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Archive for the ‘Corruption’ Category

This is it for me, at least for this chapter.  I am off to join some people who don’t much appreciate voices singing out of key, and while they might be able to get over my public disdain for coaches who punt in opposing territory, it would be rather awkward to continue to point out the incompetence of the administration.  So for now, it’s probably best to hang it up.

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I am enjoying the goings-on in Dubai tremendously.  It’s like the field mouse of an economics drug trial: take every extreme symptom, jam it into one place of absolutely no global consequence, and then try to figure out the cure.

Suppose you had a tiny country that decided it wanted to be important.  Playing on confusion with its oil-rich neighbors, it goes out and borrows a lot of money to build buildings.  Taking the Paris Hilton strategy that if you insist on your caricature long enough others will eventually believe it, the country makes a big show of people piling into the buildings.  Real estate developers, the ultimate momentum players, pile in.  The country goes the offshore tax haven route – no income taxes – and throws in absolutely no labor standards to ensure that construction can proceed on whatever blistering pace can be achieved by malnourished Thais and Pakistanis welding in 115F heat.  Eventually it hits the wall – for reasons completely beyond its control, at some point people look around and realize they have the world’s largest Potemkin village.  There is no market.  The locals are preposterously corrupt.  Islam is not compatible with the hedge fund lifestyle.  What then? (more…)

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Now here’s an interesting verdict that doesn’t seem to get much press:

In a ruling that could leave the government open to billions of dollars in claims from Hurricane Katrina victims, a federal judge said late Wednesday that the U.S. Army Corps of Engineers had displayed “gross negligence” in failing to maintain a navigation channel — resulting in levee breaches that flooded large swaths of greater New Orleans. (more…)

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Short post to follow up on two things that were on Baseline recently.

First of all, take James’ advice and check out this Interfluidity post:

An enduring truth about financial regulation is this: Given the discretion to do so, financial regulators will always do the wrong thing.

Steve touches on several of the themes I tried to articulate here, and he does a better job explaining the motivations of each of the players. (more…)

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James Kwak over at Baseline has an post about the accounting treatment of Bank of America and Fannie Mae; quoting John Hempton:

If Bank of America were to provide at the same rate its quarterly losses would be 50-80 billion and it would be completely bereft of capital – it would be totally cactus. It would be – like Fannie Mae – a zombie government property.

Hempton claims that BAC has the right recognition policy and Fannie is being crushed by regulatory conservatism.  I think that’s about as likely as the Easter Bunny, but Hempton deserves credit for thinking outside the box. (more…)

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I find it awfully difficult to care about county elections.  Luckily, Ben Adler seems willing to look at them, and he picked up something interesting:

Unlike the New York City mayoral, or the Virginia governor’s race, there is a really bad sign for Democrats out of the East Coast:… Republicans made inroads in New York’s suburbs.

Why does this matter so much? Because the New York suburbs epitomize the new Blue America. Twenty-some-odd years ago, the economically diverse, but generally affluent, suburbs in Westchester and Long Island represented the success of the Reagan Revolution…But the New York suburbs led the way back to Democratic dominance, arguably presaging the Obama coalition.

I have written often about the strange alliance of very high and very low incomes that defines the modern Democratic party – the working class and the intellectual property class.  It’s my version of “flat earth,” I suppose.  So I’m a bit jealous that someone else spotted this. (more…)

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Even by off-cycle election standards, this was an odd one.  Perhaps it’s just payback for such a good election last year.  I’ll trade watching Chris Christie do his Sopranos impression for never having had to listen to this:

It’s been just 68 days since that afternoon in Dayton, Ohio, when Senator McCain introduced me as his running mate. He is truly the maverick. He took a chance on me. I will always be grateful for that. It will be the honor of a lifetime to work him as vice president of the United States. And I pledge to govern with integrity, and goodwill, and clear conviction, and a servant’s heart.

When the Democratic Party finishes licking its wounds, I hope it learns at least one lesson: when you win an election, you are expected to do something.  Asking the genie for three more wishes is not something. (more…)

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William Voegeli has an LA Times article on the two different models of large state – Texas and California:

California and Texas are not perfect representatives of the alternative deals, but they come close. Overall, the Census Bureau’s latest data show that state and local government expenditures for all purposes in 2005-06 were 46.8% higher in California than in Texas: $10,070 per person compared with $6,858. Only three states and the District of Columbia saw higher per capita government outlays than California, while those expenditures in Texas were lower than in all but seven states. California ranked 10th in overall taxes levied by state and local governments, on a per capita basis, while Texas, one of only seven states with no individual income tax, was 38th.

California is not exactly a high-tax, high-service state – it is more of a high borrowing, medium service state, at least when compared with the corner solutions (CT, NJ, HI) – but the contrast with Texas is apt.  What is the root of the difference? (more…)

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Once upon a time, there was a hedge fund named Hermitage Capital.  Its head was Bill Browder, and it had the clever idea, back during the Yeltsin Administration, of investing Western capital in Russia.  It worked spectacularly well, until it didn’t:

Browder is a smart guy.  He made a lot of money and managed to get his money and his life out of the country, which would be reason enough for me to refrain from paying for Youtube videos naming the Russian government agents who defrauded me. (more…)

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Luigi Zingales has an excellent article for National Affairs that tries to place what has been so special about the American economic system…and why it is particularly vulnerable today:

Capitalism has long enjoyed exceptionally strong public support in the United States because America’s form of capitalism has long been distinct from those found elsewhere in the world — particularly because of its uniquely open and free market system. Capitalism calls not only for freedom of enterprise, but for rules and policies that allow for freedom of entry, that facilitate access to financial resources for newcomers, and that maintain a level playing field among competitors. The United States has generally come closest to this ideal combination — which is no small feat, since economic pressures and incentives do not naturally point to such a balance of policies. While everyone benefits from a free and competitive market, no one in particular makes huge profits from keeping the system competitive and the playing field level. True capitalism lacks a strong lobby.

That’s why it is such a shame that a government that should know better is so determined to ignore Stiglitz, Volker, and Johnson. (more…)

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