Banks and CPAs

"With all the attention to banking regulation, it seems strange that something called Basel III has escaped widespread notice, even though its various new rules have been up for public discussion since January and the window closed on that opportunity on Friday, April 16. Maybe it's because the Basel Accords, a set of rules agreed to by bank regulators around the world, have been something of an embarrasment to the authors. ... The idea was to give an increasingly globalized financial-services industry a common set of rules so that bankers could have more confidence in the solidity of their global counterparties. ... In an unsuprisingly generous gesture toward national treasuries, banks were allowed to regard government-issued securities as zero risk, meaning they would require not offsetting capital. ... Japanese banks were boasting that they were over-compliant with Basel standards right before they tanked in 1990. ... But the Basel standards proved to be largely irrelevant to the factors that caused the fall 2008 near-meltdown of global finance. For example, Lehman Brothers had close to triple the core capital required by the Basel standards when it crashed. ... The 2008 crisis resulted when the Fed-created credit bubble collapsed and soaring housing prices deflated as well. ... One of the great ironies of our times is that the two strongest defenders of the Fannie-Freddie shell game, Chris Dodd and Barney Frank, are now in charge of reforming banking regulation. ... Aside from giving Washington an even tighter grip on the banking industry, the Dodd bill partly institutionalizes what Ben Bernanke at the Fed and Henry Paulson at Treasury, and Timothy Geithner at the New York Fed did ad hoc in the fall of 2008. It permits backdoor bailouts and gives enormous powers to the same Fed that crafted the housing bubble", my emphasis, George Melloan at the WSJ, 24 April 2010, link:

http://online.wsj.com/article/SB10001424052748704508904575192534100550538.html.

The Dodd bill stinks. It's more of the same and more TBTF bailout. I agree with Melloan. There is virtually no rule that banks can't "engineer" around. Irony? Or as Yves Smith says, "Feature, not bug".

Another SEC Victory

"The [SEC] suspected Texas financier R. Allen Stanford of running a Ponzi scheme as early as 1997 but took more than a decade to pursue him seriously, according to a report further tarring the agency that missed Bernard Madoff's huge fraud. The report by the SEC's inspector general says SEC examiners concluded four times from 1997 to 2004 that Mr. Stanford's businesses were fraudulent, but each time decided not to go further. ... The former SEC official, Spencer Barasch, is now a partner at law firm Andrews Kurth LLP. ... The inspector general referred Mr. Barasch for possible disbarment from practising law. ... SEC Inspector General David Kotz's report suggests the agency's mistakes in the Stanford case were in part the result of a culture that favored easily resolved cases over messier ones. Cases such as the alleged Stanford fraud weren't considered 'quick hit' and 'slam dunk,' and examiners were discouraged from pursuing them, Mr. Kotz found. ... Examiners noted that Mr. Stanford was promising to pay investors a return well above the market, without any apparent way of delivering on that promise. ... SEC enforcement officials also appeared to have ignored warnings from insiders at Stanford's operations", my emphasis, Michael Crittenden & Kara Scannell at the WSJ, 17 April 2010, link:

http://online.wsj.com/article/SB10001424052702303491304575188220570802084.html.

Another day, another missed fraud at the SEC.

Fat Tails and America

Harvard history professor, Niall Ferguson has a wonderful post about America's potential and sudden demise at the 28 February 2010 LA Times, link: http://www.latimes.com/news/opinion/commentary/la-oe-ferguson28-2010feb28,0,7706980.story. Damn he's sharp!

China's a Bubble-3

"James Tsai is the sort of MBA corporate recruiters covet. He went to a good prep school, earned a degree with honors from Middlebury College, and made vice-president in Bank of America's international wealth management group at the age of 26. ... And now he's hustling to land his first post-MBA job--in China. ... Every era has its version of the MBA dream. ... Now, the emerging narrative is about steroidal Asia and its promise of growth. At premier institutions such as the University of Chicago's Booth School, the University of Pennsylvania's Wharton School, and Northwestern's Kellogg, the percentage of MBAs taking jobs in Asia--including US students like Tsai as well as international students--has more than doubled in the past five yars, from roughly 5% of the graduating class to more than 10%. ... And right now, Asia is where the career velocity and opportunity are. 'This has never really happened before, except in little spurts, where you have a fairly large group of talented, recent MBAs asking for assignments in China, Vietnam, India,' says Jeff Joerres, CEO of global staffing firm Manpower. ... On Facebook, Twitter, and Skype, MBAs swap stories about the adrenaline rush of working in an emerging market and the joys of geographic arbitrage. ... The University of Chicago's Booth School is seeing so much interest from Chinese companies that it recently opened a career services office in Hong Kong. ... How much longer can the Asian allure hold?," my emphasis, Michelle Conlin at Businessweek, 22 March 2010, link: http://www.businessweek.com/magazine/content/10_12/b4171086653619.htm.

