Year: 2010

MARRIAGE

Some on the right believe that if 50.1% of the people vote for something – like California’s marriage ban – it must be Constitutional. And that the Courts should have no role in deciding whether or not that’s so.

So if, for example, 50.1% of the people voted to prevent Catholics from receiving Social Security benefits – or marrying – that would be okay.

And if a judge said, “Whoa! Hang on! We have a Constitution meant to protect the 49.9% – or even the 4.9% or the 0.00049% – from the ‘tyranny of the majority,’” then that judge should be impeached. Never mind that in this case the judge was agreeing with noted conservative attorney Ted Olson and noted Republican Governor Arnold Schwarzenegger and noted former First Lady Laura Bush.

Get a grip, people!

You can still consider your own marriage superior to ours!

You can still disown your child for being gay!

You can still hope he or she never forms a stable, loving relationship!

Or that – if God forbid he or she does – he or she will be discriminated against in subtler ways (like being kicked out of your church).

The only thing you can’t hope, if Judge Walker’s ruling is upheld, is that your child and his or her family will be denied Social Security benefits (along with the other Federal benefits and responsibilities of civil marriage).

Sorry, but that’s the downside of living in a country where everyone is guaranteed equal treatment under the law.

See David Boies on CBS here. Ted Olson on Fox, here. And a straight San Franciscan’s take on gay marriage here.

DODD-FRANK

Sam Kahn: I’ve had dozens of conversations with people over the years who blame Frank and Dodd for the financial meltdown. All concede that that the problems occurred starting in the late 1990s going through 2007 when the bad stuff really started happening. In every conversation, I asked people to name the chairmen of the committees from 1994 through the end of 2006. [Frank was in the minority all those years, Dodd was in the minority most of those years – they can’t possibly be blamed for the inactions of the “regulation is bad” Republicans.] I’ve yet to find one person who could name any of the Republican chairs. They are, in my opinion, the ultimate Teflon people. They ran the committees, but no one even knows who they are. Instead, Republicans want to blame Dodd and Frank.”

CHEEZ DOODLES

Jim Leff: “Cheez Doodles weren’t invented. They were ripped off.”

THUMBNAILS

From the Campaign for America’s Future

NYT’s Paul Krugman sounds the alarm that there’s not enough state aid to prevent a collapse in infrastructure and education: “…for all the talk of a failed stimulus, if you look at government spending as a whole you see hardly any stimulus at all. And with federal spending now trailing off, while big state and local cutbacks continue, we’re going into reverse … Everything we know about economic growth says that a well-educated population and high-quality infrastructure are crucial.”

NYT edit board tries shaming Congress to do more on jobs: “… the response from Washington has been inadequate, at best, with Democratic initiatives too timid and Republicans bent on obstruction … the [$26B state aid] measure started out as a $50 billion effort … it was a reasonable response to anticipated budget shortfalls estimated at well over $100 billion this year. Now, deep spending cuts and tax increases will still be needed to balance budgets, undermining the recovery. … There is no one way to foster job growth. There are many ways, and they should all be deployed. Maybe after Congress gets back from vacation.”

Robert Reich rebuts Robert Rubin and Alan Greenspan’s no-more-stimulus stance: “Both Greenspan and Rubin are deficit hawks. So was Herbert Hoover and so was Hoover’s Treasury Secretary Andrew Mellon. And look what Hoover and Mellon got us into. When we least need him, Hoover is being exhumed.”

Tomorrow: ETFs – and More Reason to Think Charlie Rangel Shouldn’t Quit

CLIMATE CHANGE

The eminent meteorologist staying with us this past weekend notes that average Moscow mid-summer highs are 73 degrees and that prior to this summer Moscow’s highest recorded temperature ever (one freakish day in 1920) was 98.2 degrees.  Yet lately, it’s been routinely over 95 degrees and several days over 100 degrees – which would be like New York City (average mid-summer highs 84) having weeks of heat above 106, occasionally spiking to 113 or Phoenix (average mid-summer highs 101) having weeks of 123-degree heat occasionally spiking to 130.

A good chunk of Russia is burning and the smoke – which my meteorologist says they are wrongly calling “smog” – is choking folks in Red Square (photos here).  Muscovites are advised to stay indoors, shower more often, and – rueful smile – “refrain from smoking.”

My meteorologist has been reading James Hansen’s Storms of My Grandchildren: The Truth about the Coming Climate Catastrophe and Our Last Chance to Save Humanity.

(“Hansen, director of the NASA Goddard Institute for Space Studies, lays all the cards on the table in this thorough, detailed analysis . . . a Silent Spring-style warning cry that predicts ‘a rough ride’ for our grandchildren.” – Publishers Weekly.)

My meteorologist’s own view is that it’s probably too late to reverse/prevent the climate change to come.  We’ve already thrown the system out of whack, and a “positive feedback loop” that could cause (among much else) the western ice shelf of Antarctica to break off and melt sometime in this century – once things get moving, it could happen relatively fast – and raise sea level three to six feet.  (Bye-bye, Florida and population centers around the world; hello, famine, drought, pestilence, mass migration, and war.) Did you notice that a chunk of ice four times the size of Manhattan broke off from Greenland Thursday?

None of this is certain of course, and many – largely scoffed at by Republicans who blocked the latest energy bill – still believe we can act to prevent or mitigate the damage.

(One small, imperfect, but specific and practical thing you can do?  Vote Democrat.)

Which leads me directly – this notion of “cut taxes, let our children pay; mock Al Gore, let our children pay” – to Matt Miller’s Great Idea:

LOWER THE VOTING AGE TO 10 . . .

. . .  Says Matt Miller, here – brilliantly – in the Washington Post:

What this country needs is a movement to lower the voting age to 10. Hear me out.

Wherever you look, from debt to schools to climate to pensions, the distinctive feature of American public life today is a shocking disregard for the future. Yes, politicians blather on about “our children and grandchildren” all the time — but when it comes to what they actually do, the future doesn’t have a vote. If you want to change people’s behavior, you need to change their incentives. It’s time to give politicians a reason not simply to praise children, but also to pander to them.

