Monday, November 2, 2009

Big surprise: Geithner lines Wall Street's pockets again

Well, speak of the devil (in reference to my previous post), Tim Geithner comes through again... for Wall Street, not the American people.

Once again, Bill Black provides a cogent narrative of the latest shenanigans. Is Geithner just the most incompetent boob to ever hold an office, or is he the devil incarnate? I'd love to say that time will tell, but somehow I think this guy will always be two steps ahead of the law. No one in Washington seems to be interested in holding him accountable.

Saturday, October 24, 2009

Frontline's "The Warning" explains the roots of the financial crisis

PBS's brilliant Frontline really needs to be commended for its work in exposing the causes of the financial crisis. In a time when we can question the motivations of many in the news media, Frontline is not pulling any punches and is clearly party-neutral with respect to identifying the culprits in this calamity.

This week's program, "The Warning," chronicles the efforts of Brooksley Born, then the new head of the Commodity Futures Trading Commission (CFTC), to gain approval in the late 1990s to regulate credit default swaps and other types of complex derivatives that were largely responsible for the recent financial system meltdown. Her efforts were thwarted, however, due to heavy opposition from Clinton's triad of senior financial advisors: Secretary of the Treasury, Robert Rubin, his Deputy Secretary, Larry Summers, and Fed Chairman, Alan Greenspan.

Thanks to documentaries such this, it becomes painfully clearer all the time that we simply don't learn from our mistakes. Even though Ms. Born's concerns were proven to be valid during the very time that Congress was holding hearings on her powers -- thanks to the trillion-dollar meltdown of Long-Term Capital Management, the then-darling of the hedge fund industry -- the CFTC's regulatory authority was never expanded, and now we all know the consequences. Making matters worse, Obama has put virtually the same team that opposed Ms. Born into powerful positions in his own administration. Is there any wonder why more than a year has passed since the meltdown and no financial reforms have been implemented?

Here's a little additional background to keep in mind as you watch the episode:

  1. Prior to becoming Sec'y of the Treasury, Robert Rubin was the CEO of Goldman Sachs. Hank Paulson, Bush's last Treasury Secretary, was also the former CEO of Goldman Sachs. Goldman's power and influence in Washington are extensive! Predictably, Goldman Sachs was the largest contributor to the Obama campaign, and continues to be the most blatantly opportunistic firm on Wall Street with respect to taking advantage of the absence of regulatory reform.
  2. Two of Rubin's disciples, Tim Geithner and Gary Gensler (also ex-Goldman), are now, respectively, Secretary of the Treasury and head of the CFTC, which, again, is the agency that should be regulating derivatives, but isn't.
  3. Rubin moved on from the Treasury to Citigroup, which was one of the sickest of the sick in the meltdown, with the result being the U.S. government supplying $100 billion in emergency aid and taking a 34% equity stake.
  4. Following Clinton's final term, Summers moved on to the presidency of Harvard, where he was embroiled in one controversy after another. He was ultimately ousted by the faculty through a vote of no confidence. Too bad they didn't act sooner, though, as Summers' recommendations regarding investments in derivatives cost the Harvard endowment over $1 billion.
  5. Summers made over $5 million last year from Wall Street connections, supposedly for doing speaking engagements and consulting approximately one day a week. He is now Obama's senior financial advisor, and frequent mouthpiece on financial policy. (Follow my "Larry Summers" link on the right to read some of my additional thoughts about Summers).
  6. Greenspan ultimately retired, with his reputation now in tatters. He admitted this year before Congress that many of his most fundamental beliefs concerning regulation and the self-correcting powers of the markets, upon which his key decisions as Fed chief were based, were simply wrong.

Watch "The Warning" and draw your own conclusions. I'm sure you can probably guess, however, how I feel about our current president surrounding himself with a cast of characters who were so toxic to our way of life, and who seem to be in no particular hurry to put fixes in place.

Also outstanding is this video timelime of the events that set the stage for the financial crisis. Again, big kudos to Frontline.

Click here for Frontline's timeline.

Sunday, October 18, 2009

It's About Principles: What the Republican Party Must Do

The following are the stated principles of the Republican Party:

  • The Republican Party, like our nation's founders, believes that government must be limited so that it never becomes powerful enough to infringe on the rights of individuals.
  • The Republican Party supports low taxes because individuals know best how to make their own economic and charitable choices.
  • The Republican Party is supportive of logical business regulations that encourage entrepreneurs to start more businesses so more individuals can enjoy the satisfaction and fruits of self-made success.
  • The Republican Party is committed to preserving our national strength while working to extend peace, freedom and human rights throughout the world.

I believe strongly in all of these principles, and yet, I have never voted for a Republican presidential candidate. (I haven’t always voted for the Democrat either, instead choosing to let my abstention speak for itself.) One would think that I would be easy game for the GOP, so why haven’t they been able to win me over? It’s not because their core principles are not brilliantly clear, sensible and powerful. Rather, it’s because Republicans never actually make their core principles the foundation of their platform, nor are they ever even able to achieve a unified vision of their platform across the various factions within their party.

The trouble with Republicans is not their passion for their core principles. It’s that they are usually even more passionate as individuals about something else, and they don’t know where to draw the line between beliefs about governance and beliefs about deeply personal life choices. What is especially unsavory to independent moderates about the conflation of these beliefs is that the personal beliefs that are most loudly proclaimed are often based on some form of intolerance, and they reek of hypocrisy in that they typically conflict with the core principles’ themes of individual responsibility, personal freedom, and limited government. Intolerance and hypocrisy also set you up to be a bad joke, as depicted in this video:

Rather than painting a clear picture of how legislation based on their core principles would create a better America, Republicans allow themselves to become fractured over issues concerning, for example, religion, abortion, gay rights, and in the case of Mitt Romney’s candidacy, whether they could accept a Mormon president, as if Mr. Romney’s faith mattered in the least to his potential job performance. Simply put, the Party has been a mess for a very long time, and it can only win the Oval Office when the Democrats hand it to them on a silver platter, as LBJ did with his aimless mishandling of Vietnam, as Carter did with his mishandling of the economy and our national defenses, and as Clinton did with his indiscretions, which elevated “moral values” to the #1 reason why people voted for George Bush in 2000. Winning by unifying against another’s weaknesses simply isn’t a sustainable long-term plan, because you have no strategy once the other guy is gone and you’re in control. You need a vision of your own, which is where core principles come into play. No principles, no identity. It’s that simple.

