Tag Archives: government

Andrew Ross Sorkin’s Case for Paying the A.I.G. Bonuses

Andrew Ross Sorkin wrote the following in today’s NY Times with regard to why the A.I.G. bonuses should be paid:

via Dealbook – The Case for Paying the A.I.G. Bonuses – NYTimes.com.

â??This isnâ??t just a matter of dollars and cents,â? he said. â??Itâ??s about our fundamental values.â?

On that last issue, lawyers, Wall Street types and compensation consultants agree with the president. But from their point of view, the â??fundamental valueâ? in question here is the sanctity of contracts.

That may strike many people as a bit of convenient legalese, but maybe there is something to it. If you think this economy is a mess now, imagine what it would look like if the business community started to worry that the government would start abrogating contracts left and right.

As much as we might want to void those A.I.G. pay contracts, Pearl Meyer, a compensation consultant at Steven Hall & Partners, says it would put American business on a worse slippery slope than it already is. Business agreements of other companies that have taken taxpayer money might fall into question. Even companies that have not turned to Washington might seize the opportunity to break inconvenient contracts.

If government officials were to break the contracts, they would be â??breaking a bond,â? Ms. Meyer says. â??They are raising a whole new question about the trust and commitment organizations have to their employees.â? The auto industry unions are facing a similar issue â?? but the big difference is that there is a negotiation; no one is unilaterally tearing up contracts.”

One word comes to mind: FRAUD.

A.I.G. committed fraud in the worst way and the bonuses are based on fraud. Accounting fraud, insurance fraud, whatever you name it, fraud took down A.I.G. As an insurance company, A.I.G. is obligated to retain a certain level of capital reserves from which to pay its obligations. Instead, it appears A.I.G. kept little to no capital reserves for insurance contracts it wrote for securities. The money it received from those insurance contracts was looted by its executives through excessive compensation and bonuses. As a result, A.I.G. lacked necessary funds to pay the beneficiaries of those insurance contracts when the insurance notes came due.

A basic tenet of contract law says that contracts based on fraud are not enforceable. Those bonus contracts should be presumed unenforceable until it is clear the recipients were not party to the fraud and actually earned the bonuses received.

I would like to see a real investigation led by William K. Black to determine what exactly went on at A.I.G. and when the executives and other employees knew or should have known they were committing fraud. I find it shocking the Feds have not already begun a thorough investigation into A.I.G. and other financial institutions to get to the bottom of the economic fiasco they caused. Until an investigation is completed, we should all presume fraud is involved.

Then again, I’m surprised A.I.G. wasn’t immediately placed into receivership, executive ranks fired, its counter-party contracts renegotiated through the receiver, and its assets sold off to the highest bidder to pay its obligations.

Digital Converter Box is here

I used the analog to digital converter box coupon card this past weekend. So now we can still get TV after the super bowl when the transition to digital television is complete. It is an RCA brand converter box.

[flickr]photo:2535060951[/flickr]

I don’t generally shop in Wal*Mart (ruthless and toothless); however the converter box cost $10 after the coupon ($50 retail price). That beat the $65 charged by Radio Shack for a no brand item.

The nice thing I found out about this box is that it includes a V-Chip intended to let parents filter out inappropriate content from their youngsters. It is likely that most people who rely on the government coupons to purchase a converter box will not have televisions built since 2000 when the V-Chip was mandated. The program is still a boondoggle, just not as big as I had previously made it out to be.

In case you still are not aware of the television transition, these are the dates you need to be aware of:

  • January 2, 2008 – Digital to analog converter coupon program becomes available. * Coupons are now available.
  • February 17, 2009 – Last day for analog broadcasts.
  • February 18, 2009 – Analog broadcasts will be turned off. Televisions will need a digital tuner, digital-to-analog converter box, or cable/satellite subscription.

