October 2009 Archives

Blackmail is a recent invention

I’m surprised to learn that blackmail has a short history:

The use of blackmail in matters of the heart is a relatively recent development in the long march of human history, said Angus McLaren, a professor emeritus of history at the University of Victoria and author of “Sexual Blackmail: A Modern History.”

“It was a crime that only emerged in the 19th century,” he said. Before that, the law did not recognize such attempts as much of a threat, because anyone with the kind of wealth that might be worth trying to tap had little to lose through scandal. “If one was an aristocrat, say, you couldn’t lose your position because of trifling with the housemaids.” The Duke of Wellington, he said, “was the Duke of Wellington, and no one could take that from him.”

As the 19th century advanced, however, the professional class began to grow; people built their own fortunes, and came to learn that their position depended in no small part upon how they were seen by others. “Reputation was the most important piece of property any individual might have,” he said.

Posted by James on Oct 07, 2009

Brilliant edit of BlueCross prepaid postcard

BlueCross BlueShield of North Carolina outrageously mailed its customers pre-paid, pre-addressed postcards opposing a public option to send their Senator.

One clever recipient edited the postcard to send the opposite message:

Letter to Senator opposing public option revised to support public option

Posted by James on Oct 26, 2009

Despite incompetent SEC, more evidence Wall Street is rigged against us little guys

“Hollywood” Henderson famously said of Steelers quarterback Terry Bradshaw, “He couldn’t spell ‘Cat’ if you spotted him the ‘c’ and the ‘a’.”

If the SEC (Securities & Exchange Commission) played in the NFL, it would be Bradshaw. Amazingly, the SEC failed to stop Bernie Madoff’s $50 billion Ponzi scheme even after being told in exquisite detail — over the course of nine years — that Madoff was running a Ponzi scheme and how he was doing it:

Madoff avoided scrutiny despite the dogged bell-ringing of a Boston accountant, [Harry Markopolos], who repeatedly accused Madoff of breaking the law in a series of letters to the SEC that began in 1999…

A former SEC enforcement official said the letters should have raised red flags for regulators.

“It is not common to get complaints about somebody who’s running a large amount of money that it’s a Ponzi scheme,” said the former official, speaking on condition of anonymity.

He said that investigating a Ponzi scheme is not difficult: The agency can simply demand proof that the investment adviser holds the amount of money he claims to hold. And he added that regulators also should have noticed that Madoff was audited by a tiny company with no reputation. He said there are only a few accounting firms with the sophistication to audit an investment adviser that, at the time of registration with the SEC, reported $17 billion on assets. Regulators should have noticed instantly, he said, that Madoff’s auditor was not on the list.

The enormity of the SEC’s failure is obvious from the 477-page report it created to document its parade of errors.

Someone in the SEC even invested with Madoff, despite the repeated tips:

The family of a Security and Exchange Commission investigator, whose office received a tip that Bernie Madoff was running a Ponzi scheme, invested $2 million in the scam, the agency’s report said.

The tip to the Office of Internet Enforcement in 2005 was among at least six warnings the SEC received but failed to fully investigate since 1992, Inspector General David Kotz said in a report released Friday night.

Even the beyond-brazen Madoff was shocked by the SEC’s incompetence:

Madoff, 71, told Inspector General H. David Kotz’s office this year that after being questioned in May 2006 and giving his account number at Depository Trust Co., an independent clearing agency, “I thought it was the end game, over. Monday morning they’ll call DTC and this will be over.” When that never happened, Madoff was “astonished,” according to a summary Kotz issued yesterday. The Ponzi scheme continued for 2 ½ years.

“This was perhaps the most egregious failure in the enforcement investigation of Madoff,” Kotz’s report said. “They never verified Madoff’s purported trading with any independent third parties.” By checking with the clearing agency, the SEC would have “immediately realized that Madoff was not trading in anywhere near the volume that he was showing on the customer statements.”

Given such financial regulatory incompetence, it’s especially worrying to learn that a multi-billion-dollar hedge fund has been systematically profiting from inside information. Given the shoddiness of federal regulators, this is almost certainly the tip of a proverbial iceberg.

We now know that some “smart money” really is smart… if by “smart,” you mean willing and able to illegally access and profit from inside information:

[The Galleon Group hedge fund’s] success was achieved more by guile than genius, said U.S. Securities and Exchange Commission enforcement chief Robert Khuzami, who sued [Galleon founder Raj] Rajaratnam and the others last week.

“He is not the astute student of company fundamentals or marketplace trends that he is widely thought to be,” Khuzami said at an Oct. 16 press conference. “He is not a master of the universe but rather a master of the Rolodex.”

…The wire transcripts laid out in criminal and civil complaints make it appear that trafficking in inside information was a routine way of business for Rajaratnam. The starting point for this case was a 2005 job interview at Manhattan-based Galleon, at which Rajaratnam asked the applicant to name companies where he had an “edge,” — access to inside information, prosecutors said.

The applicant, who would became the government’s key confidential witness, mentioned Polycom Inc. The witness had gotten advance word from a friend there on the company’s quarterly earnings, according to prosecutors.

The informant wasn’t hired by Galleon. Instead, the witness began feeding Rajaratnam inside information on Pleasanton, California-based Polycom and two other companies, Mountain View, California-based Google Inc. and McLean-based Hilton Hotels Corp. Galleon allegedly turned a $4 million profit on the tip about Blackstone Group LP’s $20 billion buyout of Hilton the day before the announcement. The informant in return received inside information from Rajaratnam on Intel and other companies, according to the complaint…

A Sept. 9, 2008, call between Chiesi and her contact there illustrates the information-swapping process. After discussing whether Cambridge, Massachusetts-based Akamai would be buying back stock, Chiesi told her source, according to the transcript, “I want you to buy AMD … before the end of the month. Nothing’s gonna happen next week, but the week after … I think I’ve got a big deal.”

The Akamai executive replied, “Okay, okay, good. I really appreciate that.”

On Oct. 10, 2008, the tipster called Chiesi, saying, “I’m gonna come visit you in New York, and I’m gonna give you a present. But it has to be face to face.” She asked what he was talking about, and the Akamai executive replied, “Information.” Chiesi said, according to the transcript. “Well, that is a great present.”