It took millions of independent moderates to put President Obama into office. I was among them. We all had our reasons for voting for him, but the lack of a good alternative was probably foremost. That, by no means, makes for a strong support base. Indeed, recent polls are showing that millions of independent moderates have withdrawn their support. Again, I am among them. This is going to open a door for Hillary in 2012 and for the GOP.

I believe that a healthy two-party system is critical, and that moderates need a voice within that system. Moderates are the swing vote, yet they are without a home. That needs to change, which is why I would like to see the Republican Party reform. If the GOP is going to become a viable alternative for moderates, it needs to have courage in its convictions and build a fortress around its core principles. Party members need to agree among themselves to shelve the social issues that ultimately divide the party and create an unacceptable environment for moderates. Accordingly, they need to develop a platform that focuses exclusively on matters concerning the prosperity, defense and welfare of the people. The GOP will never win if it is known as the anti-abortion, or anti-gay, or pro-prayer-in-school party. Certain right-wing factions within the Party would love such monikers, but they would be the kiss of death for the GOP. Party leadership needs to take control, purge intolerance from the agenda, and put the focus of the platform on the sound administration of the country. They need to go back to basics and stick to business. If they do, they might have a chance, and we might have an alternative for moderates.

Friday, October 9, 2009

Has the "Obama Bubble" Reached its Peak?

Having endured dot-com mania and the housing/credit crisis, we’re all starting to get pretty good at recognizing the signs of a bubble: lots of hype, no sense of proportion, free-flowing accolades and unearned reverence, irrational behavior, and endless exhibitions of wretched excess. Certainly, some of these bubblelicious signs apply to our president.

I really don’t think President Obama has anguished over how to inflate his image and get himself placed on a pedestal, but that’s precisely where many people, especially those overseas, have placed him. His charisma and promise of hope have bought him a very low bar. I'm sure, upon honest reflection, most people would admit that there has been little objective evaluation of his work thus far. However, we reached a tipping point today. The gap between his image and his qualifications and actual results became too wide and clear to be denied. With his premature “winning” (as if he actually wanted it) of the Nobel Peace Prize today, I think the pitfalls of this leader-as-pop-icon situation that the public has created have finally hit home, even with many of his most devoted supporters. Especially coming on the heels of the IOC "malfunction" in Copenhagen, one can’t help but wonder if today may have been the top for Obama – just like NASDAQ at 5132.52 on March 10th, 2000 – and that it may be all downhill from here. Of course, the Right expressed plenty of outrage today about the win being undeserved. However, I think this eerie feeling that the Obama bubble has been pricked is what’s giving so many others more of a feeling of loss today, rather than outrage. Truly, it’s sad when bubbles finally burst.

I think the obvious-to-all absurdity of today’s award was a wake-up call. It reminds us that we need to be realistic in our expectations and rigorous in our evaluations. Moreover, it reminds us that people in lofty places (e.g., the Nobel judges) can make foolish decisions or ones that are motivated to serve their own political aims, and that the rest of us need to stay awake at the switch in order to detect when they do. President Obama and the rest of our politicians are only human. They have strengths and weaknesses like the rest of us, and as our public servants, we should treat them with respect and realize that they’ll never do everything perfectly. Importantly, however, as we do with employees in the workplace, we must also diligently monitor and evaluate their work, and hold them accountable for their actions. Questioning is not a sign of being unsupportive. It’s helpful, as we learn from it, and it’s essential if we want to be our very best.

With the bloom off the rose a bit now, maybe we can take some of the emotion, dogma, and tribal warfare out of this presidency and get down to the objective administration of this great republic. Today may have actually been an important turning point for the better.

Saturday, August 22, 2009

The Whole Foods Health Care Flap

So, this is the article from Whole Foods' CEO that created the big flap. Three main themes: government frugality, individual responsibility, and personal choice. How controversial! In order to consider these ideas some kind of betrayal of Whole Foods' customers' values, it seems to me that those who have their undies in a twist are making some very thin connections: healthy eating = progressiveness = liberalism = blind agreement with Obama's agenda. None of those connections are 1:1 (exclusive). Obviously, Mackey's experience leads him to have a different opinion about how to create a healthier America. Why not respect that, and use it as an input when evaluating our options? At least his experience is based on real-world interactions with real people who have experience using both socialized and free market health care systems. I wish we could say that Obama and Congress have experience grounded in reality, but we know that simply isn't true.

Click here for Wall St. Journal article.

Tuesday, August 4, 2009

Goldman CEO Warns Employees to Keep a Low Profile

From the New York Post:

Goldman Sachs CEO Lloyd Blankfein has warned his employess to avoid making big-ticket, high-profile purchases as the gold-plated Wall Street firm hunkers down amid a firestorm of public and political anger over outsize bonus payments.

According to sources at the bank, Blankfein has told Goldman staff that spending should be toned down in light of the billions in bailout money that banks, including Goldman, have gotten from Uncle Sam.

A source within the bank said Blankfein first began calling for an end to the conspicuous consumption late last year, but has stepped up his campaign in recent weeks as the White House has sought to rein in compensation and as the firm has gotten dinged by a pair of high-profile magazine articles.

"This is a sensitive time for us, and [Blankfein] wants to make sure that we're not being seen living high on the hog," said one Goldman exec.

Indeed, the exec said that senior managers were ordered to tell their staffs that just because Goldman made a record second-quarter profit of $2.3 billion, they shouldn't bank on getting a fat bonus just yet. Blankfein was quoted as reminding staff that bonuses are based on full-year results, and that the year is far from over.

Blankfein's admonishing of workers about profligate spending comes as the firm has been hit with a barrage of negative press lately over its uncanny ability to make money not only in the best of times -- but also the worst.

A Rolling Stone article referred to the firm as "a great vampire squid wrapped around the face of humanity," while a recent New York magazine piece floated the idea that Goldman benefited from the rescue of troubled insurance giant American International Group.

A spokeswoman declined to comment.

Goldman's speedy recovery in the wake of the global recession and the demise of many of its rivals has drawn more outrage than awe.

Observers question everything from the bank's massive pay to its uncanny ability to serve as a incubator for Washington policymakers. Goldman alumni include former Treasury Secretaries Henry Paulson and Robert Rubin, and Jon Corzine, the current New Jersey governor and former US senator.

Goldman accepted $10 billion in rescue funds from Uncle Sam to help it stay afloat last year amid a crisis of confidence on Wall Street but quickly repaid the money thanks to record revenues.

