Thursday, April 30, 2015

Property before people

One of the things that led me into the newspaper business was a line I read when I was about 10 years old in one of the Atlanta newspapers: “If all the investigations of the Georgia prison system were laid end to end, a lot of whitewash would be spilled.”

I wanted to be able to write things like that.

The best newspapermen still do. Not that it leads to results. I was reminded of that line by the events in Baltimore. Gov. Hogan turned machine guns against his own citizens because, he said, “Baltimore city families deserve peace and safety in their communities.”

He does not believe that. If he did, he would have pointed the machine guns at the real threats to the safety of “Baltimore families” years ago.

What he is protecting is property: The brutal beatings and murders of Baltimoreans by cops did not bother the governor, nor the mayor.

Police Commissioner Anthony W. Batts, who took over in late 2012, has publicly vowed to eliminate misconduct among the city’s 2,800 officers. Other police officials say the department has begun to track such allegations more closely to punish officers in the wrong.
Deputy Commissioner Jerry Rodriguez leads the bureau tasked with keeping police officers accountable.
“I can’t speak to what was done before, but I can certainly tell you that’s what’s being done now, and we won’t deviate from that,” said Deputy Commissioner Jerry Rodriguez, who joined the agency in January 2013 to lead the new Professional Standards and Accountability Bureau.

A burned drug store got the governor’s attention, and the mayor’s attention. Dead people did not.

Property before people. It’s the American way.

UPDATE (Friday, May 1) This is an interesting take, trying to see ourselves as others see us:

A statement from the United Nations said, “We condemn the militarization and police brutality that we have seen in recent months in America, and we strongly urge American state security forces to launch a full investigation into the death of Freddie Gray in Baltimore. There is no excuse for excessive police violence.” The U.N. called on the United States to make a concerted effort to make databases of police violence public to improve transparency and cut down on corruption in the justice system.

Wednesday, April 15, 2015

Book Review 346: Serpent on the Rock

SERPENT ON THE ROCK: Backstabbing, Lying, Embezzling, Cover-ups, Just Another Day on Wall Street in History’s Biggest Corporate Swindle, by Kurt Eichenwald. 503 pages, Broadway paperback, $15.95

For a time, and despite a weird, poisonous managerial culture, Bache was the largest American stock brokerage, but that did not earn it prestige, not even by the loose standards by which Wall Street awards esteem. It did not earn it money, either.

So when some financial leaders — I am looking at you, Jamie Dimon — assert that regulation restricts size, and size is good for America’s financial health, it is worth asking, Oh,yeah? What about Bache?

Although Bache was big, slow and stupid, it was not especially dishonest. A low bar but something.

Not until Reagan and deregulation created opportunities. Just as he said lowering taxes would do.

The opportunities for robbery were especially alluring in the selling of limited partnerships. Although Bache eventually failed, no one ever faced criminal charges, so New York Times reporter Kurt Eichenwald did not have the easy ride of mining indictments and trial transcripts. But he did become a repository for document dumps by distressed employees (some of whom were honest) and victims. We have to take him, in large part, on trust, but he seems reliable.

The Rock in “Serpent on the Rock” is Prudential, the giant —but not big enough to compete effectively in an unregulated environment — insurance combine. It thought it needed a brokerage, and Bache was desperate to be acquired.

Prudential had a solid reputation, lots of capital and a huge pool of potential victims, er, clients.

Bache as a whole never performed, but Prudential’s incompetent management had no clue what to do about that. And the one place it never bothered to look for trouble was the Direct Investment Group, which was marketing billions of dollars in limited partnerships as safe. They were not.

Pru never looked because Direct Investment was reporting strong profits, feeding bonuses upstream; and on Wall Street you can get away with anything as long as you feed bonuses to your superiors.

Even the most minimally competent manager could have spotted DIG as a problem, because one manager of partnerships it was working with in a big way was VMS, and anybody who read The Wall Street Journal in the late ‘80s was alerted to the dangerous state of VMS.