You CAN have a sense of humor in the gov’t

There is a widespread belief that government bureaucrats lack senses of humor and that individuality is discouraged when in the ranks of government. The folks at the Social Security Administration (SSA) disproved that last week in a press release.

“For reasons likely to puzzle baby name experts around the world, American parents have become infatuated by names, particularly for their sons, that rhyme with the word â??maiden.â?Â  …  Social Security spokesman Mark Lassiter indicated that the agency would resist any legislative efforts to standardize the spelling of these names.”

SSA Press Release: Pop Culture Makes Mark on Social Security’s Most Popular Baby Names List

SSA tracks the most popular names born in the U.S. through registrations for Social Security numbers. It publishes its list annually. You can see the most popular names for the past 130 years on its web site.

McCain: Cutting taxes more important than balanced budget

I don’t think John McCain subscribes to the belief that: “A deficit today means a tax tomorrow.”

McCain: Cutting taxes more important than balanced budget – Yahoo! News

WASHINGTON – Republican John McCain said Sunday that cutting taxes and stimulating the economy are more important than balancing the budget, and accused both Hillary Rodham Clinton and Barack Obama of supporting tax hikes that would worsen the impact of a recession.

“The goal right now is to get the economy going again,” the GOP presidential nominee-in-waiting said on ABC’s “This Week,” adding that he would put the country “on a path to a balanced budget” by attacking wasteful spending.

What John McCain asks for is not a tax cut, it is a deferred tax. As far as he’s concerned, he won’t need to pay the tax man today (but his kids/grandkids surely will).

The thing I don’t think John McCain or our Congress quite understands is that they are pushing 96% taxes someday in the future to pay for the war they refuse to pay for today. In the end, someone needs to pay for war spending, in addition to all the regular stuff the government spends on domestically. I’d rather we all pay our fair share today through taxes (yes, even increased taxes) than it be forced on my generation later on. If that’s the case, I’d rather the U.S. Government default on its debt obligations today rather than force the younger generations to do so later.

Note: I’m not against trimming or cutting programs, I just think a balanced budget is required before tax cuts can be implemented. The first place I’d cut is Congressional pay. The second is the war in Iraq. What a boondoggle!

Digital Television Converter Coupons Are Here

I wrote about the need to sign up to receive coupons for the analog to digital television converter coupons back in January (See: Digital Television Transition: Start Preparing Now). Our two coupons arrived this week.

The envelope:

Analog to Digital Converter Coupon

A coupon:

Analog to Digital Converter Coupon

They came with a list of qualified converter boxes and a list of local retailers (all big box stores) that sell them.

Analog to Digital Converter Coupon

This whole television transition is one big bloated boondoggle. These stores and the converter box makers scored with this one. For one, the coupons are good only with stand-alone devices that will convert the signals and not for multi-purpose devices like VCRs, televisions, etc. that build in a converter. Two, television broadcasters don’t need to pay a penny for their broadcast licenses. Three, the converters are expected to cost $75 or more. Four, the converter boxes don’t even include a V-chip (this was a missed opportunity to get a V-chip in every home). There is more to complain about, but I’ll spare myself the time and effort. 😉

Why I love the Internet

Because geeky professors can feel empowered to make videos in which they sound alarms and spread their message virally, while they enjoy their morning coffee.

Very cool, however the message given in the video isn’t. The professor, Brad DeLong, rings the alarm, saying evasive action taken by the Fed may not work and that government needs to start talking about solutions before we get another depression with deflation or the inverse, inflation.

The right to be let alone

I’m working on a paper and presentation about the zones of privacy and keep running across this quote from Justice Brandeis’s dissent in Olmstead v. United States. I like it a lot so I am sharing it:

“The makers of our Constitution undertook to secure conditions favorable to the pursuit of happiness. They recognized the significance of man’s spiritual nature, of his feelings and of his intellect. They knew that only a part of the pain, pleasure and satisfactions of life are to be found in material things. They sought to protect Americans in their beliefs, their thoughts, their emotions and their sensations. They conferred, as against the government, the right to be let alone – the most comprehensive of rights and the right most valued by civilized men. To protect, that right, every unjustifiable intrusion by the government upon the privacy of the individual, whatever the means employed, must be deemed a violation of the Fourth Amendment. And the use, as evidence in a criminal proceeding, of facts ascertained by such intrusion must be deemed a violation of the Fifth.”

