Unbalanced Billing

Even as the healthcare reform legislation is hitting new and perhaps fatal roadblocks (the election of a Republican to fill the Senate seat vacated by Ted Kennedy ended the Democrats’ “filibuster-proof”60 seat majority), there are some issues that seem to have been resolved in insurance company’s best interests under any iteration of the proposed act. In recent blogs, I’ve already noted how the pharmaceutical industry protected itself against serious competition and price cuts by making sure that Americans cannot legally import safe prescription drugs from Europe or Canada at much lower prices. Today, I’d like to address one particular issue, one that factors into a very large number of “medical bankruptcies” – where critical care decimates the bank accounts of those facing an emergency – even for people who have health insurance.

The issue is known as “‘balance billing,’ which occurs when doctors, hospitals or medical labs bill their patients the difference between what they charge and what insurers pay for their services. It comes into play when patients use providers who aren't part of their insurers’ networks and thus haven't agreed to prearranged payment rates.” The January 18^th Washington Post.

The practice might be justifiable in situations where a patient voluntarily steps “out-of-plan” to access a particular doctor for whatever reason, but it is much more difficult to justify where an extreme or very rare medical condition necessitates a specialist who is not “in plan” or, even worse, where “out-of-plan” care was administered without the patient’s knowledge or consent – what might happen after an accident or heart attack where an unconscious patient is simply taken to the emergency room of a hospital that is not “in plan” and perhaps even admitted to the hospital and operated upon without ever having made a conscious choice. Often, folks who opt for out-of-plan care can at least negotiate with the outside physician or hospital for a better rate; unconscious patients obvioulsy do not have that option.

The former case – access to a specialist – is a very sticky issue because some choice is being exercised by the patient (or the patient’s guardian). But in circumstances where effective treatment is truly available only out-of-plan, but there are doctors that are generally available in that medical practice specialty in plan, insurance companies most often require in plan treatment. In the latter case – involuntary care – it is difficult to see any justification for making the patient pay the higher rate.

How do the current House and Senate versions of the reform proposals deal with the issue? “Congressional aides say there's no need to limit the practice, because the pending legislation would require insurers to have enough specialists to ensure patients could get care within their insurers' networks. Both bills cap out-of-pocket costs for patients seeing in-network providers, and the House version recognizes the financial threat from out-of-network costs by counting a portion of out-of-network costs toward the cap.” Great theory, but hardly the real world. Take for example a medical practitioner who may have had a rare occasion to treat a particular ailment who is in plan, but the truly specialist with substantial and effective experience in the field who is not a part of that plan. Technically, the insurance company may have an argument that they have that base covered, but how would you feel if your life or the life of a family member hung in the balance? Some states (e.g., Maryland, which set its own rates, Colorado, etc.) have reacted by banning the balance billing practice for emergency care. But this is most certainly not a generally accepted rule, and the practice regarding specialists is far more complex.

The above Washington Post provides an example of a newborn whose defective heart carried a very low survival rate, but where an out-of-plan surgeon (with no true comparable counterpart in plan) had had a great deal of success with that particular defect. The insurance carrier, Anthem Blue Cross and Blue Cross in Virginia, only agreed to pay what their internal rate for that kind of surgery would have been (i.e., they approved the out-of-plan surgery, but only at their rate – although there was confusion as to whether or not this was adequately explained to the policy-holders), and denied the rest, a very significant sum of $85,000 for two related surgeries. The Post: “Company spokesman Scott Golden defended Anthem's decisions. ‘To keep health care costs from rising faster than they already are, we cannot pay doctors who refuse to participate in our network amounts far greater than that paid to doctors who have agreed to provide services to our members for a reasonable fee,’ he said in a written response to a reporter's questions. ‘Doing so would only encourage doctors to drop out of our networks and balance bill all members.’”

In the end, we still have the most expensive medical care on earth, with costs rising beyond our aggregate ability to pay. There are serious issues that still need to be addressed, and whether healthcare reform succeeds in the current Congress or not, sooner or later, this country is going to have to face the reality of a healthcare system that the nation can no longer afford to pay for… assuming that event has not already occurred.

I’m Peter Dekom, and I am deeply concerned.

Savoring Yet Another Victory – al Qaeda & the Crotch Bomber

If there is a “Terrorist’s Hall of Fame” somewhere on this planet – probably in the Tribal Districts of Pakistan if you want a nice safe place to have one – it would feature the “heroes and martyrs” section including the dozen of rabble-rousing clerics, the piles of suicide bombers who have shredded innocent lives with an angry-yet-lust-for-“paradise” explosion for Allah, the hijackers, shoe bomber, crotch bomber and that perennial favorite, Osama bin Laden. Under Islam, those living normal pious lives in keeping with the requirements of the faith will be piled into a giant waiting room upon death to await that distant judgment day when they may ascend into heaven. Those who sacrificed their lives for their religion get the “fast pass” without waiting.

Doesn’t seem fair somehow, and clearly, fanatics have used this “loophole” as a gigantic recruitment tool to garner long lists of young men and women waiting for their “fast pass” to heaven… and their suicide bomber death. Despite this expectation being decried by moderate Muslim clerics all over the globe, the thought of martyrdom and instant paradise just cannot be shaken from the psyche of some many young gullibles, otherwise living shallow and often hopeless lives. They are greeted as heroes by parents and the public. They see the honoring parades, the posters of glory and are seduced by this viciously-conjured practice of unqualified clerics promising instant paradise in heaven.

