As the Big Three automakers' pleas for emergency bailout money appear to have fallen on deaf ears on Capitol Hill, the blogosphere is awash with discussion of bankruptcy scenarios (see, e.g., here, here, and here).  "Prepackaged" bankruptcy in particular seems to be a popular solution (see here and here).  But I find it hard to see how a prepack would work here.  Unlike a standard Chapter 11 filing, a prepack is a bankruptcy filing where the debtor and its major constituents--in this case, bondholders, banks, employees, unions, management, dealers (have I left anyone out?)--already have a deal worked out before they file.  Instead of negotiating in Chapter 11 (i.e., after the Chapter 11 filing), management and the major constituents work out the company's financial restructuring, new financing, and anticipated operational changes beforehand, and when they file for bankruptcy, they include not just the bankruptcy petition, but also the plan of reorganization and all the creditor consents required to confirm the plan.

Just judging from what I read in the paper, it is not apparent that the Big Three have had any discussions with their banks or bondholders or dealers about how to share the pain of a restructuring, or who would provide financing in bankruptcy.  Now, this may be just posturing on the part of companies.  They seem to be playing chicken with Congress, on the "too-big-to-fail" theory.  Needless to say, that's a dangerous game.  Especially during the interregnum, the specter of political gridlock looms large.

There may just be some usage issues here:  when commentators say "prepackaged," they might instead mean some kind of bankruptcy filing with strong government involvement.  For example, the government could offer bankruptcy financing conditioned on specific operational and managerial changes.  Not a bad idea.  But that's not a prepack.

Permalink | Bankruptcy| Current Affairs| Employees| Financial Crisis | Comments (0) | TrackBack (0) | Bookmark

In this rant, I went so far as to invoke the good name of Justice Brandeis who, after all, had a lot to say about how we regulate after a financial crisis.

You can find a PDF of the article on Drexel's website here.

Permalink | Current Affairs | Comments (3) | TrackBack (0) | Bookmark

Alright, I admit it. It’s a nasty habit I acquired from working in New York City. I read the NY Post (often before the WSJ)! It keeps me in good humor to read about the latest fiascos among the Hamptons crowd. Like Icarus, even a G5 has to come down some day, I always say.

But today was a shock! The headline read: Cuckold “Sore” at his Wife. To my dismay, said cuckold was my former partner and ski buddy (I won’t republish his name here). Apparently he is suing his estranged wife and her lover for giving him an STD.  Even the father-in-law is involved somehow.

Now I have to ask, what do you do when you read something like this? I looked up Emily Post but couldn’t find a good analog. Do you call? Ask how he’s doing? Send flowers? Next week the firm is having its annual worldwide partners’ meeting. All I can say, there’s another reason I’m glad I don’t go to those anymore!

Permalink | Current Affairs | Comments (0) | TrackBack (0) | Bookmark

Or so Wikipedia tells me. It defines “pundit” as “someone who offers mass-media opinion, analysis or commentary on a particular subject area (most typically political analysis, the social sciences or sport), on which they are presumed to be "knowledgeable.”

So yesterday I became a pundit. Check out my views (as reported by the Philadelphia Inquirer) on how to fix the financial crisis.

Now I have to admit these quotes attributed to me, while taken from a conversation I had with the reporter last Friday, certainly sound more interesting here than I remember being when I sort of made them. But who cares, I’m a pundit now!

So readers of the GLOM, here it comes. Straight from the horse’s laptop. Unadulterated Okamoto punditry.  At least until Gordon yanks my typepad account.

Permalink | Current Affairs | Comments (0) | TrackBack (0) | Bookmark

Here and here are some quick must-reads on Fannie Mae and Freddie Mac, their relation to the mortgage meltdown, and a great case for regulating mortgage markets.  And here's something just for fun.

Permalink | Current Affairs| Economics| Securities | Comments (4) | TrackBack (0) | Bookmark

The housing bust has even hit The O.C., where foreclosures topped 1,000 in May.  To catch a glimpse of the situation on the ground, you can view a slideshow of foreclosed properties at the O.C. Register.  Just click the blue More Photos button in column 2.  HT to Calculated Risk.

Permalink | Bankruptcy| Current Affairs | Comments (0) | TrackBack (0) | Bookmark

Thanks to Gordon and the rest of the Conglomerate crew for inviting me to blog here. I am a loyal reader and am excited to try my hand at writing.

It is a fascinating time for those of us who study banking regulation. On May 9 the Office of the Comptroller of the Currency closed ANB, a national bank based in Bentonville, Arkansas. Last week nine ANB branches reopened as branches of Pulaski Bank & Trust Company.

The Wall Street Journal (link unavailable) blames ANB’s failure on the combination punches of the credit crunch and housing downturn. ANB opened in 1994 and quickly amassed deposits by offering above market interest rates on certificates of deposit and buying deposits from deposit brokers. ANB then lent these deposits to finance speculative housing construction and land development. ANB even opened branches in fast growing areas far from Bentonville, including Jackson Hole, Wyoming and St. George, Utah. Unable to sell the newly constructed homes, developers defaulted on their loans to ANB. With ANB's past-due and non-accrual loans reaching $732 million, the OCC decided to pull the plug.

ANB is the third federally insured bank to fail in 2008 (only three banks failed in 2007). However, it is the second largest bank to fail since 2001. (The largest being an internet-based bank.) Regulators are clearly worried that ANB is only the tip of the iceberg. Earlier this year, the Federal Deposit Insurance Corporation announced plans to beef up its current bank failure staff of 220 with 140 new hires.

Will we really see a significant increase in bank failures? It is certainly possible. However, even with increased failures, I do not think we are looking at bank failure rates similar to those during the savings and loan crisis.

What we can bank on are adjustments to the regulatory oversight of banks. Anecdotal evidence suggests federal and state regulators are already directing banks to increase allowances for loan losses. In addition, if ANB’s failure is indicative of future failures, we may see a return to interest rates caps for deposits and increased restrictions on brokered deposits.

