that are too big for any one country and its people to fix on their own?

My response:

Many people say that. But we have yet to figure out how to respond to challenges that are completely within the power of a country to tackle. Mega-corporations own the U.S. government (and governments of many nations). I think the biggest design challenge is figuring out how to break up these politically and economically dominant mega-companies and give power back to people and markets. For example, you can’t fix global warming until countries can enforce rules on mega-polluters. And you can’t help the poor, unemployed and uninsured while you’re shoveling trillions of dollars to bail out failed, bankrupt banks that are recycling the government’s largess back into the pockets of politicians as thanks for showering them with taxpayers' money.

Posted by James on Jun 25, 2009

How to change a culture

This interesting article by physician Perri Klass on the best way to stop bullying in schools is relevant to any organization seeking to change its culture. Just as stopping bullies is a school-wide activity, a key to changing any dysfunctional culture is organization-wide awareness. Focusing solely on the bad behavior is far less effective than encouraging and empowering everyone to intervene when they observe bad behavior, rather than enable it by looking the other way:

Next month, the American Academy of Pediatrics will… [recommend] that schools adopt a prevention model developed by Dan Olweus, a research professor of psychology at the University of Bergen, Norway, who first began studying the phenomenon of school bullying in Scandinavia in the 1970s…

Dr. Robert Sege, chief of ambulatory pediatrics at Boston Medical Center and a lead author of the new policy statement, says the Olweus approach focuses attention on the largest group of children, the bystanders. “Olweus’s genius,” he said, “is that he manages to turn the school situation around so the other kids realize that the bully is someone who has a problem managing his or her behavior, and the victim is someone they can protect.”

The other lead author, Dr. Joseph Wright, senior vice president at Children’s National Medical Center in Washington and the chairman of the pediatrics academy’s committee on violence prevention, notes that a quarter of all children report that they have been involved in bullying, either as bullies or as victims…

For a successful anti-bullying program, the school needs to survey the children and find out the details — where it happens, when it happens.

Structural changes can address those vulnerable places — the out-of-sight corner of the playground, the entrance hallway at dismissal time.

Then, Dr. Sege said, “activating the bystanders” means changing the culture of the school; through class discussions, parent meetings and consistent responses to every incident, the school must put out the message that bullying will not be tolerated.

Posted by James on Jun 09, 2009

If you think 9.4% unemployment's bad...

The official U.S. unemployment rate hit 9.4% in May.

But economic suffering is even more widespread than that dreadful number suggests:

The Bureau of Labor Statistics tracks the number of self-employed workers who say they are working “part time for economic reasons,” which means that they work fewer than 35 hours a week because they can’t line up more employment. In March 2008, 622,000 self-employed workers across the country put themselves in this category. A year later, the number had almost doubled, to nearly 1.1 million.

Posted by James on Jun 08, 2009

Krugman: We can't accept healthcare reform without cost controls

In February, Paul Krugman argued that Obama’s stimulus package was too small and that passing a second stimulus package later would be incredibly difficult politically because Republicans would argue economic stimulus failed. I agreed with his logic.

Paul Krugman’s latest begins with a (completely warranted) I-told-you-so:

[S]ome of us warned about what might happen: if unemployment surpassed the administration’s optimistic projections, Republicans wouldn’t accept the need for more stimulus. Instead, they’d declare the whole economic policy a failure. And that’s exactly how it’s playing out. With the unemployment rate now almost certain to pass 10 percent, there’s an overwhelming economic case for more stimulus. But as a political matter it’s going to be harder, not easier, to get that extra stimulus now than it would have been to get the plan right in the first place.

The point is that if you’re making big policy changes, the final form of the policy has to be good enough to do the job. You might think that half a loaf is always better than none — but it isn’t if the failure of half-measures ends up discrediting your whole policy approach.

Given Professor Nobel Prize’s supernatural ability to peer into the future, we should really pay attention to his warning against healthcare reform without a strong public (government-administered) health insurance option with the power to negotiate rates.

As usual, our legislators are trying their best to pass something that looks, smells and tastes good to ordinary Americans without touching the bottom lines of the powerful companies those legislators really work for. So we should expect a watered-down law that accomplishes about 20% of what it should. And Krugman’s warning us this would be worse than nothing:

[R]eform isn’t worth having if you can only get it on terms so compromised that it’s doomed to fail.

[T]he success of [healthcare] reform depends on successful cost control. We really, really don’t want to get into a position a few years from now where premiums are rising rapidly, many Americans are priced out of the insurance market despite government subsidies, and the cost of health care subsidies is a growing strain on the budget.

And that’s why the public plan is an important part of reform: it would help keep costs down through a combination of low overhead and bargaining power. That’s not an abstract hypothesis, it’s a conclusion based on solid experience. Currently, Medicare has much lower administrative costs than private insurance companies, while federal health care programs other than Medicare (which isn’t allowed to bargain over drug prices) pay much less for prescription drugs than non-federal buyers. There’s every reason to believe that a public option could achieve similar savings.

Indeed, the prospects for such savings are precisely what have the opponents of a public plan so terrified.

I concur (as I do with 99% of what the bearded oracle writes).

Posted by James on Jun 28, 2009

Matt Taibbi destroys Hank Paulsen

Remind me never to get on Matt Taibbi’s bad side. Taibbi asked The Wall Street Journal, “did Evan Newmark ever work for Goldman Sachs? And if the answer to the question is yes, don’t you think that might have been a good fact to disclose before he fellated Hank Paulson in his "Mean Street” column?“ He then informs us Evan Newmark was a managing director at Goldman and then savages Hank Paulsen:

Exactly what part of Paulson’s record is heroic, Evan? The part where he called up SEC director William Donaldson in 2004 and quietly arranged to get the state to drop capital requirements for the country’s top five investment banks? You remember that business, right, Evan? Your hero Paulson met with Donaldson and got the rules changed so that Goldman and four other banks no longer had to abide by the old restrictions that forced banks to actually have a dollar or two on hand for every ten or so they lent out. After that, it was party time! Bear Stearns in just a few years had a debt-to-equity ration of 33-1! Lehman’s went to 32-1. By an amazing coincidence, both of these companies exploded just a few years after that meeting, and all of the rest of us, Evan, ended up footing the bill, thanks to a state-sponsored rescue of Bear and a much larger massive bailout of Wall Street in general, necessitated in large part by the damage caused by the chaos surrounding Lehman’s collapse.

