Ken Lewis' Congressional testimony yesterday painted an interesting picture of a guy trying to have it both ways.
According to today's Wall Street Journal reporting on the event, Lewis both claimed he was strongarmed and coerced by Bernanke and Paulson to close the Merrill Lynch purchase, but then claimed it was a good deal, just the same.
How could both be true? If it was a good deal, why did Lewis need to be coerced?
Lewis also seems to be backtracking somewhat on the disclosure aspect of the deal. Prior to this, I am reasonably sure Lewis claimed that Bernanke told him not to disclose his concerns to shareholders prior to the vote to close the Merrill Lynch sale.
Now, Lewis is saying Bernanke didn't tell him to hide "something that should be disclosed."
One wonders whether Lewis is taking this line in order to protect himself from SEC charges.
Overall, reading the article, I'm struck with how Lewis is complicating the story as the consequences of his statements, as originally reported, have become clearer. Perhaps, too, having been relieved of his chairman role at BankAmerica, Lewis may realize that the company will not be going to bat for him if he comes clean about what really happened.
His own apparent hiding of his concerns from shareholders, and true feeling that the Merrill purchase should not have been closed, would, today, likely end in serious penalties for Lewis.
Now that this is clear, he seems a whole lot more tentative about speaking truth to power, doesn't he?
Once again, we see the results of government intervention and coercion on business and truth-telling, in general.
Friday, June 12, 2009
Thursday, June 11, 2009
Another Boneheaded Union Speeds Its Own Demise
According to Tuesday's Wall Street Journal, the Boston Globe's union employees rejected, by a 277-265 vote, management's package of wage cuts calculated to keep the paper operating.
I guess that means that just 7 employees will likely be responsible for delivering a death blow to the ailing, aged newspaper.
After years of being the subject of various celebrity investors in late 2006, the Boston Globe doesn't seem to be attracting any more white knights to peel it off of the New York Times Corporation.
What do you suppose those 7 union employees don't get about what is happening to daily newspapers in even large US cities, let alone smaller ones? They have been the victims of Schumpeterian dynamics for at least a decade.
Craigslist help give the sector a big, final push by thinning advertising revenue after basic economics and television news had gutted afternoon editions and newspapers several decades ago. Even if a few of the big dailies survive, you have to wonder how much they will still rely on printed editions, rather than online publication.
I laughed when I read this passage at the end of the Journal piece, quoting Guild (union) president Dan Totten,
"Globe workers and the New England community understand that the quality of The Boston Globe- an institution so vital to the life and culture of the region- depends on the fair treatment of the men and women who work so hard to produce it."
Talk about clueless! If the paper was so damned 'vital,' it wouldn't be having such profitability problems, or would have been sold or spun off by now.
I guess that means that just 7 employees will likely be responsible for delivering a death blow to the ailing, aged newspaper.
After years of being the subject of various celebrity investors in late 2006, the Boston Globe doesn't seem to be attracting any more white knights to peel it off of the New York Times Corporation.
What do you suppose those 7 union employees don't get about what is happening to daily newspapers in even large US cities, let alone smaller ones? They have been the victims of Schumpeterian dynamics for at least a decade.
Craigslist help give the sector a big, final push by thinning advertising revenue after basic economics and television news had gutted afternoon editions and newspapers several decades ago. Even if a few of the big dailies survive, you have to wonder how much they will still rely on printed editions, rather than online publication.
I laughed when I read this passage at the end of the Journal piece, quoting Guild (union) president Dan Totten,
"Globe workers and the New England community understand that the quality of The Boston Globe- an institution so vital to the life and culture of the region- depends on the fair treatment of the men and women who work so hard to produce it."
Talk about clueless! If the paper was so damned 'vital,' it wouldn't be having such profitability problems, or would have been sold or spun off by now.
Wednesday, June 10, 2009
Counting On A Consumer-Led Recovery?
Yesterday's Wall Street Journal presented a chilling chart pertaining to consumer debt.
Since 70% of US economic spending comes from the consumer, that segment's ability to finance further spending would seem to have a lot to do with any imminent, sustainable recovery, would it not?
According to the chart, sourced from the Fed, consumer household debt as a percentage of disposable income has remained above 120% since roughly 2005.Whatever increased savings have occurred in the past six months has had little impact on overall consumer indebtedness.
