Thursday, December 31, 2009

That’s Too Much Information

“The National Security Agency", the eavesdropping agency, tracking e-mail and cellphone traffic around the world, each day collects four times the volume of information stored in the Library of Congress…said Matthew M. Aid, an intelligence historian whose book, ‘The Secret Sentry,’ examines the N.S.A.” December 31st New York Times. After 9/11, we created an über-agency, the National Counterterrorism Center , just outside Washington , D.C. (in Virginia ), to coordinate all of the relevant intelligence and insure maximum cooperation between and among all of the relevant governmental agencies on this super-sensitive mission. But what exactly do you do with mountains of intelligence, showing lots of threats, when following every lead would grind the government to a fatalistic halt?


Still the agencies don’t really share all the information, still the airplane is the favored “terror-delivery mechanism” of our sworn al Qaeda enemies (and their ilk) – they seem to thrive on public transportation in general, and still the governmental turf wars continue (particularly between the CIA and the FBI). There is much that must be improved. But we are also in danger in overreacting in a way that may assuage some that we are safe, but which may in fact provide costly additional layers of relatively ineffective preventative measures. Bottom line, if a terrorist knows that he or she cannot follow one path because it is too well-guarded, they will simply find another way. And since they have clearly shown that their human bombs are totally expendable, they can continue to throw their explosive minions at us until one or more connect.


But who’s kidding whom here… sooner or later there is going to be another major terrorist attack in the United States, innocents are going to be slaughtered, and even the best-intentioned preventative system in the world can’t stop every possible threat. The land is too vast, ingress (one way or another) is just too easy and the numbers of people that must be watched is too great for us to be able to stop it all, Dick Cheney’s admonitions to the contrary notwithstanding. That al Qaeda can still strike where we have deployed the greatest internal measures at extreme costs (air travel) has to send a pretty strong signal to all of us.


For us to control it all requires that we suspend the Constitution and track the conversations and movements of everyone in this country and everyone who might travel here… destroying our economy in the process (a bigger victory for al Qaeda, don’t you think, than any bomb could inflict?). We live in a modern age with modern-age risks. We have to balance protecting ourselves against a complete erosion of who we are as Americans. And if you think we face horrible risks here, imagine what life is like for the average Israeli.

The President has ordered a major review of the failure that allowed Nigerian crotch-bomber, Umar Farouk Abdulmutallab, trained by al Qaeda in Yemen, to carry explosives onto a Detroit-bound jet on Christmas for the expressed intent to detonate and devastate. Déjà vu, 9/11-shoe bomber all over again. “‘It’s totally frustrating,’ said Thomas H. Kean, chairman of the national Sept. 11 commission. ‘It’s almost like the words being used to describe what went wrong are exactly the same.’… Eleanor Hill, staff director of the joint Congressional inquiry into Sept. 11, called the emerging story ‘eerily similar to the disconnects and missteps we investigated.’… ‘There seems to have been the same failure to put the pieces of the puzzle together and get them to the right people in time,’ Ms. Hill said.” New York Times.

Notwithstanding appearances to the contrary, things are getting better, but the system is just overwhelmed. “Intelligence analysts from one agency now routinely serve for a time in another agency, to develop personal ties. Databases of suspected terrorists are far more complete and accessible. The ban on hoarding data is strictly enforced... ‘It is the death penalty if you are not sharing threat information,’ said Kip Hawley, who headed the Transportation Security Administration until January. That agency, for example, participates in daily briefings run by the counterterrorism center, and at times National Security Agency analysts visit counterparts at the T.S.A. to walk them through intercepts, he said.” The Times.

Yet we see the same “missed warnings”… the bomber’s own father issuing one of the cautions that was disregarded. We note what information was not shared, even though one agency clearly had knowledge of some relevant “nasties.” Can every lead be followed? We make foreign travelers go through so many hoops that we are killing our tourism industry during an economic period when we need every penny. We are even killing off the incentives for domestic travel as airline stocks teeter. And if we are trying to defeat these “inglorious basterds” as they try and suck the life out of us, how far should we destroy our lifestyle to accommodate our fears?

I’m Peter Dekom, and I approve this message.


Wednesday, December 30, 2009

Airport Porn


I can see the ads for new TSA personnel now: “Voyeurs - who love looking for weapons -wanted. See more people naked than any Internet site imaginable. Applicants must be willing to peer endlessly at naked human shapes for hours, eye stamina required.” There are government pervs out there who could not be more grateful to al Qaeda, shoe and crotch bombers, for providing paid voyeur entertainment, with full government job security and benefits.

“Bottom” line, having full body scanners at just about every U.S. airport (and a whole host of airports overseas – the Dutch have “embraced” the technology, and Israel adds super-expert, psychological profilers to their “scanning” system) is going to be just another ordinary fact of life for American travelers. Will this deter anyone from traveling, further tanking the fragile balance sheets of teetering airline stocks? Guess! But think of the positive impact on air pollution emission – those “wide-bodied” craft suck down tons of jet fuel.

For the curious (and those seeking where to invest a buck or two), there are two predominant systems: Millimeter-wave (which uses a radar-like bounce-back wave transmission that creates a computer image of your body) and Backscatter x-ray (which uses an ultra-mild x-ray that bounces off your body and the objects you are carrying to define an image). We are assured that neither of these systems creates any toxicity; but they both use fairly harmless radiation.

The December 30th FastCompany.com tells us the ugly truth about this intrusion into our privacy: “Then there's the awkward bit: While these things do certainly reveal your weapons...they also reveal your body. In detail. Down to the furry bits. And, given that they're going to have to be human-operated (with some computer assistance, for sure, but still man-in-the-loop) like the baggage machines, that means you're effectively going to be taking your clothes off for a TSA guy/gal (and how long before there's a law suit about there being no TSA girls on duty to scan women for a particular flight?) Yup--that's a stranger, a government employee. And one who's almost certainly empowered to arrange for you to be thrown in jail if you object or are, in these stupidly super-sensitive times, deemed as being ‘uncooperative.’

