US birds in ‘widespread decline’ BBC
Pink elephant is caught on camera BBC
New Particle Throws Monkeywrench in Particle Physics Universe Today
Brutalizing The FASB’s Attempts At Piglipsticking Tyler Durden
New Deficit Forecast Casts Shadow on Obama Agenda New York Times
Save the Credit Unions! Felix Salmon. Those big “corporate” credit units seized tonight are sucking the life out of the good little guys.
Congress’s Potemkin Populism Robert Reich
AIG warns staff to travel in pairs after death threats over bonuses Guardian
Goldman Insists It Would Have Lost Little if A.I.G. Had Failed New York Times. This from the man who said Goldman was seeing 25 standard deviation moves several days in a row. Statistically, that’s impossible, and since he doesn’t grasp statistics, query how good a grasp he has on what might trigger failure (after all, Bear looked viable on a raw numbers basis till the run started)
Not populism but opposition Christopher Caldwell. Financial Times
Did AIG explicitly lie about its bonuses? Glenn Greenwald. Salon
Who is the next AIG? Politico and Banker fury over tax ‘witch-hunt’ Financial Times. Get a load of this:
“Finance is one of America’s great industries, and they’re destroying it,” said one banker at a firm that has accepted public money. “This happened out of haste and anger over AIG, but we’re not like AIG.”
The banker added: “It’s like a McCarthy witch-hunt…This is the most profoundly anti- American thing I’ve ever seen.”
The industry does not get it. Or more accurately, its incumbents are hooked on lifestyles that the business, even with taxpayer help, will no longer support, but because Congress is the bearer of bad tidings, the message is being rejected.
Notice the lack of negotiation or counterproposals? The Wall Street chieftans know there probably is no solution space (ie, range both sides would find acceptable). But the stonewalling is not going to have any impact on the backlash.
Antidote du jour. The second is from reader Alex:
18 comments
Comments are closed.
I’ve long thought that the particle physics of the last fifty years are the greatest shaggy dog story in the history of modern science. Not that I’m qualified to have an informed opinion (tho’ that’s never stopped me). It’s not that it’s ‘wrong,’ but more that it’s not a meaningful way to assemble the evidentiary facts into a functional narrative of behavior. I have my personal properllor-head perspective on this, but I’m waiting for the next Dirac-head to junk this schema and put the tinkertoys together another way.
And re: bankers who don’t ‘get’ how parasitic they are in the larger scheme of things, give ’em each a mop, a shiv, and a jumpsuit, set ’em inside where they belong for a spell, and they’ll learn the facts of life fast enough. Nobody kisses your ass _there_ unless you damn well earn it. We need credit intermediation for a functional economy, but we do NOT need any of the recent intermediaries: they are entirely dispensible.
My friend the particle physicist gave it up 25 years ago and converted himself into an engineering mathematician. In that time, he says, engineering research has developed and changed a good deal; particle physics is still stuck at about where it was 25 years ago.
The theory behind particle physics (or so I’ve read) is that if you bust enough watches, you can figure out how they run.
Psssst…your not busting watches. If you don’t know what your busting, your probably able to reconstruct it into all sorts of plausible things.
I was in particle physics for 15 years (including a teaching stint at your alma mater, YS)–and even on CDF.
The 4140 is a curiosity. I mean, the people who found it are happy, it’s interesting, and one of my friends from grad school who had a hint of this thing 10 years ago is sort of sad that he didn’t find it then.
But it’s just not that big a deal. A few theorists will be trying to work out exactly what it is. But the phenomenon, whatever exactly it turns out to be, will be a long-predicted one and will lack long-range impact. It’s no monkey wrench.
And I also left the field, and also found that things have progressed little. A couple of years ago, my advisor said of a similar discovered particle, “We’ve been reduced to being excited about this?”
YS:
I read the Edmonston piece about Goldman. I don’t believe it. But Goldman is “audited” by PWC, a Big 87654 firm. Surely, Goldman couldn’t say it’s AIG exposure was “immaterial” unless that was true. Oh, and pigs fly. Paraphrasing Bill Clinton, “It all depends upon what the word ‘immaterial’ means”.