Permalink | Current Affairs | Comments (2) | TrackBack (0) | Bookmark

Forbes' 2008 list of the world's richest people reveals that, after thirteen years, Bill Gates no longer holds the title of the world's richest man.  Instead, that honor now goes to Warren Buffett with a net worth estimated at $62 billion.  Gates, at a net worth of $58 billion, fell to the number 3 slot.  Apparently, you can blame Microsoft's bid for Yahoo, and Microsoft's subsequent decline in stock price, for Gates' slide on the Forbes list.  But Microsoft lent a helping hand to at least one other billionaire.  Thus, this year saw the youngest ever billionaire on the list, 23 year-old Facebook founder Mark Zuckerberg, who ranked 785 with a net worth of $1.5 billion.  Microsoft's purchase of a stake in Facebook no doubt helped get Zuckerberg on the list.  Despite Gates fall from number one, I am sure this is one of those instances where coming in third place is not tantamount to losing.

Permalink | Current Affairs | Comments (0) | TrackBack (0) | Bookmark

• It's quite difficult for a non-criminal law person to understand what's going on with the Blakeley and Apprendi line of cases.  Those are the ones that threw out the federal sentencing guidelines.  Finding something to be unconstitutional decades after it was promulgated always raises the suspicion that the constitutional excuse is nothing more than an excuse, for one thing, and though district court judges hated the guidelines, the Miranda-like advantages of them (clarity, predictability, transparency, and so on) are not hard to grasp.  Plus, summarily throwing out the guidelines sounded like it would create chaos.  So in addition to commending Doug Berman's sentencing blog posts to you on the latest sentencing cases, Gall and Kimbrough (reaffirming the Supreme Court's "guidelines are advisory" approach), I'll point you to Michael O'Hear's helpful reminder that it is the courts of appeals who have provided the "oh no they aren't advisory" counter-approach.

• The D.C. Circuit verrrrry strangely just held that an FCC 2-2 deadlock on a request for regulatory forbearance - that the agency deemed granted, rather than denied, and that accordingly changed the regulatory requirements on the forbearance requester - "cannot be considered an order of the Commission nor can it constitute agency action."   So the court couldn't review it.  The path for the FCC in light of this precedent is clear - deadlock on all similar requests that you'd like to grant, and avoid judicial review altogether.  Admittedly, the statutory scheme did give the court a basis for its decision.  Under the statute, a forbearance is deemed granted if the agency "does not deny" it.  And if it didn't deny it, the agency didn't create a record for review.

• We'll be watching the litigation over the president's removal of the American member of the International Boundary Commission very closely.  The commissioner was summarily fired, the commission was created by a treaty, does that limit the ability of the president to appoint the official of his choice?  The district court has said no - stay tuned for the Ninth Circuit's view.

Permalink | Current Affairs | Comments (0) | TrackBack (0) | Bookmark

I suspect because it is the admissions season, recently I have been receiving a number of emails about Harvard's decision to expand its tuition-free program for students from low and middle income families--though it is not really new.  In 2004, Harvard announced that parents of families with income of less than $40,000 would not have to contribute to the cost of their child attending Harvard.  Now, such a break will be given to parents of families with income of less than $60,000.  In addition, Harvard has reduced the contribution for families with income between $60,000 and $80,000.   A US News and World Report article has highlighted the fact that there are a growing number of schools offering students free schooling.  And apparently these school programs are having an impact.  Indeed, Harvard notes that its program has been very successful in attracting students from lower income brackets.  Apparently, during the first full year of its program, the number of students enrolled at Harvard from lower income brackets increased by 24 percent for the entering class.  To be sure, financial aid programs like the one instituted at Harvard only underscore the staggering costs of higher education and the fact that many families find themselves priced out of the market.  Nevertheless, they do have an important impact. 

Permalink | Current Affairs | Comments (9) | TrackBack (0) | Bookmark

As luck would have it, I was in Boston this weekend and got a chance to hear the hometown perspective on the Patriots' version of "spygate"--Coach Bill Belichick videotaping the New York Jets' defensive signals.  As one would expect, there were plenty who believed that the punishment (fines on both the coach and the team as well as the potential loss of a first round draft pick) was too harsh, particularly because many felt that others in the league were guilty of similar conduct.  But there were also those who felt that the punishment was both necessary and appropriate, and hoped that the team could just move on.  In the end, though, it seemed that many were simply disheartened by the conduct and the shadow it would cast over the team and the game of football.  As a fan of both the Patriots and the NFL, I would have to put myself in that final category.

On a broader note, however, the debate regarding the appropriateness of the punishment reminded me of the debate regarding individual vs. collective liability in the corporate context.  Thus, many people's arguments seemed to suggest that the most appropriate penalty and the one most likely to deter future misconduct was one that focused on the individual--in this case Belichick.   As a result, these people scrutinized the $500,000 fine levied against Belichick.  Some thought it set the right tone--it was the highest fine ever levied against an NFL coach and according to ESPN, represents 12% of his 2007 salary.  But many others were dissatisfied and questioned why the fine was not stiffer and did not include any game suspensions.  For these any team penalty harms players and fans who had no control over the misconduct, but also because such a penalty was perceived as less effective than one that focused on the individual. 

Others seemed to believe that the most significant penalty should be aimed at the team, arguing that the only way to ensure that this kind of misconduct does not occur in the future is to hold the team responsible, which would create incentives for the team and its owner to more effectively monitor its coaches.  Most of these people were not happy with the $250,000 fine imposed on the team and thought it needed to be significantly higher to get the attention of management, and encourage them play a more active role in weeding out misconduct.  There also was debate about whether stripping the Patriots of its first round draft pick if the team made the playoffs was enough.  Regardless of how people resolved this debate, however, most people who focused on the team penalty seemed to think that such a penalty (and not whatever was imposed on Belichick) was the most important one and the one that would prove most effective in sending a message aimed at deterring future misconduct.

Certainly in the corporate realm we have seen a lot of debate regarding whether and to what extent individual executives or their corporations should be subjected to liability for misconduct.  And just like in the corporate context, the resulting punishment seems to satisfy very few.  More importantly, however, similar to the corporate context, there was an effort to impose both individual and collective liability, based on the recognition that both the individual and the corporation, or the team in this case, not only bear some responsibility for the misconduct, but also appear to reap whatever benefits flow from the misconduct.