About 125 million Americans voted in the 2008 presidential election. There are about 35 million Americans ages 10 to 17. Giving them the vote would transform our political conversation. It would introduce the voice we’re sorely missing — a call to stewardship, of governing for the long run, via the kind of simple, “childlike” questions that never get asked today.

Imagine a phalanx of fresh-faced yet fierce 13-year-olds (like those on my daughter’s middle school debate team) shaming the adults with the following, for starters:

— Is it really a national priority to borrow billions more from us to keep taxes for the best-off 2 percent of Americans lower than they were during the Clinton boom, when we’re in the midst of two wars and already piling up trillions in fresh debt?

— Why are you handing off to us a system of decaying bridges, roads, sewers and airports? Doesn’t it embarrass you that you’ve decided you prefer to devote the resources for such investments to your own current consumption?

— Even if you’re not sure whether global warming is man-made or potentially fatal, wouldn’t it be prudent to put a high price on carbon to force us toward a green energy economy, just in case the worst turns out to be true? What will you tell us if you leave behind a scorched planet? “Sorry, kids, you had to be there — the interest-group politics were really tough”?

— Why are we the only advanced nation that requires kids to go deep into debt to get a college degree?

— How can you keep assigning the least qualified teachers in the country to the millions of poor children who need great teachers the most?

— Is the quarterly earnings craze in a stock market that operates like a casino really the way to fund and build enterprises that will be globally competitive when we grow up?

— Why do you say Social Security can’t be touched, even though you’re planning real benefit increases for future retirees now in their 40s despite trillions in existing unfunded promises? Why rule out questioning these built-in increases when there’s no similar “trust fund” for great teachers or for universal pre-school?

— Are you really going to keep letting senators who represent less than 15 percent of the population stop any legislation they want? What about majority rule?

Isn’t a children’s movement that sounds like this overdue? Still, I know what you’re thinking. This is a joke, right? Miller can’t seriously be proposing we give fifth-graders an equal say with mature, responsible adults.

Let that objection linger in view of the questions above and decide for yourself if the grown-ups really occupy the high ground here. We’re in a topsy-turvy world best captured by my favorite political cartoon from the debt-soaked 1980s:

“Your generation will just have to spend a third of your income to support my generation when you grow up,” says a stern father.

“Why us?” his scared daughter asks.

“Because of your failure as children to teach your parents to be responsible.”

“I’m sorry, Daddy!”

“So am I.”

The fascinating thing would be to get a movement going in six or seven states to enact this lower voting age. The crusade would provide the news hook the media needs to focus on long-term challenges that are routinely ignored amid the breathless daily panting over trivia.

I’m not saying “10” is the only answer. I want creative litigation brought on behalf of minor future taxpayers, suing states and public-sector unions that have recklessly saddled kids with zillions in unfunded pensions. Or anti-debt street protests by 10th-graders eager to redefine community service for their college résumés.

It would be nice if the kids didn’t have to take up this burden, but we are where we are. To those who say this is all unseemly if not insane, I have four words: Got a better idea?

Matt Miller, a senior fellow at the Center for American Progress and co-host of public radio’s “Left, Right & Center,” writes a weekly column for The Post. He can be reached at mattino2@gmail.com.

NBIX / DEPO

So maybe we’re now, above $6, out of half the NBIX we bought at $2.60.  (Upon further reflection, birds feeling good in hands, I sold some more from my tax-deferred account Friday.)  So from now on we’re playing with house money.*  But guru suggests we not sell DEPO, which jumped nicely to $3.75, whether we bought it originally at $4.50, and/or more recently at $2.36.  He sees it going to $6 in the year ahead.

Tomorrow, or soon: marriage, Rangel, and more

MARRIAGE

MSNBC’s Karen Finney posting in U.S. News yesterday (in part):

Arguments have also been made that same-sex marriage dilutes the institution of marriage, just as similar arguments suggested that interracial marriage diluted the white race. My personal favorite absurd justification says that (despite the idea that we are all God’s children and loved equally) gay marriage is against the laws of God and nature. That argument was used [in 1963] by Leon M. Bazile, the judge in the initial case against the Lovings, who said:

“Almighty God created the races white, black, yellow, malay and red, and he placed them on separate continents. And but for the interference with his arrangement there would be no cause for such marriages. The fact that he separated the races shows that he did not intend for the races to mix.”

☞ Prompting a reader named Marcus to post:

I read the judge’s 136 page ruling from start to end last night. When I read the parts quoted from the brochures used to inform voters about proposition 8 I was shell shocked. I could not believe the state of california (intentionally not capitalized) allowed such hate-filled misinformative junk to be circulated around as proper guiding information to the voters. It’s now perfectly clear to me why proposition 8 passed.

WHAT’S IN THE FINANCIAL REFORM BILL

Yesterday I cited a very bright, hugely self-confident right-winger who declared to the world that the 2,300-page financial reform bill was a disaster, based on his certainty that no one, least of all he, knew what was in it.

Here’s what’s in it, as laid out yesterday in Boston by Treasury Deputy Secretary Neal Wolin.

He recounts the financial disaster the President inherited (you already know that part) . . .

. . . lays the blame at a lot of feet . . .

Legislative loopholes allowed large parts of the financial industry to operate without oversight, transparency, or restraint.

Policy makers were too slow to fix a broken system.

And there is no doubt that, across the country, many Americans took on more debt than they could afford; and that many firms encouraged them to do just that.

So we all share responsibility for the crisis. And we all share responsibility for reform.

. . . and then explains what’s been done and where we go from here:

Last month, when President Obama signed into law a comprehensive financial reform bill – the most significant financial reforms since the 1930s – we took a tremendous step forward in meeting that responsibility.