This is 2010's Havard MBA indicator. China's a bubble.

Obama's Brain?

"Why has President Barack Obama decided to foment a crisis in US relations with Israel? ... It is not credible to argue that Jerusalem's local planning board's decision to approve the construction of 1,600 housing units in Ramat Shlomo drove cool Obama into a fit of wild rage at Prime Minister Binyamin Netenyahu. Obama himself claims that he launched a political war against Israel in the interest of promoting peace. But this claim, too, does not stand up to scrutiny. ... First, Obama's assault on Israel is likely related to the failure of his Iran policy. ... By this line of thinking, if Israel simply returned to the indefensible 1949 armistice lines, Iran's centrifuges would stop spinning, and Syria al-Qaida, the Taliban, Hizbullah, Hamas and the Iranian Revolutionary Guards would all beat their swords into plowshares. Second, even more important that its usefulness as a tool to divert the public's attention away from his failure of Iran policy, Obama's assault on Israel may well be aimed at mantaining that failed policy. ... That is, the anti-Israel campaign may be a means to force Israel to stand by as Obama allows Iran to build a nuclear arsenal", Caroline Glick at Frontpage Mgazine, 22 March 2010, link: http://frontpagemag.com/2010/03/22/obamas-war-on-Israel/

Obama's letting Iran build nukes jeopardizes US interests in the Middle East. Does he not know this? Bad? Or does he know it? Worse. What Iran policy?

Bailout Bargain?

"It's way too early to tally the costs of the government's various efforts to help out our nation's financial institutions survive the credit debacle. But that hasn't stopped anonymous Treasury officials from claiming in recent days that their Armageddon-avoidance will wind up costing far less than many feared. One Treasury estimate, leaked to the [WSJ] last week, put a price tag on $89 billion on the financial bailout. That's far below the $250 billion the Congression Budget Office estimated last year or other analyses that put the all-in-number at $1 trillion or more. ... And given that the Treasury is run by Timothy F. Geithner, the man who doled out billions as president of the Federal Reserve Bank of New York, his current minions certainly have an interest in peddling the view that the price of those rescues has become less onerous. ... But if the Treasury wants to provde a full assessment of the costs of this financial debacle, it will have to add some more beads to its abacus. ... A major factor missing from the Treasury's math is the vast transfer of wealth to bank firm investors resulting from the Fed's near-zero interest-rate policy", Gretchen Morgenson at the NYT, 18 April 2010, link:

http://www.nytimes.com/2010/04/18/business/economy/18gret.html.

By George, Gretchen's got it!

Affirmative Action Navy

"Not only was this a possible naval disaster, but it was also a diplomatic one as well: the navigator was an officer in the British Royal Navy, a billet unique to the Churchill. ... Newly arrived Navy chaplain Maurice Kaprow could not believe what he was seeing and hearing. 'Someone came up to me and said,' "We've run aground--she's finished",' he recalls. ... As it turned out, one of the ship's propellers had broken. But seven years later, Kaprow still cannot fathom which was worse: that US sailors were openly heckling a captain or that the captain seemed to deserve it. ... [Holly] Graf was relieved of duty in January, after nearly two year on the Cowpens, for 'cruelty and maltreatment' of her crew, according to a blistering Navy inspector general's report obtained by TIME. ... The saga of Holly Graf [HG] suggests the Navy had long ignored warning signs about her suitability for command. And while news of her spectacular fall instantly raised questions about institutional sexism, the lesson may be the opposite, as he case highlights how the Navy has pushed to integrate women into its war-fighting fleet. [HG] had dreamed of skippering a Navy vessel ever since her high school days in Simsbury, Conn. ... After she graduated from the US Naval Academy in 1985, colleagues sensed that Graf was on a fast track to flag rank. ... She earned a bronze star during the Iraq war (along with the Legion of Merit, Defense Meretorious Service Medal and two Meretorious Medals). ... If the Navy had warning signs about Graf after her time on the Curtis Wilbur, it didn't seem to pay them any heed. Instead, in 2003, Graf made US Navy history by becoming the first female commander of a destroyer, the Churchill .... Morale was the lowest he had ever encountered on any vessel. Kaprow says he tried to talk to Graf about her leadership style. ... But his complaints, like those made by [Kirk] Benson and others, produced no apparent change in Graf's demeanor and did not slow her rise. ... The [HG] saga has left the Navy facing two uncomfortable questions: Would the Navy have relieved a man for the erros Graf committed? And if Graf's command style was so toxic, how did the Navy miss it in the first place? ... A better explanation is that the Navy failed to move on Graf earlier not in spite of her gender but because of it", Mark Thompson at Time, 15 March 2010, link:

http://www.time.com/time/nation/article/0,8599,1971246,00.html.

Shades of Army Major Hassan. This is your affirmative action Navy at work, see my 29 July 2009 post:

http://skepticaltexascpa.blogspot.com/2009/07/diversity-and-navy.html.