Downer cows in the food supply – ugh!

This past week, the massive beef recall from a Southern California slaughterhouse made headlines. It seems most attention was paid to the inhumane treatment of the cows. I find the use of downer cows to be the most heinous and horrid part of this whole mess.

Lawmakers react to massive recall from SoCal slaughterhouse

Federal lawmakers and watchdog groups had harsh words Monday for the U.S. Department of Agriculture after the agency ordered a recall of 143 million pounds of beef from a Southern California slaughterhouse.Beef products dating to Feb. 1, 2006 that came from the Chino-based Westland/Hallmark Meat Co. are subject to the recall, which is the largest such action in U.S. history. The notice came after the Humane Society of the United States filmed undercover video showing crippled and sick animals being shoved with forklifts â?? treatment that has also triggered an animal-abuse investigation.

USDA spokesman Keith Williams said the agency did not have a shortage of inspectors. He said his department has evidence that Westland did not routinely contact its veterinarian when cattle became non-ambulatory after passing inspection, violating health regulations.

Williams said the recall was done primarily to revoke the USDA’s seal of inspection for the meat â?? not because of the risk of illness.

“Everybody’s going, ‘Oh, a recall, that means death, that means sickness.’ That’s a different kind of issue,” Williams said. “This is a lower severity, where there would be a remote probability of sickness.

This official response by the USDA is not acceptable and is bullshit, pun intended. The inability to stand is one of the signs of Mad Cow disease. It is the reason these rules were put in place. The fact that downer cows were put into the food supply means the USDA food inspection process does not work and we are all at risk of getting e coli, salmonella, and bovine spongiform encephalopathy (BSE), the human version of Mad Cow disease, among other diseases. The link between BSE and downer cows is clear. The possibility is low, but it is still there. Not only that, but in the logic of the USDA spokesman, there is no need to have rules against downer cows since there is low risk of illness.

Deporting American citizens?

This is one example of how inept the U.S. immigration service is and how the immigration system is broken. How idiotic can they be not to run the quick and simple checks?

McClatchy Washington Bureau | 01/24/2008 | Immigration officials detaining, deporting American citizens

FLORENCE, Ariz. â?? Thomas Warziniack was born in Minnesota and grew up in Georgia, but immigration authorities pronounced him an illegal immigrant from Russia.Immigration and Customs Enforcement has held Warziniack for weeks in an Arizona detention facility with the aim of deporting him to a country he’s never seen. His jailers shrugged off Warziniack’s claims that he was an American citizen, even though they could have retrieved his Minnesota birth certificate in minutes and even though a Colorado court had concluded that he was a U.S. citizen a year before it shipped him to Arizona.

Digital Television Transition: 365 days to go

A year from tomorrow, February 18, 2009, the traditional, analog broadcast television signals across the U.S.A. will be turned off. (See: Digital Television Transition).

If you’re like me and rely on over-the-air television signals, you will need to invest in a digital-to-analog converter box, or a nifty new television built to receive digital broadcast signals, or subscribe to cable/satellite television.

The estimated price of the digital to analog converter box is $75. The federal government is providing $40 coupons towards your purchase. Request a coupon: https://www.dtv2009.gov/ApplyCoupon.aspx According to the coupon request form, TV converter boxes are not expected to be available in retail stores until late February or early March. You should sign up now before they are gone (limited supply); however you will not receive your coupon until after converter boxes are available in stores. The Coupon will expire 90 days after the date it is issued.