“The privacy implications of all this have worried individuals and pressure groups for ages, and since the machines are also being trialed for use in situations other than airports, a new lawsuit ... has just been brought against the Department of Justice concerning the illegal strip-search nature of the technology.” If our government is in the business of promoting transparency, these puppies deliver! “Hey, buddy, I can see right through you,” has an entirely new meaning. Wives, mothers, sisters and girlfriends all on display! Now if only the government could create a scanner that could work on Wall Street, an arena capable of inflicting trillions of dollars of damage to the American system!

The most recent “fomenter of seemingly justifiable profound intrusion by government” is 23-year-old Nigerian Umar Farouk Abdulmutallab, who is accused of trying to blow up a plane descending into Detroit on Christmas Day in the name of Al Qaeda. He added explosive crotch covers to shoe soles into the panoply of “weird places to hide bad stuff.” He will be able to sit (after healing) in his prison cell, an unwelcome guest of U.S. taxpayers, and contemplate how his actions have further, and seemingly permanently, disrupted the lives of ordinary Americans taking ordinary trips… those fat cats in private jets, well, life is always different at the top.

So for anyone old enough or who has looked at the history of the era, picture the reaction of all those civil libertarians of the 1960s who, sometimes with reason, feared excessive government intrusion into our privacy. Imagine dropping one of those dudes into a 2010 modern international airport in the U.S. Yeah, they’d be taken away in handcuffs, and litigation – creating needed jobs for unemployed lawyers – would proliferate.

The fact is, when you look at the routine bombings in Baghdad, the seemingly unchecked success of the Taliban in Afghanistan and Pakistan, the free range that folks like al Qaeda’s “never caught” fugitive leader, Osama bin Laden, seem to enjoy and how our daily lives – from airport travel to huge federal budget deficits – have changed for the worse, it’s hard to say that we are winning the war against these terrorists. They seem to have the consistent upper hand. It just goes to show how, in a modern world, it just doesn’t take that many desperate and violent people to create massive hardship and tremendous economic costs. But if every time there is an “incident,” exactly how far do we really want to go to change our lives for the worse? When is enough… enough?

I’m Peter Dekom, and I approve this message.

Tuesday, December 29, 2009

Jabbar, Meet Barry


On June 20, 2004, Marianne Bertrand and Sendhil Mullainathan, of the prestigious Graduate School of Business at the University of Chicago, released a report in the American Economic Review – entitled Are Emily and Greg More Employable than Lakisha and Jamal? A Field Study on Labor Market Discrimination – that sent shock-waves through the human resources/ employment market. By using very controlled techniques – significantly by using resumes with “vanilla” names and others with names clearly associated with African-Americans – the study proved rather conclusively that job discrimination based on race continues to be a major fact of life for most Black Americans.

Bottom line, the report concluded, “Whites receive 50% more callbacks for interviews. Callbacks are also more responsive to resume quality for White names than for African American ones. The racial gap is uniform across occupation, industry and employer size. We also find little evidence that employers are inferring social class from the names.”

But 2004 was a different time – long before the current meltdown – and the study heightened awareness in the employment community… or did it? Exactly what did the financial crisis of the last few years do for the African American labor market, particularly for those young men and women from this minority community who made their way through college, many from the most prestigious universities in America?

Employment for the uneducated and untrained, comparing Whites to Blacks, didn’t budge remotely by the same percentage that the educated were impacted; the Bureau of Labor Statistics noted that in 2009 Black male college grads over 25 were almost twice as likely to be unemployed as their White counterparts – 8.4% versus 4.4%, respectively. Stunned that college may not have broken down employment barriers and may have subjected Black Americans to new and equally pernicious discrimination barriers? In short, a college education for an African American male widens the unemployment gap with comparable Whites, while remaining under- or uneducated does not! This, in a country that elected a Black man to be President of the United States?!

And when it comes to supervisorial jobs, Blacks and women still hit glass – or brick – ceilings: “A more recent study[September 2006], published… in The Journal of Labor Economics found white, Asian and Hispanic managers tended to hire more whites and fewer blacks than black managers did...There is also the matter of how many jobs, especially higher-level ones, are never even posted and depend on word-of-mouth and informal networks, in many cases leaving blacks at a disadvantage. A recent study [Networks of Opportunity: Gender, Race and Job Leads, August 2009 Caliber, University of California Press] published in the academic journal Social Problems found that white males receive substantially more job leads for high-level supervisory positions than women and members of minorities.” New York Times (Nov. 30)

The Times also provides anecdotal information from three young college-educated Blacks, Johnny R. Williams (MBA, University of Chicago), Barry Jabbar Sykes (a math major from traditionally Black Morehouse College) and Terelle Hairston (a Yale grad). All three were having problems getting interviews and callbacks, seemingly based on names and descriptions in their resumes suggesting that they were African American. Williams deleted the resume reference to his participation in an African American business students association. The technique worked, and when a money management firm in Dallas invited him to any interview, excited that they had finally attracted a grad from a top business school, they were stunned to meet him in person: “ ‘Their eyes kind of hit the ceiling a bit,’ he said. ‘It was kind of quiet for about 45 seconds.’ … The company’s interest in him quickly cooled, setting off the inevitable questions in his mind.”

Sykes lost the name by which most people knew him – Jabbar – and became Barry J. Sykes. He continues his search in the information technology field, where people with his math skills are still desperately needed. Hairston even worries about telephone interviews: “It does weigh on you in the search because you’re wondering, how much is race playing a factor in whether I’m even getting a first call, or whether I’m even getting an in-person interview once they hear my voice and they know I’m probably African-American?” Tough times often bring out the worst in many of us, but I am still appalled. What would you say to any of these young, accomplished Black men if you looked them in the eye?

I’m Peter Dekom, and I thought you might want to know.