Meanwhile your own Goldman, Sachs ended up with a 22:1 debt-to-equity ratio a few years following that meeting, a number that would have been much higher if one didn’t count the hedges Goldman bought through a company called AIG. Thanks in large part to Paulson’s leadership in his last years as head of Goldman, the company was so massively over-leveraged that it would have gone under if AIG — which owed Goldman billions when it went into its death spiral last September — had been allowed to collapse. But thanks to Hank Paulson, who heroically stepped in and gave AIG $80 billion the same weekend he allowed one of Goldman’s last key competitors, Lehman, to collapse, Goldman didn’t have to go without that money; $13 billion of the AIG bailout went straight to Goldman. So I guess we have Paulson to thank for the fact that he used about $13 billion of our taxpayer money to essentially bail out his own fuckups

Or maybe it was Paulson’s foresight in heading off the crisis before it happened that inspired you? Maybe it was the way Paulson pronounced the subprime fallout “contained” in 2007 and called the economy the “strongest in decades?” Or maybe it was the way he remained calm last July, saying that it was a “very manageable situation” and “our regulators are on top of it?” Remember how he said all that shit, Evan, just about six weeks before the world exploded? …

Or was it his non-intervention last summer when gas prices hit $4.50 a gallon thanks again to his old buddies at Goldman and Morgan Stanley, who juiced the commodities market with so much speculative cash that oil prices soared despite the fact that supply was up and demand was down all year? Do you remember that part? How about the way food prices soared thanks to the same commodities speculators? According to the World Food Program at the UN, about 100 million people joined the ranks of the hungry last year during the commodities spike.

Or maybe it was the way the Treasury Department refused to tell the Congress really anything at all about how it chose whom to give TARP money to; how when the Congressional Oversight Panel asked Paulson what criteria he was using to decide who gets bailout money and who doesn’t, he sent Congress back a copy of a TARP application form. Maybe it was that. Or maybe it was the way Paulson got a $200 million tax deferral thanks to an obscure rule that allows executives who join the government to defer taxes on their holdings.

Posted by James on Jun 09, 2009

Mob boss (Microsoft) scared entire computer industry into whacking popular Linux netbooks

The PC industry is no “free market.” A ruthless gangster named “Microsoft” shakes down PC manufacturers like the mob stealing protection money from small businesspeople.

A most blatant example: the sudden disappearance of very popular netbooks. A slew of innovative, inexpensive, cute, portable, cheap netbooks running Linux (usually Ubuntu Linux) were designed and sold by Taiwanese manufacturers like MSI and Asus. They were great. They sold well. People loved them.

So I was recently shocked to discover — while researching potential birthday presents for my wife — that you basically can’t buy a netbook with Linux any more. Their manufacturers have ALL switched to Microgarbage! I wondered, “What’s going on?”

A reporter got the answer in Taiwan, home of most netbooks and laptops: Microsoft leaned on all the Taiwanese manufacturers who had been selling Linux-based machines and threatened them into killing their wonderful machines which were enticing people away from Microsoft’s strangling “embrace” in droves.

30-year business journalist Dana Blankenhorn was so shocked that Linux had disappeared from the Taiwanese computer industry trade show Computex that he asked about it during a Q&A session. He quotes Li Chang, vice president of the Taipei Computer Association, explaining the sudden disappearance of Linux netbooks as follows:

“In our association we operate as a consortium, like the open source consortium. They want to promote open source and Linux. But if you begin from the PC you are afraid of Microsoft. They try to go to the smart phone or PDA to start again.”

“If you begin from the PC you are afraid of Microsoft.” That’s pretty clear.

The next generation netbooks looked even more exciting before “disappearing” faster than a witness about to testify against the mob:

One of the rumors floating around Computex involves a pretty little Asus ‘Smartbook’ based on the Qualcomm Snapdragon processor and its mid-show disappearance…

The smartbook itself is a cute little number, one of the nicer ones at the show…

A cheap, light, and functional machine is what everyone wants, and it is exactly what MS can’t deliver… They don’t have anything people want, so they have to force things onto an unwilling market.

That brings us back to the Asus and what was billed as the best netbook/smartbook of the show. You have a company that kicked off the netbook craze two years ago with the Eee, an OS that is not only MS free, but Linux based as well, and a chipmaker that actually delivers product. The buzz was growing at Computex, and that would create a PR disaster for MS.

So it went away. No really, it went POOF in the middle of the show. No explanation, no excuses, just that it was there one day, and gone the next. PR disaster averted for Redmond, phew.

So what do you do if you are a fading convicted monopolist with a toolbox full of hammers but no product? The story as we heard it is that the ‘nice’ folk at MS called the nice folk at Asus, sans quotes around the second nice, and ‘nicely’ suggested that they really didn’t want to show one of the best devices of Computex at Computex. Asus meekly complied, and the device went poof.

…Given the number of people who told us the same story and what their positions are, we have no doubt that it did happen.

After I complained to a friend about Microsoft’s anti-competitive tactics, he replied:

Well just uninstall windows and reinstall linux.

I replied:

I did exactly that with my laptop. But that’s no solution:

1) I still must pay “the Microsoft tax.”

2) I still end up subsidizing Microsoft

3) I must take the time and effort to install a new OS. How many people would take the time to install Windows over a Linux distribution? Your average computer user wouldn’t even know how to! And it would be ridiculously expensive because you must pay retail for Windows.

4) By wiping the OS that comes with the machine and putting on another, I probably void my warranty

5) By wiping the OS that comes with the machine and putting on another, I probably guarantee that I’ll never get any customer service (for which I effectively paid when I bought the machine)

6) Millions of people who should be getting exposed to Ubuntu/Linux and drawn into the joys of free software remain trapped in the proprietary, non-free world of Microsoft. This is a HUGE factor in Microsoft’s mind. It’s why they let everyone in China steal Windows. It’s why they were scared by the nearly completed One Laptop Per Child project into basically giving away the software. Microsoft doesn’t want hundreds of millions of people using Linux. It’s their biggest nightmare. So they’re blocking consumer choice by threatening computer manufacturers into not offering consumers a Linux option.

7) #6 means greater artificial demand for Microsoft programs and fewer programs get written for Linux. I still can’t do my taxes on Linux, for example. If more manufacturers offered Linux computers, I’d soon be able to get TurboTax on Linux.

8) #6 also means device driver manufacturers can more easily continue ignoring Linux or deliberately hiding their APIs from the Linux community while sharing them with Microsoft (as some do because Microsoft bribes them to do so)

P.S. The Dell laptop (not a netbook) I bought with Windows and wiped out actually is one of the few machines sold with Linux. BUT… I like to buy my electronics through Costco, and Costco sold only Windows machines. I considered buying direct from Dell, but they only sold the machine I bought with crappy configuration options. It had something like a 100GB hard drive, when I wanted to buy the one with 250GB at Costco. I tried to get my operating system cost back from Dell because I never once booted into Windows, but I never got a penny back.

—James

I just realized another problem: If I install the operating system, I’m responsible for figuring out how to configure all the devices (sound, video, camera, USB, etc.). Normally, the laptop manufacturer is responsible for configuring everything.

Posted by James on Jun 21, 2009

Not even one Democratic Senator in the Congressional Progressive Caucus!

Here’s the complete list of Senators in the Congressional Progressive Caucus:

Hon. Bernie Sanders (I-VT)

Only one Senator is willing to stand with many proud House progressives?!?!?!