For my part, while I do think we should ask questions that allow us to fully understand the extent of the misconduct and the reasons behind it, I nevertheless hope for the day when we can talk about the Patriots without hearing the word spy--or worse, the word cheater

Permalink | Current Affairs| Law & Society| Sports | Comments (0) | TrackBack (0) | Bookmark

On Monday Maryland held a panel discussion on the current credit/housing crisis. The discussion sparked debate about responses to the crisis and potential bailout solutions that are similar to those occurring in Congress. As far as I can tell, views about bailout options fell into three categories:

First were those who believed that we should not engage in any form of bailout. The rationale for such a view was that we should not be in the business of helping people who gambled and loss. Those who held this position, however, appeared to recognize that a total “hands off” approach may not be feasible given the potential for significant foreclosures and their impact on the housing market and the economy in general. However, it was clear that people in this first category would like any bailout solution to be as limited as possible.

Second were those who believed that any solution should distinguish between borrowers, allowing some relief for low-income borrowers, but not for others. I got the sense that this solution was premised on two notions. First was the notion that low-income borrowers have fewer resources to help themselves, and hence the risk of foreclosure in their cases was more severe. Moreover, the impact of that foreclosure would be more severe—that is, if such borrowers were to lose their current houses, they may have relatively few housing options, raising the specter of not just increased foreclosures, but also increased homelessness. It seemed that people in this category also believed that low-income borrowers were less blameworthy. That is low-income borrowers may have been more susceptible to hard-sale tactics, that—while falling short of fraud—may have nevertheless been objectionable. In contrast, people in this category viewed middle-income borrowers with less sympathy. This is not only because such borrowers were perceived to have more resources, but also because such borrowers were perceived as having the educational background that should have made them less susceptible to unfair lending tactics. In this regard, these middle-income borrowers appeared to be more at fault for their current situation, and thus less deserving of rescue.

Finally were those who believed that we should have a bailout solution that encompassed everyone. For these people, the subprime and near-prime lending industry had created a climate pursuant to which many homeowners had been talked into houses that they could not afford. People in this category believed that the crux of the problem was not borrowers’ conduct, but the failure to effectively regulate the industry. Moreover, people in this category shunned the effort to draft a solution based on the relative blame of borrowers.

The panel and ensuing discussion was fascinating because there was disagreement not only about the extent of the problem, but also about the feasibility of any solution. At core, however, people’s disagreement centered around their views of the market as well as their views about whether borrowers were “to blame” for their current situation and whether such blame should matter.

Permalink | Current Affairs| Economics | Comments (1) | TrackBack (0) | Bookmark

As an avid YouTube viewer, I’m distressed to hear of the coming infestation of commercials that will soon be crawling about the bottom of the videos.  The NYT and W$J both report that the honeymoon is over, and now Google is scrounging for a return on its $1.65 billion acquisition.  Thus, we can look forward to a new type of video ad:

I suppose that isn’t horrendous –- it’s certainly vastly superior to the dreaded alternative: the pre-roll. Evidently, pre-rolls are so noxious that, in tests, YouTube viewers abandoned them at a rate of more than 70%.

And, admittedly, if Google can’t find a way for their model to be profitable, they’ll have trouble placating the providers of the most entertaining and professional content, which will then demand that the good stuff (e.g., gaffes by Arsenal goalkeepers) be hunted down and removed.  As the music-downloading wars suggest, commercial hegemony (iTunes) and associated litigation eventually grind down the viability of guerrilla sites (Napster, Kazaa, &c.).

But here is something to look forward to with the new commercials: humorous malapropisms when cheerful and earnest ads are run atop wholly inappropriate videos.  Search engine and context juxtapositions have long been embarrassing:

For instance, a story on LATimes.com about police spying on activists ends with ads for doing public records searches -- basically spying on people. And below an obituary for a rabbi in NYTimes.com is an ad link to humorous Yiddish garb.

I wonder what truly offensive and entertaining pairings the genius of video will bring us.

[In the meantime, here's a combination of entertaining video and advertising all in one.]

Permalink | Current Affairs | Comments (1) | TrackBack (0) | Bookmark

The Pythons were right to worry.

Permalink | Current Affairs | Comments (0) | TrackBack (0) | Bookmark

With the Dow's introductory curtsey below the 13,000 mark this morning, the wild swings in the market of late seem to merit comment.  The Wall Street Journal obliges with its lead today, a piece -- under the witty (dare I say, Murdochian?) caption, "Credit and Blame" -- pointing the finger at S&P, Moody's, and Fitch.  The agencies "gave top ratings to many securities built on the questionable [subprime] loans, making the securities seem as safe as a Treasury bond."

As we did on last night's Marketplace, I suspect we'll hear a good deal more in the coming weeks and months about the incentives and compensation structure of the ratings industry:

The subprime market has been lucrative for the credit-rating firms.  Compared with their traditional business of rating corporate bonds, the firms get fees about twice as high when they rate a security backed by a pool of home loans.  [W$J]

And who pays that fee?  The banks and mortgage companies who create the products.  And when an agency won't render a positive rating?  Customers can "take their business to another rating agency."  [W$J]

This symbiosis of rater and rated is reminiscent of the mutual fund problems that flared up in 2003.  Lipper and Morningstar purport to rate, recommend, and supply "leading fund intelligence" on mutual funds, but critics like David Swensen note that their system is retrospective and largely useless as an aide in forecasting: e.g., tech funds received middling grades in the mid-nineties (just before their historic run up) and spectacular grades at the millennium (just before their historic crash).

Of course, even law schools ask the graded to pay the graders -- with what some see as a concomitant increase in the rosiness of the ratings (i.e., grade inflation) -- so perhaps this problem is impossible to avoid.  Or can we ask employers to pay universities to grade potential hires?

Permalink | Current Affairs | Comments (6) | TrackBack (0) | Bookmark

I wonder if anything is happening in the business world today ...

If you don't want to read about the credit markets, I would suggest the sports pages. College football teams are now in their fall camps!

Permalink | Current Affairs | Comments (0) | TrackBack (0) | Bookmark

In the NYT Magazine last Sunday, a fascinating article depicted the world of online pornography, profiling one company that at least by those quoted was seen as being a very good employer.  Employees have benefits, including 401(k) plans, and the headquarters reaches out to the community.  Prof. Bartow doesn't believe all the press and writes about it at Feminist Law Professors.

