Category Archives: economics

SVB Bank: Too big to fail?

Back in the 2008 financial crisis, the US propped up a number of banks and financial firms that would otherwise have gone under. They were “too big to fail,” so large their collapse would do unacceptable damage, even if their bad judgment brought it on themselves. Critics said that gave the same companies a free hand to act without consequences — the government wasn’t going to let them fail, right?

And now we have Silicon Valley’s SVB collapse and the government’s promise to cover deposits way above the $250,000 federal bank insurance limit: “On a call with reporters, a Treasury official emphasized that the federal intervention would not bring SVB or Signature back to life, as the enormously controversial bank bailouts during the 2008 financial crisis had done for banks that were close to failing. Their executives would not retain their jobs. These new safeguards were aimed at protecting people and businesses who had made a reasonable decision to put their money into an accredited and regulated bank — not investors who bought risky securities.”

What reasonable? Everyone who has that kind of money should know they were putting in more than the limit; the idea they should get insurance anyway doesn’t work for me.

Republicans are screaming, inevitably, that the bank died because it was too woke, because they always scream that. Possible insider trading by bank management might have been a bigger issue, or the bank pushing for looser regulations. Fox News’ Jesse Watters claims SVB collapsed because of Pride Month. And here’s a goody the Wall Street Journal saying it’s because SVB didn’t have an all-white board.

The bank did a lot of business with venture capitalists and unsurprisingly venture capitalists were furious the government might not reimburse depositors. That includes (as noted at the link), a number of VCers who talk a lot about moral hazard and the dangers of things like student-loan forgiveness, but suddenly want the welfare state to prop up their industry.

Don’t get me wrong, I don’t think SVB is an outlier. We have a right-wing business group opposing tighter rail regulations in the wake of the Ohio disasters. Florida insurers have dealt with massive payouts in the aftermath of Hurricane Ian by rewriting damage assessments: ” “In one claim reviewed by The Post, a nearly $500,000 damage estimate on a house with a mostly tarped roof was reduced to about $13,000. In another, the desk adjusters blamed roof storm damage on past wear and tear, meaning it would not be covered.”

That the rot in American business is widespread does not, however, mean it’s excusable anywhere.

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Marketing snake oil doesn’t mean you’re cleverer than your customers

Helaine Olen looks at the career of Glenn W. Turner, who popularized the phrase “fake it until you make it.” Great advice if you need a shot of confidence — but not so much if you’re scamming your customers, which Olen argues has become increasingly prevalent since the 1980s began to exult that “greed is good”: “As we transitioned from a society that manufactured things to one whose products were intangible, reality was increasingly in the eye of the beholder — or the pitchman.”

That kind of thinking could explain bald-faced lies such as Keebler claiming a cookie made with high fructose corn syrup has no high-fructose corn syrup, but it’s often bigger in scope than that kind of old-school snake oil. Case in point, the way the Sackler’s opioid empire relentlessly pushed oxycontin and willfully pretended they were helping people in pain, not catering to millions of addicts. More recently, some doctors made bank by prescribing ivermectin to treat covid; now that fear of covid is, however unreasonably, fading (it’s still killing a lot of people), they’ve discovered it’s also wonderful for treating the flu.

Or Marc Tessier-Levigne, now Stanford University president. In his former life as a Genentech executive he authored a paper that proclaimed a breakthrough in identifying the genetic roots of Alzheimer’s. The Stanford Daily reports the research was bogus.

Or consider the NYT is willing to write about Sam Bankman-Fried, crypto conman, and discuss how lots of people in the Bahamas like him.

Part of the problem is that snake oil is horribly easy to sell. It’s not just mountebank doctors selling fake cures to gullible targets; J.P. Morgan gave $175 million for access to a company’s non-existent client email lists. Charlie Javice founded the company, Frank, which supposedly helped five million students at 6,000 colleges negotiate the financial-aid maze. That shouldn’t have passed the smell test given there aren’t that many colleges that receive financial aid. Yet it did.