And not a single “Democrat”?!?!?!

No wonder Democratic control of the House, the Senate and the presidency has led to so little progressive change. There’s not a single Democrat in the Senate willing to speak out with a proud progressive voice.

(The late, great Sen. Paul Wellstone (D-MN) was a member — and a powerfully persuasive progressive — until his death in a suspicious small plane crash eleven days before his likely re-election despite — perhaps even because — he voted against giving George W. Bush the power to invade Iraq.)

Posted by James on Jun 25, 2009

Paul Wilmott, quant with a heart and a brain

Newsweek has a fascinating article on finance quant Paul Wilmott.

Wilmott’s an important, influential figure in finance. His story is well worth reading because it shows there’s a way to do quantitative finance well. Due to the complexity of human brains and human society, quantitative finance can never be like physics in its certitude. But quant models can be powerful analytical tools supplementing and magnifying the power of the human brain. Unfortunately, too many quants have revered their equations as if they were physics equations or pronouncements from the Oracle of Delphi.

You know Wilmott’s worth listening to when you learn that Nassim Taleb — notorious for contemptuously dismissing as quacks and charlatans almost all financial practitioners and academics — praises Wilmott:

Nassim Taleb, the mathematician and author of the bestseller The Black Swan, calls him the smartest quant in the world. “He’s the only one who truly understands what’s going on … the only quant who uses his own head and has any sense of ethics,” says Taleb.

Wilmott’s also an interesting character with an unusual background (which probably helps him think outside the box):

Born in Birkenhead, a small town outside Liverpool, Wilmott studied applied math at Oxford. In his spare time, he dabbled in juggling and competitive ballroom dancing. After earning a Ph.D. in fluid mechanics from Oxford in 1985, he got his start as an applied mathematician, working on jet-engine turbines for Rolls-Royce and calculating detonation sites for an explosives company. In the late 1980s, he started applying math to finance. His first burst of fame came in 1993 when he co-wrote a textbook on derivatives. Soon he’d made a name for himself as a contrarian guru, writing more textbooks, and giving speeches around the world to rooms full of bankers. From 2001 to 2005 he ran a $170 million hedge fund that returned an average of 15 percent a year.

Though a quant, Wilmott isn’t in finance just for money or the intellectual thrill of developing mathematical models of financial markets. He readily expresses anger at the bankers and unthinking quants who have gotten rich blowing up the world’s economy and escaped punishment:

Wilmott walks by several tube stops, deep in conversation on the topic that gets him most agitated these days: structured credit, the area of finance most at fault in the crash, and where quants inflicted the most damage by applying mathematical models they swore could predict default rates. “A complete lapse of ethics and responsibility,” he calls it…

[Wilmott]’s also stunned by the lack of outrage over the financial mess. The violence that erupted at this year’s G20 summit wasn’t anywhere near what he thought it should’ve been. “Where the hell was everybody? If people aren’t angry now, they’ll never be.”

Posted by James on Jun 01, 2009

Please retire Chris Dodd from the Senate (Part 1)

It’s time for my home state’s Senator, Chris Dodd, to return home from the U.S. Senate.

Sen. Dodd seems a nice guy. And he has cast many good votes in his many terms since joining Congress in 1975, 34 years ago.

But — as Chairman of the Senate Banking Committee — Sen. Dodd was better positioned than almost anyone to prevent the financial crisis, to prevent the looting of taxpayers' financial futures to bail out failed, bankrupt banks, and to punish those responsible. Senate Banking Committee Chairman Dodd failed in all three areas… all while receiving millions in kickbacks campaign contributions — plus sweetheart mortgage deals — from those same financial institutions he failed to adequately regulate.

More on this in a future post. Today, I want to talk about something Sen. Dodd did to undermine American democracy itself.

Nearly a decade after it should have spoken out against electronic voting, The New York Times declared this week in an editorial that “Electronic voting machines that do not produce a paper record of every vote cast cannot be trusted.”

In 2004, The New York Times noted Sen. Dodd’s central role in preventing election paper trails: “Mr. Dodd, who has actively opposed paper trails, then appointed Jim Dickson, an [American Association of People With Disabilities] official, to the Board of Advisors of the Election Assistance Commission, where he will be in a good position to oppose paper trails at the federal level.”

Knowingly or unwittingly, every time Sen. Dodd appeared at a meeting with disabled people as props to defend his opposition to paper trails, he was part of the electronic voting industry’s conspiracy to use the disabled to prevent auditable elections. The same 2004 New York Times article above noted the flow of cash from electronic voting machine companies to associations purporting to advocate for the rights of the disabled:

The National Federation of the Blind, for instance, has been championing controversial voting machines that do not provide a paper trail. It has attested not only to the machines' accessibility, but also to their security and accuracy — neither of which is within the federation’s areas of expertise. What’s even more troubling is that the group has accepted a $1 million gift for a new training institute from Diebold, the machines' manufacturer, which put the testimonial on its Web site. The federation stands by its “complete confidence” in Diebold even though several recent studies have raised serious doubts about the company, and California has banned more than 14,000 Diebold machines from being used this November because of doubts about their reliability.

Sen. Dodd’s sister is blind, and he has mentioned her as a reason for his legislation. I deeply respect his concern for his sister and for all American disabled. But that does not excuse the travesty of the legislation he drafted and passed and defended against all attempts at voter-verified paper ballots and other forms of auditable paper verification.

Tens of thousands of activists from all major and minor political parties have been screaming about electronic voting for many, many years. Have elections been stolen using electronic voting machines? Almost certainly. Can we prove so? It’s pretty hard when there’s no physical record of how people voted. Computers can be programmed to report anything, no matter how people actually voted. Sadly, I think that’s precisely why these machines became so commonplace during this decade.

Who wrote and advocated legislation requiring states to dump paper ballots and instead use unauditable electronic voting machines and paying states to buy those unauditable, privately owned-and-operated machines? The #1 person behind that legislation — called HAVA — which outsourced U.S. elections to private companies using secret software: Senator Chris Dodd.

Most of the electronic voting machine companies were owned by right-wingers. The CEO of Diebold famously promised Ohio Republicans in a 2003 fund-raising letter that “I am committed to helping Ohio deliver its electoral votes to the president next year.”

Only one company, TruVote, was dedicated to a voter-verified paper audit trail. TruVote had built a brilliant electronic device that printed a paper ballot which the voter then viewed through glass before accepting, at which point it was dropped into a lockbox with other voter-verified printouts. The system was backed by Microsoft. But Mr. Gibbs' system died after he “was killed when the SUV he was driving was hit from behind by a tractor trailer”. (You can view a 5-minute video on Mr. Gibbs' creation.)

Did Sen. Dodd intend to undermine democracy? Did he intend to steal from the people their ability to trust in the integrity of the vote-counting process? Of course not. But it really doesn’t matter why he forced electronic voting machines on states. He should have known better. He shouldn’t have risked turning America into a banana republic. And he failed — for years — to listen to (or understand or agree with) the loud voices of computer experts and election experts who decried HAVA and the unauditable elections it produced.