These gullibles have decimated the Western way of life, costing the United States and its allies trillions of dollars in wars that have sapped the strength and spirit of these great nations. Wars that we have not won, that continue in one unsatisfying way or another, while “hot spots” continue to emerge all over the world, most recently in war-torn Yemen, where yet another al Qaeda training facility has produced an astounding success… without even bringing down the Christmas day flight to Detroit. Our budgets have been strained to the breaking point by the military and diplomatic costs imposed to ward off the evil of Islamists terrorists. We live in fear and cannot get on a jet flight without the most somber reminder that traveling is the favorite target of those hell-bent on destroying us.

The effectiveness of these al Qaeda (and their cronies’) efforts is staggering; we may have stopped an number of individual incidents from shattering the lives of innocents, but sooner or later, we know there will be a big hit; our lives have been profoundly disrupted, American soldiers sacrificed into the gaping mouth of “defensive” military action, our privacy compromised, traveling by passenger jet is miserable and profoundly time-consuming (remember, time = money!), we have massive new federal bureaucracies with undereducated bottom-end-job-seekers peering into our luggage, now looking at the naked figures of our bodies and sometimes even patting us down, our communications tapped and our taxes sucked up by all of the above. We can’t even go to sporting events without going through a metal detector and a purse search!

A shoe bomber killed our ability to take most liquids and gels on board aircraft. The crotch bomber has limited us to one piece of carry-on (while most of the airlines continue to charge us for checked baggage!), made us sit in our seat for the last hour of flight (with no access to our carry-on) and has travelers (read: tourists or terrorists?) from certain countries face pat-downs (which may be seriously violative of their religious beliefs) and personal baggage inspection. It will take more bureaucrats, bottom-level government officers, scanning equipment and vastly more money (while deterring revenue-producing tourist dollars) to implement this additional layer of intrusion. And jet travel has a new time-delay added to the already incessant waits at the airport.

In the world of budgeting for the future, in business and in government, a 1% increase generally doesn’t stir anyone’s ire. A percent here and there, a little at a time, and one hardly notices that what may, in any given instant, seem like a pittance; over time, an aggregation of “pittances” can produce billions and billions of dollars of valueless costs that drain our economy, haven’t seemed to work anyway, sapped our strength, hammered our spirit, and forever changed the way we live.

Remember when you could greet an arriving passenger at the gate… surprises and hugs along the way? Are we really any safer? And just think, if someone really wanted to smuggle weapons of mass destruction into this country, how hard could that be? Look at the tons and tons of illegal drugs that make their way into the U.S. every month! Could al Qaeda operatives have ever fathomed a success like the one they have enjoyed at our expense over the years since 9/11/01?! How much more could they have hurt us than we have hurt ourselves? Are we proud of the “victory of profound disruption” we have handed them on a silver platter? And exactly when is enough… enough?!

The January 13^th Sphere.com puts our commitment to “security” this way: “On Dec. 19, 2009, President Obama authorized a military budget plan for a record $663 billion to defend the United States, the highest since World War II -- higher, adjusted for inflation, even than during the Korean and Vietnam wars… Six days later, al-Qaeda struck with an attack on a Detroit-bound airliner that very nearly succeeded in killing 278 passengers on board the Northwest Airlines Airbus 300. Less than a week later, al-Qaeda attacked in Afghanistan, where the United States is building up a force of nearly 100,000 troops at a monthly cost of $3.6 billion. This time it was a suicide bomber who evaded U.S. intelligence nets and killed seven Americans and a Jordanian at a remote CIA base.

“Everywhere, it seems, Uncle Sam is struggling to regain its footing -- despite its vast spending on security… Counting outlays for the military, homeland defense, airport security, nuclear weapons, and other facets of defense, the United States will spend well over $700 billion for security this year, more than the rest of the world combined… But thanks to a cunning and innovative enemy, a defense budget encrusted with ‘we've always done it this way’ convention, and strategic choices attuned to the last century, the United States seems to be merely treading water in what senior officials acknowledge will be a long and difficult war.” Are we remotely getting our money’s worth; are we truly any “safer”?

Maybe these words from Washington Post columnist Fareed Zakaria (January 11^th) might tell you how far we have conformed to al Qaeda’s plans: “The purpose of terrorism is to provoke an overreaction. Its real aim is not to kill the hundreds of people directly targeted but to sow fear in the rest of the population. Terrorism is an unusual military tactic in that it depends on the response of the onlookers. If we are not terrorized, then the attack didn't work. Alas, this one worked very well.” I, for one, deeply resent having my way of life so deeply altered – clearly and intentionally – by these “terrorists” with their perverted sensibilities… and I am beginning to think I’d rather live with the risks than let these butt-heads gloat in the victory they seem to be savoring.

I’m Peter Dekom, and I know that this just can’t go on like this for much more.

Made In China

For many older Americans, the term “Made in Japan” once signaled shoddy and cheap merchandise; the thought of a quality Japanese car would have been ludicrous half a century ago (the huge Japanese car export business really did not begin until the 1960s). Today, quality surveys generally put Japanese electronics (e.g., Sony, Sharp, JVC, Toshiba, etc.) at the top of the heap, and Japanese cars have generated a solid reputation that makes them coveted, often at the expense of American-made vehicles. When Korea entered the market, folks chuckled at the shoddy LG or Samsung electronics, and titters followed Hyundai cars wherever they went. Not anymore!

We keep hearing that the 21^st century is the time for China resurgence, but for most of us, the Chinese manufacturing machine, which keeps the shelves of Wal*Mart filled with inexpensive goods, is simply the servicing arm of foreign invention; China is the ultimate subcontracting manufacturer to the world. Cheap labor. Cheap manufacturing. Cheap indigenous natural resources. Little originality. Think again! Here comes China like a roaring freight train, pockets filled with cash (and massive foreign currency reserves, particularly U.S. dollars), ready to invest in research, development and invention as the Western world struggles to find a path to recovery.

