Role Reversal, Tea Party Edition

Tim Wise goes off on the Tea Party, with the simple thought experiment "what if the Tea Party activists were black?"

Imagine that hundreds of black protesters were to descend upon Washington DC and Northern Virginia, just a few miles from the Capitol and White House, armed with AK-47s, assorted handguns, and ammunition. And imagine that some of these protesters —the black protesters — spoke of the need for political revolution, and possibly even armed conflict in the event that laws they didn’t like were enforced by the government? Would these protester — these black protesters with guns — be seen as brave defenders of the Second Amendment, or would they be viewed by most whites as a danger to the republic?...Because, after all, that’s what happened recently when white gun enthusiasts descended upon the nation’s capital, arms in hand, and verbally announced their readiness to make war on the country’s political leaders if the need arose....

Imagine that a rap artist were to say, in reference to a white president: “He’s a piece of shit and I told him to suck on my machine gun.” Because that’s what rocker Ted Nugent said recently about President Obama.

Yes, let's imagine how that would have played out in the media.

(H/t Good blog)

Recycling, Courtesy of S.P.Q.R.

In the first century B.C. Roman merchants lost their cargo to the Mediterranean.
In the 21st century we're using that same cargo to study the physical properties of neutrinos.

Because 2,000 year old lead has almost completely lost its natural radioactivity - it can shield a particle detector without adding its own signature.

How freaky is that?

(H/t Neatorama)

More on the Horizon

Check out Grist's slideshow on the gulf oil disaster.

Not only are the pictures impressive, but you learn things like:

1) They've been trying to use robots to switch on safety measures underwater (as in, take robot to control panel, use robot arm to pull lever, hope it works).

So far, it hasn't worked.

2) They're currently building a "recovery system chamber" - a massive metal dome - to drop over the wellhead and stop the leak. They've never used a dome this big, nor have they used one at this depth. Cross your fingers.

3) The oil slick is currently 16 miles away from Lousiana's Delta National Wildlife Refuge.

(H/t Good blog)

I [heart] WTF

Not in a general sense, mine you.

I [heart] WTF CNN - a website that allows you to compare the inane offerings of America's "Most Trusted Source for News" with sites that cover news.

In a world where a media company was capable of shame - this kind of comparison could spawn changes.

But I'm still young enough to remember that Glenn Beck used to have the second highest rated show on CNN.

(H/t TechCrunch)

Flames on the Horizon

The oil rig Deepwater Horizon

While it's far too early to know exactly what events led to the explosion, fire and sinking of the oil rig, Deepwater Horizon - you'd be hard pressed to come up with a bigger black eye for offshore drilling.

Consider:

• Eleven people are missing and presumed dead
• This occurred less than 50 miles from shore.
• The oil rig is state of the art, with a replacement cost of well over a half a billion dollars.
• The wellhead is continuously leaking thousands of barrels of oil a day.
• The preferred method for sealing the leak could take months.
• The resulting oil slick is headed into the delta of the most significant river in the country
• The oil slick will be set on fire - to reduce it by 3%.
• Offshore drilling is regulated by the (utterly disgraced) D of I Minerals Management Service.

Check out The Big Picture's post on this They have some commentary and some photos of the rig and the fire that help you appreciate the size of this mess.

That's not to presume corruption or ineptitude played a role. What happened may very well have been unavoidable.

-But the visuals are just unbelievably bad.

Kick the Can

Trudy Lieberman digs into a report from Medicare's chief actuary, Richard Foster. It's an analysis on the projected effect of health care reform on health care costs.

Here's Trudy:

Foster crunched some numbers and found that health care costs will likely continue to increase, despite promises from politicos that reform would actually lower them and make those darn insurance premiums affordable. Upon signing the new law last month, the president himself said that the measure would “bring down health care costs for families and businesses and governments.” Well, what do you know? It may not.

Simply put, Foster says that the new law will not slow the growth of the nation’s health care bill. Instead, the cuts in Medicare spending and other ways Congress has finagled the financing won’t offset the big bucks needed to provide health insurance to thirty-four million currently uninsured Americans. In fact, Foster wrote that the country’s medical spending would increase by about $311 billion (0.9 percent) over the next decade. One of the biggest reasons is that more insured people will be using more services. That should have been obvious, given that the total health care expenditures equal the number of services times their price.

So, yes, you will have more people insured, yes egregious exploitation of consumers will be reined in somewhat - but the overall problem remains. We will continue to spend more on health care.

The last time we went after Medicare spending (mid-1990s) - we did not fix much of anything. Newt Gingrich described that effort as "a little bit like having a car that needed an engine overhaul, and we changed the spark plugs and got you to the next phase."

As if that weren’t enough, Foster['s report] raised the specter that Congress might have to revisit some of the Medicare cuts—perhaps even cancel them, as they have done for the doctors year after year. Even though in the late 1990s Congress decreed cuts for the docs, physicians have repeatedly lobbied the press and the pols to stop the cuts from taking effect, and they are scheduled to do that again this week. Furthermore, the report noted that the proposed cuts might be deep enough to affect the solvency of about 15 percent of hospitals and nursing homes, causing some to stop treating Medicare patients and “possibly jeopardizing access to care for beneficiaries.”

So, we've created a promise to cut Medicare payments - that will likely get lobbied out of existence. If the cuts do go into effect we'll have hospitals in jeopardy.

I don't think anyone ever believed that the heath care bill would put our health care troubles to bed - but if Mr. Foster's projections prove out - I'm sure I won't be alone in my disappointment that we had a year worth of legislative combat, and the end result was Medicare getting another shiny new set of spark plugs.

You Can Have My Pasta When You Pry It From My Cold, Dead Hands

Scientific American is obviously in league with the devil - as it is saying terrible things about my beloved carbs:

“If you reduce saturated fat and replace it with high glycemic-index carbohydrates, you may not only not get benefits—you might actually produce harm,” Ludwig argues. The next time you eat a piece of buttered toast, he says, consider that “butter is actually the more healthful component.”

Did he really just say that?

Oh, yes he did.

Blasphemer!!!

