Vladimir Kagan's Blog

Financial Crisis, Problems of Enforcement - part 1

 

 

The Economy is Rotten… But We’ll Survive

(for the time being!)

A report on the latest Coudert Institute seminar

Copyright Vladimir Kagan, March 8, 2011

 

By now, the economy and it’s bi-product, the deficit should be old-hat news, but it has taken the country by storm… even revolutions in the Mid-east can’t drive the issue off the headlines.

 

 The gibberish going on in Congress is Band-Aid medicine… No One wants to give up their entitlement… it’s OK if it’s the other guys benefits, but don’t take mine! There can be no real fix without increased revenue… which means taxation.

 

With its in-your-face approach to current events, last week’s session at the Coudert Institute was a shock treatment.

 

We’ve been diddled by the banks… and other big-time players!

 

This revelation came on a pleasant sunny afternoon in Dale Coudert’s garden…

 

….Laid out in plain language by Robert Monks, the author of Corpocracy and a lifelong expert on corporate governance together with Richard D. Greenfield, a banking, securities and consumer litigator.

 

•            The financial meltdown was a man-made crisis, triggered by corporate greed. It started with reckless husbanding of the sub-prime mortgages.

•            Back in 2001 banks had an investment ratio of 7 to 1…. By 2008 it had jumped to 50 to 1.

•            There was no accountability

•            Many of the Multi-national corporations are bigger than a country…Only the super 8 powers are larger. We’re talking about corporate giants like Citigroup, Exxon, Goldman Sachs.

•            They are largely unaccountable to any country’s laws. They write their own rules. Their leaders are the Emperors of today; they vote salaries to themselves that are obscene. Their Board’s are composed of like-minded corporate cronies that create a buddy system.

•            Shareholders can’t shake their control.

•            In the USA, their favorite state for incorporation is Delaware, with laws that coddle their transgressions.

•            They are not shy to incorporate in tax havens like, The Cayman Islands, Sky, Guernsey

•            These modern-day villains fall under the banner of Wall Street…. No wonder it is considered the curse of the 21^st Century.

•            No one has been punished. No one has gone to jail.

 

The Rouge's Gallery

Richards Fuld Jr. Lehman Bros.             Sanford Weill  CitiBank             E. Stanley O'Neil: Merirril Lynch

 
 Lloyd Blanfein Goldman Sachs

 

In no uncertain terms, Monks and Greenfield implicated the culpritidy of Lloyd Blanfein, Chairman of Goldman Sachs, who, at the onset of the crisis in 2007 received the largest corporate bonus ever of $67.9 Million. Aided by his old colleague Bob Rubin, recently returned to the firm after a stint as Treasury secretary under Clinton. (A recent quote in a financial paper) “The Treasury secretary who presided over the now-bursting bubble might be a logical subject for some of the discussion out there right now. But no: Robert Rubin is invisible these days, lost in the lazy media impulse to blame whoever’s in power now. Rubin along with Phil Gramm, helped kill legislation to make derivatives more transparent”

 

Sanford Weill, chairman of Citigroup, was one of the worst. His “culpritity” in the crisis that burst the bubble has his fingerprints all over it’s creation.…He spearheaded the sub-prime dilemma by blandly ignoring the risks: Mortgages going to unqualified borrowers, inflated land and real estate values. They traded these amongst themselves, bundling good loans into the bad and creating false profits and values.

 

Richard S. Fuld, Jr., the arrogant chairman of the now defunct Lehman Bros. The 4th largest investment bank in the USA…. A March 2010 report by the court-appointed examiner indicated that Lehman executives regularly used cosmetic accounting gimmicks at the end of each quarter to make its finances appear less shaky than they really were.

 

E.  Stanley O’Neal, chairman of Merrill Lynch, now a subsidiary of Bank of America, on November 2007, announced it would write-down $8.4 billion in losses associated with the national housing crisis… He got fired for this.

 

The system had been rotten for years, ever since President Reagan started to strip away regulations, it left the banks and investment bankers to forage on their own. No one paid attention to the underpaid regulators, who were easily bought and brought into the banking system. The bank’s own mandated regulatory systems were ignored. It all imploded by 2007. All signs of their flagrant miss-management and cover-ups were ignored.

