When have capitalists ever been moral?

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.

 

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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

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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. 

Reuters

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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Politifact – “BOOM! ROASTED!”

Politifact reminds me of Michael Scott when he’s trying to roast; they are so eager to roast and find “lies” that they don’t do any deeper introspection on the substance of the statements they are evaluating.

Consider, for instance, their recent 4-Pinocchio rating for the old chestnut that “women make 77 cents for the same job as men.” Take this, exaggerating Obama:

The Obama campaign took a legitimate statistic and described it in a way that makes it sound much more dramatic than it actually is. The 77-cent figure is real, but it does not factor in occupations held, hours worked or length of tenure.

BOOM! ROASTED!

Well, except look at those caveats–(1) occupations held; (2) hours worked; or (3) length of tenure. If we look at BLS occupation figures, (warning: PDF!) we see that women are still pulling down less than men in a variety of categories, so how might those three factors play into this equation?

• Occupations held: Well, this is a problem, except even in the most specific BLS figures the disparity exists. Female chief executives make 69% what male chief executives make. Unless there is some massive difference in the types of “first-line supervisors of retail sales workers,” women are still making 79% of what their male counterparts make. That’s a pretty specific job type, and yet, the disparity still exists. Now, there’s no way of knowing exactly which job they hold; (PDF) research suggests that within the same establishment, wage gaps are smaller, but the overall pattern still holds that women are paid less than men for similar occupations regardless of establishment. So is Politifact right that the 77-cent figure for “the same work” is false? I mean, maybe, but the real figure might be something like 80-cents. How much better is that?
• Hours worked: Well, it’s hard to say for hours worked; those pesky women are always taking so much more time off! Or not. BLS figures show that there’s a small difference in aggregate hours worked, but the difference between 8.2 hours and 7.8 hours, even considering overtime, doesn’t make up for the 23-cent gap, and as part-time employees, women actually work more than men. Plus, in “white-collar” occupations where hourly wages don’t matter (managers, supervisors, chief executives, elementary school teachers, accountants, social workers), women still earn less than men. Maybe they’re also working fewer hours there, which is why their companies reward them less. Or maybe something else. But they definitely earn less for similar work, if not the same.
• Length of tenure: This one pisses me off the most. Maybe those lower-paid women have not worked there as long. True! But is that “not the same job”? A seventh-year teacher and a third-year teacher/cashier/clerk/nurse are doing the “same work.” They do, however, have different levels of seniority. And it turns out that men get promoted at a much higher rate than women (10.6% of men get promoted, as opposed to 7.6% of women), even though their wage growth at each level of promotion is similar. Again, this could be because men are just much better, hard-working, committed, etc. to their jobs than women. Or, perhaps, it could be that there continue to be discriminatory hiring, firing, and promotion practices at these establishments.

The point of this whole exercise is to illustrate that Politifact’s urge to get Obama in a hits-generating BOOM! ROASTED! moment has actually obscured the truth behind the statement. Just because it is difficult to get an exact comparison of apples-to-apples, doesn’t mean that women aren’t working for less pay doing essentially the same job. The bottom line is: women are promoted less often than men, earn less money than men in similar occupations (or “the same work”), and are subject to discriminatory hiring, promotion, and pay. Even if the 77-cent figure did take into account those three missing factors, it would still hit pretty close to the mark.

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Why “aspirin between the knees” matters

OK, it was a bad joke about how women should just keep their legs closed if they don’t want to get pregnant. And it’s easy for the Santorum campaign to shrug it off as a joke, just as it’s easy for us to laugh about it.

But the problem here is that it’s actually not a joke at all. Rick Santorum believes that birth control is a dangerous sin, and that abstinence is the only acceptable form of birth control.

That is to say, the joke about “squeezing an aspiring between your knees” as birth control is not “off-color” or “crossing the line”: It’s accurately depicting the Santorum campaign’s position on birth control and consensual male-female sex.

Santorum may say now that he thinks birth control should be available (one wonders why his argument doesn’t apply to abortion, but we’ll skip that), but his stance on birth control affordability/availability is clear: he believes birth control pills are bad, and that people should not use them and that abstinence is the only method.