Monday, December 28, 2009

Ciudad Juarez


Mexican President Felipe Calderón called this border city of 1.3 million people – across from El Paso, Texas – the “tip of the spear” of an effort aimed at extinguishing the dominance of major drug cartels that hold sway over this critical town… smack on one of the main drug trafficking routes from Mexico to the U.S. Two years ago, Calderón sent 10,000 military troops into Juarez to deal with crooked cops and politicians, paid well to look the other way. The U.S. backed these efforts with financial and military aid, from guns and helicopters to money to pay and train the necessary troops.

But so far, these efforts have provided a violent nightmare, while the drug cartels appear stronger than ever. Here are a few disturbing facts about this murderous city as reported in the December 26th Washington Post:

· Thirty Juarez police officers have been killed this year; most were hunted down in their homes, according to police officials.

· With more than 2,500 homicides, Juarez accounts for more than one-third of the 6,000 drug-related murders in Mexico this year; since April, when a surge of federal troops brought a brief lull in the death toll, the city has resumed a pace of eight to 10 murders a day. The violence has also spilled over into the suburban neighborhoods of El Paso.

· Two-thirds of those killed violently in Juarez are between 14 and 24 years old.

· The city estimates that the violence has created 7,000 orphans and displaced 100,000 people, many of whom have fled across the Rio Grande to Texas. Most of the members of the business and political elite of Juarez, including the mayor, now either sleep or maintain a second home in El Paso. The chief human rights advocate also retreated across the river.

· In a macabre daily ritual, assassins now appear to time their killings so that they get play on the afternoon and evening television news shows, according to Jaime Torres, a spokesman on public security for the Juarez government and former news director.

· Well-known prosecutors, professors, attorneys, doctors, executives and journalists have been assassinated. Victims also include a growing number of small-shop owners because extortion is rampant; [just before Christmas,] an elderly woman selling burritos at a busy intersection near the tourist zone was shot dead. Police counted 36 shell casings at the scene.

In short, this massive military push seems to be a bust. Arms still flow like water south from U.S. border states into Mexico, and U.S. drug users continue to suck the toxic narcotics up and over the border, fattening drug lords and lining their pockets with gold. And the casualties continue to mount.

There are those who call for an even greater concentration of troops, for to fail now would be to acknowledge the hopelessness of defeating the powerful Mexican drug cartels. The recent slaughter of a Mexican marine’s family in retribution for the slaying of a major drug kingpin off the Mexican coast is just a sign as to who really seems to have the upper hand in this contest. Others believe that the battle to stop drugs flowing into the U.S. is not a Mexican priority, and that withdrawing troops from Juarez might vastly reduce the violence. Or this alternative: “The head of the powerful business organization that represents the local assembly factories, or maquiladoras, recently called for the United Nations to send blue-helmeted peacekeeping soldiers to Juarez.” The Post. It really is a civil war – criminal gangs with enough power to threaten the very existence of a democratically elected government.

Many questions are being asked on both side of the border. What would happen if narcotics were controlled the way alcohol sales are dealt with? Are we begging for a “stoner” population with lost ambition, irresponsible ethics and an expansion of the welfare state? Or would we simply be taking the incentive out of a criminal activity that thrives of the high prices generated simply because drugs are illegal?

The Mexican government has begun a major interagency review of this two-year, U.S.-backed Mexican military invasion of Juarez. American and Mexican officials admit that these efforts have simply failed to stem the incredible volume of violence and criminal activity in this border region; if anything, the situation may even be worse than what existed before the military intervention. It’s a period of “serious reassessment.” There clearly are no easy answers, but life in many parts of Mexico has become intolerable for so many… and that violence is now spilling over into American border towns as well.

I’m Peter Dekom, and I thought you might be interested.

Sunday, December 27, 2009

Con-Flicted!

Words from the wise to the young, entry-level lawyer: beware of the “poor country lawyer.” That slow-talkin’, idiom-usin’, drawlin’ country bumpkin with a devilish twinkle in his/her eye will most probably eat your young liver is a whirl of charm before a local jury in a matter being heard before a local judge. Red alert, this is not a drill. They’re the ones likely to send their clients for a “consultation” to all of the other top local competitor lawyers… so that no one competent from the local bar can ever represent the other side. You see, once a lawyer has been consulted on a case, even before being retained, they have a serious conflict of interest… so they can’t represent the “other side” without consent of the party that interviewed them. Clever, these folks.

And so it is with Washington, D.C. With so much technological, legal and financial complexity passing before so many administrative bodies and even Congress, our friendly federal government is filled with task forces, advisory committees and special purpose advisors to one governmental executive (including the President) or another. Clearly, the most educated and informed members of these advisory boards, however they are constituted, are either academics or, more likely, members of the industry in question with years of specialized knowledge based on their expertise and their experience.

For years, the industries under government regulation or scrutiny have been more than happy to supply their experts to explain the inner workings of their industry and underlying processes to the relevant government functionaries; after all, they wouldn’t want the government to misunderstand the intimate requirements of their business operations. And yes, gotta admit it, it is these same business sectors that, whether as trade associations or individual businesses, have found numerous ways to “support” those elected to Congress or, perish the thought, the Presidency itself. Political Action Committees. Campaign contributions. Fund raisers. Stuff. They’re very much like those poor country lawyers… and they’re here to help you.

Funny that even some of the academics on these federal advisory panels may also perform some heavy consulting for the industries that they study or provide inventive value to. Those who are exceptionally good at “explaining” a particular business and are sufficiently versed in the nuances of their “sector” (they can respond in an instant to a pointed question) are often engaged as lobbyists – and actually have to register as same with the feds – for their particular industry or business. To Washingtonians, these are the boys and girls from “K Street,” an avenue well-known for the plethora of insider lobbyists whose offices proliferate particularly on this downtown D.C. boulevard.

For years, it has been standard procedure for industry to supply these exceptionally well-informed lobbyists to the government to participate on so many of these often unpaid advisory panels, charged with providing nuanced essential information to various governmental bodies, particularly administrative agencies, Congressional subcommittees and the President of the United States. With an addiction that seems to mirror dependence on heroin, the U.S. government has developed a rather in-depth dependence on these lobbyist/experts in forming policy, fashioning legislation and creating administrative rules to operate the entire incentivizing/ regulatory schema of the U.S. government.

