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Hey, Doocy apologized for fabricating part of Obama’s speech!
A few days ago my friend Michael Thaddeus wrote a guest post after noticing that Fox News reporter Steve Doocy had added three words, “Unlike some people,” to Obama’s line “I wasn’t born with a silver spoon in my mouth.”
This fabrication had the effect of making Obama appear to be making a snide reference to Romney. Indeed Doocy was talking to Romney on Fox News when he added the words. But the truth was that Obama had been saying the silver spoon line since 2009, as Thaddeus pointed out.
Moreover, the Washington Post and New York Post had picked up the line verbatim from Doocy, rather than checking the original source, and when Thaddeus had contacted them they had ignored his complaints. So that’s when he asked me to put up his guest post, which I did.
And what’s super cool is that it was picked up by a bunch of people who linked to my blog (ISPN Media, Deep Brain Media, Brobrubel’s blog, The Fifth Column, and FAIR), and quite a bit of twitter buzz for what I’m used to.
A bunch of other media outlets also picked this up who didn’t link to my blog (which is kind of ironic considering the post is about doing your job as a journalist) including USA Today, Media Matters, and the Daily Kos, after which the Washington Post corrected its Obama quote.
After that, the story got onto Talking Points Memo, and didn’t link to my blog but was attributed to Michael Thaddeus which later got shortened to MT for some reason. It was even the top story on Talking Points Memo for some time Sunday afternoon.
The ultimate (in terms of my kids thinking I’m cool) happened Monday evening though when the story was featured on the Colbert Report. Cool!
Oh yeah, and Doocy finally apologized on Fox News.
Blogging isn’t dead, people!!
Calling all data scientists! The first ever global data science hackathon
Hey I’m helping organize a NYC data hackathon at Bloomberg Ventures to take place April 28th – 29th, from 8am Saturday to 8am Sunday. I’m looking for outrageously nerdy people to come help. There will be some prizes.
Read the official blurb below carefully and if you’re in, sign up for the event by registering here.
Update: they’ve decided on prizes.
See you there!
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Are you a smart data scientist? Participate in this hackful event. 24 hours of non-stop, fun data science competition. The first ever global, simultaneous data science hackathon!
In connection with Big Data Week, we’re helping organize a global data science hackathon that will simultaneously take place in various locations around the world (including London, Sydney, and San Francisco). We will host the NYC event at the Bloomberg Ventures office in the West Village.
The aim of the hackathon is to promote data science and show the world what is possible today combining data science with open source, Hadoop, machine learning, and data mining tools.
Data scientists, data geeks, and hackers will self organize around teams of 3-5 members. Contestants will be presented with a ‘big data’ set (hosted on the Kaggle platform). In order to win prizes, the teams will have to use data science tools and develop an analytical model that will solve a specific data science problem specified by the judging tech panel. The contestants will have to report their achievements at specific milestones, and a leader board will be published online at each milestone.
The contestants will spend 24 hours in Bloomberg Ventures’ office space where food, drinks, workspaces, and resting areas will be provided. Teams will compete for both local and global titles and prizes.
The Hackathon runs for 24 hours starting on April 28th at 8am (early start to allow for the event to happen simultaneously in multiple time zones around the world).
If you have questions, please email shivon.zilis@bloombergventures.com
PLEASE READ CAREFULLY:
1. This is a technical competition, not a networking event or an opportunity to learn more about big data techniques and technologies. We have limited space, so we unfortunately need to be strict about who gets to compete. If you’re an entrepreneur looking to recruit, we’re excited to have you as a member of this community, but this specific event is not the right venue, please come our regular Data Business meetups instead! 🙂
2. You should have Mad Skillz at at least one of the following:
- Data grappling and/or cleaning,
- Data modeling and forecasting,
- Data visualization,
- Spontaneous micro- and macro-economic theory creation
3. You should know one or more of the following languages:
- R
- python
- Matlab
- Some statistical package like SPSS or SAS
4. You should bring your hardcore laptop to the event, since we will have on the order of 10 gigs of data to play with.
Who here reads Dutch? (#OWS)
Hey I was interviewed last week by the Belgian newspaper De Tijd about Occupy Wall Street and the Alternative Banking group. Here are pdf versions of the first page and the second page, but I wanted to show the picture too, event though this jpeg version isn’t good enough to read:
Random stuff, some good some bad
- In case you didn’t hear, Obama didn’t nominate Larry Summers to head the World Bank. This goes in the category of good news in the sense that expectations were so low that this seems like a close call. But I guess it’s bad news that expectations have gotten so low.
- Am I the only person who always thinks of tapioca when I hear the word “mediocre”?