The reforms that are now the law of the land will help us rebuild a stronger, safer financial system; a system that is pro-growth and pro-investment; a system that does what it ought to do – help businesses finance growth, help Americans save for retirement and borrow to finance an education or a home, without fear of deception or abuse; a system that does these things without letting risks build up unseen and unmanaged; a system that is far less prone to panic and collapse.

A lot has been said about the financial reform law, so I want first to step back and look – in broad strokes – at what the new law accomplishes.

> First, these reforms give us the tools to look beyond the safety of individual firms or markets to the health of the broader financial system. Through the Financial Stability Oversight Council, supported by the Office of Financial Research, regulators will have the ability and the responsibility to identify and manage systemic risk.

And the Federal Reserve will have examination and enforcement authority over all bank holding companies, as well as any non-bank financial companies designated by the Council – so that the largest, most complex financial institutions will be subject to consolidated oversight, regardless of their corporate form.

> Second, these reforms require regulators to impose stronger prudential standards – robust, risk-based capital, leverage, and liquidity standards to guard against both firm-specific failures and systemic shocks.

> Third, the reforms establish a comprehensive regulatory framework for the derivatives markets – the source of so much risk and uncertainty in the recent crisis. And at the same time, through a narrowly tailored end-user exemption, the reforms ensure that commercial firms will be able to hedge their risks effectively and efficiently.

> Fourth, the reforms put an end to the problem of “Too Big to Fail.” They give the federal government the authority to shut down and break apart large non-bank financial firms whose failure threatens the broader system.

No firm can be insulated from the consequences of its actions. No firm can be protected from failure. No firm will benefit from the perception that taxpayers will be there to break their fall. The new law makes absolutely clear that taxpayers will never be asked bear the costs of a financial firm’s failure.

> Finally, the reforms address the fundamental failure of consumer protection that plagued our system in the years leading up to the crisis.

The Bureau of Consumer Financial Protection, an independent entity within the Federal Reserve, will have one mission: to promote transparency and consumer choice, and to prevent abusive and deceptive practices.

Now, the law does much more. But these are the core elements: a focus on systemic risk; heightened prudential standards; comprehensive regulation of derivatives; an end to “too big to fail;” robust consumer protection.

Flaws in each of these areas helped precipitate or prolong the crisis. This bill targets those flaws – and fixes them.

Enactment of the legislation is, of course, not the end of the financial reform effort. Now we must turn to the important work of implementation.

Those of us in government – policy-makers, regulators, and supervisors – must make sure that these reforms meet the promise of the law; that these reforms provide both the necessary protections against financial excess and the benefits of financial innovation.

We have already begun a rigorous implementation process. The work cannot be done overnight. It will take time.

Each of the agencies involved in implementing financial reform – Treasury, the Federal Reserve, the SEC, the CFTC, the OCC, the FDIC and others – are in the process of outlining how they propose to prioritize the rules they now have to write and setting initial dates for when the public will be able to comment on draft rules.

Our work involves writing new rules in some of the most complex areas of modern finance. It involves consolidating authority now spread across multiple agencies. It involves setting up new institutions for coordination, crisis management, consumer protection, and for indentifying systemic risks. It involves negotiations with countries around the world.

Now, without getting ahead of that process, let me provide you with a brief introduction to the steps we expect to take in four of the most important areas over the next several months.

First, consumer protection.

Strengthening consumer protection doesn’t mean more regulation, it means better regulation – to help consumers get the information they need to make the choices that are right for them.

We will move quickly to give consumers simpler disclosures for credit cards, auto loans and mortgages, so that they can make better choices, borrow more responsibly, and compare costs.

For example, in place of the two separate, inconsistent and overly-complicated federal mortgage disclosure forms that borrowers receive today, there should be one clear, simple, user-friendly form. We intend to move quickly to make that happen – and we will seek and test the best ideas from consumers, mortgage companies, and experts alike.

In addition, we will be inviting public comment on new national underwriting standards for mortgages, so that we can begin to shape the reforms of the mortgage market.

And we are working quickly to get the CFPB up and running, to consolidate rule-making and enforcement responsibilities that today are split, inefficiently and ineffectively, among seven different regulatory agencies.

Second, we are moving forward on reforming the GSEs and our broader housing finance system.

In a few weeks, the Treasury Department will host leading academics, consumer and community organizations, industry participants and other stakeholders for a conference on the future of housing finance. We’ll use that conference to seek input from across the political and ideological spectrum. And early next year, we will put forward our plan for reform.

Third, we are going to move quickly to implement the reforms of the derivatives market. We will work with the Fed, the SEC and the CFTC to outline specific quantitative targets for moving standardized derivatives trades onto central clearing houses. And we will accelerate the international effort internationally to put in place consistent global standards for these critical markets.

Fourth and finally, we are working quickly to establish new rules on capital to constrain excessive risk taking and leverage in the largest global financial institutions.

This is a global effort.

Financial firms will have to hold more, higher-quality capital than they did before the crisis.

Firms will be required to hold more capital against the types of risky trading-related assets and obligations that caused so much financial damage during the crisis.

Bigger firms and more complex, interconnected firms will have to hold relatively more capital than smaller firms.

New capital requirements will be supplemented with new global standards for liquidity management, so that firms can withstand a severe shock in liquidity without deepening the crisis by selling assets in a panic or cutting credit lines indiscriminately.

Getting this right is essential.

We know that capital requirements must be raised. But we also know that if we set them too high too fast, we could hurt economic recovery or simply end up pushing risk outside of the regulated financial system.

So we will move quickly, but we will move carefully. There will be a reasonable transition period, with three years to meet the new minimum requirements and an additional period to build up buffers beyond those minimums.

And it is important to note that, because of the rigorous bank stress tests we conducted in 2009, the U.S. financial system is in a very strong position internationally to adapt to the new rules.

Those are the areas where we – the Treasury, the regulators – will be focused in the coming months. We are committed to moving with speed, with transparency, and with a commitment to ensuring that our financial system remains the most competitive financial system in the world.