Until now. This fall, the Obama administration, the White House ethics counsel, Norm Eisen, slipped a new rule out into the ether, curtailing the ability of registered lobbyists to continue to serve on such federal advisory panels, paralleling other new rules limiting the ability of lobbyists to work in the Obama administration or to negotiate contracts involving the stimulus package. The November 26th Washington Post: “Under the policy, which is being phased in over the coming months, none of the more than 13,000 lobbyists in Washington would be able to hold seats on the committees, which advise agencies on trade rules, troop levels, environmental regulations, consumer protections and thousands of other government policies… According to the most recent estimates from the General Services Administration, 52 government agencies use 915 advisory committees organized under the law, with a total membership of more than 60,000. Other estimates put the figure at about 1,000 panels. Federal officials say they do not know how many panel members are lobbyists.”

Needless to say, the lobbyists, good at arguing their causes in the first place, are crying foul and telling the government that it is effectively depriving itself of the best experts in the relevant fields. One such reaction; “‘It's taken me years to learn what the General Agreement on Tariffs and Trade is,’ said Robert Vastine, a lobbyist for the Coalition of Service Industries who also serves as chairman of a trade advisory board. ‘It's a whole different and specialized world. It is not easily obtained knowledge, and they are crippling themselves terribly by ruling out all registered lobbyists.’” The Post.

The other side? “‘If the result of this new approach is that business owners join the conversation in D.C. about issues affecting them, that's fine,’ [White House ethics counsel Norm] Eisen said in an interview. ‘It's healthy to move away from the professional advocates for the special interests and let some new voices be heard.’” Or this response: “‘You may lose a lot of expertise, but these people are also paid to have a point of view; they have an agenda,’ said Mary Boyle, a vice president at Common Cause. ‘We support what the administration is doing to get deep-seated special interests out of the business of running our government, so this seems like a step in the right direction.’” The Post. What’s your opinion? Guess mine!

I’m Peter Dekom, and I approve this message.


Saturday, December 26, 2009

I Win, I Win, You Lose, Boy Do You Lose


Customers (er… sometimes known as clients) are sold complex new financial instruments for their pension plans, investment portfolios, etc. that are difficult to understand, hard to value without serious expertise in a relatively new field, but are strongly recommended by a trusted stockbroker, investment advisor or financial expert working for a rock-solid financial institution with an apparently impeccable reputation. Add to that seeming powerful combination that imprimatur of seeming safety, the stellar credit rating from a stellar credit rating agency. Insert investor drool. Add big institutional investor drool – pension funds, university endowments, trust funds, hedge funds, etc.

Add a few more touches. The investment instrument is actually a bundle created by the same financial institution that is recommending the “buy,” and the broker/advisor tells you that they are investing in that asset as well. The safety? While individual loans and/or lines of credit may be risky, when these loans are bundled, you get “safety in numbers.” They even have some cool names for these bundled loans: collateralized debt obligations (CDOs) or mortgage backed securities or something like that. Derivatives – investment units based on the performance of some form of market trend or aggregation. Good investment the buyers are told.

What the investor/buyers were not told? Does the underlying institution have the same confidence in the market you are being sold that they are telling you? Are they protecting themselves in any way against failure that they aren’t letting you in on, because it would undermine your confidence in your decision to buy that new credit bundled derivative? Or do they have an advantage, once the market falls, that you do not? Maybe that the financial institution has taken out its own “insurance policy” (in the form of a credit default swap – CDS) against failure on their share of the investment… Or, how’s this for chutzpah, that same financial institution, famous for inventive minds constantly finding new bundles of complex financial assumption that can be traded as well, creates a new derivative that actually bets that the very instruments sold based on aggregated debt note above will fall in value. In “short,” the financial institution makes a bundle when your bundle of aggregated debt falls, and when your aggregated debt crashes and burns, the financial institution makes a “killing” in the rise of the value of their “bet” (or short) against your investment.

Some investment banks bet heavily on the credit bundles without the off-setting “hedge bet.” Bearn Stearns. Lehman Brothers. Etc. But the New York Times tells us of the story of how one rising star in the financial world protected his institution from the same fate: “In late October 2007, as the financial markets were starting to come unglued, a Goldman Sachs trader, Jonathan M. Egol, received very good news. At 37, he was named a managing director [the ultimate brass ring job, if you will] at the firm… Mr. Egol, a Princeton graduate, had risen to prominence inside the bank by creating mortgage-related securities, named Abacus, that were at first intended to protect Goldman from investment losses if the housing market collapsed. As the market soured, Goldman created even more of these securities, enabling it to pocket huge profits.”

Hey, I’d promote him too, but that Goldman prospered while those who trusted Goldman’s advice and bought the earlier CDOs… who were not informed of the need for an “Abacus” alternative investment when the market began to turn… and lost their investment shirts, so to speak, well there’s something pretty sinister about that in my opinion. “Pension funds and insurance companies lost billions of dollars on securities that they believed were solid investments, according to former Goldman employees with direct knowledge of the deals who asked not to be identified because they have confidentiality agreements with the firm.” The Times.

But clever “monkey-see-Wall Street-monkey-do” firms saw the light from Egol’s beam. “Goldman was not the only firm that peddled these complex securities — known as synthetic collateralized debt obligations, or C.D.O.’s — and then made financial bets against them, called selling short in Wall Street parlance. Others that created similar securities and then bet they would fail, according to Wall Street traders, include Deutsche Bank and Morgan Stanley, as well as smaller firms like Tricadia Inc., an investment company whose parent firm was overseen by Lewis A. Sachs, who this year became a special counselor to Treasury Secretary Timothy F. Geithner… ” The Times. That relationship between the government’s navigators through these roiling financial waters and such Wall Street insiders rears its ugly head, yet again. “Some [credit-backed] securities packaged by Goldman and Tricadia ended up being so vulnerable that they soured within months of being created.”