Tellin' It Like It Is

You just have to love the NY Post:

(Ht CJR)

Bloomberg: SIGTARP Says NY Fed Investigation Could Lead to Charges

AIG Probe May Lead to Criminal Coverup Charges, Barofsky Says

Barofsky's talking about people who walk some mighty hallowed halls there. As in, Sec. Geithner,
Chittum's take: Yow.

But I'd read the whole thing.

Go, Barofsky!

Blameless

The NYT reports that former First Lady Lara Bush is "opening up" about her 1963 at-fault car accident that killed another driver.

It was 1963 and she was a 17 year old driver on a back country road. She goes through a stop sign, hits another car, and kills its 17-year old driver.

Y'know, we're talking about over four decades ago... and there's not a lot of relevance these days, but look at the defensive onslaught she's bringing to bear:

• It was dark
• It was a bad intersection
• The stop sign was small
• The victim's car was unsafe

Oh, and she points out that she was chatting with a friend in the car when she went through the stop sign - so you can pretty much ignore everything in that list.

No worries, there's more:

• Immediate concern for the other driver - “The whole time,” she adds later, “I was praying that the person in the other car was alive. In my mind, I was calling ‘Please, God. Please, God. Please, God,’ over and over and over again.”
• The victim's car was unsafe

Whatever relevance these two items might have, it is beyond dispute that they do nothing to excuse the initial mistake of blowing through a stop sign. And shame on that poor kid for driving an unsafe car, no?

Look, you want to come clean about a mistake of yours that killed somebody - you should probably dial down the surrounding noise.

It doesn't stop with the accident.

She doesn't go the the victim's funeral - but even that wasn't her fault, you see? Her parents didn't want her to go, so instead she slept through it.

Honest to Pete - if I killed somebody in an accident, I wouldn't go to their funeral - because it would be an insult to their family. No matter how sorry I was - I'd be a distraction from an event that should be entirely focused on the deceased and their family.

You could say that, and hold your head up - but no. Her parents stopped her. It was beyond her control.

I'm sure this will get a good amount of press for her new book, but this hardly sounds like a person opening up. More like papering over. She's said nothing in the past, so sure, you could say it's more open than nothing.

But "open"? I think not.

No Caption Required

(H/t Imagefave)

AC/DC + Castle + High-end Projectors

Creative artists at seeper put together a seriously cool light show they projected on the side of Rochester Castle in Kent.

Sadly, it is a commercial for the Iron Man movie - but the effects are really good (particularly the last bit, at 5:20 into the clip)

Great Moments in UI - Vol. I

As part of my contracting gig - I'm required to submit a weekly timesheet using a web app.

Rather, I'm required to:

1. Log into a web application
2. Select the current date (because defaulting it would be hard)
3. Select my current client company (because defaulting a field that doesn't change would be hard)
4. Print out a hardcopy
5. Get my manager to sign it
6. Fax it to my staffing company

As procedures go, this is about middle of the road for a large business: it employs multiple and expensive components (human and software), it has a looping workflow, numerous opportunities for failure, and data that passes through four mediums - to be ultimately archived in three.

That's when things go as expected.

This past week, things did not go as expected.
I logged in,

for the 224th time in this system - I told a computer what the current date was.

Then (again, for the 224th time) I told my employer's web app where I am currently working.

And something new happened - a JavaScript Alertbox popped up saying the following:

The page at [your staffing company's website] says:


Current Week Ending Date has passed Actual End Date for this placement.


You cannot enter time and/or expenses for this placement.
Please contact your recruiter for assistance.


Placement: [Where I currently work] [My Start Date] - May 2, 2010

If you're me - you read that a couple times over before anything sinks in.

Actual End Date...?

And then somewhere in your higher logic center - some neurons fire and you're madly emailing your recruiter: Seriously. I call WTF?.

Since I do my timesheet is at the end of the week, I'm sending this email at 4:20pm on a Friday. Amazingly, I don't get a reply for three days.

When I do - it goes like this:

Good morning!
There seems to be a glitch with [our timekeeping system] this week. It is a company-wide problem that we are aware of. I know several of you are receiving an error box that says your project is ending 05/02/10. This is NOT the case! We don’t know why the system is showing that as an end date, but please disregard it. Again, your position is secure and not ending this weekend.

.....*ahem*.....

Fail.

It's the 198th Anniversary of the Battle of York!

You know, in the War of 1812...where the Americans overwhelmed the British garrison of the Town of York (present day Toronto) and then sacked the town after their leader, Zebulon Pike was killed by an exploding armory?

...And...the savagery of the Americans at York was used as a justification for the British burning Washington D.C...?

Nothin'...?

Yeah, me neither.

I just wanted an excuse to post this video of the Three Dead Trolls playing their War of 1812 song. Enjoy.

There Are Two of Them?

(Via the BBC)

The twin brother of Poland's former president, who was killed in a plane crash in Russia this month, says he will run to be elected in his place.

Jaroslaw Kaczynski said he would stand in the 20 June presidential election despite his "personal pain", in order to continue his brother's mission.

Dangerous Game

In the early nineteen-seventies, Mark and Delia Owens, two graduate students in biology at the University of Georgia, were seized by the idea of resettling in remotest Africa. They organized an auction, sold their possessions, and used the modest proceeds to buy camping equipment and a pair of one-way air tickets to Johannesburg....

The story progresses until these two people find themselves locked in a deadly struggle against ivory poachers, poverty and corrupt government officials.

Heard this one before, right?

No you haven't.

The Hunted is a long, slow-boil story that starts with youth and idealism - and ends with a dead body dumped in a lagoon.

(H/t Marc Ambinder)

Sen. McConnell?

Don't look now, but opposing financial reform just got a little harder:

Goldman executives cheered housing market's decline, newly released e-mails show

As the U.S. housing market began its epic fall nearly three years ago, top executives at Wall Street powerhouse Goldman Sachs cheered the large financial gains the firm stood to make on certain bets it had placed, according to newly released documents.

The documents show that the firm's executives were celebrating earlier investments calculated to benefit if housing prices fell, a Senate investigative committee found. In an e-mail sent in the fall of 2007, for example, Goldman executive Donald Mullen predicted a windfall because credit-rating companies had downgraded mortgage-related investments, which caused losses for investors.

