4.16.2009
Gays and The Military: A Bad Fit
According to the Washington Post: With the nation engaged in two wars and facing a number of potential adversaries, this is no time to weaken our military. Yet if gay rights activists and their allies have their way, grave harm will soon be inflicted on our all-volunteer force.
The administration and some in Congress have pledged to repeal Section 654 of U.S. Code Title 10, which states that homosexuals are not eligible for military service. Often confused with the "don't ask, don't tell" regulations issued by President Bill Clinton, this statute establishes several reasons that homosexuality is incompatible with military service.
Section 654 recognizes that the military is a "specialized society" that is "fundamentally different from civilian life." It requires a unique code of personal conduct and demands "extraordinary sacrifices, including the ultimate sacrifice, in order to provide for the common defense." The law appreciates military personnel who, unlike civilians who go home after work, must accept living conditions that are often "characterized by forced intimacy with little or no privacy."
While there have been changes in civilian society since this statute was adopted by wide bipartisan majorities in 1993, the military realities it describes abide. If anything, they are more acute in wartime.
In our experience, and that of more than 1,000 retired flag and general officers who have joined us in signing an open letter to President Obama and Congress, repeal of this law would prompt many dedicated people to leave the military. Polling by Military Times of its active-duty subscribers over the past four years indicates that 58 percent have consistently opposed repeal. In its most recent survey, 10 percent said they would not reenlist if that happened, and 14 percent said they would consider leaving.
If just the lesser number left the military, our active-duty, reserve and National Guard forces would lose 228,600 people -- more than the total of today's active-duty Marine Corps. Losses of even a few thousand sergeants, petty officers and experienced mid-grade officers, when we are trying to expand the Army and Marine Corps, could be crippling.
And the damage would not stop there. Legislation introduced to repeal Section 654 (H.R. 1283) would impose on commanders a radical policy that mandates "nondiscrimination" against "homosexuality, or bisexuality, whether the orientation is real or perceived." Mandatory training classes and judicial proceedings would consume valuable time defining that language. Team cohesion and concentration on missions would suffer if our troops had to live in close quarters with others who could be sexually attracted to them.
We don't need a study commission to know that tensions are inevitable in conditions offering little or no privacy, increasing the stress of daily military life. "Zero tolerance" of dissent would become official intolerance of anyone who disagrees with this policy, forcing additional thousands to leave the service by denying them promotions or punishing them in other ways. Many more will be dissuaded from ever enlisting. There is no compelling national security reason for running these risks to our armed forces. Discharges for homosexual conduct have been few compared with separations for other reasons, such as pregnancy/family hardship or weight-standard violations. There are better ways to remedy shortages in some military specialties than imposing social policies that would escalate losses of experienced personnel who are not easily replaced.
Some suggest that the United States must emulate Denmark, the Netherlands and Canada, which have incorporated homosexuals into their forces. But none of these countries has the institutional culture or worldwide responsibilities of our military. America's armed forces are models for our allies' militaries and the envy of our adversaries -- not the other way around.
As former senior commanders, we know that the reason for this long-standing envy is the unsurpassed discipline, morale and readiness of our military. The burden should be on proponents of repeal to demonstrate how their initiative would improve these qualities of our armed services. This they cannot do.
Consequently, our recent open letter advised America's elected leaders: "We believe that imposing this burden on our men and women in uniform would undermine recruiting and retention, impact leadership at all echelons, have adverse effects on the willingness of parents who lend their sons and daughters to military service, and eventually break the All-Volunteer Force."
Everyone can serve America in some way, but there is no constitutional right to serve in the military. The issue is not one of individual desires, or of the norms and mores of civilian society. Rather, the question is one of national security and the discipline, morale, readiness and culture of the U.S. armed forces upon which that security depends. It is a question we cannot afford to answer in a way that breaks our military.
The administration and some in Congress have pledged to repeal Section 654 of U.S. Code Title 10, which states that homosexuals are not eligible for military service. Often confused with the "don't ask, don't tell" regulations issued by President Bill Clinton, this statute establishes several reasons that homosexuality is incompatible with military service.
Section 654 recognizes that the military is a "specialized society" that is "fundamentally different from civilian life." It requires a unique code of personal conduct and demands "extraordinary sacrifices, including the ultimate sacrifice, in order to provide for the common defense." The law appreciates military personnel who, unlike civilians who go home after work, must accept living conditions that are often "characterized by forced intimacy with little or no privacy."
While there have been changes in civilian society since this statute was adopted by wide bipartisan majorities in 1993, the military realities it describes abide. If anything, they are more acute in wartime.
In our experience, and that of more than 1,000 retired flag and general officers who have joined us in signing an open letter to President Obama and Congress, repeal of this law would prompt many dedicated people to leave the military. Polling by Military Times of its active-duty subscribers over the past four years indicates that 58 percent have consistently opposed repeal. In its most recent survey, 10 percent said they would not reenlist if that happened, and 14 percent said they would consider leaving.