The Goldman exec said that while Blankfein was cajoling workers to cut back on their spending to avoid negative publicity, he was also playing cheerleader.

In a company-wide voice mail left last week, the CEO assured employees that management is "focused on addressing the negative news and that [Goldman] remains committed to integrity and excellence."

"I know you're all working hard," he added.

If this seems familiar, perhaps you're recalling the scene from Goodfellas in which Robert De Niro admonishes his crew members for going on spending sprees following their big Lufthansa heist. For your enjoyment:

Finally! Congress is Waking Up to Wall St. Market Manipulation

Everyone knows that Wall Street firms are using high frequency trading platforms to frontrun their own clients, yet no one is speaking out against it...until now. Thank you, Senator Schumer.

Click here for related article.

Sunday, August 2, 2009

Daniel Hannan speaks about U.K. Health Care System

I love this guy. He's one of the most articulate and clearest-thinking politicians I know of. I wish he were American.

His cautionary tale about how Canada's "public option" morphed into a government-only program is very much in line with what I believe will happen here.

"No New Taxes"... Yep, We've Heard that One Before

Oh, I don't know, maybe they should have thought about deficits (like the rest of us did) before they lined Goldman Sachs' pockets with billions and queued up billions in pork barrel spending disguised as stimulus. I know I sound like a broken record about the government's need to think things all the way through, but it's just so obvious.

George Stephanopoulos re Tim Geithner interview:
To get the economy back on track, will President Barack Obama have to break his pledge not to raise taxes on 95 percent of Americans? In a “This Week” exclusive, Treasury Secretary Tim Geithner told me, "We’re going to have to do what’s necessary.”

Click here for related article.

Larry Summers: A Master of Double-Speak

This guy is so over-rated it makes my stomach churn. Obama's economics team refuses to admit that because they got it wrong on the severity of the recession, that the stimulus plan was not front-loaded enough and that the spending needs to be more sharply focused and shifted forward. Instead, they shout down tough questions and continue to try to BS the American public into believing that they've got it all under control and that the wasteful, massive deficit spending yet to come on pork and social agenda items will be good for us.

Listen in this clip to how Summers flip-flops between whether the stimulus plan was intended to have a short- or long-term impact. Listen also to the double-speak about job creation. "We don't know what the baseline is, or how many jobs will actually be saved or created, but we know it will be more than what otherwise would have happened." Huh? I wish I never had to substantiate any of my ideas or actions. It's insulting to anyone with half a brain. This guy is a thug, a crook, and a moron.

Saturday, August 1, 2009

Health Care Reform: Rise up, Mr. Obama. This is your Man-on-the-Moon Moment.

Many reforms in health care are needed, but the proposed legislation doesn’t address them. For example, the argument that the so-called public option will increase competition is totally false. Employers are justifiably tired of paying ever-increasing insurance premiums for their employees. When the public option becomes available, many firms will simply decide to give their employees a raise to cover the cost of the public option, and then they’ll cancel their company-sponsored plans. That way, they can convert their medical benefits expense to salaries expense, which is much easier to control (i.e., salaries increase at about the rate of inflation, whereas medical premiums have been rising at two to three times that). Once that happens, you’ll then have most Americans on a bare-bones Medicare-type program, with no options and no industry competition. The insurance carriers currently battle it out against each other every day. They do what they can to keep costs down, but they can only do so much to control the medical and pharmaceutical industries. With whom do government agencies like the Social Security Administration, the IRS, and Veterans’ Affairs compete? No one, and they don’t exactly set any standards for efficiency and customer service, do they? It will be the same with whatever new agency ends up running health care.

The health care industry represents 16% of our economy. It employs millions, and it touches every one of us. There is no simple, quick fix for this problem. Bringing health care costs under control is going to take a tremendous amount of collaborative work by the insurance, medical, pharmaceutical, and technology industries. This undertaking is far bigger than the Apollo project, for example, and that project could have never been accomplished without industry doing most of the work. As it did with Apollo, government (NASA, in that case) should play a facilitation role in health care reform, but it should not attempt to become the industry itself. It doesn’t have the technical or managerial skill, nor could it ever put the incentives in place to ensure that the system would be able to actually improve service while also driving costs down, which should be the ultimate goal. The current dialogue in Washington never makes mention of that, which is frightening and disappointing in its lack of ambition. Our politicians are content with the notion of serving more people, but serving them poorly in order to do it (all but themselves, that is). Well, I’m not.

Mr. Obama should use his estimable leadership skills to unify the efforts of these various industries, rather than trying to put them out of business or under some type of Soviet-like control. A sharp bureaucrat can always muscle some kind of ineffective legislation into place (e.g., the stimulus bill), but a real leader inspires the public to raise its ambitions and strive to take on new challenges. President Kennedy inspired the nation to put a man on the moon within 10 years. I’d like to see President Obama do something similar with health care reform. He has the vision and the charisma. He just needs to do it. That's what voters really wanted from him anyway, not bureaucratic quick fixes.

Mr. Obama, don’t deny Americans the opportunity to be Americans. Tackling problems head-on and developing world-class solutions is what we do. Yes we can, remember?

Sunday, July 19, 2009

Beware of the "Global Warming Industrial Complex"

How's that for a new term?! I just heard it yesterday. (For younger readers, that's a takeoff on Eisenhower's term, the military industrial complex.)

Is global warming a problem? Probably. Has it been overblown? Probably. One thing is for sure, though, it has now become very big business -- a new expense for some businesses and a huge money-making opportunity for others -- and once something becomes big business, there simply becomes too much temptation to manipulate the facts.

Members of the global warming industrial complex (e.g., Goldman Sachs, GE, alternative energy producers) have been lobbying hard for cap-and-trade, and it has been easy for our politicians to fall in line in support of it. After all, the public has been worked into a panic about it, and what politician wants to appear to be politically incorrect, especially when climate change is so popular with the hip and influential?

I'm not saying that we shouldn't do anything about climate change. Rather, I'm asking, are we sure we've really done enough homework to ensure that an elaborate scheme of trading carbon credits -- in which polluters get to keep polluting as long as they have enough money to do so -- is the real answer to the problem? Besides, if the answer is a system in which Goldman Sachs is allowed to shave a profit off of every transaction, I'm going to be suspicious from the get-go anyway. It just smells fishy.