And the still murky circumstances surrounding Dodd’s negotiations over HAVA apparently concerned the Justice Department. In 2006, Roll Call reported:

Justice Department investigators have begun a review of Senate Rules and Administration Committee records relating to negotiations over the Help America Vote Act, involving then-Chairman Chris Dodd (D-Conn.) and former House Administration Chairman Bob Ney (R-Ohio), as they wrap up their investigation into Ney’s connections to disgraced lobbyist Jack Abramoff.

This may well be an example of smoke without fire. But it’s troubling to learn that Dodd’s democracy-undermining legislation was drafted after suspicious negotiations involving two disgraced Republican insiders, Bob Ney and Jack Abramoff.

Even more appalling than Dodd’s initial drafting of HAVA is his continued staunch opposition to a paper audit trail. Three years later, in 2005, after the stolen 2004 presidential election, HAVA’s deficiencies were blatantly obvious. Nevertheless, in 2005, Dodd stood on the anti-democratic side of Republican Senator John Ensign (R-NV), who was calling for printers to be attached to existing electronic voting machines to create a paper trail to “make sure the machines are kept honest.” Attaching printers to untrustworthy voting machines was a poor “solution,” but Dodd opposed the push to add a modicum of election transparency and accountability, advocating instead for an even lousier “solution” — doing nothing:

Senator Christopher Dodd, the [Senate Rules and Administration Committee]’s ranking Democrat, objected because a paper-only verification system couldn’t be used by the blind and some other people with disabilities.

“By insisting on paper, you’re denying people who cannot read because they cannot see,” Dodd, of Connecticut, said during a hearing attended by several people with disabilities. “I would vehemently oppose any legislation that excludes the ability of those people to have the right to the same thing that those who can read have.”

Adding printers denies the blind what??? The same right to have their votes stolen as everyone else?!?!?! How is protecting the integrity of 99.9% of Americans' votes worse than leaving 100% of American votes at risk of theft by whichever private companies created and control the electronic voting machines? Don’t even the disabled benefit when all Americans can feel some confidence that 99.9% of American votes — as opposed to 0% — are counted honestly and accurately?

In March 2005, voting integrity advocates from TrueVoteCT talked for more than 1 ½ hours with “Ms. Kennie Gill, a member of Senator Dodd’s Washington staff and his primary assistant on the issue of electronic voting. [Dodd staffer Anthony] Householder described Ms. Gill as Dodd’s HAVA expert and the person who drafted HAVA in the first place.”

TrueVoteCT left the meeting very disturbed:

The impression that we were left with is that Ms. Gill (and we would assume Senator Dodd himself) are for some reason not supportive of VVPBs [voter-verified paper ballots]…

Ms. Gill (and presumably Senator Dodd) have a very troubling understanding of the problems associated with DREs. They seem to believe, against the views of almost all independent computing experts, that paperless DREs can be trusted to count our votes, as long as they are properly engineered and administered.

Ms. Gill (and presumably Senator Dodd) seem to have a fundamental antipathy against VVPBs, much of it based on erroneous assumptions about how VVPB technology works and on how well VVPB machines worked in Nevada.

TrueVoteCT was also upset that Dodd’s staffer falsely denied Chris Dodd played any role in killing paper voting trails in Connecticut:

One of the first questions that came up was whether Senator Dodd would support SB55, given its amended language to require an accessible VVPB. She replied that Senator Dodd makes it a policy not to take a position on state laws. No one at the meeting raised the point that Senator Dodd was instrumental in killing last year’s version of SB55 (SB388), which had received widespread support in the Connecticut General Assembly and looked like it was headed for easy passage.

No matter Sen. Dodd’s motives, his strong and unwavering support for paperless electronic voting played an instrumental role in election thefts this decade, including the 2004 presidential election. For that alone, Sen. Dodd should retire — or be retired.

Posted by James on Jun 25, 2009

Please retire Chris Dodd from the Senate (Part 2)

In Part 1, I criticized Sen. Dodd for writing the legislation — HAVA — that pushed unauditable, privately operated electronic voting machines into American elections and for fighting — for years — against paper audit trails, thus undermining Americans' trust in the legitimacy and integrity of our elections and our ability to verify election “results.”

In Part 2, I show that Sen. Dodd was uniquely positioned to prevent the banking crisis but utterly failed Connecticut and America.

Sen. Dodd — Chairman of the Senate Banking Committee — has taken millions of dollars from financial institutions to not do his job:

Why does Dodd — a long-term incumbent in a small state — need all this money? And why are powerful financial firms so eager to give Dodd money?

They wanted a friend running the Senate Banking Committee, a friend who wouldn’t push new regulations or tough enforcement of existing regulations. And that’s exactly what they got for their money.

What did we citizens get for Dodd’s close friendship with the finance industry? Dodd’s failure to regulate banks led directly to: * A financial crisis * Bank failures * A deep, protracted recession * Massive job losses * Plummeting home values * Trillions in taxpayer subsidies for failed banks that we and future generations must pay back * Inflation expectations — due to the debt incurred to bail out banks — that will make government and private borrowing far more expensive for decades to come

During Dodd’s watch as Chairman of the Senate Banking Committee, the U.S. banking system collapsed as it had not since the Great Depression. This occurred because Congress tore down laws preventing banks and other financial insitutions from taking massive risks. And then Congress failed to watch — let alone regulate — what those financial institutions were doing.

No one was better positioned to prevent the madness than Dodd.

But Dodd was part of the problem, not the solution. One landmark law — The Financial Services Modernization Act of 1999 (informally called Gramm-Leach-Bliley) — repealed essential legislation — the Glass-Steagall Act of 1933 and the Bank Holding Company Act of 1956 — put in place after the Great Depression to prevent another banking crisis.

Dodd voted “yes” on repealing Glass-Steagall and gutting the Bank Holding Company Act. Shamefully, only eight Senators — including five of the best (Boxer, Dorgan, Feingold, Harkin and Wellstone) — voted “no.”

Sen. Dodd absolutely should have known he was pulling the pin on a hand grenade. Many others shouted loudly that deregulation would cause a financial crisis & taxpayer bailouts:

  • Ralph Nader knew: “These conglomerates will be the financial equivalent of nuclear bombs. The explosion of even one could have a disastrous impact not only on the U.S. economy but on financial systems around the world.”

  • Molly Ivins knew: “Watch the banking industry dig its own grave. Watch supposedly smart people set up a financial disaster… Not since Congress passed the Garn-St. Germain bill in 1981 – the one that deregulated the S&Ls and unleashed a half-a-trillion-dollar disaster, which the taxpayers of this country wound up paying for – has there been a move to match this for pure folly… The most obvious risk is that a blunder in the insurance or brokerage end of the business could bring down a bank, putting insured deposits at risk. The taxpayers, of course, then wind up with the tab, as we did with the savings-and-loan mess.”