If just the lesser number left the military, our active-duty, reserve and National Guard forces would lose 228,600 people -- more than the total of today's active-duty Marine Corps. Losses of even a few thousand sergeants, petty officers and experienced mid-grade officers, when we are trying to expand the Army and Marine Corps, could be crippling.
And the damage would not stop there. Legislation introduced to repeal Section 654 (H.R. 1283) would impose on commanders a radical policy that mandates "nondiscrimination" against "homosexuality, or bisexuality, whether the orientation is real or perceived." Mandatory training classes and judicial proceedings would consume valuable time defining that language. Team cohesion and concentration on missions would suffer if our troops had to live in close quarters with others who could be sexually attracted to them.
We don't need a study commission to know that tensions are inevitable in conditions offering little or no privacy, increasing the stress of daily military life. "Zero tolerance" of dissent would become official intolerance of anyone who disagrees with this policy, forcing additional thousands to leave the service by denying them promotions or punishing them in other ways. Many more will be dissuaded from ever enlisting. There is no compelling national security reason for running these risks to our armed forces. Discharges for homosexual conduct have been few compared with separations for other reasons, such as pregnancy/family hardship or weight-standard violations. There are better ways to remedy shortages in some military specialties than imposing social policies that would escalate losses of experienced personnel who are not easily replaced.
Some suggest that the United States must emulate Denmark, the Netherlands and Canada, which have incorporated homosexuals into their forces. But none of these countries has the institutional culture or worldwide responsibilities of our military. America's armed forces are models for our allies' militaries and the envy of our adversaries -- not the other way around.
As former senior commanders, we know that the reason for this long-standing envy is the unsurpassed discipline, morale and readiness of our military. The burden should be on proponents of repeal to demonstrate how their initiative would improve these qualities of our armed services. This they cannot do.
Consequently, our recent open letter advised America's elected leaders: "We believe that imposing this burden on our men and women in uniform would undermine recruiting and retention, impact leadership at all echelons, have adverse effects on the willingness of parents who lend their sons and daughters to military service, and eventually break the All-Volunteer Force."
Everyone can serve America in some way, but there is no constitutional right to serve in the military. The issue is not one of individual desires, or of the norms and mores of civilian society. Rather, the question is one of national security and the discipline, morale, readiness and culture of the U.S. armed forces upon which that security depends. It is a question we cannot afford to answer in a way that breaks our military.
4.14.2009
Tainted Chinese Drywall
Knauf Tianjin – the main Chinese manufacturer so far singled out for blame – says it was responsible for only around 20 per cent of that supply, and the firm complains that because it was the only company that stamped its name on its product that it is being unfairly targeted.
Laboratory tests carried out for Florida's Department of Health showed that samples of Chinese-made drywall - including Knauf's - contained strontium sulfide, which gives a rotten egg odor when moistened and reacts with hydrogen in the air to take on corrosive powers capable of eating through metals and electrical wires.
"This is a noxious, pungent chemical compound. If it can corrode metals in your house, I hate to think what it's doing to residents and their children and pets," said Jordan Chaikin of Florida legal firm Parker Waichman Alonso, which has launched a federal class-action lawsuit against Knauf in the US District Court in Fort Myers.
"People are stuck with these homes, they can't afford to leave, they put their life's savings into them or they're mortgaged and they're turning to builders for help," he said. "But in some cases builders have filed Chapter 11 bankruptcy so there can be no claims against them. Some homes need to be bulldozed, in other cases gutted entirely, and that's very expensive for builders."
The crisis has woven a tangled economic and legal web. Among the builders on the receiving end of consumers' wrath is Lennar Homes of Miami, which has identified tainted drywall in over 80 of its properties and has pledged to pay the costs of replacing it and relocating residents in the interim.
Lennar Homes is the subject of some lawsuits. But, in turn, it has launched a suit itself against Knauf and another Chinese drywall manufacturer, Taishan Gypsum. It is also suing independent US contractors for installing the defective product in Lennar homes.
"They have refused to take responsibility for their defective product, leaving us no other option but to seek redress in a court of law," the company asserted in a written statement.
"The builders are victims too," says Howard Ehrsam, a civil engineer who founded Chinese Drywall Screening, of Port St Lucie, Florida, to meet growing demand from homeowners for diagnosis and advice.
source: CS Monitor
Laboratory tests carried out for Florida's Department of Health showed that samples of Chinese-made drywall - including Knauf's - contained strontium sulfide, which gives a rotten egg odor when moistened and reacts with hydrogen in the air to take on corrosive powers capable of eating through metals and electrical wires.
"This is a noxious, pungent chemical compound. If it can corrode metals in your house, I hate to think what it's doing to residents and their children and pets," said Jordan Chaikin of Florida legal firm Parker Waichman Alonso, which has launched a federal class-action lawsuit against Knauf in the US District Court in Fort Myers.
"People are stuck with these homes, they can't afford to leave, they put their life's savings into them or they're mortgaged and they're turning to builders for help," he said. "But in some cases builders have filed Chapter 11 bankruptcy so there can be no claims against them. Some homes need to be bulldozed, in other cases gutted entirely, and that's very expensive for builders."