The federal department responsible for the program has a web site that provides more information regarding the coupon program, such as rules and the coupon request form. https://www.dtv2009.gov/

Digital Television Transition: Start Preparing Now

Read this if you want to guarantee that your television will still work after the 2009 Superbowl. Even more importantly, you will also need to make sure your mothers, grandmothers, or aunties know the following since they will need your help to sort through this mess and are less likely to know what’s going on.

WHAT’S HAPPENING?
The United States is currently undergoing a transition from regular analog television signals to a digital format (DTV). This is often referred to as the DTV transition. With traditional analog technology, pictures and sounds are converted into waveform electrical signals for transmission through the air. In contrast, digital technology converts these pictures and sounds into a stream of digits consisting of zeros and ones for transmission. In other words, the digital signal is in the same format as video on your computer (MPEG-2).

Analog format is how television has been broadcast since it first started in the 1930’s. All televisions since that time have been built to receive and decode those analog signals.

Digital television format is the future. Digital transmission of television signals provides several advantages compared to analog transmission, such as enabling better quality picture and sound reception as well as using the radio spectrum more efficiently than analog transmission. This increased efficiency makes multicastingâ??where several digital television signals are transmitted in the same amount of spectrum necessary for one analog television signalâ??and HDTV services possible. A primary goal of the DTV transition is for the federal government to reclaim spectrum that broadcasters currently use to provide analog television signals. It is auctioning off that spectrum (likely to mobile phone providers) in January 2008 so there’s no turning back.

Here’s the rub. A television must be built to receive and decode the digital signal. Televisions built before 1998 were ONLY built to receive analog signals. Since then, only some televisions have been built with a digital tuner to receive digital signals. Televisions sold after April 2007 must have a digital tuner, although anecdotal stories abound regarding stores not meeting those obligations. If you bought a television since then, you’ll need to verify it has a digital tuner.

Today, most television stations throughout the country provide a digital broadcast signal in addition to their analog signal. Within hours of the 2009 Super Bowl the analog signals will turn off for good. That means televisions built without a digital television tuner will not be able to receive over the air television.

The Federal Communications Commission (FCC) has a web site that provides more information regarding the DTV transition. http://www.dtv.gov/

WHAT DOES THIS MEAN FOR ME AND WHAT DO I NEED TO DO?
It all depends on how you receive your television signal and your television set itself. There are three primary ways people receive television programming: over the air reception, cable, or satellite.

1) Over the air broadcasts: Don’t laugh because 19% of American households (20.8 million households) still rely on the rabbit ears. I’m part of this 19%.

This group will either need to buy a new television with a digital tuner or buy a digital to analog converter box. Estimated price of the converter box is $75.

The federal government is providing $40 coupons for these people to purchase the digital to analog converter box. Request a coupon: https://www.dtv2009.gov/ApplyCoupon.aspx According to the coupon request form, TV converter boxes are not expected to be available in retail stores until late February or early March. You should sign up now; however you will not receive your coupon until after converter boxes are available in stores. The Coupon will expire 90 days after the date it is issued.

The federal department responsible for the program has a web site that provides more information regarding the coupon program, such as rules and the coupon request form. https://www.dtv2009.gov/

2) Cable: No need to do anything. You’ll still receive your local and cable stations without fail. Just make sure you take care of those who are likely not to subscribe to cable (see above), such as your grandmother, aunties, and the neighborhood granny who looks after your home while you’re at work or school. A rallying cry should be “No grannies left behind.” 😉

Currently, federal law requires cable companies to carry broadcast stations when asked by the local broadcaster. Those must-carry provisions require cable companies to provide the broadcastersâ?? signals to their subscribers in substantially the same format as it was received from the broadcasters. That’s why cable subscribers should be unfazed by the DTV transition.

Note: If you don’t have digital cable, you will only receive your local stations, such as PBS, ABC, and NBC, in analog format.

3) Satellite: Satellite doesn’t have the same must-carry obligations as cable systems so you’re likely to continue receiving the same stations you did before the DTV transition.