- There are lots of actions going on in Occupy Wall Street, part of the Spring Resistance. It’s going to be an exciting May Day, what are you plans?
- Did you hear that New Jersey was somehow calculated to be the country’s least corrupt state? This Bloomberg article convincingly blows away the methodology that came to that conclusion. In particular, as part of the methodology they asked questions about levels of transparency and other things to people working in New Jersey League of Municipalities (NJLM). A bit of googling brings up this article from nj.com, exposing that NJLM clearly have incentives to want the state government to look good: it consists of “… more than 13,000 elected and appointed municipal officials — including 560 mayors — as members… its 17 employees are members of the Public Employees’ Retirement System, and 16 percent of its budget comes from taxpayer funds in the form of dues from each municipality.” Guess what NJLM said? That New Jersey is wonderfully transparent. And guess what else? The resulting report is front and center on their webpage. By the way, NJLM was sued by Fair Share Housing to open up their documents to the public, and they lost. So they have a thing about transparency. And just to be clear, the questions for deciding whether a given state is corrupt could have been along the lines whether the accounting methods for the state pension funds are available on the web and searchable on the state government’s website.
- If you know of examples of so-called quantitative models that are fundamentally flawed and/or politically motivated like this, please tell me about them! I enjoy tearing apart such models.
- The Dallas Fed has called for an end to too-big-to-fail banks. Mmmhmmm. I love it when someone uses the phrase, “Aspiring politicians in this audience do not have to be part of the Occupy Wall Street movement, or be advocates for the Tea Party, to recognize that government-assisted bailouts of reckless financial institutions are sociologically and politically offensive”.
- Volcker says more reforms are needed in finance and government. Can we start listening to this guy now that we broke up with Summers? Please?
Why Larry Summers lost the presidency of Harvard
Some people still think Larry Summers got fired from being the president of Harvard because of the ridiculous comments he made about women in math (see my post about this here) or because of the comments he made about Cornel West. Actually, the truth is something worse, and for which he should actually be in jail. It’s also something that makes Harvard look bad, so maybe that’s why it’s less known.
The subtitle of this post is: Why Larry Summers shouldn’t be made head of the World Bank.
I was inspired to write this by being disgusted at continued rumors that he could get yet another prestigious job. It’s like this guy can’t fail spectacularly enough! Let’s give him another chance!
Let’s set the record straight: Summers was directly involved with defrauding the U.S. Government (see below) and Russia. He admitted to not understand conflict of interest issues (see below). It is particularly appalling, knowing these things, that he would be considered for the World Bank head, which presumably requires nuanced understanding of such issues.
I’m using this article, entitled “How Harvard Lost Russia,” and written in 2006 in Institutional Insider (II), as a reference. More on that article and how it led to getting Summers fired below. And by the way, I’m not claiming this story is completely unkown: see this wikipedia article for a quick overview, for example, in addition to the II article. I just think it needs reviving at this crucial moment, before Summers gets more toys to play with.
Shleifer
So why did Summers lose his job at Harvard? It was because of his protecting a buddy, a fellow economist at Harvard named Andrei Shleifer.
Andrei Shleifer managed to get put in charge of helping Russia privatize stuff in the mid 1990’s. His mission was to make things more useful and transparent to the infant capitalist system. Through his wife and friends, Shleifer instead orchestrated a boondoggle on Russia. He invested money through his wife and helped his friend Jonathan Hay and his lover and friends invest theirs, and set up the very first mutual fund as well as thwarting the efforts of other people to set up their own funds. All of these things were strictly against the conflict of interest policy they were working under.
Shleifer got in trouble, and the U.S Government sued and won against Harvard and Shleifer. From the article:
The judge determined that Shleifer and Hay were subject to the conflict-of-interest rules and had tried to circumvent them; that Shleifer engaged in apparent self-dealing; that Hay attempted to “launder” $400,000 through his father and girlfriend; that Hay knew the claims he caused to be submitted to AID were false; and that Shleifer and Hay conspired to defraud the U.S. government by submitting false claims.
On August 3, 2005, the parties announced a settlement under which Harvard was required to pay $26.5 million to the U.S. government, Shleifer $2 million and Hay between $1 million and $2 million, depending on his earnings over the next decade. Shleifer was barred from participating in any AID project for two years and Hay for five years. Shleifer and Zimmerman were required by terms of the settlement to take out a $2 million mortgage on their Newton house. None of the defendants acknowledged any liability under the settlement. (Forum Financial also settled its lawsuit against Harvard, Shleifer and Hay under undisclosed terms.
