SEC Chief: Staying calm a "signal achievement"; Madoff a "big asterisk"

The head of the Securities and Exchange Commission has denied any responsibility for the U.S.'s current economic woes. From a December 24th article in the Washington Post (as are all quotes in what follows except where noted):

Christopher Cox, the embattled chairman of the Securities and Exchange Commission, is defending his restrained approach to the financial crisis, saying he has provided steady leadership as Wall Street's main regulator at a time when other federal regulators have responded precipitously to upheaval in the markets.

During his tenure, the SEC has watched as all the investment banks it oversaw collapsed, were swallowed up or got out of their traditional line of business. The agency, meanwhile, was on the sidelines while the Treasury Department and Federal Reserve worked to bail out the financial sector....

I don't know about anybody else, but I'm certainly not pleased that my investments in financial institutions have tanked, due in large part, as I understand it, to widespread deception and misinformation about the true value of assets on these institutions' books as well as the risks involved. How can this possibly not be the SEC's job? I'm supposed to evaluate these things myself?

... Cox said... that he had responded properly to the broader financial crisis given the information he had. Confronted with a barrage of criticism from lawmakers, former officials and even some of his staff, Cox said he took pride in his measured response to the market turmoil.

"What we have done in this current turmoil is stay calm, which has been our greatest contribution—not being impulsive, not changing the rules willy-nilly, but going through a very professional and orderly process that takes into account unintended consequences and gives ample notice to market participants," Cox said. This caution, he added, "has really been a signal achievement for the SEC...."

Although Cox speaks of staying calm in the face of financial turmoil, lawmakers across the political spectrum counter that this is actually another way of saying that his agency remained passive during the worst global financial crisis in decades. And they say that Cox's stewardship before this year—focusing on deregulation as the agency's staff shrank—laid the groundwork for the meltdown.

"The commission in recent years has handcuffed the inspection and enforcement division," said Arthur Levitt, SEC chairman during the Clinton administration. "The environment was not conducive to proactive enforcement activity...."

In a 90-minute conversation in his 10th-floor corner office last week, Cox said the SEC's emphasis on enforcement is as strong as ever. "We've done everything we can during the last several years in the agency to make sure that people understand there's a strong market cop on the beat," he said.

He also said that "the SEC is not a safety and soundness regulator" despite the fact that the very first sentence in the SEC's statement on what it does says, "The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation."

Further evidence that the SEC has not been doing its job appears in a New York Times article from yesterday titled "Federal Cases of Stock Fraud Drop Sharply," which notes that there have been only 133 prosecutions for securities fraud in the first 11 months of this year, versus 437 in 2000 and a high of 513 in 2002 while the number of investigations leading to such prosecutions has dropped from 69 in 2000 to just 9 in 2007.

Furthermore he implied that failure to do anything about the biggest Ponzi scheme in history was no more than a footnote to an otherwise highly successful tenure.

[T]he SEC, by its own admission, failed to detect an alleged $50 billion fraud by Bernard L. Madoff that may be the largest Ponzi scheme in history.

But in his first interview since the Madoff scandal broke, Cox said he was not responsible for the agency's failure to detect the alleged fraud...

"That's why Madoff is such a big asterisk," he added. "The case is very troubling for that reason. It's what the SEC's good at. And it's inexplicable."

I Pray on Christmas

I had never heard this song until a few days ago, despite Harry Connick, Jr. being one of my favorite male singers. I hope you enjoy it too! Merry Christmas, Happy Hannukah, Cool Kwanzaa, Sunny Solstice, or whatever it is you celebrate!
 
 

Drug Discounts for All Pennsylvanians on All Drugs at All Drugstores

A fellow technical professional I met last night at Philly–TPNG was handing out cards that provide any PA resident with discounts on all prescription drugs at all pharmacies in PA. I quote from a follow-up e-mail he sent to the group today:

This is a FREE program for the residents of Pennsylvania and it provides an alternative pricing option for prescription medicines.

If you are interested, please go to www.padrugcard.com and register for your own FREE card and take that card to your pharmacist so they can register your Group and ID number. Then, when faced with a charge for a prescription medicine that you think may be higher than you would like to pay, ask them to let you know what that price would be under the PA Drug Card Program.