While the U.S. still outspends China on research and development (we spend 2.7% of our GDP, while China is still at a lower 1.5%), China has one of the highest numbers in the developing world, and remember that that 1.5% is applied against a total GDP that will soon replace that of the United States as the largest on earth. China is accelerating research and fighting to bring its “best and brightest” scientists and engineers – those who left China to be schooled in the West and were captured by American universities and corporations – back to the motherland.

The January 7^th New York Times provides this chilling example of exactly how far China is willing to go to buy back this talent pool: “Scientists in the United States were not overly surprised in 2008 when the prestigious Howard Hughes Medical Institute in Maryland awarded a $10 million research grant to a Princeton University molecular biologist, Shi Yigong… Dr. Shi’s cell studies had already opened a new line of research into cancer treatment. At Princeton, his laboratory occupied an entire floor and had a $2 million annual budget. … The surprise — shock, actually — came a few months later, when Dr. Shi, a naturalized American citizen and 18-year resident of the United States, announced that he was leaving for good to pursue science in China. He declined the grant, resigned from Princeton’s faculty and became the dean of life sciences at Ts inghua University in Beijing.”

As the number of technology patents filed in the U.S. is falling, so are such applications rising in China. “Chinese scientists are also under more pressure to compete with those abroad, and in the past decade they quadrupled the number of scientific papers they published a year. Their 2007 total was second only to that of the United States. About 5,000 Chinese scientists are engaged in the emerging field of nanotechnology alone… A 2008 study by the Georgia Institute of Technology concluded that within the next decade or two, China would pass the United States in its ability to transform its research and development into products and services that can be marketed to the world.” The Times.

As the endowments of private colleges and universities were slammed in the market fall of 2008 and as states slash and burn their higher education budgets to reflect the harsh economic realities of the recent meltdown (and despite pledges from the federal government, we are truly spending less money on education at virtually every level in this country), we are cutting research and making it vastly more difficult for students to get the advanced degrees we, as a nation, need to remain competitive. We had relied very heavily on importing motivated students with strong financial support from their countries of origin into the highest reaches of academia to fill a technology vacuum in this country – American-born students disproportionately avoided advanced degrees in science, engineering and math – but those countries are luring these top-flight professionals back just as we tighten our immigration and travel restrictions to make it vastly more difficult for such student to study and remain here.

Do we cheer as China hacks into Google, censors blogs without discrimination and generally discourages free access to the Web creating de facto competitive brakes on their own progress? Do we have to rely on their missteps to sustain our waning competitive edge? Can’t we rely on our own efforts, our own inherent spirit, our once strong educational standards and work ethic instead of hoping for the weakness of others?

It never ceases to amaze me how, when we absolutely know we need better educated and skilled people to implement a sustainable economy – we write about it all the time – we’d rather spend that money on prisons and wars we cannot win than on our own children. We have lots of excuses, mostly in the name of “security” and “safety,” but in the end that national identity we are trying so hard to preserve may eventually not be worth preserving as the rest of the world marginalizes our value-added and leaves us behind… a strong wall, protecting a once-great nation that nobody really wants anymore. This cannot be the legacy we leave the next generations. Education has to be the single most important value this nation can espouse!

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

The Wrong Half of the Island

Current news reports of the destruction and havoc in the area around Haiti’s capital city, Port-au-Price, will undoubtedly continue in great detail for some time, but it also helps to know about the source of the poverty and hopelessness that makes rebuilding extraordinarily difficult. Haiti and the Dominican Republic share the same island – Hispaniola – but their economies bear little resemblance to each other.

Island history didn’t start out that way. There were five indigenous tribes when Columbus’ ships ranged into the region in 1492, but soon Spanish conquerors viciously wrested control of the island (the “gateway to the Caribbean”) from the locals, and mined gold from the hills, filling their galleons with New World riches. Local Native Americans who refused to work in the mines were pressed into an even more horrible form of slavery, and the diseases brought by the Spaniards decimated what was left of these indigenous tribes.

By the early 1500s, the Spaniards were importing large numbers of slaves from Africa to work the mines and till the fields on this island. Some of the surviving Indians intermarried with escaped African slaves, and strange new racial combinations blossomed. Children of white settlers and African slaves increased the racial mix. But the island certainly was born under a dark sky.

Most of us think of Hispaniola as a pirate haven; the western part of the island did in fact become home to a number of pirates, the majority in this area being ethnically French (think: Jean Lafitte). From the mid-1600s until well into the 1700s, this was truly pirate country, with most of the population disavowing any allegiance to Spain.

Needless to say, the Spaniards were none too happy with this division of loyalties, but in 1697, the French and the Spanish agreed (the Treaty of Ryswick) to split the island in half, a reality which continues culturally and linguistically to divide that island to the present day. The French succeeded to the western half, then known as Saint-Domingue which is present day Haiti, and the Spaniards accepted the eastern part, which is today the Dominican Republic (although the exact borders were set during the American occupation many years later).

In terms of both wealth and cruelty, western Hispaniola was in its golden era: “By about 1790, Saint-Domingue had… quickly became the richest French colony in the New World due to the immense profits from the sugar, coffee and indigo industries. This outcome was made possible by the labor and knowledge of thousands of enslaved Africans who brought to the island skills and technology for indigo production. The French-enacted Code Noir (Black Code), prepared by Jean-Baptiste Colbert and ratified by Louis XIV, established rigid rules on slave treatment and permissible freedom. Saint-Domingue has been described as one of the most brutally efficient slave colonies; one-third of newly imported Africans died within a few years.” Wikipedia.