What interested me about the magazine article were two small tidbits:

First, the payments systems for online pornography have become more complex, paralleling the payment systems for online gambling.  PayPal apparently exited the pornography industry in 2002, one year before it exited the online gambling industry.  Credit card companies preceded PayPal in denying charges to porn sites.  However, unlike funding online gambling, funding pornographic viewing was not seen by financial institutions as potentially illegal, but as potentially uneconomic.  Porn sites apparently have a huge "charge-back" rate -- the rate at which users complain to credit card companies of overcharges or fraudulent charges.

Second, in quoting someone about the difficulties in creating payment systems for porn sites, the article quotes Gary Kremen, who it describes as the person "who founded both the porn site Sex.com and the dating site Match.com in the mid-90s."  I don't think I'll ever look at those Match.com commercials the same from now on!

Permalink | Current Affairs | Comments (2) | TrackBack (0) | Bookmark

I do not currently own a pet, but I did grow up with a dog.  Thus, I was really sad to see the impact of the recent pet food contamination on both pets and their families.  However, I have noticed that the pet industry has changed dramatically since I was a kid.  Last week, I heard a story on NPR about the strong growth in the pet industry, and one expert called the industry one of the most dynamic segments of the economy.  I found it interesting that there was such a strong, and apparently expanding, market for pet products and services.

Apparently Americans are willing to spend a significant amount of money on their pets.  According to a study by the American Pet Products Manufactuerers Association, Americans spent some $38 billion on their pets last year, and are estimated to spend about $40 billion this year.  Those numbers are compared to the $21 billion spent on pets in 1996.  As a result of this kind of spending, even traditional companies have gotten into the pet industry.  The last time I was at Old Navy, I couldn't help put notice the seeming increased shelf space devoted to pet products.  Americans are also spending more on health care and insurance for their pets.  Additionally, the trend in healthy food products is spilling over into pet products so that more and more pet owners are willing to spend extra to buy organic foods for their pets.  Some experts suggest that one response to the recent problems with pet food contamination will be an increased reliance on the market for organic pet food.  Apparently, however, one of the fastest growing segments of the pet industry is the market for high-end products.  This not only includes such products as designer dog carriers and jewelry, but also expensive pet services from groomings to spas.  In fact, the last time I was on a plane, the in-flight magazine had several ads featuring pet spas and camps.  I did not even realize that such a market existed, but it appears that many people are willing to give their dogs a vacation seperate from their own.

I consider myself a dog-lover, but the strength of this market amazes me.  The limited research I have done on the pet industry suggests that these trends are not a passing fad, and as a result both old and new companies are looking for ways to participate in the market for pet products and services.  It looks like man's best friend has a lot of market power.

Permalink | Current Affairs | Comments (3) | TrackBack (0) | Bookmark

Okay I will admit that I am a huge American Idol fan.  Of course, I do appreciate its flaws, including the fact that it does not necessarily result in America choosing the "best" singer, and that it is often a vehicle for shameless self-promotions.  This latter is evidenced not only by the "videos" in which contestants promote products, but also by the various celebrities who just happen to be in the audience on a date close to their upcoming movie/TV show/latest CD release.  Nevertheless, I enjoy the singing and I do think the show gives some people with real talent a potentially life-altering opportunity to showcase their talent.  And of course whatever I may think of the show, it is a huge hit, which means big money.  And last night the show made an effort to "give back" some of its success, and I am among those who think that the show's efforts were commendable. 

American Idol got several corporate sponsors to agree to donate money to charities that fight hunger in the US and Africa.  On American Idol, the voting for contestants occurs through telephone calls or text messaging.  Usually the audience has two hours to vote via a toll free number, and callers can vote as many times as they like for their favorite contestant.  Last night, voting was open for four hours and American Idol sponsors agreed to make donations in connection with the calls the show received.  Idol often gets more than 30 million calls--so that agreement could potentially translate into a lot of money.  The show has been vague on how much sponsors would donate.  However, last night, I believe the host of American Idol indicated that sponsors would donate ten cents for every call received up to a maximum of 50 million calls.

To be sure, the "gives back" campaign could just be a plug for good will, and the donations being made may just be a "drop in the bucket" in the context of the amount of profit the show ultimately generates, but it is nevertheless a good deed that is worthy of recognition.  American Idol has become a phenomenon that translates into big business and millions of dollars in profits.  I appreciate the Idol using the show as a platform to raise awareness about, and money for, hunger.  Moreover, I appreciate the fact that the show got the audience to participate.  In fact, fans of the show could make individual donations to charities.  Given the many young people who watch American Idol, last night's show sent a positive message that giving back is an important part of being a success in business or otherwise.  Hence, regardless of what one may think of the motives, I applaud the show's efforts to use even a portion of its success to try and impact issues of social and economic significance.

Permalink | Current Affairs| Television | Comments (3) | TrackBack (0) | Bookmark

As a half Virginia, half Virginia Tech family, we have been glued to the news stories coming out of Blacksburg after the massacre there yesterday.  The media seems to want to jump to the bigger, but I think straw, question of "How Safe Are Our Schools"?  Comparisons to the University of Texas sniper and even the Columbine shootings are in almost every news story.

In the mid-1990s, Paul and I used to laugh at the local news in Houston, which stopped reporting actual local news in favor of scare stories like "Does your bra give you cancer?"  I remember once turning on the television to hear "Masked gunmen rob Southwest Houston branch of national bank.  Coming up next, how safe are you at your bank?"  The news never told us any more details of the actual robbery, spending its time planting the idea that you might not want to go into your bank lobby.  Just a few weeks ago, I felt the same disconnect reading this CNN story, CNN Shooting Highlights Safety in Public Workplaces.  The article links together the stories of two young women who were shot by their ex-boyfriends who followed them to work.  One woman worked at the CNN Center in Atlanta, and the other worked at the University of Washington in Seattle.  The article seems to have been edited recently, but at the time, the tone was that the boyfriends had targeted these women because they worked in public places.  Someone else must have highlighted to CNN the logical fallacy there. 