Thanks Yves!
Although I think if I show Ricky he is on the internet, he might have a similar reaction such as this:
http://icanhascheezburger.com/2009/02/17/funny-pictures-from-mai-lawyers/
I am a physicists as well. Yeah, particle physics is indeed becoming a less exciting field of physics. But that is because, we made substantial progress in putting together a theory which explains the observations that we have. I do agree however that the bang for the buck is pretty small these days. There are better things to invest human capital into that will actually have a beneficial effect on the human condition. The same could be said of Dark Energy Research, a field I am semi-involved in.
On the other hand, the money sent to AIG is several times the amount of public money that is invested in science world wide.
Physics, and science in general, is like a bully. A bully beats up on those weaker than him and as soon as a bigger guy comes along and pulls one hair out of our bully’s eyebrow, he whines, wails and scampers away.
So, in the play yard of the universe, science seizes those weaker areas of nature who aren’t able to defend thier own mysteries. When those victories occur, science can not resist gloating about them, pads herself on the back and deifies her high priests and priestesses in solemn ceremonies.
But there are lots of areas where science is useless and nature is impregnable. For example, you might ask ‘Where is the world’s shortest mountain?’ Or ‘Who is the world’s tallest midget?’ Every few months of so, they blabber about the world’s richest human, usually a man. But where is the world’s poorest human? I mean, we could ask, ‘why are we here,’ but we don’t want to pile on. There is no need for the ‘nucular’ option, as some might say.
So, a typical aspiring scientist is usually reduced to wondering where he can make the greatest gain, the greatest personal reward or name for him or herself. ‘Hey, is that field moving fast these day,’ they whisper to each other. He’s looking for a victory he can score. He’s looking for his little guy victim. You hardly ever run into one who goes about proclaiming he’s determined to work on a seemingly unsolvable problem, even if he doesn’t go anywhere in that pursuit during his lifetime. He’s not working on why, for example, gravity is not repulsive or why there are constants in the world? If one did, he is laughed at as having ‘wasted’ his life. And so, he knows well enough to just beat up on the little guys and stay away from the big guys of nature…just like a typical bully, and hides beyhod such things like ‘to the best of our scientific knowledge.’ And everyone nods his or her head and excuses the incompetence. In that way, we all participate in the bullying of nautre.
Yves… unfortunately, you’re not getting it. Some institutions were likely to fail without TARP funds, others were in a more solid position. Remember, many of the better capitalized institutions were encouraged by the Fed and the Treasury to both take TARP funds and acquire less stable firms in order to shore up confidence.
There are many good people at those well-capitalized institutions that took TARP money in Oct. who had no part in the activities that have crippled our financial system. These people, rightly, feel unfairly attacked by the government and by the media given the simplistic and punitive tax on bonuses for married couples that earn over $250K/yr ($125K/yr if married but filing jointly). If you live in New York, you know that $250K/yr is hardly wealthy and can be a simple income level to attain for dual-income families.
The “brain drain” that people fear will leave these institutions are not just the executives, but the more junior talent who will find these measures ultimately unbearable. Maybe these people will join a service organization and better society, maybe they will join another financial institution, but the fact that the government is in effect dictating to them what should be done with their lives as “shareholders” of the places where they work should scare everyone.
No one is saying that everything should be business as usual at these firms. A 90% tax on bonuses of all employees of an institution with TARP money, however, is not the solution. I welcome a more nuanced and reasoned analysis from you on this subject, as your blog is a must read for me.
Anon of 2:49 PM,
Did I say anywhere above or in the blog that I favored the 90% tax?
However, your reasoning is flawed. Just because it is expensive to live in New York, it does not follow that ANYONE is entitled to a certain standard of living. That isn’t how it works. If you can’t afford to live in Manhattan, take the kids out of private schools and move to Jersey.
People who own private businesses or live in normal real companies that fall on hard times have to take big hits and make significant lifestyle adjustments. You are effectively arguing that investment bankers are exempt, even though they are now are loss making and on taxpayer life support.