Summers and Shleifer
Summers was good friends with this criminal, and used his position to protect him. From the article:
Shleifer remained close to his friend and mentor Summers; they talked to and saw each other frequently and continued vacationing together in the summer on the Cape. Then it became known in early 2001 that Summers was on the short list of candidates to succeed Neil Rudenstine as the president of Harvard University. Shleifer and Zimmerman began campaigning for Summers to get the Harvard post, giving meet-and-greet parties for him at their home. Summers stayed with them when he visited Harvard.
In March 2001, Summers was named president of Harvard. Shleifer, who had been courted by New York University’s Stern School of Business, decided to stay put.
Having his close friend as his boss would turn out to be quite helpful to Shleifer. Summers asserted in his deposition that he recused himself from any involvement in the university’s handling of the Shleifer matter, but the new president stayed involved anyway. Early in his presidency he told the dean of the faculty of arts and sciences, Jeremy Knowles, to keep Shleifer at Harvard.
“I expressed to Dean Knowles,” Summers testified in a deposition in 2002, “. . . that I was concerned to make sure that Professor Shleifer remained at Harvard because I felt that he made a great contribution to the economics department . . . and expressed the hope that Dean Knowles would be attentive to that. . . . I think he recognized and shared the concern.”
“Conflict of interest issues should be left to the lawyers” says Summers
This is the testimony that says to me, in no uncertain terms, that Summers cannot be put in charge of something politically sensitive:
Summers said conflict-of-interest “issues,” in his Washington experience, were “left to the lawyers.” He said he was sensitive to “ethics rules,” but testified that “in Washington I wasn’t ever smart enough to predict them . . . things that seemed very ethical to me were thought of as problematic and things that seemed quite problematic to me were thought of as perfectly fine. . . .”
More intervention on behalf of Shleifer
Maybe you’d think that getting sued by the US Government and losing $40 million might lose your job as a Harvard Professor. But you’d be wrong:
Knowles tells Institutional Investor that he does not remember Summers’ approaching him about Shleifer. “I don’t recall this particular conversation, but the president and I shared the goal of recruiting and retaining the best faculty, so it would have been perfectly natural for us to mention to each other the names of people that we certainly wouldn’t want to lose.” However, not long after Summers says he intervened on the professor’s behalf, Knowles promoted Shleifer from professor of economics to a named chair, the Whipple V.N. Jones professorship.
Shleifer’s legal position changed on June 28, 2004, when Judge Woodlock ruled that he and Hay had conspired to defraud the U.S. government and had violated conflict-of-interest regulations. Still, there was no indication that the Summers administration had initiated disciplinary proceedings. To the contrary, efforts were seemingly made to divert attention from the growing scandal. The message from the top at Harvard was, “No problem — Andrei Shleifer is a star,” says one senior Harvard figure.
The Summers-Shleifer friendship flourished. They spoke on the phone more than once a day, on average. Two months after the court ruling against Shleifer, he hosted Summers at a break-the-fast dinner on Yom Kippur.
One instance was a meeting early in the academic year that began in September 2004, less than two months after the federal court formally adjudicated Shleifer’s liability for conspiring to defraud the U.S. government. A faculty member asked Kirby why Harvard should defend a professor who had been found liable for conspiring to commit fraud. The second confrontation came early in the current academic year when another professor asked Kirby why Harvard should pay a settlement of $26.5 million and legal fees estimated at between $10 million and $15 million for legal violations by a single professor and his employee, about which it was unaware. On both occasions Kirby is said to have turned red in the face and angrily cut off discussion.
On at least one other occasion, Summers himself told members of the faculty of arts and sciences that the millions of dollars that Harvard paid in damages did not come from the budget of the faculty of arts and sciences, but didn’t say where the money came from. Those listening inferred he meant that the matter shouldn’t be of concern to the faculty and that they shouldn’t raise it, a curious notion, given that Shleifer was one of their own.
A spokesman for Summers said he was “unable to schedule” an interview with Summers for II in December, when this article was being prepared. As the lawsuit was against the university, not just the faculty of arts and sciences, the settlement came from “university funds available for these purposes,” the spokesman added.
…
Shleifer has never acknowledged doing anything wrong. Summers has said nothing. And so far as is known, there has been no internal investigation or sanction. “An observer trying to make sense of the University’s position on Shleifer, Ogletree and Tribe is driven to an unhappy conclusion. Defiance seems to be a better way to escape institutional opprobrium than confession and apology. . . . And most of all being a close personal friend of the president probably does one no harm.”
The article gets Summers fired
An anonymous person got a bunch of copies of the II article and stuck one in every Harvard faculty’s mailbox the morning of the no-confidence vote that got Summers ousted.
And just in case you’re wondering, here’s the website of Sheifer, still on faculty of Harvard.