The crisis has woven a tangled economic and legal web. Among the builders on the receiving end of consumers' wrath is Lennar Homes of Miami, which has identified tainted drywall in over 80 of its properties and has pledged to pay the costs of replacing it and relocating residents in the interim.
Lennar Homes is the subject of some lawsuits. But, in turn, it has launched a suit itself against Knauf and another Chinese drywall manufacturer, Taishan Gypsum. It is also suing independent US contractors for installing the defective product in Lennar homes.
"They have refused to take responsibility for their defective product, leaving us no other option but to seek redress in a court of law," the company asserted in a written statement.
"The builders are victims too," says Howard Ehrsam, a civil engineer who founded Chinese Drywall Screening, of Port St Lucie, Florida, to meet growing demand from homeowners for diagnosis and advice.
source: CS Monitor
Casino Capitalism
The American Conservative's article "The Wealth Delusion" writes: ...In the past four years, America’s 500 largest corporations made a profit of $2.4 trillion, more than 4 percent of GDP. Did they use it to increase productive capacity, improve quality, or strengthen their balance sheets? No, $1.7 trillion went for stock buybacks and $900 billion for dividends. Of the $2.4 trillion they made, they passed on $2.6 trillion to their shareholders. They gave away more than they made and invested nothing.Investment, as defined by Adam Smith, Max Weber, and most economics textbooks, is the use of deferred consumption for the purchase of capital goods, which create a cash flow in the future. For the past generation, however, when most of us used the word “investment,” it meant that a greater fool could be found to buy our house or share of a derivatives contract for more than we paid.
When the bore at a cocktail party says, “My house is the best investment I ever made,” he means he paid less than it is now worth. But his house does not create a cash flow. It is merely a consumption item whose value has gone up. We have a semantic problem: the word “investment” has come to mean two different things, and this confusion played a part in creating the bubble whose explosion will end up costing many of us our jobs.
Look at the archetypal “investment” of the past 30 years: the leveraged buyout. Private equity firms find a company with a steady cash flow, put up a little money, borrow lots more, and then use that company’s own cash flow to fund its takeover. They load a healthy firm with tons of debt, using existing cash flow to pay the interest. Retained profits, which the firm could have used for R&D, building new plants, hiring new workers, or productive investment, are sacrificed to service new, unproductive debt.
These leveraged buyout artists call themselves investors, but what they do is the opposite of investment. They are asset strippers. Traditional investors take savings created by deferred consumption and use it to create productive capacity for the future. Private equity firms take existing productive capacity, monetize it, and use it to fund their luxurious current consumption. Investment is supposed to mean sacrificing now to make the future richer. These pirates sacrifice the future to consume more today.
It didn’t used to be this way. In the 17th century, suppose an Amsterdam burgher restrained his desire for luxury, didn’t commission a Rembrandt portrait of his wife, and instead bought shares in the Dutch East Asia Company. The company used his money to outfit a ship bound for the Spice Islands. With a little luck, it returned two years later, sold its pepper for a profit and paid our burgher a dividend. His earlier restraint increased world trade, seasoned food all over Europe, and made him money. That is what we have always called an investment.
Or suppose a London rentier in 1880 bought bonds for a proposed railroad from Buenos Aires deep into the grasslands of Argentina. His money allowed the railroad to buy land, import workers, lay track. Worthless land became valuable. Cattle grazing there, previously slaughtered for their hides and left to rot, became a valuable export crop. The landlords cheerfully paid the railroad freight rates, the railroad paid the rentier his interest, and for the first time meat regularly appeared on the dinner tables of Europe’s urban poor.
Of course, real investment still occurs today. An immigrant saves some money, borrows more, and opens a curry shop. A software engineer with a brilliant idea finds a venture capitalist to back him and invents Google. But these investors, who create jobs and increase productivity, are generally not funded by investment banks or financial markets. They borrow from commercial banks or perhaps sell equity to venture capital firms. The huge profits once made at Goldman Sachs, Lehman Brothers, and Bear Stearns had little to do with funding productive investment. Casino-style trading, mergers-and-acquisition work, highly leveraged arbitrage—shorting the 30-year bond while going long on the 29-year—made big bucks for financiers. But it did nothing for the economy as a whole.
Central banks battled any threat to the financial economy by increasing liquidity. This huge pool of new money sloshing around, chasing things to buy, created spectacular asset-price inflation. Three decades ago, houses on my London block cost £3,000. Last year, they went for £1 million. Back then, share prices traded at six to eight times earnings. Today, despite the huge fall in stock prices, P/E ratios are still considerably higher than they were in the early ’80s. Why save when the value of your house goes up more than your annual salary? Why invest in new plants when firing workers makes your stock price—and thus your bonus—go up?
With asset prices rising for over a generation, investment lost its Calvinist roots. An investment no longer demanded sacrifice of current pleasure. Indeed it was the great borrowers who made fortunes. With CEO bonuses linked to short-term stock price increases, corporations spent retained profits to buy back shares, using their money to drive up stock prices instead of investing in things that would strengthen the firm in the long run.