Of course, if you bought a television that receives digital signals you can still receive over the air broadcasts. I’ve heard the HD picture quality from over the air broadcasts is actually better than is provided by digital cable. I haven’t tested it yet, but I wouldn’t be surprised since cable companies will want you to subscribe to their HD services.

WHAT ARE THE DATES I NEED TO BE AWARE OF?

  • January 2, 2008 – Digital to analog converter coupon program becomes available. * Coupons are now available.
  • February 17, 2009 – Last day for analog broadcasts.
  • February 18, 2009 – Analog broadcasts will be turned off. Televisions will need a digital tuner, digital-to-analog converter box, or cable/satellite subscription.

Huckabee wants a 23% Federal sales tax?

The more I hear about Mike Huckabee’s policy proposals, the more I think he’s a bad choice for running the country, let alone representing anyone in our Federal government.

Huckabee campaigning for 23% sales tax – Los Angeles Times

WASHINGTON — Mike Huckabee, one of the most conservative Republicans in the 2008 presidential race, has embraced one of the most radical ideas on the campaign trail: a plan to abolish all federal income and payroll taxes and replace them with a single 23% national sales tax.The idea — dubbed the “fair tax” by proponents — has been a political asset for Huckabee; its well-organized backers have helped catapult him from the back of the presidential pack to its top tier.

Proponents of a national sales tax say it would be an improvement over the current system because it would increase the incentive to save, by taxing money spent instead of money earned.

Also, the proposal would rid the tax code of its myriad loopholes and would free taxpayers and businesses from the time-consuming, often costly task of preparing annual tax returns.

“What we would do with the fair tax is to eliminate all the taxes on productivity, which means you could earn anything you want,” Huckabee said. “You wouldn’t be penalized for saving, earning, for having a capital gain, making an investment.”

Huckabee and Fairtax.org call for a 23% tax on virtually all purchases in place of federal income taxes, as well as payroll taxes to fund Social Security and Medicare.

To ease the effect on the poor, they propose a “prebate” — a monthly cash payment to every family — to cover sales taxes on spending up to the federal poverty level.

Is the “fair tax” fair? Maybe. But does it solve other problems in our tax system, or does it make them worse? I think it makes things worse. I don’t understand how this will be easier on regular people, save the government money, or cut down on bureaucracy.

First, this plan is missing one critical element. It doesn’t make the tax system easier on the regular, everyday person. We’ll have more money in our pockets but will pay a 30% (or higher) tax. Not only that, but we’ll need to deal with another bureaucratic mess to get whatever rebates the government sees fit to give out.

Secondly, the “prebate” program will be tasked with paying people rebates for everything they spent. This will invite huge amounts of fraud. I can easily see a black market developing to match poor people who don’t use up their entire rebate with rich people who easily used up their rebates. I can also see a “you scratch my back, I’ll scratch yours” barter system developing in place of regular commerce similar to how some lower wage persons work “under the table.” There is some incentive in today’s state-based sales tax programs, but those incentives will become much larger when 1/4 to 1/3 of a purchase price is added at the end as tax. For example, in California I’ll end up paying a 31.25% (23% + 8.25%) tax for every purchase I make.

Finally, a huge bureaucracy will need to be created in place of the IRS to manage the “prebate” program, develop eligibility criteria, investigate and manage fraud, and process all the paperwork submitted. All those folks freshly laid off from the IRS will be hired to staff this new tax agency.

Other issues that will need to be worked out including how to deal with people and companies who made financial plans based on expected taxes. Also, what about services and groceries? Some groceries are exempt in states that charge income tax. Would that continue under a federal system.

In the end, I believe the national sales tax is not a replacement or substitute for the Federal income tax system currently in place. If anything, it might make make feelings of an inherent sense of unfairness felt by poorer people, as well as create a less manageable system.