Inspired by the French Revolution, the slaves began an open revolt against French rule in 1791. Weaving through a series of complex alliances – and the young United States played both sides of the street – made even more difficult by a war between England and France… Haiti settled into relative stability and autonomy until Napoleon Bonaparte decided to send 20,000 troops to retake the island. The war escalated from there. After years of brutal fighting and having lost 50,000 soldiers and 18 generals to war and the decimation of yellow fever, Napoleon let go of the island. The toll among the locals was even worse, an estimated 100,000 blacks and 24,000 (out of 40,000) of the white colonists perished. But Haiti achieved independence in 1804 and was the first country in the New World to abolish slavery.

The French efforts to retake control did not die with independence. “In July 1825, King Charles X of France sent a fleet of fourteen vessels and thousands of troops to reconquer the island. Under pressure, [the Haitian President] agreed to a treaty by which France formally recognized the independence of the nation in exchange for a payment of 150 million francs (the sum was reduced in 1838 to 90 million francs) – an indemnity for profits lost from the slave trade.” Wikipedia. The U.S. supported this killing financial burden imposed on this tiny island as a message to its own slaves against the thought of rebelling. Our hands were most dirty.

Foreign governments frequently sent troops supporting differing factions on the island; the local Haitian banks were often looted by these intruders who created reasons why they or their nationals were entitled to payments by the local government. Political instability was the rule – in its 200 year history, Haiti has experienced 32 coups, the most recent in 2004! By 1915, Haiti was occupied by the United States, which ruled this nation until 1934, an occupation that only served to sap the strength of a nation rapidly running out of resources that had been plundered over the centuries by the European powers. Wikipedia: “Scholars agree that Haiti was in much better shape after the occupation than before, but some accuse the US of establishing a ‘shaky’ foundation that left the country with a doomed financial structure. This was due to a 1922 $40 million loan owed to the US as well as the country's national treasury and to the Banque Nationale owned by a New York bank. The result was a financial system that siphoned the country's wealth to offshore creditors instead of reinvesting it in the country’s economy.”

From 1957 until 1986, Haiti was governed under the brutal and exploitative dictatorships of “Papa Doc” Duvalier and his son, known as “Baby Doc.” Educated professionals fled the country; infrastructure was virtually completely neglected as Haiti was government primarily for the economic benefit of the Duvaliers. What little economic value that had remained in Haiti prior to 1957 was gone by the time the Duvalier regime ended. Baby Doc found exile in France as protests mounted. In 1987 a Constitution was instituted, but a bloody confrontation killed the first election. Suspicious of outsiders by this time, Haitian law forbade the ownership of land by foreigners, a practice that likewise discouraged much-needed foreign investment in this now profoundly impoverished nation.

The U.S. mounted a massive food aid program to Haiti in the 1980s, but the result was to make farming in Haiti uneconomic; local farmers gave up trying to complete with free food. Farms languished and were abandoned, eroded in the bad weather, and eventually, most of the farmland was no longer able to support agriculture (even before the big quake, Haiti imported 80% of its food). When the food aid from the United States began to ebb, Haitians were forced to buy food, increasing in cost as the Haitian consumers were losing buying power in the international market.

Forests were cut down for the wood, to make charcoal and build ramshackle slums in the hills above Port-au-Prince. Building codes are virtually non-existent, and because the western side of Hispaniola faces the area where hurricanes come from, Haiti’s side of the island has been virtually stripped by the rage of these storms, which have increased in intensity as global climate changes has impacted the region. An HIV epidemic added another inconceivable burden to this nation, now stripped of resources and what little dignity it had left.

The United States has had, at best, a mixed relationship with Haiti, most recently exercising its political influence in the 2004 coup. Haitians have always been suspicious that their political strings are in fact being pulled from Washington, D.C. In some significant part, we in the United States contributed to their state of extreme poverty – the worst in the Western Hemisphere – as you can see from our checkered involvement over time. As this struggling nation now faces the tremendous economic cost of this series of devastating earthquakes, America has a major moral reason why we really need to help these people restore vitality and a livelihood that has been dead for decades. The big quake was a horrible reminder of the scope and breadth of our obligation.

I’m Peter Dekom, and I thought you might want to know why things are so bad in Haiti.

The Most Underreported Story

Time Magazine, in its annual “Person of the Year” issue (December 28, 2009 – January 4, 2010) called the increased re-segregation of American public primary and secondary schools the most underreported story of 2009 (page 29): “According to a January report from UCLA’s Civil Rights Project, African-American and Latino schoolchildren are more segregated than they have been since the time of Martin Luther King Jr.’s death, in 1968. In the 2006-7 school year, nearly 40% attended schools – many of them subpar ‘dropout factories’ – where students of color made up to 90% to 100% of the student body.”

In an era of extreme budgetary shortfalls and harsh economic realities for school budgets, can we even afford to address this anomaly in the current economy? If the issue were presented a bit differently, can we afford the long-term social costs (more use of the criminal justice system, more consumption of safety net social services and compensation plans, more costs to businesses and citizens for the cost of increased criminal activity) associated with failed primary and secondary education… would the answer be the same? We’re talking trillions of dollars here! We’re not even applying the pre-Brown vs. Board of Education (the big 1954 desegregation case in the US Supreme Court) “separate but equal” standard to our inner city schools.