  • Senator Byron Dorgan knew: “This bill will also, in my judgment, raise the likelihood of future massive taxpayer bailouts. It will fuel the consolidation and mergers in the banking and financial services industry at the expense of customers, farm businesses, family farmers, and others, and in some instances I think it inappropriately limits the ability of the banking and thrift institution regulators from monitoring activities between such institutions and their insurance or securities affiliates and subsidiaries raising significant safety and soundness consumer protection concerns.” Sen. Dorgan even predicted the timeframe: “I think we will look back in 10 years’ time and say we should not have done this but we did because we forgot the lessons of the past, and that that which is true in the 1930’s is true in 2010.”

  • Senator Paul Wellstone knew: “This is the wrong kind of modernization because it fails to put in place adequate regulatory safeguards for these new financial giants whose failure could jeopardize the entire economy. It is the wrong kind of modernization because taxpayers could be stuck with the bill if these conglomerates become ‘too big to fail.’” He continued: “We are flirting with disaster. We are strolling casually along the upper decks of the Titanic, oblivious to the dangers ahead of us. Remember, the Titanic in its day symbolized the ultimate triumph of technology and progress. Just like these new financial conglomerates, it was considered ‘too big to fail.’ Because everybody assumed this flagship of Western technology was unsinkable, they saw no need to take ordinary precautions. They disregarded the usual rules of speed and safety, as Congress is now doing with [this legislation].”

Most damagingly, Senate Banking Committee Chairman Dodd failed to regulate derivatives. Since at least the mid-1990s, experts had been calling for derivatives regulation. In 1994, the government’s own Government Accounting Office (GAO) issued a 200-page GAO report calling for regulation of the exploding derivatives market. The report warned that failure to regulate derivatives could result in “a financial bailout paid for by taxpayers.”

Passing such legislation was Senate Banking Committee chairman Dodd’s job. He failed.

Public Citizen explains Congress' central role in bringing on the banking crisis:

The current financial crisis is the natural and logical result of a failed financial regulatory system that placed an irrational faith in the ability of markets to self-correct. As a result, regulators ignored repeated warnings about the over-the-counter derivatives markets, problems with securitization and lax mortgage underwriting standards, excessive leverage in financial institutions, and the general movement of financial activity into increasingly complex and opaque forms…

This has allowed institutions to structure complex transactions and take on risky exposures without fulfilling the regulatory requirements Congress deemed necessary to prevent a systemic financial crisis after the Great Depression. These unregulated and under-regulated activities and institutions, the “shadow financial system,” were permitted to become so intertwined with the real economy that the government has chosen to use taxpayers’ money to bail them out when they failed.

No one was better positioned to understand the dangers or empowered to prevent them than Senate Banking Chairman Dodd. And when problems first appeared, instead of addressing them, he moved to Iowa and launched a presidential campaign.

It doesn’t matter whether Dodd was simply ignorant of the massive risks banks were taking or seduced by power and money. He failed, and America and Connecticut will pay a dear price for decades to come. It’s time for Sen. Dodd to go.

Posted by James on Jun 29, 2009

Privatization's purpose: Showering campaign contributors with taxpayer money

Decades of corporate and Republican rhetoric convinced many — if not most — Americans that governments are fat, bloated bureaucracies whereas free markets solve most of the world’s ills.

One corollary: Government is always the problem, never the solution.

A corollary to that corollary: Most/all government functions should be outsourced to private industry. Taxpayers “obviously” benefit from ripping functions out of government bureaucracies and handing them over to profit-focused private firms.

Although politicians sell privatization as a money-saver for taxpayers, privatization almost always raises the cost of providing those services because politicians' true motive is not cost saving but rewarding their private industry bribers campaign contributors. The reward is government contracts larded with profit and paid for with your tax dollars.

For example, the government deployed even more private, corporate mercenaries in Iraq than U.S. soldiers. And these private mercenaries earned many times more U.S. soldiers doing equivalent work:

If you’re a former Navy Seal or a Delta Force guy working for Blackwater, you can make about 600 dollars a day for your work in Iraq. I mean, we’re talking six figure salaries. Some of these guys working for private military companies make as much as General Petraeus if not more.

Even more, the companies employing these private mercenaries made fat profits on top of their soldiers' fat salaries.

(Of course, legislators also wanted to use private mercenaries rather than U.S. troops to maintain a fiction that our “troop” levels and death count were low in Iraq.)

Gail Collins writes about another taxpayer scam perpetrated in the name of saving taxpayers money, paying financial companies to sell loans the U.S. government could sell directly to students at much lower cost:

The Obama administration is trying to reform the current loopy [college loan] system in which the government pays private companies to do the lending. The loans are then guaranteed by the government so the private companies are sheltered from loss. Then the government buys the loans back so the private companies can go out and do it all over again.

The White House believes that if it cuts out the middlemen, and just gives the loans to the students directly, it can save $94 billion over 10 years.

Hell hath no fury like a middleman scorned. The lenders have been rallying the troops, waving the banner of choice.

Citigroup sent a call to arms to its student borrowers, which is currently posted on Talking Points Memo. It warns darkly that if the Obama Armageddon comes to pass, “students and their families will not enjoy the benefits that competition has made possible for more than 40 years.”

…Since the government-guaranteed loans are regulated by Congress, they have virtually identical terms.

To understand how much banks love the free government money they’re receiving through this program, consider the lengths to which they go to ingratiate themselves with college loan officers:

The real competition among the lenders is not to win over students so much as the school financial aid officers. This has led to unfortunate but deeply unsurprising instances of thinly disguised bribes and kickbacks.

Posted by James on Jun 04, 2009

Raising successful children (and people)

Successful parents, teachers and mentors don’t praise (or criticize) innate traits, like intelligence. They emphasize factors students control, like effort and curiosity. A 2007 Scientific American Mind article praises parenting that inculcates a “growth mind-set”:

More than 30 years of scientific investigation suggests that an overemphasis on intellect or talent leaves people vulnerable to failure, fearful of challenges and unwilling to remedy their shortcomings.

The result plays out in children like Jonathan, who coast through the early grades under the dangerous notion that no-effort academic achievement defines them as smart or gifted. Such children hold an implicit belief that intelligence is innate and fixed, making striving to learn seem far less important than being (or looking) smart. This belief also makes them see challenges, mistakes and even the need to exert effort as threats to their ego rather than as opportunities to improve. And it causes them to lose confidence and motivation when the work is no longer easy for them.

