YUTOPIA

There's a running debate on the merits of a liberal arts education. Detractors generally claim that it's useless in "the real world" and supporters generally counter that it "teaching you how to think" or provides some non-monetary worth. But there are times when being moderately well-read could have some financial benefit.¹

Today's NYPost reports that the Manhattan DA's office is investigating fraud related to the demolition of the 9/11 damaged Deutsche Bank building. Thus far the demolition process has compounded tragedies from the worst of political bureaucracies to the fire which claimed the lives of two firefighters. WSJ's Daniel Henninger covered the negligence in detail.

But aside from the general risks of government waste, there were some more obvious red flags. As the NYPost reports:

The construction site's manager, Bovis Lend Lease Corp., which was contracted by the Lower Manhattan Development Corp. to oversee the entire $150 million project, retained the John Galt Company to demolish the building and remove hazardous materials from it.

The LMDC, which purchased the land and the building for $90 million, was under pressure to get the demolition moving because the building was slated to be replaced with a new structure and remained a bitter eyesore next to Ground Zero.

"They were in a bind and wanted it done," one of the sources said.

"They did not ask too many questions, and that may be why there was room for f- - -ing around."

As it turned out, Galt was little more than a corporate entity utilizing officials from two other companies working on the site: Regional Scaffolding and Hoisting Co., and Safeway Environmental Corp., which had its own questionable histories and little experience.[Emphasis added]

Readers of Ayn Rand's Atlas Shrugged will immediately recognize the name "John Galt" as one of the stories main characters. But since "John Galt" is a normal enough name and not as well known literarilly it would be easier to pass off than "Dumbledore and Associates" or "Hamlet Incorporated." But had anyone literate been paying attention, someone should have at least asked if it was a legitimate company. On the other hand, given the irony of The John Galt Company being instrumental in government waste and special interest pandering, it's possible the founders were just being postmodern.²

In either case, the lesson here is that liberal arts can be rewarding - either in identifying fraud, or apparently, perpetuating it pretentiously.

1. Excluding quiz shows.
2. It's possible they could have been referring to the Scottish novelist, but I find this reference more ironic.

Posted by Josh at 4:51 PM | Permalink | Comments (0)

We recently mocked big business for outsmarting themselves in the subprime crisis, but it seems that there's plenty of criticism to go around. Take for example, this powerful New York Times article of the subprime crisis' impact on communities. To be sure, people are living scared and are understandably nervous about losing their homes and even treading financial water. And we can even grant that lenders have and still do engage in predatory lending practices, including student loans.

But just as we must hold big businesses accountable for their unethical practices, we must also examine the motivations of the affected individuals involved as well. Specifically, while big businesses are motivated by profit, many "victims" sought to maximize consumption with minimum immediate and therefore minimum visible cost. For example, the article reports that one person facing foreclosure, "bought her Bronx home for $535,000 with no cash down." For many people, myself included, $535,000 is a great deal of money. To "purchase" a house for that amount entirely on credit demonstrates not just a lack of financial acumen, but the immature mentality of expectation and entitlement i.e. that desires ought to be satisfied immediately.

Worse is that people aren't even learning from their mistakes. The article continues:

In some cases they cannot even work up the money to furnish their homes. Few customers have visited Boston Road Furniture, despite a handwritten come-on taped to the window that promises anyone can “Get Up to $3,000 Instantly No Job No Credit Check.”

The proprietor adds:

“We need a government loan,” he said. “This country is falling apart. We need customers. We need some help. So many ‘For Sale’ signs in this neighborhood. People just have to leave their homes and run.” [emphasis added]

The communal mentality is firmly entrenched in credit as a normal way of operation. True credit and financial liquidity are an essential part of economic systems, but here we have the epitome of short term financial thinking. Immediate interests are always satisfied, while the inevitable costs are simply ignored and disregarded - out of sight, out of mind.

Big businesses did take a hit for their own corporate greed to the tune of several billion dollars, and deservedly so. But while there are no doubt actual victims of the subprime crisis, there are also affected individuals who are now facing the consequences of their own materialism.

I refer all others to SNL'a helpful advice.