When the crash came, years later, investors who relied on the stellar reputation of the Prudential lost most of their money. The ones who had bought VMS limited partnerships usually lost all of it.

It takes a while for Eichenwald to set the stage, but when he finally does, “Serpent on the Rock” turns from an interesting to a compelling story. It turns out Prudential’s reputation was phony, and the big company screwed its customers as enthusiastically as Bache ever had.

And got away with it.

Sunday, April 12, 2015

Keeping bankers honest

UPDATE: In case you think I am mistaken about the dishonesty and incompetence of bankers in general and JPMorganhase in particular, read this.

                                                                        * * *

I don't know whether to laugh or to cry over this Bloomberg News story about how the world's biggest bank is going to use a computer screen to find "rogue employees."

A February memo from executives including Chief Operating Officer Matt Zames urged employees to flag compliance concerns to managers and reminded them that scandals hurt bonuses for everyone. Dedicated whistle-blower phone lines and e-mail addresses were created for workers to raise issues anonymously.

“The problem we saw last year in FX and the other unacceptable events have implications beyond just a one-time fine,” according to the memo, a copy of which was obtained by Bloomberg News. “They damage our reputation.”
The only meaningful words in those paragraphs were  "scandals hurt bonuses for everyone."

If we look back at notable Wall Street scandals, we find that few were not obvious to anyone who bothered to look. No subtleties that only a computer could spot were involved.

Let's stroll down memory lane and recall some moral plagues of finance:

In the early '90s, Prudential-Bache was revealed to have bilked hundreds of thousands of mostly unsophisticated investors by selling them corrupt limited partnerships. The victims, of course, were surprised, but the managers? Hardly. The head of partnership sales had a record of accepting unethical side deals from general partners, and one of the principal general partners was an ex-con who served time for embezzling from a bank.

A bit later, Nick Leeson destroyed Barings Bank with fraudulent derivatives trades. Were the executives surprised? They shouldn't have been. Leeson had been refused a broker's license in the UK for fraud on his application. So Barings sent him to Asia and put him in charge.

About 10 years after that, AIG failed, but was buoyed up by the Treasury. The problem was in a unit that had written insurance on debt swaps that totaled hundreds of billions of dollars. Were the executives surprised? They shouldn't have been, since they were never asked to set aside any reserves for these policies.

In all three of these examples, the misbehavior was in units that were reporting large profits. The executives supposed to oversee these departments were enjoying bonuses based on the hot performance.

I don't care if Jamie Dimon does hire 2,300 "compliance officers." In most big financial scandals, somebody in compliance had asked questions. Somebody who didn't get on the bonus gravy train. In each case, that somebody was ignored (and sometimes disciplined or dismissed) by someone who was in Wall Street's bonus army.

So what Dimon is doing is a waste of money ($730 million, according to Bloomberg). If Dimon was serious about playing by the rules, he would do two things:

 He would call off his jihad against Congress which is trying (part of it, anyway) to write reguations to control financial fraud.

And he would modify JPMorganChase's bonus. I suggest a three-year delay before any part of an annual bonus vests, and then a gradual payout over 10 years, with automatic clawbacks when bonus babies are found to be crooks.

Dimon won't do that because he's a big bonus baby himself and like all the other chiefs of the big banks, he's incompetent.

How incompetent, you ask. Well, you just read the reasons why anybody who cared to look could have halted the frauds that are daily behavior on Wall Street. If he had done that simple, obvious, easy thing, he'd have saved his company $36,000,000,000 in legal expeses for his bank's misbehavior,

It isn't easy to see why a board of directors would not dismiss a chief executive who racked up $36 billion (about 75 Solyndras) in unnecessary costs.

When lawyers turn down fees

The New York Times has a fascinating story claiming that prestigious law firms won't touch the bigots' side of the homosexual marriage cases at the Supreme Court.

Before I get started, I have to say I don't believe elites exist. If they could, then big corporations would not be run by the incompetents that do run them.