Charity auctions and hate crimes
I read an absolutely incredible story last night on Bloomberg.
This Morgan Stanley executive William Jennings (co-head of North American fixed-income capital markets) is being charged with a hate crime. Let me piece it together a bit.
On December 22nd Jennings hosted a charity auction at Morgan Stanley until 6pm, then went to Ink48, a hotel in midtown on the west side. After partying on the rooftops for some time, and drinking, his car service didn’t show up fast enough for him so he hailed a cab to take him to Connecticut, where he lives with his wife and three kids in a $3.4 million house.
When he got to Connecticut, he got into a fight with the cab driver and ended up refusing to pay, stabbing the guy in his hand with a knife (which required 60 stitches) while using ethnic slurs. Then he went away to Florida for two weeks on the DL. My favorite line from the article:
Jennings fell asleep during the trip, the driver said. Once at the destination, though, Jennings said “he did not feel like paying” because he was already home.
Up for debate and the trial: did he really refuse to pay or was he just arguing his fare? Was it really 60 stitches or is that an exaggeration? Did he really use ethnic slurs? I’m throwing in these questions because I want to be correct and because the overall point of my post won’t depend on these details anyway.
Not up for debate: he stabbed the cabbie, it was definitely an argument over money, and he was worried enough to go to Florida for two weeks.
Okay, now that I’ve summed this up I’m gonna connect it to charity auctions. Yes I am.
I’ve been to charity auctions myself. I want to devote an entire post to describing what such an event consists of; for now take it from me that they are orgies of self-congratulatory arrogance. And ironically, they are not at all charitable in the sense of being generous and tolerant.
They are in fact celebrations of self-centeredness, displays of careless overabundance. Yes, I’ll pay $120k to go to Australia for a week to golf, and I’ll do it for the poor children, and by the way also because I can afford to throw away such money and especially by the way because everyone in this room now knows that.
So I think it’s extra deliciously ironic that this guy went from that atmosphere to arguing with an Egyptian cabbie over a $200 fare (or maybe $300, if we want to be generous to Jennings and believe his “extortionist cabbie” sob story).
But my point is that, although the cab ride was a different atmosphere from the charity auction, his was not a different attitude at all: both parts of his evening centered on assumptions of entitlement and selfishness and the idea that he is somehow outside the regular rules and cannot be held accountable like normal people. From the article:
He then went on vacation to Florida, police said. Jennings told officers he subsequently called his lawyer after a friend told him police were looking for a suspect in the stabbing incident, according to the report.
“Jennings said he didn’t know what to do — he just wanted the whole thing to go away,” Darien Police Detective Chester Perkowski said in a court document filed with the report.
The part about the car service not showing up is absolutely key: these guys use car services a lot, and when you do that, you get used to not paying for such trivial little things as rides, or for that matter food or drinks. All such things are handed to you for free when you are this important (read: rich). Paying, writing a check or what have you, is reserved for ostentatious displays of wealth. I know hedge fund guys that don’t even carry money in their wallet because they never use cash. Actually I don’t know them personally but I know that this is true because they brag about it in the elevators.
I’m not trying to generalize this story – most Morgan Stanley execs haven’t been charged with knifing down working class cabbies. But it’s impossible for me not to see the consistency in the two events.
Math-Startup Collaborative at Columbia tomorrow
The Columbia Chapter of SIAM (Society for Industrial and Applied Mathematics) invites YOU to:
Spring 2012 Math-Startup Collaborative Wednesday, February 29 | 6:00 – 8:00 PM | Davis Auditorium, Schapiro Center
Meet Columbia alumni from NYC startups, including Bitly, Foursquare, and Codecademy, and learn about the role of math and engineering in their companies. Students interested in startup careers and internships, or those simply curious to see how math is applied in the wild, are especially welcome. The event, which consists of a series of presentations from our startup members, will be followed by a reception (with free food!). This is sure to be the largest applied math event of the semester!
Startup presenters include:
- Bitly –> http://blog.bitly.com/
- Foursquare –> https://foursquare.com/about/
- Codecademy –> http://blog.codecademy.com/
- BuzzFeed –> http://www.buzzfeed.com/about
- Sailthru –> http://blog.sailthru.com/
Space is limited! Contact Ilana Lefkovitz (itl2103@columbia.edu) for more information.
Please RSVP at bit.ly/Math–Startup-RSVP-2012
Co-sponsored by the Application Development Initiative (ADI). Reception sponsored by AOL Ventures.