I am more amenable to a flat tax with no loop holes such as credits, deductions, or accounting trick rewards. A flat tax can be eased in over 25-30 years by making it optional for all those who have worked full-time more than two years consecutively and make it compulsory for those who haven’t. It can also be equalized in favor of poorer people by taxing only income over first 25,000 (or some other arbitrary number).

Turn off the Greenspan double-speak machine

Alan Greenspan has been hawking his book lately. The more I hear him, the more I’m convinced he doesn’t know what he’s talking about and never did. His doublespeak constantly reminds me of 1984. With that in mind, maybe his goal is to confuse people into inaction.

“We are beginning to get not stagflation, but the early symptoms of it,” Greenspan said.

So he’s saying is we’re seeing the early signs of stagnant inflation (stagflation) in the economy.

Greenspan sees early signs of U.S. stagflation: Financial News – Yahoo! Finance

In an interview on ABC’s “This Week with George Stephanopoulos,” Greenspan said low inflation was a major contributor to economic growth and prices must be held in check.”We are beginning to get not stagflation, but the early symptoms of it,” Greenspan said.

“Fundamentally, inflation must be suppressed,” he added. “It’s critically important that the Federal Reserve is allowed politically to do what it has to do to suppress the inflation rates that I see emerging, not immediately, but clearly over the intermediate and longer-term period.”

I think Greenspan shares a lot of the blame for this inflationary spike and impending stagflation, if it occurs. He led the Fed down a interest rate cutting path that created the cheap money high that resulted in the housing bubble as a knee-jerk reaction to a soft recession in the economy after the dot-com bloodbath/implosion and the 9/11/2001 terrorist attacks. Economies operate in cycles with highs and lows. The recession we had was a natural part of that cycle. Instead of letting the recession play out, the Fed intervened by slashing interest rates to almost nothing. Instead of giving time between each rate cut to see if the previous rate cut was working, the Fed kept slashing. That kept the U.S. economy out of recession but it created unsustainable inflation in the housing market, and it likely made this next recession a bloodier mess. It makes me think that the Fed was operating with the short-term vision Wall Street is famous for pushing on public companies. In contrast, the Fed needs to keep the long-term health of the economy in mind, even if it might hurt a little before then.

Speaking of the Fed, Congress needs to do its job to provide some oversight over the Fed to make sure it isn’t pandering to a particular lobby and isn’t cooking the books. It is after all a quasi-government organization that has been assigned the task of a central bank. Oh wait, Congress already panders to a particular lobby (the one with fistfuls of dollars, euros, and pounds) and doesn’t bother to keep the books. Nevermind.

Time to turn off the Greenspan double-speak machine and ignore anything it says.

Riddle me this Batman:

If someone doesn’t pass the bar exam, is she still a lawyer?

In South Carolina, that’s answered in the affirmative. It appears a well connected politician was able to pull a few strings so his daughter could “pass” the South Carolina bar exam. Might as well scrap the test at this point. The one positive in all this: at least corruption in South Carolina isn’t hidden.
GreenvilleOnline.com -News-Harrison: ‘Daughter’s hard work’ helped change Bar exam – (11/14/2007)

The chairman of the House Judiciary Committee said Tuesday it was his daughterâ??s hard work and not his influence that helped change the results of this summerâ??s Bar exam, allowing her and 19 other applicants to pass.Rep. Jim Harrison told The Greenville News that his intervention by calling the chairman of the Board of Law Examiners was nothing unusual.

“I did the same for her as I would do for any constituent or any father would do for his child,” Harrison said of his daughter, “and that is simply to raise the issue that thereâ??s something that needs to be looked at, and if it is looked at, let the chips fall wherever they may.”

Harrisonâ??s comments came hours before his daughter, Catherine, and 383 others were admitted to the Bar by the South Carolina Supreme Court, which two weeks ago changed the results of the July Bar exam, resulting in 20 people passing who earlier hadnâ??t.