Settlement Conferences In Arkansas?

I sent the following message to Robbie Wills, the Speaker of the Arkansas House.

I was reading an article on BNET about home foreclosures. Let me quote:
Under a New York state law passed in 2008, banks and mortgage services must meet with subprime mortgage holders in a “settlement conference” before a foreclosure case goes to trial. The goal is for lenders and borrowers to come up with an equitable way to keep people in their homes without breaking the bank.
http://industry.bnet.com/financial-services/10005770/lenders-flout-law-aimed-at-saving-homeowners-from-foreclosure/

I like that idea. I have many students who have mortgage problems and none have ever mentioned a settlement conference so I assume Arkansas has no such law. Could we do something like that? Those people could use some help.
James Pilant

Heads I Win, Tails You Lose

According to a McClatchy investigation, Goldman Sachs begin creating a new form of security in 2006. These “investments” were placed off shore in the Cayman Islands. The investments were high grade securities based on home mortgages but there was a catch. They insured these collateralized debt obligations so that the investors were on hook to cover their losses. The investors thought they were getting good investments but instead they were investing in the real estate bubble. If they lost as Goldman Sachs might have concluded was highly likely, the investors were required by contract to cover the losses. The contracts literally converted the investors into insurers. They insured that Goldman Sach would make money whether the investments did well or collapsed.

I recommend you give it a read.

Collateralized debt obligations are the chief weapon that destroyed the financial security of millions of Americans as well as countless others around the world. The McClatchy articles are an excellent way to begin to understand these strange forms of investments

$35,000 Toilet

Full of it?

From CNBC -

When John Thain became Merrill Lynch’s CEO in early 2008, he hired Michael S. Smith Design to revamp his office suite, spending approximately $1.22 million according to documents.

Additionally, documents showed that Thain signed off on the purchases personally, and that he used over $30,000 to pay the expenses Smith incurred in doing the work.

The following is a list of the items in his suite:

• Area Rug $87,784 Mahogany Pedestal Table $25,713
• 19th Century Credenza $68,179
• Pendant Light Furniture $19,751
• 4 Pairs of Curtains $28,091
• Pair of Guest Chairs $87,784
• George IV Chair $18,468
• 6 Wall Sconces $2,741
• Parchment Waste Can $1,405
• Roman Shade Fabric $10,967
• Roman Shades $7,315
• Coffee Table $5,852
• Commode on Legs $35,115

Under Thain’s Leadership Merrily Lynch lost billions of dollars and company was sold to Bank of America.

A moral fable? Maybe people with too much of a sense of entitlement are not good leadership? Is spending money with poor judgment a positive in a CEO?

James Pilant

Tolstoi

I’ve been reading Garnett’s Wisdom in Conduct. He talks about Tolstoi and his five rules being an oversimplification. I admire Tolstoi but I have to agree with Garnett. These kind of platitudening (if you don’t mind me inventing a word) is all too common. If we just did this or that following these simple rules the world would be a better place. Most of the rules suggest that we need to be nicer than we are now.

I am strongly opposed to simple niceness. We can do things better not nicer. Niceness is not a cause worthy to fight for. Being a better and a kinder person has its place. For instance, I often tell my students that each of us has a story, the story of our lives. Few ever get to tell the story to anyone at any time, because most of us are too wrapped up in ourselves to listen the sounds of anybody else’s beating heart. Kind of a pity, really. We have a lot to say. On the other hand, we have a lot of nonsense we talk about habitually, time killers, social recognitions, maintenance phrases (how’s the weather, etc.) and sometimes we take the serious, (I love you), and make it trivial.

The story of one’s life we should encourage and pay attention to; the trivial and annoying we should ignore and discourage. Both involve strength and judgment. Neither are just being nice. In fact, nice, may be fairly pointless unless translated with more specificity, like kindness, caring, compassion, etc.

Bank Bailout Estimated Cost: 14 Trillion +

According to a report by Nomi Prins and Krisztina Ugrin, the money paid out to save the banking industry is currently 14 trillion dollars while the money paid out in the stimulus and other responses to the economic crisis total almost 2 trillion dollars. So, the banking industry gets 14 trillion and regular Americans get a little less than 2 trillion scattered over hundreds of programs. Did you know that we can pay off every sub prime mortgage in the United States for 1.4 trillion? Did you know that our total exposure as a nation under the bank bailout could run as high as 23.7 trillion?
Are you feeling uncomfortable yet?

 

 

 

The Greatest Book Ever Dealing With Corporate Crime

In 1908, Gustavus Myers, published History of the Great American Fortunes. It’s a very large work but much of what it has to say is as relevant now as it was then. For instance, he talks about the transfer of the public domain to private interests as quick way to personal riches. That has not changed.