Posted by Josh at 11:59 PM | Permalink | Comments (1)

In the world of competitive finance, there's never a bad time to make money. Sure the subprime market has many feeling the pinch, but the real opportunists find ways to profit in any circumstance. For example, one strategy is short selling or in other words, betting on a loss. In a must read NYTimes article, Ben Stein examines Goldman Sach's practices of knowingly creating and selling flawed financial investments while covering themselves in the process.

But it's not just the Big Guys who are getting all the breaks. In my favorite story of the subprime fiasco, some people are fighting foreclosures with impressive Talmudic reasoning:

A Federal Court Judge rejected 14 foreclosure claims by Deutsche Bank, which was trying to collect on securitized sub-prime mortgage loans it acquired. The judge stated that the Bank did not really own the “bad loans” because it acquired them after defaults had already occurred. He asked the bank to prove it held the mortgage at the time of the foreclosure notices or said he will dismiss its claims.

The snowballing effect of subprime defaults is the result of repackaging, revaluing, and reselling various debts to various investors. However, once the debt is securitized and resold it can be difficult to track down who owned what and when. As a result Deutsche Bank not only loses on the initial investment, but cannot even recoup the losses through the typical hedge of property foreclosure.

Almost makes you feel sorry for them.

Posted by Josh at 2:32 PM | Permalink

I just received this unfortunate e-mail:

Dear All:

Barukh Dayan Ha-Emet. I am sorry to note the passing of Rebbetzin Sifra Tendler, wife of Rabbi Dr. Moshe D. Tendler, shlita, (rosh yeshiva at RIETS) and daughter of Rav Moshe Feinstein zt"l.

The funeral will take place today at three PM at Rabbi Tendler's shul in Monsey.

3 PM Community Synagogue of Monsey
89 West Maple Avenue
Monsey, NY 10952

Shiva will be observed at the Tendler residence
4 Cloverdale Lane
Monsey, NY 10952

HaMakom yenachem et'chem b'toch shar avay'lay Tzion vee'Yerushalayim.

Rebbitzen Tendler had been ill for some time, most recently with a relapse of cancer (I believe lymphoma). Our wishes and condolences are with the entire Tendler family.

Posted by Josh at 10:04 AM | Permalink | Comments (1)

New Scientist reports on an advancement in painkillers which might seem hard to swallow:

Saliva from humans has yielded a natural painkiller up to six times more powerful than morphine, researchers say.

The substance, dubbed opiorphin, may spawn a new generation of natural painkillers that relieve pain as well as morphine but without the addictive and psychological side effects of the traditional drug.

On the downside, it kind of gives new meaning to "lohesh 'al hamaka" (M. Sanhedrin 10:1), so if you're planning on taking this, just don't say anything.

Posted by Josh at 10:00 AM | Permalink | Comments (0)

Remember the Swiss banks' billion dollar settlement to Holocaust survivors back in 2000? Turns out things are far from settled. New York Magazine has an excellent article detailing the battle over legal fees, currently at $4,760,000.

The short version is that Burt Neuborne, and NYU law professor, took the case pro bono for the litigation. However, after the settlement was reached the question became how to distribute more than $1 billion to hundreds of thousands of people, understandably, not a minor undertaking. According to the article, "Neuborne declared that he had worked 8,178 hours since 1999, at $700 an hour. After applying a 25 percent discount, he staked out his bottom line: $4,088,500." When word got out and people complained, "he removed 1,600 disputed hours from his bill, but he also removed his discount, raising his fee by $671,500 in the process. The bill now comes to $4.76 million."

And that's just Neuborne's side of the story, and we're not even giong to get into how he calculated those 8,178 (or the 6,578 adjusted) hours.

The article does an excellent job covering the murkier sides of legal wrangling and deal-making. For one juicy example:

Then Judge Korman (largely following the proposal of a special master tasked with devising a plan) decided that the looted-assets survivors would get nothing at all. There were just too many of them, he reasoned, and how could anyone prove which looted assets ended up in Switzerland? Korman ruled that using their $100 million share of the settlement to help destitute survivors would be the "next best thing." He ordered that 75 percent of the aid for Jewish survivors be spent in the former Soviet Union, where he considered the needs overwhelming; 21 percent would go to other foreign nations. Only 4 percent would be used to help survivors in the U.S. And that's the root of the trouble.