"Sounds like we will make some serious money," Mullen wrote.

Mitch...? You reading this? How are those 41 signatures lookin' there, boy?

0 for 90

The [California Department of Managed Health Care] randomly selected 90 instances in which Anthem Blue Cross of California dropped the insurance of policyholders after diagnoses with costly or life-threatening illnesses to determine how many were legally justified.

None were. “In all 90 files, there was no evidence (that Blue Cross), before rescinding coverage, investigated or established that the applicant’s omission/misrepresentation was willful,” the DMHC report said.

Full article on Reuters.com

(H/t CJR)

Magnetar, the Musical

Sure, most folks have heard this - I didn't realize they had a video out there as well:

Paying For It

When I was in college - I was out with a group celebrating our mutual friend DM's birthday. Late in the evening. DM suggested that I (as the lone car-owner) drive him to a bar he wanted to visit.

Uh, okay

This suggestion and my agreement received an odd reaction. Nobody else seemed to want to go. My car was small, so the whole group was never going to be able to go - but still. Odd.

My usual half-@ssedto drinking had kept me sober - and DM didn't drink. DM's enjoyment of the bar scene had always seemed vicarious - he'd watch what others would do, and then out-crazy them while sober. It sounds strange to describe it now, but at the time it was just part of being around DM.

I took his latest suggestion as an excuse to prolong the evening. He wanted to stay out - okay.

For reasons that will soon become obvious - my line of reasoning will seem completely implausible - but at the time, I truly had no idea what was in store. DM wanted to drive to a bar, and I said okay.

When we got there - it was obvious that DM was using his birthday as an excuse, but for something else.

DM wanted to go to a strip club. And that's where we went.

I have three distinct memories of the evening:

First, talking with the bouncer on the way in. I briefly wondered if being 19 was old enough to get in. The bouncer made it clear if we had the cover charge, he didn't care if we were in pre-school.

Second, talking with a stripper at the bar. She was waiting for her shift to start, and amused herself by picking on me. She called me baby face and yelled at the bouncer for letting me in. I remember this woman looked...used up. She had feathery clothes and a voice like a chain smoker. She was having great fun trying to make me uncomfortable. It was working. I had never met a stripper before and it was like encountering someone from Mars.

This place and the people in it were normal to her. She was in her element - and I was the freak. It was a lasting and unsettling feeling.

However, the most disturbing impression was the one that made me write this. The one I was reminded of as I read this article from New York Magazine, Rachel Uchitel is Not A Madam.

At some point - I was standing back, having paid my $6 cover, drinking my required $8 can of beer - and I watched a stripper at the end of her routine crawl around picking up dollar bills off the stage floor. The act was over, the music had stopped - and this person was very clearly tired. The fake smile was gone, and this woman was picking up her money in a manner not unlike a person cleaning up dirty laundry. I have to do this, in this way, so this is what I will do.

My point isn't to get all sanctimonious about the objectification or degredation of women - I was a 19 year old male who went into a strip club for precisely the reason you'd expect. All protestations aside, I was there to see women take their clothes off.

What I'm talking about is the dreadful symmetry at work in such a place - This woman was surrounded by a group of leering predators. Her employer had created an environment where money ended up on the floor - and she was required to crawl around on all fours to retrieve it.

And off the stage was a decidedly sad bunch of men, buying overpriced cans of beer and throwing money on stage at a rate that none of them could reasonably afford. The more they paid, the more attention they would recieve from the strippers.

Economics governed the strippers behavior - once off stage, they would stalk the room - aggressively prancing in front of men who were hanging back from the stage (and consequently, were spending less money). Those who did not respond to these antics with cash were shunned by the strippers - but a regularly-attired waitress would soon approach and offer more $8 cans of beer.

It was a system - designed to exploit the intersection of what men will pay to see - and what women would do for money.

Well, duh - I'm sure you're saying. Of course that is the thinking behind it. Yes, but what I'm laborously trying to get across was my surprise at how systematic the whole thing seemed. How efficiently it ripped off both parties.

And what is clear from Lisa Taddeo's article in NY Magazine - is that however appalling this system appears - it is a thin slice of nothing compared to the one she describes. One constructed to maximize the financial return from putting attractive women in close proximity with wealthy men. They take great pains to avoid outright prostitution - but somehow that makes them appear that much worse.

Ms. Uchitel's rise to infamy with the Tiger Woods scandal has netted her the oportunity to tell us what she knows. She knows plenty - and while she comes across as a mid-level, more commercial Stephen Ward, it's hard to feel any sympathy.

She is just another predator, being turned into a different type of prey by Ms. Taddeo.

It is a fascinating story - but disheartening on so many levels. The world has gotten far too good at this sort of thing.

Fox? Bernie? Go F&*#! Yourself

Watching this, I laughed so hard I think I pulled something...



(H/t to TPM)

Ethan McCord: Candor on the Ground

Danger Room interviews Ethan McCord. McCord was the solider who - in the wake of an Apache helocopter attack - carried the wounded body of an Iraqi girl to safety.

Dude is Seriously Bleak

...but he reminds me of someone.



(H/t Felix)

Michael Specter on Embracing What We Know

Michael Specter advocates for the pursuit of science in a way I find rather satisfying.


Not because it's a smug beatdown-the-forces-of-antiscience screed - but because it (briefly) advances an argument that highlights real common ground between science and those concerned about Big Pharma, and Monsanto.

Namely - you can hate Monsanto, you can fear Big Pharma, but the very real problems you have with those entities (risky expensive drugs, agricultural monoculture, chemicals in food) are not problems with science.

They are problems of conduct - specifically, the conduct of corporations employing scientific advances for profit.

These are absolutely problems that need to be addressed - but they are not reasons to restrain scientific inquiry into agriculture, chemistry - or to run towards any alternative that presents itself.

As he puts it:
We hate Big Pharma....so we run away from it and leap into the arms of Big Placebo!

We are afraid - so we look to control what we can - what we choose to eat, and what medicince we choose to ingest.

But our choices are not inherently more valid, just because they belong to us. Science can still reveal things about those choices - gradations in quality and benefits - or invalidate them outright.