“Aspirin between the knees” is the reality of the Santorum campaign, not just a one-off line by a surrogate.

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The points count the same no matter when they happen

Carmelo Anthony says he still wants the last shot, but insists that he is not selfish:

“Of course I want to take the last shot, let’s be quite frank: I’ve been doing for nine years already, and I’ve made a ton of them,” he said.

OK, so let’s be clear. Carmelo Anthony does make last shots. In fact, he makes them quite well. A 48% clip on final shots is a big deal.

Except… it turns out there is more to a basketball game than the last 5 seconds. Games are often decided by more points, and those games are not quite as peachy for Anthony.

In the rest of the game, Anthony is, well, not that great.

He shoots at lower efficiency and rebounds at lower rates, despite his gaudy topline numbers, which mostly come from an ungodly number of shot attempts. The league average small forward takes 16.5 shots per 48 minutes; Anthony takes 26.3. For comparison, Lebron James averages 24.0, Kevin Durant takes 24.7, and Luol Deng takes 18.1. Anthony is not better at shooting than these players, nor are his teammates that much worse. Anthony loves isolation, though, and enjoys shooting the basketball, like many basketball players.

Unfortunately, it turns out that winning basketball is not dependent on the number of shots you take, but on the percentage of shots you make and the number of possessions your team has. And that makes Anthony much less valuable than many other small forwards in the league.

We have a problem in sports where we look at the magnificent last minute shot and the drama that it entails, and we believe that value in a player resides in that moment (see, Aaron Boone, “Big Shot” Billups, Adam Vinatieri, etc.). In fact, most games are decided by more than the last minute shot, and even in the NBA playoffs, wins by more than 4 points are more common than wins than 3 or fewer.

In short, by continuing to play basketball and jack up a huge number of shot attempts despite being inefficient at making them, Anthony is the definition of selfish, regardless of how many times the final shot makes it.

Baseball starts in, like, three days, so basketball will probably take a backseat, but it’s worth noting that the points in any game count the same, no matter what form they take.

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The new NBA contract does not solve anything

Although the new NBA collective bargaining agreement (CBA) does give us basketball again, it does not solve any of the supposed problems that it set out to solve.

The owners claimed that the old CBA was deficient. The new CBA will supposedly address three primary areas of concern:

• Profitability: Small-market teams find it difficult to be profitable with high player salaries weighing them down.
• Parity: The rise of superteams (Miami, Los Angeles, Dallas, etc.) has made it impossible to have strong small-market teams (please ignore San Antonio).
• Bad Contracts: Too many middling players receive outrageous contracts, and teams have no way of freeing themselves from bad contracts (i.e., their own bad decisions).

Let’s see how the new contract affects these aspects.

Profitability: Why are NBA teams having problems making money? Is it the colossal player salaries? Well, since player salaries are a flat percentage of revenue, some other higher expenditures must be impacting the NBA’s finances. Even though player salaries are the biggest chunk of an NBA team’s expenditures, they are also the most consistent because they are tied to league revenues. The new CBA does nothing to address the other costs (stadium expenses, administrative overhead costs, etc.). Assuming that the owners find no solution to those growing costs, there’s no reason why this exact standoff won’t happen again in 10 years. (That’s what happened last time.)

Parity: Will the new CBA stop superteams? Absolutely not; if anything, it encourages them. More than football or baseball teams, basketball teams rely on stars and superstars to succeed. Superstars bring people through the turnstiles, and put up championship banners. The more you have, the more you win.

How does the new CBA encourage superteams? Assume that you are a superstar player. You know that you will get paid identical money from all the clubs; no team can possibly offer more than a max contract, and your options are limited by the stricter salary cap. Would you rather go to an attractive city (big market) and a team of other stars, or would you rather go to a small market with middling players? Consider Lebron James: if there had been no cap and no max contract, Miami could not have afforded James, Wade, and Bosh. Instead, they could form the Superfriends and cost the same as the Washington Wizards.

The new CBA only makes these conditions worse.