One of the commenters on this LGM post suggested that both Javice and Elizabeth Holmes benefited from the same classism that creates the glass floor: they come from white, upper-class backgrounds which meant they grew up learning to present themselves as someone you can trust to run a business (see Pedigree for more discussion of this). Much like British traitor Kim Philby, they could present themselves as the “right sort” which goes a long way to ensuring success. Lest you think I’m singling out women, you can say the same about Jared Kushner’s undistinguished business career.

I’m reminded of one prominent economist — I can’t remember which one — who lobbied hard to loosen the restrictions in the Glass-Steagall Act, which separated banks’ commercial and investment branches. When the government loosened regulations banks promptly started making very unwise decisions. Said economist insisted that had never occurred to him. That was idiotic. As I’ve quoted before, “The only security which we can have that men will be honest, is to make it their interest to be honest; and the best defence which we can have against their being knaves, is to make it terrible to them to be knaves.” Or as someone put it in comments here, ” without regulation there are often zero adults in the room.” Maybe J.P. Morgan was no different from any victim of the big con: they thought they saw a chance for a big, big score and turned off their brain.

I’ll end with an other quote from the same thread about the nature of business, that Henry Ford and the other automotive pioneers “may have been scumbags but they were actually interested in making and selling cars. The people who want to be in the business world for the sake of being in the business world are suspect in every possible way: there is literally nothing anchoring them but greed.

To use two modern examples Steve Jobs was AFAICT a piece of shit, but he really did have a vision about the future of computing and some of his attention was actually spent trying to accomplish that vision. Elon Musk doesn’t actually care about electric cars, as can be seen by decision after decision he’s made to do what he wants (play edgelord on the Twits, for example) rather than devote R&D money to Tesla.”



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The myth of meritocracy

PEDIGREE: How Elite Students Get Elite Jobs by Lauren A. Rivera does a deep dive into the topic of how the supposed meritocratic pipeline to big-money jobs (talented kids go to top-tier schools, high-powered banking and Wall Street firms recruit from those schools to ensure they hire the best) skews heavily toward the already privileged. Concentrating recruiting in top tier schools, for instance, in the belief anyone attending Harvard or Yale must be better than someone at FSU or NC State, skews towards kids who are well off enough to attend there, and get the kind of coaching and SAT training that gives them an edge. There’s also the desire for a “good fit” with corporate culture, meaning the kind of manners and style better-off kids grow up with.

In addition, rich kids have advantages in contacts and networking, plus choices of summer jobs — one guy Rivera interviewed says having a banking internship shows you’ve had “real world” experience, unlike working your way through school as a Starbucks barista (I have a feeling the dude who said that has never worked retail). Extracurriculars matter too: as many of the recruiters come from an upper-class background themselves, they think sports that show the right stuff are things like polo or sculling, as opposed to football or pickup basketball games.

Rivera argues that in addition to making it harder for the working class to bust the glass ceiling — if a mediocre Harvard grad is automatically assumed better than a state-school superstar — it works out poorly for the firms. The pitch for potential recruits involves the glamor and excitement of a life in banking or consulting (depressingly, something like 70 percent of Ivy League graduates get sucked up into those careers. What a waste) the early years involve a numbing, unexciting workload; upper-class kids often drop out to find a more engaging career where someone working class is more likely to tough it out to earn the megabucks salary.

I’d wondered if it would be worth reading the book — the topic is one I’ve read about online a fair amount — but Rivera’s deep dive made it informative and interesting.


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Money makes the world go round. This is not necessarily a good thing

Hospice is now dominated by for-profit corporations. Unsurprisingly some of what they do to generate increasing amounts of profit is unscrupulous, illegal and harmful to patients.

Companies that buy up cheap housing make it harder for people to afford housing.

“As crypto’s self-appointed ambassador to Washington, Bankman-Fried was pressing for federal regulation even as he dodged U.S. oversight from his corporate headquarters in the Bahamas.” — a look at the now toppling crypto-kingdom of Sam Bankman-Fried. Who insists that when his FTX gambled with depositors’ money he didn’t realize that’s what he was doing. Reuters reports the company also bought Bankman-Fried a vacation home. LGM weighs in.

