Monthly Archives: June 2010

Girl Economist

Is another recommended blog. Her latest post has this good insight:

I will simply close by saying that within the discipline, a hard core of theory has evolved, with sometimes too little attention paid to the historical and institutional contexts that gave rise to the phenomena upon which the theory is based. Over time and in the absence of falsifiable propositions, the preservation of theoretical consistency has tended to dominate and counter trends that would otherwise tend to reconcile theory with reality. The isolation of theory from reality, bolstered by a liturgy conducted in a language that few outside the religion understand, may have, in turn, allowed certain aspects of the theory to be uncritically co-opted by certain groups to further their causes at the expense of the general public’s interest and general welfare.

New eyes, untrained and unbiased by indoctrination into the hard core of economic theory and its accompanying heuristics and corollaries, may well be exactly what economics needs to become a true and more useful science.

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A thought on Social Security

Forecasts from the Congressional Budget Office estimate that over time the share of GDP will rise from 5 to 6 percent. This may be a relatively minor increase in context of other expanding entitlement programs, and it is probably politically infeasible to cut benefits or enact major structural changes for the generation of people that are 30-40 years old and up. But why not phase the program out (either in whole or in part) after that? Young people like myself have decades to plan ahead for a retirement without Social Security, and as living standards continue to increase I am fairly confident in saying that even a Social Security that drastically reduces benefits for people in my demographic cohort would not leave us worse off.
Addendum: Here is the CBO Director’s blog.

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I know what this says, but what does it mean?

Section 79.200, RSMo 1994, provides:

79.200. Mayor shall have the power to enforce laws. – The mayor shall be active and vigilant in enforcing all laws and ordinances for the government of the city, and he shall cause all subordinate officers to be dealt with promptly for any neglect or violation of duty; and he is hereby authorized to call on every male inhabitant of the city over eighteen years of age and under fifty, to aid in enforcing the laws.

The excerpt is from a 1996 opinion written by Jay Nixon, Missouri’s Attorney General at the time. I am not qualified to interpret the meaning of this law, and I’m quite honestly curious…what, precisely, does it mean that the mayor can “call on every male inhabitant of the city over eighteen years of age and under fifty, to aid in enforcing the laws”?

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On abortion

Consider any other medical procedure. Literally, any other medical procedure. Is there any other medical procedure that we regulate with such vigor? Why or why not?

Libertarians who support the status quo pro-life regulatory efforts have a real tough question to answer there.

I will say that I think that restrictions on abortions are a subsidy to men at the expense of women.

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When does Apple get together with Detroit?

Or more directly, when will auto manufacturers build vehicles with cameras embedded in them? We already have the Iphone, or the Flip camera; why hasn’t anyone thought to put these in vehicles?

This simple mashup could have profound implications for Americans dealing with law enforcement. With an embedded camera setup, citizens now can operate on equal footing with law enforcement and have a far easier time proving claims of law enforcement misconduct. Other security needs are also met with the use of embedded cameras; it raises the costs of property crime, as criminals are now faced with the reality that without being able to destroy the video data they are leaving behind powerful incriminating evidence.

The technology for this is already in the market and it is modular, which means that auto manufacturers don’t even need to think about this. There are plenty of firms that make aftermarket addons for automobiles; you could develop a device as an addon suitable for even the most ancient of vehicles.

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Recommended

Sunshine in Missouri, a blog written by an attorney who is interested in Missouri’s Sunshine law that allows open access to public records.

I had the rare thought while paging through that this is one of the few blogs I wish were updated more often.

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The culture that is Asian

Specifically, Korean and Japanese, from the NYT:

…While many teams complained about the official World Cup balls, Japan and South Korea simply practiced with them until they grew comfortable with their speed and trajectory.

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Why would Columbia Police Department delay the execution of 57% of SWAT search warrants between 2007-2010?

Brennan David at the Columbia Tribune writes:

Columbia’s SWAT team served 106 narcotics search warrants between Jan. 1, 2007, and May 11, 2010. The Tribune, through an open records request, received 99 of those search warrants; the others were considered closed records for various reasons.

Of the 99 SWAT narcotics search warrants granted by the Boone County Circuit Court to Columbia police, officers executed 43 percent of them within hours of being issued. Of those, 65 percent resulted in one felony arrest, and 18 percent resulted in misdemeanor arrests.