Bad Contracts: Let’s set aside the fact that bad contracts are the owners’ fault in the first place! They exist; now what?

The new CBA has a few features to mitigate bad contracts: 1) the “amnesty” clause that allows teams to waive/release bad contracts; and 2) a costlier mid-level exception combined with more limits to sign-and-trade deals that will probably result in shorter contracts.

Yet, none of these proposals actually targets the underlying causes of these bad decisions. If we assume that people respond to incentives, then a painful negative response to a bad contract would make them less likely. Instead, the CBA makes it easier to wash one’s hands of a bad contract, making it all the more likely that GMs will sign more bad short-term contracts because they have less chance of getting burned. Just changing what makes a “bad contract” doesn’t make it less damaging to the competitive advantage of a team. Signing Joe Johnson for 6 years and $119 million dollars would have been just as dumb at 5/50 if the league’s max contract was 5/50. When dealing with scarce resources like excellent basketball players, one wrong move will still cost your team in money and in chances at success.

Conclusion: The new CBA will do little to nothing about anything it purports to solve.

What it does do is pay players less money. This will make owners happy for now, but it does nothing to address the underlying problems that hurt the league financially and the teams competitively.

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Rush Limbaugh aligns himself with a group that abducts children, turns them into soldiers, and forces them to murder their parents

Blind, partisan hatred has become an easy way to describe the entire Republican party. The joke goes that if Obama supports puppies and rainbows, the GOP opposes it. So reflexive is the anti-Obama instinct among them, that for whatever X he proposes, they simply must adopt not-X. It’s a simplistic analysis, but… it’s true almost all the time, isn’t it?

Case in point; the Lord’s Resistance Army now enjoys the support of the figurehead of the GOP: Rush Limbaugh. Of course, I’ve long known that Limbaugh is a fucking prick deserving no attention whatsoever. And so I will not give him a link to his site. But if I were to, you would see that he opposes Obama’s recent decision to send 100 troops into Uganda to combat the LRA. Ok, fine. Reasonable people can disagree about whether it is wise to send troops into yet another country to get involved in yet another local conflict.

But Limbaugh does not stop there. He titles his entry, “Obama invades Uganda, targets Christians.” You see, the LRA describes itself as Christian, and this therefore represents an irresistible opportunity for Limbaugh to cast this as an example of Obama – the secret Muslim – getting involved in Africa to target Christians. Because Obama, after all, represents a threat to the real American way of life. It’s a Holy War, and Obama wants the Christians to lose.

Limbaugh further reads LRA propaganda about their alleged goals of bringing peace and security to Uganda. He ignores the fact that:

They force abducted children to become soldiers and kill their parents.

They slaughter hundreds of civilians, sparing not the men, women, or children.

They force children soldiers to murder other children who try to escape.

Again, reasonable people can disagree over whether the United States should get involved. But for Limbaugh to take the LRA’s side, ignore their depraved mass murders, and cast this as an example of Obama attacking Christians is a new low, even for Limbaugh. Fuck him. But when your reflexive Obama-hatred motivates every political position you take, this is the logical conclusion.

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We already have the “middle way” party — it’s the Democrats

People who advocate for a third party typically say that the two parties are too extreme. Matt Miller’s piece in WaPo today is no different. Matt Yglesias has taken on Miller’s assertion about Democrats defending teachers’ unions (which is obviously false considering Race to the Top and other Obama administration objectives), so I guess I’ll mention the health care bit:

Or take health care. Republicans say the answer is to repeal President Obama’s reforms — but they won’t offer plans to insure more than 3 million of the 50 million Americans who lack coverage. Yet Democrats want to micromanage providers, protect the trial lawyers who bankroll their campaigns, and fully insulate people from the costs of their own care, assuring that there’s no consumer brake on runaway costs. Again, Democrats and Republicans can’t solve the problem.

Let’s take the points one by one.

“Democrats want to micromanage providers” — Not clear exactly how this is intractable, since Republicans want this too (see all abortion cases ever). It seems to me that government’s very use of Medicaid and Medicare reimbursement is already a micromanagement of providers.