“Time and time again, Americans fall prey to the myth of the billionaire genius, the man (because it is almost always a man) who is better than us mere mortals, able to solve any business or political or philanthropic problem that comes his way — till, suddenly, he is not.” — Helaine Olen. See also Elon Musk running Twitter into the ground and (though she’s not a man) Elizabeth Holmes.

While this Forbes article on Trump’s secret debts to a Korean company is good, but I don’t buy the assertion that most people of Trump’s wealth could be corrupted by a mere $20 million debt. Trump has, after all, allegedly cheated contractors of much less money. I’ve seen this argument before — billionaires have too much money to be tempted — but the billionaire mind doesn’t seem to see it that way.

Alex Jones loves money and he has a lot of it. He’s doing his best to make sure the Sandy Hook parents who won their lawsuit against him don’t get any.

“A nudge is ultimately a highly conservative approach to the question of how a society should think about the public good.”

“The shooter who terrorized a Colorado movie theater in 2012 charged more than $9,000 worth of guns, ammunition and tactical gear in the two months leading up to his attack that killed 12 and injured 70. The man who shot up the Pulse Nightclub in Orlando, killing 49 people, put more than $26,000 on credit cards.” Nevertheless, crediit-card companies refused a proposal to create a unique code for firearm sellers which would help flag suspicious purchases.

Amazon’s policy of letting readers buy an ebook, then return it after a week, means some authors end up with negative royalty balances.


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News from the world of business, property and money

First some good news: while community activists have struggled to reform the police, insurers for PDs and cities are imposing changes.

Abbott Laboratories has faced multiple allegations of selling tainted baby formula. Here’s how their lawyers protect them from scandal.

Are you ready for fast-food restaurants that are exclusively drive-through?

As a reporter in Florida I covered multiple conflicts involving beachfront owners vs. tourists. Colorado’s facing the same thing.

“More than anything, they have succumbed to a mindset where “winning” means earning enough money to insulate themselves from the damage they are creating by earning money in that way. It’s as if they want to build a car that goes fast enough to escape from its own exhaust.” — a look at how billionaires have decided rather than avert the apocalypse, they’ll just save themselves.

A cash infusion for Trump’s Truth Social network may be falling through.

“They were clearly pumping their prowess as a crypto hedge fund after they already knew they were in trouble.” No surprise given their guiding investment principle apparently didn’t go beyond “cryptocurrency will go up for years!”

When turnover becomes high, it’s always someone’s first day at work.

“But it turns out that running a publicly traded company, with its attendant fiduciary duties, analyst calls and slog of quarterly earnings, is a far cry from the hustle and thrill of start-up life.” Which is why so many Silicon Valley stars are riding off into the sunset.

Republicans think corporate America should fight harder against efforts to reduce climate change.

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Republicans think people should pay their debts. Oh, wait.

As the White House is pointing out, multiple Republicans in Congress who are shocked — shocked! — that students might get out of paying their loans were fine accepting debt forgiveness for PPP loans, which helped keep companies afloat during the pandemic.  Curt Schilling, an ex-baseball star, is likewise shocked —never mind that he was fine with defaulting on a $75 million state loan from Rhode Island for his now defunct business.

Hell, for that matter they’re fine with Trump filing Chapter 11 bankruptcy — the “I don’t want to pay my debts but I don’t want to shut down my business” version — six times. Republicans are squealing a lot about how forgiving student loans leaves hardworking blue collar types on the hook for unemployed liberal arts majors but they’re fine voting for a god king who leaves contractors with unpaid bills.

All the emphasis on how hardworking truckers will pay tax to support unemployed philosophy majors ignores, as a friend of mine pointed out on FB, that a lot of these loans cover trucking school, paramedic training, construction training and lots of other employment. Training on the job isn’t as common as it used to be and not everyone who takes out student loans is white collar or rich.

Megan McArdle is horrified the program, rather than helping those in need, is a giveaway so that people can “have nice clothes and go out a lot.” Of course, McArdle also believes that poverty is always the result of bad life decisions so it’s the individual’s own fault they’re poor. And that blacks commit more crimes and get more welfare, both incorrect. So I am somewhat unimpressed she thinks Biden’s program is too generous.