I am the most boring person in the world
A few nights ago I went to a CFPB Town Hall Meeting after work. The discussion in the kitchen that morning went something like this:
me: “I’m going to be late tonight, guys, because I’m going to a CFPB Town Hall meeting… I’m really excited about it!”
my husband: “What the hell is CFPB?”
me: “Oh, it stands for the Consumer Financial Protection Bureau. You know, the thing that Elizabeth Warren started but then didn’t get to be in charge of? I need to go see if this guy Cordray is going to be pushy enough to lead an effective government agency. Today the issues at the meeting are things like checking accounts and debit cards and overdraft policies. I totally need to go, can you guys eat leftovers?”
my husband: “You are the most boring person in the world”
my three sons, simultaneously: “Yeah mom, he’s right. You are the most boring person in the world.”
Whatever. I guess they’re right, but I went anyway. After lots of incredibly congratulatory introductions, including a 5 minutes speech from New York Attorney General Eric Schneiderman, there were a bunch of questions from the audience.
There were lots of community groups represented, as well as individuals. Two themes emerged through the questions that seem like particularly egregious consumer issues affecting poor people.
First was the issue of pre-paid debit cards and the corresponding fees. This guy stood up at the microphone and described his friend who get a debit card for child support, court-ordered. But this debit card extracts enormous fees every time she takes money out, including things like $5 just to check the balance. The guy was saying, you know my friend needs that money for her children, and it’s not fair that so much of it goes to fees- it’s abusive. I was totally crying. I mean, I’m an easy cry, but still. That wasn’t the only story about such debit cards where there was no choice in the matter but the fees were extortionist.
Second the issue of Walmart issuing its pay to people in debit card form came up time after time as well. So it seems that Walmart is not only a retailer, but also a financial institution of the crappiest kind now. It issues debit cards as payment to people who don’t accept direct deposit or don’t have checking accounts, and again it seems that the money on the cards is somehow deeply tied to a fee structure. I need to look into this more (as does the CFPB) but I’m wondering off the top of my head whether people can just demand to be paid in cash instead. It’s like these people are being paid really badly, with very few benefits, and even when they get paid they’re being nickeled and dimed every step of the way. It’s like it’s not really their money even then.
So in other words, debit cards are the new check cashers, but maybe worse since their fee structure doesn’t seem to be as transparent.
Of course, I took the opportunity to ask a question too, since I am not shy. And I was told not to ask a question but rather to tell a story, but whatever, I decided to phrase is as “making three suggestions.” After introducing myself as coming from the Alternative Banking group, I mentioned the following:
- The CFPB should use its powers to bring together mortgage investors and homeowners to the same table, in order to align their interests and bypass the banks as servicers, since the banks are only endlessly delaying the process in order to extract fees.
- I mentioned that our group is working on a “find a credit union app” but that the CFPB should really be doing that with us, to help underbanked people find alternatives to crappy banking solutions (like debit cards).
- I mentioned that we had submitted a public comment letter demanding that the credit score models be open sourced, since there was no legitimate reason for such models, which directly affect consumers in their daily lives, to be kept proprietary.
Akshat was there too, from Occupy the SEC, and he asked about the Volcker Rule.
Condray took notes. I mean, what’s he going to say.
Well actually sometimes he did say stuff, like to Akshat, and for the most part it was something along the lines of, “that is not in our jurisdiction”, although there was one exception when he talked about how Walmart, being a retailer, is not in his jurisdiction but since it’s acting as a banking institution it actually is.
Overall I’m a bit disappointed. Although I did certainly like the fact that he held a town hall meeting at all, I am worried that he’s just too nice, and that he’s going to try to please everyone and be kind of wishy-washy. I would have loved to see him manage to sustain disgust at the abuses he was hearing about, but instead he sounded more concerned than angry, and I would put my money on angry any day. I want the CFPB to be led by a son-of-a-bitch that pisses people off and constantly tried to enlarge his jurisdiction rather than keeping well inside the lines. Time will tell.
It’s all mom’s fault
Maybe it’s because I grew up with an unapologetic working mother, but I am confused and enraged by all the cultural norms concerning mothers and how everything is their fault.
When I grew up in the 1970’s I had all sorts of role models of mothering. I was lucky to live next door to Sally, I met MA (Mary Ann) in puberty, and of course there was my own mom. All of these women were fiercely devoted to their choices: Sally and MA stayed home with their young kids but as their kids grew up, devoted more and more time to other things. My mom was a computer science professor my entire life. It goes without saying (but just for the record I’ll say it here) that I support people doing what they want to and need to for their own private reasons, no questions asked.
Sure, there were differences in interactions between my mom and these other surrogate moms. My mom didn’t have a lot of extra time to shop or cook, for example. But on the other hand she was a great role model for me in showing me how to be happy with what you do and have kids at the same time. And some things she didn’t have time for I was lucky enough to get from other things and people.