While the whole saga is completely understandable, it is no less simultaneously disturbing on many levels, just what you'd expect when you mix the legal system with Jewish cultural politics.

Posted by Josh at 3:43 PM | Permalink

Jack Abramoff is about to be sentenced for that whole messy lobbyist scandal thing. Not surprisingly, here comes the support from the rabbi:

The former Republican superlobbyist may have fleeced clients such as Indian tribes of millions of dollars, but Abramoff often donated half or more his income each year to charities and community projects, religious leaders told the court.

Abramoff was "driven in a material world yet sought to find some balance and channel his considerable energy and creativity for a more noble purpose," Rabbi Kalman Winter wrote U.S. District Judge Paul C. Huck, who will sentence the lobbyist in the Florida case.

Ignoring for a moment the laws of mitzvah haba'ah b'aveira (fulfilling a commandment through a sin), I am wondering exactly what type of message this sends and what is really the appropriate "Jewish" response. Mr. Abramoff committed several felonies which challenged the very fabric of our legislative system, but then again the man isn't completely evil and isn't motivated entirely by avarice as evidenced by his numerous "good deeds."

This case is actually a very good example of a much larger problem in Modern Jewish Ethics. When previously respectable people have their transgressions publicized, it is not uncommon to hear the "but he did so much good" defense to somehow mitigate the offense. In its most extreme form, the "good deed" defense can actually lead people to overlook or even deny the offense itself. For one extreme example, see the case of Baruch Lanner where his devoted followers ignored even the most damming of evidence to support their leader.

Naturally, our perspectives of the ethics involved would be different if we knew the people involved. It's quite possible that if we met Mr. Abramoff in shul he would be cordial and maybe invite us for lunch. If we have known someone well for a longer period of time, and we have found that in that time this person has always acted with integrity, we would be disinclined to believe accusations which challenged our empirically reinforced perceptions.

But when our friends or acquaintances fall from grace, what should the reaction be? Paraphrasing Shel Silvertein's poem The Zebra, are they good people with bad traits or bad people with good traits?

I suggest that the good and bad need not be contradictory, but rather necessary parts of a person. Kohelet 7:20 says that no one is entirely righteous such that he will not ever sin - i.e. no one is perfect. As such we would need to evaluate what was done (assuming it can be proven) and remember that even good people can make significant mistakes. It is unfair and unethical to simply characterize people as being entirely good or entirely evil since no one can live up to those standards.

But we must also remember that consideration for good deeds does not necessarily exempt someone from facing the consequences of his/her actions. To his credit, R. Winter is not asking for exoneration, but clemency in the form of a lenient sentence. I have not read the letter in its entirety, but it's likely R. Winter explains Abramoff's actions without actually justifying them. This difference is crucial in that the good and the bad are taken as a unit in a complete context as opposed to the simple dichotomies which many of us prefer.

Mr. Abramoff's role in developing Red Scorpion or Red Scorpion 2 is a separate matter entirely...

UPDATE: The sentence was just announced at 5 years, 10 months, but that could be reduced pending cooperation in other cases.

Posted by Josh at 2:38 PM | Permalink | Comments (6)

There's a great article in the L.A. Times about a diamond deal gone bad. What makes this so fascinating is that the diamond industry is one of the few which relies primarily on trust and where "word is bond." Normally such scandals are rare since as the article notes, even the mere filing of lawsuits is enough to tarnish one's reputation. I'm curious if the increase of globalization will turn the diamond trade into just another business.

For those with Lexis-Nexis or good Library access, I highly recommend the authoritative academic study by U of C law professor (and really cool person) Lisa Bernstein, "Opting Out of the Legal System: Extralegal Contractual Relations in the Diamond Industry," 21 Journal of Legal Studies 115 (1992).