In recent times, we've seen one poorly structured scheme after another that has backfired on the public, whether it was Enron being allowed to dominate the energy markets, or the attempts to create an "ownership society" by lowering standards at Fannie Mae and flooding them with too much money, or the lack of regulation over securitized home mortgages and derivatives, or poor regulation of the IPO-ing of internet companies, or no regulation of hedge funds (that manipulate the markets), etc., etc. The simple truth is that our government doesn't have the discipline and objectivity to think scenarios all the way through; i.e., to contemplate possible negative outcomes as well as positive ones. They don't model the unintended consequences, which is an essential skill that any good businessperson tries to learn. Furthermore, they don't have the integrity to say, "Let's stop and rethink this" when they discover that they're wrong. Instead, they simply work the numbers so they can justify the case they're trying to make, and then they ram their legislation into place as quickly as possible. (...and we've come to learn that few bills are even read before voted on!) They can get away with making expensive mistakes because they have the taxpayer and deficit spending to fall back on. If a businessperson makes the same mistake, he's bankrupt (unless, of course, his business is too big to fail). The bottom line: I fear that we are rushing head-long into another poorly structured scheme that will not address the problem, that will burden the public with yet more expense that it cannot afford, and that will line the pockets of the well-connected and corrupt.

The military industrial complex panicked us into an over-blown fear of the communist threat in the '50s and '60s. The result was massive, wasteful defense spending and a war in Vietnam that cost over 50,000 U.S. lives, and well over a million lives of our supposed enemy. Now, the global warming industrial complex, with the full buy-in of our eager-to-be-loved president, is pushing us towards a "solution" that will line their pockets, add an enormous expense to every family in the country, do nothing regarding other countries' responsibilities re climate change standards, and supposedly reduce temperatures by only .2 degrees by the year 2100. I've spent my entire career being a problem solver, and it just seems to me, based on the outcomes in this deal, that people haven't spent enough time working on the potential solutions. Ditto for healthcare reform, but that's another story.

Simply put, we need to demand more rigorous work and a higher level of professional integrity from our politicians. Furthermore, we need to maintain a healthy skepticism about everything our government proposes. Don't we have enough evidence that we need to?

Saturday, July 18, 2009

Goldman Sachs Goes Green... In More Ways than One

Hmm... Are we seeing a pattern yet?

1) Goldman Sachs conspires with our government officials to create a panic over a real or imagined problem.

2) Current or former senior officers of Goldman are put in charge of the problem.

3) It is determined that only Goldman Sachs is qualified to handle whatever the fix is for the problem, and it is given a preferential role in all related money-making opportunities.

Related article:

Goldman Sachs to be carbon regulator?

July 8, 2009

Sens. Dianne Feinstein (D-CA) and Olympia Snow (RINO-ME) have introduced a bill to make the Commodity Futures Trading Commission the sole regulator of the carbon market created by cap-and-trade legislation.

So does this mean that freebooting Goldman Sachs could be the de facto regulator of the carbon market?

Consider that:

  • The current chairman of the CFTC is Gary Gensler, formerly of Goldman Sachs.
  • Goldman Sachs is a part owner of the exchanges where carbon allowances would be traded.
  • Goldman Sachs has spent millions of dollars lobbying for cap-and-trade legislation in anticipation of making billions of dollars at the expense taxpayers and consumers.
  • Goldman has a special exemption from the CFTC to exceed the trading limits normally placed on commodity speculators. Not only was this exemption secret for 17 years, the CFTC recently had to ask Goldman for permission to release the letter to Congress!
  • Goldman Sachs employees are heavy contributors to the Democratic Party giving it over $4.4. million in the last election. Barack Obama received more than $997,000, Feinstein received $24,250, and Snowe received $17,000 from Goldman. All-in-all, this could result in a pretty decent return-on-investment for Goldman.

As the global warming bubble inflates and then bursts, will Goldman Sachs self-regulate all the way to the bank… making record profits at the expense and misery of taxpayers and consumers?

Can you tell the difference between the CFTC and Goldman Sachs?

Gary Gensler, CFTC Chairman

Gary Gensler, CFTC Chairman

Lloyd Blankfein, Goldman Sachs Chairman

Lloyd Blankfein, Goldman Sachs Chairman

Rolling Stone's Matt Taibbi Speaks About Goldman Bonuses

More on the corruption surrounding Goldman Sachs. Matt Taibbi of Rolling Stone has been doing a good job following all of this. Here's a link to the article referenced in the video.

Is Obama on Goldman's Payroll?

I've spent most of my career working in the financial services industry, and I have never seen the kind of corrupt shenanigans that are going on today. Washington is absolutely in Wall Street's hip pocket. Yes, today, on the heels of a near collapse in the economy. The gentleman in this video provides a very lucid analysis of what's going on.

Goldman Sachs' Tentacles Reaching into Government

Here's a very clear presentation on how Goldman Sachs has woven its way into the fabric of our government. Is it any surprise that they are able to virtually print money?

Tuesday, July 7, 2009

Wednesday, June 10, 2009

Executive Pay Caps are a Sham

The government’s theory is that compensation plans at the big banks were responsible for the banks’ excessive risk taking. To curb the risky behavior, the government wants to limit pay to $500K per year. I guess the idea is that the bankers will engage in risky behavior until they’ve made their $500K, then they’ll pack up their beach chairs and go on vacation until January.

This is obviously a very indirect and gutless way to deal with a major problem, and for starters, it won’t work. The best managers and technicians in these risky endeavors are simply going to move on to banks that aren’t covered by the provisions of the law, or they’ll start up their own firms. Let's face it, if you make $5 million a year, you’ll move to London if you have to. Some sacrifice! The trouble is, the banks they leave will keep running their risky businesses, but they’ll just run them with less talented people; i.e., those who are willing to work for less than $500K a year. How’s that for an unintended consequence? We might as well let teenagers manage our nuclear arsenal as well.

The fact of the matter is that we don’t want our banks engaging in risky activities AT ALL, other than normal lending activities, which have historically been challenging enough for our bankers to manage. We need to restore banking to what used to be called the 3-6-3 principle: borrow at 3%, lend at 6%, and be on the golf course by 3 o’clock. As holders of the public trust, we want our banks to engage in simple, transparent activities. The days of banks using depositor money to speculatively trade in exotic derivatives and foreign currencies for their own accounts need to come to an end, as do the days of banks making loans and then selling them off with no further exposure to risk. If you make a loan, you need to be prepared to stand by the risk of that loan. You’ll then be more careful making the loan in the first place.