On various sports chatrooms, the rumor is that the Virginia Tech gunman may have initially been seeking revenge on a girlfriend/ex-girlfriend in the dormitory.  The current CNN story hints at these rumors, quoting police as saying that initially they thought the dorm shooting was "a domestic fight" and an "isolated incident," which is why classes were not cancelled before the second shooting started.  To me, the common thread in these stories, if any, isn't that people were killed in public places, but that scorned men turned violent.  Instead of asking "How Dangerous is Your School/Workplace" maybe we should ask "How Dangerous is Your Boyfriend?"  These rumors may turn out to be unsubstantiated, and the Virginia Tech gunman may have had non-romantic reasons to turn anger outward, more of an Appalachian Law School situation than a Tarasoff situation. 

However, reading these headlines, I feel like I'm watching the old Steve Martin movie "The Jerk."  As the shooter, who has picked Martin's character, Navin Johnson to shoot by randomly choosing his name out of the phone book, misses Johnson and instead shoots cans of motor oil he is holding in his hands, Johnson cried "He hates these cans.  Stay away from the cans!"

Permalink | Current Affairs | Comments (1) | TrackBack (0) | Bookmark

When calamity strikes, as it did today in Blacksburg, Virginia, finding an appropriate response is impossible. We want to help, but we are too far away. So we pray, and hope that our thoughts of compassion will carry to the families and friends of the victims.

Permalink | Current Affairs | Comments (5) | TrackBack (0) | Bookmark

Our friend and former colleague, Jennifer Walker Elrod, has been nominated to the Fifth Circuit Court of Appeals.  Jennifer is a 1988 graduate of Baylor University (Economics) and a 1992 graduate of Harvard Law School.  After her two-year clerkship with U.S. District Judge Sim Lake (of Enron fame), she was an associate at Baker Botts LLP in Houston.  She was appointed to the 190th District Court in Houston, Texas in March 2002 and was elected to a four-year term in November 2002.  Beyond that, Jennifer has been extremely active in the Houston community; according to a press release from Baylor when she was selected as a Distinguished Alumna, "Elrod served pro bono as the first General Counsel to Communities in School-Houston, and she was chair of the board of the Gulf Coast Legal Foundation. In 2004, The Houston Young Lawyers Association named Judge Elrod the Woodrow Seals Outstanding Young Lawyer of Houston, and [in 2006] she was honored as an Extraordinary Mother by the Cystic Fibrosis Foundation of Houston."

And even beyond that, Jennifer was a great role model to me when I became a working mother, having preceded me in that noble profession by a year or so.  To celebrate the other half of her life, I am posting two photos of her: her professional photo and a photo of her holding my son at 8 months.  (Wasn't he a bruiser?)

Permalink | Current Affairs | Comments (13) | TrackBack (0) | Bookmark

CSM has an interesting piece on credit checks as a civil rights issue.  Apparently, more and more employers perform credit checks as part of their diligence in hiring.  However, some studies show that average credit scores for blacks and Hispanics are worse than for whites, while there is apparently a lack of data supporting a relation between bad credit and poor employee performance.  The story describes a suit against Harvard University by a job applicant whose bad credit history prevented her hire.

Permalink | Current Affairs| Employees | Comments (0) | TrackBack (0) | Bookmark

You probably thought you knew how to cough and sneeze.  Cover your mouth/ nose with your hand or a tissue, right?  Wrong, wrong, wrong.  A friend at the School of Public Health here at Emory pointed me to a public health video encouraging proper coughing and sneezing technique in accordance with infection control guidelines from the CDC.  The basic advice:  sneeze or cough into your sleeve.  Watch the hilarious video, which demonstrates the various ways of accomplishing this with different types of apparel, and in which contestants compete to get it right.

Permalink | Current Affairs| Health Care | Comments (3) | TrackBack (0) | Bookmark

Last Saturday my copy of People's Best (and Worst) of 2006 arrived in my mailbox.  In glancing through the year's best movies, songs, and books as well as noteworthy weddings, births and divorces, I noticed a 1/2 page box with the title "Hall of Shame."  The six scandals depicted were the O.J. Simpson non-book, Congressman Mark Foley's preying on teenage pages, Pastor Ted Haggard's secret relationship with a male prostitute, John Mark Karr's non-confession to having been with a child beauty queen (and worse) when she died, the e. coli-ridden spinach and Patricia Dunn's "allegedly spying on her own board of directors."  Wow.  That seems like an odd addition to the list.

The rationale that pops to mind is that People editors didn't want it just to be a list of middle-aged men who clearly have some issues in the love and romance department.  So let's throw in a vegetable and a corporate female?  (Here are some of Gordon's postings on Dunn's action, in case you need a refresher for that 15 minutes.)  Can anyone think of better nominees for the 2006 Hall of Shame?

Permalink | Current Affairs | Comments (1) | TrackBack (0) | Bookmark

For people in the DC area, the news has been filled with the protests at Gallaudet University, one of the nation’s top schools for the deaf.  In the beginning of this month, students, faculty and alumni began protesting in earnest the appointment of Jane K. Fernandes as incoming president.  The protests related both to process (protesters claimed that the presidential search process was too narrow and not inclusive enough) and to substance (protesters claimed that Fernandes was not the right leader for the school). 

The protests included a march on the Capitol as well as some students engaging in hunger strikes.  In addition, the faculty voted that Fernandes should not retain her position and expressed a loss of confidence in Gallaudet’s board and its current president.  The protests also included students taking over a campus building and blockading the school’s entrances, which eventually resulted in the arrests of 130 people.  Through it all, Fernandes remained adamant that she would not step down.  However, on Sunday, Gallaudet’s board voted to revoke her appointment. 

I would guess that a lot of people in this area were surprised by the strength of the protests if not the ultimate decision.  Yet the interplay between the board and its constituents during the protests also was an interesting story about board decision-making—albeit in a more complex context.  Indeed, the board’s decision was met with jubilation by protestors and their supporters, but concern by others.  A statement from the board recognized these divergent reactions.  The statement noted that although the board believed the decision was in the best interests of the university, it understood “the impact of this decision and the important issues that inherently arise when a Board re-examines decisions in the face of an on-going protest.”  A spokesperson for the American Council of Trustees and Alumni was more critical, noting, “Gallaudet’s governance has proven dysfunctional not once—but twice.”  Between Fernandes’ stance and the steadfastness of the protestors, the board was certainly in a difficult position.  It is an open question how this decision will impact their abilities going forward.