Here it is, thirty years later, and lots things have changed for working mothers. Some things have gotten easier: there’s online shopping, so I can provide my three sons with clothes and food without leaving home, which was a major struggle for my mom. Some things have gotten harder: school and daycare has gotten more expensive (more on that below). Other things haven’t changed so much, which itself is strange.
Here’s an article that got me pissed off enough to write this post. It’s a New York Times piece about an Olympic swimmer who, after taking time off and having two children, has returned to swimming and is actually competitive at the age of 40. I am so completely impressed by her, but for some reason the Times sees it as appropriate to deliver the following lines:
Evans said she had been criticized on social networking sites for training when she should be home with her children. But she has set up her schedule so her main swimming workout takes place in the morning, from 5:30 to 7:30, so she can make it home in time for breakfast. Her crazy hours are not lost on her daughter, who recently asked, “Why do you swim in the dark, Mommy?”
…
Willson’s job in technology sales allows him to work from home. He can chip in with the children when needed and behold the force of nature that is his wife.
First of all, how is it appropriate to mention idiots on Facebook? It is so entirely defensive and out of place. If I’m training for the Olympics, probably for the very last time in my life, my kids will be psyched for me to do my best, even if it means missing breakfast sometimes. And why is there always a mention of the martyred husband? Just imagine this was a male swimmer coming back to the Olympics after not swimming for 15 years, do we hear about his wife? No we don’t. Ridiculous, and the New York Times should do better. If they mention idiots on Facebook, they should also mention how they are idiots.
Here’s another story that got me incredibly pissed (if you were looking for a happy post this morning, I apologize). It’s about a public ad campaign in Georgia with billboard pictures of fat kids looking unhappy. This is insane and insulting on so many levels I don’t really know where to start, but let me start with the intended target: the mom. Yes, it’s mom’s fault that there are fat kids, and these billboards are telling mom not to let their kids get fat.
As an aside, it’s also now officially okay to blame mom for making her kids fat, as it’s also officially okay to blame the kids themselves. It’s government-sponsored bullying. Never mind the fact that they’ve shown nutrition education and exercise doesn’t actually cause people to lose weight (i.e. understanding where calories are hidden in food doesn’t magically make them leave cheeseburgers). Never mind that nobody has come up with a viable plan for how to address this issue. Let’s blame moms anyway, because then we are taking this issue seriously.
It makes you wonder why women want to become moms at all considering all the things we are signing up for. Oh and wait, actually lots of women aren’t having kids, but interestingly a recent paper came out showing women who are highly educated are having more kids. Here’s the abstract for that paper:
Conventional wisdom suggests that in developed countries income and fertility are negatively correlated. We present new evidence that between 2001 and 2009 the cross-sectional relationship between fertility and women’s education in the U.S. is U-shaped. At the same time, average hours worked increase monotonically with women’s education. This pattern is true for all women and mothers to newborns regardless of marital status. In this paper, we advance the marketization hypothesis for explaining the positive correlation between fertility and female labor supply along the educational gradient. In our model, raising children and home-making require parents’ time, which could be substituted by services bought in the market such as baby-sitting and housekeeping. Highly educated women substitute a significant part of their own time for market services to raise children and run their households, which enables them to have more children and work longer hours. Finally, we use our model to shed light on differences between the U.S. and Western Europe in fertility and women’s time allocated to labor supply and home production. We argue that higher inequality in the U.S. lowers the cost of baby-sitting and housekeeping services and enables U.S. women to have more children, spend less time on home production and work more than their European counterparts.
Also interesting is this interview, where they describe the results of another paper which tracked women vs. men in various fields of science, including math. It looks like evidence for my post about meritocracy and horizon bias, i.e. the idea that women self-select out of certain fields because they are just not very appealing. From the interview:
The women who come in to academic science careers tend to be so highly motivated that they stay. They limit the number of children they have. Other studies have shown that female academics have fewer children than other professional women, such as lawyers. Female graduates see women scientists working very hard in what they feel are less fair conditions, and it puts them off. Societal factors also make it harder for women to have such demanding careers–women tend to manage family problems, for example.
By the way, I am not insufferably sad about mothers and their fates. I make fun of mothers too, and this article about passive parents is one I could have written. From the article:
But seriously, what is the deal with asking our children to behave? “Maybe you should get down?” What the hell is wrong with you lady? She’s four. There’s no room for negotiating here. I’m all for giving my kids choices to make them feel like they’re in control of something, blah, blah, blah, but this is not the time. “Maybe” should be reserved for times like: “Do you want to wear a dress today or MAYBE a skirt?”
