Archive for July, 2012

We typically try to refrain from over-analyzing the horse race, but sometimes, we allow ourselves some horse-race bullshit. After all, it does matter who wins a presidential election.

Thus, the podcast follows. Topics include:

  • Romney and Bain: Is Romney being Swift-boated (i.e., attacked with misleading reports that undermine his core strength)? Is it working?
  • Is it fair to attack Romney for being an out-of-touch rich guy, even if he is?
  • Do narratives matter?
  • How much to economic indicators matter?
  • What are our best guesses on the presidential race so far?
  • Will the Supreme Court Obamacare decision matter?
[audio http://dl.dropbox.com/u/14175885/Podcast8.mp3]


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With each financial scam/hoax/fraud, we hear people decry capitalists not acting as they once did — with honor and so forth. David Rhode has a new short piece for the Atlantic about this topic regarding the Libor scandal. In summary, bankers are behaving unethically and their lack of ethics hurts all of us. And I basically agree with that.

I do take issue, however, with the idea that somehow the past was better. Remember that time when Jay Gould tried to corner the gold market? Remember that time when rampant speculation and poorly regulated credit markets led to the Great Depression? (Oh yeah, did I mention that a bunch of financial wizards tried to overthrow the government?) The amorality of the S&L is on par with the amorality of today.

Capitalists have always pursued profit above all. That’s the point. It would be folly to expect them to do otherwise. That’s exactly why blunt, dumb regulations, rather than public scoldings, are needed to hold the line.


David Rohde

David Rohde – David Rohde is a columnist for Reuters, two-time winner of the Pulitzer Prize, and a former reporter for The New York Times. His forthcoming book, Beyond War: Technology, Economic Growth and American Influence in the New Middle East will be published in March 2013. More

The Libor Scandal and Capitalism’s Moral Decay

By David Rohde

Jul 13 2012, 2:45 PM ET 181

The scandal engulfing the financial industry is yet another sign that our business leaders no longer respect the rule of law. 



Maybe the acronym at the heart of the scandal is too confusing. Or Americans are simply tired of hearing about greedy bankers. By any measure, though, the Libor bank scandal is an extraordinary example of the 1 percent stealing from the 99 percent – and our crumbling ethics.

If an organized crime group was accused of breaking into the Nassau County Treasurer’s Office on New York’s Long Island and stealing $13 million, outrage would be widespread. And if the same group was accused of stealing millions from the City of Baltimore and other struggling municipalities, they would emerge as an issue in the presidential campaign.

Instead, the Libor scandal is emerging in dribs and drabs and drawing little public attention. The middle class is being victimized, and there is little protest.

Last month, the British bank Barclays agreed to pay $453 million to American and British authorities to settle allegations that it manipulated key interest rates for profit between 2005 and 2009, specifically the London Interbank Offered Rate, or Libor. American and British investigators are now examining whether traders at a dozen other banks — including the “too-big-to-fail” U.S. banks JPMorgan, Citibank and Bank of America — also manipulated rates.

It is hard to overstate the impact of the Libor benchmark, which is used to value some $360 trillion in loans and financial contracts worldwide. It affects lending to governments, businesses and consumers, and even student loan and credit card rates.

So Barclays’ victims weren’t just other banks and traders. They included taxpayers in dozens of communities who are believed to have paid millions more in interest than they should have at the height of the financial crisis. Teachers and other public servants may have been laid off because of bankers’ pursuit of ever-higher profits.

Lawsuits filed by the City of Baltimore and dozens of other parties against Barclays, JP Morgan, Bank of America, Citibank and Deutsche Bank have been consolidated into a single case in a New York federal court. Banks are denying any wrongdoing, and the true scope of the losses — and the role of American banks — is expected to emerge in the complex legal battles ahead.

I do not believe all bankers are evil. I admire business owners who innovate, create jobs and strengthen communities. But theft — whether the perpetrator is clad in a business suit or blue jeans — is theft.

And let’s not kid ourselves. Our ethical decay stretches beyond Wall Street. It spans industries, political parties and groups. In April, systematic bribery by executives of the U.S.’s second-largest company – Walmart – was reported across Mexico. In June, American sports officials accused cyclist Lance Armstrong of engaging in a massive doping conspiracy. And Jesse Jackson Jr. appears to be the fifth member of Congress to be embroiled in an ethics scandal in two years.

