Monday, April 30, 2007

The State of the Podosphere

Over the Christmas break I found a podcast with a guy named Jack Lewis. Its focus is old time and bluegrass music. The host runs an internet radio station and showcases non-signed bands. Lewis sounds like something from the mountains. His folksy manner is interesting. But in the 26 episodes that he did he gave people a good understanding of the differences between bluegrass and old time music. He also did a couple of casts on the history of bluegrass. And a couple on how bands work including the issues that a band has in doing a live performance.

It turns out that Mr. Lewis had a career in the military as an engineer, so while he sounds country he is pretty well educated. But regardless of his background he did some very interesting programs for those of us who are interested in this type of music. Then he went off the air. No explanation on why. That is one of the uncertainties about this new medium.

A couple of my other favorites are specialized to my fields of interest. So there is EconTalk from George Mason University - a great range of topics with a very skilled interviewed - Russ Roberts who is on the faculty there and at the Hoover Institution. Or the Invisible Hand which reviews current management and business books. And then there are the professional ones -the Tax Foundation has a really good one on tax issues. The Federalist Society has a wide range of its programs on legal issues on a wide range of topics. And the Economist does a weekly update of its current issue.

The range of programs is growing and iTunes is a great resource to see what comes next.

Lou Dobbs could learn something from Herman Melville

I am currently reading Moby Dick - it is another part of the quest to either re-read those things that interested me earlier or to read those books I should have read earlier. It is a great book. Like The Wealth of Nations it tells you a lot about things that you may not have known before - as noted TWON explains sheep tallow and MD does the same for whaling. There are chapters on painting whales and how the boats are arranged and the line that is used in whaling. But one of the most interesting is a chapter on the industry of whaling. Melville exhibits a well developed understanding of the importance of the division of labor. He explains that certain parts of the whaling industry are best done by certain types of people. He is quite understanding that Americans can do best by organizing the entrepreneurial parts of the voyage and leaving the other skills to those who do them.

Unlike Dobbs, the CNN commentator who seems to want us to go back to a more primitive time, Melville understands that the most important economic tasks are those that organize others. Dobbs has a pathetic disregard for the values of the division of labor and rails against any effort by Americans to hold on to high value added jobs while exporting ones that once were important. Two weeks ago Russ Roberts of EconTalk did a wonderful podcast with Don Boudreaux, of Cafe Hayek about the silly arguments that people make in regard to buying local. Boudreaux reduces the Dobbsian logic to this - if it is good to only buy American then it is even better to only buy products from your own household. Like Bastiat, Boudreaux makes a good point by focusing on the inherent flaw in the logic and then making fun of it. The podcast can be found at Econtalk if you have not listened to these shows, they are well worth getting. Roberts is a skilled interviewer and he covers a wide range of economically related topics.

I will probably do another post on Moby Dick when I finish the book. Melville is almost lyrical in his writing style. At the same time he creates a very good story.

Tuesday, April 24, 2007

The long term distortive effects of governmental policies

During the Second World War the Roosevelt administration instituted wage and price controls to control wartime inflation. Wage and price controls do all sorts of odd things to the economy. But the effects of this policy were long term. Often when one tries to artificially hold down the price of something, markets react in a different area. When the Office of Price Administration instituted these limits, employers, wanting to attract the best employees, began to offer non-taxed (and non-covered) fringe benefits. That began the offering of widespread health benefits. It changed the face of health care but also altered consumer choices.

So what do we have after almost 60 years of this situation? Health care is a much larger part of the economy than it once was. Obviously that came about, in part, because of advances in medicine, but that is not the only reason. There is some evidence that were people not able to get the things they get as fringes that they might consume 20% less of them than they do now. The tax code is certainly more complicated than it should be (although that is not the exclusive fault of fringe benefits). Finally, some of our basic understandings about how the economy works are simply wrong. For example, all of the catterwalling about the supposed stagnation in wages is based on data which ignores the values of fringes. A good deal of the debates about the negative economic effects of immigration are based on this false data.

One wonders how things would be different if we had never imposed those controls. The thought experiment is helpful in a couple of ways. First, it could help us imagine differences in society that might have been. At the same time, it could also help us think about steps that might be taken with what is today.

Rivercats and the 51s

On Saturday the Cats were rained out. Sunday's day game had a bit of light rain and our usual group was not there, except me. The team won 6-4. It was a fun game.