I could go on and on about the passivity of modern yuppie parents, and I’d be right (hey I live in the Upper West Side so you know I’d be right). But if you think about it for a minute, this is just another manifestation of the same thing: it’s all mom’s fault. These women are performing a mother role instead mothering from the stomach, and it’s because they are made insecure by all the incredible bullshit out there about how to be a good mom and what other people are going to think if they scream at their kid in public or if their kid starts to scream. We have taught our mothers to be insecure, and to feel at fault, and oh yes, to be the target of bullying ad campaigns as well.
People, let’s get it together and solve problems instead of pointing fingers. I’m looking at you, Santorum.
#OWS Alternative Banking update
Crossposted from the Alternative Banking Blog.
I wanted to mention a few things that have been going on with the Alternative Banking group lately.
- The Occupy the SEC group submitted their public comments last week on the Volcker Rule and got AMAZING press. See here for a partial list of articles that have been written about these incredible folks.
- Hey, did you notice something about that last link? Yeah, Alt Banking now has a blog! Woohoo! One of our members Nathan has been updating it and he’s doing a fine job. I love how he mentions Jeremy Lin when discussing derivatives.
- Alt Banking also has a separate suggested reading list page on the new blog. Please add to it!
- We just submitted a short letter as a public comment to the new Consumer Financial Protection Bureau regulation which gives them oversight powers on debt collectors and credit score bureaus. We basically told them to make credit score models open source (and I wasn’t even in the initial conversation about what we should say to these guys! Open source rules!!):
ECB trades crap for slightly less crappy crap
Yesterday I read this New York Times article on how the ECB is trading its short term Greek bonds, with Greece, for longer term bonds.
Specifically, in order to avoid holding bonds that Greece is officially planning to “voluntarily” default on, the ECB is turning in that super crappy crap for other bonds that Greece hasn’t yet decided how much they’ll default on.
Just to spell it out even more, the plan to get private bondholders more excited about trusting the European bond market has been this:
- have the the ECB step in (around the beginning of 2012) and provide liquidity and faith in the bond market,
- negotiate that the Greek bonds maturing in March 2012 are given a 70% haircut,
- make sure credit default swaps on those bonds are not activated (why we need it to be “voluntary”),
- change the terms of the bonds’ contracts so that the holdouts of this voluntary deal can be safely ignored, and
- have the ECB trade those bonds for longer-dated bonds at the last minute so they don’t actually have to take losses.
I’m not sure about you, but if I’m a private European debt holder my confidence in the bond market is not stronger right now. The argument for why the ECB is doing this is that they aren’t allowed to be seen giving money to Greece, by their charter. It’s odd to me that this charter, of all the various rules that have been broken here, is the one that is being fixated on as the important one we can’t break.
There are complicated politics going on, I am sure. I’m no expert in European politics, but this is about as European and about as political as things get.
Ignoring all of that, as a private bondholder, I’m putting a “ECB back-door swap” premium on all of my European debt from now on. Except maybe for German debt since I think Germany would rather jump out of the Euro altogether than default on its debt. But every other country is fair game. Bottomline is I short French debt today.
How Harvard is failing its students
In a recent Bloomberg article, Ezra Klein argues that Harvard and the other Ivy Leagues are failing their students because the students end up confused about what they can do with themselves after college and end up going to Wall Street firms as a way of making themselves marketable. From the article:
For many kids, college represents an end goal. Once you get into a good college, you’ve made it, and everyone stops worrying about you. You’re encouraged to take classes in subjects like English literature and history and political science, all of which are fine and interesting, but none of which leave you with marketable skills. After a few years of study, you suddenly find it’s late in your junior year, or early in your senior year, and you have no skills pointing to the obvious next step.
What Wall Street figured out is that colleges are producing a large number of very smart, completely confused graduates. Kids who have ample mental horsepower, incredible work ethics and no idea what to do next. So the finance industry takes advantage of that confusion, attracting students who never intended to work in finance but don’t have any better ideas about where to go.
He then talks about how the investment banks makes the application process formal, which is something that these kids are good at, and also that Wall Street promises to build them into people with careers and options. He also points out that some kids go into other formal applicationed jobs like Teach for America, so it’s not all about the money, at least not for all of them, and he concludes by saying how Harvard should change:
My hunch is that we have underemphasized the need to learn skills, rather than simply learn, while in college. The fact that Teach for America — which pays almost nothing and can place its hires far from cosmopolitan hot spots — is one of the few recruiting systems competitive with Wall Street suggests that graduates are open to paths that aren’t remotely as remunerative as finance and aren’t based in New York or San Francisco. They’re just not seeing all that many of them.