Around the world, a globalized economy is creating planetary-sized profits — and relentless pressure. A May survey by Ernst & Young of 400 chief financial officers around the world found that a growing number of them were willing to pay bribes and falsify their firm’s financial performance to survive the financial downturn.

The number of chief financial officers who said they would engage in bribery to stay in business grew from 9 percent in 2011 to 15 percent in 2012. And the number who said they would misstate their company’s financial health to get though a downturn rose from 3 percent in 2011 to 5 percent in 2012.

“One of the most troubling findings of the survey is the widespread acceptance of unethical business practices,” Ernst & Young said in a statement. “It is particularly alarming that respondents are increasingly willing to make cash payments.”

Corporate boards and other overseers, meanwhile, appear to be looking the other way. Eighty-one percent of those surveyed worldwide by Ernst & Young said anti-bribery and anti-corruption codes of conduct were in place in their companies. But nearly half said they did not believe employees had been punished for violating those polices.

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When I read stories about the “most common passwords” or whatever, I always wonder how they got this information in the first place. Usually the pieces are laughers or a warning to people to have more “secure” passwords. The latest Yahoo! Mail breach suggests that the commonest password “base words” are things like “password” and “qwerty.”

But fancier passwords are actually not much better than non-fancy passwords. “checkmymail” is as safe as “Ch3cK!Mym41L” if they’re going to be stolen anyways. The most likely threat of breach isn’t from someone guessing your password — it’s from you writing it down, saving it in your browser, forgetting to logout on a public computer, or having someone steal your password wholesale from the company itself. If banks, email companies, and the federal government can’t keep information from outing, what’s the point in having a super-secure password?

When we think about risk, it usually turns out that the biggest risks are hidden or impossible to assess. You can take a lot of precautions to protect your password (Slate’s Farhad Manjoo has tips here), but in the long run, that risk is tiny compared to the risk of just having your password stolen one day. It’s like the weird-but-true factoid that you have a higher chance of dying by asteroid than by lightning. We can take precautions to protect us from the small risks, but the big risks are often out of our control; you can’t get Yahoo!Mail (for which you pay nothing) to be more secure with your data.

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Here it is:

This ad impressed me. Not because it hits Romney hard (though it does), but because of the sound editing. Listen to it again, and make sure to note the images that appear as the sound changes. The editing manages to evoke empty warehouses, open spaces, an office intercom, and a voice from very far away. An interesting discussion of how this is done, including reverberation and high-pass filtering, can be found here.

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One thing bugs the shit out of me is the conventional wisdom that two-person opposite-sex biological parents represent the best environment for raising children. David Brooks raised the old chestnut again in his wacky piece about the decline in opportunities for the lower classes:

A long series of cultural, economic and social trends have merged to create this sad state of affairs. Traditional social norms were abandoned, meaning more children are born out of wedlock. Their single parents simply have less time and resources to prepare them for a more competitive world.

First, this may be true and it may not be. Research has been inconclusive, and difficult to extricate from simple socioeconomic trends. Additionally, some research has shown that high-conflict marriages are as bad if not worse than single-parent households, and that stability may be a better indicator than number of parents.

Second, even assuming the argument is correct and two parents are better than one, why wouldn’t three parents or four parents be better than two? As California prepares to address this with possible legislation to open the door to more greater-than-two-parent households, it’s not surprising that the usual suspects have crawled out to voice their opposition:

“This bill is a Trojan horse for the same-sex-marriage agenda,” Peter Sprigg, a senior fellow at the Family Research Council, said.

“Advocates for same-sex marriage are very interested in separating parentage and marriage from biological parentage, because that’s the one thing same-sex couples can never achieve,” he added.

I mean, sure, but part of the core conservative argument against same-sex marriage is that two-biological-parent households are better than two-nonbiological-parent households. Why wouldn’t the introduction of more adults, including the biological parents not be better? In fact, we have been doing this for some time, with villages, tribes, and relatives often taking on the responsibility of childcare. Like, oh, I don’t know, this family.

If stability is the goal, why not include as many stable adults as we can find?

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