Last night the Rivercats had a good outing. They started off strong with homers in the first and second JJ Furmaniak and Kurt Suzuki scored the round trips. But they then went into a real slump and for the next 8 innings were hitless. That is not entirely true the Las Vegas pitchers seemed to have a penchant for hitting our batters. Dan Johnson, who is on a rehab assignment with his old team, missed a shot by ducking. Hiram Bocachica was not so lucky and actually had to be pulled from the game. What held us together was the pitching - Colby Lewis went six innnings and had a dozen strikeouts, Ron Flores added one and Conner Robertson added two for a total of 15. As impressive was the strike count - Lewis threw 66 strikes for 99 pitches, Casilla 6 for 9 (although he was not that impressive last night), Flores 20 of 33 and Robertson 9 of 10.

In the bottom of the 10th Lloyd Turner got on base and then stole second. That was all he needed when Tony Abreu blew a hit by Brian Stavitsky, Turner made it home to win the game.

For some reason the Las Vegas team seems to always have a good selection of fans at our games and this one was no exception. In our section there must have been twenty or thirty near us. Sacramento uses a couple of rows in front of us as visiting player family seats and that often makes for an interesting game.

Monday, April 23, 2007

Stop me if you've heard this one before

In this morning's Washington Post there is a story about the Democrats new attempt to square the circle of the Alternative Minimum Tax. The AMT, as it is known, was a device to get at the supposed 155 miscreants in the system who supposedly did not pay any tax. Its' operation was supposed to be simple - attack those people who use "preferences" in the system to escape tax and add a separate higher tax schedule for those who did not pay enough.

The "new" proposal would exempt those earning under $250,000 per year - or 98 percent of the taxpayers (I guess then the dems assume that there are about 7750 taxpayers total unless of course there are more than the originally assumed 155 non-payers). Those earning between $250,000 and $500,000 would see a tax reduction according to the Post's anonymous sources. SO, those earning more than $500,000 "would take a much harder hit from the AMT, as well as other adjustments to the tax code, the sources said." Yeah, right. That would amount to a 5-13% boost in tax rate for those taxpayers according to a study by Brookings and the Urban Institute. "A huge number of families will receive tax relief as the result of this. It's something like 87 million to one million," (Note that comes from the Chair of the Democrat Campaign Committee not the Chair of Ways and Means, but then that tells you something about the tax policy here. The significant raise in rates seems to be assumed not to have any distorting effect on the economy. That is absurd.

It would probably not be prudent to guess whether the original brainstorm of these members will come out the way it was described by the Post. Based on past performances since the original idea of the AMT, the chances are close to zero.

Friday, April 20, 2007

Without much need for additional comment - Advocacy news

The tragedy at Virginia Tech has set the gun control advocates tongues a flutter.

In today's NYT - the following comments were made in a story - Mr. Cho’s ability to purchase two guns despite his history of mental illness has cast new attention on Virginia’s relatively lax gun laws. (EMPHASIS ADDED) And since states are supposed to enforce federal gun laws, the sales raise questions about whether Virgina — and other states — fully comply with the federal restrictions.
Virginia state law on mental health disqualifications to firearms purchases is worded slightly differently from the federal statute. As a result, the form that Virginia courts use to notify state police about a mental health disqualification only addresses the state criteria, which lists two potential categories that would warrant notification to the state police — someone who was “involuntarily committed,” or ruled mentally “incapacitated.”

But in the LA Times earlier in the week - Seung-hui Cho's recent purchase of the two semiautomatic handguns used in the Virginia Tech rampage was done by the book and in accordance with Virginia's firearms laws. (AGAIN EMPHASIS ADDED)

Cho bought one of the guns, a .22-caliber Walther P22, at JND Pawnbrokers in Blacksburg in February, a federal law enforcement official familiar with the investigation said. Cho then bought a 9-millimeter Glock Model 19 at Roanoke Firearms on March 12, said the official, who spoke on condition of anonymity because federal law prohibits the release of information about specific gun traces.

The dealers involved did everything they were legally required to do before selling them to Cho, said Michael Campbell, special agent and spokesman for the Bureau of Alcohol, Tobacco Firearms and Explosives. "As far as I know, everything was legitimate. The background checks were done. They followed all the procedures." (Some more emphasis added.)

Authorities also found paperwork for the gun purchase from Roanoke Firearms in Cho's possession. At least four agents rushed over to the shop, where Markell produced the required federal form 4473 linking the purchase to Cho.

My comment - a fundamental principle of the American system is a federalist one. The NYT seems to forget that, but what else is new?