Adam Liptak comes out of the gate running:

  Leading law firms are willing to represent tobacco companies accused of lying about their deadly products, factories that spew pollution, and corporations said to be complicit in torture and murder abroad. But standing up for traditional marriage has turned out to be too much for the elite bar.

But it could have been even zingier if he'd mentioned the elite forms that are on retainer from despots and mass murderers.

Still, the fact that his case could have been made even stronger does not detract from the dramatic situation: Lawyers turning down fees over a moral principle -- or is it just business calculation?
 “Firms are trying to recruit the best talent from the best law schools,” said Dale Carpenter, a law professor at the University of Minnesota, “and the overwhelming majority of them want to work in a community of respect and diversity.”
Carpenter, Liptak does not say, is a well-known advocate for homosexual rights from a libertarian standpoint. 

In any event, we've come a long way from the days when white shoe firms discriminated against Jews, women, blacks, etc. and were proud of it.

When rightwingers like Rand Paul say they want to take the country back, that's what they want to take it back to.

Sunday, April 5, 2015

Book Review 345: The Corvette

THE CORVETTE: Fifty Year History, by Randy Leffingwell. 384 pages, illustrated. Crystalline

In a sort of a cosmic horselaugh, on Feb. 12, 2014, the earth opened up and swallowed the National Corvette Museum at Bowling Green, Kentucky. Somebody doesn't like poseurs.

I was astonished to learn from Randy Leffingwell that the Corvette was inspired by the Jaguar XK-120. It doesn’t show.

A friend in high school had a similar car, an XK-140, and it was a sports car. (The XK-120 was the fastest production car in the early ‘50s.) The Corvette was nothing like that.

The Corvette was basically a Chevy sedan with a fiberglass body: same Blue Streak six, drum brakes, two-speed automatic transmission. As even enthusiast Leffingwell admits, all American buyers cared about were a radio, air conditioning and automatic transmission.

It wasn’t even cheap, despite using workadaddy parts. Buyers stayed away in droves.

When the engineers sought to make the car real, they had to look to Europe. No one in America made disc brakes or even a four-speed transmission. So instead they crammed bigger and bigger unsophisticated V-8 engines into a huge car (it had to be huge to accommodate its primitive brakes).

As noted collector Jay Leno says, Americans like their cars “big and stupid,” and rather slowly the Corvette got a following. Not of driving enthusiasts, since the thing never did handle well, but what might be called accelerationists. Leffingwell speaks admiringly of Corvette’s “tire-melting” and “asphalt-shredding” takeoff speed.

By 1992, a million of them had been sold. In “The Corvette” there are numerous shiny pictures of them, almost all strangely static.

It has always been an ugly car.

They say, and Leffingwell repeats, that racing improves the breed, but it never did much for the Corvette (or for GM’s other cars). In its long run, the only technical innovation the Corvette ever managed was antilock brakes.

And, like all American cars for the past 60 years, it was well on its way to the junkyard as it rolled out of the factory. Car & Driver magazine is attempting to put a 2014 Corvette through its 40,000-mile long term road test.

The engine blew at 6,000 miles. (Something about build quality, the GM engineers muttered to the journalists.) Re-engined, the starter motor failed. Last I checked, Car & Driver had managed to go 16,000 miles.

“The Corvette: Fifty Year History” is sort of like the car: heavy, unwieldy, overblown.

Friday, April 3, 2015

Shades of Mr. Dooley

I nominate Gary Legum as the finest political satirist in America since Finley Peter Dunne. I gotta admit, there are not huge numbers of people vying for the title, and Legum is not the equal of Dunne, who covered the whole spectrum of our political foolishness.

Legum satirizes just one person, over and over. But what a piece of work is Peggy Noonan, and what does it say about the American right that she was the speechwriter for the Great Communicator and is still, in her dotage, given a proud place in that echo chamber of misplaced worrywarts, the Wall Street Journal?

It says as much as anyone needs to know, really. A political movement that takes Peggy Noonan seriously can never be taken seriously itself.