Praising children’s innate abilities, as Jonathan’s parents did, reinforces this mind-set, which can also prevent young athletes or people in the workforce and even marriages from living up to their potential. On the other hand, our studies show that teaching people to have a “growth mind-set,” which encourages a focus on effort rather than on intelligence or talent, helps make them into high achievers in school and in life…

The most persistent students do not ruminate about their own failure much at all but instead think of mistakes as problems to be solved… [and] focused on fixing errors and honing their skills. One advised himself: “I should slow down and try to figure this out.” Two schoolchildren were particularly inspiring. One, in the wake of difficulty, pulled up his chair, rubbed his hands together, smacked his lips and said, “I love a challenge!” The other, also confronting the hard problems, looked up at the experimenter and approvingly declared, “I was hoping this would be informative!” Predictably, the students with this attitude outperformed their cohorts in these studies.

The article says children who have been taught to think about “the mind as a learning machine” outperformed children taught study skills:

Students read and discussed an article entitled “You Can Grow Your Brain.” They were taught that the brain is like a muscle that gets stronger with use and that learning prompts neurons in the brain to grow new connections. From such instruction, many students began to see themselves as agents of their own brain development. Students who had been disruptive or bored sat still and took note. One particularly unruly boy looked up during the discussion and said, “You mean I don’t have to be dumb?”

As the semester progressed, the math grades of the kids who learned only study skills continued to decline, whereas those of the students given the growth-mind-set training stopped falling and began to bounce back.

Posted by James on Jun 09, 2009

Sen. Dodd after destroying bank regulations: "I welcome this day as a day of success and triumph"

In 2008, Sen. John McCain accused Sen. Chris Dodd of having helped cause the financial crisis: “The same people that are now claiming credit for this [financial] rescue are the same ones that were willing co-conspirators in causing the problem. Congressman Barney Frank and Senator Chris Dodd are two of them.”

Sen. McCain’s attack on Sen. Dodd is absolutely justified.

On October 23, 1999, The New York Times described Sen. Chris Dodd’s essential role in destroying regulations that had protected American banks from their own greed since the Great Depression:

Dodd, whose state is home to the nation’s largest insurance companies, and Schumer, with strong ties to Wall Street, have long sought legislation to repeal the Glass-Steagall Act. Both men said in interviews Friday that they moved to strike a compromise after it became apparent that the legislation might be killed, as it was last year by [Republican Phil] Gramm, over the debate about the Community Reinvestment Act…

After receiving calls from executives of some of the nation’s leading financial companies, Dodd and Schumer began trying to work out a compromise. An agreement was quickly reached on the issue of banks and expanded powers — no institution would be allowed to move into any new lines of business without a satisfactory lending record…

For more than 20 years, Congress has tried unsuccessfully to rewrite the nation’s financial services laws and repeal Glass-Steagall.

This abominable legislation had died a year earlier and would have died again, had Sen. Dodd not saved it.

Dodd was immensely proud of his role in gutting Depression-era banking protections, bragging before the entire Senate, “I welcome this day as a day of success and triumph.”

You can watch him say this about 4 minutes and 40 seconds into this video clip of Sen. Dodd praising the bill.

Sen. Dodd was especially proud of having gutted critical banking regulations because — he explained — Congress had tried and failed for decades to pass such legislation. He even suggested history would try to diminish the centrality of his role:

I have been a member of the Senate Banking Committee since the first day I was sworn into the Senate, almost 19 years ago. I think this effort dates to about 1967 or 1968, more than 30 years ago. This has been an ongoing debate and issue on the part of the Banking Committees of the Senate and the House, the Commerce Committee, and numerous efforts at the executive branch level. But certainly over the last 20 years, on numerous occasions, this body has enacted reforms to financial services only to watch the legislation die…

I suppose history books will expand the size of the number of people who were in that room that night as oftentimes happens. It wasn’t that big a room. There were not that many people in the room.

Sen. Dodd closed with a most ironic metaphor:

I have often said over the years of trying to achieve financial modernization I am reminded of the mythical figure Sisyphus who rolled the rock up the hill only to have it roll back down the hill when he got near the top. I have a painting of Sisyphus that I cherish. Today, I can report that the rock is at the top of the hill and I think it will stay there.

Sadly, the rock Sen. Dodd rolled to the top of the mountain crashed down, crushing the U.S. and global economies and costing taxpayers trillions.

The current financial crisis would have been impossible without Sen. Dodd’s intervention to save this bill that gutted Great Depression-era protections. Explains The Courier Times:

Most financial experts lay blame for the current meltdown of Wall Street on the Financial Services Modernization Act that a Republican Congress passed on Nov. 4, 1999 and was signed into law by Democratic President Bill Clinton.

The effect of the legislation was to repeal the Glass-Steagall Act of 1933 (also known as the 1933 Emergency Banking Act) that divided Wall Street between investment banks and commercial banks.

That act prevented banks and insurance companies from expanding into one another’s businesses, one of the root causes of the Great Depression.

But Dodd didn’t stop there.

The next year, in 2000, Dodd supported another abominable piece of financial deregulation, also authored by the abominable Sen. Phil Gramm! The “Commodity Futures Modernization Act” tore down laws preventing Wall Street firms from gamble trillions of dollars on “credit default swaps,” which the brilliant Warren Buffet famously called “financial weapons of mass destruction” years before they exploded.

The dangers of such gambling were not hypothetical. Such gambling had been illegal for nearly 100 years precisely because it had caused the 1907 stock market crash! 60 Minutes explained:

[E]ssentially [credit default swaps] are side bets on the performance of the U.S. mortgage markets and the solvency on some of the biggest financial institutions in the world. It’s a form of legalized gambling that allows you to wager on financial outcomes without ever having to actually buy the stocks and bonds and mortgages.

It would have been illegal during most of the 20th century, but eight years ago Congress gave Wall Street an exemption and it has turned out to be a very bad idea…

Dinallo says credit default swaps were totally unregulated [after 2000] and that the big banks and investment houses that sold them didn’t have to set aside any money to cover their potential losses and pay off their bets…

“It was illegal gambling. And we made it legal gambling…with absolutely no regulatory controls. Zero, as far as I can tell,” Dinallo says.

“I mean it sounds a little like a bookie operation,” Kroft comments.

“Yes, and it used to be illegal. It [became] very illegal 100 years ago,” Dinallo says.

In the early part of the 20th century, the streets of New York and other large cities were lined with gaming establishments called “bucket shops,” where people could place wagers on whether the price of stocks would go up or down without actually buying them. This unfettered speculation contributed to the panic and stock market crash of 1907, and state laws all over the country were enacted to ban them…

Dinallo says “…[It became] a felony when a law came into effect because it had brought down the market in 1907. And they said, ‘We’re not gonna let this happen again.’ And then 100 years later in 2000, we rolled them all back.”

The vehicle for doing this was an obscure but critical piece of federal legislation called the Commodity Futures Modernization Act of 2000. And the bill was a big favorite of the financial industry it would eventually help destroy.

It not only removed derivatives and credit default swaps from the purview of federal oversight, on page 262 of the legislation, Congress pre-empted the states from enforcing existing gambling and bucket shop laws against Wall Street.

“It makes it sound like they knew it was illegal,” Kroft remarks.