Wednesday, April 18, 2007

Tax Policy Logic

Ok, so on this day after the filing deadline for income taxes it seems timely to discuss some logic. The Alternative Minimum Tax was created because some in Congress thought that some "wealthy" taxpayers were not paying their fair share. Never mind that the data did not support their hypothesis. Data here did not matter, the logic of sticking it to the rich did. According to the Tax Foundation a substantial portion of the tax burden is paid by the to one half of one percent. Go into 5% of taxpayers and the total percentage of tax paid approaches 50%. In a recent study the Foundation found that "fully 60% of all Americans are net consumers of government services." (i.e. they get more than they pay) and that this redistribution might amount to $1 trillion.

So the AMT was set up to catch those few miscreants who don't share in that burden. But here is where the logic stops. The AMT disallows some legitimate deductions including things like tax exempt interest. But it also rejects state and local taxes. So, if you are following the logic so far, if I attempt to pay my local and state taxes legally I am penalized by the AMT and bear a higher burden at the federal level - thus I pay a higher state burden and then am double kicked with a higher federal burden. Or to turn the logic on its head, if I try to evade state and local taxes, I reduce my chances of paying the AMT.

The Foundation found in a new 2007 poll of tax attitudes that a majority of U.S. adults believe the federal tax code is complex, that the federal income taxes they pay are "too high," and the federal tax system needs major changes or a complete overhaul. The poll also found that just 10% of taxpayers are willing to pay higher taxes to eliminate the federal deficit. 66 percent) favor a complete elimination of the federal estate tax. The skepticism that Americans evidence on their tax system is understandable when you think about the logic that went into the development of policies like the AMT.

Enviros and logic

Penn and Teller asked a group of people at an environmental rally to sign a petition to ban "dihydrogen monoxide" (water). This is a great parody but it also has a very good notion about a lot of the causes that some people are willing to link themselves to. The video is a good caution for all of us to think carefully about jumping on the bandwagon for causes where we do not have expertise. Just because it makes you feel good does not necessarily make it good policy.

Tuesday, April 17, 2007

Mr. Market's Brother, Mr. News

Legendary investor Warren Buffett has an analogy presented several times in his annual reports called Mr. Market. One of the risks for any investor is the immediate ability to understand the market price of a particular stock or bond. Unfortunately, Mr. Market is a person of enormously variable emotions. So sometimes he is happy and other times he is sad. And sometimes he misprices his market simply because of his feelings of the day.

As I have thought about the last couple of days of news, Buffett's analogy seems to extend to the current news business. A few years ago USC President Steve Sample in a book called The Contrarian's Guide to Leadership, suggested that he had tried an experiment where for six months he avoided newspapers and other kinds of media. He found unsurprisingly that he learned about all the important stories of the day, through common talk with associates and at the same time he had a good deal more time that had formerly been devoted to reading newspapers and watching TV news.

One wonders what would have been different on the major stories like the Imus chattering, the Duke Lacrosse students jeopardy for a false accusation, and the tragedy at Virginia Tech. The news cycle for each of the stories takes a predictable pattern - it goes from breaking news (with lots of speculation), to bringing in the "experts" (most of whom are really not expert about anything but accessing the media), to endless meanderings into the minutae of the issue, to moving on to the next crisis. It creates some absurd moments that are often repeated. For example, Geraldo Rivera (Allen Cruz Rivera) last night commented on Fox that the Virginia Tech was a story so profound that it "tested the limits of his journalistic professional training" - that was absurd on its face from this buffoon who tries to wrap himself in the mantle of seriousness and who once tried to hustle us through a basement that was once used by Al Capone.

Ultimately the three stories have differing impact on our lives. The Imus story deserved to be consigned to page 30 - a hasbeen makes an insensitive remark that in no way diminished the achievements of a basketball team. The Duke Lacrosse story was abetted in part by the media. Clearly this "rogue" prosecutor who was seeking re-election wanted to pump this story up. Clearly, the "experts" (Jackson and Sharpton and their co-conspirators) wanted to present their slapstick regardless of the story. But with a more measured approach, Nifong might have been a bit more cautious or he might have been recognized earlier for the miscreant that he is. On the Virginia Tech story, perhaps by stepping back from the reportage we could get a better measure of the scope of the tragedy but more importantly whether anything could or should have been done differently. Mr. News in all three spaces inhibited our ability to understand and deal with issues. That is unfortunate.

More on the Minneapolis Taxi Drivers

The Airport Commission voted unanimously that taxi drivers in the Minneapolis airport cannot refuse fares based on whether the potential fare is carrying alcohol. "We are sending a message that if you want to drive a taxi at our airport you can't refuse our customers," Steve Wareham, operations manager of Minneapolis-St. Paul International Airport.