The visual in the chart makes clear how the rate of increase in this measure moved up from a clear inflection point in about 1999. Thus, we've had nearly a decade of pretty much monotonic growth in this debt/income measure.
That's not going to go away very quickly.
Since federal stimulus spending does not lead to the same quality of jobs as those in the private sector, recent jobless increases are only going to exacerbate this picture. Either spending will slow due to joblessness, or debt will be paid off, and savings will effectively rise. Both will hamstring consumer spending.
Don't expect a sudden lift to the US economy from domestic consumer spending anytime soon.
Tuesday, June 09, 2009
Indiana Fights For Business & The Rule of Law
Indiana treasurer Richard Mourdock, seen in this interview on Fox News, articulates the state's points vis a vis the Chrysler bankruptcy.
Supreme Court Justice Ruth Ginsberg has agreed to stay the sale of Chrysler assets to Fiat, pending consideration of Indiana's case.
Supreme Court Justice Ruth Ginsberg has agreed to stay the sale of Chrysler assets to Fiat, pending consideration of Indiana's case.
Perhaps the rule of law will be upheld yet in America!
Steinhardt's Economic Outlook
One of my readers sent me the URL of a website containing this clip. It's a recent interview with Michael Steinhardt, about whose opinions I have written in this prior post from March of this year.
I remain impressed by Steinhardt's careful, deliberate, logical explanation for his expectations on the near term US economic outlook.
And I want to thank my reader for the link. Very illuminating, if disconcerting. But Steinhardt echoes the opinions of others whom I respect, including Martin Feldstein.
I remain impressed by Steinhardt's careful, deliberate, logical explanation for his expectations on the near term US economic outlook.
And I want to thank my reader for the link. Very illuminating, if disconcerting. But Steinhardt echoes the opinions of others whom I respect, including Martin Feldstein.
Monday, June 08, 2009
Do Healthcare Costs Make US Business Uncompetitive?
What sort of analysis would make you conclude that a sector of the US economy accounting for 17% of GDP requires radical, forcible restructuring?
If someone told you that the sector's costs, as inputs to other parts of the US economy, were inhibiting US competitiveness on a global basis, what evidence would you require to believe that contention?
Friday's Wall Street Journal featured an article by Betsy McCaughey, the now-legendary figure who is credited with having derailed HillaryCare in the 1990s. She was a lieutenant governor of New York who switched parties, left the field of political offices and now runs a health-related concern to reduce deaths from infection.
Responding to the current administration's claim that US healthcare costs are an economic burden on American business which must be forcibly restructured, Ms. McCaughey offered rebuttals to five claims by the administration.
First, Ms. McCaughey correctly dissects the administration's claim that because Medicare is in financial trouble, all Americans must be put on a federally-mandated healthcare 'diet.' It's a non-sequitor.
If anything, Medicare's and Medicaid's problems suggest they should be fixed prior to giving the federal government any further role in healthcare.
Next, Ms. McCaughey notes that the rate of increase in healthcare spending has actually fallen in the past five years, to a 6-7% range, from 13% in 1980. She notes an apple-to-oranges comparison by the current administration alleging that premiums have risen, writing,
"The real cause is the declineing share of care paid for out of pocket (down to 15% today from 33% in 1975). Auto-insurance premiums would also skyrocket if coverage suddenly included oil changes and tune-ups."
Regarding the alleged added 'burden' of healthcare spending today by families, the author notes that, since 1960, four budget items have accounted for a little over half of American family spending- food, energy, housing and healthcare. These made up 53% of the 1960 average household budget, and 55% today. She goes on to contend that Americans spend more for healthcare in part because they can afford it, and they "get more for it" than do Europeans using state healthcare systems.
Ms. McCaughey revisits, again, the tired old argument that Euopean state-run healthcare is cheaper than that in America. She cites statistics on medical innovation in America, and the rising rates of surviving various health problems, such as breast cancer or heart disease. As she notes,
"If you had a heart attack in the 1980s and made it to the hospital you had only a 60% chance of living a year. Now your chance is over 90%. No one wants 1980s medicine at 1980s prices. And in 10 years, no one will want 2009 care."
Finally, she tackles the economic argument that we need to cut healthcare spending in order to save American jobs. She writes,
"At a time when the economy is ailing and the president is bailing out industries to protect jobs, his advisers recommend shrinking the health-care industry. It currently provides 1.4 million jobs- 10 times the U.S. work force of General Motors and Chrysler."