Sociologists blame “white flight” – the move of white families to the suburbs. This phenomenon is not unique to the United States. In a July 29, 2009 article, the Guardian wrote about a similar problem in the UK: “[An Institute of Community Cohesion] study, which focused on 13 local areas including Bolton, Sunderland, Oldham, Hounslow and Bristol, concluded: ‘Many of the schools and colleges in the areas we have studied are segregated to a greater or lesser extent and the evidence available to us at a local level suggested that this was generally worsening over recent years... This reflects in part residential segregation, but it also reflects parental choice, despite the fact that most people we spoke to in focus groups wanted their children to have a mixed education. Parental choice tended to push people to what they saw as the safe option, where children with similar backgrounds went.’” Sounds British, doesn’t it?

But the issue remains; if we subject students to “dropout factories” (and public high schools in the top ten US cities have an aggregate drop-out rate of over 50%!), we are going to be paying vastly more money for the rest of those students’ lives for all the reasons listed above. There are practices that are local “separation of the races choices” that are disturbing. Take this note in the May 21^, 2009 New York Times: “Racially segregated proms have been held in Montgomery County [Georgia] — where about two-thirds of the population is white — almost every year since its schools were integrated in 1971. Such proms are, by many accounts, longstanding traditions in towns across the rural South, though in recent years a number of communities have successfully pushed for change. When the actor Morgan Freeman offered to pay for last year’s first-of-its-kind integrated prom at Charleston High School in Mississippi, his home state, the idea was quickly embraced by students — and rejected by a group of white parents, who held a competing ‘private’ prom.”

The South still has its stubborn pockets of racial segregationist holdouts, but the problem is actually worse in the North. “[As a report from the Civil Rights Project at the University of California notes:] Indeed, Brown [vs Board of Education] made a huge difference in the South -- from 1970 to 2004, black students in the South were actually less segregated than those in any other region as the result of vigorous enforcement by the federal government in the late l960s and strong requirements from the Supreme Court through the early l970s. The highest rates of total segregation actually come today in Northern cities like Chicago and Detroit, according to the report.” January 22, 2009, SouthernStudies.org

We have an African-American President, an economy in shambles, and we are supporting an educational system that not only fails to make us competitive with the rising standards in the rest of the world, it will saddle us with incalculable hard dollar social costs because of its failures. Why are we wasting so much money on failure and to create future economic hardship for us all?

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

Sobbing on Wall Street

The sight of senior Wall Street CEOs testifying in Washington, D.C. on January 13^th in perfectly tailored $5-10,000 suits, barely able to hide their “I won while you lost” smirks on their faces was almost too much to bear. They feigned humble pie, acknowledged that reform is necessary and that they “done bad.” We know not all the bankers in America are bad; we know that not all the employees at these financial institutions contributed to our economic collapse, but it’s kind of like living in a country that declared war and lost… the citizens of the losing nation are going to pay. The difference in this instance is that the Wall Street players just don’t think they will have to make up for the losses they caused if they just play their cards right creating some short-term cosmetics along the way… and if push comes to shove and they get socked with a new excess profits tax, they’ll find one way or another to pass that cost on to you.

One of my favorite financial writers, Robert Teitelman with theDeal.com, penned a terrific piece on January 14^th directed at the banking community, which noted, in part: “In short, you're a pariah, at least for now. By any measure, you make a lot of money, even if you have two jumbo mortgages and three private school tuitions. Again: No one out there cares about your personal problems. Yes, critics may miss the fact that public opprobrium, whether rational or not, is a form of moral hazard -- at least for this generation of Wall Streeters. The critics will deny this, of course, because Wall Streeters are assumed to be, to a man, so rich that criticism and extra taxes bounce off them. But let's face it: An awful lot of self-identity went into those big checks. It's the rare individual who does not, over time, begin to believe they're worth $20 million a year and be intoxicated by the power and trappings.

“But it's a democracy, and you can't escape the crowd. Public opinion is like a market shift: Suddenly the great mass of folks requires a scapegoat. And majority rules. You may think individually, but you're judged by those who have no clue about what you do (or don't do). And Wall Street has been thoughtlessly creating this image for itself over many decades, particularly since the '80s. You may have acted with modesty and rectitude. You may have created value and dealt with clients honestly. But not every one of your colleagues did, and sleaziness is contagious. Many flaunted their wealth. Others cut corners, some fraudulently. Even worse, many thousands were drawn to finance lacking skill, judgment or much in the way of interest and still got to ride on the bandwagon. When the average compensation at Goldman, Sachs & Co. (NYSE:GS) is $770,000 you have to imagine a pay bubble exists. The average deserves that?

“The truth is ‘Wall Street’ has become more about individual ‘eat what you can kill’ and less about the collective over the past 30 years. This is hard to deny. There is far more speculation, far greater conflicts and far less a sense that the client, or the firm or the public, comes first. (Sure, that's a much larger problem than just Wall Street, but no one cares about that right now either.) Wall Street remains the necessary driver of American capitalism. But it has long ceased to try to explain what it does that's beneficial and necessary, perhaps because the gap between image and reality has widened, perhaps through sheer arrogance. It has not only failed to invest in the bank of public opinion over the past four decades, it has steadily withdrawn funds and is now operating at a serious deficit. It's your right to feel personally aggrieved, even victimized. But the crowd doesn't care, and right now the crowd is calling the shots.”

The reality is that the solution may lie, not just in some temporary tax on “excess profits” or stellar bonuses, but in the nexus of regulation. First, by repealing various statutes over the years that separated commercial banking from investment and merchant banking (read: we let the lending and savings industry merge with structures focused on risk-taking), we let these giants merge and grow such that a single company’s failure can have a devastating impact on the economy as a whole. We cannot be distracted into believing that just taxing compensation will make it “all better,” not even at the $90 billion tax number we are reading in the press.