We’ve already seen plenty of evidence that Obama and his team are as corrupt as any group of politicians we’ve had in the White House. The payoffs to labor unions, special interest groups, and corporate bigwigs started as soon as Obama took office. So, it’s no surprise that his administration is pussyfooting around with implementing much needed reforms. It’s no surprise, but it’s inexcusable. (Full disclosure: I voted for Obama, but suffice it to say, I’d like my vote back.)

We don’t need indirect, half-hearted approaches to solving major problems. We need to identify root causes, and aggressively rebuild the systems that will serve the public’s interests and restore trust in our financial system. That’s what was done following the Great Depression, and the regulations that came out of that era served us well for many years until our politicians succumbed to lobbyists’ payola or to their own ill-conceived notions of how to create a "great society" that were completely oblivious to unintended consequences. We must return to basics. Restoring the Glass-Steagall Act would be a great place to start.

Sunday, May 10, 2009

Geithner's PPIP: The Greatest Boondoggle in History

Treasury Secretary Tim Geithner's Public-Private Investment Program (PPIP) is the "greatest boondoggle in the history of the world," says William Black, a former bank regulator, who was counsel to the Federal Home Loan Bank Board during the S&L crisis. Says Black, an Associate Professor of Economics and Law at the University of Missouri - Kansas City, as occurred during the S&L era, the PPIP will allow banks to exchange "trash for cash" and turn "real losses into faulty gains." If the goal of Tim Geithner and other regulators was "to rip off the American taxpayer for the benefit of the least-deserving wealthiest people you can imagine, well - mission accomplished," Black says.

Black's interview on Yahoo! can be seen here:

Friday, May 8, 2009

Friday, April 24, 2009

Bill Moyers: Discussion on Financial Crisis

Bill Moyers had another great show on the financial crisis tonight. The show unified many of the concepts I have written about in recent months. The discussion raises many important questions, perhaps none more important than whether the Obama administration will have the courage to support the newly-proposed Congressional panel that will investigate the crisis and propose reforms. Please watch.

Bill Moyers speaks with economist Simon Johnson and Ferdinand Pecora biographer and legal scholar Michael Perino. Johnson is a former chief economist of the International Monetary Fund (IMF) and a professor at MIT Sloan School of Management, and Perino is a professor of law at St. John's University and has been an advisor to the Securities and Exchange Commission.

Click here to watch video.

Sunday, April 19, 2009

Goldman Sachs' Trading Profits: the more things change, the more they remain the same.

That's Lloyd Blankfein, CEO of Goldman Sachs. You'd be smiling too if you'd just gotten away with one of the biggest heists of all time. Here's why he's so happy:
  1. In 2008, Goldman loses billions trading in mortgage-backed securities and related derivatives.
  2. To qualify for bailout funds, Goldman's application to convert to a bank holding company is expedited, even though it doesn't engage in any common banking activities. (Have you ever seen a Goldman Sachs ATM, credit card, or TV commercial?)
  3. Their former CEO, then-Treasury Secretary Hank Paulson, gives them $10 billion of TARP money...well, they are a bank now, after all.
  4. News surfaces that Goldman had been hedging its exposure to losses in mortgage securities by buying credit default swaps from AIG. (Oh, so you mean they have insurance to cover their losses? Why didn't they tell us that before we gave them the TARP money?)
  5. The Fed and Treasury think a calamity will ensue if AIG fails and its counterparties, like Goldman, are not paid off. So, an additional $80 billion of taxpayer money is given to AIG, who promptly pays off its counterparties, including several foreign banks. Goldman Sachs gets $13.9 billion. (But wait! Didn't we already cover Goldman's losses with TARP money?)
  6. Goldman loves the volatility in the markets--it makes for great trading--and racks up $5.7 billion in trading revenues in the first three months of this year. In short, they're right back to doing the same things that got them into trouble in the first place.
  7. Goldman says it doesn't like that the TARP funds came with strings attached, so they want to pay the money back early. Things are going pretty well for them these days, so they sell $5 billion in stock to raise additional money to pay back the TARP funds.

Happy days are here again!

I would like for Obama to ask his people how the public was supposed to be helped by providing Goldman with the risk capital to run its trading desk. TARP money was intended to fund loans to businesses and consumers, not high-risk trading operations.

Good grief.

Here's more on the whole debacle from Time:

Click here for Time article.

Bill Black Speaks Out on the Stress Tests

Bill Black, a former senior bank regulator and S&L prosecutor, is one of the few people with both the guts and knowledge to speak the truth about how the banking crisis is being mishandled, and principally by the people who caused it in the first place. When all we get is spin from Larry Summers and Tim Geithner, it's reassuring that at least one strong, reasoned voice is willing to speak the truth.

From the article that accompanied the video:

The bank stress tests currently underway are “a complete sham,” says William
Black, a former senior bank regulator and S&L prosecutor, and currently an
Associate Professor of Economics and Law at the University of Missouri - Kansas
City. “It’s a Potemkin model. Built to fool people.” Like many others, Black
believes the “worst case scenario” used in the stress test don’t go far enough.

He detailed these and related concerns in a recent interview with Naked
Capitalism. But Black, who was counsel to the Federal Home Loan Bank Board
during the S&L Crisis, says the program's failings go way beyond such
technical issues. “There is no real purpose [of the stress test] other than to
fool us. To make us chumps,” Black says. Noting policymakers have long stated
the problem is a lack of confidence, Black says Treasury Secretary Tim Geithner
is now essentially saying: “’If we lie and they believe us, all will be well.’
It’s Orwellian."

The former regulator is extremely critical of Geithner,
calling him a “failed regulator” now “adding to failed policy” by not allowing
“banks that really need desperately to be closed” to fail. (On Saturday,
Geithner said on Face the Nation, if banks need "exceptional assistance" in the
future "then we'll make sure that assistance comes with conditions," including
potentially changing management and the board, but did not say they'd be shut

Black says the stress test must also be viewed in the context of
Geithner’s toxic debt plan, which he calls “an enormous taxpayer subsidy for
people who caused the problem.” The fact bank stocks have been rising since
Geithner unveiled his plan is “bad news for taxpayers,” he says. “It’s the
subsidy of all history."