But as I said at the start, reform is a shared responsibility. And so to those in the financial industry, I encourage you not to wait on Washington before embracing change. As we work together to rebuild our financial system, responsible private sector leadership is every bit as important as responsible regulation and supervision.

Now, before I close, let me just say this: As with any issue of public policy as significant and consequential as financial reform, there are bound to be differences of opinion. But I think no one who witnessed the events of the past two years can deny that the these reforms are necessary and long, long overdue.

No doubt, some people will continue to claim – as they have over the past year – that these reforms will bring about the end of American enterprise. So let me offer some perspective.

Four years after the great crash of 1929, still in the depths of a Great Depression, another generation rose to meet the great challenge of their day by establishing bold new bank protections and new securities laws.

At the time, just as now, the opponents of reform predicted grave danger.

In 1933, Time Magazine wrote, in reference to the bill that created the FDIC, “through the great banking houses of Manhattan last week ran wild-eyed alarm. Big bankers stared at one another in anger and astonishment. A bill just passed… would rivet upon their institutions what they considered a monstrous system. Such a system, they felt, would not only rob them of their pride of profession but would reduce all U.S. banking to its lowest level.”

A year later, in 1934, the President of the Chamber of Commerce, speaking of the Securities Exchange Act said, “it is the opinion not only of Stock Exchange brokers, but of thoughtful business men that its sweeping and drastic provisions would seriously affect the legitimate business of all members of Stock Exchanges and investment banks, with resultant disastrous consequences to the stock market; would greatly prejudice the interest of all investors; would tend to destroy the liquidity of banks and would impose on corporations of the country serious handicaps in the practical operation of their business.”

We all know how wrong those warnings were. Far from weakening American firms, destroying the liquidity of American banks, and handicapping the operation of business, the creation of the FDIC and the ’34 Act – along with the ’33 Act – helped lay the foundations for the most stable, most competitive, most innovative, most transparent and most trusted financial system in the world.

Like the banking and securities laws of the 1930s, the Dodd-Frank Act lays the foundation for a stronger, safer financial system – innovative, creative, competitive, globally leading, and far more stable than the one we have today.

These reforms will benefit American business and the American people, by providing a more stable source of financing for the investments and innovations that will drive economic growth in the years ahead.

Across America, millions of Americans still feel the pain of the economic downturn. But we are on the road to recovery. We are repairing the damage caused by the crisis. And by implementing financial reform, we are taking the hard but necessary steps to ensure that our financial system leads the world in this century, just as it did in the last.

Thank you very much.

OK, sorry: Monday, Matt Miller’s Great Idea (Unless You Want to Read It Today)

AMEN

Dan Nachbar: “I have my gripes with Mayor Bloomberg, but one must give him credit for his clear-eyed and courageous stand on the so-called ‘ground-zero mosque’ question. One paragraph of his speech this week caught my eye:

The attack was an act of war, and our first responders defended not only our city, but our country and our constitution. We do not honor their lives by denying the very constitutional rights they died protecting. We honor their lives by defending those rights and the freedoms that the terrorists attacked.

☞ Well said, Mike.

WITH LIBERTY AND JUSTICE FOR ALL

Five years ago, the California legislature passed same-sex marriage but Governor Schwarzenneger vetoed it. Yesterday, a U.S. District Court ruled the ban unconstitutional – and Governor Schwarzenegger issued this laudable statement:

For the hundreds of thousands of Californians in gay and lesbian households who are managing their day-to-day lives, this decision affirms the full legal protections and safeguards I believe everyone deserves. At the same time, it provides an opportunity for all Californians to consider our history of leading the way to the future, and our growing reputation of treating all people and their relationships with equal respect and dignity.

Today’s decision is by no means California’s first milestone, nor our last, on America’s road to equality and freedom for all people.

☞ Well said, Ahhhnold.

NBIX

Guru expects positive data this month or next on a depression trial. If the data are good, he sees the stock at $8 (and higher down the road); if not good, at $4. I prefer $8, but sold a chunk in my non-taxable account yesterday at $6.45, up from $2.60, on the theory that you can’t go broke taking 148% five-month tax-deferred profits. I’m holding most of it for the longer term (even if this set of data don’t pan out and it does go to $4).

ASSUMING THE BEST OF EACH OTHER

We are so quick to assume the worst. Not that it isn’t sometimes justified ($90,000 in a freezer?). And not that I am myself guiltless in this. But I try hard to avoid it because, in my experience, assuming the best of each other often proves to be a pretty good assumption.

One example, just because it’s top of mind, before I get to the main event.

A very bright guy – who assumes the worst of anyone and anything not right-wing – sent his list a scathing email about the financial reform bill that had just passed. The bill, he assured us without qualification, was a nightmare, not least because neither he “nor anyone else,” he said, had read the 2,300-page monstrosity or knew what was in it. Based on his not knowing what was in it, he was certain it was terrible. When I challenged him, he wrote back that House Financial Services Chair Barney Frank had taken $7 million in sweetheart loans from Countrywide Financial in return for enabling the lax mortgage regulation that all but brought down the financial system. I pointed out that Barney was in the minority at the time – it was the “regulation is bad” Republicans and Bush who ran the show – and asked him to supply a source for the $7 million allegation. He said he had “read it” and I should Google it. I said he should Google it, because it was an incredibly serious allegation – about a friend of mine – and I was calling him on it. He couldn’t find the source and suggested we “agree to disagree.” Bull—-, I replied, noting that he of all people, an Orthodox Jew, should remember that “bearing false witness” was one of the Top Ten things we’re not supposed to do. (For the record: Barney has never taken a Countrywide mortgage. He currently rents. The property he most recently owned cost $170,000. And the 2,300 pages of legislation are, in the main, very positive for investors, consumers, and the stability of the financial system as a whole.)

And now!