Anyhow, what you need to know about the right reaction to the Iran negotiations is right here.

Do yourself two favors. Read Dunne if you haven't, and go to and read more Legums.

Book Review 344: The Chairman John McCloy

THE CHAIRMAN: John McCloy The Making of the American Establishment, by Kai Bird. 800 pages, illustrated. . Simon & Schuster

John McCloy, who died in 1989, is almost forgotten today. While reading Kai Bird’s “The Chairman” I mentioned his name to two of the best-read men I know and neither had heard of him.

But there was a time — from the mid-‘30s to 1962, and residually to around 1980 — when Jack McCloy was perhaps the most influential American — more so than Hearst, Luce or DeWitt, more than any Rockefeller (for whom he was lawyer, friend and adviser), more than Billy Graham or Douglas MacArthur (to pick two people who received popular adulation).

Kai Bird does not claim as much in his restrained biography, but after reading all of McCloy’s achievements, it is hard to think of anyone who outclassed him. He did not have the power of a president or a governor or a corporate chieftain. But he had real influence.

Before reading this biography, I knew of McCloy as the high commissioner of occupied Germany and as a Republican “wise man.” I did not have any idea of the extent of his activity.

It was a long life and he took part in innumerable crises and issues. Sometimes his advice was good, but when it was bad, it was very bad.

Though I had studied the imprisonment of Americans of Japanese descent during the war, those histories did not reveal the behind-the-scenes influence of McCloy. He was also a Vietnam War hawk and one of two main agents (the other being Henry Kissinger) pressuring President Carter to admit the shah to America. If we are to be fair, McCloy would have advised President Kennedy against invading Vietnam, but once in, he did not see how America could get out.

Usually he was more flexible. As a lawyer and negotiator, he was ready to accept less than he wanted and to change his mind at times. In one of his better moments, the Cuban missile affair, he started out shooting from the hip (uncharacteristically) but reversed on reflection and teamed with Adlai Stevenson in a series of meetings with Russian envoys to come to a face-saving settlement.

It was remarkable for a man not in government service, although McCloy always had a hard time separating the interests of his government from those of his clients and class. He was a Wall Street lawyer of the Stimsonian bent, full of self-righteousness that, somehow, tended also to make his clients lots of money.

“The Chairman” is one of the finest American political biographies I have read. Even in lesser hands than Bird’s, it would hold attention.

When I knew of him, McCloy seemed embedded in the Eastern Establishment, but unlike his patrons, he was not born in it. His father was the starter, scratching his way onto the Philadelphia Main Line but felled by an early death.

His widow was left with little but contacts. She used them to make sure her boy finished the ascent.

Amherst, Harvard Law, World War I, where McCloy developed his link to Germany, the most important of his life, then Wall Street, where he was, during the ‘20s, a not-too-trustworthy manager of corporate bankruptcies.

Bird says no one thought he was brilliant, but nobody who met him ever disliked him, and he was patient. He made his wider reputation by spending a decade pursuing the Black Tom case, a wartime espionage incident, and this part reads like a mystery.

But before he became known for that, he was already a key man in the unseen rooms of influence. The Council on Foreign Relations was the most prominent of many.

Bird contends that the greatest of McCloy’s many services to his country was helping to organize for victory in World War II, but that — plus his Black Tom experience — also led him to his greatest disservice: McCloy did as much as anyone to create the national security state.

That did not prevent the McCarthyites from going after him. McCloy is not usually listed among McCarthy’s victims, and he evaded destruction, but his personal experience does not seem to have created in him any sympathy or understanding of what the national security state meant in the lives of less influential and connected citizens.

He was a — perhaps the — Republican internationalist, conservative at home, liberal overseas. But not really liberal. He talked a lot about democracy and made it his life’s mission to give the Germans (at least in the western three-quarters) a chance to embrace democracy, but he never thought that foreigners, especially black, brown or yellow ones, were really capable of governing themselves, and never objected to subversion of democratically-elected governments.