Barry Eichengreen, perhaps the leading economic historian of the Golden Age, tells us that much of the growth in Europe after World War II was due to a social pact. Labor agreed to restrain its wage demands, and in return, capital agreed to reinvest most profits into the business. As productive investment rose, so did worker productivity, and between 1950 and 1970 real wages more than doubled. Investment in productive capacity works: it makes the entire society richer—entrepreneurs, bankers, and workers alike.
That compact has broken down. As finance has grown to dominate the rest of the economy, with interest payments as a share of GDP rising from under 1 percent to over 16 percent, real productive investment has declined. If you build a factory or invent a new product using borrowed money, you create a cash flow that allows interest payments to be paid no matter what happens in the financial markets. But when “investment” creates no new productive capacity, when the link between financial investment and the real productive economy is broken, finance becomes a faith-based enterprise in perpetual asset-price increases. When that faith begins to crumble, the debt structure has no foundation to hold it up.
Hyman Minsky, the Cassandra of this financial crisis, described three types of financial structure. The first, and safest, he called “hedged.” All borrowing—
interest and principal payments—is covered by cash flow. Minsky defines a “speculative” financial structure as one in which, in certain periods, cash flow will not be sufficient to fund interest payments but the value of the investment remains greater than the interest and principal payments due. The third and most fragile structure he calls “Ponzi.” Not only are interest payments less than cash flow, but the present value of the discounted cash flows generated by the investment are less than the money owed to fund it.
A Ponzi structure can only be maintained, Minsky said, by further borrowing, and this borrowing is only possible if interest payments do not rise while asset prices do. We have been deep into Ponzi finance for some time. Central bankers, recognizing the fragility of our financial architecture, have kept interest rates low. But the stability of the system required asset prices to keep going up so that the value of collateral grew, keeping banks confident enough to allow further borrowing. If asset prices stagnate, causing banks to reject the further loans necessary just to pay existing interest, the structure falls apart. That is why a relatively minor decline in American home prices brought the entire financial system to its knees.
The current crisis gives us an opportunity to rethink the link between the financial and real economies. For too long, those working in the productive economy of goods and services have subsidized bankers and traders who have done little to make the rest of us richer or more productive. Since we are bailing out their stupid bets, let us insist that from now on their investments serve our common future. We can no longer afford paper “investments” that merely represent a hope that since asset prices have gone up in the past, they will continue to do so forever.
The American Way
Bob Herbert of the New York Times writes: Pittsburgh--Late in the afternoon on Good Friday, in a cold, steady rain, a gray-haired 60-year-old woman sat shivering and praying on a stone step outside of 1016 Fairfield St., which is where the terrible shooting had occurred. She read from a prayer book and from time to time would take a drag on a soggy Newport cigarette. A candle flickered beside her as she prayed.
Police officers in a squad car a half-block away were keeping a close eye on the woman and the house with the boarded-up windows behind her.
Reluctant to talk at first, the woman eventually whispered, “I’m the grandmother of the kid that killed those cops.” She said her name was Catherine Scott and that she was praying for her grandson, Richard Poplawski, who is 22 and being held in the Allegheny County Jail, and for the three officers he is accused of gunning down: Stephen Mayhle, who was 29; Paul Sciullo II, 37; and Eric Kelly, 41.
The officers were killed a week and a half ago as they responded to a disturbance at the house. Police said they were met there by Poplawski, who was wearing a bulletproof vest and was armed with a variety of weapons, including an AK-47 assault rifle.
“My grandson did a terrible thing,” said Ms. Scott. “There is no mercy for what he did.”
Mercy or not, there is no end to the trauma and heartbreak caused by these horrifying, blood-drenched eruptions of gun violence, which are as common to the American scene as changes in the weather.
On the same day that the three Pittsburgh cops were murdered, a 34-year-old man in Graham, Wash., James Harrison, shot his five children to death and then killed himself. The children were identified by police as Maxine, 16, Samantha, 14, Jamie, 11, Heather, 8, and James, 7.
Just a day earlier, a man in Binghamton, N.Y., invaded a civic association and shot 17 people, 13 of them fatally, and then killed himself. On April 7, three days after the shootings in Pittsburgh and Graham, Wash., a man with a handgun in Priceville, Ala., murdered his wife, their 16-year-old daughter, his sister, and his sister’s 11-year-old son, before killing himself.
More? There’s always more. Four police officers in Oakland, Calif. — Dan Sakai, 35, Mark Dunakin, 40, John Hege, 41, and Ervin Romans, 43 — were shot to death last month by a 27-year-old parolee who was then shot to death by the police.
This is the American way. Since Sept. 11, 2001, when the country’s attention understandably turned to terrorism, nearly 120,000 Americans have been killed in nonterror homicides, most of them committed with guns. Think about it — 120,000 dead. That’s nearly 25 times the number of Americans killed in Iraq and Afghanistan.