Larry Summers and "Brain Bubbles"

I love this! From the article's author on Larry Summers and "brain bubbles":

"This is the process wherein the intelligence of an inarguably intelligent person is inflated and valued beyond all reason, creating a dangerous accumulation of unhedged risk. Brain Bubbles need to be popped; Larry Summers needs to be stopped!"

Right on!

Click here for related article.

Monday, April 13, 2009

We need to say goodbye to Goldman Sachs

I have a real bee in my bonnet these days about Goldman Sachs. Yes, they are good at what they do, and technically speaking, I can’t say that I’m aware of them having done anything illegal during the buildup to our current crisis. However, in my book, they are the poster child for all that should be purged from the financial markets. Having Goldman running amok in our financial system is like having wild pigs in your back yard. No one really dislikes wild pigs, but there's absolutely no upside to having them in your back yard. Even worse, they can do a fair amount of damage. Ditto for having Goldman in our financial system.

Goldman’s bread and butter is trading and investment banking, the latter of which is on hiatus for who knows how long. So, its shareholders essentially just own an interest in a big trading desk. Goldman takes shareholder capital and speculatively trades in stocks, options, bonds, foreign currencies, interest rates, credit default swaps, etc. Name a derivative, and they probably trade it. As I said, it’s all speculative. They do nothing to create value. They just trade. However, what they do is different from just going to Vegas and rolling the dice. How so? Because their very act of placing a bet can actually have an influence on the outcome of that bet; for example, when they choose to short a stock. They can relentlessly drive a stock into the ground, and those on the losing side of the trade are the public, who were lulled into believing that buy-and-hold is a viable investment strategy, and that the SEC is ready and able to protect their interests.

I’d like someone in government who is allowing this to happen to explain why it’s in the public’s interest to let Goldman ride roughshod over the financial markets. How do we benefit? Clearly, we don’t, and that’s precisely why the realm in which Goldman plays—what some people call the shadow market—needs to be regulated into oblivion. Simply put, we need to purge the financial system of the casino activities that have done so much harm in recent years, and we need to make an example of Goldman, precisely because it is the much-envied “gold standard” among firms that engage in these activities. The financial markets need to be returned to long-term investors, and made safe with rules that are clear and enforced.

It is a tragedy that the public has been denied the right to participate in the capitalist system without it being corrupted and manipulated. Investors with good intentions have been completely thwarted by the likes of Goldman and countless other hedge funds and institutional trading desks for too many years now. Enough is enough. The stock market wasn’t created with the intention of using the public as pawns in trading schemes that only benefit the rich. Goldman and other market manipulators must be shown the door if we are to ever restore trust in the financial markets.

Saturday, April 11, 2009

Leverage: The Meltdown Amplifier

Someone on another blog, SeekingAlpha, wrote an article in which he asked, "Why does one crash cause minimal damage to the financial system, so that the economy can pick itself up quickly, while another crash leaves a devastated financial sector in the wreckage?"

The answer is actually quite simple: leverage. Leverage creates losses that are multiples of the original amount of capital that was put at risk. In short, people borrow to buy assets that end up losing tremendous value, and then those people are left with the debt and no assets to sell to cover it. For example, low margin requirements amplified the losses associated with the 1929 crash, making the fallout much more severe than the typical market correction. Investors were required to put up only 10% of the cost of the stock when they purchased it. When the stocks lost most of their value, the investors still owed a remaining 90% of the original cost. Where was that money going to come from? Certainly not from selling the stock. So, the stock investors of 1929 defaulted on their margin debt and left the banks holding the bag. This is the same situation today, except that we're talking about inflated home values and defaulted mortgage debt.

Complicating the mortgage default problem is the destruction caused by the casino-like activities in the unregulated credit default swaps market. The likes of Goldman Sachs put up pennies on the dollar to buy swaps (again, the use of leverage), most notoriously from AIG, and left AIG with losses of 30-50 times of what Goldman paid. Because our brainiacs in Washington decided to bail AIG out, the public will now be paying for those losses for decades, thus putting a stranglehold on the economy for years.

Most economic crises have not involved substantial leverage. The dot-com crisis is a good example. Trillions were lost in that crisis on dot-com stocks, but those stocks had not been purchased with leverage. Money was transferred from one party to another, but there was no change in the amount of money in circulation within the economy. In other words, although the dot-com stocks took a beating, the economy as a whole was net neutral. Hence, the recovery was fairly swift, given the magnitude of the disaster.

Today, in contrast, we borrowed to create inflated asset values. Indeed, the credit amplified the inflation, as buyers who weren't required to put cash on the table became desensitized to the prices they were paying. Those assets have now declined in value by half, but the debt remains. Hence, the economy as a whole is in a net loss position (technically speaking, insolvent), whereas it wasn't following dot-com mania. It is much more difficult to recover from such losses.

Our government is borrowing money to pay off the debts that are left over from the housing bubble, thus socializing the losses from the housing market and Wall Street's excesses. However, replacing one debt with another debt does nothing to get the economy out of its net loss position. Only the generation of profits and the systematic and disciplined repayment of debt from those profits can do that.

Saturday, April 4, 2009

Remember the dot-com meltdown? What if the government had bailed out Webvan,, and

Some of my friends have asked me how the current crisis differs from the dot-com meltdown and the recession that followed it. They asked, with a hopeful inflection, "Weren’t trillions of dollars lost in that whole debacle, and even though that recession was really bad, didn’t we get over it pretty quickly?"

Yes, it was an obscene, huge disaster. Trillions were lost, and like today’s crisis, it was the result of a massive, irresponsible bubble. Of further similarity, the damage was initially confined to one economic sector (tech then, and home lending this time), but the fallout subsequently spread over the next year or two to the rest of the economy, resulting in a widespread and deep recession. Importantly, we did recover from that recession fairly quickly, especially when you consider that the recession was exacerbated by an event, namely 9/11, that obviously had no connection whatsoever to the dot-com meltdown. That said, to be fair, it is also important to remember that the recovery from that earlier recession was made possible at least in part by the credit-fueled bubble that we’re currently suffering from.

So, will the recovery from this recession also be quick? If not, what’s different this time?

My feeling is that the current government-sponsored stimuli will lead to the appearance of recovery for a time, but it won’t be sustainable. Why? Because all true recoveries are born from the failure of the weak, and the redeployment of sidelined assets (including human assets) in the creation of new goods and services that consumers really need and want by viable businesses with the know-how to cost-effectively leverage those assets. In other words, financial capital (whether it comes from investors or taxpayers) must be deployed in ways that will generate true demand in order for economic activities to be sustainable. Government-sponsored spending initiatives don’t do that. Why? If they were viable, sensible investment opportunities, investment capital would have already found its way to them.

