Category Archives: Commentary

Madison, WI

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Hey there, just wanted to put out a quick update about the protests going on in Madison, WI. First, I support the right of public workers to unionize. Period. Second, I wonder whether comments like this will come back to burn Republicans:

“The people who are not around the Capitol square are with us,” said Rep. Robin Vos, a Republican from Rochester and co-chair of the Legislature’s budget committee. “They may have a bunch around the square, but we’ve got the rest on our side.”

Isn’t that what Mubarak’s people said in the earlier days of the uprising in Egypt?

Comments such as these should put all progressives in Wisconsin who are not out there protesting on notice. Don’t let them get away with this. Go protest if you can, or write these Republican politicians to let them know that while you may not be there, you are not “on their side.”

Which side are you on?

Citi’s Moral Hazard

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The Special Inspector General of the TARP has just released a report on the government’s role in saving Citigroup from failure. You can read the report here (PDF). If you are short on time, just skip down to the “Conclusions” section on p.47. While it appears that the govt. has profited by the bailout, the TARP legacy has left “too big to fail” intact. The following excerpt examines the danger still latent in the system:

When the Government assured the world in 2008 that it would use TARP to prevent the failure of any major financial institution, and then demonstrated its resolve by standing behind Citigroup, it did more than reassure troubled markets – it encouraged high-risk behavior by insulating the risk takers from the consequences of failure. Unless and until institutions like Citigroup are either broken up so that they are no longer a threat to the financial system, or a structure is put in place to assure that they will be left to suffer the full consequences of their own folly, the prospect of more bailouts will potentially fuel more bad behavior with potentially disastrous results.

Notwithstanding the passage of the Dodd-Frank Act, which does give FDIC new resolution authority for financial companies deemed systemically significant, the market still gives the largest financial institutions an advantage over their smaller counterparts. They are able to raise funds more cheaply, and enjoy enhanced credit ratings based on the assumption that the Government remains as a backstop. Specifically, creditors who believe that the Government will not allow such institutions to fail may under price their extensions of credit, giving those institutions access to capital at a price that does not fully account for the risk created by their behavior. Cheaper credit is effectively a subsidy, which translates into greater profits, giving the largest financial institutions an unearned advantage over their smaller competitors. And because of the prospect of another Government bailout, executives at such institutions might be motivated to take greater risks than they otherwise would, shooting for a big payoff but with reason to hope that if things went wrong they might still be able to keep their jobs.

I think that Citi’s moral hazard = America’s moral hazard. More thoughts on our current state of affairs soon.

Dear Mr. President

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You have recently indicated your willingness to extend tax breaks for the richest Americans in this time of great financial distress. In the spirit of bi-partisanship, as you so often trumpet, I’d like to remind you of some words from Theodore Roosevelt:

It is not the critic who counts: not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again, because there is no effort without error or shortcoming, but who knows the great enthusiasms, the great devotions, who spends himself for a worthy cause; who, at the best, knows, in the end, the triumph of high achievement, and who, at the worst, if he fails, at least he fails while daring greatly, so that his place shall never be with those cold and timid souls who knew neither victory nor defeat.

Are you a cold and timid soul, Mr. President?

For shame.

Autumn Update

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Well it is finally autumn down here in New Orleans. Unfortunately, my pumpkin rotted and I had to trash it. As the front sweeps away down here, the drama in the air is palpable. On most every front, there is a lot of heady shit going down. For instance, it appears that Halliburton was indeed the culprit behind the Deepwater Horizon disaster. This is the same corporation that has been defrauding American taxpayers for years. Pause for a moment and consider the recent news that GlaxoSmithKlien had been ordered to pay a $750 M fine for selling tainted drugs. The settlement, negotiated with the DOJ, was for civil and criminal penalties. I begin to wonder whether this is just the “cost of doing business,” at least when you are out to poison people anyway. The fine is a landmark, though, and I’ll take it. My mini-course on the Foreign Corrupt Practices Act (FCPA) touched upon many of these themes. Were the DOJ to tackle Halliburton, the Federal Govt. could just possibly recover some of the assets sucked up by the Cheney network.

On top of this (already old) news, we’re also in an election season… yay! Luckily I don’t watch much network TV, so I’m spared most of the local ads. What I do see is that a crazed movement, two parts sheer ignorance and one part racism, is out to wreak great havoc. As a soon to be young lawyer, I’m hoping that things don’t go completely off the rails. Did you know that a question on the Massachusetts ballet would reduce revenue thereby necessitating major service cuts on the T? Whatever. The Taxes are Too Damn High! Last stop, Brighton Beach.

But there are also some signs of hope, particularly in California. Now, California has really become a dysfunctional mess of late; however, it’s importance to America necessitates an optimism about the Golden State. California may legalize the recreational use of marijuana. Given the violence and collateral damage of the “war on drugs,” isn’t it time we re-thought or national policies? Geez. Should this pass, I’d like to see what Justice does about it. Perhaps the deeper question here is whether/how we can transition from a military industrial complex to a R&D industrial complex. The U.S. is lagging way behind its peers on these expenditures. We do, however, get royally ripped off by our B.S. healthcare system and our lousy educational system (at least for the poor).

Federalism, a concept most “tea partiers” do not care to understand, allows the states to serve as laboratories of democracy. It also constructs, or concedes, certain functions to the federal government. I’m not so cynical to say that this system can no longer function, but I’m not so blind to see how it has been severely perverted. America has become somewhat perverted. We can’t even change unconscionable, legally deficient policies? Obama’s got to heat back up, because his bi-partisanship has really slowed things to a glacial crawl. Actually, I’ll take that back; the glaciers are probably chipping away at an increased rate these days… again, whatever. Kick in the crotch!

So, let us celebrate that we may (and really must) vote, get dressed up/down for halloween, and eat one too many tootsie rolls. Toast some apple cider, spiced or otherwise, to the possibility that this may be our last best chance.

~WD