“I would agree,” Dinallo says. “They did know it was illegal. Or at least prosecutable.”

So, who made it legal? Here’s a hint.

Here’s Sen. Chris Dodd’s only recorded remark during a June 21, 2000 hearing on the proposed “Commodity Futures Modernization Act”, legislation co-authored by Senate Agriculture Committee Chairman Richard Lugar and Senate Banking Committee Chairman Phil Gramm:

Senator DODD. Mr. Chairman, before you do that, I presume that opening statements in which we lavish praise on you and Senator Gramm are appropriate? The CHAIRMAN [Sen. Lugar]. Oh, they would be welcome, published in full. Thank you.

Strangely, Dodd asked no recorded questions of any of the witnesses (Federal Reserve Chairman Alan Greenspan, Treasury Secretary Larry Summers, Securities & Exchange (SEC) Commission Chairman Levitt, and Commodity Futures Trading Commission Chairman William Rainer).

Six months later, the Senate introduced the bill the day after the Supreme Court effectively declared George W. Bush the next president. It never faced a recorded vote:

On December 15, with little warning or fanfare—aside from the overshadowed discussions on the floors of Congress—the new, compromise version was included as a rider to the Consolidated Appropriations Act for FY 2001, an 11,000 page omnibus appropriations conference report.

But Dodd had praised its co-authors during the Senate hearing on the bill and said nothing as it slipped into law.

Nine years later, exhibit A is AIG. The massive, profitable AIG insurance business was utterly destroyed by a tiny subsidiary operating, basically, as a hedge fund attached to a giant insurance company. That tiny unregulated hedge fund within AIG single-handedly destroyed more value than the rest of the massive company was worth. Because government judged AIG “too big to fail,” taxpayers have given AIG hundreds of billions of dollars to pay off its losing bets. AIG would not have been able to make those bets without Sen. Chris Dodd’s timely intervention in 1999 to save the dying legislation and his support of another Phil Gramm monster in 2000.

Posted by James on Jun 30, 2009

Sen. Grassley: No government health insurance option because the people would love it

This astonishing political gem from the top Republican on the Senate Finance Committee — Sen. Chuck Grassley (R-Iowa) — is a month old, but it’s too important to let pass (although most of the mainstream media seems to have done just that).

On Politico.com, Sen. Grassley wrote in an op-ed piece:

I’m concerned about a government-run plan that forces people out of private insurance.

What a specious argument! No one said anything about “force”!!! We’d be free to choose a private plan. The proposal would increase choice.

In this plan, the government would set the prices, determine which treatments are covered and control costs with a one-size-fits-all package.

As if hospitals and private insurance companies don’t do exactly that already! My father-in-law was billed $18,000 for one night of observation in the hospital — no treatment or diagnosis! Had he been insured, the insurance company would have negotiated the bill down to a few thousand dollars. The insured today have zero ability to “set the prices” or “control costs.” And the uninsured are abused by hospitals.

And “one-size-fits-all” would be far superior to the frequent arbitrary denial of coverage to “insured” people, as documented in Michael Moore’s “Sicko” and elsewhere.

As many as 119 million Americans would shift from private coverage to the government plan and put America on the path toward a completely government-run health care system.

No one is proposing or wants “a completely government-run health care system.” That’s another totally bogus claim intended to scare us! You could still buy private insurance if a government option is provided to compete with private plans. And high-quality doctors will still be free to charge higher prices and to not treat those with government-provided insurance.

Cost shifting already happens in Medicare and Medicaid. Doctors and hospitals are already paid less by public programs. They make up the difference by passing the costs onto their other patients.

If more people entered public plans, even more doctors would stop seeing Medicare, Medicaid and government plan patients.

Healthcare prices (at least their official prices, called chargemaster list prices) today are many times higher than healthcare providers' costs and many times higher than prices in other countries! If government monopsony power is the only force that can restrain the outrageous prices charged by monopolistic hospitals and drug companies, then let’s do what every other industrialized country on the planet does and let the government pay for everyone’s basic health coverage. Will doctors and hospital executives starve if they’re paid “only” what Medicare and Medicaid pay? (As an example, the CEO of our local “non-profit” Stamford Hospital makes $1.5 million a year in salary and benefits.)

Employers, especially small businesses, would stop offering coverage since they would be able to tell employees to get their coverage from the government plan.

Eventually, the government plan would overtake the entire market.

Grassley’s bottom line: We can’t provide a government health insurance option because it would be so popular that 119 million insured Americans would switch to it! And small businesses — unshackled from the burden of providing extremely expensive small group insurance coverage — would thrive.

Add in the 45 million or so uninsured Americans and HALF THE COUNTRY wants to join a government health insurance plan!

Even worse, says Grassley, a government health insurance option would bring down medical costs!

We all know that Senators and their big business campaign bankrollers view as problems what the American people overwhelmingly see as solutions. But something is truly sick in Washington, DC when a senior Senator is so out-of-touch that he thinks he can convince anyone to oppose a government health insurance option by issuing a statement so full of lies and red herrings.

Posted by James on Jun 06, 2009

Sen. Paul Wellstone: "People... think both parties are controlled by the same investors"

Oh, how I wish the American people could have heard Sen. Paul Wellstone’s powerful truth-telling, populist voice throughout eight long years of George W. Bush!

So I want to share this, from a 1999 Senate speech. Wellstone opposed legislation allowing a new wave of bank deregulation that — he warned, accurately — would create unregulated banks “too big to fail.” Sen. Wellstone went beyond his critique of the bill to criticize both parties as unresponsive to ordinary Americans. He didn’t understand why the Senate was wasting time “fixing” something the people of Minnesota didn’t think was broken while ignoring major issues — like healthcare — people knew were broken. How righteously angry would Sen. Wellstone be today, a decade later, with most Senators even more brazenly serving corporate interests and ignoring the popular will?

Antitrust action has been taken off the table. This is a classic example of why we need [campaign finance] reform. Because when it comes to antitrust action, and having the Senate say “we are on the side of consumers, we are on the side of family farmers, we are on the side of community people, and we are willing to take on these huge companies” — We dare not do that. These monopolies are the campaign givers. These are the heavy hitters. These are the [political] investors.

At the end of the last [19th] century, industrial concentration accelerated at an alarming pace. Lots of people, including the columnist and author E.J. Dionne, former House Speaker Newt Gingrich, and the philosopher, Michael Sandel, have noted the similarities between that era and our own.

American democracy suffered as a result of that concentration of economic power. The two parties became dominated by similar corporate interests. Their platforms started to sound an awful lot alike, and voter participation declined dramatically. Why? Because people realized that they had little to say in the economic decisions that most affected their lives.

I think that aptly describes the situation today. I tell you, when I travel in Minnesota or travel in the country, one of the things that people say to me is that they think both parties are controlled by the same investors. They do not think there is any real opportunity for them to have any say anymore in this political process.