I am no insider in the Charlie Rangel camp, and don’t propose to say that in 80 years he has never made a mistake. But doesn’t this, from the New York Sun, give you pause? It did me:

Railroading Rangel
Editorial of the New York Sun
August 1, 2010

A wise labor lawyer, Judith Vladeck, once offered us her explanation of why honest labor leaders rarely step down from their jobs voluntarily. In contradistinction to the captains of industry and finance, she said, they rarely have vast estates to which to retire. They depend on their offices to carry them into old age.

Mrs. Vladeck is gone, alas, but we’ve been thinking of her words during the railroading of an honest stalwart of the left, Congressman Charles Rangel. He is set to go on trial at the age of 80, in the closing years of a long career of service that began in the frozen ditches and darkest days of fight for a free Korea. The charges center on his use of congressional letterhead to try to raise private, voluntary contributions for a public college.

On its face, the alleged infraction strikes us as not only petty but also illogical. No one carped when Mr. Rangel used earmarks to steer something like $1.9 million in taxpayer funding to the Charles B. Rangel Center for Public Affairs at City College. But his use of congressional stationary to approach people like David Rockefeller and ask them to contribute to City College to educate minority students in public service is somehow taken as scandalous.

The statement of alleged violations issued by a House investigative subcommittee reckons the charitable contributions to the Rangel Center “constituted indirect gifts” that were “attributable” to Mr. Rangel. He, incidentally, is described as “respondent,” though, since he himself requested the investigation, the “respondent” could just as easily be the Ethics Committee.

The reason these contributions are “gifts” and “attributable” to Mr. Rangel seems to be that he would have an office in the Rangel Center and the center would allow him to store and archive his papers and “to perpetuate his legacy.” But the papers themselves would no longer be Mr. Rangel’s, because he is giving them to a university that is owned by the public. The logical move is to send Mr. Rangel not a subpoena but a thank you note.

One of the contributors to the Rangel Center, Eugene Isenberg, chairs a company, Nabors Industries, that had an interest in a matter before Ways and Means. It got decided in a way that benefited Nabors. No quid pro quo is in evidence, or even, so far as we can tell, alleged. The Isenberg check was a gift to Mr. Rangel only by the logic of the Ethics Committee.

What really happened is that Messrs Rangel, by his papers and name and time, and Isenberg, by his $100,000 check, each gave to the same charity, a center to help uplift minority students to careers in public service. The approach to Mr. Isenberg, moreover, was made not by Mr. Rangel, though the two talked on September 19, 2006, in the presence of the president of City College, Gregory Williams. The meeting had been arranged by a paragon of political probity, Robert Morgenthau, the district attorney of New York County, whose grandfather had gone to City College.

The commitment by Mr. Isenberg to make a contribution to the Rangel Center was made in a meeting between Mr. Isenberg and Mr. Williams, at which Mr. Rangel was not even present. The meeting took place on November 9, 2006, before Mr. Rangel acceded to the chairmanship of Ways and Means, and at a time when Nabors had no matters pending before the committee.

It turns out that when Mr. Morgenthau was United States attorney for the Southern District, he gave Mr. Rangel his start. And over the years Mr. Morgenthau made, separately, the acquaintance of Mr. Isenberg and learned of his interest in minority education. For that reason he sought to bring him together with the Rangel Center. Mr. Morgenthau has been defending Mr. Rangel throughout this drama.

Illogic also infects the controversy over the alleged abuses of the rent-controlled apartment that Mr. Rangel’s political committee used as an office. Mr. Rangel’s defense filing pointed out that it was an un-renovated, vacant space in a building in which there was a 20% vacancy rate. It was allegedly rented in Mr. Rangel’s name, but the landlord accepted its use by a political committee.

The Ethics Committee seems to reckon this added up to a benefit to Mr. Rangel. But how so? It might be a benefit to his political committee, but not even that is clear. There’s a lot of office space in Manhattan. The benefit, if there is one, seems to be that Mr. Rangel’s political committee is conveniently located near his modest residence. Call out the National Guard, we say.

The squabble over Mr. Rangel’s errors on his tax return strikes us as indicating nothing so much as the need for tax reform. Mr. Rangel’s tax error was not nearly as serious, in our view, as, say, Secretary Geithner’s. But if the chairman of Ways and Means can’t figure out his taxes, how can the rest of us long-suffering Americans?

Here the Ethics Committee could order Mr. Rangel to have lunch with Steve Forbes, who is the leading advocate of a flat tax that would be easy to understand and hard to dodge. Mr. Rangel, as Ira Stoll pointed out over the weekend in a defense of Mr. Rangel at futureofcapitalism.com, has shown a certain a savvy in respect of capital gains.

Mr. Rangel doesn’t deserve the bum’s rush he is getting from President Obama. Let the president remember his haste in respect of Shirley Sherrod. When Mr. Rangel was 20, he was lying in a ditch in Korea, while the corpses of many of his fellow GIs lay nearby, either slain in combat or frozen to death. Private Rangel rallied his comrades and led 40 of them out from behind enemy lines. Instantly recognized as a hero, he was decorated for valor.

We are not indifferent to serious ethical questions when they crop up. But it happens that we have spent a long career arguing against the use of small bore ethics attacks like those being used against Mr. Rangel. Instead we’ve long favored substantive debate on policy. If Mr. Rangel goes to trial, let us hope it will be an open and public proceeding, so that the American people can hear all the testimony and the measure of Mr. Rangel can be taken in full.

Mr. Rangel, Mr. Morgenthau told us the other day, never knew father. His mother abandoned him when he was two weeks old. He was brought up by his grandfather, who was elevator operator in the office of the district attorney, Frank Hogan. He went into the Army, got himself decorated, came back, went to St. John’s Law School, got on the law review, and came to work for the U.S. attorney.

“It’s a pretty amazing career,” Mr. Morgenthau said. He says he sees nothing to suggest that Mr. Rangel took any money at all. In Mr. Morgenthau’s vast prosecutorial judgment, any mistakes, if there are any, are anomalous in a career that is long and distinguished. “I can’t think of a better person to name a school for public service for than Charlie Rangel.”