Ms. McCaughey provides some persuasive arguments not to attempt to pass an omnibus healthcare bill this summer, as the Democrats are so eager to do.
But, beyond her excellent refutations of the White House's report on the healthcare situation, there remains a fundamental lack of a convincing, compelling business case to sustain the contention that American medical costs currently cost American business growth, profits, or jobs.
We have no trend information demonstrating the contention. Nothing about comparative medical expense levels and corresponding health indicia across the globe. Nothing relating healthcare spending, health, and business growth, profitability or job growth.
Nothing has been presented which clearly demonstrates a significant decline in American economic performance traceable to, and only to, rising healthcare costs.
Without this type of evidence, who would be foolish enough to radically, but vaguely, restructure our healthcare sector?
Ironically, this drive by the Democrats to federalize healthcare may, and probably will, only succeed in putting larger costs and clumsier procedures into practice, while resulting in a less-healthy American population.
This is progress? Or change you would want?
If someone told you that the sector's costs, as inputs to other parts of the US economy, were inhibiting US competitiveness on a global basis, what evidence would you require to believe that contention?
Friday's Wall Street Journal featured an article by Betsy McCaughey, the now-legendary figure who is credited with having derailed HillaryCare in the 1990s. She was a lieutenant governor of New York who switched parties, left the field of political offices and now runs a health-related concern to reduce deaths from infection.
Responding to the current administration's claim that US healthcare costs are an economic burden on American business which must be forcibly restructured, Ms. McCaughey offered rebuttals to five claims by the administration.
First, Ms. McCaughey correctly dissects the administration's claim that because Medicare is in financial trouble, all Americans must be put on a federally-mandated healthcare 'diet.' It's a non-sequitor.
If anything, Medicare's and Medicaid's problems suggest they should be fixed prior to giving the federal government any further role in healthcare.
Next, Ms. McCaughey notes that the rate of increase in healthcare spending has actually fallen in the past five years, to a 6-7% range, from 13% in 1980. She notes an apple-to-oranges comparison by the current administration alleging that premiums have risen, writing,
"The real cause is the declineing share of care paid for out of pocket (down to 15% today from 33% in 1975). Auto-insurance premiums would also skyrocket if coverage suddenly included oil changes and tune-ups."
Regarding the alleged added 'burden' of healthcare spending today by families, the author notes that, since 1960, four budget items have accounted for a little over half of American family spending- food, energy, housing and healthcare. These made up 53% of the 1960 average household budget, and 55% today. She goes on to contend that Americans spend more for healthcare in part because they can afford it, and they "get more for it" than do Europeans using state healthcare systems.
Ms. McCaughey revisits, again, the tired old argument that Euopean state-run healthcare is cheaper than that in America. She cites statistics on medical innovation in America, and the rising rates of surviving various health problems, such as breast cancer or heart disease. As she notes,
"If you had a heart attack in the 1980s and made it to the hospital you had only a 60% chance of living a year. Now your chance is over 90%. No one wants 1980s medicine at 1980s prices. And in 10 years, no one will want 2009 care."
Finally, she tackles the economic argument that we need to cut healthcare spending in order to save American jobs. She writes,
"At a time when the economy is ailing and the president is bailing out industries to protect jobs, his advisers recommend shrinking the health-care industry. It currently provides 1.4 million jobs- 10 times the U.S. work force of General Motors and Chrysler."
Ms. McCaughey provides some persuasive arguments not to attempt to pass an omnibus healthcare bill this summer, as the Democrats are so eager to do.
But, beyond her excellent refutations of the White House's report on the healthcare situation, there remains a fundamental lack of a convincing, compelling business case to sustain the contention that American medical costs currently cost American business growth, profits, or jobs.
We have no trend information demonstrating the contention. Nothing about comparative medical expense levels and corresponding health indicia across the globe. Nothing relating healthcare spending, health, and business growth, profitability or job growth.
Nothing has been presented which clearly demonstrates a significant decline in American economic performance traceable to, and only to, rising healthcare costs.
Without this type of evidence, who would be foolish enough to radically, but vaguely, restructure our healthcare sector?
Ironically, this drive by the Democrats to federalize healthcare may, and probably will, only succeed in putting larger costs and clumsier procedures into practice, while resulting in a less-healthy American population.
This is progress? Or change you would want?
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