Monday, July 27, 2009

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Arianna Huffington: More Pigs at the Trough: What Enron and WorldCom Can Teach Us About Goldman and AIG Top
America, it seems, can't wait to get back to business -- risky business -- as usual. No matter how atrocious business has been. Newsweek 's latest cover story declares that The Great Recession is over. A Merrill Lynch report concurs , saying, "The recession is over...We are bullish on global equities." Goldman Sachs is placing riskier bets on the market than it did before the financial meltdown (and setting aside huge amounts of money to pay its executives). The problem is, this victory dance is being done on top of the same shaky financial system that nearly toppled over, sending us all plummeting into the economic abyss. And while the market is over 9,100 (with another 10 percent gain predicted by the end of the year ) and Goldman, Citi, and Bank of America are reporting multi-billion dollar profits, unemployment is heading to 10 percent, foreclosures continue at a rate of 10,000 a day , credit card defaults are hitting record highs , and states all across the country are cutting vital services to the bone. We've seen this headlong rush to move on before. And it should be making us very afraid. In 2003, I wrote a book called Pigs at the Trough detailing the corporate greed and malfeasance that brought us the financial scandals at Enron, WorldCom, Tyco, Global Crossing, and many others. Rereading it in the midst of the current crisis, I was stunned to see the direct line connecting the outrages of 2003 to the predicament we are facing today, and how they set the stage -- and opened the door -- for the much larger, more sophisticated, and much more dangerous excesses that drove the housing and financial collapse of the past year. So when I was asked by my publisher to release an updated and expanded version of Pigs , I was delighted to do so. It comes out today. Of course, when I originally wrote Pigs , I didn't know that in just six years America would find itself in the midst of a slew of fresh corporate outrages that would lead to a worldwide economic meltdown. But I can't say that I was surprised. The reason is simple: the system that allowed the scandals at Enron, Tyco, Global Crossing, et al. was never really reformed. Yes, there were window-dressing changes, and Band-Aid legislation (yes, I'm talking about you, Sarbanes-Oxley ). But the guiding philosophy -- that the free market would regulate itself, and that Wall Street always knew best -- remained in place. Indeed, it was given a much freer rein. So it's been déjà vu all over again. With one big difference that makes this current crisis so painful: the scale of it all. In 2003, the corporate crooks were largely playing with shareholders' money. The new batch of Pigs is playing with taxpayer money -- trillions of it. And if we don't reform the system, given the exponential worsening of things between 2003 and now, the next financial collapse will surely be more than we can withstand. What we are experiencing is not so much Back to the Future as it is Forward to the Past. Enron's Ken Lay, meet Merrill Lynch's John Thain . WorldCom's Bernie Ebbers, meet AIG's Joe Cassano . And how's this for an ironic connection: Bernie Madoff will serve his sentence in the same North Carolina prison where John Rigas and his son Tim have been since 2007. As you may recall, John, the founder of Adelphia Communications, and Tim, the company's Chief Financial Officer, were two of the many villains of the previous financial debacle -- and among the Pigs I profiled in my book. Politics makes for strange bedfellows and crime can make for strangely appropriate ones. It's as if nothing has been learned since the last go-round. It's just that the numbers have gotten much larger -- and the risks to our well-being much greater. Two days before Enron went bust, the company gave senior employees $55 million in bonuses while simultaneously coming out against any financial assistance for the 4,500 workers who had just been fired. There was outrage and recrimination. But we quickly moved on. And a little over seven years later found ourselves once again outraged, this time by AIG's plan to pay $165 million in bonuses to the same people who had driven the company to brink of collapse and the need for a $180 billion government bailout . Similarly, in 2002, on the same day WorldCom stunned the world with the magnitude of its accounting fraud, the company's inner circle began an extravagant, all-expenses-paid vacation in Maui. There was outrage and recrimination. But we quickly moved on. And six years later were outraged by the $443,000 luxury spa retreat executives of AIG took just days after the government unveiled the first $85 billion of the taxpayer-funded bailout package for the insurance giant. And the media share a big part of the responsibility. Back in 2003, just as the likes of Ken Lay, Jeff Skilling, Bernie Ebbers, Dennis Kozlowski, and John Rigas were being called on the carpet, the financial press was anointing a new set of corporate kings. Among them, future SEC target Angelo Mozilo, the former chairman and CEO of subprime mortgage dealer Countrywide. That year, Fortune lauded Countrywide for having "the best stock market performance of any financial services company in the Fortune 500" in over two decades. As Connie Bruck reports in the New Yorker , in 2005 Countrywide was named one of Fortune 's "Most Admired Companies" and Barron's anointed Mozilo one of the best CEOs in the world. The next year, American Banker gave him its lifetime-achievement award. The year after that, the subprime mess began to hit the fan. But instead of holding the Horsemen of the Financial Apocalypse who are still in charge accountable, those in the financial media are ready to move on, searching for the next superstar cover boys. With so many both on Wall Street and in the media tripping over themselves to return to the pre-meltdown status quo, it's easy to get blinded by the premature exuberance and hop on the green shoots bandwagon. But we must resist and demand fundamental reform. We cannot allow Wall Street and its lobbyists -- as I warn in Pigs at the Trough -- "to embrace reform while working diligently behind the scenes to undermine it." If we are going to truly rebuild our free market capitalist system, we have to break the cycle of shock, followed by outrage, followed by a few high-profile show trials, followed by the punishment of a few culprits, followed by some meaningless reforms... and then we all move on. Until it starts again. The question is, does the political will to create and implement new rules for Wall Street exist, or will the result be a series of tough-sounding-but-ultimately-toothless reform measures that allow the cancer of greed and corruption that has infected our political and financial systems to spread and become even more destructive? Does our body politic have the strength to save itself?
 