For the most part, we pay no attention to this relentless carnage. The idea of doing something meaningful about the insane number of guns in circulation is a nonstarter. So what if eight kids are shot to death every day in America. So what if someone is killed by a gun every 17 minutes.
The goal of the National Rifle Association and a host of so-called conservative lawmakers is to get ever more guns into the hands of ever more people. Texas is one of a number of states considering bills to allow concealed guns on college campuses.
Supporters argue, among other things, that it will enable students and professors to defend themselves against mass murderers, like the deranged gunman who killed 32 people at Virginia Tech two years ago.
They’d like guns to be as ubiquitous as laptops or cellphones. One Texas lawmaker referred to unarmed people on campuses as “sitting ducks.”
The police department in Pittsburgh has been convulsed with grief over the loss of the three officers. Hardened detectives walked around with stunned looks on their faces and tears in their eyes.
“They all had families,” said Detective Antonio Ciummo, a father of four. “It’s hard to describe the kind of pain their families are going through. And the rest of our families. They’re upset. They’re sad. They’re scared. They know it could happen to anyone.”
The front page of The Pittsburgh Tribune-Review carried a large photo of Officer Mayhle’s sad and frightened 6-year-old daughter, Jennifer. She was clutching a rose and a teddy bear in a police officer’s uniform. There was also a photo of Officer Kelly’s widow, Marena, her eyes looking skyward, as if searching.
Murderous gunfire claims many more victims than those who are actually felled by the bullets. But all the expressions of horror at the violence and pity for the dead and those who loved them ring hollow in a society that is neither mature nor civilized enough to do anything about it.
source NY Times by Bob Herbert
Police officers in a squad car a half-block away were keeping a close eye on the woman and the house with the boarded-up windows behind her.
Reluctant to talk at first, the woman eventually whispered, “I’m the grandmother of the kid that killed those cops.” She said her name was Catherine Scott and that she was praying for her grandson, Richard Poplawski, who is 22 and being held in the Allegheny County Jail, and for the three officers he is accused of gunning down: Stephen Mayhle, who was 29; Paul Sciullo II, 37; and Eric Kelly, 41.
The officers were killed a week and a half ago as they responded to a disturbance at the house. Police said they were met there by Poplawski, who was wearing a bulletproof vest and was armed with a variety of weapons, including an AK-47 assault rifle.
“My grandson did a terrible thing,” said Ms. Scott. “There is no mercy for what he did.”
Mercy or not, there is no end to the trauma and heartbreak caused by these horrifying, blood-drenched eruptions of gun violence, which are as common to the American scene as changes in the weather.
On the same day that the three Pittsburgh cops were murdered, a 34-year-old man in Graham, Wash., James Harrison, shot his five children to death and then killed himself. The children were identified by police as Maxine, 16, Samantha, 14, Jamie, 11, Heather, 8, and James, 7.
Just a day earlier, a man in Binghamton, N.Y., invaded a civic association and shot 17 people, 13 of them fatally, and then killed himself. On April 7, three days after the shootings in Pittsburgh and Graham, Wash., a man with a handgun in Priceville, Ala., murdered his wife, their 16-year-old daughter, his sister, and his sister’s 11-year-old son, before killing himself.
More? There’s always more. Four police officers in Oakland, Calif. — Dan Sakai, 35, Mark Dunakin, 40, John Hege, 41, and Ervin Romans, 43 — were shot to death last month by a 27-year-old parolee who was then shot to death by the police.
This is the American way. Since Sept. 11, 2001, when the country’s attention understandably turned to terrorism, nearly 120,000 Americans have been killed in nonterror homicides, most of them committed with guns. Think about it — 120,000 dead. That’s nearly 25 times the number of Americans killed in Iraq and Afghanistan.
For the most part, we pay no attention to this relentless carnage. The idea of doing something meaningful about the insane number of guns in circulation is a nonstarter. So what if eight kids are shot to death every day in America. So what if someone is killed by a gun every 17 minutes.
The goal of the National Rifle Association and a host of so-called conservative lawmakers is to get ever more guns into the hands of ever more people. Texas is one of a number of states considering bills to allow concealed guns on college campuses.
Supporters argue, among other things, that it will enable students and professors to defend themselves against mass murderers, like the deranged gunman who killed 32 people at Virginia Tech two years ago.
They’d like guns to be as ubiquitous as laptops or cellphones. One Texas lawmaker referred to unarmed people on campuses as “sitting ducks.”
The police department in Pittsburgh has been convulsed with grief over the loss of the three officers. Hardened detectives walked around with stunned looks on their faces and tears in their eyes.
“They all had families,” said Detective Antonio Ciummo, a father of four. “It’s hard to describe the kind of pain their families are going through. And the rest of our families. They’re upset. They’re sad. They’re scared. They know it could happen to anyone.”
The front page of The Pittsburgh Tribune-Review carried a large photo of Officer Mayhle’s sad and frightened 6-year-old daughter, Jennifer. She was clutching a rose and a teddy bear in a police officer’s uniform. There was also a photo of Officer Kelly’s widow, Marena, her eyes looking skyward, as if searching.