Finally, there is that rarely mentioned party to all this, Mr. Rangel’s constituents in Harlem, who have returned him to office for so many terms, including after these matters surfaced. They are in no rush to see him leave, and neither are we. Neither do we see any scandal in him landing, whenever it is that he does retire, in an office at the Charles B. Rangel Center for Public Service at City College. We suspect Judith Vladeck would have understood, and his students will be lucky to be able to study at the feet of a political master.

Tomorrow: Matt Miller’s Great Idea

CORRECTION

I jumped the gun last week. “Thanks to Dodd-Frank, the Financial Reform bill,” I wrote, “your broker now has – for the first time in history – a personal fiduciary responsibility to act in your best interest.”

Don Culp: “Brokers DO NOT currently have fiduciary responsibility under Dodd-Frank. The issue has been pushed off to the SEC to study and receive comment on over the next six months.”

☞ Don’s right. But this is a high priority for S.E.C. Chair Mary Shapiro, so – despite the delay – it is highly likely to get done. Likewise, the second piece of this – that brokerage firms will no longer be able to force aggrieved customers into binding arbitration (in which, as I suggested, the firms have an inherent advantage). That, too, goes to the S.E.C., which Dodd-Frank gives the authority but not the mandate to fix.

CHEESE DOODLES

Jim Busek: “Morrie’s passing reminds me of one of my all-time favorite Esquire cartoons: An obvious American tourist – Hawaiian shirt, pot belly, camera around his neck – is in some sort of Mideast bazaar. The illustration shows him leaned into a kiosk, clutching the native vendor by the neck shouting: ‘Cheese Doodles! Cheese Doodles! For God’s sake man, don’t you know what Cheese Doodles are?’ ”

MUD

GLDD, our dredging company, issued a strong earnings report yesterday but was cautious looking forward (“we think it is prudent to moderate expectations for the second half versus the first six months”) and the stock dropped more than 10% at one point, largely recovering in after-hours trading. There is very little flash in dredging, but something kind of inexorable about sedimentation.

SECRETARY GEITHNER ON THE ECONOMY

It’s a sober assessment, but upbeat. In part:

Welcome to the Recovery

New York Times

August 3, 2010
By Timothy F. Geithner

The devastation wrought by the great recession is still all too real for millions of Americans who lost their jobs, businesses and homes. The scars of the crisis are fresh, and every new economic report brings another wave of anxiety. That uncertainty is understandable, but a review of recent data on the American economy shows that we are on a path back to growth.

. . . last week’s data on economic growth show that large parts of the private sector continue to strengthen. Business investment and consumption — the two keys to private demand — are getting stronger, better than last year and better than last quarter. Uncertainty is still inhibiting investment, but business capital spending increased at a solid annual rate of about 17 percent.

. . . As the economists Ken Rogoff and Carmen Reinhart have written, recoveries that follow financial crises are typically a hard climb. That is reality. The process of repair means economic growth will come slower than we would like. But despite these challenges, there is good news to report:

• Exports are booming because American companies are very competitive and lead the world in many high-tech industries.

• Private job growth has returned — not as fast as we would like, but at an earlier stage of this recovery than in the last two recoveries. Manufacturing has generated 136,000 new jobs in the past six months.

• Businesses have repaired their balance sheets and are now in a strong financial position to reinvest and grow.

• American families are saving more, paying down their debt and borrowing more responsibly. This has been a necessary adjustment because the borrow-and-spend path we were on wasn’t sustainable.

• The auto industry is coming back, and the Big Three — Chrysler, Ford and General Motors — are now leaner, generating profits despite lower annual sales.

• Major banks, forced by the stress tests to raise capital and open their books, are stronger and more competitive. Now, as businesses expand again, our banks are better positioned to finance growth.

• The government’s investment in banks has already earned more than $20 billion in profits for taxpayers, and the TARP program will be out of business earlier than expected — and costing nearly a quarter of a trillion dollars less than projected last year.

We all understand and appreciate that these signs of strength in parts of the economy are cold comfort to those Americans still looking for work and to those industries, like construction, hit hardest by the crisis. But these economic measures, nonetheless, do represent an encouraging turnaround from the frightening future we faced just 18 months ago.

. . . According to a report released last week by Alan Blinder and Mark Zandi, advisers to President Bill Clinton and Senator John McCain, respectively, the combined actions since the fall of 2007 of the Federal Reserve, the White House and Congress helped save 8.5 million jobs and increased gross domestic product by 6.5 percent relative to what would have happened had we done nothing. The study showed that government action delivered a powerful bang for the buck, and that the bank rescue on its own will turn a profit for taxpayers.

. . . There are urgent tasks to be undertaken to reinforce the recovery, and Congress should move now to help small business, to assist states in keeping teachers in the classroom, to increase investments in public infrastructure, to promote clean energy and to increase exports. And while making smart, targeted investments in our future, we must also cut the deficit over the next few years and make sure that America once again lives within its means.

These are considerable challenges, but we are in a much stronger position to face them today than when President Obama took office. By taking aggressive action to fix the financial system, reduce growth in health care costs and improve education, we have put the American economy on a firmer foundation for future growth.

And as the president said last week, no one should bet against the American worker, American business and American ingenuity.

We suffered a terrible blow, but we are coming back.

APPLE (OR SOMEONE) RESPONDS

Friday I warned you about the sharply off-color language in this cartoon mocking the iPhone. Here now the even more sharply off-color – and equally funny – response. (Thanks, Dan.)

The broader context, of course, is that both phones are breathtakingly good. When my stepfather was born (hey, Lew!) no one had radios. When my brother was born (hey, Steve!), no one had televisions. When I was in college, I remember visiting my college roommate in Cincinnati (hey, Arn!) and seeing my first ‘touch-tone’ phone. Cincinnati was a test market. And until about five minutes ago, no one had personal computers or iPhone or iPads or GPS or a free way to make cartoon characters talk trash.