If Connecticut’s choice in 2010 is Sen. Dodd vs. a Republican, we need a third-party alternative. Connecticut voters know they made a bad mistake in 2006 choosing the Devil they knew — Sleazy Joe Lieberman — over Democratic nominee Ned Lamont (whose campaign I proudly worked on from January through November 2006). Given a choice between a corporate lackey and a true progressive, Connecticut won’t repeat its mistake.

Posted by James on Jun 29, 2009

The real bloated bureaucracy: The Pentagon

Another day, another astonishing report on Pentagon waste:

U.S. reliance on contractors has grown to “unprecedented proportions,” says the bipartisan commission, established by Congress last year. More than 240,000 private sector employees are supporting military operations in Iraq and Afghanistan. Thousands more work for the State Department and U.S. Agency for International Development.

But the government has no central data base of who all these contractors are, what services they provide, and how much they’re paid. The Pentagon has failed to provide enough trained staff to watch over them, creating conditions for waste and corruption, the commission says…

KBR Inc. [until recently a subsidiary of Halliburton, which Dick Cheney was CEO of], the primary LOGCAP contractor in Iraq, has been paid nearly $32 billion since 2001. The commission says billions of dollars of that amount ended up wasted due to poorly defined work orders, inadequate oversight and contractor inefficiencies.

In one example, defense auditors challenged KBR after it billed the government for $100 million in costs for private security even though the contract prohibited the use of for-hire guards.

When politicians and TV hosts rail against “bloated” government bureaucracies, the one agency they don’t want you to think about — the Pentagon — is the one agency that most deserves the title.

I urge you to watch this excellent 3-minute CBS News report on Pentagon waste.

America spends almost as much on our U.S. military as all other nations on Earth spend on their militaries combined! By some accounting methods, U.S. military spending consumes 54% of all federal spending.

What do we get for this incredible sum? We never found Osama bin Laden. We were completely surprised by 9/11. The military’s NORAD — whose sole job is to protect U.S. airspace — totally and inexplicably failed to stop the rogue planes that the FAA detected long before they struck their targets. We attacked, invaded and occupied a nation (Iraq) because its biological and nuclear weapons programs supposedly constituted a grave threat to the United States… yet those weapons programs didn’t exist, something the U.S. military — with its massive intelligence budget, many times larger than the CIA’s — should have known. Even worse, the Pentagon itself, under Douglas Feith, cobbled together totally bogus “evidence” to “justify” attacking Iraq. This totally unnecessary action cost U.S. taxpayers trillions, cost thousands of U.S. soldiers their lives, brought heartache to hundreds of thousands of U.S. military families, diverted America’s attention away from Al Qaeda, led to the deaths of over a million Iraqis, and greatly diminished America in the world’s eyes.

For decades, we’ve read again and again that no one inside the Pentagon can tell us where the money we gave them went. The Pentagon uses literally hundreds of different accounting systems that can’t talk to one another. It’s a very deliberate shell game.

Several years in a row before 9/11 (after which military spending exploded and transparency became even more opaque), the Pentagon’s own auditors' reports showed the Pentagon could not account for OVER A TRILLION DOLLARS A YEAR. Defense Secretary Rumsfeld was feeling pressured by those reports, which he acknowledged in a speech on 9/10/2001, the day before 9/11:

Our financial systems are decades old. According to some estimates, we cannot track $2.3 trillion in transactions. We cannot share information from floor to floor in this building because it’s stored on dozens of technological systems that are inaccessible or incompatible…

There’s a myth, sort of a legend, that money enters this building and disappears, like a bright light into a black hole, never to be seen again. In truth, there is a real person at the other end of every dollar, a real person who’s in charge of every domain, and that means that there will be real consequences from, and real resistance to, fundamental change. We will not complete this work in one year, or five years, or even eight years. An institution built with trillions of dollars over decades of time does not turn on a dime. Some say it’s like turning a battleship. I suspect it’s more difficult.

Continue Reading…

Posted by James on Jun 08, 2009

The world we're heading for: No animals, no fish, and a massive human population collapse

New Scientist magazine in February published a detailed analysis of the likely impact of global warming this century. It reads like a horror novel, which is why I’m so angry our “representatives” in Washington are pretending to curtail U.S. carbon emissions. We’re driving at high-speed toward a cliff, and their response is to pretend to step on the brakes.

Here’s a short excerpt:

Alligators basking off the English coast; a vast Brazilian desert… and 90 per cent of humanity vanished. Welcome to the world warmed by 4 °C…

Four degrees [Celsius] may not sound like much – after all, it is less than a typical temperature change between night and day. It might sound quite pleasant, like moving to Florida from Boston, say, or retiring from the UK to southern Spain. An average warming of the entire globe by 4°C is a very different matter, however, and would render the planet unrecognisable from anything humans have ever experienced…

The 2007 report of the Intergovernmental Panel on Climate Change, whose conclusions are generally accepted as conservative, predicted a rise of anywhere between 2°C and 6.4°C this century. And in August 2008, Bob Watson, former chair of the IPCC, warned that the world should work on mitigation and adaptation strategies to “prepare for 4 °C of warming”…

The last time the world experienced temperature rises of this magnitude was 55 million years ago, after the so-called Palaeocene-Eocene Thermal Maximum event. Then, the culprits were clathrates – large areas of frozen, chemically caged methane – which were released from the deep ocean in explosive belches that filled the atmosphere with around 5 gigatonnes of carbon. The already warm planet rocketed by 5 or 6 °C, tropical forests sprang up in ice-free polar regions, and the oceans turned so acidic from dissolved carbon dioxide that there was a vast die-off of sea life. Sea levels rose to 100 metres higher than today’s and desert stretched from southern Africa into Europe…

[M]any of the places where people live and grow food would no longer be suitable for either. Rising sea levels – from thermal expansion of the oceans, melting glaciers and storm surges – would drown today’s coastal regions in up to 2 metres of water initially, and possibly much more if the Greenland ice sheet and parts of Antarctica were to melt. “It’s hard to see west Antarctica’s ice sheets surviving the century, meaning a sea-level rise of at least 1 or 2 metres,” says climatologist James Hansen, who heads NASA’s Goddard Institute for Space Studies in New York. “CO2 concentrations of 550 parts per million [compared with about 385 ppm now] would be disastrous,” he adds, “certainly leading to an ice-free planet, with sea level about 80 metres higher… and the trip getting there would be horrendous.”

This really would be survival, though, in a world that few would choose to live. Large chunks of Earth’s biodiversity would vanish because species won’t be able to adapt quickly enough to higher temperatures, lack of water, loss of ecosystems, or because starving humans had eaten them. “You can forget lions and tigers: if it moves we’ll have eaten it,” says Lovelock. “People will be desperate.”

We’re not talking about six generations from now. We could well hit 4°C of warming by 2050. I’d like to still be alive then, and I’m not sure I want alligators lounging around the pool at my future retirement home.

Posted by James on Jun 26, 2009