The same set of Wall Street monkeys who milked TARP money, slorpped near zero-rate fed funds for internal use (while small business were denied credit) and reveled in government-subsidized insurance proceeds from AIG… Those same financial institutions who now need rakes and wheelbarrows to dump bonus money onto the desks of their high-roller, revenue-generating “financial team”… the best and the brightest who always know how to protect the mother ship, even as those around her, those who trusted her advice, perished in flames. Are you getting steamed?

Congress and the Securities and Exchange Commission are beginning their investigations of his practice of betting against the very instruments sold to their clients. No matter the result, the message is clear: these financial institutions are “too big to continue” in their present form and “too big on their impact on the general economy” not to be seriously and tightly regulated. That part Glass–Steagall Act (the Banking Act of 1933) that prohibited commercial banks from engaging in speculative trading (thus separating investment and self-investing merchant banks from what we think of as traditional banks) was repealed in 1999 by a bill sponsored by Senator Phil Gramm (Republican of Texas) and signed into law by Democrat President Bill Clinton. The mega-merger frenzy that followed led to the situation we have today… conflicts of interest with legal sanction.

If we do not learn to curtail, corral and regulate these big financial institutions, if we continue to afford these mega-wealthy traders with legal rights, benefits and privileges that are not given to the general population, if we continue to cultivate greedy and self-indulgent special interests with their own “special access” to the highest reaches of government, we are sowing the seeds for the failure of the “government of the people, by the people and for the people” – as President Abraham Lincoln so eloquently spoke in his timeless Gettysburg Address.

I’m Peter Dekom, and I approve this message.

Friday, December 25, 2009

Training for Unemployment


It’s pretty clear where the jobs aren’t. Undergraduate degrees in “marketing,” “communications,” “journalism,” and “business” seem focused on earning money, but they are way too abstract and fundamental to compete with people with graduate degrees in the same fields who are also begging for jobs. There are six times more people looking for work that there are openings. But our high schools are the breeding grounds for future hopes, inspirations and passage into a highly competitive labor market. We’re not just vying for work against fellow Americans; the global marketplace can attach an expert to a task in an out-sourced minute.

I’ve blogged about teachers who ignore the computers in their classrooms and resort to the traditional teaching materials at the expense of the tools of modernity that their students must master to have a meaningful future. And now comes another anomaly: just as the computer revolution is exploding in every possible field of endeavor, just as the one solid job growth path rising above the rest is computer science, our high schools, faced with their own budget crises, are downsizing their computer science classes.

Just about everyone knows how to surf the Web, send emails, play in their social networks, shop and maybe use a couple of easy programs like Office’s Word or PowerPoint, but how many know how to create computer programs, write codes, set up Websites and navigate in the world of customized programming? High schools got to the front of this field pretty quickly with advanced comp/sci courses that taught how to write in Java or C++ or how to migrate into the world of HTML code and complex expressions of computer logic. It’s the stuff that enables everything from design robotics to video games to writing the next source code for a super-cool new social network.

But instead of growing these classes, our high schools are cutting back: “Nationally, the portion of schools that offer an introductory computer science course has dropped from 78 percent in 2005 to 65 percent this year, and the corresponding decline in AP courses went from 40 to 27 percent, according to a survey by the Computer Science Teachers Association… In the spring, the College Board, citing declining enrollment, canceled its AP computer science AB class, the more rigorous of its two courses in the subject… The result of sporadic or skimpy computer science training is that a generation of teenagers great at using computers will be unlikely to play a role in the way computer technology shapes lives in the future, said Chris Stephenson, executive director of the New York-based Computer Science Teachers Association.” Washington Post, December 21st.

That the academic standards foisted on our schools by the clearly failed No Child Left Behind Act don’t recognize the values inherent in computer science has lowered the priority of teaching this subject. Seems pretty stupid, doesn’t it? Being labeled a computer nerd in high school doesn’t help recruit the best and the brightest to this most necessary field, where current jobs still go begging even in this brutal economy. So what’s a nation to do? “Educators and technologists say two things need to change: the image of computing work, and computer science education in high schools. Teacher groups, professional organizations like the Association for Computing Machinery and the National Science Foundation are pushing for these changes, but so are major technology companies including Google, Microsoft and Intel

“Today, introductory courses in computer science are too often focused merely on teaching students to use software like word processing and spreadsheet programs, said Janice C. Cuny, a program director at the National Science Foundation. The Advanced Placement curriculum, she added, concentrates narrowly on programming. ‘We’re not showing and teaching kids the magic of computing,’ Ms. Cuny said…The agency is working to change this by developing a new introductory high school course and seeking to overhaul Advanced Placement courses as well. It hopes to train 10,000 high school teachers in the modernized courses by 2015.” New York Times, December 20th.

By linking computer science to the magic of special effects or 3D animation or the engine that drives video games or even a cool new app for a cell phone, kids are learning the cool side of computing and code-writing. Perhaps, if our policy-makers can wake up before our children’s educations destroy their competitive edge in the global marketplace, there is hope for an American educational system badly in need of new directions, new ideas and vastly better and more “modern” teachers.

I’m Peter Dekom, and I approve this message.

Thursday, December 24, 2009

Soccer and Women


“We will reduce the deficit, we will control the debt and there will be no need for a bailout,” the Greek finance minister, George Papaconstantinou, said in [recent] interview in his office… “We are not Iceland; we are not Dubai.” NY Times, December 12th. The world markets are not so sure. Greece is sinking into the kind of over-borrowed morass that has tanked more than one economy in this recent meltdown. Elections in October placed the Socialist government of Prime Minister George Papandreou in the saddle of this European Union nation. He recently announced that there would be a budget deficit of 12.7%, which is a multiple of the 3% limit set by the European Monetary Union… $430 billion and fast approaching an aggregate debt of 110% of the country’s GDP.