Peter Cohan, writing for the January 15^th DailyFinance.com, pits the bonus package against the damage Wall Street banks created and presents this more shocking perspective: “Wall Street is on track to pay itself near-record bonuses for its 2009 performance. The Associated Press reports that the six biggest banks will reap a $150 billion 2009 bonus bonanza, a mere 8.5% less than what they received in the record year of 2007. Do you think you have the right to protest? Of course you do. But it won't get you too far because you lack the cash for your protests to make a difference.

“It's worth remembering that Wall Street got those record 2007 bonuses in early 2008, after the recession sparked by the financial crisis had begun. As I've posted, that crisis was caused mostly by Wall Street's overextension of securitization and leverage. And the costs of that crisis have been astounding: $30 trillion in 2008 global stock market losses, record foreclosures of 2.8 million home in 2009, 27 million Americans underemployed, 10%+ unemployment, 2009 worker wages down the most in 20 years, and a government bailout that could hit $23.7 trillion.” We really need to reduce the risk that this ever happens again… ever!

Regulation has to take two forms in my opinion: 1. Literally creating transparency and responsibility in all forms of economic activity that can have a reach beyond the instant companies and transactions at issue. Hedge funds, private equity, the derivative market and credit rating services are all in dire need of such oversight, even as Wall Street fights against this trend. and 2. Just as the government did with AT&T years ago, the financial institutions that have merged and grown to be uncontrollable behemoths need to be broken back up into smaller and independent component parts. AT&T’s original break-up has spawned dozens of new companies, in competition with each other, creating new technologies and new jobs along the way. Yes, there does come a time when big, particularly when “big” was not due just to growth but more to mergers and acquisitions, is truly bad.

I’m Peter Dekom, and yes, size does matter!

We Really, Really Hate Our Jobs

With employers pretty much being able to increase workloads and cut costs, almost at will, it’s no wonder that Americans dislike their jobs at the highest level in over two decades. All the bosses have to do is point at the incredibly high unemployment rate and the contraction in consumer spending. Insert the cracking sound of a whip. Not that being an employer is particularly fun these days, where customers’ spending habits are possibly creating a generation of economically-threatened misers. Insert the sound of hitting bottom.

45% of Americans expressed job satisfaction in a recent poll; the rest… well…. According to the January 5^th CBS2.com, “That was the lowest level ever recorded by the Conference Board research group in more than 22 years of studying the issue. In 2008, 49 percent of those surveyed reported satisfaction with their jobs… The drop in workers’ happiness can be partly blamed on the worst recession since the 1930s, which made it difficult for some people to find challenging and suitable jobs. But worker dissatisfaction has been on the rise for more than two decades.”

The source of dissatisfaction, according to the pollsters, varied from boring work, a failure of pay scales to keep up with inflation, soaring medical costs and falling benefits to a decline in job security and the loss of the notion of teamwork, where everyone is out for themselves and holding onto what they have. I suspect the feeling of being trapped, with few if any alternatives available, may add a psychological discomfort even for those who are not even interested in switching jobs. The fact that there are six people looking for every job opening is a very sobering thought.

Times have changed significantly. “One clue that may explain workers’ growing dissatisfaction: Only 51 percent now find their jobs interesting - another low in the survey's 22 years. In 1987, nearly 70 percent said they were interested in their work.” CBS2.com Wow! And we now face competition from skilled and qualified workers in other countries whose wage and benefit packages represent a fraction of what is still accorded to their American counterparts. To make matters worse, the highest level of unhappiness (64%) resides with the youngest workers (under 25), who will be around the longest to face this foreign competition. Exactly how competitive and quality-oriented are unhappy workers?

If things are bad for the employed, the situation borders on the intolerable for the unemployed of this country. The December 14^th New York Times reports the results of a NY Times/CBS poll taken of several hundred unemployed workers: with half reporting mental anguish (depression or anxiety), “Joblessness has wreaked financial and emotional havoc on the lives of many of those out of work… causing major life changes, mental health issues and trouble maintaining even basic necessities… Roughly half of the respondents described the recession as a hardship that had caused fundamental changes in their lives. Generally, those who have been out of work longer reported experiencing more acute financial and emotional effects…

“With unemployment driving foreclosures nationwide, a quarter of those polled said they had either lost their home or been threatened with foreclosure or eviction for not paying their mortgage or rent. About a quarter… have received food stamps. More than half said they had cut back on both luxuries and necessities in their spending. Seven in 10 rated their family’s financial situation as fairly bad or very bad… But the impact on their lives was not limited to the difficulty in paying bills. Almost half said unemployment had led to more conflicts or arguments with family members and friends; 55 percent have suffered from insomnia.”

We’re getting used to living with less… unless we are working for a Wall Street Pig-Firm… and the scars of this economic meltdown – even when these horrific days are well behind us – will still be visible as these latest “depression babies” take their place in history… trying to convince future generations, who may not experience such an economic collapse, that markets fall, unemployment rises, and you have to prepare for the rainy day… hell, the worse downpour for the longest time you can imagine. We are survivors; we create, build and grow… It’s not over, it’s not forever, but we do need to find a whole lot of new paths and new ways of walking and talking.

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

The People Who Eat Mud

“There are people digging with their hands, searching for people
in the rubble. There was unimaginable destruction.”