Financial economists have long debated whether stock prices reflect all public information about companies or all public and private information. We now know — despite a virtually deaf-and-dumb SEC — that at least some big financial players have been systematically harvesting and taking advantage of private information about companies that ordinary investors have no access to. Given how pathetic our financial regulatory structure is, we can only speculate how widespread these problems are.

Posted by James on Oct 19, 2009

Does the flu vaccine help?

The flu vaccine protects against dying from the flu, right? “Of course,” I always assumed. Data superficially confirm that obvious assumption; people who get the flu vaccine are much less likely to die.

But the first rigorous study of whether the flu vaccine provides protection seems to show that people who get flu shots are less likely to die than those who don’t entirely because they’re healthier and live safer, according to a thought-provoking Atlantic article:

In 2004, Jackson and three colleagues set out to determine whether the mortality difference between the vaccinated and the unvaccinated might be caused by a phenomenon known as the “healthy user effect.” They hypothesized that on average, people who get vaccinated are simply healthier than those who don’t, and thus less liable to die over the short term. People who don’t get vaccinated may be bedridden or otherwise too sick to go get a shot. They may also be more likely to succumb to flu or any other illness, because they are generally older and sicker. To test their thesis, Jackson and her colleagues combed through eight years of medical data on more than 72,000 people 65 and older. They looked at who got flu shots and who didn’t. Then they examined which group’s members were more likely to die of any cause when it was not flu season.

Jackson’s findings showed that outside of flu season, the baseline risk of death among people who did not get vaccinated was approximately 60 percent higher than among those who did, lending support to the hypothesis that on average, healthy people chose to get the vaccine, while the “frail elderly” didn’t or couldn’t. In fact, the healthy-user effect explained the entire benefit that other researchers were attributing to flu vaccine, suggesting that the vaccine itself might not reduce mortality at all. Jackson’s papers “are beautiful,” says Lone Simonsen, who is a professor of global health at George Washington University, in Washington, D.C., and an internationally recognized expert in influenza and vaccine epidemiology. “They are classic studies in epidemiology, they are so carefully done.”

The results were also so unexpected that many experts simply refused to believe them. Jackson’s papers were turned down for publication in the top-ranked medical journals. One flu expert who reviewed her studies for the Journal of the American Medical Association wrote, “To accept these results would be to say that the earth is flat!” When the papers were finally published in 2006, in the less prominent International Journal of Epidemiology, they were largely ignored by doctors and public-health officials. “The answer I got,” says Jackson, “was not the right answer.”

The Atlantic article offers further evidence that sheds doubt on the flu vaccine’s effectiveness:

In 2004, for example, vaccine production fell behind, causing a 40 percent drop in immunization rates. Yet mortality did not rise. In addition, vaccine “mismatches” occurred in 1968 and 1997: in both years, the vaccine that had been produced in the summer protected against one set of viruses, but come winter, a different set was circulating. In effect, nobody was vaccinated. Yet death rates from all causes, including flu and the various illnesses it can exacerbate, did not budge. Sumit Majumdar, a physician and researcher at the University of Alberta, in Canada, offers another historical observation: rising rates of vaccination of the elderly over the past two decades have not coincided with a lower overall mortality rate. In 1989, only 15 percent of people over age 65 in the U.S. and Canada were vaccinated against flu. Today, more than 65 percent are immunized. Yet death rates among the elderly during flu season have increased rather than decreased.

News reports have spotlighted the “Swine Flu” as especially dangerous because — unlike “normal” flus — it supposedly kills many young, healthy people. But facts suggest that’s not true either:

As of August 8, only 36 deaths from swine flu had been confirmed among children in the U.S., and the overwhelming majority of those children had multiple, severe health disorders.

The article explains that young, healthy people’s immune systems put up a strong fight against flu, even without vaccination. And old, sick people’s immune systems don’t benefit much from vaccination because their immune systems don’t respond very well. This is, in theory, a reasonable explanation why flu vaccines may provide little benefit.

The scientific way to prove or disprove the flu vaccine’s effectiveness is a random experiment, in which some people are given the vaccine and others receive a placebo. But the scientific community seems to feel that — because the vaccine has “proven” its effectiveness — giving placebos would be unethical. Epidemiologist and flu expert Thomas Jefferson argues the exact opposite: “We have built huge, population-based policies on the flimsiest of scientific evidence. The most unethical thing to do is to carry on business as usual.”

Also interestingly, despite the inexplicable scientific consensus that flu vaccines work, “more than 50 percent of health-care workers say they do not intend to get vaccinated for swine flu and don’t routinely get their shots for seasonal flu, in part because many of them doubt the vaccines’ efficacy.” If many nurses and doctors — who could easily get vaccinated — tune out the flu vaccination hype and skip vaccination, isn’t a scientific study long overdue?

Posted by James on Oct 21, 2009

Everything will be automated

According to New Scientist magazine, casinos may soon be equipped with technology that quickly detects card counters:

Krists Zutis and Jesse Hoey at the University of Dundee, UK, have developed a system to help casinos spot card counters quickly.

A stereo camera mounted above the table records the action. A computer processes the video feed to identify cards as they are dealt, face up, and monitors their value. The camera also records the precise height of betting chip stacks and the computer uses the information to work out betting patterns.

By comparing the cards and gambling patterns, the computer can identify a card counter inside 20 hands – even if the gambler starts off with a run of high bets to confuse the system.

Rain Man would have been quite a boring movie had the casino tossed Dustin Hoffman out on his arse before he won a small fortune.

But the real implication of this is that routinized work is rapidly being automated. If what you do can be written down as a formula — no matter how complex — your job is at great risk.

Posted by James on Oct 25, 2009

If you can't find terrorists, fake 'em

This article from The Nation and republished by CBS News is five months old, but I love it so much I’ve got to mention it:

By now, it’s maddeningly familiar. A scary terrorist plot is announced. Then it’s revealed that the suspects are a hapless bunch of ne'er-do-wells or run-of-the-mill thugs without the slightest connection to any terrorists at all, never mind to Al Qaeda. Finally, the last piece of the puzzle: the entire plot is revealed to have been cooked up by a scummy government agent-provocateur.