Project Gutenberg has the complete work unfortunately mistitled Great Fortunes From Railroads. If you’re serious about the study of business ethics, you need to read it, all 712 pages of it.

A New Model?

The impact of the new technologies, even something as ubiquitous as e-mail have only begun to be felt in many parts of society. For instance, take shareholder voting. Usually, this ratifies selection of the board of directors and takes place once a year. This is a reflection of the difficulty of getting all the shareholders together to vote or was. Really, it’s obsolete. Shareholders should be empowered by the new technologies and there should be multiple votes each year. For instance, the extravagant pay and benefits offered CEO’s and other officers of the company might require ratification by the shareholders instead of being chosen by a board of compensation often appointed by the CEO himself.

What about government? How many places could the government in this country empower citizens to make a difference in the decision making. Right now, floods of e-mails are fired in whenever a major issue appears. But we can do better. I believe right now we have the technology to eliminate fake e-mails and other nonsense from the process. If one of my websites can screen out spam and confirm my identity so I can download modifications to my video games, surely a congressional office can do the same. I don’t think they want to do this. Floods of e-mail enable a representative to vote anyway they like. Accurate e-mails reflecting the actual views of the citizens, particularly the most energized and interest citizens would likely reflect real public concerns and handicap a representative freedom to do any act they wish for any constituency for instance a corporation having made large campaign contributions.

We don’t think about these things. We act as if the world were connected by horse drawn vehicles from another age when people communicate with every part of the world in tenths of a second. Let’s start thinking and start building a society where people matter.

James Pilant

China targeting 8% growth in 2010 ?

That’s the BBC headline. My question is how accurate is it? We aren’t talking about a Western Democracy. This is almost the last of its kind, a communist state. It is easy to find numerous web sites discussing the lack of accuracy and inflated claims made by the Soviet Government during its time. Eastern European Communits countries have a similar dismal record of accuracy. When China’s Great Leap Forward had already become a disaster (1956) government statistics showed it to be a great success. Now that foreign investment, exports and international agreements are on the line, is the temptation less? It was explained to me over and over again by many news articles and “analysis” (sometimes even by my Chinese students) that China would be the big winner during the world economic crisis, that it was immune to economic downturn. If that is so, why did the Chinese Government create a 586 billion (U.S.) dollar stimulus package for its economy?

What about the issue of corruption? The only real information about the critical nature of corruption is anecdotal. Try these two stories. About 80% of the foreign money sent to help survivors of the earthquake in 2009 wound up in the hands of the government. Researchers estimate that 73 billion dollars a year are spent on government banquets.

How about this quote from the Carnegie International Endowment for Peace:

Failure to contain endemic corruption among Chinese officials poses one of the most serious threats to the nation’s future economic and political stability, says a new report from the Carnegie Endowment. Minxin Pei, an expert on economic reform and governance in China, argues that corruption not only fuels social unrest and contributes to the rise in socioeconomic inequality, but holds major implications beyond its borders for foreign investment, international law, and environmental protection.

Are Chinese economic statistics accurate? I have my doubts. What about the greater question? Is China going to be the next world superpower? My prediction is no. There are too many geographic, foreign policy, economic  and cultural difficulties for the country to maintain its stability for even the next decade.

James Pilant

America: What Went Wrong? A Retrospective

The book was published just before the 1992 election. How prophetic was the book? At several points it makes predictions. On page 106, the authors point to the disastrous deregulation of the airlines, the trucking industry and the savings and loans. They point out that Bush 1, was calling for banking deregulation, a project that took another eight years to complete. Let me quote the book:

Now, the people who rewrote the government rule book to deregulate airlines, trucking and savings and loans are about to rewrite the rule on banks. They call it banking reform. President Bush spelled out the plans in February 1991: “Regulatory reform is long overdue. Our banking reform proposals … address the reality of the modern financial marketplace by creating a U.S. financial system that protects taxpayers, serves consumers and strengthens our economy.”

Sound familiar? It should. The arguments for deregulating banks are much the same as those that were made in the 1970s and 1980s for the other industries: Removing government restrictions on the private sector would let free and open competition rule the marketplace. Getting rid of regulations would spur the growth of new companies. Existing companies would become more efficient or perish. Competition would create jobs, drive down prices and benefit consumers and businesses alike.

But it would take another President, this time, a Democrat, Bill Clinton, to finish the job of deregulating the banks and setting the stage for a worldwide financial calamity.

I want to give full credit and much deserved praise to Donald L. Bartlett and James B. Steele for their excellent award-winning effort in this book.

Christian Business Ethics Principles

Wayne A. Grudem in his blog post on the web site, Compassion in Politics writes his concept of seven critical components of Christian Business Ethics Principles. You might give this a look. I do not agree with these but I consider them useful.