That is why the Cuban crisis was his last important role. That was the last time that great power politics of the Congress of Vienna variety prevailed. For all that McCloy was an anti-isolationist, he was isolated because the circles he moved in contained only a limited variety of men and viewpoints, none of them sympathetic to the aims of 90% of the world to go back to misgoverning themselves ast they had done before the technical mastery of the Europeans suppressed them.

McCloy lived too long. The last pages depict touching scenes of McCloy holding the hand of his wife, who had dementia, for hours and reading aloud from the histories and biographies that so interested him.

Bird’s book came out in 1992. He wrote that the Establishment “continues to define the parameters of sound thinking on the great imponderables of public policy. The ideas that the American Establishment stood for are still the driving ideas of the republic. Liberal  internationalism abroad and a moderate social compact based on a free market economy at home still define what is considered legitimate political thought.”

So McCarthy ruined McCloy after all.

Must see teevee

For years I have said that the reason that Bush I did not invade Iraq was that he didn't have the infantry to do it. I have been ridiculed for that.

Now I find somebody else who says that: Dick Cheney.

As vindications go, this one is doubly ironic. First, that it's creepy Cheney, second that the Youtube post is by a 9/11 truther site.


Life is full of vexations.

Oh, look, sausage!

They say there are two things you never want to watch: people making sausage and people making laws. For the past two years, I've been involved in trying to prevent a law from being made, and I'd say that is like putting sausage in the grinder and expecting a live, squealing pig to come out the other end.

However, this is not about my legislative adventures. It's about the idiots in my home state of Tennessee, the ones that re-elected Scott DesJarlais. (His district does not quite but almost reaches my hometown of Chattanooga. Growing up there, I learned that all Christians -- all the ones I knew, anyway -- were hypocrites. DesJarlais's disgusting life and successful electoral career proves it.)

DesJarlais is only the most disgusting politician in Tennessee (and probably the whole country) but there is a lot of competition. You can see some of that here.

It's from the Nashville Post, and as an aside I'd like to say I wish I'd had the resources to do that kind of reporting and posting when I was editing a small business paper. But that was preInternet. We wrote our stories on floppies. Sigh.

The issue is whether an armed society is 1) a polite society, 2) a frightened society or 3) a stupid society. Based on the Post's interviews with the leaders (not the followers) of the Tennessee Legislature, I'm going with 3. (Also, hypocrites, but I already knew that.)

The reality-base community has been having a field day with Tennessee stoopid lately, not since the Scopes monkey trial have the people of Tennessee taken such a role on the national stage.

There was the guy who accidentally (or "accidently," as they say in Tennessee) shot himself in the head while playing with a cat. In a public park, with other people around who can be thankful the bullet did not have their names on it.

But, as we see from Andrea Zelinski's terrific interview, Tennessee lawmakers blame God:
Casada: If someone gets run over by an automobile accidently, there's nothing I can do about that. These are things beyond, they're called acts of God, they're beyond our control.
It's true, as a native I can attest that Tennesseans have a low opinion of God.

But you should read the whole thing, because Glen Casada, who is head of his party's caucus (Republican, of course) was lying. The lawmakers do think it is possible to control firearms. They ban them from the Legislature and nearby government buildings.

No good guys in those buildings, I think we can safely conclude that.

Thursday, April 2, 2015

Horrible hospital history

Tomorrow is First Friday in Wailuku, when my friend Jason Schwartz and I do a webcast from the sidewalk of North Market Street. Usually we interview tourists, joke around with the junior high kids, talk about food poisonings and real estate and, now and then, do politics.

Tomorrow is Passover, so Jason will be at sedar and I'll be solo. Besides the usual stuff, I plan to present a history of how Maui Memorial Hospital was sold down the river. It won't be pretty and nobody will come out of it looking good.

Since I don't like talking to myself, I hope some RtO readers will listen in to the webcast. The address is and I'll go live about 5 p.m and continue till I run out of things to say, between 6:30 and 7.

You can call in, too: (808) 281-3752.

(Brought to you by my other blog,