Reyne Haines: John Lennon Exhibit in New York Top
Recently, a new exhibit opened at the Rock and Roll Hall of Fame Annex in New York City. "John Lennon: The New York City Years" The exhibition offers a glimpse into Lennons life in New York. Lennon called the Big Apple home from 1971 until 1980. Visitors will get to see some of his original artwork, lyric sheets and production notes along with handwritten manuscripts and his Steinway piano. Also, videos playing experimental films by Lennon, and also music clips will play on four large screens for your viewing pleasure. The most interesting aspect of the exhibit, a white phone is mounted at the exit. If it rings, make sure to pick it up. Yoko Ono will occassionally call looking to chat with visitors. If you visit this exhibit, please post your review here for others to read. Thanks! Reyne
 
Michael Likosky: Finally, A Craigslist for Government Assets Top
If you're looking for a good deal on public assets, Allen & Overy LLP, a leading international law firm, has a product for you. It's called the "PPPs & Municipal Home Rule" tool. Don't be turned-off by the long-winded name. Allen & Overy is saving investors a lot of time and money by honing in on what really matters. The two most important things for public asset gobblers are: (1) good prices and (2) elected officials ready to deal But you might ask: Who has the time to drive around the country looking for good government garage sales? And, Craigslist doesn't have a listing for bridges, emergency response systems and dog shelters. This is where Allen & Overy provides such a valuable service. It turns out that there are twenty-seven states in America that make it easy for their cities to deal directly with investors. So far so good. But, that information only takes us so far. That is, the real deal on public assets is to be had from cities in financial distress. A road is not a road, a bridge not a bridge. In other words, a cash-strapped city will sell its public park at a better price than a cash flush one. Financial crisis, it turns out, depresses asset price, but not necessarily value. Even crisis-ridden Californians have to drink water and drive to work. And, when the financial crisis does end for more Americans, they'll be more water drunk and more miles driven. Now that's value for the money. What Allen & Overy does is to find all those cities in states that have had credit rating downgrades during the last quarter of 2008. Ones with "heightened interest" in selling off public assets. They are right: when looking for "jurisdictions of opportunity", it is easy to become "overwhelmed by the scale of the U.S. infrastructure market." The beauty of the Allen & Overy tool is that they reduce the "pursuit costs" of investors looking for this type of opportunity.
 
David Wild: Top Five Reasons That I Love "Funny People" Much More Than I Love Funny People Top
1) Funny People will cost you a set and rather reasonable amount at the box office. Actual funny people have a funny way of costing you considerably more than you would ever imagine. Just ask anyone who's ever gone to a diner with one. 2) Leslie Mann is really funny -- and really hot. Most actual funny people are only hot by virtue of an extremely liberal interpretation of the theory of relativity. Worryingly, Seth Rogan is looking pretty good to me too. 3) In a remarkable central performance, Adam Sandler is significantly better in Funny People than Laurence Olivier was in The Jazz Singer . This clearly means that Adam Sandler is a much better actor than Laurence Olivier, thus ending years of public debate. 4) With the three outstanding movies that he's directed to date -- 40 Year Old Virgin , Knocked Up and now Funny People , Judd Apatow has now hit the Human Comedy trifecta, getting ever closer to the core of the human condition without abandoning the dick jokes that would be hard for a generation to live without. 5) Sure, I've seen "Fire & Rain," but I never thought that I'd live to see James Taylor totally kill in a movie comedy. Eminem, on the other hand, I always expected to kill, but not quite like he does here.
 