I love my choices. Often to a degree that blinds me to how foolish they are. But in those sober moments when I can look back dispassionately - I learn a lot.

I've learned to cook using cookbooks that use and describe a scientific method. "We tried X, it led to Y"
I buy products using test data from the most objective sources I can find.

Sure, I still cook and buy crap - but I am light years ahead of where I would be had I tried to learn all of this stuff on my own. They spent the time and money to learn stuff - and all I had to do was read what they found out.

It is pointed out over and over that our internal bias is the largest obstacle to the discovery of hard facts.

I remember grilling my pediatrician about thimerosal in my children's vaccines - I was genuinely scared to death. My doctor did not help me by treating me as if I had no idea that vaccines are intended to prevent horrible disease.

It was an unpleasant experience, but my doctor's ham-handed attempt to say vaccines are beneficial has no bearing on their validity as preventative medicine. It's that age old problem:

Science is great at discovering things, but they need a marketing strategy.

Sadly, the people who create and sell crap often have marketing strategies.

The people who sell the valueless anti-bacterial soap do. Likewise those who sell the ineffective cough syrups. Yet somehow, they continue to sell product.

Ginkgo? Crap. Airborne? Fraud. Despite this, I work with several people with masters degrees who swear by this stuff.

If I was to lock horns with them over their belief in these products - it would utterly poison future discussion. We need people with real concerns about health - to unite behind regulations and allow science to progress, but constrain business conduct for the greater good. It can't be about "You're stupid for believing in that." It has to be, what are we both trying to achieve? How will we know when we achieve it?

And science is the only way to do that.

A Look at the Vampire Squid's Inbox

S.E.C. to Goldman Sachs - Elections have consequences.

Simon Johnson to Goldman Sachs (CC: John Paulson) - The Worst is Yet to Come

Simon Johnston to Goldman Sachs - Tell Your Friends We're Coming

Sen. Mitch McConnell to Goldman Sachs - I Got Your Back

The Stanford Report - A.K.A. "As the S.E.C. Slept..."

The OIG released its report (PDF) on how the S.E.C. handled the Robert Allen Stanford Ponzi scheme.

As you'd expect with anything involving the S.E.C. - it concludes that mistakes were made. From their conclusion:

The OIG investigation found that the SEC’s Fort Worth office was aware since 1997 that Robert Allen Stanford was likely operating a Ponzi scheme, having come to that conclusion a mere two years after SGC, Stanford’s investment adviser, registered with the SEC in 1995. We found that over the next eight years, the SEC’s Fort Worth Examination group conducted four examinations of Stanford’s operations, finding in each examination that its sale of CDs through SIB could not have been “legitimate,” and that it was “highly unlikely” that the returns Stanford claimed to generate could have been achieved with its purported conservative investment approach. While the Fort Worth Examination group made multiple efforts after each examination to convince Enforcement to open and conduct an investigation of Stanford, no meaningful effort was made by Enforcement to investigate the potential fraud, or to bring an action to attempt to stop it, until late 2005.

I especially appreciate the last part of this paragraph (emphasis added):

Moreover, the OIG investigation found that even at that time, Enforcement missed an opportunity to bring an action against SGC for its admitted failure to conduct any due diligence regarding Stanford’s investment portfolio, which could have potentially completely stopped the sales of the SIB CDs through the SGC investment adviser, and provided investors and prospective investors notice that the SEC considered SGC’s sales of the CDs to be fraudulent. The OIG investigation found that this particular type of action was not considered, partially because the new head of Enforcement in Fort Worth was not apprised of the findings in the investment advisers’ examinations in 1998 and 2002, or even that SGC had registered as an investment adviser, a fact she learned for the first time in the course of this OIG investigation in January 2010.

As in:

"Really, Mr. OIG investigator (who has come to my office to interview me on what I knew about the Stanford Ponzi scheme which blew up a year ago), you're telling me that my office has the power to regulate SGC as an investment advisor? Wow, I had no idea! We should get on that...

Amazingly, the report goes downhill from there. It details how the culture at S.E.C. enforcement led their regulators to chase stats rather than investigate wrongdoing. Complex cases, or "novel" cases like Standford's Ponzi scheme were thought to be less certain to succeed. Regulators were looking for "slam dunk" cases.

They didn't investigate things like Ponzi schemes - because they though might be hard.

(H/t Felix Salmon)

Once Again, Bill O'Reilly Forgets That Recording Technology Exists

I know, beating on the giant ball of idiocy that is Bill O'Reilly is kind of pointless - but when it's done with grace and artistry, you just have to stand up and cheer:

To the creator of this piece, HuffPo's Ben Craw, I award both ears and the tail.

(H/t TPM, 'natch)

Reality Check

Dow ends up nearly 380 on Citigroup profit news
Huffington Post Sara Lepro and Tim Paradis | March 10, 2009

Goldman's Pay Restraint Helped Drive Record Profit
By Susanne Craig | January 21, 2010

Bank of America Continues to Improve
NYTimes - By Andrew Martin | April 16, 2010

Give banks unlimited access to financing at close to 0% and a steep yield curve, exempt them from marking their worst assets to market, and they will earn money, even when their combined commercial loan book is shrinking at an annual rate of 20%
-David Goldman

(Via CJR)

The S.E.C. Barks...and at Goldman Sachs!

I'll be damned...U.S. Accuses Goldman Sachs of Fraud in Mortgage Deal

CJR's Ryan Chittum is over the moon on this one:

This is a huge story. The SEC has found that its jaws still snap; Goldman, which has heretofore seemed virtually untouchable, is in the docket; it illustrates short-sellers’—John Paulson specifically here—role in creating the crisis and making billions off it; and the press and bloggers can claim a big victory, regardless of the ultimate outcome of the case. It also points the way to possible further SEC actions over the banks’ similar dealings with Magnetar, which ProPublica detailed so impressively last week.

I'd like to see some pelts on the wall before I get too excited, but the idea that the S.E.C. noticed something might have gone wrong with the Abacus trades is at least encouraging.

I was thinking about Goldman's Abacus deal and the deals that Magnetar enabled and something occurred to me.