Posted by Josh at 12:40 PM | Permalink

Now the the transit strike is finally over, analysts are now trying to figure out what if anything can be learned from the strike. As you might expect, what you'll find is subject to the spin of the source. The NYTimes blames both sides and hits the classic liberal trifecta calling the strike a "clash of race, culture and class." Others discuss the ramifications of the pensions, with the NYPost taking the perspective of the city and MSNBC covering the viewpoint of the workers.

In discussing the economics of the strike, it is tempting as many outlets have done, to focus exclusively on the Government and the Union. In this dichotomy, the Government gets the role of the Big Corporation while the Union represents the downtrodden. Fortunately, others have recognized that there is a third economic group involved - the people of New York. Yes, everyone covered that the people were thoroughly inconvenienced, but there has been a growing awareness among that not all "workers" are equal. Compared to many of their fellow New Yorkers, the TWU actually have fairly sweet deal already. As Forbes reports:

According to the Manhattan Institute, the average bus or subway driver--the most-skilled job in the union by most standards--is already paid $63,000 a year. The person who sits behind the bullet-proof glass in what used to be called a token booth, and who now says for most purchases you have to use the metro-card machines, takes down an average of $51,000. And the least-skilled work, though certainly the dirtiest, is the subway cleaner who clocks in at an average of $40,000.

Compare that with the average New York worker. Take out Wall Street, where mega-bonuses skew the average unfairly, and the average private sector worker earns $49,000. Peel off the college-educated (which you don't need for most transit jobs) and the average income drops to well below $35,000. That includes everyone from a skilled factory worker to the clerk in Bloomingdale's.

Nationwide, according to the Bureau of Labor Statistics, the average unskilled worker (we'll put the cleaners in that category) earns $23,753 a year in the private sector; in the public sector that jumps to $30,056, but is still ten grand less than a New York subway cleaner. The disparity jumps even further when you look at the nationwide "transportation workers" as a specialty. There the average annual wage is $30,846 in the private sector and $34,611 in the public sector. Clearly, it pays to work for the government. But it pays even better to work for the MTA (Metropolitan Transit Authority)--indeed 80% better. New York is expensive, but not that expensive.

Note that this doesn't even account for the guaranteed pensions and that Transit Workers can retire at 55, thereby cashing in even more.

Despite the occasional socialist rantings, maybe there really is a class warfare going on in New York, but it's not simply between the Big and Little Guys - the haves and have nots. Bloomberg implied as much saying, "You've got people making $50,000 and $60,000 a year keeping people who are making $20,000 and $30,000 a year from being able to earn a living. That's just not acceptable."

Perhaps it's time to acknowledge that unions may deserve their own economic class to account for their financial and political security which is disproportionate to skill or education.

On some level, the public is starting to realize just how different the regular workers are when compared to the unions. The TWU itself reminded the New Yorkers of this by causing many to not work or lose business. As a consequence, it's possible that the public's response could extend beyond vitriol to the point where the Unions may actually lose political capital as well.

Posted by Josh at 2:52 PM | Permalink

It's been a while since I've written about politics, but today's New York Times carries a really disturbing editorial. The Times argues against Israel's position to bar East Jerusalem Arabs fom voting in the PA elections in which Hamas is on the ballot. For the Times, such an action violates the fundamental principles of democracy:

The messy thing about democracy is that people tend to vote for the candidates they want - a point that seemed lost on Israel...Israel is concerned about a strong showing by Hamas. That's understandable, but democracy doesn't work this way.

Of course, the Times conveniently forgets that Hamas is not just a political party, but an officially designated terrorist organization. For the Times, Hamas achieving power democratically "is the lesser evil because any movement, once in power, is compelled to supplement its bluster with deeds." Considering that one of their "blusters" is that "Israel will exist and will continue to exist until Islam will obliterate it, just as it obliterated others before it," are we to assume that the Times then is advocating the destruction of Israel?

The issue here is not merely on the rights of democracy, but of responsibility. Thomas Jefferson famously declared "the price of freedom is eternal vigilance,"and legitimizing a terrorist organization as a policital party hardly demonstrates vigilance.

Hitler also rose to power through the democracy of the Weimar Republic, and we see how well that worked.

Posted by Josh at 9:35 AM | Permalink | Comments (5)

The New York Post has some excellent coverage of the strike including some history of past strikes and apparently, my observations from yesterday could have used a little more research.