Norm Stamper: Let's All Have a Beer and Talk Police Work Top
Whatever ultimate effect President Obama's "stupid" remark may have on his popularity, whatever long-term impact it will have on Professor Gates, Sgt. Jim Crowley, the Cambridge Police Department, or aggrieved cops across the land, it has certainly set us to talking. (Or SCREAMING, to judge by the multitudes of uppercase ranters who believe Obama really, really blew it.) I didn't care for the "s" word (either as adjective or adverb), but had the president selected a more measured, politically palatable word ("questionable," "imprudent," "unfortunate," "regrettable") his take on the professor's arrest would have been buried on A-19, if reported at all. Instead, the whole country's abuzz over a hornet's nest of an issue we've conveniently neglected as a nation, for decades. Historically, police have been experienced by black communities across the land as biased and brutal, oppressive as well as dismissive and neglectful. There's been progress, for sure. But, whether you're a 22-year-old laborer or a 58-year-old Harvard scholar, if your skin is black your history with the police is likely to have been spotty at best. Families and friends tell stories. They forge "truths" about the institutions that affect them. They pass along their views from one generation to the next. We all do it. So, if you're a white middle class suburbanite whose local cops have recovered your stolen Audi, convinced the boomer next door to turn down their Steppenwolf at two in the morning, or pulled a loved one from a burning wreck you're like to have a positive attitude about the police, telling uplifting stories about them. And siding with them, automatically, when their behavior gets questioned or criticized. But if you're a struggling black mom, for example, whose husband is serving a long prison term for simple possession of pot (when, under identical circumstances, more affluent offenders, disproportionately white, walk), and whose well-behaved male teens have been stopped and frisked repeatedly, called names and/or had guns drawn on them, you're not so likely to have warm and fuzzy feelings toward the local PD. Facts? Intentions? "Reality"? They matter, but they don't count. What counts is perception, and belief. After all, the consequences of what we perceive and believe are always real. So, what do we do about this deep, destructive divide between (not all) white cops and (not all) black citizens? Two things, I think. First we insist on rigorous standards of police conduct. There can be no room for racism, sexism, homophobia or any other brand of bigotry within the ranks. For the record, I did not label Sgt. James Crowley a racist. I did offer my opinion that had Gates been white he would not have been arrested. This belief was reinforced when Sgt. Leon Lasher, the imposing black officer pictured standing with Crowley and the small handcuffed prisoner on the porch of that cheery yellow home, answered a reporter's question. Yes, he said, the outcome likely would have been different had he handled the contact with Gates. This from a man who supports his white colleague's actions "100 percent." The second thing we must do is strengthen police competence, and come up with a better definition of what it means to play "by the book." See, Crowley may in fact have "followed protocol," as Lasher maintains. But I take issue with the all-too-common practice of police officers baiting a citizen into committing an act of disorderly conduct so that he or she can arrest that citizen for...disorderly conduct. However offended Crowley may have been by Gates's conduct inside his own home, that behavior was not a crime. But to coax the man outside, where a crowd might well gather, and where a continuation of the professor's tirade would (disputably) justify an arrest? (Then writing in his report of poor kitchen "acoustics"? Please .) Can you say "contempt of cop"? I think the officer perhaps didn't know how to handle a "real American": a person who believes in the law and in the sanctity of his home, who has a healthy skepticism of authority, and who demands of those who wield it that they abide by the rules. Yes, it's possible to hold these views and still behave rashly, or "overreact," as I now firmly believe Gates did. As George Thompson of Verbal Judo fame might put it, any cop can handle nice guys and wimps; give me the cop who can deal effectively with a real American, a cop who can skillfully defuse rather than escalate a conflict. I'm just saying. The president, wounded by a wave of criticism, hounded by police union demands for an apology and struggling to get the country's focus back on health care, did a very smart thing. He phoned Sgt. Crowley (later describing him as a good man and an outstanding police officer), and suggested they meet, with Gates, over a beer. The Cop, The Professor, and The President sitting down over brews in the White House is mind-boggling symbolism. And yet altogether "American." Perhaps, instead of shouting at one another the rest of us can take a cue from these guys and sit down over a Bud or an ice tea and talk police work, and how to make it better.
 

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