I’ve seen this movie before.

In this case, the alleged perps — Onta Williams, James Cromitie, David Williams, and Laguerre Payen — were losers, ex-cons, drug addicts. Al Qaeda they’re not. Without the assistance of the agent who entrapped them, they would never have dreamed of committing political violence, nor would they have had the slightest idea about where to acquire plastic explosives or a Stinger missile. That didn’t stop prosecutors from acting as if they’d captured Osama bin Laden himself.

…The four losers were ensnared by a creepy FBI agent who hung around the mosque in upstate New York until he found what he was looking for. …[T]he informant whipped up their violent tendencies and their hatred of Jews, cooked up the plot, incited them, arranged their purchase of weapons, and then had them busted. To ensure that it made headlines, the creepy informant claimed to be representing a Pakistani extremist group, Jaish-e Muhammad, a bona fide terrorist organization. He wasn’t, of course…

Plot after plot — the destruction of the Brooklyn Bridge! bombing the New York Subways! taking down the Sears Tower! bombing the Prudential building in Newark! — proved to be utter nonsense.

That’s reporting. Rather than act as a stenographer for the police and FBI, the reporter puts the story in context: as just the latest in a long string of bogus “terror plot” after bogus “terror plot,” each involving idiots coached, equipped and bribed or tricked by government agents.

Finding real terrorists is hard work. Much easier to bribe some desperate morons into acting the role. That’s exactly why most of the prisoners we locked up and tortured for years in Guantanamo (and elsewhere) were ordinary, innocent people with the great misfortune of having been turned in as “terrorists” for the reward money America was handing out.

Governments' frequent use of entrapment, patsies, agent-provocateurs, and false flag attacks is one reason (among many) so many (myself included) question the guilt of many supposed assassins, including Lee Harvey Oswald, Sirhan Sirhan, James Earl Ray, the 9/11 hijackers, Dr. Bruce Ivins, and the 7/7 London subway bombers.

Posted by James on Oct 25, 2009

I long ago stopped eating beef, but for those who haven't...

I stopped eating beef many years ago because, as The New York Times reported in 2004 about the U.S. Department of Agriculture, “you’d have a hard time finding a federal agency more completely dominated by the industry it was created to regulate.” When the regulated are also the regulators, regulation is a sham. There’s no factual reason to believe U.S. beef is safe because the industry prevents anyone from systematically testing whether it is or is not safe:

The beef industry has fought for nearly two decades against government testing for any dangerous pathogens, and it isn’t hard to guess why: when there is no true grasp of how far and wide a food-borne pathogen has spread, there’s no obligation to bear the cost of dealing with it….

Last year the Agriculture Department tested only 20,000 cattle for bovine spongiform encephalopathy, out of the roughly 35 million slaughtered. Belgium, with a cattle population a small fraction of ours, tested about 20 times that number for the disease. Japan tests every cow and steer that people are going to eat.

The Dept. of Agriculture is likely covering up “mad cow” disease (bovine spongiform encephalopathy), if America is like other countries:

In Britain, where mad cow disease was discovered, the ministry of agriculture misled the public about the risks of the disease from the very beginning. In December 1986, the first government memo on the new pathogen warned that it might have “severe repercussions to the export trade and possibly also for humans” and thus all news of it was to be kept “confidential.” Ten years later, when Britons began to fall sick with a new variant of Creutzfeldt-Jakob syndrome, thought to be the human form of mad cow, Agriculture Minister Douglas Hogg assured them that “British beef is wholly safe.” It was something of a shock, three months later, when the health minister, Stephen Dorrell, told Parliament that mad cow disease might indeed be able to cross the species barrier and sicken human beings.

In the wake of that scandal, France, Spain, Italy, Germany and Japan banned imports of British beef — yet they denied for years there was any risk of mad cow disease among their own cattle. Those denials proved false, once widespread testing for the disease was introduced.

Until just last year, “downer” cows — cows unable to stand up — could still legally be killed and sold as beef.

Agriculture Secretary Ed Schafer announced a total ban on the slaughter at meat plants of cows too sick or weak to stand… The review was prompted by a 143-million-pound beef recall in February, ordered after the Humane Society released undercover video showing employees abusing downer cows at the Westland/Hallmark Meat Company in Chino, Calif.

Which brings us to the latest disgusting beef news — that “tens of thousands of people are still sickened annually by [O157:H7 E. coli], federal health officials estimate… [E]ating ground beef is still a gamble,” according to The New York Times:

Ground beef is usually not simply a chunk of meat run through a grinder. Instead, records and interviews show, a single portion of hamburger meat is often an amalgam of various grades of meat from different parts of cows and even from different slaughterhouses. These cuts of meat are particularly vulnerable to E. coli contamination, food experts and officials say. Despite this, there is no federal requirement for grinders to test their ingredients for the pathogen.

The frozen hamburgers that [put Stephanie Smith in a coma for nine weeks and left her paralyzed], which were made by the food giant Cargill, were labeled “American Chef’s Selection Angus Beef Patties.” Yet confidential grinding logs and other Cargill records show that the hamburgers were made from a mix of slaughterhouse trimmings and a mash-like product derived from scraps that were ground together at a plant in Wisconsin. The ingredients came from slaughterhouses in Nebraska, Texas and Uruguay, and from a South Dakota company that processes fatty trimmings and treats them with ammonia to kill bacteria.

Using a combination of sources — a practice followed by most large producers of fresh and packaged hamburger — allowed Cargill to spend about 25 percent less than it would have for cuts of whole meat.

Those low-grade ingredients are cut from areas of the cow that are more likely to have had contact with feces, which carries E. coli, industry research shows. Yet Cargill, like most meat companies, relies on its suppliers to check for the bacteria and does its own testing only after the ingredients are ground together….

Unwritten agreements between some companies appear to stand in the way of ingredient testing. Many big slaughterhouses will sell only to grinders who agree not to test their shipments for E. coli, according to officials at two large grinding companies. Slaughterhouses fear that one grinder’s discovery of E. coli will set off a recall of ingredients they sold to others….