The Transit Workers Union was formed way back in 1934 and even went on strike in 1966. Back then, the public sector employees were subject to the "Condon-Wadlin Act" which also prohibited city workers from striking, but imposed such harsh penalties that it wasn't enforced.

Although then Mayor Lindsay acquiesced to the union, Governor Rockefeller commissioned a new panel to reevaluate and redefine the labor arrangement for employees of the public sector. This panel was chaired by George W. Taylor and its recommendations ultimately became The Taylor Law. Striking was still prohibited, but the penalties, while harsh, were more reasonable and thus would have a better chance of being enforced by the courts.

That said, I still share the views of the many angry New Yorkers who are fed up with the union.

Posted by Josh at 11:50 AM | Permalink | Comments (0)

After weeks of posturing and threatening the Transit Worker's Union (TWU) finally went on strike, thereby disabling New York's public transportation system. Personally I'm not really affected by the strike. My inability to find an apartment has, for once, worked out to my advantage since my commute requires New Jersey Transit as opposed to the subway.

However, like most New Yorkers, I am thoroughly annoyed at the TWU.

Continue reading "State Of The Unions" »

Posted by Josh at 2:03 PM | Permalink

In a recent year long Batman story arc, Batman's Gotham City is virtually destroyed by a cataclysmic earthquake. Due to Gotham's reputation as being a difficult and crime-ridden city the government deems the city not worth saving, and basically seals off Gotham from the rest of the United States declaring it a "No Man's Land." In the NML, the citizens lack basic resources and are terrorized by gangs while the power brokers consolidate and manipulate for their own personal or political gain.

Sounding familiar?

As the news comes in from New Orleans I am increasingly reminded of Batman's frightening scenario. While there aren't super-villains (in the literal sense at least), there is still the tragedy, despair, lawlessness, and political wrangling. "Chaos" and "anarchy" are the most common descriptions, and the comparisons to third world countries are not even hyperbole anymore.

The Independent writes:

Robberies, carjackings and even reports of rape and murder have all abounded in a city where the dead have been left lying where they fell or else float eerily down the rivers created by the water-filled streets.

Oh, and martial law is getting underway as well.

People are already questioning if New Orleans is worth rebuilding. Even the the Speaker of the House has already given up stating that part of New Orleans "could be bulldozed."

Yet despite all the obvious problems, the media seems to focus more on placing the blame be it on the about blaming the President, FEMA, or even the residents themselves.

This entire tragedy has been mishandled from every angle imaginable. There is plenty of blame to go around, all of which can be sorted out later. But the first priority has to be making sure that people get the help they desperately need.

As today's WSJ lead editorial reminds us, maintaining civil order isn't easy in a crisis, especially when there is "complacency born of prosperity and the resilience of our legal and civic institutions."

But unlike Gotham, we don't have a bat signal to bail us out.

Posted by Josh at 1:23 PM | Permalink | Comments (1)

I haven't been following the election Ukraine so much, but check out the picture in this MSNBC article.

While I'm happy that democracy is winning out there, is that really any excuse for an accordion?

Posted by Josh at 1:14 PM | Permalink | Comments (5)

In probably the most shocking display of chutzpah in recent times, Germany is seeking compensation from Poland.

Specifically, there are calls "for an admission of the wrongs done to Germans at the end of the war and for some form of material compensation."

Some 12 million Germans were kicked out of central Europe, many of them killed, at the war's end, when Europe's borders were redrawn by the allies. Poland, in particular, was literally lifted from east to west and transplanted on to territory that for centuries had been peopled by Germans.

So let's recap here:

• Germany invades Poland, starting WWII.
• The Nazi regime murders hundreds of thousands of Polish citizens, spreading death and destruction across the country.
• Germany loses the war it started.
• Germany then complains about the treatment it gets after the war by the country it decimated, and seeks restitution.

And this is ignoring the millions of lives lost worldwide because of Germany's actions.

I'm still appalled at the absurdity of this and that people are able to suggest this with a straight face.

Posted by Josh at 1:24 AM | Permalink | Comments (2)