I am part of the Pharmacy Business Development team who are getting the word out to all Pennsylvania residents that this program is available to us all for FREE. The program is expected to provide a discount off of the retail pricess of over 16,000 medications in the range of 10% to 75%.

While this doesn't help me immediately (I'm enrolled in a plan that allows me to mail-order 90-day supplies, which are cheaper than the 30-day supplies offered under this plan), it appears to offer savings potential to anyone who is not covered by a prescription plan and even to some people who are so covered, as the discounted price might well be lower than the co-pay.

The website also provides links to a medication pricing calculator that will show the nearby pharmacies at which the drugs you need are cheapest.

 

Bagosora convicted for Rwandan genocide

In the 1996 Presidential election, I voted for Robert Krueger, rather than either Bill Clinton or Bob Dole. Krueger had served Clinton as Ambassador to Burundi, then to Botswana. While primarily symbolic of the repugnance I felt for voting for either of the mainstream candidates, I picked Mr Krueger for a very important reason.

Earlier that year while serving in Burundi, a county of inconsequential strategic importance to the U.S. with the poorest and most unhappy people in the world, at significant personal risk¹, Mr Krueger tried to draw attention to the horrific human rights abuses that were occurring in that country, whose ethnic make-up and conflicts mirrored those of neighboring Rwanda. A significant part of the Rwandan genocide of 1996 took place in Burundi against Burundi Hutus. Because of his commitment to human rights and against genocide, and specifically because of his commitment to the people of Burundi and his willingness to do something, Robert Krueger is one of my heroes².

All of which is a bit of a personal lead-in to today's news that a United Nations court in Tanzania sentenced Theoneste Bagosora, the former Rwandan Minister of Defense who organized the genocide, to life in prison along with two co-defendants, for genocide and crimes against humanity. He was responsible for over 800,000 people dying in 90 days, as well as for the death of a former Rwandan prime minister and 10 Belgian peacekeepers. There are too many former (and current) leaders in the world who are guilty of such crimes and still free. Let this be an example of what can happen to those who would abuse their fellow human beings, and a beginning to doing away with such evil in the world.

---

¹ In 1995, while in Burundi, his convoy was ambushed.
² Mr Krueger and his wife co-wrote a book about their time in Burundi called From Bloodshed to Hope in Burundi: Our Embassy Years During Genocide.

Car czar

What on earth makes anyone think that a government appointee would be any better at ensuring the viability of the auto industry than a carefully selected and knowledgeable executive whose first duty to his or her board, stockholders, employees and customers is to ensure the viability of the business? In fact, it seems pretty obvious that anybody with a proven—or even with a high likelihood of having—ability to do so would already be running an auto company. Not that the executives we've seen have necessarily done a good job (and to the extent they haven't, others have stepped in to fill the gap: Honda, Subaru, Toyota, Volvo, etc.). I'm just asking we wouldn't expect government to do worse than the capitalists.

Furthermore, let's call this what it is: nationalization of the auto industry. To nationalize, according to the American Heritage Dictionary of the English Language means, "To convert from private to governmental ownership and control." In what sense is this not what we're considering?
 

A joke and a true story from our Obama Change brunch

Today a group of us formerly associated with the Obama campaigns's Baederwood (Jenkintown/Abington) office, held a brunch, the ostensible purpose of which was to take photos of us each holding a sign naming the issue on which we most stood with President-Elect Obama (mine was "Civil Liberties" but at my feet I also had my protest placard I've been using for years that says "Pray for Peace"). Mostly what we did though was share our hopes, aspirations and stories with each other.

Gail told a joke. It's shortly after the Inauguration. A man walks up to the White House and tells the guard he's there to see George Bush. The guard says, "He doesn't live here anymore" and the man leaves. Next day, same thing. "I'm here to see George Bush." "He doesn't live here anymore." The man leaves again. Third day, same thing yet again. "I'm here to see George Bush." "He doesn't live here anymore," but this time the guard adds, "This is the third day you've been here asking the same question and I've given you the same answer all three days. Why do you keep coming back and asking it?" And the man replies, "Because it sounds so wonderful!"