Within weeks of the Cargill outbreak in 2007, U.S.D.A. officials swept across the country, conducting spot checks at 224 meat plants to assess their efforts to combat E. coli. Although inspectors had been monitoring these plants all along, officials found serious problems at 55 that were failing to follow their own safety plans.

“Every time we look, we find out that things are not what we hoped they would be,” said Loren D. Lange, an executive associate in the Agriculture Department’s food safety division.

Posted by James on Oct 09, 2009

Larry Summers discovers he's a fool

Throughout the banking crisis, intelligent economists — including Paul Krugman, Simon Johnson and Joe Stiglitz — screamed at the tops of their lungs that our major banks were bankrupt and needed to be temporarily nationalized and that we needed to re-regulate the financial industry to prevent a recurrence of “heads we win, tails taxpayers lose” gambling by banks.

Instead, the Obama Administration shut out the intelligent economists and put policy in the hands of bankers (esp. many from Goldman Sachs) and banks' best buddies (like Timothy Geithner). The Administration and the Federal Reserve also showered worthless banks with trillions in gifts from taxpayers while requiring nothing — like acceptance of re-regulation — in return.

As the aforementioned economists predicted, bank lending remains anemic (because we failed to address the underlying problem of undercapitalized banks), firms like Goldman are taking on large risks again (because no new laws are restricting them from gambling with their implicit taxpayer insurance policy), and bank lobbyists are fighting re-regulation.

Obama’s top bank buddy crony, Lawrence Summers, is expressing shock that banks aren’t playing nice, as Paul Krugman explains:

Citigroup and Bank of America, which silenced talk of nationalization earlier this year by claiming that they had returned to profitability, are now — you guessed it — back to reporting losses.

Ask the people at Goldman, and they’ll tell you that it’s nobody’s business but their own how much they earn. But as one critic recently put it: “There is no financial institution that exists today that is not the direct or indirect beneficiary of trillions of dollars of taxpayer support for the financial system.” Indeed: Goldman has made a lot of money in its trading operations, but it was only able to stay in that game thanks to policies that put vast amounts of public money at risk, from the bailout of A.I.G. to the guarantees extended to many of Goldman’s bonds.

So who was this thundering bank critic? None other than Lawrence Summers, the Obama administration’s chief economist — and one of the architects of the administration’s bank policy, which up until now has been to go easy on financial institutions and hope that they mend themselves.

Why the change in tone? Administration officials are furious at the way the financial industry, just months after receiving a gigantic taxpayer bailout, is lobbying fiercely against serious reform. But you have to wonder what they expected to happen. They followed a softly, softly policy, providing aid with few strings, back when all of Wall Street was on the ropes; this left them with very little leverage over firms like Goldman that are now, once again, making a lot of money.

But there’s an even bigger problem: while the wheeler-dealer side of the financial industry, a k a trading operations, is highly profitable again, the part of banking that really matters — lending, which fuels investment and job creation — is not. Key banks remain financially weak, and their weakness is hurting the economy as a whole.

Posted by James on Oct 19, 2009

Massive databases threaten us all... even if we have nothing to hide

Since the beginning of the Bush Administration (even before 9/11), the U.S. government has massively expanded its (unconstitutional) spying on ordinary Americans. Our government — by which I mean the NSA and similar secret organizations about which even Congress knows little — electronically captures, records and can access virtually every email, phone call, credit card purchase, blog post, and Internet search. Just a few examples:

The threat to personal liberty is unprecedented.

Many say, “If I have nothing to hide, let them look.”

The biggest problem with complete transparency is that although YOU may have nothing to hide, powerful Congressmen, government officials… even the president… might. And knowledge of crimes or embarrassing facts equals power. Those who possess secrets about the people running America could blackmail them into acting in their interests and against the people’s interests.

Don’t think this could really happen? It already has.

For years, the government gagged former FBI translator Sibel Edmonds — on the grounds that what she knew was protected as “state secrets” — from telling her shocking story, but the brave Ms. Edmonds has recently testified about what she learned at the FBI:

The deposition included criminal allegations against specifically named members of Congress. Among those named by Edmonds as part of a broad criminal conspiracy: Reps. Dennis Hastert (R-IL), Dan Burton (R-IN), Roy Blunt (R-MO), Bob Livingston (R-LA), Stephen Solarz (D-NY), Tom Lantos (D-CA), as well as an unnamed, still-serving Congresswoman (D) said to have been secretly videotaped, for blackmail purposes, during a lesbian affair.

High-ranking officials from the Bush Administration named in her testimony, as part of the criminal conspiracy on behalf of agents of the Government of Turkey, include Douglas Feith, Paul Wolfowitz, Marc Grossman, and others.

During the deposition… Edmonds discusses covert “activities” by Turkish entities “that would involve trying to obtain very sensitive, classified, highly classified U.S. intelligence information, weapons technology information, classified Congressional records…recruiting key U.S. individuals with access to highly sensitive information, blackmailing, bribery.”

You can read more in The American Conservative magazine, which includes this segment detailing how secret information on individuals' vulnerabilities has been used to blackmail them:

GIRALDI: So the network starts with a person like [Marc Grossman, then the third highest-ranking official at the State Department] providing information that enables Turkish and Israeli intelligence officers to have access to people in Congress, who then provide classified information that winds up in the foreign embassies?

EDMONDS: Absolutely. And we also had Pentagon officials doing the same thing. We were looking at Richard Perle and Douglas Feith. They had a list of individuals in the Pentagon broken down by access to certain types of information. Some of them would be policy related, some of them would be weapons-technology related, some of them would be nuclear-related. Perle and Feith would provide the names of those Americans, officials in the Pentagon, to Grossman, together with highly sensitive personal information: this person is a closet gay; this person has a chronic gambling issue; this person is an alcoholic. The files on the American targets would contain things like the size of their mortgages or whether they were going through divorces. One Air Force major I remember was going through a really nasty divorce and a child custody fight. They detailed all different kinds of vulnerabilities.

GIRALDI: So they had access to their personnel files and also their security files and were illegally accessing this kind of information to give to foreign agents who exploited the vulnerabilities of these people to recruit them as sources of information?

EDMONDS: Yes. Some of those individuals on the list were also working for the RAND Corporation. RAND ended up becoming one of the prime targets for these foreign agents.