TAX COMPARISONS

Want to see how you’ll do if the President’s tax plan is enacted? John Seiffer: ‘I don’t know who this organization is or if it’s accurate – but this calculator is pretty easy to use.’

☞ The basic notion is that for taxpayers with income under $200,000 (single) or $250,000 (joint), taxes won’t go up. But check out your own situation.*

Be sure, however, to note the biased way the results are summarized. ‘If Congress fails to act to extend the Bush tax cuts,’ it reads, ‘ your income tax burden will be [$2,500] higher in 2011.’ The exact same data could just as easily have been summarized, ‘As you can see by comparing the second and third columns, if Congress ratifies Obama’s plan to keep the Obama tax cuts for 95% of working families (but to let the Bush tax cuts for the most affluent expire), your taxes will not go up a dime.’

*In response to a bug I reported, since fixed, the developer, writes me: ‘We’re very confident in the regular tax calculations for all scenarios. Alternative Minimum Tax calculations might be slightly more shaky because we don’t ask about many things that could affect it, and because of a handful of complicated proposals described on pages 123-130 of this JCT report. Another element that is perhaps slightly more ambiguous than the rest of the calculator are the various education credits, again, because we make a lot of assumptions and don’t ask important questions in an effort to keep the calculator simple. After all, we’re not TurboTax – we’re just trying to give people a reasonable estimate.’

BRCI

Doug Gary: ‘I’m curious if you might offer readers an update on BRCI. Your last update, I think was in March.’

☞ I’ve been disappointed that their very good efforts have thus far not taken off. I think one just holds it expecting the worst, but with a small it might yet work.

HAS APPLE PEAKED?

Probably not, and it’s a national treasure, for sure . . . but – if you can stand some sharply off-color language from cartoon characters – here is a VERY funny video that compares my iPhone 4 with the HTC Evo I must admit I am now beginning to yearn for.

MAKE YOUR OWN CLIP?

As if you had time for this – you can now apparently make your own laugh-out-loud video, like the one above, with this. Free. Easy. (Is it? I haven’t tried it.)

TREES/PERSON

Trees take CO2 out of the air and convert it to oxygen. Today, there are roughly 400 billion trees and nearly 7 billion people – 60 trees for each of us. When I was born, there were roughly 50% more trees and 4.5 billion fewer people – so roughly vaguely 240 trees per person. Discuss.

THE ANSWER?

Hard to imagine it could be this simple – I haven’t a clue – but I love thinking it could work: a solar-powered process that takes CO2 out of the air and turns it into fuel. They talk of returning atmospheric CO2 levels to pre-industrial levels within a decade of ramping up.

BUILDING AMERICA BONDS

Bob Fyfe: “I recently heard about Build America Bonds and after a small amount of research feel that they may be a good fit for an IRA, especially in a Roth. I’d like to hear your thoughts, and on the PowerShares Build America Bond fund (BAB) in particular.”

☞ I’m all for building America but would not jump at this. As you probably know, these are federally taxable municipal bonds (so keeping them in an IRA makes sense) subsidized but not guaranteed by the United States Treasury (so you are accepting some risk).

Actually, you are accepting two risks.

The first is that rising interest rates could depress the values of these long-term bonds as they would depress the value of any other fixed-rate long-term bonds. (Who wants to pay full price for a bond yielding 5.7%, say, if new bonds of similar quality and maturity are yielding 8%?) You’d still get your interest, and repayment in full decades from now if you held on to maturity; but if there had been a bout of inflation along the way, the $25,000 you invested today would have greatly diminished purchasing power when the bond matured.

The second, lesser but real risk is that the issuer might default. One imagines an individual issuer that got in trouble would likely be rescued by the state – lest investors demand higher rates on all future bond offerings from within that state. And one imagines that if an entire state got into trouble, the Federal government would step in for the same reason. But in a worst case scenario, where many states were looking to the Federal government for a bail-out, one can imagine some sort of grand restructuring plan where the Treasury does not simply print enough money to bail everyone out 100 cents on the dollar.

So if it’s safety and peace of mind you’re after for your IRA, you might consider TIPS. The Treasury will not default. And if we have inflation, the value of your bonds will rise with it, at least in large part. (The government’s calculation of inflation may not match the inflation you experience.) I would stick with recently issued TIPS so they that don’t yet have much “inflation accretion” built into the settlement price – lest deflation deflate that accretion.

TAKE BACK OUR COUNTRY – INDEED

It used to be owned fairly broadly. Since the Reagan revolution, ownership has shifted sharply to those at the top. Income has risen a mere 16% in those 30 years for folks in the bottom quintile and just 25% for those in the middle quintile – but by 281% for those in the top 1% (and even more for the really rich). Meanwhile, with its recent Citizens United ruling, the corporate-leaning Supreme Court gave the wealthy more sway over who gets elected . . . and the Republican minority in the Senate will not allow voters even to know who is funding the ocean of ads this new ruling will spawn. It’s all here.

LIES

Jim Leff: “You wrote: ‘And, yes, I know, everyone hates partisan politics, but these are just facts. When Bush promised a humble foreign policy, he was already looking for a way into Iraq. When he said that the “vast majority” of his tax cuts would go to people at the “bottom of the economic ladder,” he was simply flat-out lying. When so much money is involved and the facts are so clear, how can it be called anything else?’ Want an even bigger lie? How about ‘I’m a uniter, not a divider,’ the lie that pulled in the independents? I never heard any journalist (let alone the Kerry campaign) throw that back at him.”

WARRANTS

Ted Graham: “Can you update us on your current thoughts about BZ+, INHIW and ROICW?”

☞ The easy one is ROICW: it has more than four more years yet to run, and – while still entirely speculative – I actually bought a few more last week at 72 cents. There is the very real chance they will expire worthless; but there is upside as well, as most recently described here.