These numbers seem tame by US standards, and while the UK, Spain and Ireland face heavy debt loads, the underlying economics in Greece makes the current crisis, the worst in decades, particularly burdensome. Just as price fly upwards (Greek wages are low, but they face European prices), there are pressures for the government to mandate huge cuts in labor costs, implementing wage and hiring freezes immediately.

That does not sit well with powerful labor unions, and Greeks have an enormous propensity to protest, often violently. Expensive social programs combined with the pressure on the lives of ordinary Greek citizens to live the European lifestyle without earning the same pay have created debt load that exceeds the system’s ability to support such borrowings. After 15 years of prosperity and growth, the Greek financial world is now in tatters. But cuts will not go down lightly. “The president of the civil servants’ union Adedy, Spyros Papaspyros, said the union was prepared to strike if cutbacks were unilateral and severe. ‘If funding cuts are made in critical sectors such as health or welfare, we create a serious risk of destabilization,’ he said.” The Times

The major credit rating agencies have downgraded Greek bonds, and as a result, the interest rate the government has to pay on its deficit borrowings rose significantly (about 50% on its two year bonds!) in a single week. And if the economy stinks, the streets of Athens are smell even worse as a two-week strike by garbage collectors raged on. Greece has always been fractious, as anyone studying the battles between the ancient Greek cities of Athens and Sparta can attest. And Greeks are notorious for finding ways to avoid taxes and slide their economic activities beneath the radar. The Times suggests that as much as 30% of the Greek economy is underground and off the books.

What’s a government to do as it runs desperately short of cash? “Mr. Papandreou stressed the need for drastic measures. ‘We acknowledge the scale of the problem that we are faced with, and we are determined to make the shift toward a sustainable and healthy economy,’ he said in Brussels... He called for a ‘merciless crackdown on the corruption that is endemic in society and on widespread tax evasion.’” The Times. Yeah, right. Greek citizens are hardly ready to bring that underground economy to the surface and decimate their already limited ability to live in a European world on Greek wages.

Want a typical Greek perspective? “As he sat in a cafe with friends in the chic Kolonaki area on a recent afternoon, Antonis, 33, who disclosed only his first name, proudly announced that he refused to pay taxes… ‘Why should I pay?’ he asked with a grin. ‘I don’t care about my government; I don’t care about my country,’ he added. He conceded, however, that he did care about soccer and women.” The Times.

The lesson in this is that there are many shoes left to drop, many economic shocks that have yet to be felt to the system, and since the global economy is just that, an economic explosion thousands of miles away can send cracks and rubble all over the financial world. We are, like it or not and despite the growing pressures in the US for increased isolationism, in the same damned boat!

I’m Peter Dekom, and I approve this message.

Wednesday, December 23, 2009

Would You Believe a Restaurant Critic Who is Paid by the Restaurant?


Well, that’s been the way the credit-rating world has operated for years. Companies that need credit ratings to place their credit instruments (like bonds) into the commercial marketplace – a sophisticated way to borrow money – have simply had to engage a credit-rating service, pay for a rating and then access the money in the marketplace based on the rating they paid for. Clearly, the better the rating, the lower the perceived risk to “lenders” (or folks that buy the debt instruments), the lower effective interest rate and the greater the probability of success. There was a mutually-shared myth in the markets that the rating agencies were truly neutral and unbiased. Indeed with millions of such rated transactions on the books, and even a common statutory or regulatory requirement from many government agencies (from local on up) that borrowers must use a “Nationally Recognized Statistical Rating Organization” to access their investment funds (like pensions, state reserves, etc.), the requirement to uses these agencies is deeply imbedded into our economy.

When the subprime market crashed and burned, dragging down the underlying financial institutions and the individual investors, many of those bundles of subprime mortgages had been rating A or better by the relevant top rating agencies. Suddenly, just about every rating issued by such agencies became suspect, and indeed investigation into many rated transactions sustained the newfound skepticism. The economy imploded. We had trusted those rating companies, but they were in the business of competing for clients; they knew they if they developed a reputation for being too tough, clients would simply take their business to a more lenient agency… so they relaxed their reviews, stringency and took their fees with a wink and a smile.

The top names in the ratings field – Moody’s Investors Service, Standard & Poor’s and Fitch Ratings – came under intense criticism, governmental scrutiny and endured more than one lawsuit holding them responsible for what were seemingly unsupportable high ratings on transactions that soured big time. Screams for a new set of regulations on these agencies arose. Experts argued that companies seeking ratings should no longer be able to pick their favored agency, that a blind pool concept would make vastly more sense.

So here we are, more than a year after the markets collapsed, massive levels of positively-rated debt have collapsed, and regulators and legislators have had a chance to sit back and prepare a regulatory response so that the litany of horrible generated in part from inaccurate credit ratings will never happen again. But Washington is well… Washington. Republicans don’t like regulating business, and Democrats and Republicans get big campaign contributions from many of those folks they are regulating. Didn’t even mention the reprioritization of what Congress will or will not consider based on old fashioned horse-trading. And then there’s basic fear on the part of legislators that since the credit markets are so fragile right now – debt is really hard to get anyway – any move to tighten credit ratings would only making the debt markets even more restrictive at a moment in time when the government really wants to get them going again.

So what is actually happening today? First, there appears to be little appetite for a top-to-bottom overhaul of the rules impacting credit agencies; there isn’t even a consensus, much less a groundswell, for major reform. The December 8th New York Times: “Under bills that legislators are currently considering, the rating agencies will have to contend with greater oversight, stiffer rules about disclosure and a provision that would make it easier for plaintiffs to sue the firms. But nothing in the laws tackles the critic-for-hire problem or threatens the 85 percent market share that Moody’s, S.& P. and Fitch now enjoy.”