The lawyer representing the cabbies, Jeff Hassan, has claimed that this could wind up in the Supreme Court. Well, Jeff, bring it on. Hassan claimed that a 1990 ruling by the Minnesota Supreme Court provides a precedent. That decision allowed the Amish to not use bright orange triangles on their buggies. The Amish, as a matter of principle, eschew things which bring attention to them. Hassan is blowing smoke. No one would claim that the Amish are a "public accommodation" but the cabbies are. They are providing a public service and thus fall under the standard that they have to serve all comers except those who fall under reasonable rules (for example a large family or a potential passenger with excessive luggage). But here the passengers are exercising their rights by carrying a legal product. If the cabbies don't want to have the fares from the airport, they can choose not to serve the airport.

This kind of attempt to impose religious principles on society has two elements. First, it is unlikely that a Christian group of cabbies would be given similar coverage to the coverage that this story has received. Second, there is a broader principle here. Americans should be respectful but not subserviant to religious rules. Hassan and his "clients" are asking the Minneapolis customers to be the latter. Not unsurprisingly, Mr. Hassan advertises on the web. Could he be called a cab chaser?

Friday, April 13, 2007

Interpreting Mr. Nifong's statements

Yesterday the Attorney General of North Carolina dismissed all charges against the three Duke University students pending from the year old indictment created by Durham district attorney general Mike Nifong. I went back and got his original statement at the time of the indictment - which was coincidentaly a year ago. Presented below are both statements with annotations.

April 2006 - Yesterday, based on evidence developed thus far in the investigation of the alleged sexual assault occurring at 610 N. Buchanan Boulevard in Durham, I submitted bills of indictment to the Grand Jury charging two members of the Duke University lacrosse team with the felonies of First Degree Rape, First Degree Sex Offense, and First Degree Kidnapping. The Grand Jury has returned those bills as true bills against Collin Finnerty and Reade William Seligmann. Upon my motion, and pursuant to the order of Judge Ronald L. Stephens under N.C.G.S. 15A-623(f), the bills of indictment were sealed. Because of that, no one in the court system was permitted to disclose that those bills had been returned – or even that they had been submitted to the Grand Jury – until such time as the defendants were arrested. Those arrests occurred earlier this morning, and each defendant was placed under a secured bond of $400,000.00. (Please be reminded that I am running for re-election and think this indictment will seal my campaign.)

It had been my hope to be able to charge all three of the assailants at the same time, but the evidence available to me at this moment does not permit that.(Indeed the evidence available to me is not actually dispositive of any crime being committed) Investigation into the identity of the third assailant will continue in the hope that he can also be identified with certainty. It is important that we not only bring the assailants to justice, but also that we lift the cloud of suspicion from those team members who were not involved in the assault.

Since these are now active and pending cases, the District Attorney’s Office will make no more public statements about the matter other than those made in open court pursuant to any hearings held in connection with these cases.

April 2007 - Attorney General Roy Cooper announced that his office had made the decision to dismiss the remaining charges in what has come to be known as the Duke Lacrosse Case. (You may remember that this is the case I started a year ago when I was in a tight re-election campaign.) While I certainly take issue with some of Mr. Cooper's comments, I want to make it clear that I have every confidence in the investigation into the case that was conducted by his office. ...(The major concern I have with Mr. Cooper's statements is that they are substantially correct.) Obviously, they have had access not only to all the evidence that I had, but also to additional evidence that I have not seen which they developed during their twelve weeks of independent investigation. I have every confidence that the decision to dismiss all charges was the correct decision based on that evidence. (I also hope that now everyone will forget about my misconduct.)

At the same time, it is important to remember that the attorney general had the opportunity to review this investigation and to make this decision because I requested that he do so. ... It is also important to remember that I turned over to him every document, every photograph, every piece of evidence of any kind that had been turned up in the Durham Police Department's investigation of these cases and in my office's review of that investigation. (In the case of Mr. Cooper's investigation I agreed to comply with the law because had I not I would have been put in the slammer immediately. Of course some of you will quibble that I did not offer the same kind of legal protection to the people I was investigating but then you will remember I was in a tough re-election campaign.)

If I did not want to subject either that investigation or my own performance to such scrutiny -- if, in other words, I had anything to hide -- I could have simply dismissed the cases myself. The fact that I instead chose to seek that review should, in and of itself, call into question the characterizations of this prosecution as "rogue" and "unchecked." ...(My turning this over to the AG was not entirely voluntary but at this point with potential pending legal actions against me, I want to try to change that history.)

To the extent that I made judgments that ultimately proved to be incorrect, I apologize to the three students that were wrongly accused. I also understand that, whenever someone has been wrongly accused, the harm caused by the accusations might not be immediately undone merely by dismissing them. (Gee, I sure hope everybody forgets this and dismisses the pending disbarrment proceedings and civil suits that I know are around the corner.)