I also have trouble with this “oh we really didn’t need TARP money”. That is probably true for some mid sized and smaller commercial banks. I have a great deal of trouble believing that is true for any capital markets firm (Goldman, Morgan Stanley, JP Morgan).
Unless you see the extent of exposures at your firm and are in a position to have an independent view as to the quality and accuracy of the marks (including how the risk models are put together and what their assumptions are) you cannot say with ANY degree of certainty that your firm would be OK ex TARP money.
Management has an incentive to tell the troops are fine irrespective of the true state of affairs. Look at how Lehman keep reassuring its staff that the critics were wrong, when its collapse showed a massive hole its balance sheet.
Concerning witch hunts, FT’s editorial department released another doozy (http://www.ft.com/cms/s/0/22366be8-157c-11de-b9a9-0000779fd2ac.html).
“And it expresses the tyrannical principle that Congress can use the tax code to void contracts that the executive branch has consented to, after the fact and with retrospective force. The measure is constitutionally dubious, as Congress well knows.”
Voiding contracts? There’s no breach of a legal contract involved. These businesses can still pay their employees whatever was agreed to. The employees then simply pay taxes on earnings.
Second, congressional laws trump presidential promises. That’s why Congress is the legislative branch, and the administration the executive branch. If the author truly thinks this arrangement is unconstitutional then he should try the judicial branch.
For some reason I suspect the Supreme Court would say that true tyranny is a president that rules without regard for the laws of the land.
Remember, many of the better capitalized institutions were encouraged by the Fed and the Treasury to both take TARP funds and acquire less stable firms in order to shore up confidence.
Oh yeah, now I remember, “they made us take it”, “We were doing fine”, “If we’d have known we couldn’t just blow it on spa treatments and private jets, we’d have never taken it”, “we thought it was free money”,
Who do you think you’re kidding?
encouraged by the Fed and the Treasury to … acquire less stable firms in order to shore up confidence
Yeah, because nothing shores up confidence like making firms “too-big-to-fail” even bigger.
Anonymous @ 5:15
quoted FT: “And it expresses the tyrannical principle that Congress can use the tax code to void contracts that the executive branch has consented to…”
I think they are referring to the “tyrannical principle” of Article I Section 8 of the U.S. consititution:
“To make all laws which shall be necessary and proper for carrying into execution the foregoing powers, and all other powers vested by this Constitution in the government of the United States, or in any department or officer thereof. “
And Article I, Section 9:
“No money shall be drawn from the treasury, but in consequence of appropriations made by law; and a regular statement and account of receipts and expenditures of all public money shall be published from time to time. “
Ah, for a moment I was confused over whether you agreed or disagreed. You might want to add “The Congress shall have Power – To make all Laws which…” for clarity.
Just down the page at FT, though, it looks like Aline van Duyn gets it, but then, I think she’s stationed in the US.
http://www.ft.com/cms/s/0/8693e754-1582-11de-b9a9-0000779fd2ac.html
Anon @ 5:15…you have strange suspicions, judging from the last 8 years.
Obama is the Hugo Chavez of American politics. This is only the beginning.
Swampyankee says,”Obama is the Hugo Chavez of American politics. This is only the beginning.”
Or George Bush and Paulson were the Bautistas of American politics? This sort of comparison is asinine and I shouldn’t even dignify it with comment. Give bonuses if they are money-making firms not dependent on taxpayer money. If not, shrink them down and give the TARP/TALF money to community banks, who might actually know how to lend the money without bringing down the entire economy. Bust AIG, Citi and the huge sows down to size, and tax the hell out of their bonuses, if they’re going to act like the swine they are with federal loot.
If they don’t like it, I encourage them to get a new job at another bank not taking TARP that is willing to pay them a “competitive salary” for their talents. I’m not sure what exactly that salary now is, now that there are about 10000 job-less investment bankers roaming the streets in their wingtips, looking for a trick. This is no different–exactly the same–as Republicans insisting that the automobile unions come down on salaries and benefits for the auto. Only when it hits the top 3%, idiots start crying socialism. I didn’t hear that from the country clubbers when government was insisting the auto unions bite the bullet on government “interference” with their “sacred” contracts, did we?