Sure, you could argue that Goldman and Magnetar had merely figured out a clever way to use the rules to maximum advantage. The standard Wall Street argument - we are predators, stop telling us to act like social workers. But you also hear a lot about moral hazard - a situation where a person is rewarded for something that causes a disproportionate amount of harm.

The last time there was a lot of play on that term - we were talking about homeowners walking away from their mortgages - or being saved by the taxpayers from their own bad choices (the Santelli argument).

Now, flip that around and look at the traditional model of investment vs. the derivitives market.

The traditional investment model, you have someone asking for money to make a product (a business that makes widgets, a bunch of home mortgages, whatever). The greater the likelihood the product will make money, the less this person will have to pay for their financing.

Well, duh - right?

The flip side of this is the investors mantra: higher returns come with increased risk.

We'd all love to have investments bringing home 10% every year (unless it's with Madoff) but most of us would be content with steady returns a little lower than that.

But think of the margin for the traditional investment model - most investments are going to bring in single digits, and have the occasional big year in the teens (if you're lucky). In exchange, you'll have some bad years and (if you adjust for inflation) you'll see a market that gets you about 3.7% return over 77 years.

Bleah.

Now take the derivative model of the credit default swap.

You'll take out a swap on a bond worth lots of money - and you'll pay a small fraction of it's value annualy. If the bond tanks, you'll get paid the full value of whatever you insured with the swap.

Since you don't have to actually own the bond you insured, you aren't being made whole for a loss you've incurred, you're just getting paid.

On a run of the mill CDO the traditional investor might get 6% - but to a company like Magnetar, betting on the CDO tanking - they could make 200% and quite possibly a lot more. The hedge fund who picked the securities for Goldman's Abacus deal got a 590% return on the year.

Now, here's the moral hazard: You're an investment banker. You have 10 billion to invest.

Do you want to scour the market for good businesses so you can get a solid 6 and the satisfaction of creating something%

Or would you rather polish turds, sell them to the ignorant and make 300%, 400% or even 500% when everything burns to the ground?

That's moral hazard.

I get that short sellers have an important role in the market, but secret short selling doesn't help the market, no do shorts where the ROI is so staggeringly out of whack that traditional investments cannot compete.

This sh!t needs to stop.

Reverse Auction

Here's a rough paraphrasing of how the remains of Lehman Brothers was auctioned off to Goldman Sachs by the CME Group:

CME Group: I have Lehman’s equity-derivatives positions, valued at around $5 million, what are my bids?

Goldman Sachs: I'm the only one bidding - and I bid negative $445 million.

CME Group: "Negative..." Can you clarify that bid a little?

Goldman Sachs: You give me $445 million, and I'll take the equity positions off your hands.

CME Group: Deal.

Seriously. That's what went down. As a bonus, only six firms were invited to participate in the "auction."

(H/t CJR)

Don't Worry Your Pretty Little Head About It

"Beware of he who would deny you access to information, for in his heart he dreams himself your master"

Back when the mortgage mess was merely incredibly bad - Bloomberg asked the Federal Reserve to disclose who they've been lending to, and in what amounts.

The Fed's answer was immediate: No.

So Bloomberg sued. They still haven't gotten the information, but they are still fighting for it.

To be fair, the Fed is standing up for the privacy concerns of groups like the Clearing House Association LLC (whose members include banks like Bank of America and JP Morgan Chase) - and that group of business does offer a compelling reason why the Fed shouldn't tell us:

“Our member banks are very concerned about real-time disclosure of information that could cause a run on the banks,” said Paul Saltzman, the group’s general counsel, in an interview yesterday.

Oh. Well, in that case - they'd better not tell us.

(Via CJR and Bloomberg)

Three Sips From the Firehose

What do a drowned woman, a refinancing deadline, and $15 million dollars have to do with each other? Quite a lot, actually.

Repo transactions: Keeping Wall Street's balance sheets low since at least 2001.

Oh, and this just in: JP Morgan's Jamie Dimon wants you to know: you can't touch me.

Trudy's Devilish Details

CJR's Trudy Liebermann brings a fine piece of information to the health care debate - and wonders why we weren't talking about it earlier:

[Health Care Reform] will require the National Association of Insurance Commissions (NAIC), the group of state regulators that writes rules for insurance companies, to come up with new requirements for the most popular Medicare supplement policies, Plan C and Plan F. These policies are purchased by close to 60 percent of all Medicare beneficiaries who have supplemental coverage, including gobs of people living in South Florida. The idea behind this change is to make these Medicare supplements cover less and require seniors to pay more for their coverage—in other words, shift more of the cost of medical care to them.

The theory is that if seniors have to pay more, they won’t go to the doctor as often. “More cost sharing is the continued triumph of the unholy alliance between the academic economists, policy wonks, and the Republicans who think that health care costs so much because people have too much insurance,” says Bruce Vladeck, former Medicare administrator and now a senior adviser at the Greater New York Hospital Association.

...Nobody is talking much about this potential expense for seniors, who will feel the financial pinch beginning in 2015—a date that those retiring in the next few years should keep in mind as they embark on their planning. That, to us, suggests some good consumer stories down the road.

Why did this provision slip through virtually undetected by the media? Were their heads too wrapped up in the donut hole, along with the political spin from Dems and Republicans about helping all those folks on Medicare? I asked a top official at the AARP, who replied: “We are conflicted so we have chosen not to comment. I think seniors will be unhappy, and it won’t affect utilization at all.” In other words, seniors will still go to the doctor—they’ll just have to shell out more to cover the bill.

Now wouldn't that have been a fine discussion to have in the debates? Instead we were treated to shouts of "Socialism!" and fanciful notions of Death Panels.

Seniors paying more is never something that plays well - and I'd be interested to know why this perfectly valid criticism wasn't given more play and substance by the opposition.

Magnetar of Destruction

Oh, you were hoping for the magnetars that deep fry our satelites?
You wish.

I'm late to most things these days, so while the rest of the world was listening to This American Life's story on the Magnetar hedge fund involved in a glorified pump-and-dump scheme - I had to read about it on CJR.

Scheme doesn't seem to cover it, considering that what TAL and Propublica are laying out.