Permalink | Current Affairs | Comments (1) | TrackBack (0) | Bookmark

Tower Records is going out of business. Given the way we get our music now, I guess it was inevitable. I certainly I can’t remember the last time I went into a music store to purchase music as opposed to downloading something. But Tower Records was such a fixture that it never occurred to me they would actually shut down. Granted they did file bankruptcy in 2004, but I always figured there was hope. Now there are set to close shop in December of this year. I guess I better go buy some actual CDs and get my final Tower Records receipt so that I can store it with all of my other now outdated treasures.

Permalink | Current Affairs | Comments (3) | TrackBack (0) | Bookmark

I wish that I could write a pithy, touching post to commerate today, September 11, that would be linked throughout the blogosphere, but I don't think I can.  I don't tend to think of that day in political terms, as either the start of armed conflict, or of a new era of domestic conflict between security, privacy and profiling.  My first thought isn't even of Osama bin Laden or Al Qaeda.  In my memory, the day stands out as very personal.  Like a sentimental sap, I always tend to watch or read those tributes to the widows of 9/11 who were pregnant, sometimes unknowingly, on the day their husbands died because I was also pregnant 9/11/01.

In fact, I was trapped in the doctor's office that Tuesday morning enduring the rather unpleasant gestational diabetes test.  The office did not have a TV or a radio on, so my only news came from a man in the waiting room with a Walkman and from my husband on my cell phone.  I remember the man saying, "They've just taken the GM plant."  (I have no idea where that rumor started.)  During my doctor's visit, Houston leaders evacuated downtown, including Paul's building.  If terrorists were targeting what they hated about America, many buildings named after oil companies, ringed with petrochemical plants, seemed like a probable target, I guess.

Our family was supposed to meet my parents in Port Aransas toward the end of that week, and although planes were not flying, my parents decided to drive and not change our plans.  This seemed sort of stubborn to me at the time, but looking back I can see that in the face of an uncertain future, we just want to be with our family in a place that feels like home.  I remember CNN being the background to our weekend there (complete with a comic-relief CNN ticker headline "Cheney Has Slept at Camp David Since Tuesday").

So, although I understand the ripple effects of this morning five years ago, my thoughts stay primarily in the first ripple:  the loved ones called by the passengers on Flight 93, the ones left behind by the victims of the WTC and Pentagon crashes, the firefighters, the volunteers and the heroes.

Permalink | Current Affairs | Comments (3) | TrackBack (0) | Bookmark

I just wanted to say a brief hello before we got underway.  Last week I was in Vancouver with my husband who was attending the AALS Workshop on Criminal Law and Procedure, and I followed news and events in the Canadian newspapers.  One story that received a lot of attention was the passing of Kenneth Thomson. Thomson, who passed away on Monday June 12 at 82 of a heart attack, was the richest man in Canada, and the ninth richest man in the world according to Forbes magazine, with a net worth of about $19 billion. Academics should all be familiar with Thomson because of his role as chairman of Thomson Corp., which owned—among other information resources—West, the producer of Westlaw. Newspapers referred to Thomson’s leadership style as understated, calling him a “reluctant heir,” who preferred to lead by surrounding himself with a strong management team and relying on their authority. Thomson’s style was certainly effective. He transformed the near $500 million newspaper company built by his father into a $29 billion empire.

I hope everyone enjoys the forum.

Permalink | Current Affairs | Comments (0) | TrackBack (0) | Bookmark

Alex Tabarrok at Marginal Revolution has written an Open Letter on Immigration, which attempts to reflect "the consensus opinion of economists on the major issues."  Alex's goal is "not to cover all the issues but rather to say, 'here is the hard-won consensus that economists have come to on these major issues.  By all means let us have a debate but let it be an informed debate.'"

Just as a matter of full disclosure, I should note that I co-signed the letter after finding it in the blogosphere.

Permalink | Current Affairs| Globalization/Trade | Comments (1) | TrackBack (0) | Bookmark

Although I had already seen on the Today show that the miners' families were tragically misinformed about the fate of their loved ones in the middle of the night, only to find out that 12 of the 13 miners had been killed, my NYT headlines email still has the story "12 Miners Found Alive 41 Hours After Explosion."  The link is still good and directs me to the false story, complete with pictures of jubilant family members.  Break the link, NYT.

UPDATE:  My hotel room USA Today has the same false headline.  I guess this is the Dewey Wins! story of our generation, only much more personally tragic.

Permalink | Current Affairs | Comments (1) | TrackBack (1) | Bookmark

Lior Strahilevitz, blogging at the University of Chicago Law School Faculty Blog (has anyone come up with a cute shorthand yet like Co-op or the Glom?) has a post on Seattle voters' decision yesterday to scrap the city's plan to build a monorail.  The voters had several times approved monorail funding initiatives, and the city had so far spent $200 million with nothing to show for it.  The voters finally pulled the plug (for now, anyway).

Strahilevitz draws three lessons from the debacle:

1. Mass transit innovation should be undertaken only with "substantial federal assistance."
2. "Too much political process can be a bad thing" (with the implication that the program could have succeeded if the experts in the government had only solicited less input).
3. "Direct democracy is a flawed approach for transportation planning," because "transportation planning is a technocratic exercise" which should be left to the experts.  I think this is substantially the same as number 2, but maybe I just don't get it.

Seriously?  Those are the lessons?  He must be joking.  Let me try:

1. Mass transit innovation spending is a boondoggle for politicians and urban planners and it's a massive waste of money whether its done by the feds or a city.
2. There will inevitably be political meddling in such projects -- it's precisely why we shouldn't get involved in them in the first place.  Just scrap these projects before they get off the ground, so there's nothing for the process to meddle with.
3. Technocrats are just autocrats with engineering degrees. It was the technocrats who figured out how to consume $200 million dollars before the "political process" finally shut them down. The "experts" will fleece us if they have the chance, although they will do so expertly.  The voters may have enabled them, but there would have been nothing to enable if we didn't go in for these things in the first place.