What's A Rabba?

"Enthusiastic applause greeted Sara Hurwitz when she stepped to the podium last month to address a gathering of the Jewish Orthodox Feminist Alliance in New York. ... Rabbi Pinchos Lipshutz warned, 'We cannot allow someone whose guide is 20th century feminism ... to hijack and attmept to redefine Orthodixy.' ... The uproar threatens to formally splinter the long-volatile Orthodox movement into liberal and conservative factions. 'The two wings are moving further and further apart,' says Brandeis University historian Jonathan D. Sarna. 'The issue of women in a very significant divider, and it wlll take all the diplomacy that can be mustered to keep Orthodoxy from splitting.' ... In a 1984 essay she presciently wrote: 'It seems but a matter of time that a woman who is as well-versed in rabbinic sources as a male ... will say to herself" "Why not me?"' ... In March 2009, after months of deliberation, Rabbi Weiss invented a title for her, 'maharat,' which is an acronym of the Hebrew words for halachic, spiritual and Torah leader. ... The title failed to catch on. 'People didn't know what maharat meant,' Rabba Hurwitz says. 'Rabba is a more respectful and accurate description of who I am and what I do.' Speaking about the controversy, she adds: I understand that people are concerned. This is new, but nothing I am doing is outside the framework of Jewish law.' ... She can, moreover, do some things that a male rabbi cannot, like be a reasuring prescence on the female side of the barrier, or mechitzah, that separates men and women in an Orthodox synagogue; and she can field intimate questions that some women are more comfortable asking another woman. 'All of that,' Rabba Hurwitz says, 'adds to the community'," my emphasis, Evan Goldstein at the WSJ, 23 April 2010, link:

http://online.wsj.com/article/SB10001424052748704671904575193990303740922.html.

Interesting. Weiss "invented a title for her", yet "nothing [she] is doing is outside the framework of Jewish law." What would Antonin Scalia say about this if asked?

Where's Whitey?

"When Angela Freeman moved to Pennsauken in the mid-1980s, she was among a wave of black teachers hired to reflect the township's changing racial demographics. ... Freeman felt welcome enough, but she noticed that any discussion of race was conducted in code, with teachers and administrators avoiding words like black and white. ... The issue is how to stanch the outflow of the town's white residents while creating a welcoming environment for everyone. ... The strategy, as refined over the years: Market the town's diversity as an asset. ... In those 20 years 1980-2000], there has been a doubling of minority residents, drawn by the same relatively low property taxes and proximity to Philadelphia that had attracted families for decades. ... 'People were asking why, I a black man, wanted more white people living here. It wasn't an easy sell,' said [Harold] Adams, a real estate assessor. 'We were coming at it from a practical standpoint.' ... 'When a town gets below 50 percent white, it makes it very difficult for the town to maintain services,' Adams said", James Osborne at the Philadelphia Inquirer, 26 February 2010, link:

http://www.philly.com/philly/news/homepage/85456127.html.

See my 5 January 2009 post:

http://skepticaltexascpa.blogspot.com/2009/01/wait-listed-by-jail.html. Should Pennsauken offer whites minority set-asides?

My Brother's Keeper?

"Employees and retirees of Minneapolis publisher Augsburg Fortress [AF] are suing their employer, alleging in their complaint that it allowed their pension plan to fail, and used its connection to the Lutheran church as a legal shield to avoid paying them all their pensions. ... The plan had only $8.6 million to pay $24.2 million in pension obligations to 500 employees and retirees, said the company, which publishes books for the Evangelical Lutheran Church of America, including hymnals, the works of theologian Dietrich Bonhoeffer, and Garrison Keillor's latest book. ... Beth Lewis, [AF's] president [said], 'We did what we thought was most equitable for the largest number of plan participants.' ... But when the law was enacted in the 1970s, churches were exempt unless they opted in. In the 1980s, the IRS definition of 'church plan' widened to include almost any organization affiliated with a religious group. That includes recreational groups, hospitals and publishers like [AF]. ... Church plans don't have to file annual reports with the [IRS] disclosing their pension obligations, assets and investment managers, among other details. ... The publisher had asked the church for help, but 'the church-wide organization advised us that it had no obligations or fiduciary duties' to do so, Ms. Lewis said. ... [AF] is a separately incorporated unit under the ELCA church-wide organization", Ellen Schultz at the WSJ, 22 April 2010, link:

http://online.wsj.com/article/SB10001424052748704448304575196061466485430.html.

Apparently the ECLA, like Vampire Squid, does "God's work". Sure. Elevating "form over substance" fits well with Uncle Sam's current zeitgeist, see my 16 September 2008 post:

http://skepticaltexascpa.blogspot.com/2008/09/sarbox-scam-2.html. No one should assume his pension is safe, no matter who he works for. Or thinks he works for.