At the critical tail end of 2006, Magnetar was behind 2 out of every 3 dollars of mezzanine CDOs - toxic mortgage-backed investments sent on suicide missions - so that Magnetar could win more than their value using Credit Default Swaps. That's over 20 billion dollars.

Here's CJR's nice summation: Magnetar was taking insurance out on [their] own house and then building it out of matchsticks.

If you haven't yet, Listen to TAL's story Inside Job, read Propublica's article.

It's a free market - and I'm sure there will be people saying the guys at Magnetar are just better at playing the game than everyone else - but here's the thing: there are all manner of clever ways to rip people off, some are downright ingenious - but we regulate markets to lighten the burden of commerce.

Clever people could change a gas pump to dispense less gas than they claim - they could water down the mixture in ways the consumer would never notice. That'd be clever. But it would be unethical and illegal.

What Magnetar was doing was unethical - but is permitted under current law. They insured their investments against loss - after ensuring their investments would lose.

Which makes me wonder if the sellers of credit default swaps can take a page from health insurance companies.

As in: I'm sorry Magnetar, but on page 348 of your application, you clearly misspelled your billing address. I'm afraid that constitutes a fraudulent application - we're cancelling your CDS, retroactive to the day you posted this application. Good bye.

Ba$tards.

United States Victory Appreciation Month

Celebrating our rich heritage of kicking the confederacy's ass

Oh, how I love this:

Danziger Bridge: Blown Wide Open

(Via TPM)

Looks like the Danziger Bridge scandal was as bad as alleged. Here's a cop admitting as much:

As Lance Madison ran toward the Friendly Inn, a motel at the bottom of the bridge, Ronald Madison trailed approximately 20 to 30 feet behind him. The [Lousiana State Police] car moved to cut off Lance Madison and, in so doing, briefly pulled slightly ahead of Ronald Madison, who continued to run after his brother. As Ronald Madison then ran past the slowing LSP car, heading toward the motel, he passed by defendant HUNTER and defendant HUNTER had a clear view of him. Defendant HUNTER saw blood on Ronald Madison's shirt, and thought he might have been shot. Ronald Madison, who was running with his hands in view, had no weapon and posed no threat. Ronald Madison did not change his direction, turn around, or stop running as he passed the LSP car. Instead, Madison continued to run away, following his brother, who was a short distance ahead of him. At no time as Ronald Madison ran, did defendant HUNTER see him turn toward the officers, reach into his waistband, or make any threatening gestures.

As the unmarked LSP car pulled to a stop, Officer A, without warning, fired a shotgun at Ronald Madison's back as Madison ran away in the direction of the motel. Defendant HUNTER immediately got out of the car and went to where Ronald Madison was lying on the ground. Ronald Madison was alive, but appeared to be dying. He was lying on his side, with two officers standing nearby. Neither defendant HUNTER nor either of the other officers searched Ronald Madison for a weapon.

As Ronald Madison lay dying on the pavement, Sergeant A ran down the bridge toward Ronald and asked an officer if Ronald was "one of them." When the officer replied in the affirmative, Sergeant A began kicking or stomping Ronald Madison repeatedly with his foot. Sergeant A appeared to be striking Madison's torso with as much force as he could muster. Defendant HUNTER charged toward Sergeant A, who backed off from Madison. As defendant HUNTER walked away, an officer standing nearby appeared shocked that HUNTER had confronted Sergeant A.

Spread The Wealth

I love this.

Short version - FiveThirtyEight.com abuses the notion that the US tax code takes from the rich to give to the poor.

He uses a stat called the GINI Coefficient (which measures how evenly the wealth of a nation is distributed.)

For those unfamiliar with the Gini Coefficient, it is a measure of the distribution of income (or wealth), bounded between 0 and 1, with zero meaning equal distribution across all citizens and 1 meaning that all the income/wealth belongs to the one, richest person. That is, the lower the number the more evenly--though not necessarily fairly, which is a normative judgment for each person to make for herself--income is distributed prior to (or after) government activity in the form of taxes and/or transfers.

As you can see, the before-taxes-and-transfers Gini Coefficient for the United States (.46) is very close to the average for all nations of the OECD (.45). Put another way, the ex ante maldistribution of income here is about the same as for comparable nations. To see what the net effect of those government policies are, we need to look next at the after-tax-and-transfer Gini Coefficients.

Here are the relevant visuals (being the the right of these charts means having more wealth concentrated in the hands of a few)

 Before Taxes:

and after taxes:

So, the current US tax code is actually moving wealth into the hands of a few.

I suppose you could take the viewpoint that ending tax cuts to the wealthy IS wealth redistribution – so people making that argument have a leg to stand on – but the idea that the wealthy are currently being impoverished by their high taxes is dead on arrival.

So to those claiming that letting the Bush tax cuts expire amounts to class warfare – I’d say, Yeah, but you started it. And now you want a truce after you drew first blood?

I don’t think so.

Nonpersons

A recent project has enabled a centralized org chart to be available internally. This new achievement was forwarded to all with much fanfare.

Naturally, I - the obedient minion - clicked on the link to find myself in the chart.

And just as naturally, I did not find myself anywhere in the chart. Nor were any of my fellow contractors. This is to be expected.

But the post-message snark was especially nice.

Contractor 1 (to entire team): As I commented in the blog post, you’ll find a noticeably incomplete org chart when you drill down to [our] team. Several people are missing. In its present form, I wouldn’t recommend including it.

Contractor 2 (to all contractors): Several people are missing? It looks to me like it’s just not showing the contractors. All the people seem to be accounted for.

Nice.

The Unmaking of a Design

Okay, I'm going to gripe about work now.

I've said before, a large part of what I do is ask my employer to do things they don't want to do. Most times, I'm asking them to avoid raining needlessly cruelty on their customers.

If I was being fair - I would say their opposition to my suggestions does not originate in a desire to be cruel - but rather a need to please their corporate overlord.

I haven't met many overlords, but they seem fixated on one message:

Hit your release date & don't go over budget.

These are good goals. I respect them. Because while there are and endless supply of worthy ideas, money is finite.

CorpWorld attempts to deal with a byzantine process that prioritizes the ideas that flow through CorpWorld like a river. As no champion of an idea likes to be told "No," any rejection is followed up by a rigorous search of the rules to maximize their odds of getting funded.