GIRALDI: RAND does highly classified research for the U.S. government. So they were setting up these people for recruitment as agents or as agents of influence?

EDMONDS: Yes, and the RAND sources would be paid peanuts compared to what the information was worth when it was sold if it was not immediately useful for Turkey or Israel. They also had sources who were working in some midwestern Air Force bases. The sources would provide the information on CD’s and DVD’s. In one case, for example, a Turkish military attaché got the disc and discovered that it was something really important, so he offered it to the Pakistani ISI person at the embassy, but the price was too high. Then a Turkish contact in Chicago said he knew two Saudi businessmen in Detroit who would be very interested in this information, and they would pay the price. So the Turkish military attaché flew to Detroit with his assistant to make the sale.

Even if you leave aside the issue of government blackmail, the idea that people with nothing to hide shouldn’t fear an all-knowing government is nonsense. Do you really want strangers poking through your bank accounts, Google searches for medical information, and credit card purchases, for example? Would you show that information to your neighbors? Then why let total strangers poke around in your (not so) private life?

Yesterday’s news gives another good reason to disallow the creation of massive databases of valuable information: many of the people with access to those databases are not trustworthy. According to “Bankers Gone Bad”:

70 percent of financial institutions say… they have experienced a case of data theft by one of their employees in the past 12 months, according to new survey data.

Shirley Inscoe, who spent 21 years at Wachovia handling insider fraud investigations and fraud prevention, says banks don’t want to talk about the insider fraud, and many aren’t aware that it’s an “epic problem.”

“There needs to be more training around this issue,” says Inscoe, who co-authored a book about bank insider fraud called Insidious — How Trusted Employees Steal Millions and Why It’s So Hard for Banks to Stop Them, which publishes later this month. “We are seeing a huge increase in this country of organized crime rings threatening individuals who work in financial institutions and making them [commit fraud on their behalf],” she says.

Posted by James on Oct 06, 2009

Moderate exercise is healthy exercise

This article summarizes recent scientific research on the effect of exercise on illness. The bottom line: moderate exercise is helps prevent and moderate illness, but intense exercise lasting an hour or more weakens immune system protection to below that of sedentary people:

The bulk of the new research, including the mouse studies mentioned, reinforce a theory that physiologists advanced some years ago, about what they call “a J-shaped curve” involving exercise and immunity. In this model, the risk both of catching a cold or the flu and of having a particularly severe form of the infection “drop if you exercise moderately,” says Mary P. Miles, PhD, an associate professor of exercise sciences at Montana State University and the author of an editorial about exercise and immunity published in the most recent edition of the journal Exercise and Sport Sciences Review. But the risk both of catching an illness and of becoming especially sick when you do “jump right back up” if you exercise intensely or for a prolonged period of time, surpassing the risks among the sedentary.

Posted by James on Oct 15, 2009

One sentence explains need for universal basic healthcare

According to Nicholas Kristoff, “lack of insurance increases a working-age person’s risk of dying in any given year by 40 percent.”

And working-age people are often raising dependent children.

Posted by James on Oct 05, 2009

Our overlords at Goldman Sachs: "Tolerate the inequality"

Goldman Sachs Vice Chairman Lord Griffiths tells us plebes to sit down and shut up about the billions and billions in bonuses bankers in New York and London are receiving soon after massive public bailouts of their failed banks:

Lord Griffiths, vice-chairman of Goldman Sachs International and a former adviser to Margaret Thatcher, said banks should not be ashamed of rewarding their staff.

Speaking to an audience at St Paul’s Cathedral in London about morality in the marketplace last night, Griffiths said the British public should “tolerate the inequality as a way to achieve greater prosperity for all”.

Decades after Reagan’s “trickle-down” bulls—t — which was patently false at the time and has been thoroughly discredited by subsequent events — elites are still feeding us the same crap. Do they really think we’re THAT stupid?

Posted by James on Oct 22, 2009

Path to political success: Dumbing down student tests and claiming dramatic improvement

New York State students' math performance has risen sharply, according to state education officials. But national math tests say otherwise:

New York State’s fourth and eighth graders made no notable progress on federal math exams this year, according to test scores released on Wednesday, sharply contradicting the results of state-administered tests that showed record gains.

Are New York State education officials manipulating the tests or the scoring to make student performance look artificially good? It would hardly be the first time.

George W. Bush won was handed the presidency by the Supreme Court in 2000. Bush lied his way into the presidency in part by claiming to be a “compassionate conservative” and in part by bragging about the “Texas miracle” and his intention to be “the education president.” We later learned that Texas' “miracle” was nothing but Enron-style flim-flam, the kind that would make Bush’s pal “Kenny Boy” proud:

As a presidential candidate, Texas’s former governor, George W. Bush, contended that Texas’s methods of holding schools responsible for student performance had brought huge improvements in passing rates and remarkable strides in eliminating the gap between white and minority children.

The claims catapulted Houston’s superintendent, Rod Paige, to Washington as education secretary and made Texas a model for the country. The education law signed by President Bush in January 2002, No Child Left Behind, gives public schools 12 years to match Houston’s success and bring virtually all children to academic proficiency.

But an examination of the performance of students in Houston by The New York Times raises serious doubts about the magnitude of those gains. Scores on a national exam that Houston students took alongside the Texas exam from 1999 to 2002 showed much smaller gains and falling scores in high school reading.

Compared with the rest of the country, Houston’s gains on the national exam, the Stanford Achievement Test, were modest. The improvements in middle and elementary school were a fraction of those depicted by the Texas test and were similar to those posted on the Stanford test by students in Los Angeles.

Over all, a comparison of the performance of Houston students who took the Stanford exam in 2002 and in 1999 showed most did not advance in relation to their counterparts across the nation. More than half of them either remained in the same place or lost ground in reading and math.

…The Texas Education Agency found rampant undercounting of school dropouts. Houston school officials have also been accused of overstating how many high school graduates were college bound and of failing to report violent crimes in schools to state authorities.

Texas later admitted its test was dumbed down in a way that made students look artificially good:

Officials here now say that TAAS was only a test of “minimal skills,” paving the way for ratcheting up standards with a new exam.