 

In 2009, President Obama considered these culprits too large to fail and bailed them out….. He paid bitterly for this in the 2010 elections.

 

$$$$$$$

 

The bad news was sweetened by an after dinner cabaret featuring my old friend Robert Hardwick and his trio accompanying Nancy Anderson and Patricia Cook, who sang songs with monetary themes…. A surreal ending to a heavy dose of reality.

The next morning’s session was  down-to-earth…. I’ll tell you about this in my next letter.

 

P.S. Bob Monks and Dick Greenfield are no strangers to big money…Greenfield, as a class-action lawyer has made millions while the public he battles for make pennies. Monks is old money…Both are familiar with and on a first name basis with the culprits; they went to the same prep schools and colleges; sit on the same charities and eat at the same dinner parties. 

 

 

 

 

 

 

 

 

 

 

 

 

Social Networking – The George Orwell of the 21st Century

 

Copyright Vladimir Kagan February 7, 2011

 

 

George Orwell’s book, 1984, published in 1949 - tried to predict what it was going to be like forty years hence….“Big Brother is watching you”…. Poor George couldn’t begin to fathom what is going on today!

 

Most of us (of a certain vintage) are uninitiated into the jargons of today’s youth. We may have a glimmer of what Social Networking is; if you are a movie fan and have seen the movie by the same name (it’s been nominated for an Oscar) you’re obviously very savvy.… You may have been invited to become a friend on FaceBook… If you have great savoir-faire, you may even have brushed up against Twitter, (Sarah Palin’s favorite form of communication)…. I’m almost certain that You-tube is beyond your kin, unless you have grandchildren hovering near you.

 

This was the context of The Coudert Institute’s second mesmerizing forum of the year titled: “What is Social Media? Where is it Going? Privacy and Governance on the Mobile Net”

 

Dale Coudert opening the second of her fascinating seminars - Social Networking and what it means to us

….All this movie stuff is not what it is about. IT’S ABOUT YOU and where you’ve been, what you are doing, how you are feeling, what you are buying, what you are eating, who your friends are and lots and lots more. Who’s interested in this?.... Walmart for one, your government for certain, telemarketers, hucksters, Wall Street Bankers, City planners, the Department of Defense and of course, our enemies.

 

This is an amazing tool for good and evil…. how to control and regulate it was much of the morning’s discussion. We were treated to this erudite information by two of the country’s top experts in the field…. John Henry Clippinger, PhD, currently Co-Director of the Law Lab at the Berkman Center for Internet & Society at Harvard University and Professor Alex “Sandy” Pentland, Director of MIT’s Human Dynamics Laboratory and the MIT Media Lab Entrepreneurship Program.

 

John Henry Clippinger, PhD, from Harvard University and Professor Alex “Sandy” Pentland of MIT about to square off on the pros and cons of Social Networking

This was the stuff for advanced students’ four-year graduate course in Cyber Media…. We got a glimpse of the complexity of the subject in three intensive hours of conversation with these experts.

"Sandy" Pentland, MIT's guru on Cyber space introducing us to "Human Dynamics 101"

 

Dr. Clippinger driving home the good and evils of the new world of Cyber information

It is inconceivable how sophisticated the technology is in this rarefied field. Why it is going to change everything…. what we can or can’t do about it… It is Email turned inside out. It acquires its knowledge not from your computer (that’s old fashioned), but from your cell phones, GPS, I-Pads, monitoring medical implants and other smart paraphernalia. The “boys” at MIT can predict your health before you can…they know when you might be catching the Flu, they know when you are stressed-out (even if you don’t know it), they can track the flow of infectious viruses, a change in your personal behavior, (even if you are ducking out for a clandestine affair!) they know when you go to the bathroom, they are privy to when, where and what you are shopping, they can foretell who are your friends with 95% accuracy, 40% who are not your friends now but may become so within 6 months…..….The list goes on. All this requires NO new hardware…. the signals already exist…. This thing crosses borders seamlessly! No wonder huge conglomerate merchants will pay dearly for this information: These companies can tailor their marketing accordingly: predict buying trends, control inventory flow, explore new markets with accuracy, adjust for regional proclivity and corner markets at their whim. (And you can’t do a darn thing about it!)