I am on one such project. It had a very simple idea - one that (without fear of violating my NDA) I can describe as Let's do what damn near everyone else is doing. Or LDWDNEEID, for short. As you'd expect, the goal of this project was not to set the bar for the industry, merely to achieve parity with the market.

Parity is not sexy - yet somehow the battalion of fabulists behind LDWDNEEID convinced the Overlords to fund it.

This was over a year ago. We began assembling a team of experts in the various disciplines and walked our way through every modest scenario that LDWDNEEID would need to accommodate. We wrote stuff down -small stuff, core stuff, important stuff - and I drew pictures of what that stuff might look like (nothing too detailed, lord knows we hadn't heard back from the experts on what was technically feasible).

It is at this stage when a person like me can have the most impact. Early on in a project simple decisions can affect the DNA of generations of code. Just presenting an alternative early on can avoid crippling pain later on. Our entire team deliberated and we came to a modest set of improvements to the normal process. Nothing earth shattering, but we had our ideas - and they were given form and purpose.

Enter the HiPPO. Now, your average HiPPO is a dangerous beast (they've seen it all, they know what they like, etc) but our HiPPO was absentee which compounded these problems. We had HiPPO by proxy. The HiPPO's minions would attend meetings in their stead. The minions would gamely make small decisions - but big things had to be run past the HiPPO.

So be it. Above a certain pay grade, people are insanely overbooked, so we were grateful we had been granted room to work.

Now, I'd said that LDWDNEEID was not a sexy beast - and sooner or later this fact was bound to come to the attention of the HiPPO. Right about the time we were set on a design, our herbivorous master issued a new directive, People want more... we will add SpuriousFeature and PointlessBling to LDWDNEEID, and they will be happy. Counterarguments were in vain - so this was added to our scope.

I extracted one concession from the HiPPO: we would test these features on real users. There were two competing designs on how best to present SpuriousFeature. We would ask users which design they preferred: SpuriousFeature 1, or SpuriousFeature2.

Weeks (and thousands of dollars) later - the users showed a clear tendency...to not use the SpuriousFeature at all. They also did not understand why PointlessBling was part of LDWDNEEID.

These results were interpreted as a clear endorsement of SpuriousFeature1. PointlessBling's test results were deemed too inconclusive to rely on.

Shortly after this decision was agreed on, CorpWorld laid off a large number of people (including my partner) and a large number of survivors changed chairs. The HiPPO was in a new chair - but their Parthian shot hit home. SpuriousFeature and PointlessBling were staying.

Also - we added Inexplicable Legacy System Constraint. This still allowed LDWDNEEID to accomplish its core function, but just barely.

Enter the Buddha.

At this point, LDWDNEEID was reviewed by another team I'll collectively call Buddha, who wanted it to look and act like other projects.

Again, I understand this goal. People don't like learning how one system works, they sure don't like to learn how ten different systems work. It is a good goal.

The result of Buddha’s review was to have the current project manager fired - and to completely re-imagine LDWDNEEID so that it was consistent with a project I'll call TinyApp.

Now, TinyApp is a fine app, but as you might expect - it is not very big. By contrast LDWDNEEID (and SpuriousFeature1/PointlessBling) was rather large and would have a very hard time being consistent with something designed around doing a lot less.

I pointed this out. The team agreed. Buddha was unmoved. We would squeeze LDWDNEEID down so it could be consistent with TinyApp.

We hadn't coded anything at this point, so this was a documentation change. I drew my pictures, tested the layout and came to the inescapable conclusion that it was impossible to include SpuriousFeature1. Not only that, but just converting the original LDWDNEEID to be like TinyApp would violate a slew of interface best practices.

I demonstrated this, repeatedly. Buddha was unmoved.

Then the cost estimates rolled in. Like magic, SpuriousFeature1 and PointlessBling were transformed from whimsical notions into line items that cost money.

They were out.

This was good, but again, the simple fact was LDWDNEEID still had major problems as it tried to be like something totally unlike itself. Best practices be damned. Consistency uber alles. Never mind that TinyApp was never designed to be forward compatible with other projects. It did not and would not scale to anything larger than itself.

Orders were orders, and we pressed on. Ten pounds of digital sh!t were duly crammed into a 5 pound digital bowl. And it looked and worked awful. I begged for a test. The interface had huge problems that might prevent people from being able to use it at all. Nothing doing. No test, we had a deadline and tests take time.

At this point - we turned over about half of our project team. With new faces come new ideas and retreading of old ground. This is both good and bad. To the good, we were given leeway to make LDWDNEEID as big as it needed to be (huzzah!) but new constraints were added to LDWDNEEID's core function. Instead of doing what damn near everyone else was doing - our new mantra was Lets Do What Virtually No Sane Person Would Want.

At this point - a sober review of LDWVNSPWW^TM would make any thinking Overlord pull the plug. We would be spending serious dollars to position ourselves behind the rest of the market and (in my opinion) still fall well short of what our end users would want.

However, LDWVNSPWW^TM had acquired a destiny. We would build it, for we are dumb. Staff attrition had reached an appalling new low (our meetings were frequently three people, down from ten) but there was a date and it would be met.

I'd managed to get another test into the mix, right as development was starting (which is the worst time to find out it’s time to change things, second only to right after your go-live) and the results were appalling. LDWVNSPWW^TM was doing what no sane person would want and sane people asking us why.

We had no answer for that - only that we would try to get some minor changes into the code before things calcified.

With the onrushing train of go-live nigh - programmers start doing something that makes everything worse.

They read our documentation.

Suddenly there are all sorts of panicked questions about features we'd laid out over a year ago. What is this? they exclaim.

All the modest interface ideas from last year are revisited - I am called by a developer to who asks if I can revise a specification. I defer to the client, who does not respond. The project manager demands immediate action - they will lose their resources if they don't get an answer now.

I hedge. If I change things and the client disagrees, I'll just have to change it back. I ask for a full list of suggestions so they can be reviewed en masse instead of bit by bit.

Over the course of my discussion it becomes obvious that the programmer is telling me what he's already built - and asking me to change the documentation to match it.