Murderous gunfire claims many more victims than those who are actually felled by the bullets. But all the expressions of horror at the violence and pity for the dead and those who loved them ring hollow in a society that is neither mature nor civilized enough to do anything about it.
source NY Times by Bob Herbert
4.13.2009
Egg Roll At The White House
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4.12.2009
Excess pay reflects badly on directors
When it was announced last week that Home Depot chief Frank Blake would forgo his $1.2 million cash bonus for 2008, many in Atlanta’s business community couldn’t help but reflect on our very own poster child for the excessively compensated executive, Blake’s predecessor, Robert Nardelli.
Nardelli’s $32 million pay in his last year paled in comparison to his $210 million severance package.
You have to really want somebody to leave to pay that kind of walk-away money. But, from what I’ve heard, it was worth every penny.
Executive pay once again dominates the headlines. But executive pay was out of hand long before the financial meltdown.
Like the spoiled children you encounter in the grocery store, it’s not so much their fault as it is the person pushing the cart.
In this case, the board of directors.
John Bogle, founder of Vanguard and a tough-as-nails critic of the lack of corporate governance, took on the overindulged executives in his 2005 book, “The Battle for the Soul of Capitalism.” He showed that in 1980, the average CEO earned 42 times the average worker. By 2004, that had risen to 280 times.
Corporate profits grew at an average annual pace of only 2.9 percent during that time. So any way you slice it, the CEOs didn’t earn such a jump in pay.
Some say the explosion in executive pay was lit by the act of trying to limit it. In the 1990s, Congress capped the corporate tax deductibility for executive salaries in excess of $1 million.
Quicker than you can say stock options, those and other ingenious payouts led to an explosion in compensation packages. It also led to risky, short-term business strategies because the stock price was all that mattered.
While we may wish for some saintly regulator to swoop in and right all we think is wrong, we should be mindful of who assumes that duty in reality —- Congress.
If its work in the 1990s weren’t disqualification enough, surely its recent escapades are.
The House’s move to tax AIG’s bonuses was so unconstitutional as to be laughable, if it weren’t for the revelation they not only don’t read the bills they are voting on but haven’t read the Constitution (see Article 1, Section 9, Paragraph 3).
But if boards of directors aren’t up to the task, then government seems more than willing to do it for them.
Home Depot learned the hard way. The Nardelli flap embarrassed its board, employees, founders and Atlanta.
Blake’s total compensation for 2008 was $9.2 million, somewhere just above the median point in The Wall Street Journal’s current survey of CEO pay.
Still, $9.2 million is a long way from the Nardelli norm ($30 million average the last three years).
It should be noted that only three directors remain on Home Depot’s board from that period.
source: Atlanta Journal Constitution
Nardelli’s $32 million pay in his last year paled in comparison to his $210 million severance package.
You have to really want somebody to leave to pay that kind of walk-away money. But, from what I’ve heard, it was worth every penny.
Executive pay once again dominates the headlines. But executive pay was out of hand long before the financial meltdown.
Like the spoiled children you encounter in the grocery store, it’s not so much their fault as it is the person pushing the cart.
In this case, the board of directors.
John Bogle, founder of Vanguard and a tough-as-nails critic of the lack of corporate governance, took on the overindulged executives in his 2005 book, “The Battle for the Soul of Capitalism.” He showed that in 1980, the average CEO earned 42 times the average worker. By 2004, that had risen to 280 times.
Corporate profits grew at an average annual pace of only 2.9 percent during that time. So any way you slice it, the CEOs didn’t earn such a jump in pay.
Some say the explosion in executive pay was lit by the act of trying to limit it. In the 1990s, Congress capped the corporate tax deductibility for executive salaries in excess of $1 million.
Quicker than you can say stock options, those and other ingenious payouts led to an explosion in compensation packages. It also led to risky, short-term business strategies because the stock price was all that mattered.
While we may wish for some saintly regulator to swoop in and right all we think is wrong, we should be mindful of who assumes that duty in reality —- Congress.
If its work in the 1990s weren’t disqualification enough, surely its recent escapades are.
The House’s move to tax AIG’s bonuses was so unconstitutional as to be laughable, if it weren’t for the revelation they not only don’t read the bills they are voting on but haven’t read the Constitution (see Article 1, Section 9, Paragraph 3).
But if boards of directors aren’t up to the task, then government seems more than willing to do it for them.
Home Depot learned the hard way. The Nardelli flap embarrassed its board, employees, founders and Atlanta.
Blake’s total compensation for 2008 was $9.2 million, somewhere just above the median point in The Wall Street Journal’s current survey of CEO pay.
Still, $9.2 million is a long way from the Nardelli norm ($30 million average the last three years).
It should be noted that only three directors remain on Home Depot’s board from that period.
source: Atlanta Journal Constitution
Alabaster Box
There was a woman who was a notorious sinner in that city. When she learned that Jesus was eating at the Pharisee's home, she took an alabaster jar of perfume and knelt at his feet behind him. She was crying and began to wash his feet with her tears and dry them with her hair. Then she kissed his feet over and over again, anointing them constantly with the perfume.