Right-wing pundit Timothy Carney proposes this is all a diabolical conspiracy: mocking the PPP moochers is saying that anyone who gets some sort of benefit from government isn’t allowed to criticize the government. That’s why government is constantly expanding benefits, to silence us! But no, that’s not it: it’s criticism of people whose cries of Pay Your Debts, Don’t Burden Taxpayers don’t apply to themselves. That’s legit.


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Books for our time

In SANDY HOOK: An American Tragedy and the Battle for Truth, Elizabeth Williamson looks back at how Alex Jones kicked off the modern age of conspiracy with his claims the entire thing was a false flag and maybe those kids didn’t die or even exist — sure, there’s no hard and fast proof, but Something Just Feels Wrong To Him. Through the power of the Internet and social media, this deranged based-on-nothing bullshit spread wildly, thereby foreshadowing Pizzagate, QAnon, anti-vax paranoia and Stop the Steal.

The book is excellent, showing the growth of the False Flag legend, the impact on the families and there efforts to push back, including multiple lawsuits against Jones. Williamson also captures the variety of reasons people choose to belief this stuff: narcissism (Jones), grift (Jones again — he sells a lot of InfoWars swag), lonely people finding companionship in online conspiracist groups, 9/11 truthers hopping to a new conspiracy, people smugly convinced at their own genius in figuring it out and sociopaths who enjoy harassing the families. While one of the grieving parents has successfully talked some of the conspiracists off their ledge, the book is a depressing reminder how difficult it is to crush these ideas once they grow.

EMPIRE OF PAIN: The Secret History of the Sackler Dynasty by Patrick Radden Keefe shows how the infamous opioid-dealing clan first got involved in drugs in the 1950s. Dr. Arthur Sackler made the family wealthy by applying mainstream advertising techniques to drug marketing and targeting doctors, which he insisted was completely ethical — no amount of salesmanship can convince a doctor to prescribe a particular drug (this was a lie)! Sackler saw no conflict between marketing drugs and running a supposedly objective medical newspaper that promoted the same drugs (he was into advertorials before advertorials were cool).

Later in the century, Sackler’s family adopted similar approaches to promoting Oxycontin as an opiate for everyday pain (much as Arthur promoted Valium as a tranquilizer for non-mentally ill people). No risk of addiction, ever! If people suffer withdrawal, it’s really their underlying pain overcoming the opiates — what they need is more doses! Even when the family knew this was bullshit they kept saying it, just as they turned a blind eye to doctors writing impossibly large numbers of prescriptions. Well, a blind eye except when they sent salespeople to pitch the prescription mills.

This kind of immorality and corruption — some FDA officials who turned blind eyes of their own wound up with great post-government jobs working for the Sacklers — isn’t anything new to me but I still found this book horrifying. Possibly it’s the sheer, unimaginable scope of the damage the Sacklers caused to so many innocent people (while insisting the family were the real victims). Perhaps it’s their incomparable greed: when the family members learned their $700 million annual draws (that’s apiece) might not be sustainable, they demanded More Sales. Or their complete inability to even fake contrition or acknowledge their company’s drug had problems. Either way, they make Elizabeth Holmes look like a choir girl.

#SFWApro. All rights to cover image remain with current holder.



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“If you’re rich you can buy immunity/If you’re poor better write your eulogy.”

Some links about wealth, and occasionally the lack of it. The title’s a quote but I’m not sure of the source.

“​​As soon as anyone who’s antiracist or curious about equity hears the word[s] tax breaks, it is so obvious to us that that’s immediately going to be racially inequitable,” — a look at the good and bad of private individuals paying for government operations.

“This sort of crusade is exactly what we often see when powerful business executives champion a passion project. The causes chosen are often capricious — and almost never threaten their benefactor’s elevated position in our economic and societal firmament.” — Helaine Olen, pondering that Carl Icahn has become a moral crusader for the more humane treatment of pigs. Not that she objects to compassion for animals, but are their better causes out there?

Then we have Peter Thiel, a billionaire who does not even pretend to use his great power for good.