“protect trial lawyers” — If only there were some prominent Democrat who could stand up and say he was willing to deal on tort reform in like a big, public address. Oh yeah, like this guy:

“I’m willing to look at other ideas to bring down costs” besides repealing his healthcare overhaul, Obama said in his State of the Union address, including “medical malpractice reform to rein in frivolous lawsuits.”

Huh.

“fully insulate people from the cost of their own care” — Yeah, if only there were some sort of, oh I don’t know, like an individual mandate that made sure that all people paid into the system, like some sort of big insurance pool. And furthermore, what if we put in some cost controls, particularly on end of life care in Medicare, that ensured that only the most effective treatments were used?

The point is that these third party enthusiasts already got their wish without realizing it — a centrist President who is willing to deal on almost any issue and serve up sacred cows in search of a compromise. The only thing is that guy turned out to be Barack Obama and he already has a party. And it turns out that being willing to compromise on almost anything still doesn’t buy you any favors. (See the court cases against the individual mandate and the “death panels” hullabaloo.)

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Republican faith in government (the parts they like, anyways)

Dahlia Lithwick — official Unpersons hero — has a new piece up today about Republicans’ lack of faith in government… except in the case of the death penalty. While all other functions of government in Republicans’ eyes are bureaucratic nightmares of erroneous decision-making and inefficient backlogs, the death penalty and the criminal justice system are never wrong:

These same Republicans who are dubious of government’s ability to do anything right have an apparently bottomless faith in the capital-justice system. Everything is broken in America, they claim—except the machinery of death.

I would point out, though, that this is not restricted to the death penalty.

The Republican party line wants the government to butt out of doctors’ decisions… except when it comes to abortion, death-with-dignity, or medical marijuana.

The Republican party can reject the government’s fact-finding… except when the military says it has evidence of weapons of mass destruction in Iraq.

The Republican party dislikes government intrusion in private life, unless it concerns listening in on phone calls, censoring the internet, or policing private, consensual sex between adults.

My point is that the Republican hypocrisy about “big government” is nothing new, nor is it limited to criminal law and capital punishment.

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Whatever you do, don’t resign

If you are a craven politician, just don’t resign. “Surviving” a scandal is pretty easy if all you want is to “survive.”

Scandal-plagued people who refuse to resign (David Vitter, Larry Craig, Charlie Rangel, Maxine Waters, et al.) keep their jobs. Furthermore, despite impropriety that the rest of the country dislikes, their constituents don’t seem to mind.

Additionally, party members should not force you to resign, because it actually costs them in the long run. They are much less likely to win the seat after you’ve resigned (see William Jefferson, Chris Lee, and now Anthony Weiner).

Voters reward stubbornness and craven lying. Live up to your reputations, politicians!

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More smog =! more jobs

You could reasonably make the argument that the new smog regulations that the Obama administration backtracked on might be costly for heavy polluters such as public utilities and manufacturers. Furthermore, you could argue that public utilities are already the target of extensive regulation, and that they are taxed highly, usually with separate state public utility taxes on top of federal.

But the Obama administration’s argument that the smog regulations would “hurt job creation” is just ludicrous. I mean, it doesn’t even begin to make sense.

First, it presumes that the reason companies aren’t hiring is because they don’t have enough money. This is patently false; companies have giant piles of cash and don’t know what to do with them.

Second, it presumes that the regulations themselves somehow constrict the companies’ ability to hire new workers. Yet, generally, payroll considerations have little or nothing to do with regulatory regimes, and any correlation is probably slim at best.

Third, and most importantly, it ignores any demand-side problems. The reason companies aren’t hiring is because they don’t have customers to buy what they want to sell. There’s an enormous gap in demand that is not being filled, particularly as government spending plateaus off or falls. Austerity basically sucks for everyone.

If the Obama administration doesn’t want to issue these anti-smog regulations for tactical reasons or for scientific reasons, that’s their choice. The Obama administration’s idiotic argument that this will “save/create jobs” only makes him look worse to liberals and will buy him exactly no good will from independents/conservatives.

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