Another of the attendees had been at the Bush anti-Inaugural in 2000. They were protesting at the Supreme Court building, where five of the nine justices had essentially appointed Bush president despite the fact that he lost the election (at least this was this man's opinion). At one point he got so angry he started kicking at the steps leading up to the courthouse. A security guard rushed over and asked, "What are you doing?" When he heard the explanation, the security guard leaned over and whispered, "Would you please kick it for me too?"

FiveThirtyEight.com: Quick Thoughts From Kansas

[Quoted in its entirety.]

Six points of general consensus among the reporters, strategists and analysts that were present at the Dole Institute.

1. Obama will have a relatively long honeymoon period, and the public will be inclined to be relatively sympathetic toward him.
1a. The Democrats' largest problem is with the public perception of their Congressional leadership.

2. Obama, politically speaking, has handled his transition very well. The Republicans on the panel felt extremely reassured by appointments like Jim Jones and Robert Gates. This bought Obama a huge amount of political capital.

3. The Republican bench is relatively inadequate at the present time in terms of candidates for national office.
3a. On the other hand, the 2012 Presidential cycle is already being looked at as something of a lost cause. Some of the stronger candidates—both known and unknown—might want to wait until 2016 to run.
3b. In the long-term, the future of the party probably lies in governor's offices. If the Republicans are smart, this may be their major focus in 2010-12, as opposed to the Congress and even perhaps the Presidency.

4. Sarah Palin is, for the time being, the public face of the Republican Party.
4a. This is not necessarily a good thing for the Republican Party.

5. The compressed primary calendar is problematic.
5a. The compressed primary calendar is unlikely to change.

6. Obama ran the best campaign we have seen in a generation.

I'd say that's it in a nutshell!

WSJ: Rename Homeland Security

Wow! Finding something I want to blog about in the Wall Street Journal twice in one day! Peggy Noonan has a piece titled "At Least Bush Kept Us Safe". About this statement, which is not hers but "more or less" a quote of what some apparent Republicans were saying at a Christmas gathering she attended in Northern Virginia, Noonan says,

It is unknown, and perhaps can't be known, whether this was fully due to the government's efforts, or the luck of the draw, or a combination of luck and effort. And it not only can't be fully known by the public, it can hardly be fully known by the players at all levels of government.

I agree—it can't be known. Personally I'm inclined to assume it's largely been the luck of the draw. Partly because I'm pretty sure if anything major had been thwarted, somebody would have made sure the press found out about it (those that did make the press all seem to have turned out to have been overblown). And partly because thinking that it was the government's effort makes it all that much easier for government to justify continuing the abuses of the last 7+ years in the name of Homeland Security.

Which brings me to the first point I want to emphasize in Noonan's article:

What's at stake for him [Obama] is two words. When Republicans say, in coming years, "At least Bush kept us safe," Democrats will not want tacked onto the end of that sentence, "unlike Obama."

By the way, he should both reorder the Department of Homeland Security, that hopeless bureaucracy, and change its name. Homeland is a Nazi-ish word, not an American concept at all. And at this point "Homeland Security" is associated more with pointless harassment than safety. No one knows who came up with it. Probably some guy with two Christmas trees in Northern Virginia.

I don't always agree with Peggy Noonan, but on this I'm with her 100%, and have been saying the same since 25 November 2002.

The second point was even more of an aside in the article:

At such a gathering a month ago, there would have been some angry mutterings at John McCain, but not now. He's come quietly back to the Senate, where one of his colleagues told him of an amazing thing. The colleague had been touring the young democracies of Eastern Europe during the American election, and he found it wasn't so much Barack Obama that immediately knocked out observers but Mr. McCain's concession speech. This is the first American transfer of power they'd seen in eight years, and they couldn't get over the peacefulness and grace with which Mr. McCain accepted the people's verdict. "It really impressed them," the colleague told Mr. McCain, and later me. It gave them a template, a guide to how the older democracies do it.

Nice! I'm glad. It was graceful, kind and an excellent model for peaceful transfers of power in a democracy [also via The Daily Beast's Cheat Sheet].

WSJ: End marijuana prohibition

In recognition of the 7th anniversary of the end of the First Prohibition, the Wall Street Journal is running an op-ed calling for the end of the current prohibition against certain drugs.

Today is the 75th anniversary of that blessed day in 1933 when Utah became the 36th and deciding state to ratify the 21st amendment, thereby repealing the 18th amendment. This ended the nation's disastrous experiment with alcohol prohibition.