“Basically, [Americans] are afraid of strangers,” she says. “It was considered beyond the pale that you would install a public toilet that didn’t practically burn itself down and rise from the ashes every time someone used it.” — on the rise and fall of the public toilet

“Whether you’re British royalty, a bulge-bracket bank or a venture-capital-funded food delivery start-up, there is often some way to make the wheels of justice in civil cases grind to a halt — if you have the resources. Settlements in civil cases are a feature of our legal system available to those who can afford it.” Case in point, the Sacklers and oxycontin.

For some, however, helping arrange those settlements isn’t half as awful as letting innocent people out of jail.

Then there’s the major league baseball owners. When players strike, however reasonable their demands or unreasonable the owners’ position, you can count on people ranting about how greedy and unreasonable the players are — my god, they’re getting paid to play baseball! Don’t they know millions of people would have their jobs for free?

Well, the owners of these teams are multimillionaires who still get big government handouts for building new stadiums. I’m quite sure lots of people would happily take ownership of a baseball teams for free so why do the owners never get the same grief? Do people really think they’re just in it for fun?

And of course, there’s our own government. The Supreme Court just shut down a lawsuit from Abu Zubaydah, who was tortured for information even after the CIA decided he didn’t know anything. The Supreme decision is part of a several-decades-long history of assuming our leaders should not be sued even for crimes.

“The Montessori method routed disproportionately to rich white kids because good things do, but also because she increasingly viewed her project as, in Kramer’s words, “a patentable business.” The method was not only something to be taught; it was something to be sold.”

To ened on an upbeat note, Marvin Skreli, the pharma douchebag millionaire who jacked up the price of one life-saving drug by more than twenty times, has been permanently barred from serving as director or officer of a publicly traded company.

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Good news!

From a Democratic Party email listing 10 positive items I wasn’t aware of. If you feel you could use some upbeat news, read on.

10. Paid Sick Leave: Thanks to Democratic leadership, New Mexico joined 15 other states in passing landmark paid sick leave legislation. And as of this year, Mainers, Coloradans, and Connecticans are now eligible for the benefit.

9. Anti-Discrimination: This year, Virginia, Vermont, Oregon, and Maryland all banned the so-called “gay panic defense” that’s been used to excuse violent hate crimes against the LGBTQ community. Six Dem-majority states banned hair discrimination, which dispoportionately targets, shames, and punishes Black and indigenous students and workers.

8. Housing Assistance: Access to safe and affordable housing has always been a challenge, but a global pandemic only heightened the threat. Democrats in states like New York and Virginia allocated billions of dollars in federal COVID relief to help renters struggling to pay the bills.

7. Gun Reform: While Republican-controlled state legislatures spent the year making it easier than ever to purchase and carry a gun, Democrats doubled down on efforts to prevent senseless violence and keep dangerous weapons away from people who intend to do harm. Virginia banned convicted domestic abusers from having a gun, as did Colorado – which also implemented a waiting period for gun purchases and passed a law requiring gun owners to lock up their weapons.

6. Cannabis Legalization: This year, New Jersey, New York, New Mexico, Virginia, and Connecticut all legalized marijuana, addressing long-standing racial inequities in our criminal justice system and benefitting the states economically through increased tax revenue.

5. Education Investments: This year, California approved funding to establish universal pre-K. Virginia Democrats gave teachers a 5% raise and made community college free for tens of thousands of low and middle-income students pursuing jobs in high-demand fields.

4. Police Reform: The legacies of George Floyd, Breonna Taylor, and other victims of police violence continued to inspire major reforms in blue states this year. Maryland’s Democratic legislators overrode the Republican governor’s veto to pass a police reform package that included the establishment of a civilian review board, restrictions of no-knock warrants, and mandated body cameras. California passed its own package of reforms, raising standards and aiming to take badges away from police who lie, use excessive force, or display racial bias.

3. Voting Rights: While Republicans are in the midst of a well-funded, well-coordinated effort to roll back voting rights, Democratic majorities in the states moved quickly to expand access to the ballot box. Virginia became the first state in the South to enact a Voting Rights Act. Democrats passed automatic voter registration in Delaware, Hawaii, Connecticut, and Nevada, which also pushed through legislation to permanently expand mail voting after a successful 2020 election administration during the pandemic.