But the percentage of warrants producing a felony arrest dropped drastically to 37.5 percent when investigators waited one day before serving the search warrant. In those cases, 50 percent produced misdemeanor arrests.

“This does not surprise me,” Dresner said. “I think the nature of drug sales is that it is a very immediate transaction. For consumers and dealers, once there is a product available, it travels fast, and sales occur very quickly.”

What isn’t being said here is very important. It’s that the police have financial incentives to delay the execution of a warrant, particularly when illicit substances are present. They’d rather serve the warrant when they might find a suspect in possession of large quantities of cash, which they can seize through a civil procedure without the trouble of obtaining a conviction. This is particularly true when cannabis exclusively is involved; it is not a dangerous substance, and complaints relating to its distribution are usually related to the amount of traffic, not the hazard of the plant itself. The proceeds of these seizures can be retained for the Columbia Police Department’s budget through a loophole that allows the federal government to appropriate these seizures and disburse cash and equipment back to the Columbia Police Department. In the last ten years, the Columbia Police Department has received roughly $210,000 from the Department of Justice’s Equitable Sharing Program, though that figure does not capture the full amount of money benefiting law enforcement free of legislative stipulation and civilian oversight. The Missouri Constitution (Article 9, Section 7) mandates the proceeds of these seizures be sent to education, but with the involvement of the federal government and the laxity of legislative oversight this constitutional requirement is circumvented with ease and negligible oversight.

In other words, the Columbia Police Department has for years been pursuing low-level crimes with SWAT raids not for the purpose of making this community safer, but for the purpose of obtaining funding for all the things their budget doesn’t give them. As the United States Appellate Court for the Fifth Circuit said in 1992:

As was obvious at the oral argument of this appeal, each member of the court was deeply disturbed by the actions of the federal and state agents in appropriating Scarabin’s money — candidly acknowledged by counsel for the DEA — actions that would have constituted illicit money laundering if perpetrated by private parties. We were even more distressed by the revelation that those activities were not merely condoned but were actively advocated and supported by officials of the DEA in positions to make and implement policy.

Money laundering indeed. I want to point out that civil forfeiture came into the law enforcement toolbox during the 1980′s, when the government started taking on the Mafia and other large, sophisticated organizations. We forgot, however, that when we went beyond the Constitutional protections against unwarranted search and seizure that our law enforcement stopped acting like law enforcement and began behaving like the criminals they sought to prosecute.

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Self-Portrait in a Convex Mirror

We have seen the city; it is the gibbous
Mirrored eye of an insect. All things happen
On its balcony and are resumed within,
But the action is the cold, syrupy flow
Of a pageant. One feels too confined,
Sifting the April sunlight for clues,
In the mere stillness of the ease of its
Parameter. The hand holds no chalk
And each part of the whole falls off
And cannot know it knew, except
Here and there, in cold pockets
Of remembrance, whispers out of time.

-John Ashbery

A friend directed me to this article in Slatec, which is a good introduction to the work of the American poet John Ashbery, a fascinating author whose work I am just beginning to engage. Recommended.

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On the Presidential beer choice

From Mike Allen’s Playbook this morning:

Seated in dark leather chairs, with the G8 and G20 logo serving as a backdrop in the small room, Obama and Cameron satisfied a wager they had made on the U.S-Britain soccer match. ‘Since it ended in a tie, we’re exchanging, by paying off our debts at the same time, this is Goose Island 312 beer from my hometown of Chicago,’ Obama said, holding a yellow-tagged bottle of beer. Cameron then handed his beer to a smiling Obama. ‘This is Hobgoblin,’ he said. ‘I advised him that in America, we drink our beer cold,’ Obama quipped. ‘He has to put it in a refrigerator before he drinks it, but I think that he will find it outstanding.”

I like 312 Urban Wheat Ale very very much, but I will have to say Cameron is on to something as well. Hobgoblin is a stunningly good beer, a red ale (?) that is complex and flavorful and a versatile beverage with food, like a duck confit crepé made with a cream sauce.

I will also note that Americans prefer their beer, on average, colder than the Europeans. This is partially because during the colonization of the West people developed a taste for crisp, lighter beers that were best consumed cold for refreshment. The more complex, heavier beers from Europe simply did not travel well; both the closures on beer as well as the glass that went into bottles were often less than adequate for the rigors of travel, and particularly with regard to exposure to light and heat.

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Virginia sheriff under investigation for embezzlement from asset forfeiture funds

From WAVY in Virginia:

The Middlesex County sheriff is being investigated by police for allegedly using county and state funds for himself.