 

This intrusive technology can also determine

• If you have or are susceptible to Diabetes
• Where cops should be located on a Saturday night
• Where taxicabs in New York City pick up most passengers
• Infant mortality and where it is most prevalent

How to regulate this sensitive material is the joint project of the MIT and Harvard teams.

 

There’s an upside to this information gathering: It’s called “Shared Mobility”. It can predict traffic jams, people movement, vehicular movement, and social behavior. In emergencies like Katrina and Haiti it can locate victims and survivors, it can find the nearest heavy equipment for clearing roads, mudslides, prevent traffic jams, locate and move medical personnel into the troubled areas.

 

All this knowledge is the 21^st century version of the water cooler gossip at the office. Executive teams had for years tried to break-up this café klatch mentality by staggering, coffee breaks and discouraging discourse amongst its employees. In fact, it has been established that that wasn’t all bad. Gossip is the best form of disseminating information…. A large corporate entity saved $15 million dollars a year when they brought back the communal coffee break!

 

This flow of information is like the 1993 play (and movie): Six Degrees of Separation… By example, to celebrate the 40^th anniversary of the Internet, a contest was established called the Grand Challenge. 10 balloons were hidden throughout the USA…. it took the MIT team 9 hours to locate every one of them!

 

NUDGE, a new computer economics breaks it down this way:

 

Habitual                                                Attentive                                 

Fast                                                          Slow

Parallel                                                     Serial

Automatic                                                Controlled

Associates                                                Rule Based

Frankly, I haven’t the foggiest idea what this means)

But Dr. Clippinger assured me that it means 99% of what we do is habitual and imitative - and not "rational" or conscious!

 

Our current methods of gauging demographics are over fifty years old. Census taking is inaccurate and costly…the new technology is 10 times better and more precise.

 

A test study was conducted in San Francisco where they discovered entirely different patterns of activities in different parts of the city…. Like two separate communities… it was a window on tribal behavior. It would allow the city to explore new business models, population growth, and where the people really are and what they are doing!

 

 

The world we live in is full of sensors, whether at traffic lights, every corner in Las Vegas, subways, airports, department stores, boutiques, Hotel lobbies, even the lavatory…. What’s most troublesome is lack of accountability.

 

Adding to this heavy dose of Cyber reality, Dr. Clippinger told us about coming changes…where we’ve been and where we are going…. Not surprising, this explosion of information started with the hackers of twenty years ago…. This morphed into new early technologies such as Tech Model, Arpanet which became the Internet, Richard Stallman’s free software, open licenses, GPL, Browsers, The World Wide Web, Yahoo, Amazon, Portals, MSN, EBay, search engines such as Google…. We are in a fast evolving world of information. New players not dreamed of ten years ago, invaded our virtual world with social networking and chat messaging, BBS, Pod Casting, Friendstel, Twitter, Myspace, Orkut and of course Mark Zuckerberg‘s FaceBook.

 

Mark Zuckerberg, the sweat heart of the information age

The "smart-ass" kids that run today's world... Mark Zuckerberg and one of his cohorts at FaceBook

....and the rest of the FaceBook team (these photos were cribbed from the recent Time Magazine's cover story on Mark Zuckerberg as the "Person of The Year")

If you think that all it takes to access Facebook is to punch in a few words on your laptop and it floats to outer space... you are mistaken! This is just a part of FaceBook's elaborate electronics that make it all seem easy

Question: Whom can you trust???? No easy way to distinguish friend from foe. It can promote transparency in government. It can also foster revolutions as we are seeing in Egypt today.

 

IF Professor Pentland taught us how to swim in waters over our heads, Dr. Clippinger took us over the falls!... They jokingly said, MIT invents the Bomb and Harvard tell us where to drop it!

 

This well greased Mutt and Jeff team introduced us to the interesting correlation of “honest signaling” in the animal world and the Homo sapiens world we live in:

 

A Peacock’s display of his rainbow colors takes energy and is rewarded with mating privileges. It is an honest signal because it cannot be faked.

Researchers took an ordinary sparrow and tinted his feathers to replicate the dominant bird in the neighborhood. This worked fine for a while until his rivals figured out that he was a fake: then they killed him! Fellow sparrows found out that he was a fraud. Animals are good at that. Nature selects for that ability to detect dishonest signals and punish the deceivers. 