It is my sincere desire that the actions of Attorney General Cooper will serve to remedy any remaining injury that has resulted from these cases. PLEASE DON'T SUBJECT ME TO ANY LEGAL PROCEEDINGS.

Michael B. Nifong
(Soon to be former) District Attorney and future inmate number 41175-201

Thursday, April 12, 2007

Nifong and Imus

Yesterday's news held two related stories. Don Imus, the shock joke (yes I know he is called a shock jock but I think most of what this guy does is a continuing unfunny joke) of MSNBC lost his gig with that network and at the same time lost a bunch of sponsors for his insensitive remarks about the Rutgers Women's Basketball team. At the same time, after a careful review the North Carolina AG decided that all charges should be dropped in the Duke sexual assault case.

Imus' behavior was inexcusable but as many have pointed out so is the continued behavior of large numbers of "entertainers" in the Hip Hop and Rap genre and in a series of comedy programs in places like HBO. Why the media only goes to meltdown on Imus is one of those questions that will probably never be answered.

The AG decision in North Carolina was the only conclusion that could have been reached. Hopefully, Mr. Nifong, who clearly used his office to persecute in this case (again the change in spelling is intentional) to gain re-election. Hopefully, Mr. Nifong will be disbarred.

The reaction in both cases also says something about the current state of the media. In both cases the media played the story out with the hype reaction that typifies their current state of reporting. Imus and Nifong should both become bad memories but the larger issue of how society should react in these kinds of cases deserves a lot more discussion.

Wednesday, April 11, 2007

The AMT and politics

Citizens for Tax Justice released a report on the places where the Alternative Minimum Tax hits hardest and softest. The AMT seems likely to be altered in this congress in part because some of its chief sponsors have begun to realize how absurd the effects of this bolt on addition to the system actually affects tax fairness. The AMT was the creation of a group of lefties (and was supported by groups like the CTJ) to assure that rich folks did not avoid their "responsibilities." It creates a second tax schedule which ultimately disallows some deductions and other provisions from a taxpayer's return if, in the opinion of the lawmakers, that the poor schlep did not pay enough taxes. But the irony of this abomination is that it has constantly reached deeper and deeper into the tax paying public far below what anyone would recognize as "wealthy."

The irony of the list is for the most part the ones in the blue list (except for possibly Virginia) are blue states. Thus, the supporters of the AMT have foisted additional burden on those most likely to vote for blue candidates. Ironic isn't it? The reality here is that a tax system which sets a reasonable base and low rates will probably be the fairest of all systems. Indeed, a progressive tax system, that raises more revenue from the wealthy than the poor, (as the existing system does) is ultimately not that hard to construct - and we can get that goal without putting all the extra BS in the system like the AMT. But then that should only be a surprise to those who want to get the tax system to raise more than money.

Tuesday, April 10, 2007

The Cats come back...

In tonight's game Jason Stokes hit a grand slam. But the game was pretty good even before then. For the last couple of games the Cats have had reasonable defense but no offense. Tonight they had both. Windsor had 59 strikes off 94 pitches although Tony DeFrancesco left him in one batter too long. Barton, Stavisky and Stokes all had multiple hits (10 total for the team). Stokes also added 5 RBIs to his total which moved him from 0 to 5 and into the first place on the team. With the performance tonight, Windsor cut his ERA in half to 3.29. Antonio Perez went to 0 and 14 on his rehab assignment, so far.

The American People's Vision

In three short months the American people have recognized the quality of the new leadership in Congress. Notice that their approval rating for Congress is lower than the President's and their disapproval is higher. Perhaps Washington would gain some humility from these numbers (which are from Gallup). But perhaps not.

The real story here is not that the American people are skeptical about the quality of leadership that they hire but rather it is that the political class fails to recognize that the American people are skeptical or perhaps they just do not care.

Monday, April 09, 2007

Michael Beschloss

In February I had the chance to hear Michael Beschloss speak at a meeting I was at. His speech inspired me to get two of his works - the Conquerers and Reaching for Glory. Beschloss is an engaging speaker but I wondered whether he was as engaging a writer. He is an admirer of presidential power but not in the manner of James MacGregor Burns. Rather he is a sympathetic observer to the issues and concerns that face presidents. I wrote my BA Thesis on Burns' theory of presidential power and am admittedly not much of a fan of his fawning at presidential power. Beschloss is a lot more subtle. He seems to understand two things which I believe Burns did not. FIrst, he understands, way better than Burns did, the situational setting for many presidents. But second, I think he is more assertive in his understanding of the variations of leadership styles that are possible in the US Presidency. The two works demonstrate his skill in seeing the subtle nature of presidential leadership

The Conquerers is about Henry Morgenthau, the longest serving Secretary of the Treasury and FDR and Truman. The picture here is a complex one - although he is not altogether sympathetic to Morgenthau (but then neither am I). He also seems to be a fan of Truman, giving the President a lot more credit for innate skills that many of his early biographers somehow missed.