Because that make sense.

The client is faced with a harried manager demanding answers and raising the twin specters of increased cost and delay.

It's no contest. It never is. The client forwards instructions to make the specification match the existing code, in the interest of time. What no sane person would want - will now be that much harder to understand.

In a few days the clients will sit down to discuss the recommended changes from our test - and this same pantomime will play out again - this time followed with the fanciful promise of perhaps in a future update, we could...

Then the funding will shut off. Meetings will stop.

Days later I will learn secondhand that a malformed parody of a modest idea has been inflicted on the world.

I'll go to a launch party and drink something strong.

And then I'll wait for another project.

iPad App Fail

While I'd love to own an iPad - I think the NYT nailed the critical distinction between the iPad and a traditional laptop computer.

the iPad is not a laptop. It’s not nearly as good for creating stuff. On the other hand, it’s infinitely more convenient for consuming it — books, music, video, photos, Web, e-mail and so on. For most people, manipulating these digital materials directly by touching them is a completely new experience — and a deeply satisfying one.

I suspect the rank and file who never wanted the added baggage of a computer (antivirus software, OS upgrades, drivers, hardware upgrades, networking configuration) will be deleriously happy to have a device that just delivers the stuff that they bought a computer for in the first place.

The tech minded control types will have more to quibble about.

But I would think all users would have a problem with the choices that early content providers are making- check this out:

One big missing feature in the [Wall Street Journal] and [New York Times] iPad apps: You can’t copy text. Take a screen cap of it all you want, but you can’t get the actual text. That’s a basic function on a computer, and the iPad has a clever cut-and-paste function, but it doesn’t work here.

That would seem to be a conscious decision and not just a missing feature in these quasi-beta apps. If so it will make it hard to blog or email about a story. Of course, it will also make it harder for people to rip off whole stories on splogs, and it could lesson the relevance of aggregators.

Neither paper embeds links in their stories. While nytimes.com links to a U.S. embassy news release in the third paragraph of its Pakistan attack story today, the Times app has no links.

It’s also worth noting that you can’t comment on stories in either the Journal or Times apps.

Which is not to say that these early iPad apps will carve the iPad's future in stone - but the temptation to rein in the free-for-all of web content delivery may prove too tempting for providers.

When you have the ability to browse the web on the same device and get the same features the iPad apps are denying you - you have to wonder if the user base will drive the apps back towards conventional web content delivery.

Protecting the device is one thing (see: flash) but creating yet another siloed web experience (see: cell phones) doesn't make a lot of sense.

Crazyhorse One-Eight

(Via CJR)

On the morning of July12th, 2007, two Apache helicopters using 30mm cannon fire killed about a dozen people in the Iraqi suburb of New Baghdad.

Two children were also wounded.

Among the dead were two employees of Reuters, a cameraman and his driver.

We have it on film.

This is the gun camera film seconds before the Apache fires on a van that is collecting the wounded body of the Reuters driver. The gunner is afraid this van will get away and is urgently demanding permission to fire.

Come on, let us shoot!

Permission is granted, and the van is destroyed.

Once the wounded children are discovered and evacuated, the gunner's reply is Well, it's their fault for bringing their kids into a battle.

Well, obviously.

--------------------------------------

Afghanistan is bringing us similar good news (H/t Glenn).

You just have to throw up your hands.

What. The. F@ck?

AIG: the Biggest, Highest-Rated Mark in the World

(Via CJR)

I'm behind on so many things these days, but here's a nice get from CJR on (yet) another reason AIG went under. AIG, you'll remember is the company that covered Wall Street's bets that the housing market would go boom.

AIG essentially was saying "No, I don't think housing will blow up. I'll take that bet."

They insured bonds backed by bad mortgages to the tune of billions, and lost so big that you and I had to pay for it. But here was a nice new wrinkle AIG was covering bets on bonds whose assets could be switched with other assets.

From the Bloomberg article:

Without having to ask AIG’s permission, firms such as TCW, hired to oversee funds called collateralized debt obligations, replaced maturing assets with junk that quickly went bad. Managers including [TCW's] Lou Lucido said they didn’t realize how severe the mortgage crash would be and were called upon by CDO contracts to reinvest. At the same time, buying riskier assets could mean bigger paydays.

"The incentive was perverse," said Michael Lea, a finance professor at San Diego State University and former chief economist at mortgage giant Freddie Mac. "The fee structure encouraged TCW to put lower-rated bonds into CDOs over time."

As in "I'll insure your house, or whatever unknown house you choose to insure in the future. Don't bother notifying me - I'm sure it will be a good risk."

So you have AIG covering bets on the housing market - exposing themselves to huge liabilities over a long period of time AND the stuff they're insuring could be hollowed out and replaced with toxic crap - by cleints who stand to profit immensly by doing so.

Remember how we had to pay bonuses to AIG employees because "otherwise they might leave?"

Christ, AIG should have stopped paying these idiots bonuses years ago.

Pareidoliac Apophenia

I love space probes. If I had more bandwidth, I'd spend an awful lot of time looking at pictures from space. Sadly, since I know practically nothing about space - my analysis would be limited to looking at stuff like this and saying

Look! It's Pac Man!!

Thankfully, Bad Astronomy's Phil Plait is here to make sense of things (or at least point out how incredibly weird this image of Mimas is).

Citi Still Owes Us Big

CJR's Ryan Chittum nets a nice collection of rebuttals to this meme that the Government's shares in Citigroup have made money (and therefore Citigroup's bailout was a good deal for taxpayers).

Here's a sample:

...while the [Washington] Post asserts that the government’s Citi sale would be “a validation of the rescue plan adopted by government officials during the height of the financial panic,” it actually does no such thing. Instead, it shows yet again how government deployed its resources to benefit banks and bankers over taxpayers. That money could (not to mention should) have recapitalized Citi while giving taxpayers the bulk of the company’s shares. Instead it recapitalized Citi in exchange for a sliver of them.

The American Prospect's Dean Baker points out that not only could the government's investment into Citi bought the company outright (at its market price of the time) but the government's subsequent dealing and conversion of its preferred stock to common stock was a de facto giveaway of $90 billion dollars.

Who do we see about that?