2. Going Green: Hawaii became the first state in the nation to declare a climate emergency. New York, Rhode Island, and Massachusetts passed legislation setting a net-zero carbon emissions target by 2050. In all, at least 12 Democratic-majority states passed legislation this year to tackle climate change and create clean energy jobs.

1. Abortion: With the Supreme Court dangerously close to overturning Roe v. Wade, Democratic state legislatures are increasingly our last line of defense when it comes to defending reproductive freedom. This year, New Mexico repealed a law criminalizing abortion. Virginia, Washington, and Colorado all made insurance coverage for abortion far more accessible, while Hawaii and Maine expanded access by widening the category of health care workers who can administer abortion care.

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Total depravity in the United States

Not what it sounds like. Slacktivist, some years ago, explained that in Calvinist thought, total depravity means everything is corrupted by original sin. This is different from utter depravity, the belief that we are rotten all the way through. We’re not; there’s good in us everywhere along with our dark side. But the dark side is there, much as some people want to deny it.

For example, Traverse City in Michigan. The Washington Post reports kids in school toss around the n-word as an insult and recently held a mock online slave auction. Nevertheless, many of the white adults are adamant there’s no racism in their town.

Since 2015, nooses have shown up at multiple construction projects throughout the U.S.

There’s now a shadow industry devoted to spreading disinformation online.

“We are not the only democracy to have had a corrupt, would-be authoritarian in high office. But we have had a hard time holding that person minimally accountable, much less keeping him out of contention for future office”

QAnon convinced the father of a Parkland shooting survivor that Parkland was a false flag.

“I promised myself to never love a job again. Not in the way I loved Google.” — a software engineer who filed a harassment complaint and discovered Google didn’t return her love like she thought.

Nashville pastor Greg Locke claims the Trump Virus is a hoax and bears false witness against his neighbor.

“I believe had they done so or had they accomplished that, they would have trampled us to death,” — one officer’s testimony about the Jan. 6 anti-American mob. But the new talking point on the right is, the terrorists couldn’t have succeeded in overturning the election, so no big, right?

Toyota has a vested interest in supporting supporters of the Jan. 6 attempted coup — their bottom line.

Even back in the 1950, there were some Republicans who thought the Democratic plan to provide polio vaccine for free was socialism.

Colleges’ core revenue increased from $280 billion to $511 billion between 2009 and 2019, according to LGM. By a strange coincidence, college presidents and administrators have seen a big increase in pay while faculty get next to nothing.

Taking wolves of the endangered species list wasn’t the worst thing Donald Trump did. But given the irrational hatred many rural folk harbor for wolves (check out the book Wolf Wars for details), the opportunity to butcher them is proving irresistible.

During the Clinton impeachment trial, I read and believed articles that said Ken Starr’s pursuit of Clinton was partly because he was an old-fashioned moralist, shocked at Clinton’s adultery. His record says otherwise.

Right-wing pundit Michael Medved wants us to know that even though many of the Founding Fathers owned slaves, they were totally opposed to slavery.

Mario Batali, super-star chef and restaurateur, built a company rife with sexual harassment.

If the FBI did in fact entrap the defendants in the Governor Whitmer kidnapping case, that would be extremely unjust. At this point I have no opinion on who’s in the right.

Journalist David Neiwert has argued that Rush Limbaugh pumped far-right rhetoric into the mainstream by toning down the worst parts (e.g., far-right attacks on the government rather than the “Zionist-occupied” government). It’s still a popular right-wing tactic online.

The United States treats rebels and revolutionaries differently depending whether they challenge or support the existing social hierarchies.

I am not at all shocked that the Arizona “audit” of the votes was not only full of shit, it was full of sexual harassment.

I am not at all shocked that right-wingers are declaring Simone Biles is weak, but I am disgusted.

Even when the government makes aid available it’s damn hard to get it, except for rich people.

The prison system has allowed Larry Nassar to spend thousands of dollars on himself while he sends a pittance to his victims.

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