It's already shaping up as a day of celebration, with parties planned, bars prepping for recession-defying rounds of drinks, and newspapers set to publish cocktail recipes concocted especially for the day.

But let's hope it also serves as a day of reflection. We should consider why our forebears rejoiced at the relegalization of a powerful drug long associated with bountiful pleasure and pain, and consider too the lessons for our time....

Why did our forebears wise up so quickly while Americans today still struggle with sorting out the consequences of drug misuse from those of drug prohibition?

It's not because alcohol is any less dangerous than the drugs that are banned today. Marijuana, by comparison, is relatively harmless: little association with violent behavior, no chance of dying from an overdose, and not nearly as dangerous as alcohol if one misuses it or becomes addicted. Most of heroin's dangers are more a consequence of its prohibition than the drug's distinctive properties.

Amen! Sensible legalization of drugs would immediately and dramatically reduce the crime rate and at the same time free up prosecutors to go after the real bad guys [via The Daily Beast's Cheat Sheet].

Physics for Future Presidents

Subtitled The Science Behind the Headlines, this book, by Richard A. Muller, a professor at the University of California at Berkeley, addresses the problem of how the president of the United States, with a blizzard of issues to deal with daily, can stay informed on scientific and technological developments that have an impact on society, when even scientists can hardly keep up with the influx of new research discoveries. It based on a course Muller's been teaching for years that was voted "best course on campus." Physics News Update 878 [← invalid link as of original post; should be valid shortly] says about the book that it:

... uses no equations or detailed mathematical description. Instead it imparts a commonsense, but accurate, appreciation of certain technological hazards and opportunities.

For example, Muller believes the president should know about radiation levels (it's the accumulative dose that is medically important), about the difference between nuclear fission and fusion explosions (the latter are much more powerful), about the relative energy content of various substances (gasoline, and even cookies, have more energy per weight than TNT), and about the relative cost of electricity obtained from batteries used in cell phones, computers, and automobiles. The president must be able to intelligently absorb information about the impact of human technology on climate, and to know that no single unexpectedly hot or cold day denotes a significant indicator of things to come.

The president can't afford to learn about such things as the danger from radiation at the last minute, argues Muller, because in certain circumstances, every second counts. Consider, for example, the detonation of a dirty bomb, in which an ordinary (non-nuclear) explosion spreads radioactive materials. Fatalities, property damage, and even residual radiation, would likely be very small. "The biggest danger from a radiological weapon is the misplaced panic and overreaction that it would cause. A dirty bomb is not really a weapon of mass destruction, but it is potentially a weapon of mass disruption," Muller says. Allocating resources during a crisis—military, medical, emergency, and engineering—requires quick and shrewd thinking.

Muller views physics as the "liberal arts of high technology," insofar as physicists are trained to solve problems in a broad category of topics, many of them relating to the very topics—such as energy and nuclear issues—that form the backdrop to numerous national-security concerns. This is probably why so many presidential science advisors have been physicists.

The Physics News item contains a link to an article from Nature, but may all you really want to do is take the presidential test (I'm embarrassed to say I only got 5 of 17 answers correct).

On memory

Me and my friends—those close to my age anyway—have been continually complaining about our gradual loss of memory for at least a decade now. But today I found an article, An Infinite Loop in the Brain by Samiha Shafy [from Spiegel Online via The Daily Beast Cheat Sheet], that enlightened me a little, convincing me that a good and accurate memory is not always something to be desired:

[Jill] Price can rattle off, without hesitation, what she saw and heard on almost any given date. She remembers many early childhood experiences and most of the days between the ages of 9 and 15. After that, there are virtually no gaps in her memory. "Starting on Feb. 5, 1980, I remember everything. That was a Tuesday...."

People say to me: Oh, how fascinating, it must be a treat to have a perfect memory," she says. Her lips twist into a thin smile. "But it's also agonizing."

In addition to good memories, every angry word, every mistake, every disappointment, every shock and every moment of pain goes unforgotten. Time heals no wounds for Price. "I don't look back at the past with any distance. It's more like experiencing everything over and over again, and those memories trigger exactly the same emotions in me. It's like an endless, chaotic film that can completely overpower me. And there's no stop button."