Search warrants were filed in Chesapeake court this week for a BB&T account and a Wachovia account, one belonging to the Sheriff Guy Abbott’s forfeiture account, the other to what appears to be his personal account.

“I would hate to think that people that are suppose to protect us would go ahead and do something like that,” said Middlesex County resident Dee Bookins.

Investigators searched bank statements, signature cards, deposit slips and checks dating back 10 years. They found evidence to support allegations of embezzlement and misuse of county and state funds.

Those funds were allegedly allocated for personal use by county officials, namely Abbott.

Evidence included receipts from the Middlesex County sheriff’s office asset forfeiture account and reports Abbott sent to the Virginia Department of Criminal Justice Services.

There were also 21 itemized Mastercard statements between 2000 and 2002.

Virginia’s forfeiture laws are pretty loose. The Institute for Justice’s recently published 50-state report on forfeiture laws awards Virginia a D- and notes that Virginia lets 100% of forfeiture proceeds directly go to law enforcement; over most of the last 15 years this has sent an average of $7.2 million to law enforcement each year. Most of this money, if not all, has negligible civilian oversight, and it is often too easy to hide money in different funds, property, and other tangible assets that directly benefit individual law enforcement officers. It’s nice when you get to use the company car; it’s sweet when your work gives you under-the-table cash bonuses, SUVs, and unregulated expense accounts if you can keep making seizures of property from people who are too poor or politically weak to defend themselves in court.

Cross-posted at Americans for Forfeiture Reform.

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Feds file civil forfeiture actions against Madoff employees

Forbes reports:

The feds have launched civil forfeiture actions seeking $5 million allegedly held by two former back-office workers at Bernard L. Madoff Investment Securities LLC. U.S. prosecutors in Manhattan say Annette Bongiorno and Joann “Jodi” Crupi both spent more than 25 years working for Bernard Madoff’s now tarnished investment firm.

Bongiorno handled BLMIS clients’ questions about their investments, and allegedly oversaw fabrication of documents like account statements and trade confirmations. The government wants her to fork over $1.1 million in accounts at mainstream banks like HSBC; the nearly $300,000 she spent on a 2005 Bentley and a 2007 Mercedes Benz; and $1.3 million that went to a swanky condo. According to court papers filed by prosecutors, Bongiorno began spending much of her time in Florida and working a heavily reduced schedule starting as early as 1995, but was still making six-figure annual salaries over the course of the firm’s last decade of existence.

Crupi was responsible for client redemptions and allegedly was involved in funneling investors’ money through a chain of bank accounts controlled by BLMIS as part of its elaborate Ponzi scheme. The feds say she’s on the hook for the $2.25 million in cash she used to purchase a home in Mantoloking, N.J., and $26,500 in rental income she’s earned after buying that property.

Here’s the problem. It clearly appears that these employees are guilty of real crimes; if Forbes is right that Bongiorno for instance oversaw the fabrication of documents, then there should be plenty of ground for criminal charges. Civil forfeiture actions are inappropriate; any restitution for the crimes should come through fines tied to a criminal sentencing for Bongiorno and Crupi.  Keep in mind that we get the same result (forfeiture of property tied to illicit income) either way.

Civil forfeiture actions are inappropriate because they presume guilt, and because they’re an easy way for prosecutors to avoid the work of actually obtaining convictions in a court of law. Civil forfeiture does not require a trial, just a civil hearing, at which the defendants have to prove the innocence of their property instead of the government proving the guilt of the defendants beyond a reasonable doubt.

Civil forfeitures sound innocuous (after all, why not just take the property implicated in illicit transactions?) but in practice is a mechanism that allows the government, on both the federal and the state levels, to just take property from people without the due process protections that a criminal trial entails. As you might guess, civil forfeiture ends up being used even when there is no actual crime alleged against a citizen and this happens a lot more than one might guess (millions of dollars of forfeitures are vested against people who are never convicted of a crime every year).

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Steven Eisman testifies about the subprime nature of the for-profit education industry

Here is another must read from Steven Eisman in front of the US Senate Committee on Health, Education, Labor, and Pensions yesterday (June 24). I excerpt:

My testimony today comes largely from a recent presentation I gave at an investor conference entitled “Subprime goes to College”. The for-profit industry has grown at an extreme and unusual rate, driven by easy access to government sponsored debt in the form of Title IV student loans, where the credit is guaranteed by the government. Thus, the government, the students and the taxpayer bear all the risk and the for-profit industry reaps all the rewards. This is similar to the subprime mortgage sector in that the subprime originators bore far less risk than the investors in their mortgage paper.