With nothing dramatic happening in Congress, a number of states – some with pension funds that got seriously slammed with well-rated debt instruments that collapsed in the financial storm – have taken a more aggressive posture, mostly in the form of litigation against these rating agencies, seeking to hold them responsible for the losses. “Dozens of lawsuits have been filed against the rating agencies, including a case filed on Nov. 20 by the Ohio attorney general on behalf of public pension funds. The Ohio suit, as well as the earlier suits, seeks billions of dollars in damages from the rating agencies and accuses the firms of negligence and fraud.

“When he filed his suit, Ohio’s attorney general, Richard Cordray, said that the ‘rating agencies’ total disregard for the life’s work of ordinary Ohioans caused the collapse of our housing and credit markets and is at the heart of what’s wrong with Wall Street today.’

“After the suit was filed, Richard Blumenthal, Connecticut’s attorney general, said he planned to join the suit and thought that a “coalition of states” would also jump on the legal bandwagon — a potentially grim development for the rating agencies, which could find themselves contending with a phalanx of state officials like the one that aimed at big tobacco in the 1990s.” The Times.

But Congress absolutely can do better. They aren’t talking about a truly-independent credit rating structure, directly supervised by the government, and there no mention of the blind pool concept noted above. The agencies are still the mainstay of corporate lending and apart from the lawsuits, it does appear to be business as usual. But if this economic collapse is insufficient to have Congress to rewrite meaningful regulatory and process requirements, it would seem that nothing would ever justify the obvious reworking that the credit agencies truly need.

“‘There are a lot of complicated issues that nobody knows how to deal with, like water shortages in different parts of the world,’ says Jonathan Macey, a deputy dean at Yale Law School and a member of a bipartisan task force that has conferred with lawmakers about rating agency reform. ‘But this isn’t one of them. We could solve this one pretty easily with a modicum of political will. It’s just mortifying.’” The Times. Yeah, but who’s gonna make Congress do what needs to be done? Voters?

I’m Peter Dekom, and I approve this message.

Tuesday, December 22, 2009

Where Have All the Americans Gone?


Balancing individual versus majority interests is what America has, at least until recently, been all about. Our very Constitution protects individual rights – free speech and assembly, due process, etc. – even when the majority would not agree. We honor private property and encourage entrepreneurship, but we protect unpopular minority causes from the “tyranny of the majority.” But what happens in a world where elections are long and very expensive processes, where having access to vast pools of cash is the difference between winning and losing, regardless of the underlying message. What happens when only a tyrannical minority can afford to support the money-sucking needs of politicians running for office?


It is precisely the cost of maximizing the reach of the message that has foisted this costly (more social than monetary, if you will) burden on the American constituency. In days where telecommunications were not even remote concepts, public debates and stories in local papers were more than enough. Throw in a few posters nailed to trees, and it was pretty clear that the message was the value proposition, not the cost of getting the message to the voters.


But today, media campaigns turn over millions of dollars. Rich candidates – the Michael Bloomberg, Arnold Schwarzenegger and John Kerry candidacies are good examples – and well-financed persons seeking elective office (just about everybody who won their race) clearly have the advantage. Money buys access regardless of the message, but bad messages can’t triumph even with Scrooge McDuck millions thrown at the constituency.


In the end, we are a nation of special interests. Nebraska Senator (Democrat) Ben Nelson extracted a $100 million to pay the full cost of a Medicaid expansion in Nebraska in exchange for his vote supporting the Senate healthcare reform bill. And no one in their right mind can tell you that the failure to include in that proposed legislation the right to buy pharmaceuticals from safe sources in Canada or Europe was really about purity or safety (hey, if you are worried, buy stuff here) – do you really think Canadians are swallowing poisonous versions of expensive medical drugs? The Democrats couldn’t get enough support in the Senate version of the bill to pass this amendment… within their own party. But with 30 million more customers coming on line, able to afford better medicines, guess who wins completely?! Drug companies! Costs will continue to skyrocket for the rest of us, but good old anti-competitive pharmaceutical companies can ply their monopolies within our borders with continued disdain for the public.


Likewise the “fat cats” (the President’s descriptive epithet for the greedy on Wall Street). So what if they caused the borrowing frenzy that took down our economy? So what if they got big federal TARP checks and almost free fed funds to invest… when ordinary folks couldn’t even access ordinary business credit. They obviously are more tuned in to what gets folks elected, and they win at the expense of the majority of the rest of us. They get the bonuses, and we get prolonged unemployment and impaired credit.


Look at the proliferation of street gangs among the disenfranchised minorities of this nation. Most are vicious street thugs of no redeeming quality, but the existence of these pernicious organizations is clearly a reaction to a feeling of hopeless isolation from the sources of power in this country. And as gangs grow, eating away at American cities and, increasingly, smaller communities, as fat cats get fatter and government programs intended to benefit the majority get hijacked and become vehicles for greater consumer costs and an increasingly unwieldy healthcare system… where are those who are really looking out for the greater good for the American body politic? Playing favorites, denying justice, and raging polarizing fractionalization… Where are those fighting for a better America ?


I’m Peter Dekom, and I approve this message.

Monday, December 21, 2009

Who Put the Ho in Ho, Ho, Ho?

Nevada is hurting. Real estate prices have plunged more than just about any other state, and the unemployment rate is among the highest in the land. Impacted by the stalled economy, the once-flocking-tourists have stayed away from the vacation-casino-resorts of the Vegas strip in droves. Building and construction is now a specialty among the local bankruptcy lawyers, who appear to be the only group in the state making money these days.


How tough is it? Well, the infamous and very legal Nevada brothels have been severely impacted by the decline in tourism as well. Business, if you’ll pardon the expression, is down. So how, if you will, can these businesses create a new environment where commerce would… er… begin to be picking up? How about adding men to the sexual choices available at these bizarre establishments? An idea whose time has come?


Oh yeah… With marketing and more on her mind, Shady Lady Ranch (about 150 miles north of Vegas) owner Bobbi Davis is seeking county approval to be the first legal brothel (there are 24 across the state) to offer men to male or female clients. While prostitution has been legal in Nevada since 1971, it is still illegal in the State’s two largest cities, Reno and Las Vegas . And yes, it is a highly regulated business, with health inspectors requiring the working girls (and now, boys) to undergo frequent health inspections of … well… frequent health inspections.