To sum it all up, I have one word:  Amtrak.

In Strahilevitz' defense:  He did cite the Simpsons, though.

UPDATE:  Will Baude has more, much more.  His bottom line:   

So in the end I am unwilling to condemn all state involvement in public transportation. The network effects, public good problems, and so on are real. But we should wear our public-choice hats and remember that problems of government monopoly, confused public intervention and captured technocracy are very real, so a system that admits of lots of private competition with the public provision ought to be preferred to one that places all of our hands in one dubious basket.

"We should wear our public-choice hats."  Sounds like what Tyler Cowen would say.  Which is a good thing.

Permalink | Current Affairs| Politics | Comments (17) | TrackBack (0) | Bookmark

For some reason it seems to have passed with little fanfare (at least in my rarefied circles), but recently the Electronic Frontier Foundation (EFF) announced a startling discovery:  The government, in conjunction with printer manufacturers (or is it the Rand Corporation, in conjunction with the reverse vampires?)  have for some time been tracking computer printer output.  Details are sketchy, but it looks like the government has been working with printer manufacturers to embed coded messages in every document produced on certain color laser printers (indicating the serial number of the printer and the time and date of printing) in an effort to assist enforcement against counterfeiters.  According to this article, the technology has been employed by some manufacturers for decades.

EFF does some decent work (cracking this code, for example, would have to qualify), but unfortunately it’s also a group of fear mongers — not that just because they’re paranoid there isn’t anyone following them.  It’s just that they have limited credibility when this is their take:

Even worse, it shows how the government and private industry make backroom deals to weaken our privacy by compromising everyday equipment like printers. The logical next question is: what other deals have been or are being made to ensure that our technology rats on us?

Look guys — as Posner would tell you (and so would any other economist) it’s about trade-offs.  Do you think counterfeiting is a problem?  Should the government use any resources to combat it?  Now, if so, how can you be sure that this is not, in fact, the best way to do so, even though it entails a cost?  What doesn’t?  The next logical question is hardly “how else has private industry colluded with the government to screw us over?”  The actual next logical question is, “is this the most cost-effective way to deal with the problem of counterfeiting, given the potential cost?”  Now, how hard was that?  Let’s not assume our conclusions before we even ask the questions, shall we?

By the way — here’s what I think really ought to be the next question:  “How on earth was this kept secret for so long?”  I mean — there had to be dozens if not hundreds of folks in on this, in both industry and government.  How did the secret not get out?  How is it possible that not a single programmer involved in the project at Xerox leaked the news?  Or — did they?  Was this known to the counterfeiting community long ago?  (And, of course, if so, question one — was this a good idea? -- becomes a little easier to answer).

Relatedly, what kind of protections could EFF want in the future? Disclosure? That would immediately defeat the purpose, and, again, assume the conclusion of the very question being asked. So what, realistically, should be done?

Also, I note that, according to the EFF itself, the tracking dots are used only in color laser printers. Maybe this is itself a decent compromise position. If the government really wanted secretly to monitor subversive organizations like Greenpeace and the ACLU through their printed output, wouldn't it make more sense to target the black and white printers?  Or are these organizations printing strictly in color these days?

Finally, my real beef with EFF is not that it is wary of government; there's plenty to be wary of. My real problem is that it seems not to discriminate between potential government violations of one's privacy and anonymity on the one hand, and private sector incursions on the other. This, by the way, is a problem it shares with one of the organization's intellectual godfathers, Larry Lessig (see here).

The point seems obvious, but there is an enormous, qualitative difference between the threat posed by Leviathan reading your emails and that posed by your boss doing it. If you don't like your boss doing it enough, you work someplace else (or contract with your boss to stop). If you don't like it that Sony encodes intrusive DRM software on its CDs, you buy another label's CDs. If enough people share your aversion to these incursions in the private sphere, the market will induce the violators to respond and/or it will provide alternatives. But we can't say the same for Leviathan, and the democratic process is hardly a reliable system for inducing the government to respond, even to the preferences of the majority.

Permalink | Business Ethics| Current Affairs| Politics| Technology | Comments (3) | TrackBack (1) | Bookmark

Earlier this week, President Bush made an almost noticeable call for Americans to conserve energy and forego car trips that aren't "essential."  Like President Carter's "68 in the winter, 78 in the summer" thermostate rule of thumb, this advisory will probably fall by the wayside.  Most Americans drive because they have to drive.  Prices are sufficiently high that most adults probably aren't going for two-hour joy drives or dragging main street for fun.  Adults drive to work, to the store, to school, etc.  At some level, there are opportunities for combining errands and car pooling, but these opportunities are small.  We could trade in our cars for cars with better gas mileage, but trading in automobiles has high transaction costs.  We could use public transportation, if we lived in a city with a good one and had regular working hours, but I have never met either of those criteria.

I am hoping that high gas prices have a silver lining for telecommuting.  Today's technology allows many people to do their jobs anywhere, at anytime.  As we know, technology has mostly allowed many people to drive to work, do their jobs, drive home, and continue to do their jobs.  Surely room fulls of people consulting their blackberries and emailing others from that room could suddenly realize that they didn't all have to be in that room.  My impression from talking to nonlaw friends is that the legal profession is behind the curve here.  Culture keeps everyone driving into the office 5 or 6 days a week, so that attorneys can sit in their offices, interfacing with people all over the globe and sending documents via the server to their secretaries outside their door.  In major urban areas, people spend a lot of time commuting, and support staff generally have even longer commutes than attorneys.  In Houston, a town with very few public transportation opportunities, many oil companies had an 80/9 week in which employees would work 80 hours in 9 days, with every other Friday off.  Law firms could definitely do something like that with support staff, and ask attorneys to telecommute 2-3 days a week.  However, law firms don't have much of an incentive to reduce their employees' gasoline bills.  If the entire office could be closed more days, though, a firm could reduce their own energy costs of heating, cooling, lighting, etc.

Obviously, telecommuting has some downsides -- less camaraderie, reduced team building, possibly.  But perhaps a balance could be profitable for employers and employees.

