excerpt : “We have lapsed into a kind of mercantilist/feudal model. It is similar to the Dutch East India Company that was government sponsored and traded with the backing of the government. The only entity that can compete with a GSE is another GSE. We have tended to multiply them because the GSE has become the answer to every problem that crops up.”
The Week That Shook Wall Street - great reporting from wsj.com
Amazing must-read Page One article from wsj.com on the fall of Bear Stearns (will try to find a non-premium access page) :
- ” Bear Stearns’s board of directors was whipsawed by the rapidly unfolding events, in particular by the pressure from Washington to clinch a deal, says one person familiar with their deliberations.
"We thought they gave us 28 days," this person says, in reference to the terms of the Fed’s bailout financing. "Then they gave us 24 hours." ""
- on Tuesday “They felt comfortable with their capital base of roughly $17 billion and were looking forward to reporting Bear Stearns’s first-quarter earnings”
- Fast forward to Thursday : “On Thursday evening, after customers had continued to pull their money out of Bear Stearns, the bank reached out to J. P. Morgan. By then, Bear Stearns’s cash position had dwindled to just $2 billion.”
"The most credible explanation of why risk management based on state-of-the-art statistical models can perform so poorly is that the underlying data used to estimate a model’s structure are drawn generally from both periods of euphoria and periods of fear, that is, from regimes with importantly different dynamics."
"Thus it is important, indeed crucial, that any reforms in, and adjustments to, the structure of markets and regulation not inhibit our most reliable and effective safeguards against cumulative economic failure: market flexibility and open competition."
Wow ! What about better regulation ? What about acknowledging that repealing the Glass-Steagall act was an aberration and leads us today to bailout Bear Stearns.
NY Tech scene is alive and well ! MashMeetNYC and BarCampNYC rocked !
To anyone who’s doubting it or still has a chip on the shoulder vis a vis our West Coast friends by the bay, the NY Tech scene is alive and well and bustling (even in the first months of a recession) !
Great local ideas/companies keep getting funded and the energy level remains sky-high (fingers crossed).
Friday night the Mashable crew put together an amazing MashMeetNYC with a great crowd and some really top-notch presentations : KickApps , Utterz and the most energetic man in the Web business James Gillmore from FaceySpacey .
I also got to meet David Karp and some other great members of our NY Tech scene.
Sat-Sun was BarCampNYC3 (which I helped organize) and 250 tech enthusiasts came to Brooklyn and shared an awesome amount of knowledge with each other. Andrew Baron from Rocketboom was there ! We had folks from Montreal, Toronto, Seattle as well as the city by the bay.
BarCampNYC3 is an ad-hoc gathering born from the desire for people to share and learn in an open environment. It is an intense event with discussions, demos, and interaction from attendees. The event doesn’t cost any money, but there is a price: all attendees must give a demo, a session, or help with one.
Anyone with something to contribute or with the desire to learn are welcome and invited to join.
When you come, be prepared to share with barcampers. When you leave, be prepared to share it with the world.
When March 15th and 16th, 2008
Where Polytechnic University in Brooklyn At the Brooklyn Metrotech Center Brooklyn Campus (Directions) Six Metrotech Center Brooklyn, NY 11201
Boeing vs. EADS and the $40 billion contract - a test of government open markets
In a stunning upset, the US AirForce decided to award a $40 billion refueling fleet contract to a consortium of Northrop Grumman and European contractor EADS. Boeing, the incumbent contractor, can appeal the decision.
A few comments on this incredible news:
- For the same refueling bid, Boeing was fined for corruption of an AirForce buyer (Darleen Druyun who was sentenced to jail time) and had lost the bid. No one in the media seems to recall this key fact. Click to go to a 2005 60 Minutes story http://tinyurl.com/69u7l
- John McCain was instrumental in exposing Boeing’s corruption, which led to the ouster of 2 CEOs in a matter of months and a deep management overhaul.
- EADS is a European company with French, German and minority Gulf state shareholders (Qatar). Why is the media quoting politicians and Boeing employees call EADS a French company ?
- European governments have long bought US defense material, why should this be a one way street ?
The next few days will be a test for open government markets, which are a good barometer for free trade, currently under fire.
The Deutsche Post & the French employers union scandals and the challenge to 20th century capitalism
Huge scandals have surfaced in Europe’s largest economies in the last few weeks, Germany and France. Deutsche Post’s highly paid CEO is guilty of tax evasion and Germany’s tax authorities are pressuring Lichtenstein’s banks to open their books. France’s employer union/lobby was due to pay 1.5 million euro in retirement to an executive guilty of million-euro cash withdrawals, which ended up in union coffers. France’s CEOs have been found to be Europe’s highest paid.
The link between these news items ? They caused disbelief, uproar and fodder for anti-capitalist activists. They’re also signs of strains in our social compacts, increasingly based on our economies. Germany’s consensus capitalism is being challenged as already high-paid executives are evading taxes. In France, already the European country where the market economy is the most reviled, CEOs regularly award themselves and their peers raises (French boards are among the most cross-pollinated). They shed all responsibility (SocGen’s Daniel Bouton oversaw a 5 bil euro loss and doesn’t see why he should resign) and preside over the dismantling of France’s industry (see Pechiney-Alcan-Rio Tinto).
If Gordon G is right and greed is good, it needs to foster economic benefits for the greatest number. Henry Ford, in all his economic genius, had codified that the scale between the lowest ranked worker and the CEO should be 1 to 15. We’re now on average at 1 to 400 ! Mid-20th century capitalism brought us the reign of the middle class in Western economies and ushered in the consumer age by expanding consumption and creating huge markets.
21st century capitalism needs to maintain this social compact to foster stability. Will our governments act in time and be able to preserve large middle classes in this era of emerging economies competing with us in all industries ?