Even leaving aside the fakery that let Bush pretend more testing produces better teaching, Bush’s testing fetish failed to improve education, instead simply dumbing down education by forcing schools to focus all resources on teaching kids to pass a few tests and strangling resources for history, science, art, music, gym and other such “frills.”

Why would state-level education administrators cheat on student achievement tests? Well, puffing up student test results has become a stepping stone for politicians. It worked for Bush’s Secretary of Education Rod Paige and may have given Obama’s Secretary of Education, Arne Duncan, his lofty perch:

The Civic Committee of The Commercial Club of Chicago, a supporter of Duncan and Chicago Mayor Richard M. Daley’s push for more control of city schools… says city schools have made little progress since 2003.

Its key findings stand in stark contrast to assertions President Obama made in December when he nominated Duncan as Education secretary…

In December, Obama said that during a seven-year tenure, Duncan had boosted elementary school test scores “from 38% of students meeting the standards to 67%” — a gain of 29 percentage points. But the new report found that, adjusting for changes in tests and procedures, students' pass rates grew only about 8 percentage points…

Blogger Alexander Russo, who writes about Chicago schools, says the findings show that nearly 15 years into mayoral control, the city school system “isn’t nearly as improved as many have been led to believe.”

“What I find particularly appalling is that Duncan and Obama — supposed champions of transparency and using research rather than ideology — have cited Chicago’s inflated test scores, even though they knew the increases were exaggerated.”

Posted by James on Oct 15, 2009

Portugal proves success of drug decriminalization

I blogged in May about how America — with just 5% of the world’s population — has 25% of the world’s prisoners.

The major reason America’s prison population has skyrocketed since the 1970s is the rapid expansion of our prison-industrial complex — which makes a fortune locking up drug users — which has pushed for tough, mandatory prison sentences for drug users to keep their profits growing. (Getting tough on “criminals” was also a convenient wedge issue for conservatives who couldn’t win on economic issues.)

In 2001, Portual decriminalized all drugs. Time magazine reports on a Cato Institute (libertarian) study showing that Portugal’s drug decriminalization has been a resounding success:

jail time was replaced with the offer of therapy. The argument was that the fear of prison drives addicts underground and that incarceration is more expensive than treatment — so why not give drug addicts health services instead? Under Portugal’s new regime, people found guilty of possessing small amounts of drugs are sent to a panel consisting of a psychologist, social worker and legal adviser for appropriate treatment (which may be refused without criminal punishment), instead of jail…

[D]rug use among teens in Portugal declined and rates of new HIV infections caused by sharing of dirty needles dropped, while the number of people seeking treatment for drug addiction more than doubled.

“Judging by every metric, decriminalization in Portugal has been a resounding success,” says Glenn Greenwald, an attorney, author and fluent Portuguese speaker, who conducted the research. “It has enabled the Portuguese government to manage and control the drug problem far better than virtually every other Western country does.”

Compared to the European Union and the U.S., Portugal’s drug use numbers are impressive. Following decriminalization, Portugal had the lowest rate of lifetime marijuana use in people over 15 in the E.U.: 10%. The most comparable figure in America is in people over 12: 39.8%. Proportionally, more Americans have used cocaine than Portuguese have used marijuana.

The Cato paper reports that between 2001 and 2006 in Portugal, rates of lifetime use of any illegal drug among seventh through ninth graders fell from 14.1% to 10.6%; drug use in older teens also declined. Lifetime heroin use among 16-to-18-year-olds fell from 2.5% to 1.8% (although there was a slight increase in marijuana use in that age group). New HIV infections in drug users fell by 17% between 1999 and 2003, and deaths related to heroin and similar drugs were cut by more than half. In addition, the number of people on methadone and buprenorphine treatment for drug addiction rose to 14,877 from 6,040, after decriminalization, and money saved on enforcement allowed for increased funding of drug-free treatment.

Posted by James on Oct 24, 2009

"Public option" can't be option for only the old and sick

The army of hospital and insurance company lobbyists occupying Congress (and writing the health insurance “reform” legislation for them) has gutted the “public option.” The “public option” is supposed to keep private insurers honest by giving us a government-administered insurance option. But most healthy Americans will be prohibited from choosing this so-called “public option.”

On a level playing field, private health insurers can’t maintain their fat profit margins while competing against a revenue-neutral government plan. But this legislation has been written to tilt the playing field heavily in favor of private firms: by sending the oldest and sickest Americans to the government insurance plan while trapping young, healthy (read: the most profitable) Americans in private plans.

Someone at DemocraticUnderground.com argues persuasively that “You should hope the Republicans and Lieberman filibuster it to death”:

There’s no definitive form of this thing yet, so I hope my assumptions of what will be in it are wrong, but consider the following:

A LAW 1) Mandating health insurance policies + 2) No binding fee schedule for standard procedures and drugs

EQUALS – Unparalleled profiteering opportunities for insurance & health sector companies – Further bankruptcy of working class and poor people.

FURTHERMORE, A LAW 3) With a weak public option not available to all + 4) Restricting availability only to the people insurance companies don’t want to cover (i.e., the sick and at-risk) and/or 5) Including state triggers or opt-out clauses

EQUALS – Rigged game in which public option plans appear to fail in comparison to private insurance – Republicans get a potentially winning issue for 2010. – Reinforcement of the “Red America vs. Blue America” paradigm, just when it’s on the ropes

Posted by James on Oct 29, 2009

SEC no longer brain-dead?

Since I slammed the SEC’s incompetence, it’s only fair that I praise their (belated) recent initiative that is (finally) uncovering large insider-trading schemes. I have no idea why they didn’t begin this till two years ago, but at least they’re doing it now:

The case against Rajaratnam, built on recorded conversations within a web of alleged conspirators, offers a glimpse of how U.S. investigators are using more aggressive tactics to identify illegal trades hidden within a blizzard of hedge-fund investments. Additional probes stem from a secret Securities and Exchange Commission data-mining project set up to pinpoint clusters of people who make similar well-timed stock investments…

[T]he SEC began using computer software about two years ago to sift hundreds of millions of electronic trading records, known as blue sheets, attached to the stock exchange reports about suspicious incidents, according to people familiar with the project. By looking for patterns in the library of data, they identified groups of traders who repeatedly made similar well-timed bets.