The LBJ tapes are even more interesting. You get a lot from hearing LBJ speak to Hoover, and King and Marshall and Humphrey and Lady Bird. My picture of LBJ was not changed by this book. Nor was my picture of McNamara (who I think was one of the worst cabinet members in history), nor of McGeorge Bundy or Ball (ditto and ditto) nor for Hoover. But what did change was my view of Lady Bird. His description of her mettle in the Walter Jenkins affair was wonderful. LBJ wanted to cut and run from his long time aide but Lady Bird said no, in a firm but gentle way. She clearly understood how to move him on an issue.

Sunday, April 08, 2007

Getting the concept

On Friday, I was in a store purchasing something and the sales clerk said to me "Happy Good Friday." That statement is inherently cross referenced in so many wrong ways. Did the clerk get the whole idea about Good Friday? If she did, how could she associate happy with that? But at the same time Easter is a time of redemption and joy - and that was only two days hence. It boggled my mind a bit.

On the way downtown there were a group of kids on the street who held up signs, HONK if you know Jesus is the reason for the season. Indeed, we honked!

Friday, April 06, 2007

Four Kinds of Fraud

This week New York Attorney General Cuomo began to publicize an inquiry into the practices of colleges and universities relating to the selection of preferrred providers of privately financed student loans. For the past several years students have used supplemental loans (borrowing beyond that provided by the federal government) to help finance their educations. First, they used the loans for graduate and professional programs. But later on they used them for financing their undergraduate programs.

Student loans are an important part of the financing equation. In some institutions loan provide a substantial part of the capital that families use for paying for expenses. As this business became more important student loan providers solicited preferred relationships with institutions. This preferred relationship suggested to students that the institution had done some careful review of the alternative. In exchange for this preference, consideration was provided. In many cases colleges went through a process of procurement that was designed to select the most appropriate provider. For example, one institution that was accused by Cuomo went through a Request for Proposal process and then dedicated all of the revenues derived from the program (to the extent it was used by students in the institution) to funding additional aid for students with financial need. The alternative loan market is a very competitive one and at least at this point there is scant evidence that anyone was hurt by this preferred lender relationship. But in this case even the appearance of impropriety is significant. Cuomo makes the point that these preferred provider relationships force a high percentage of students into a single loan program (he has claimed as high as 90% - but those claims are absurd). At least in California, preferred relationships yield much lower rates of participation.

The efficacy of these relationships is being called into question by Cuomo's investigation - and in my opinion some of them should. But Cuomo's brush is a bit too broad and there is the taint of politics here which muddles the discussion somewhat. There are a set of questions here that transcend law or ethics. Clearly, over the last decade standards for what the general public should know about relationships have changed. Some of those are new ethical standards without the sting of law, and some are based on community standards without the force of law. But best practices demand that all institutions in society review how they make decisions for things like choosing a loan provider.

As I thought about the issues raised by this process, I identified four types of potential misconduct alleged by the developing story. There is a fifth one which also bothers me. Cuomo has alleged that he is acting in behalf of New York consumers but has pursued actions against colleges and universities in several states. Whether Mr. Cuomo has any jurisdiction to pursue such claims outside of an action in federal court is highly questionable. Regardless, Cuomo is proceeding. This is lousy law but the legal claims here seem to be secondary. In each of the four major categories, it seems to me that we should be thinking about two sets of issues - what is the legal issue here and as importantly what is the ethical issue? Here is my take on the other four issues:

#1 - Expensive Chatzkies - All professions receive gifts of many kinds - here the questions are on appropriate value. When you go to a national meeting of any group - there are the inevitable chatzkies - those small gifts with a logo on them to help you remember a particular provider. I will guarantee you that when the National Association of Attorneys General (NAAG - somehow that is appropriate) meet someone who sells them something provides amenities. There are also some other gifts that are increasingly less acceptable. But the bounds of what is reasonable and what is not are shifting - even at the very time that some providers are offering increasingy valuable gifts. In my own situation I travel with a small bag that I received as a recognition of my part of a transaction that assisted a number of institutions. I have no idea about the relative value of the gift. The gift is a handy reminder of my work on that transaction, for which I was not otherwise compensated. But some of the gifts here are quite excessive.

it is alleged that in addition to expensive golf outings at least one financial aid administrator accepted a "plasma TV" (which could be a gift of between $500 and $8000). By any reasonable ethical standards there is some level of gift that is appropriate but there is also a limit. In my opinion the larger gifts are inappropriate - certainly from an ethical perspective but potentially also from a legal one.