— Bernice Robertson, an analyst with the International Crisis Group

January 13, 2010 New York Times

A massive earthquake hit Haiti – near the capital city of Port-au-Prince – on January 12^th, killing thousands, injuring a multiple of that, crushing buildings and squeezing the life out of a nation where the national pastime appears to be hopelessness. This is the poorest country in the Western Hemisphere and near the bottom of the entire earth, sharing an island home with the not-so-bad-off Dominican Republic. Haiti is also the country where people eat mud to stave off the belly-wrenching pangs of hunger.

On July 29, 2008, the Guardian (a UK newspaper) wrote about this scene in the capital: “In a dusty courtyard women mould clay and water into hundreds of little platters and lay them out to harden under the Caribbean sun… The craftsmanship is rough and the finished products are uneven. But customers do not object. This is Cité Soleil, Haiti's most notorious slum, and these platters are not to hold food. They are food.

“Brittle and gritty - and as revolting as they sound - these are ‘mud cakes’. For years they have been consumed by impoverished pregnant women seeking calcium, a risky and medically unproven supplement, but now the cakes have become a staple for entire families…. It is not for the taste and nutrition - smidgins of salt and margarine do not disguise what is essentially dirt, and the Guardian can testify that the aftertaste lingers - but because they are the cheapest and increasingly only way to fill bellies… ‘It stops the hunger,’ said Marie-Carmelle Baptiste, 35, a producer, eyeing up her stock laid out in rows. She did not embroider their appeal. ‘You eat them when you have to.’”

Before the earthquake, Haiti and its population were starving. 80% of the nation’s food is imported (most of the local soil has been so depleted by over cultivation so as to be useless), vast segments of its population live in squalor, joblessness is the norm and political instability quite routine. The few successful farmers that eked out a living on their patches of land were devastated when the country lifted the tariffs on food in the 1980s, cheap imports follow, and the land simply atrophied. As forests were cut and used to make charcoal to heat homes and cook, erosion further decimated the quality of the farmland. Food prices in the international marketplace have since skyrocketed, placing new burdens on this lost corner of the earth.

Then, the earthquake hit. The January 13^th Los Angeles Times: “[A]long the city's roadsides, the true cost of Tuesday's magnitude 7 earthquake was readily visible: the bodies of victims neatly lined up, some covered in white sheets and some not… The corpses included that of a young girl -- perhaps a teenager -- in pink shorts; a couple lying next to one another; a man covered in a sheet up save for his horribly swollen feet poking out from beneath… There was virtually no sign of outside assistance other than a few United Nations vehicles passing by -- and there was no police presence, no water being handed out, no encampments except those set up by people apparently left homeless by the quake or those too afraid to go back into their ramshackle homes in case of aftershocks.

“Across the capital, some of the worst damage appeared to be in hillside neighborhoods such as Petionville… Elsewhere in the city, structures lay collapsed like giant sandwiches, with layer upon layer of concrete and remnants showing through: mattresses, shreds of clothing, chairs.” According to CNN, over 100,000 have died, most of Port-au-Prince is in rubble, electricity is off and government services have ground to a halt; thousands are missing, and big after-shocks (5.0+) have hit and more are expected.

What else is there to say; they need our help. www.ArtistsForPeaceAndJustice.com if you want to donate. To wire a payment immediately, please use the following information:

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I’m Peter Dekom, and I am deeply saddened.

Banks Laughing All the Way to You

Ha! Ha! Ha! Haw! Haw! Hee! Haw! Hee! Haw! That’s the sound of your big friendly bankers as they keep one step ahead of spate of new laws and regulations passed by Congress and signed into law by the President of the United States last year. Laws that prevent instant and random credit card rate hikes without warning, not explaining stuff clearly to consumers, limiting rate increases (effective in February), etc. The banks – the same banks who wanted government help when their balance sheets tanked with bad subprime mortgages and failing commercial real estate loans and who had no problems taking taxpayer-funded TARP money – are screaming like stuck hogs that the government is messing with a free market with all these new rules that they claim will cost them $50 billion a year.

So dem banks are messin’ with your checking account and your plastic – raising fees for all kinds of stuff (there will be a lot fewer ads for “free checking”), higher credit card fees, lower credit limits, higher interest before the limitations on interest rates kick in, “dormancy fees” when you don’t use your card enough, moving to variable interest rates and the list rolls on. Banks are even complaining that the requirement to notify consumers in advance of account changes is going to cost them tons in postage and paper. Woo hoo! I feel bad that they cannot sneak up on you anymore. How about not changing the account so often so you don’t have to send out all those nasty, piggybank-breaking stamp costs?

The one thing that these bankers are going to make sure of: dollar for dollar, they are not going to bear any financial burden for the new rules. They’ll take the bailout money, but if there is a cost that they can figure out how to charge to a consumer, well, they’re gonna go there. Of course, this refusal to accept the burdens of regulations aimed at the bankers in the first place, and shifting the entire burden to the consumers that the legislation were clearly intended protect, will probably piss off the same legislators who thought they were doing the public a favor.

So there’ll be a pile of Senate and House subcommittees considering this reaction from the financial community, a gaggle of lock-step-Congress-people who always buy any banker who uses the “free market” argument, even though the banks have been the primary beneficiaries of a very banking-friendly-subsidy-non-free-market policy, and some banking bigwigs who will testify, with straight faces, that their new assessments against consumers are necessary for their very survival. I wonder if they will fly to DC in the company jet or slum by just sitting in first class? There will be new laws, new regulations… but the banks will find a way to limit the changes and then create new loopholes to dance around the next set of changes… but they are banks… whaddyaexpect?!