The Boise warrants, by contrast, have less than a year to run. Here is Boise management’s latest discussion of where they are and the challenges they face. Last August, I wrote:

The warrants give you the right to buy the stock at $7.50 anytime between now (when you wouldn’t want to, because it’s selling for $4.53) and June 18, 2011 (when you would, if it were selling above $7.50). Were the stock to recover to $10 by then – a “were” so subjunctive it gives new depth to the mood – the warrants would be worth $2.50 each, up a further eightfold from here. So I’m holding almost all of mine, even knowing that the stock might well never approach $7.50 between now and June 18, 2011.

In the interim, I have sold a lot of them, mostly at prices ranging from 47 cents (where I sold some last week) to as high as 90-some cents. But you never know what might happen over the next 11 months, so I still have enough that, should the stock resurge, I will have ample profits to visit the newly frozen-over netherworld.

And speaking of unlikely freezings . . . Infusystems warrants expire April 11 and the underlying stock would have to double for them even to start being worth anything. The company reports good progress, so I feel fine about the warrants we chose to convert to stock (as described here) – in my case, about two-thirds of them. As for the warrants I chose not to convert? Well, there’s always a chance.

WAL*MART

As a shareholder, I love this story. In small part:

. . . With 2 million employees, 8,400 stores, $400 billion in sales, 100,000 suppliers and lots of baggage as an environmental bad guy, in 2005 Wal-Mart decided to go green.

. . . Almost overnight, Wal-Mart changed the way it acquired, stored, handled, cooled, heated, sold and disposed of its products. They reached into every part of their retail operations and found savings in trucking, refrigeration, energy, lighting, and on and on. Last year, Wal-Mart used 4.8 billion fewer plastic bags. Its trucks delivered 77 million more cases while driving 100 million fewer miles.

But Wal-Mart soon realized that 90 percent of the embedded energy in its products came not from its stories, but from its suppliers. So that had to change, too. Wal-Mart set three goals: 100 percent renewable energy. Zero waste. Sustainable products for customers and practices for employees.

Every Wal-Mart supplier recently received a 15-part questionnaire, asking for details on energy use and renewable practices. The company intends to use this information to issue a Sustainability Index for each of its products. . . .

☞ Rolling up our sleeves to become more efficient. I love it. Because whatever your political philosophy, on one thing we can all agree: efficiency is good, waste impoverishes us all.

Listen: for all our very real problems, there is so much stuff to feel great about, and so many reasons to stay engaged and upbeat.

And I don’t just mean DuPont’s great earnings report yesterday (hey, maybe we won’t double-dip after all).

For example:

DFER

Democrats for Education Reform – mostly wealthy business types, many of whom would have been moderate Republicans in an earlier era (when there were moderate Republicans), and who couldn’t abide what they perceived as the Party having been captured by the teacher’s unions – issued this assessment yesterday:

Secretary of Education Arne Duncan will be announcing the Round 2 Race to the Top finalists during a speech he is giving today at the National Press Club entitled “The Quiet Revolution.”

Race to the Top has effected more positive change in state and local education laws and policies than any other federal education program in history.

NCLB [No Child Left Behind] was akin to an IBM PC circa 1995 – uniform, powerful, but clunky. Race to the Top is a 2010 iPad – a flexible platform that provides policymakers with dynamic tools to create and adopt innovative apps and nimbly customize them to their specific needs.

It has mobilized policy-makers, principals and teachers to create the conditions that are needed to help schools meet high standards of excellence, and it has unleashed waves of creativity to reach that goal. Each state has taken its own unique route, yet the objective is common.

While not all states enacted the big changes we saw in states like Colorado, New York, Louisiana, and Rhode Island, the gains are nonetheless significant. Some states enacted solid reforms that are not revolutionary but take critical steps toward better teacher training and learning. Almost every state, with just a few exceptions, began to re-examine its education policies.

That process is ongoing and will not end with the announcement of the Round 2 finalists today or with the announcement of Round 2 winners in September. States and districts, teachers and parents, are still learning from each other about what’s possible, from both a political and policy perspective.

Our education system didn’t break overnight, and it will take more than one federal program and more than one 4-year grant cycle to fix it. What is indisputable, however, is that Race to the Top has put wind in the sails of the education reform movement and, in just a year and a half, has accelerated the pace of change more than any other past federal effort and much more than most of us dreamed possible.

☞ For another example:

DODD-FRANK: GOOD FOR INVESTORS

Did you know that, thanks to Dodd-Frank, the Financial Reform bill signed into law last week over all but unanimous Republican opposition, your broker now has – for the first time in history – a personal fiduciary responsibility to act in your best interest?

And did you know that brokerage firms can no longer force aggrieved clients into binding arbitration? (In those, the brokerage firm has this edge: arbitrators know that to get the assignment, and thus their income, they must be approved by both parties . . . and they know that the brokerage firms will have lots of future cases come to arbitration whereas for the client this is probably a once-in-a-lifetime thing.) You can still both agree to arbitration, but that’s no longer your only recourse.

Most people wind up with nothing – I’ve long quoted financial advisor Venita Van Caspel – “not because they plan to fail, but because they fail to plan.”

Which is relevant here, because in updating “The Only Investment Guide You’ll Ever Need” – ever – which I have to do for a new edition every few years (I ask you: how embarrassing is that?), I checked this weekend to see whether she is still living. Happily, she is. But oh, gosh (thanks, Google), look at this: it seems that in 1989, Ms. Van Caspel – who for a while billed herself as “The First Lady of Financial Planning” – was accused of selling properties to limited partnerships owned by her clients without telling her clients she had an interest in them. When the partnerships tanked, and the truth came out, her clients sued . . . only to have the court agree that The First Lady of Financial Planning had been acting as their stock broker, not their financial planner, and thus had no duty to disclose the conflict.

Dodd-Frank now makes stock brokers fiduciaries, too.

Vote Democrat.