Notes of Note from John F. Ince

Archive for September, 2010

The Choice Between Atrophy or Renaissance

Clearly we need to rethink the old approaches to governing the global economy. But rebuilding public finances and restoring long-term confidence in the financial services industry will require more than government intervention and new rules; it’s becoming clearer that what’s needed is a new modus operandi based on new principles like transparency, integrity and collaboration.

Clearly the financial system is not the only institution that’s in desperate need of a makeover. A string of recent events suggests that many of the institutions that have served us well for decades — even centuries — are frozen and unable to move forward. The failure to reach a meaningful agreement on climate change in Copenhagen has further undermined confidence in the ability of international institutions to provide effective leadership in dealing with a growing list of global challenges. The disastrous oil spill in the Gulf of Mexico provided yet another reminder that the world is grossly under-investing in green energy alternatives that could at last break our perilous addiction to fossil fuels. And despite Obama’s historic reforms, the government’s own projections suggest that the world’s richest nation will still struggle to rein-in the spiraling health care costs that threaten to cripple government budgets in the years to come.

Sure, one could argue that the industrial economy and industrial-age institutions brought us centuries of unprecedented productivity, knowledge accumulation and innovation that resulted in undreamt-of wealth and prosperity. But that prosperity has come at a cost to society and the planet and it is clear that the wealth and security enjoyed in advanced economies may not be sustainable as billions of citizens in emerging markets aspire to join the global middle class. Indeed, as the world’s main economic engines continue to sputter, there is growing consensus that we are finally entering a very different kind of economy. Economist Robert Reich asks, “What will it look like? Nobody knows. All we know is the current economy can’t ‘recover’ because it can’t go back to where it was before the crash.”

via Don Tapscott: Macrowikinomics: The Choice Between Atrophy or Renaissance.

Op-Ed Columnist – Downhill With the G.O.P. –

On Thursday, House Republicans released their “Pledge to America,” supposedly outlining their policy agenda. In essence, what they say is, “Deficits are a terrible thing. Let’s make them much bigger.” The document repeatedly condemns federal debt — 16 times, by my count. But the main substantive policy proposal is to make the Bush tax cuts permanent, which independent estimates say would add about $3.7 trillion to the debt over the next decade — about $700 billion more than the Obama administration’s tax proposals.True, the document talks about the need to cut spending. But as far as I can see, there’s only one specific cut proposed — canceling the rest of the Troubled Asset Relief Program, which Republicans claim implausibly would save $16 billion. That’s less than half of 1 percent of the budget cost of those tax cuts. As for the rest, everything must be cut, in ways not specified — “except for common-sense exceptions for seniors, veterans, and our troops.” In other words, Social Security, Medicare and the defense budget are off-limits.So what’s left? Howard Gleckman of the nonpartisan Tax Policy Center has done the math. As he points out, the only way to balance the budget by 2020, while simultaneously a making the Bush tax cuts permanent and b protecting all the programs Republicans say they won’t cut, is to completely abolish the rest of the federal government: “No more national parks, no more Small Business Administration loans, no more export subsidies, no more N.I.H. No more Medicaid one-third of its budget pays for long-term care for our parents and others with disabilities. No more child health or child nutrition programs. No more highway construction. No more homeland security. Oh, and no more Congress.”The “pledge,” then, is nonsense.

via Op-Ed Columnist – Downhill With the G.O.P. –

Thomas Hoenig Is Fed Up – BusinessWeek

Thomas M. Hoenig, dressed in a gray suit, white shirt with French cuffs, and baby-blue tie, faces an edgy crowd of 150 people in a hotel meeting room in suburban Lenexa, Kan. A large “Kansas City Tea Party” banner covers a table at the door. Attendees wear anti-tax stickers on their lapels. This is not an after-dinner speech for which most central bankers would volunteer.

Hoenig heads the Federal Reserve Bank of Kansas City. This year he also serves as a voting member of the powerful Federal Open Market Committee in Washington, which controls interest rates and the money supply. Many of those just now finishing their chocolate-chip bread pudding dessert at Lenexa’s Crowne Plaza Hotel would like to see Hoenig lose his job. Nothing personal: They just consider the Federal Reserve an affront to the Constitution and want to shut it down, lock, stock, and vault.

Hoenig smiles at his audience and begins: “This is a support-the-Fed rally, right?”

Dead silence.

Then the room erupts in laughter. Disarmed, the Tea Partiers listen politely as Hoenig defends the Federal Reserve as an indispensible institution, even if at the moment, he says, it happens to be heading in the wrong direction.

And, by the way, if it were up to him (though it’s not, really) he would break up the biggest Wall Street banks.

The applause starts tentatively, then builds to respectful appreciation. Afterwards, Steve Shute, a leader of the Hope for America Coalition, the Kansas group that sponsored the dinner, compliments Hoenig for impressing a tough crowd. “We believe the Federal Reserve should be abolished,” he says. It “is helping to destroy the country.” That said, Hoenig seems like an O.K. guy. “He is someone going toe-to-toe with Ben Bernanke and the Boston-New York-Washington-San Francisco elite axis at the Fed. He brought some Midwestern common sense to the Fed,” says Shute. “We know he doesn’t agree with us, but we’re still proud of him.”

This is Tom Hoenig’s moment, and it’s a strange one. In Washington, he is the burr in Fed Chairman Bernanke’s saddle: the rogue heartland banker who keeps dissenting alone—for the sixth straight time on Sept. 21—to protest the Fed’s rock-bottom interest-rate policy. Hoenig warns that the Bernanke majority is setting the country up for an as-yet-unknown asset bubble: the next dot-com or subprime craze. He can’t tell yet where the boom-and-bust will materialize, but he can feel it coming, like a Missouri wheat farmer senses in his bones the storm that’s just over the horizon.

via Thomas Hoenig Is Fed Up – BusinessWeek.