Deer, Moose and their ilk, posture with their antlers and win their superior standing with these obvious signs of their masculinity. In the REAL world, organizations posture in a similar fashion: Banks built tall and impressive buildings; insurance companies like AIG built armor around their reputation (until, like the sparrow, they crumbled from their own deceit). Citibank pouted its feathers to attain its dominance in the financial world, Lehman Brothers collapsed when their fabrications gave way to reality. These companies propagated falsehoods just like the little sparrow.

This posturing is regularly promulgated in political defamation. A New Yorker cover two years ago, depicting Obama and his wife Michelle, as Muslim jihadists…. A crude jest that took root and proliferated into a backlash of falsehood still circulating in conservative circles today. This defamation exists on both sides of the political spectrum. President Bush was vilified and political cartoonists practice this on a daily basis in their News Papers.

 

A bad judgment call by The New Yorker and its lasting consequences

The Internet is rife with fabricated events, which give legitimacy to falsehoods, BUT it also serves as a conduit for whistle blowers to expose the truth. This brings us to the now infamous WikiLeaks. Time Magazine suggested they could become as important to journalism as the Freedom of Information Act. Others consider Julian Assange, its founder, a traitor worthy of hanging. Actually, both are right. He has made whistle blowing a fine art and given them the stature of celebrated street artists…. He has also put people and governments in unimaginable jeopardy.

 

Julian Assange, the bete noir of the information age

The underground bunker of WikiLeaks

What fascinates me is the hardware behind all this cyber stuff. A recent photo in the New York Times showed the subterranean bomb shelter in Stockholm housing WikiLeaks high-powered hardware. It looks like the control center in an ultra-secured military bunker. Mark Zuckerberg’s FaceBook complex is similarly awesome. These “kids” are geniuses not only in the embryonic stage of their innovation, they take their start-ups to the industrial level and have the vision to capitalize on it…. making colossal profits.

 

This heady stuff calls for reinventing ourselves in 3D. You need to understand where and what you are dealing with…. And most of all, to protect yourself from this intrusion. Your digital footprint is everywhere! There will be 400 million medical sensors floating out in cyber space…. This could become commercial fodder for untold number of industries.

 

The mobile phone industry is growing exponentially…. cell phones are taking over the world…. remote areas where electricity is out of reach, there will be solar chargers. Inteli-pads that now cost $600 will come down to the $50s.

 

Cloud computing is the next phase in the evolution of software services…. no physical location…unlimited storage - under no one jurisdiction.

 

All this progress puts us face to face with the need for governance. Some people call for a Constitutional Convention of the 21^st Century. Privacy is the buzzword. There is a call for a global trust framework by regulators in the US, EU and Asia…. Worried corporations are seeking answers: Pay-pal is trying to rewrite their codes, Microsoft, Bank of America, AT&T, Verizon…. are active players in this game and turning to their think tanks for guidance.

 

Cyber technology is unstoppable. It is a truth that can be used for good or bad. We are fast loosing our privacy…but the world, by-and-large is a safer place to live in…. for the time being!

 

There Is No Opting Out!

 

 

 

 

 

 For information on the COUDERT INSTITUTE

www.coudertinstitute.org

coudertinstitute@aol.com

 

 

Dr. John Henry Clippinger is author of A Crowd of One: the Future of Individual Identity

 

 

 

 

To read more of Vladimir Kagan’s Blogs from the sublime to the ridiculous, go to:

http://vladimirkagan.typepad.com/vladimir-kagans-blog/

or Google: Vladimir Kagan Blog

 

 

 

 

America’s Love affair with Violence

 

Copyright Vladimir Kagan January 20, 2011

 

What has happened in Tucson has been repeated many times before; I went on Wikepedia and counted 104 shootings in schools since the University of Texas massacre in 1966. Columbine High School 1999, Virginia Tech 2007, Northern Illinois University 2008, are just a few of the more gory ones.

 

This will not go away with wishful thinking. It is a malignancy less curable than cancer. The love of violence in our daily culture is deeply embedded. The press is finding scapegoats in political rhetoric: but they are not alone! I blame our entertainment industries, which revels in mayhem, blood and gore.