In the dot-com meltdown, the likes of Webvan,, and were allowed to fail. Shareholders and bondholders lost billions, but there were no bailouts. Their business models were flawed from the get-go, and there simply was not enough demand for their services to make them viable long term. Death was a fitting and proper solution, and the hordes of tech workers who had been wasting their time creating animations of gerbils jumping through flaming hoops were provided an opportunity to move on to the likes of Apple, Cisco, Google,, and countless other enterprises old and new to create new products and services. Had the government propped up Webvan with billions of dollars to build additional unneeded warehouses, where would we be today? Of course, there was that painful couple of years in which businesses and consumers hunkered down, cut costs, rebuilt their financial strength, and regrouped strategically. That was no fun, but the healthy emerged from that period stronger, leaner, and more focused on providing true value to the consumer.

Today, unfortunately, we refuse to take the pain and we are propping up the weak, afraid to face reality. Insidiously, those who have been in bed with Wall Street for years have been put in charge of cleaning it up, so no real progress will be made until all personal favors are repaid and the players move on to their vacation homes on Long Island. So, rather than promoting failure and a healthy redeployment of assets to capable stewards of those assets, we are left with zombie corporations that will need, in Treasury Secretary Geithner’s judgment, $2 trillion of additional funding to survive. (Geithner is one of the bad guys, by the way.) In the meantime, while we’re trying to resuscitate those zombies, we plan to spend trillions more on bridges to nowhere (i.e., “shovel ready projects”) and other social programs that are destined to become anchors around taxpayers’ necks, as our politicians will surely find ways to turn temporary stimuli into permanent entitlement programs. When all is said and done, we’ll be no better off. Our economic engines will not be refueled, the corrupt and incapable will still be in charge, the casino mentality responsible for this mess will be allowed to return (if not facilitated outright), and we’ll be saddled with $10 trillion more in national debt, with no obvious benefits from its expenditure. Hence, these are the reasons why the recovery will not be sustainable.

Capital is precious, and it must be used in ways that will provide returns. Life support for zombie corporations, bridges to nowhere, and high speed trains to Las Vegas don’t provide a return on investment. Like information, ideas, and humanity itself, capital needs to be free to find its proper place. It needs a home where it can prosper and multiply. Ineffectively deployed capital needs to be allowed to move to a new home, as it did following dot-com mania, the S&L crisis, the “Asian Contagion” currency and credit crisis of the ‘90s, the oil patch meltdown of the early ‘80s, the foreign lending crisis of the late ‘80s that almost took BofA down, and the LBO junk bond boom-bust of the ‘80s. (See, there’s really nothing unusual about crises. We have them all the time!) All of those crises were considered devastating at the time, but they ultimately had no long term ill effects. On the other hand, the current blueprint for recovery was tried in the U.S. in the ‘30s and in Japan in the ‘80s-‘90s, and the outcomes then, respectively, were the Great Depression and the “Lost Decade.” I wouldn’t call that a blueprint for success.

Sunday, March 22, 2009

I thought "contracts were made to be broken"

Riddle me this: why is it that for years and years businesspeople used to say that "contracts were made to be broken," but as soon as the government steps in to financially back a company, they're all of a sudden saying that we have to "protect the sanctity of contracts?" I guess we can all afford to take the high road when we don't have to pay the bill.

When companies don't have unlimited funds at their disposal, it's amazing how creative and cooperative they can be with each other in renegotiating their obligations. If AIG had told its counterparties that they could either have their insurance premiums back or get nothing in a bankruptcy, wouldn't those counterparties have been willing to work something out? Instead, the government raced in with billions of dollars and made good on 40-to-one bets. Goodbye $170 billion of taxpayer money. How smart was that?

Businesses restructure deals and renegotiate contracts with employees, vendors, customers, and business partners all the time. The likes of Goldman Sachs are probably laughing their asses off at how naïve the government was for making good on their bets. If the government can't learn how to do business the way businesses do, then maybe it shouldn't be rushing into the corporate sector with billions of dollars in taxpayer money.

Saturday, March 21, 2009

Understanding credit default swaps and why the AIG bailout was wrong

Was the AIG bailout really necessary? Maybe, but probably not. Let me explain.

Credit default swaps (CDS) can be used in two ways: 1) to insure actual mortgages or other forms of debt against non-payment, or 2) as speculative instruments, like stock options, to place bets on the condition of a specific debt obligation or the debt markets in general. Of the CDS related to the mortgage crisis, estimates are that about 10% of the CDS were used to insure actual debts, while 90% were used in speculation, where the buyer did not actually own any debt to be insured. I'll address each of these "pools" of CDS separately.

Re the 10% non-speculative pool, if you assume that all of the sub-prime mortgages originated in the past few years, $6-$7 trillion worth, had been insured with CDS (which they weren't), and that AIG had been the only insurer (which it wasn't), and that the mortgages are now worth 50%-60% of their original values, then AIG would be sitting on about $3 trillion in CDS losses. This would have aggregated all of the mortgage losses under one roof. In other words, the total CDS losses would be equal to, and could not exceed, the amount of the mortgage losses. So, on the scoreboard: mortgage losses $0; CDS losses $3 trillion. If this had been the scenario, there would have been two options. One, AIG could have been taken into bankruptcy and the holders of the mortgage obligations would have been forced to eat the losses they thought they had insured. Alternatively, the government could have decided to, and did, bail out AIG and pay off the CDS. To get the payoffs, however, the holders of the CDS are supposed to sign over their mortgage assets to AIG. If the mortgages ever increase in value, then AIG would at some later date be able to recover some of its CDS losses. So, under this scenario, all financial institutions other than AIG would remain healthy, and AIG (and the government as owner of AIG) would be sitting on a stack of mortgages, hoping and waiting for a bounce-back in housing values.