The December 15th Sphere.com: “Until now, men have been effectively barred from legally plying the world's oldest profession in Nevada by the specificity of a state health law requiring prostitutes to undergo frequent cervical testing for sexually transmitted diseases… The health board approved a regulation to allow urethral testing for men -- a crucial rule change by the state agency with ultimate power over whether prostitutes can or can't work… For more than 25 years, no licensed female prostitute in Nevada has contracted HIV, the virus that causes AIDS, said George Flint, a Reno wedding chapel owner and longtime lobbyist for the Nevada Brothel Owners Association… ‘My concern is that we continue to maintain that kind of record,’ he said.”


Bobbi’s got pricing and customer satisfaction to consider: “She said the women usually charge about $300 per hour for the five to 20 customers who visit on any given night… ‘We don't know how to structure the men's pricing yet,’ Davis said.” Sphere.com This dark little part of Nevada, along with the reputation that comes with being the gambling capital of the world, is a strange anomaly in a nation known for puritanical values and where prostitution, while wide-spread (sorry), is illegal in every other jurisdiction in the U.S.


Are we hypocrites? Why are gambling and prostitution criminal in some places, with jails brimming with felons, and not in others? Should they be allowed anywhere? State lotteries are gambling? Are we “looking too much the other way” as celebrities run up the tab (not mentioning any recent sexual scandals!) but escape prosecution (I said “prosecution”!)? So much for hardened criminals! And exactly who are the victims? There are some, claim critics. What are your thoughts? What is the right path?


I’m Peter Dekom, and I’ll try and do better next year!

Sunday, December 20, 2009

Less than Meets the Eye


Financial institutions, particularly those with financial advisory services (investment banking) or internal investment operations (merchant banking) or fund management, have mechanisms to compensate their revenue-generating employees with exceptionally high bonus plans. In traditional sales jobs, most of us are familiar with1%0-15% sales commissions that compensate, for example, salespeople who work selling new cars in dealer showrooms. Sell a fleet of automobiles to a large taxi company, for example, and you can make a lot of money.

But in big financial institutions, there is a hierarchy of people involved in any single major transaction. Managing directors and senior managing directors sit at the top of the transactional food chain, and below them are vice-presidents, associates and various staff experts whose analysis and opinions are vital to justify and close big deals. This complex maze of highly educated people, often graduates of the top economic and business programs at our best universities, are the heart and soul of the financial world. Those who can afford to hire the best get the best insights, new ideas and the most effective analysis.

Hence, there is an effective “team” – often different folks on different transactions – that provides the overall value to closing a mega-deal. A simple commission structure could not possibly cope with the moving target of individual expertise and client-generating rainmaking. Hence, the notorious Wall Street bonus structure. The differentiating factor in financial institutions from ordinary corporate structures is that the super-high levels of compensation normally reserved to those at the very top of normal corporations are spread among literally thousands on individuals who work within a financial institution’s value train.

In big financial institutions, there can be a thousand or more “managing directors,” with a multiple of vice-presidents and associates beneath. Each member of these financial teams is compensated differently based on the obvious criteria in the process of revenue generation. Most senior players are also major shareholders in the overall company as well. It is important to understand that mega-dollars are spread far and wide within a successful investment or merchant bank, and often even the top officers of the financial institution may find that they are eclipsed in earning in any given year by a star managing director who closed a huge merger with a Fortune 100 company.

As companies that took TARP money or have accessed cheap funds from the Federal Reserve or benefited from other government subsidies free themselves from TARP compensation restrictions, they are most certainly in the spotlight. Million-dollar bonuses, paid pervasively through the system will draw obvious criticism. Britain reacted by passing an instant tax of 50% on such bonuses; France and Germany are expected to assess comparable windfall bonuses taxes as well. The U.S. government has tried to cap the earnings of top executives, but as you can see from how our financial institutions are structures, this has little or no impact on excessive pay.

Goldman Sachs, which is no longer subject to U.S. executive bonus restrictions because they have repaid their TARP money, nonetheless faces particular scrutiny because the amounts of their bonuses are, to put it mildly, embarrassing in this time of crushing unemployment, impaired credit and contracting economics… much caused by large financial institutions creating an unsustainable economic environment of over-borrowing that literally collapsed our entire financial system and tanked values from homes to corporate assets.

Goldman is having one of the best years in their 140 year history: “A year after the government rescued the financial system with billions of taxpayer dollars, banks are preparing to pay out annual bonuses that could rival those of the bubble years. Nowhere is the bonanza expected to be bigger than at Goldman Sachs, which so far this year has set aside a record $16.7 billion to pay its workers, or roughly $700,000 per employee.” December 11, 2009 New York Times When you figure that the clerical people in that mix are not the recipients of the big bonus checks, you can pretty much figure out that for the managers, a $700,000 per-employee payment is hardly the average.

By the time someone reaches the highest levels of executive responsibility at institutions like Goldman Sachs, they are already mega-millionaires. Rich by any definition of rich. But Goldman is looking for ways to deflect the criticism – their “I’m Scrooge McDuck wallowing in my money-lined private vault” image – in the wake of being beneficiaries of federal largesse and partial causes of our financial meltdown. Their solution: “Bowing to calls for restraint in tough economic times, Goldman said that its most senior executives would forgo cash bonuses this year. Instead, the 30 executives will be paid in the form of long-term stock — an arrangement that means they will not get big year-end paydays, but one that could turn out to be enormously lucrative if Goldman’s share price rises over time.” The Times.

In the end, there is a sense of outrage that those who contributed heavily to the environment that collapsed our economy and benefited substantially from government (taxpayer) money should not be allowed to wallow in wealth while the majority of the country wallows in economic misery. Hey, Congress, maybe you can learn a thing or two from Britain, France and Germany! And it’s not about 30 senior Goldman executives.

I’m Peter Dekom, and I approve this message.