 

You cannot go to a movie (this week we went to see The King’s Speech…a benign deeply intellectual film but were first bombarded with trailers (Approved for all audiences!) one new violent film after the other: exploding cars, imploding buildings, pyromaniac-effects, blood, gore and guns, guns, guns. (Any wonder that a few deranged people in our society will follow suit?)

 

Visit Netflix and their inventory of violence is endless. Go to Prime Time TV and each network is vying for more violent entertainment than the other (ratings drop if they don’t.)… Scan the hundreds of Cable stations and select more mayhem. Kid's Video Games are awash in violence. Pick up your local newspaper and see the carnage reported as news…but it also sells papers. TV news broadcasts wallow in the stuff, books feed this craze for violence. Add explicit sex into this mix and you are seeing modern America.

 

…So I say, why blame political rhetoric? Sarah Palin is just doing what comes naturally in Moose country…. and so are all the other rabble-rousers who screech on both sides of the political spectrum.

 

We need to reverse this epidemic. It will be tougher than reducing the national debt. Congress has no appetite for attacking the core problem: The proliferation of guns. They hide behind the constitution: The Right To Bear Arms…. It is not a gospel, though Congress treats it as such.

 

The right to bear arms was fine in 18^th Century America as the fledgling country was fighting a revolution: all the citizenry possessed then were muskets and single-shot pistols. However, it is totally out of sync in today’s world of AK-47 attack rifles, semi-automatic pistols and high-speed bullet clips…. Parenthetically, It is more difficult to drive a car legally, (you first must pass a state driving test)… than to acquire guns and bullets. For that, all you need do is go to the nearest gun shop and load up.

 

 

Let me give you a few guns statistics I just read:

• There are about 85 guns per 100 people in the United States

The only country that is more armed than America is Yemen!

• About 80 people die from guns every day, and several times as many are injured.
• Handgun sales in Arizona soared by 60 percent the Monday, after the Tucson shooting spree.

An article in the forthcoming American Journal of Lifestyle Medicine by Harvard professor, David Hemenway, quotes a book written a few years ago reframing the gun debate as a public health challenge. It makes clear that:

•  A gun in the home makes you more likely to be shot — by accident, by suicide or by homicide.
• The chances that a gun will be used to deter a home invasion are unbelievably remote. Dialing 911 is more effective in reducing injury than brandishing a weapon.
• American children are 11 times more likely to die in a gun accident than in other developed countries, because of the prevalence of guns.
• Suicide rates are higher in states with more guns, simply because there are more guns.
• Most homicides in the home are by family members or acquaintances — not by an intruder — the presence of a gun in the home increases the risk of a gun murder in that home.

Enough?... I think these are reasonable arguments for gun control legislation. But here is our Congressmen’s response to the issue:

 

• Gun rights advocates and lawmakers on both sides of the aisle said Thursday that there was little chance the attack would produce significant new legislation or a change in a national culture that has long been accepting of guns. If anything, they said, lawmakers are less receptive than ever to new gun restrictions.
• As an institution, Congress seems to celebrate gun ownership as much as many communities in Arizona.
• Many members of Congress own firearms, which they carry while riding around in farm trucks in their district or concealed behind a jacket in the streets, among constituents. “I carry a gun because it is a personal preference and for my own personal safety,” said Representative Jason Chaffetz, Republican of Utah, one of several lawmakers who carry a concealed weapon in their districts.
• Democrats who favor more restrictive gun laws say they do not expect new legislation to be passed, especially now that Republicans control of the House and Democrats have lost seats in the Senate. However, Democrats are hardly uniform in supporting tough gun laws as a matter of policy; as a matter of politics, Democrats in Congress have increasingly shied away from the issue.
• Asked about prospects for new gun restrictions, Representative Mike Pence, Republican of Indiana, asserted, “I maintain that firearms in the hands of law-abiding citizens makes communities safer, not less safe.”

 

• Erich Pratt, the director of communications for Gun Owners of America, says “These politicians need to remember that these rights aren’t given to us by them. They come from God. They are God-given rights.

 

 

• “The Pledge to America is our plan,” said Kevin Smith, a spokesman for the House speaker, John A. Boehner, “and our immediate focus is on addressing the top priorities of the American people, creating jobs, cutting spending and reforming the way Congress works.”…(A nice cop-out for responsible legislation!)