Re the 90% speculative pool, these were just bets between financial firms (i.e., Wall Street firms, insurers like AIG, hedge funds, etc.). These firms can place all the bets they want with each other, but ultimately, no money related to the bets ever leaves the financial system. This is why all the talk about an AIG collapse leading to a meltdown of the financial system doesn't make sense. Think of it this way: imagine all of these firms walking into a room with $100 each. You lock the door behind them, and allow them to feverishly place bets with each other on anything they want for 24 hours. At the end of 24 hours, you unlock the door and count the money. How much money would be in the room? An average of $100 per firm. One firm could theoretically have all the money, but on the whole, the financial system would be whole. Now, if the government were to walk into that room and say, "You know, this was fun, but we're going to reverse all of the bets you guys placed in the last 24 hours, and you all get to leave the room with what you came in with.", what would be the downside? None, as none of them actually needed the insurance to cover losses they had incurred in the mortgage market. All the betting was just a bunch of nonsense that didn't need to take place, and it can be reversed without any consequences.

The AIG crisis was greatly overblown due to a fundamental lack of understanding by our government officials about the speculative uses of CDS. When AIG melted down, cool heads needed to prevail, and all CDS activities should have been suspended. Speculative CDS trades should have been reversed and the premiums paid for the CDS should have been returned to the buyers. In other words, these speculative CDS trades could have been unwound, with a net loss of zero to the financial system.

To the extent AIG’s CDS were covering legitimate mortgage losses, the government could have made an assessment of whether AIG could make good on those claims, assuming they'd be able to take custody of the underlying mortgages that were insured, and that those would be sold for, say, 50 cents on the dollar. Including the proceeds from those mortgage sales, if AIG wouldn't have had enough capital to cover those legitimate claims, then it should have been put into bankruptcy and the claimants could have been paid some pro rata share of the amount they were due. This would have put the remaining portion of the mortgage losses back onto the books of the banks that were holding the mortgages. The government would then have to deal with those banks' solvency one-by-one.

In reality, the government has allowed AIG to make good on all claims, regardless of whether they were bona fide or speculative. Speculative traders in CDS have walked off with $100 billion in taxpayer money. Goldman Sachs, for example, walked off with almost $13 billion. Worst of all, when AIG paid off these amounts, they didn't force the counterparties (like Goldman) to hand over any mortgages to offset the losses. (Remember, in the insurance business, when an insurance carrier pays a claim, they have a right to take title to the impaired asset.) AIG and the government could have cut the losses in half simply by forcing the counterparties to go into the mortgage market, buy the mortgages covered by the CDS, and turn them over to AIG when AIG paid off the CDS. Why they didn't is just one more example of either incompetence or panic-induced haste at work.

Clearly, this CDS mess is the biggest financial disaster in history. Due to gross incompetence, or even worse--perhaps a conspiracy against the public in favor of Wall Street--we are witnessing the greatest transfer of wealth from the general public to the rich in the history of mankind. What can we do about it? We can still insist on a massive accounting of the speculative CDS positions. Remember, that money has not left the financial system. It's still rattling around the halls of Goldman Sachs and elsewhere. To the extent it went to overseas banks, we probably won't be able to get it back, but to the extent it's within our borders, we have a right to it. It's our money.

Sunday, February 1, 2009

Barney Frank is a Wimp, Part 2

Congressman Barney Frank continued to provide more obvious evidence that he is wimping out in performing his duty as Chair of the Financial Services Committee today on ABC’s “This Week.” He continued his campaign of setting expectations at a low level with his metaphorical discussion of “collateral benefit;” i.e., how we’re all going to have to get accustomed to the notion of some people becoming unjustly enriched by the policies that Washington will put in place to the solve the financial crisis. Furthermore, he ranted about how he wants to protect the jobs of public servants in his own district, and how he wants to cure society’s ills (e.g., the unfair distribution of income) with the economic stimulus plan.

Barney Frank is quite simply an irresponsible buffoon, and his attitudes and positions are inexcusable. When you accept a committee chair position, as he has done, that position should be your primary area of focus, especially when that area is in crisis. Instead of furthering his social agenda, he needs to worry about fixing the banking crisis and restoring credit.

Banking is the foundation upon which our economy is built. Trying to build a “great new society” on top of the shambles of our current economy would be like trying to build a skyscraper on top of Jello. Problems must be prioritized and addressed in their proper order. We need to reliquefy the banks by auctioning off their toxic assets AND by providing them with some new form of debt relief that would eliminate their many billions of dollars in exposure to derivatives losses. Without doing both of these things, the banking crisis cannot be solved, nor the broader economic crisis. There’s no point entertaining the notion of curing society's ills (as the Democrats seem compelled to want to do) without a healthy economy. We need to prioritize.

Frank’s “performance” on "This Week" can be seen here:
Click here to watch video in a new window

Thursday, January 29, 2009

Barney Frank is a Wimp

In an interview tonight (January 29, 2009) on Nightly Business Report, Congressman Barney Frank, Chairman of the Financial Services Committee, compared solving the credit crisis to fighting a war. He said that in a war, you have the concept of collateral damage: innocent people being inadvertently harmed in the crossfire. On the other hand, he warned that to solve the financial crisis, the public is going to have to get used to the concept of collateral benefit: undeserving people being unjustly enriched by the policies implemented to solve the crisis.

Maybe Barney Frank wants to roll over and concede defeat, but I certainly don’t. Going back to the war metaphor, can you imagine if FDR had said, “Gee, that Hitler guy is one bad ass dude. Fighting him is going to be really hard. I guess we’re going to have to get used to the idea of Europe being under his domination.” Are you kidding me?! Are we really so afraid to tackle a problem head-on and to deal with it appropriately, and in a way that is fair and just to the public?

We have to find the root causes of the crisis and solve them with minimal damage to the public. Credit derivatives are one big part of the problem. If the banks were so poorly managed that they let business unit heads and rogue derivatives traders expose them to countless billions of dollars in losses to hedge funds, why shouldn’t the public have the right to nullify those transactions and send the hedge funds packing? There is a concept under the law called “unjust enrichment,” whereby transactions that are blatantly unfair can be overturned. That’s clearly the case here, and we’ve got to use that concept to nullify these derivatives transactions.

Merrill Lynch reported a $15 billion loss in Q4, mostly related to derivatives losses, and their new parent company, BofA, promptly went to the government for a handout and got one. We have got to be out of our minds for letting that happen, and for letting someone like Barney Frank, who is clearly absent a spine and any measure of ingenuity, represent us.

Monday, January 5, 2009

Executive Leadership for Sustainable Growth in Mature Firms

Below is a link to the report from my team's management research project at MIT. It was in fulfillment of the requirements for an MBA in the Sloan Fellows program at MIT's Sloan School of Management. It was a really interesting and gratifying research project.

Click here to get the document. It's a big document, so it can take 30 seconds or so to load on older machines.