Sigh, there is no free market. Big bullies push individuals around because of a profoundly uneven playing field. They can aggregate billions, hire the most expensive lobbyists and lawyers they can find, sponsor huge-fund-raising efforts for politicians running for office… while ordinary people only get to aggregate their power at the ballot box. It’s the only balancing act we can get… and the thought that free market competition will create efficiencies and consumer benefits is a theory that fails in an era of credit impairment and this strange reality that banks seem to impose pretty similar looking fees and charges (or at least fees and charges that, in the aggregate, generate roughly the same result) no matter what the market conditions.

Banks aren’t really interested in little people with little purchases and small savings anyway. It’s not about the little rivulets at the source of a great river, these banks want the ocean that the big river runs into. And it is very necessary that our elected representatives push back… hard!

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

Fed Up with the Fed

Politicians want political control. Regulatory economists want the ability to operate without catering to the political pressure du jure. And most folks don’t have a clue about what’s right or what should happen, because it is just too complex for the layperson to understand. And like most regulatory bodies, the roots of the Federal Reserve Bank, our major monetary policy instrument, were fertilized in pain.

Over a century ago, the “Panic of 1907” sent Wall Street stocks plunging (by half), folks ran to pull their money out of banks and trust companies, and a ravaging recession pushed economic chaos and bankruptcy across the nation. Sound familiar? The brakes on this free fall came not from the federal government (there was no central bank to push money into this dehydrated financial system), but from the efforts of mega-banker J.P. Morgan (pictured above) who pledged his own funds and convinced a number of other bankers to furnish the necessary liquidity to the American banking system out of their own pockets. The U.S. economy was still relatively small, especially when compared to its European counterparts, and the nation was still struggling with the complexities of modern economics.

The Panic pointed out a governmental capacity that was sorely lacking at the time: a central bank that could push money into the system when needed or contract money out (by making it more expensive) to create more stability in the currency and financial markets. Congressional leaders looked to the central banks in Europe for their inspiration, but many Americans were suspicious that such a centralized institution would effectively be run for the benefit of the mega-bankers like J.P. Morgan and not for the betterment of the general public.

The 1913 bill creating the Federal Reserve came from commissions headed by a noted Republican and had initial Republican support as a private bank, but when the bill finally came to a vote, Republicans mostly voted against the legislation, liberal Democrats wanted it to be a directly controlled branch of the federal government, and conservative Democrats wanted this bank to be a separate government corporation, out of the range of powerful bankers like Morgan (made worse by his daughter’s marriage to a Rockefeller).

The ultimate result: The Fed (including its 12 branches) is a quasi-governmental corporation, but it is not a part of the federal government and it is not owned by anyone. The President appoints the board of directors, including of course the chairman, subject to Senate confirmation. They serve long, 14-year, staggered terms, to insulate them from political vagaries (the chairman gets a 4-year term). The Federal Reserve (according to Wikipedia) has the following responsibilities (which have changed over time in reaction to financial crises):

1. Conducting the nation's monetary policy by influencing monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates.
2. Supervising and regulating banking institutions to ensure the safety and soundness of the nation's banking and financial system, and protect the credit rights of consumers.
3. Maintaining stability of the financial system and containing systemic risk that may arise in financial markets.
4. Providing financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation's payments system.

Why does any of this remotely matter? Because in the interest of stability, the Fed is charged, as one of its primary duties, with preventing “bubbles” (like the real estate bubble and all the underlying lending that exploded into the current financial mess) and, when “bubbles” occur, to mitigate the damage they cause. And while Fed. Chairman Ben Bernanke is likely to be confirmed for another term in his current role, and even though he is credited with having reacted well to the financial damaged caused by the recent bubble, the harsh reality is that the Fed, much like Wall Street, fell victim to the unsustainable myth – “conventional wisdom” – that accelerating real estate prices and the easy access to mortgage money were not systemic problems for the U.S. economy. They were wrong – dead wrong!

The January 6^th New York Times illustrates: “In 2004, Alan Greenspan, then the chairman, said the rise in home values was ‘not enough in our judgment to raise major concerns.’ In 2005, Mr. Bernanke — then a Bush administration official — said a housing bubble was ‘a pretty unlikely possibility.’ As late as May 2007, he said that Fed officials ‘do not expect significant spillovers from the subprime market to the rest of the economy.’” The Fed wants an expanded role in the regulation of financial institutions to prevent bubbles – but they didn’t see this huge one coming – and a number of Congress men and women, want to impose more direct, control over the entire Federal Reserve System, incl uding the right to review and alter Fed-set interest rates.

What really pisses folks off is that Bernanke is making lots of speeches about what should be done in the future and how well the Fed reacted to the current crisis, but notably absent from these talks is any explanation of why the Fed missed this bubble and why they are the right folks to prevent the next possible bubble. My opinion? The Fed cannot become subject to the whims of political trends and be subjected to the pressures that all politicians succumb to, but likewise, it owes the American people a damned good explanation of why it erred so badly in predicting this obvious path to destruction, how they will resist the pressure of defying conventional (destructive) wisdom, what steps they are taking to better predict and deal with future bubbles and what fundamental changes in their analysis will take place to make sure Americans are protected against such economic destruction. The Fed owes us a new mission statement!

In fairness, the Fed hasn’t been a complete bust for taxpayers; in 2009, the Fed made a big profit – $45 billion to be precise – generating interest income from everything from emergency bank loans to its investments in U.S. government debt and mortgage-related securities. All that money is going back to the Department of the Treasury at a time when the country needs cash badly. That still doesn’t excuse its bigger missteps or tell the American public how the Fed plans to avoid its herd-like following of misguided “conventional wisdom” and substitute a future of astute leadership and objective analysis instead.

I’m Peter Dekom, and this is one of America’s biggest issues.