Now the Pharisee who had invited Jesus saw this and said to himself, "If this man were a prophet, he would have known who is touching him and what kind of woman she is. She's a sinner!" (Luke 7:37 - 7:39)
Now the Pharisee who had invited Jesus saw this and said to himself, "If this man were a prophet, he would have known who is touching him and what kind of woman she is. She's a sinner!" (Luke 7:37 - 7:39)
4.11.2009
Steven Levitt: Why do crack dealers still live with their moms?
From the book Freakonomics "Chapter 3: Why Do Drug Dealers Still Live with Their Moms?":
Why experts routinely make up statistics; the invention of chronic halitosis . . . How to ask a good question . . . Sudhir Venkatesh's long, strange trip into the crack den . . . Life is a tournament . . . Why prostitutes earn more than architects . . . What a drug dealer, a high-school quarterback, and an editorial assistant have in common . . . How the invention of crack cocaine mirrored the invention of nylon stockings . . . Was crack the worst thing to hit black Americans since Jim Crow?
In other words, a crack gang works pretty much like the standard capitalist enterprise: you have to be near the top of the pyramid to make a big wage. Notwithstanding the leadership's rhetoric about the family nature of the business, the gang's wages are about as skewed as wages in corporate America. A foot soldier had plenty in common with a McDonald's burger flipper or a Wal-Mart shelf stocker. In fact, most of J. T.'s foot soldiers also held minimum-wage jobs in the legitimate sector to supplement their skimpy illicit earnings. The leader of another crack gang once told Venkatesh that he could easily afford to pay his foot soldiers more, but it wouldn't be prudent. "You got all these niggers below you who want your job, you dig?" he said. "So, you know, you try to take care of them, but you know, you also have to show them you the boss. You always have to get yours first, or else you really ain't no leader. If you start taking losses, they see you as weak and shit."
Along with the bad pay, the foot soldiers faced terrible job conditions. For starters, they had to stand on a street corner all day and do business with crackheads. (The gang members were strongly advised against using the product themselves, advice that was enforced by beatings if necessary.) Foot soldiers also risked arrest and, more worrisome, violence. Using the gang's financial documents and the rest of Venkatesh's research, it is possible to construct an adverse-events index of J. T.'s gang during the four years in question. The results are astonishingly bleak. If you were a member of J. T.'s gang for all four years, here is the typical fate you would have faced during that period:
In other words, a crack gang works pretty much like the standard capitalist enterprise: you have to be near the top of the pyramid to make a big wage. Notwithstanding the leadership's rhetoric about the family nature of the business, the gang's wages are about as skewed as wages in corporate America. A foot soldier had plenty in common with a McDonald's burger flipper or a Wal-Mart shelf stocker. In fact, most of J. T.'s foot soldiers also held minimum-wage jobs in the legitimate sector to supplement their skimpy illicit earnings. The leader of another crack gang once told Venkatesh that he could easily afford to pay his foot soldiers more, but it wouldn't be prudent. "You got all these niggers below you who want your job, you dig?" he said. "So, you know, you try to take care of them, but you know, you also have to show them you the boss. You always have to get yours first, or else you really ain't no leader. If you start taking losses, they see you as weak and shit."
Along with the bad pay, the foot soldiers faced terrible job conditions. For starters, they had to stand on a street corner all day and do business with crackheads. (The gang members were strongly advised against using the product themselves, advice that was enforced by beatings if necessary.) Foot soldiers also risked arrest and, more worrisome, violence. Using the gang's financial documents and the rest of Venkatesh's research, it is possible to construct an adverse-events index of J. T.'s gang during the four years in question. The results are astonishingly bleak. If you were a member of J. T.'s gang for all four years, here is the typical fate you would have faced during that period:
- Number of times arrested 5.9
- Number of nonfatal wounds or injuries 2.4 (not including injuries meted out by the gang itself for rules violations)
- Chance of being killed 1 in 4
A 1-in-4 chance of being killed! Compare these odds to being a timber cutter, which the Bureau of Labor Statistics calls the most dangerous job in the United States. Over four years' time, a timber cutter would stand only a 1-in-200 chance of being killed. Or compare the crack dealer's odds to those of a death row inmate in Texas, which executes more prisoners than any other state. In 2003, Texas put to death twenty-four inmates—or just 5 percent of the nearly 500 inmates on its death row during that time. Which means that you stand a greater chance of dying while dealing crack in a Chicago housing project than you do while sitting on death row in Texas. So if crack dealing is the most dangerous job in America, and if the salary is only $3.30 an hour, why on earth would anyone take such a job?
Creativity and Education
Sir Ken Robinson's newest book, The Element: How Finding Your Passion Changes Everything (Viking, 274 pages, $25.95)The Element, he examines a common thread in people that found what has become all to uncommon for the masses: the intersection of passion and creativity for their own lives. As Robinson says, "Most people have no idea of their true talents or what might give them their own sense of fulfillment."4.09.2009
WASHINGTON (AP) — Barack Obama is inviting close friends and staff to a private White House meal Thursday to mark Passover, part of the new president's effort to reach out to Jewish voters.