Struggling Blockbuster Eliminates Rental Fees | The Onion – America’s Finest News Source

Finally …. FT. LAUDERDALE, FL—Blockbuster, the flagging video-store giant that has recently resorted to eliminating late fees and waiving replacement fines for lost or damaged movies, announced Monday that it would also be doing away with its long-standing rental charges in an attempt to stay competitive in the ever-changing home-video business.

According to press releases, Blockbuster’s new nationwide program, “The End Of Fees,” promoted using $7 million of the company’s last remaining $10 million, will eliminate all costs associated with DVD rentals as well as per-unit charges for its video games, snacks, carbonated drinks, gumball machines, promotional cardboard standees, and literally anything else a customer comes across at one of its thousands of nationwide locations.

“I’m proud to announce that, starting Oct. 1, Blockbuster customers will be able to take home the hottest new releases for as little as the price of absolutely nothing,” said Blockbuster Vice President of Marketing Patricia Waters, whose company’s stock dropped nearly 50 percent last year against “On Demand” digital cable and by-mail movie services such as Netflix. “At Blockbuster, the movie-viewing experience has never been more affordable.”

“Why rent from anywhere else?” Waters added. “Seriously, let us know of any reasons you may still have for not renting from us, and we’ll remedy them immediately. Immediately.”

While two pieces of identification, a valid credit card, and proof of residence were previously required to open an account at the store, customers will now only need to walk through the door of any franchise location, whether by accident or not, and make brief eye contact with an employee to qualify for membership.

via Struggling Blockbuster Eliminates Rental Fees | The Onion – America’s Finest News Source.

Americans Vastly Underestimate Wealth Inequality, Support More Equal Distribution Of Wealth: Study

Americans vastly underestimate the degree of wealth inequality in America, and we believe that the distribution should be far more equitable than it actually is, according to a new study.Or, as the studys authors put it: “All demographic groups — even those not usually associated with wealth redistribution such as Republicans and the wealthy — desired a more equal distribution of wealth than the status quo.”The report pdf “Building a Better America — One Wealth Quintile At A Time” by Dan Ariely of Duke University and Michael I. Norton of Harvard Business School hat tip to Paul Kedrosky, shows that across ideological, economic and gender groups, Americans thought the richest 20 percent of our society controlled about 59 percent of the wealth, while the real number was closer to 84 percent.More interesting than that, the report says, is that the respondents a randomly selected 5,522-person sample, reflecting the countrys ideological, economic and gender demographics, surveyed in December 2005 believed the top 20 percent should own only 32 percent of the wealth. Respondents with incomes over $100,000 per year had similar answers to those making less then $50,000.

via Americans Vastly Underestimate Wealth Inequality, Support More Equal Distribution Of Wealth: Study.

Lloyd Blankfein Took Home $125 Million In Bonuses In Last 10 Years, But Shareholders Haven’t Been So Lucky

Lloyd Blankfein, CEO of Goldman Sachs, took home $125 million in cash bonuses over the past decade, Bloomberg reports.Shareholders, however, havent been quite so lucky.Even though Goldman has outperformed its peers over Blankfeins tenure, Bloomberg points out that one-year certificates of deposit and 10-year Treasury bonds purchased in September 2000 beat Goldmans total return over the same period. The logic behind lavish CEO pay depends on maximizing returns for shareholders, but Bloomberg notes that the S&P 500 Financials Index, which includes 80 companies, has dropped 49 percent in the past ten years.Blankfein, who paid $26 million in 2008 for a condo in the Robert Stern-designed 15 Central Park West building in Manhattan, and who last month sold his previous apartment at 941 Park Avenue for $12.15 million, has overseen a period of relative strength since becoming CEO in June 2006.Even as the financial world nearly collapsed around it, Goldman has remained strong, or gotten even grown stronger. When Goldman settled with the S.E.C. for $550 million in July, the perception was that the bank and its CEO, who joined the company back in 1981 when it bought his then-employer J. Aron, had gotten off easy.Transparency regarding bonuses has been limited. This summer, the financial community braced for embarrassment in anticipation of a report by U.S. pay czar Kenneth Feinberg disclosing the total bonuses Wall Street paid during the beginning of the bailout f

via Lloyd Blankfein Took Home $125 Million In Bonuses In Last 10 Years, But Shareholders Havent Been So Lucky.

SocialVest Debuts Cause-Based Shopping Platform

Today, SocialVest is launching its online and in-store shopping platform that makes it easy for consumers to support non-profit organizations while making purchases. The free service works by rewarding users with cash back for purchases from retailers. Money earned by SocialVest users can then be donated to over one million registered non-profits with the service.

Here’s how it works. Consumers sign-up for SocialVest with their info and credit card details and can then start shopping in its online mall or at physical stores with whom SocialVest has partnered. The startup currently has partnerships with over 500 retailers including Target, Macy’s, Home Depot, Best Buy, Saks Fifth Avenue and Bloomingdales. When the user make a purchase at one of these stores using the registered credit card, SocialVest will give users a cash rebate ranging from 1% to 15% of qualifying purchase prices. Funds are accrued in users’ SocialVest accounts, and can then be pledged to any non-profit.

SocialVest has also partnered with Causes, and will be the exclusive registered credit card shopping partner for the community. The startup, which has raised $500,000 in seed funding, faces competition from CauseOn, Causeworld and Endorse For A Cause.

via SocialVest Debuts Cause-Based Shopping Platform.