The for-profit education industry accounts for 9% of the students, 25% of all Title IV disbursements but 44% of all defaults. And the President of the largest for-profit institution is paid nearly 25x the compensation level of the President of Harvard. There is something wrong with this statistical progression.

In the past 10 years, the for-profit education industry has grown 5-10 times the historical
rate of traditional post secondary education. From 1987 through 2000, the amount of total Title IV dollars received by students of for-profit schools fluctuated between $2 and $4 billion per annum. But when the Bush administration took over the reigns of government, the DOE gutted many of the rules that governed the conduct of this industry. Once the floodgates were opened, the industry embarked on 10 years of unrestricted massive growth.

He continues:

The bottom line is that as long as the government continues to flood the for profit education industry with loan dollars AND the risk for these loans is borne solely by the students and the government, THEN the industry has every incentive to grow at all costs, compensate employees based on enrollment, influence key regulatory bodies and manipulate reported statistics – ALL TO MAINTAIN ACCESS TO THE GOVERNMENT’S MONEY.

In a sense, these companies are marketing machines masquerading as universities. And when the Bush administration eliminated almost all the restrictions on how the industry is allowed to market, the machine went into overdrive. How do such schools stay in business? The answer is to control the accreditation process. The scandal here is exactly akin to the rating agency role in subprime
securitizations.

There are two kinds of accreditation — national and regional. Accreditation bodies are non-governmental, non-profit peer-reviewing groups. Schools must earn and maintain proper accreditation to remain eligible for Title IV programs. The relationship of the for profit education industry and the national accrediting boards is, in my view, similar to the relationship between the rating agencies and investment banks. There, Wall Street paid the rating agencies handsomely for ratings on subprime securitizations that turned out to be overly optimistic. Here, the industry, we believe, controls the national accrediting bodies by actually sitting on the boards of those very same institutions. The lunatics are running the asylum.

Eisman predicts massive waves of defaults; his estimate is that students will owe some $330 billion in loans and fees on defaulted loans over the next ten years.

The entire testimony is worth reading, and I thank Rick Puig for the pointer.

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IRISlink/IRIS OCR Customer Service

I bought an IRISNotes digital pen through IRIS USA’s website. The technology is fascinating of course and has the potential to be extremely useful, however the transponder that the pen uses to record its work seems to be broken. This may be a physical defect, perhaps the battery is non-functional, or perhaps it was damaged in shipping. Regardless, I was extremely frustrated that the only customer service contact was through a web contact form, which gets you a poorly written response by IRIS’s European staff (who of course are not fluent in English). There are no telephone contact numbers listed. I ended up having to call IRIS directly, using a phone number I culled from their investor newsletter. After I threatened them with a lawsuit in small-claims court they were responsive and have promised to replace the transponder, but I thought I would repost the phone number I used here so that other people who google IRIS can find a phone number without too much research.

IRISLink customer service: 561-921-0847.

You can also email Pierre de Muelenaere, the president of IRIS, here: Pierre.dm@irislink.com. Their CEO is Etienne Van de Kerckhove, who can be reached at etienne.vdk@irislink.com.

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Holy shit, Governor Christie

This is perhaps the most impressive gubernatorial performance I have seen this year. New Jersey Governor Christopher Christie slams teachers unions for gutting education reforms in the state legislature and state legislators for capitulating to a public sector union that is more interested in enriching themselves than educating children. It is an impressively angry performance, and is a must-watch. The video of his speech is here. Here is the NYT covering Gov. Christie in April, and I excerpt:

It’s fair to say that no governor in memory in any state has pushed back as hard at public employee unions — mostly teachers but police officers, too — as Mr. Christie. That’s made him an instant Republican hero, hailed by the conservative columnist George Will as “the nation’s most interesting governor.”

So the question is whether this is about Mr. Christie and New Jersey, or about the rest of us as well. And the answer is yes.

It’s a New Jersey story, of course, because that’s where government bloat and dysfunction have become an art form. And it has a particular New Jersey cast because the governor’s office is so powerful that the governor can assert himself statewide while others can only posture and threaten.

HT: Jack “Attack” Soltysik.

Addendum: the link to the video appears to be broken, but the google cached video is here.

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