...The White House says the seder meal will be traditional, including matzo, bitter herbs, a roasted egg and greens in the family dining room in the executive mansion. The evening will feature the reading of the Haggadah, the religious text of the holiday.
Passover began at sundown Wednesday. It celebrates the Jewish exodus from Egypt after 400 years of slavery.
White House aides say they believe this is the first president-hosted seder at the White House. President Bill Clinton's aides planned seders, but Clinton isn't known to have attended.
Obama's move won quick praise from the National Jewish Democratic Council.
"By hosting the first presidential seder in America's history, President Barack Obama shows the personal and deep relationship he has with the Jewish community," said Alexis C. Rice, the group's deputy executive director.
...The White House says the seder meal will be traditional, including matzo, bitter herbs, a roasted egg and greens in the family dining room in the executive mansion. The evening will feature the reading of the Haggadah, the religious text of the holiday.
Passover began at sundown Wednesday. It celebrates the Jewish exodus from Egypt after 400 years of slavery.
White House aides say they believe this is the first president-hosted seder at the White House. President Bill Clinton's aides planned seders, but Clinton isn't known to have attended.
Obama's move won quick praise from the National Jewish Democratic Council.
"By hosting the first presidential seder in America's history, President Barack Obama shows the personal and deep relationship he has with the Jewish community," said Alexis C. Rice, the group's deputy executive director.
4.08.2009
10 Economic Principles
From the Financial Times, "Ten principles for a Black Swan-proof world," by Nassim Nicholas, Taleb (published: April 7 2009):
1. What is fragile should break early while it is still small. Nothing should ever become too big to fail. Evolution in economic life helps those with the maximum amount of hidden risks – and hence the most fragile – become the biggest.
2. No socialisation of losses and privatisation of gains. Whatever may need to be bailed out should be nationalised; whatever does not need a bail-out should be free, small and risk-bearing. We have managed to combine the worst of capitalism and socialism. In France in the 1980s, the socialists took over the banks. In the US in the 2000s, the banks took over the government. This is surreal.
3. People who were driving a school bus blindfolded (and crashed it) should never be given a new bus. The economics establishment (universities, regulators, central bankers, government officials, various organisations staffed with economists) lost its legitimacy with the failure of the system. It is irresponsible and foolish to put our trust in the ability of such experts to get us out of this mess. Instead, find the smart people whose hands are clean.
4. Do not let someone making an “incentive” bonus manage a nuclear plant – or your financial risks. Odds are he would cut every corner on safety to show “profits” while claiming to be “conservative”. Bonuses do not accommodate the hidden risks of blow-ups. It is the asymmetry of the bonus system that got us here. No incentives without disincentives: capitalism is about rewards and punishments, not just rewards.
5. Counter-balance complexity with simplicity. Complexity from globalisation and highly networked economic life needs to be countered by simplicity in financial products. The complex economy is already a form of leverage: the leverage of efficiency. Such systems survive thanks to slack and redundancy; adding debt produces wild and dangerous gyrations and leaves no room for error. Capitalism cannot avoid fads and bubbles: equity bubbles (as in 2000) have proved to be mild; debt bubbles are vicious.
6. Do not give children sticks of dynamite, even if they come with a warning . Complex derivatives need to be banned because nobody understands them and few are rational enough to know it. Citizens must be protected from themselves, from bankers selling them “hedging” products, and from gullible regulators who listen to economic theorists.
7. Only Ponzi schemes should depend on confidence. Governments should never need to “restore confidence”. Cascading rumours are a product of complex systems. Governments cannot stop the rumours. Simply, we need to be in a position to shrug off rumours, be robust in the face of them.
8. Do not give an addict more drugs if he has withdrawal pains. Using leverage to cure the problems of too much leverage is not homeopathy, it is denial. The debt crisis is not a temporary problem, it is a structural one. We need rehab.
9. Citizens should not depend on financial assets or fallible “expert” advice for their retirement. Economic life should be definancialised. We should learn not to use markets as storehouses of value: they do not harbour the certainties that normal citizens require. Citizens should experience anxiety about their own businesses (which they control), not their investments (which they do not control).
10. Make an omelette with the broken eggs. Finally, this crisis cannot be fixed with makeshift repairs, no more than a boat with a rotten hull can be fixed with ad-hoc patches. We need to rebuild the hull with new (stronger) materials; we will have to remake the system before it does so itself. Let us move voluntarily into Capitalism 2.0 by helping what needs to be broken break on its own, converting debt into equity, marginalising the economics and business school establishments, shutting down the “Nobel” in economics, banning leveraged buyouts, putting bankers where they belong, clawing back the bonuses of those who got us here, and teaching people to navigate a world with fewer certainties.
Then we will see an economic life closer to our biological environment: smaller companies, richer ecology, no leverage. A world in which entrepreneurs, not bankers, take the risks and companies are born and die every day without making the news.
In other words, a place more resistant to black swans.
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