Once investigators find a cluster of correlated trades, they tap other sources of information to unravel how its members obtain and share tips, the people said. For example, if a group profits on trades before a series of corporate takeovers, the SEC may check so-called league tables listing which investment banks or law firms advised the deals. If one firm was involved in all of them, an employee there may be the source of the leak.

The data-mining strategy yielded one of its first cases in February, when the SEC and U.S. prosecutors charged takeover advisers at UBS AG and Blackstone Group LP with taking part in an $8 million insider-trading case, people familiar with the inquiry said. Authorities used a “novel” technique to detect the scheme, the SEC’s lead investigator on the case, Daniel Hawke, said at the time, without elaborating.

While the investigation of Rajaratnam didn’t stem from the data-mining project, it did start with the SEC’s identification of suspicious trades.

Posted by James on Oct 21, 2009

Spitzer: "Break the Banks"

Eliot Spitzer’s foolish, reckless visit to a prostitute and subsequent resignation from the governorship are far more consequential than most realize. As Governor of New York and a former Attorney General with deep knowledge and suspicion of Wall Street, Gov. Spitzer would have been in a powerful position to shape the debate — in a pro-public, anti-bank way — when the financial crisis broke.

How convenient, then, for banks that Spitzer was publicly shamed for his private foolishness by a Republican, Bush-appointed U.S. Attorney soon before the financial crisis erupted.

At least one bank found Spitzer’s downfall so convenient that it helped orchestrate it by closely monitoring Spitzer’s bank account and bringing his “suspicious” $5,000 purchase to the government’s attention: “At least one bank used by Mr. Spitzer, Capital One Corp.’s North Fork unit, flagged his transactions to federal regulators as a potential sign of corruption.”

The bank was dead wrong and should have known the transaction had nothing to do with corruption. Corruption usually occurs when someone puts money into a governor’s bank account.

Besides, virtually all transactions flagged by banks are for one of the following: money-laundering, check fraud, counterfeit checks, mortgage loan fraud, credit card fraud, identity theft, false statement, check kiting, consumer loan fraud, and defalcation/embezzlement. None of these was relevant to a purchase made by Eliot Spitzer. The bank should never have flagged the transaction.

But banks and the federal government possess the unfettered right to poke through our personal transactions to look for things to embarrass (or blackmail?) government officials with. The Bush Administration obviously wanted to cripple Spitzer politically because Spitzer’s name could easily have been concealed: “"Historically, ‘johns’ haven’t been prosecuted for conspiring with principals of a prostitution entity,” says New York defense lawyer Gerald Lefcourt, who isn’t involved in the case. “Could they be? Maybe. But that’s not the way law enforcement has proceeded.”" And we never learned about the many other clients of this prostitution ring.

When Spitzer’s case became public, Wall Street literally rejoiced. They considered it manna from heaven:

On CNBC, markets reporter Bob Pisani quoted an unnamed trader’s reaction, which spoke for the vast majority on Wall Street. “There is a God,” the trader was quoted as saying.

The Wall Street Journal article “Wall Street Cheers As Its Nemesis Plunges Into Crisis” reported “The news stunned traders on Wall Street, where Mr. Spitzer long has been viewed with fear and contempt”:

Amid the rash of corporate scandals that plagued Wall Street early this decade, [Spitzer] was the single most visible force trying to weed out abuses and bring down wayward chief executives. Mr. Spitzer brought fines against some of America’s largest companies for industry practices that were routine, if not accepted. He rarely sent anyone to jail in these cases, but in the process, he changed corporate behavior in lasting ways, putting many industries on alert that state officials would take a more aggressive role. “I’m a huge fan of Eliot Spitzer, and I’ll be very sorry if this is the end of his political career,” says Nell Minow, a corporate-governance expert. “Wall Street is singing, ‘Ding, dong, the witch is dead,’ but Spitzer set an expectation of better oversight by officials that will continue.”"

and

Mr. Sabin, owner of precious-metals firm Sabin Commodities [said] “…I’m sure everybody on Wall Street is happy.”

and

In a [2003] meeting of the New York Society of Securities Analysts in the ornate dining room of the Harvard Club, the attorney general mingled with financial executives, seemingly in his element working the crowded room. But when he took the podium to give the luncheon speech, his tone changed. He lashed out against mutual funds and brokerage firms for abusing the “little investor” and warned that executives would go to jail for the trading scandals he’s prosecuting.

Which brings us to Spitzer’s new article, which tells us how this debate might have moved had Spitzer not been toppled by banks and the Bush Administration (plus his foolishness):

The Obama administration, which has spent much of the past year bailing out banks and protecting the markets, has done shockingly little to help the middle class that has borne the brunt of the financial meltdown. Two acts are particularly revealing. First, the administration failed to go to the mat to give judges the power to reform mortgages in the bankruptcy context….

The second act is the recent—equally difficult to understand—concession to the banks, allowing them not to be required to offer what are called “plain vanilla” mortgages and other products to consumers. These products are simpler, more understandable, less ridden with fees, and less prone to long-term risk than most of what banks try to sell consumers on a regular basis. These are the very products consumers need.

Trillions of dollars of taxpayer infusions—direct cash, loan guarantees, capital purchases, policies to keep banks' cost of capital at virtually zero—have kept the banks afloat. It is amazing that the administration didn’t leverage these infusions to negotiate these two simple policies that would have made banking more sensible for the middle-class Americans whose tax dollars have bailed out the banks.

The administration’s failure on these two policies is symptomatic of its larger failure of vision when it comes to banking reform. The administration has spent more time worried about the musical chairs of regulatory jurisdiction than it has asking fundamental questions about what banks should be doing, what we should expect in return for the vast sums we have invested in the banks, and how discomforting it is that the banks—in an effort to forestall these very questions—are already trying to assert that things have reverted to normal. It’s worth recalling that the greatest impact of the New Deal was not the money spent on particular programs but, rather, the fundamental restructuring of the banking and securities sector that President Roosevelt imposed over the objections of business leaders….