This week its business as usual in the gun industry: The Crossroads of the West gun show went on as planned at the Pima County Fairgrounds, 13 miles from the shooting site, another gun show is scheduled for the following weekend. “We had no hesitation about going ahead with the show so soon after the incident,” said Lois Chedsey, secretary to the Arizona Arms Association, a show sponsor. “Gun sales have been up since last Saturday”

An even bigger event in Las Vegas, the Shot Show — which bills itself as the country’s largest exhibition of guns and ammunition — is proceeding next week with a four-day run that fills two floors of convention space.

•••••

Here is my formula for a reasonable approach to the problem:

• Tone down the destructive rhetoric in our political discourse.
• Try a more constructive approach to Entertainment.
• Our military seeks intelligence about the enemies we are fighting to better protect the troops: Why can’t our civilian governments pool their knowledge of potential threats by deranged individuals wandering in our streets and schools and put them safely away before they do their damage? In the 60’s we closed thousands of our mental institutions and foisted the inmates into our streets…(they thought drug treatment would take the place of incarceration…it hasn’t). Preemptive action is cheaper than long-term prisons.
• Guns are too deeply entrenched in our social fiber…we can’t eliminate them, but it is our obligation to regulate who owns one. Educate and license an owner before they are qualified to own one: This can help ferret out the unstable.
• If the stated purpose of gun ownership is self-protection or hunting, there are many guns suitable for this purpose: Assault weapons are not the answer. (We have a dear friend, who is a gun advocate. She owns a hand-gun and a rifle. She has taken shooting lessons; she is licensed and she poses no menace to anyone…Neither she, nor Sarah Palin nor the thousands of other law abiding citizens have anything to worry about…. However, anyone possessing a gun should be licensed just like anyone driving a car…. SIMPLE!….(So why are they and the NRA so opposed?)

•••••

My friends, we are in for along siege…just duck, when you hear gunshots!

 

 

 

ELENA KAGAN AND ME

Copyright Vladimir Kagan 2010

 

I have become a pretty important fellow these days. My name is splashed on the headlines of all the newspapers, magazines, and TV talk shows…KAGAN… Never mind that it’s NOT Elena. (Elena Kagan is nominee for the US Supreme Court) Still, it must be rubbing off. (I have just received a clipping that one of my 1955 Sofas sold at a Wright Auction for double it’s estimated price….unfortunately, I won’t see a penny of it!... Never mind, as long as they spell my name correctly. Another recent quote was from John Dempsey President of Estee Lauder:

 

"This is the best design building in New York. It's better than the D&D Building. They have everything here. Vladimir Kagan is here!"

Having achieved this latent fame, I am trying to find a genealogical path to this wonderful namesake of mine. I have done my due diligence and found that she is not my daughter. Comparing photographs of her and my children, there is little resemblance…mine have bigger noses. She does have an endearing Kagan smile…that will go a long way toward claiming her as a relative. Now let’s look at other similarities: We both grew up on the upper West side; she on West End Avenue and I on Riverside Drive. Our parents were both Russian immigrants (though my mother was German). Heated intellectual discussions and liberalism flows in both of our veins. She went to Harvard Law; I went to Columbia Architecture in night classes. Elena was a powerhouse on the Harvard Law Review; I was a major player in the Columbia Ski Club. My daughter Vanessa followed the family tradition and graduated from Barnard (Columbia’s sister school). 

While I enjoyed a liberal upbringing, I voted Republican most of my life…even for Ross Perot but jumped ship for Obama. (I could not See Sarah Palin as my next Vice President.) However, I think that she is cute and wouldn’t mind going fishing with her (I don’t like guns so I would not be good on the Moose Hunt.) 

But to protect my “cousin’s” reputation, I will not express any political views in this article. My Lips are sealed – the word is “mum”.

“While the flavor lasts” (where is that quote from?) I hope to seriously cash in on my fame and will double my prices for my furniture! However, before I have the new price list printed, go to my Website and start ordering at the old price!!!

I am really writing this Blog to come to the attention of my illustrious namesake and hope to be invited to her swearing-in.

 

The Kagan Children, Illya, Jessica, and Vanessa

Elena Kagan, not my daughter!