#2 - Grants of Stock - Cuomo has charged that some financial aid administrators accepted stock in one or more companies in return for their consulting services or because of their service on a board of directors. This is a bit more complex. Clearly the student aid business is an intricate one and some financial aid administrators who accepted these grants of stock were being compensated for their expertise. There is always the nagging question of whether acceptance of the board responsibility is appropriate for someone who has a financial relationship with a provider. But there is not a bright line here. In my mind, if the institution does not have a clear conflict of interest policy, the person should disclose those relationships to either the CEO or the appropriate person further up the line. In this case the issue is not the compensation but the disclosure and the conformity with the university's policies on outside income. Those standards would and should vary.

#3 - Acceptance of funds for using one provider - Some institutions accepted a cash return for selecting a preferred provider. Often these funds were funneled back into the financial aid accounts of the institution for the benefit of students in need. In the case of an institution that accepted a relationship with a preferred provider after doing a reasonable process of selection and transferred the money received back into student aid despite what Cuomo alleges there is no ethical breach and the campuses should not badgered into signing an agreement which Cuomo wants to have colleges agree to to burnish his career. This one seems pretty simple to me. The university is facilitating a transaction for the student, with no compulsion to use those services. However, the endorsement also implies that the university went through a reasonable process to select the provider. In then end this mostly looks like a procedural and ethical set of questions not like legal ones.

#4 - The use of governmental authority to advance a political agenda The root of this story is an ambitious politician looking for protecting his own career not the consumer. The co-conspirators here are at least two supporters of a government program called direct student loans which were designed to eliminate private financial institutions from student loans. Part of the publicity for this story came from a former reporter who is now a "fellow" in a charitable foundation. The supporters of direct student loans have consistently worked to create situations which create the appearance of impropriety for the programs financed from non-governmental sources. Student loans were initially all provided like the current direct student loan program - directly financed from the federal government. It was then called the Federal Insured Student Loan program or FISL (the initials somehow were appropriate). When banks were brought into the program it was because the feds proved incompetent in managing the program. Mr. Cuomo's broad brush here, in my opinion, is a classic political strategy. Throw as much mud up on the wall and see what sticks.

Here are a couple of other thoughts on this issue. First, the selection of providers for colleges and universities, especially ones which might affect students and the costs of gaining an education, should be done with care and competition. But that does not mean a preferred provider relationship is not appropriate. We negotiate a relationship with two major software providers for the Association I work for and derive a modest amount of income from it. But the ultimate relationship is one where the pricing of both products is considerably lower than could be obtained by an individual college or university. But when we went into those relationships we did it with care.

Second, if the college or the aid administrator is deriving benefit, an appropriate disclosure of that relationship is essential.

I am annoyed by both sides of this issue. On the one hand Mr. Cuomo's tactics are designed to yield the maximum publicity. On the other there is pretty clear evidence that some financial aid officers did not exercise adequate care in fulfilling their fiduciary role for student aid. Ultimately, I believe that preferred relationships can provide benefits to students. Some of Cuomo's supporters clearly do not agree. They believe that student loans can best be run by the government - I think that is nonsense. Even if colleges should not allow themselves to be bullied into responding to the Attorney General of New York, it still might be timely to review both the procurement practices for these types of relationships as well as the compensation arrangements.

Family Reunion

Last night was the season opener for the Sacramento Rivercats. They won 8-7. It was a game worth watching albeit a bit long. The Cats have a lot of new faces. Their holdovers include Ron Flores, the talented reliever who has been to the bigs several times; Hiram Bocachica, who has moved to the outfield but continues to have a strong bat; Charles Thomas - outfielder who had trouble at bat last night but still looked good in the field; Jeremy Brown, Catcher who was batting in DH last night; Santiago Casilla (the pitcher known as Jairo Garcia for one season) who has a blazing fastball which is not always on target; Daric Barton, who took over for Dan Johnson at first base and has a promising career ahead of him; and Jason WIndsor - who came up last season and had a phenomenal start in AAA. But there are also a lot of new faces.

What impressed me last night is that even though we went behind early the Cats came back three times to finally win the game in the bottom of the ninth. The team also unveiled a new logo which looks a lot like to old one, only with different colors.