For 50 years, under a regime of careful constraints on how and to whom banks lent, we avoided a meltdown of the sort we have just suffered though. The least we should now expect is a serious conversation about where banks should be active and how we can avoid rebuilding the same system that just collapsed.

The message we should be sending is clear: If banks want to participate in the high-risk activity that generates outsize bonuses but also outsize risk, they must do so only with their own capital, separated from guaranteed deposits and a taxpayer backstop to their debt and borrowing capacity. Unfortunately, this message is not being sent.

Posted by James on Oct 04, 2009

The astonishing Brooksley Born

On February 9, I blogged about Brooksley Born, whose bold warnings about the danger of secret, unregulated, “black box” (over-the-counter) derivatives drew the ire of the Alan Greenspan / Larry Summers / Bob Rubin gang.

Brooksley Born, playing the role of Cassandra, predicted our recent financial crisis and massive taxpayer bailout. For her perspicacity and concern, she was crushed politically by the banking industry.

This relatively unknown woman — a true American hero — has just received the deeply deserved Frontline treatment. I encourage you to watch the latest Frontline. Before watching, I did not know Born was the first female president of the Stanford Law Review or that Bill Clinton considered her for Attorney General before appointing her to head the Commodity Futures Trading Commission (CFTC).

After watching, I discovered more amazing facts about this wonderful woman and the obstacles she went around and over:

Born entered Stanford with the thought of being a doctor, but switched majors after a career counselor interpreted her answers on a series of vocational tests. In those days, women were assessed for their interest in nursing or teaching, men for the professional jobs, including law and medicine. The tests were even color coded — pink for women, blue for men.

Born says she insisted on taking both. Her mother, who had a master’s degree in psychology, felt that was the only way her daughter’s professional interests could be evaluated properly.

She scored high on being a doctor — and low on being a nurse. But rather than suggest she pursue a career as a physician, the counselor said the test proved that her interest in medicine was not genuine and that she was really only interested in making a lot of money. Born quit premed and majored in English.

This Stanford Magazine article also covers Born’s first meeting with the libertarian, laissez-faire Greenspan, in 1996:

“Well, Brooksley, I guess you and I will never agree about fraud,” Born, in a recent interview, remembers Greenspan saying.

“What is there not to agree on?” Born says she replied.

“Well, you probably will always believe there should be laws against fraud, and I don’t think there is any need for a law against fraud,” she recalls. Greenspan, Born says, believed the market would take care of itself.

For the incoming regulator, the meeting was a wake-up call. “That underscored to me how absolutist Alan was in his opposition to any regulation,” she said in the interview.

Posted by James on Oct 22, 2009

U.S. chemical weapons in Fallujah -> Deformed and dead babies

You’ll never see this on U.S. corporate media, but U.S. use of chemical weapons in Fallujah has killed and deformed a heart-breaking number of babies, such as one born with two heads (who died after several years). I hope you will watch Sky News' report, which shows some of the deformed babies and states that they recorded many more too horrible to show on television:

There are a wide range of problems – from abnormalities of the abdomen to facial disfigurements.

We have also seen pictures of all kinds of deformed foetuses which have not survived.

…repeatedly people tell us they believe the deformities must be linked to the heavy bombardment of Fallujah – a Sunni insurgent stronghold – by America in 2004.

People want an independent investigation into the impact of the kinds of weapons used – including controversial white phosphorus.

Posted by James on Oct 19, 2009

We're so irrational: Yet another amazing example

As absurd as it sounds, our willingness to pay for an object changes drastically after we’re asked whether it’s worth a random price. If the random price is high (low), our willingness to pay rises (falls) dramatically:

A group of students were shown a series of products. There were a couple of bottles of wines, a couple of computer components, and a couple of unrelated products. Each student was given a sheet with the products listed on it. They were asked to write the last two digits of their social security number at the top of the page. Mine are 43 so I would have written “43” at the top of the page. Then they were asked to write that number in the form of dollars (e.g. $43) next to each product listed. Then they were asked to write whether they would pay that amount (e.g $43) for each product by writing yes or no next to each product. Finally they were asked write the maximum amount they would pay for each product. In this case they were actually bidding on the products and the top bidder would actually win the auction.

Now here is the wacky part of all this. The fact that the students contemplated a decision at a completely arbitrary price, the last two digits of their social security number, very heavily influenced what they were willing to pay for the product. The students denied that the anchor influenced them, but the data shows something totally different. Correlations ranged from 0.33 to 0.52. Those are extremely significant.

The students with social security numbers in the top 20% (80-99) placed bids from 216% to 346% higher than those with social security numbers in the bottom 20% (01-20). As an example, the top 20% bid an average of $56 for a cordless keyboard while the bottom 20% bid an average of $16!

One implication (of many): If you’re shopping in an expensive store, you may feel great about buying a product that appears cheap relative to other products in that store… even if that product is wildly overpriced relative to what you could buy it for elsewhere.

Posted by James on Oct 23, 2009

Why would anyone trust this guy (FBI director) with all our data?

The Director of the FBI Robert Mueller confessed “he recently came ‘just a few clicks away from falling into a classic Internet phishing scam’ after receiving an e-mail that appeared to be from his bank… Mueller said he considers online banking ‘very safe’ but that ‘just in my household, we don’t use it [any more].’”

The article is troubling in several ways:

1) How is our FBI director ignorant of such a basic security precaution as never clicking on a link in an email… and then typing secret information into the webpage accessed via an email link?

2) If our FBI director is this ignorant of such a simple security precaution, what else might he and his subordinates in the FBI be doing that puts at risk the incredible mountains of data on every American citizen they possess and have access to?

3) If the FBI Director can’t trust himself to use online banking safely, is it that risky or is he that incompetent?

4) The U.S. government collects and analyzes basically all Internet traffic. So why are they defenseless against these phishing attacks (and large-volume spammers)? Shouldn’t they be able to identify them and shut them down?

FBI Director Mueller added, “Far too little attention has been paid to cyber threats and their consequences. Intruders are reaching into our networks every day looking for valuable information. Unfortunately they’re finding it.”

Ah, don’t tell us. Do something about it. Isn’t that your job???

Posted by James on Oct 08, 2009