Permalink | Current Affairs | Comments (4) | TrackBack (0) | Bookmark

The WSJ today has an article exposing the fact that evacuees escaped New Orleans with their socioeconomic status intact and that Texas is not a classless society.  Although as readers know, I'm the socialist hippie over here, but I found the article, which juxtaposes the K-12 opportunities for different NOLA evacuees, in poor taste.  The reporters mock a 17-year-old girl, who attended a Catholic school in NOLA, for worrying about whether she will be able to get into a certain class at the "sister school" in Dallas:  "One of her chief concerns was whether whe would get into her new school's advanced-placement art class."  Although the article later tells that the girl's father owns a wrecking business in Louisiana that may be defunct, the beginnings of the article portray the family as eating cake while others go without bread.  The article then juxtaposes an evacuee family in Houston (with a car), driving from one HISD school to another looking for a spot with a high schooler at the Houston Reliant Center who may not go to school for months.

Although the reasons for the differences in educational opportunities may hinge on many things, from economic resources to parental priorities to the simple fact of transportation, the article focuses on the social capital differences -- the families with opportunities were the ones that knew someone who knew someone.  The subject of social capital is very interesting, especially in a disaster situation.  Although donating one's financial capital is easy, it is hard to lend one's social capital to unnamed strangers.  And, if two individuals both see their earthly possessions swept away, the one with social capital will find it much easier to rebuild. 

However, the article does not analyze these interesting issues of social capital -- instead, it mocks families who are relying on social capital to rebuild.  There are no insensitive quotes from these families that would make them seem evil, only the reporter's irony-filled tone.  (Although the media has been extremely sympathetic of evacuee's attachment to house pets, the article is extremely disdainful that one family evacuated a horse used in equestrian events.)  I could be wrong, but I suspect that these families vacillate from despair at what they've lost to relief that they were lucky enough to be in positions to rebuild to guilt that they were so lucky.  I'm not sure what the WSJ reporters would have them do to atone for their good fortune.

Permalink | Current Affairs | Comments (0) | TrackBack (0) | Bookmark

[Warning: The following post contains unrealistic economic models of the behavior of very evil people.]

Dan Solove at Prawfsblawg posted a few days ago about the new NYC subway search policy.  Key graf:

I'm dashing this post off quickly, so I won't explore the legality of this.  But regardless of the legal issues, this seems to me to be a very silly policy.  It is another big waste of money and time, as well as a needless invasion of civil liberties -- all for a cosmetic security benefit.  There are 4.5 million passengers each day on the NYC subways.  What good could a few random checks do?  The odds of the police finding the terrorist with a bomb this way are about as good as the odds of being hit by lightning. I doubt it will have much of a deterrent effect either.

Unlike Dan, I'm not an expert on privacy law.  But I do think some about deterrence, and I think he's underestimating the effect of random searches on public safety. 

Assume the police are executing a search policy (nicknamed "Ring of Steel") that results in 1000 random searches a day; this results (by my very rough calculation) in a 7% chance of being searched over the course of a year of weekdays.  We have to assume that are many intermediate steps necessary in conspiring to harm others; if the terrorists have to purchase, for example, washing machine timers, ordinary subway travel becomes hazardous to the plan.  (A cheap point: these are shorter odds than the 1 in 3000 chance of being hit by lightning over the course of your lifetime, although of course the odds of being searched on any given day are 1 in 4500).

Under these assumptions, Dan is probably wrong that the search policy will have little deterrent effect.  Thinking about the issue from a behavioral perspective, some keys are:

1. Risk Aversion:  Terrorists are notoriously risk averse - they obey the law punctiliously until they attack. Thus, even a relatively minor risk of being caught will act as a very large deterrent, forcing terrorists to find other paths.
   
2. Decision-making under uncertainty: Subway searches are going to be perceived (true or not) as targeted at certain ethnic minorities; the police, if they are smart, will also vary the number of searches per day.  These two effects together should make it hard for terrorists to intelligently evaluate the likelihood of being stopped on any given trip.
3. Availability Cascades:  Again, smart police should perform searches in highly visible places, and trumpet "sweep" days (think of the IRS's press machine in March.)  The goal will be to convince folks that searches are much more common than they actually are, and to equate "going in the subway" with "possibly getting searched: better not bring illegal goods down there." [Maybe this sounds too big brother like for some.  Arguably, it would be better for society to pay the privacy cost of having lots of actual searches, so that folks could evaluate whether they think them to be worth it, rather than allowing the government to mind game the populace.]

Regardless, I think there is a good argument that terrorists, subject to human behavioral tics, are likely to vastly overestimate the likelihood of being caught and therefore be more deterred than rational terrorists (what a contradiction in terms that is!) would be.  So I have to disagree with Dan.  Subway searches can, if intelligently carried out, make it much more costly to plan and execute mass transit attacks.  Will terrorists then move on to other targets of opportunity?   Probably.  But forcing them to do so would be a victory.

Dan notes we should weigh the gains against the costs.  Fair enough. 

1. Law enforcement costs:  Two kinds: (1) direct (for more police officers); (2) indirect (lost opportunities to catch crime elsewhere).  But there are also law enforcement benefits, primarily consisting of increasing the expected sanction for the transport of drugs and guns from one part of the city to another.  This should help the City to attack pan-neighborhood gangs.
2. Civil Liberties: Again, several kinds: (1) constitutionally protected privacy (which Dan says he isn't going to talk about);  (2) constitutionally unprotected privacy (i.e.: the "private public space" so essential to living in a big city); and (3) equal protection.  The last of these really concerns me.  The privacy losses created by these searches will fall most heavily on poor and working class new yorkers, who, unlike my former law firm colleagues, will be unable to opt out of the system by regularly taking cabs/town cars instead of the subway.  This is a serious problem.  But, if it is true that searches deter attacks - and there is at least some reason to believe they will - maybe working class and poor New Yorkers will be willing to make that tradeoff? (One interesting data point is that the plan has taken flak from democrats running to oust Mayor Bloomberg for not going far enough!)

Permalink | Current Affairs | Comments (8) | TrackBack (0) | Bookmark

I just got off the phone with my grandmother who grew up in London before moving to Canada with her family (including my mother) during WWII.  She reports that as far as she knows our family members in England are fine.  None of them live in London anymore but at a time like this you always want to check on loved ones wherever they are.

This attack on our closest ally brings to mind Winston Church