We've been in the same seats for the duration of the tenure of the team in Sacramento, so part of the fun of opening night was seeing a group of people we have shared games with for six (starting seven) seasons. We got a chance to catch up on all our developments and also to watch some pretty interesting baseball.

Wednesday, April 04, 2007

Rosie should understand that God gave us two ears and one mouth with a purpose

Here are four quotes from Rosie O'Donnell, the opinionated bozo on The View. O'Donnell yaps about a lot of things and often when she opens her mouth demonstrates she should learn not to talk before she thinks. But then it may be genetic flaw that prevents her from thinking before speaking. Here are four more uses for duct tape.....

Media Expert March 29,2006 - "I'm saying that in America we're fed propaganda and if you want to know what's happening in the world go outside of the U.S. media because it's owned by four corporations. One of them is this one. And you know what; go outside of the country to find out what's going on in our own country because it's frightening. It's frightening." Hasn't she heard about the Internet? And even if she has not, can she name the four companies?

Doctor of Physics March 27,2007 - "I do believe that it's the first time in history that fire has ever melted steel. I do believe that it defies physics that World Trade Center tower 7—building 7, which collapsed in on itself—it is impossible for a building to fall the way it fell without explosives being involved. World Trade Center 7. World Trade Center 1 and 2 got hit by planes — 7, miraculously, the first time in history, steel was melted by fire. It is physically impossible. To say that we don’t know that it imploded, that it was an implosion and a demolition, is beyond ignorant. Look at the films, get a physics expert here [on the show] from Yale, from Harvard, pick the school—[the collapse] defies reason." This claim is laughable. The location in question had a couple of multithousand gallon fuel tanks which would have helped raise the temperatures in the structures.

Foreign Policy ExpertMarch 27,2006 -"There were 15 British sailors and marines who apparently went in to Iranian waters and they were seized by the Iranians. And I have one thing to say. Gulf of Tonkin. Google it." I guess Rosie has never bothered to look at how the Iranians use hostage taking as a foreign policy device. The US Embassy Hostage Crisis - google it.

Public policy expert April 19,1999 - "You are not allowed to own a gun, and if you do own a gun, I think you should go to prison." Oh get a life you moron.

Hans Christian Kerry

Yesterday John Kerry tried to discredit John McCain. The formerly French presidential candidate, in an interview, claimed that McCain had rushed him to be the loser's VP candidate when he ran for president (of the US). Kerry's contact with the truth, beginning with his work with the Vietnam Veterans Against the War, has been transitory at best. But this whopper was laughable. Luckily, most people just chuckle when he presents one of these tall tales. In reality what probably happened is Mr. Kerry begged McCain to join his team and McCain correctly assessed that Kerry was a loser. (And what's more Kerry's Massachusetts liberalism did not fit with McCain's independence.)

At the same time he said that McCain had had discussions after the 2000 election about possibly switching parties. I suspect that one is true. But again, after the 2000 election I suspect a number of people were approached. In the end only Jim Jeffords decided to make the switch.

I am not a fan of Mr. McCain's. But the chance that McCain would make such a blunder as to seriously entertain an offer from Kerry to join his ticket is beyond the realm of belief. But then those kinds of misrepresentations are Kerry's stock in trade. If he could only take McArthur's dictum and just fade away.

Tuesday, April 03, 2007

The EU and Reality

On Monday two stories came out in the press that seemingly should have been linked.

#1 - Apple and EMI announced on Monday that beginning in May they would release the entire EMI catalogue without digital rights management coding and at a higher sampling rate for $1.29 per song. Those of us who have bought music at the lower sampling rate and with the DRMs could upgrade to the higher standard for 30¢ per tune.

#2 - The European Commission has made further comments about proceeding against Apple because charged Apple and the record companies "are restricting the ability of consumers to choose where to buy music, what music is available and at what price." For Apple's part they commented "Apple has always wanted to operate a single, pan-European iTunes store accessible by anyone from any member state, but we were advised by the music labels and publishers that there were certain legal limits to the rights they could grant us. We don't believe Apple did anything to violate E.U. law. We will continue to work with the E.U. to resolve this matter." Currently, European customers of iTunes can only buy their music from their home country using a bank card from that country. The DRMs were an invention of the record companies. It seems that the country restrictions are also the creation of the companies.

I guess the news about the EMI deal did not reach the bureaucrats in Brussels. But then Luddites are mostly the last to keep up on technological developments. But shouldn't someone tell them? The EMI move should begin to break down the walls created by the record companies, the EC might do well to cool its jets for a while and let the market continue to evolve. Perhaps they might even learn something about the dynamics of markets.