Although I agree with some of his diagnosis, I don’t agree with his solution of learning more “skills” in college.
As an aside, as I learned from Karen Ho’s excellent book about investment banking, Liquidated, and also from people I’ve met, the skills you learn on Wall Street as freshmen analysts are primarily bullshitting skills and Excel skills. These most definitely should not be taught at college.
I think he is right about these kids being comfortable with the “formal process” of applying to investment banks etc., but I don’t think he dives deep enough into why this is true. The fact is, the kids who get into Harvard nowadays are, generally speaking, professional test takers. They are moreover dependent on outside metrics for evaluating themselves. If you took away tests and grading systems, these kids would be desperately unhappy, because that’s how they’ve been trained all their lives to think about their self-worth.
When I was a tutor at one of the undergrad houses at grad school, I was incredibly impressed with the international group of undergrads I was in charge of; their credentials, even at the age of 20, were amazing, and their knowledge and self-possession were stunning. Same with the high school kids I taught at math camp last summer. But one thing I saw time and time again was how much they needed to please some outside authority. It’s like they never decided whether they themselves liked their major or whether it was a good fit- it was instead about whether they’d be successful and whether it would be an impressive path for them. So, external metrics of success.
Here’s my diagnosis. These kids are vulnerable to Wall Street investment firms and to things like Teach for America because they have application processes at all. But life, normal adult life, doesn’t have an application process. You actually, at some point, need to figure out what you want to do and what makes you happy. You need to take a leap of faith that your native talents and desires will end you up at a reasonable and interesting place.
Actually you don’t ever have to decide that, you could just keep doing what you think looks good to other people and pleases your parents or friends, without regard to whether it fulfills you at all. That’s kind of what’s happening I think with the 36% of the Princeton undergrads going to finance.
As for what Harvard et al can do about this, I would suggest trying to send the message in one of their core curriculum classes, that it’s not only about what you’re good at, it’s also about what makes you happy. I’m not sure those kids have ever really been told that. Being told that might not make a huge difference, but it’s a good start.
And instead of teaching them new “skills,” they should be told about options outside of school, and meet people who are employed doing interesting things with their liberal arts education. Have them talk about the way they made their way there, forged a path, and felt insecure about doing something weird but did it anyway. In other words, present them with role models who are living out their lives on their own terms, with independent thoughts.
A modeled student
There’s a recent article from Inside Higher Ed (hat tip David Madigan) which focuses on a new “Predictive Analytics Reporting Framework” that tracks students’ online learning and predicts their outcomes, like whether they will finish the classes they’re taking or drop out. Who’s involved? The University of Phoenix among others:
A broad range of institutions (see factbox) are participating. Six major for-profits, research universities and community colleges — the sort of group that doesn’t always play nice — are sharing the vault of information and tips on how to put the data to work.
I don’t know about you but I’ve read the wikipedia article about for-profit universities and I don’t have a great feeling about their goals. In the “2010 Pell Grant Fraud controversy” section you can find this:
Out of the fifteen sampled, all were found to have engaged in deceptive practices, improperly promising unrealistically high pay for graduating students, and four engaged in outright fraud, per a GAO report released at a hearing of the Health, Education, Labor and Pensions Committee held on August 4, 2010.[28]
Anyhoo, back to the article. They track people online and make suggestions for what classes people may want to take:
The data set has the potential to give institutions sophisticated information about small subsets of students – such as which academic programs are best suited for a 25-year-old male Latino with strength in mathematics, for example. The tool could even become a sort of Match.com for students and online universities, Ice said.
That makes me wonder- what would I have been told to do as a white woman with strength in math, if such a program had existed when I went to college? Maybe I would have been pushed to become something that historical data said I’d be best suited for? Maybe something safe, like actuarial work? What if this had existed when my mother was at MIT in applied math in the early ’60’s? Would they have had a suggestion for her?
Aside from snide remarks, let me make two direct complaints about this idea. First, I despise the idea of funneling people into chutes and ladders-type career projections based on their external attributes rather than their internal motives and desires. This kind of model, which as all models is based on historical data, is potentially a way to formally adopt racist and sexist policies. It codifies discrimination.
The second complaint: this is really all about money. In the article they mention that the model has already helped them decide whether Pell grants are being issued to students “correctly”:
Students can only receive the maximum Pell Grant award when they take 12 credit hours, which “forces people into concurrency,” said Phil Ice, vice president of research and development for the American Public University System and the project’s lead investigator. “So the question becomes, is the current federal financial aid structure actually setting these individuals up for failure?”
In other words, it looks like they are going to try to use the results of this model to persuade the government to change the way Pell Grants are distributed. Now, I’m not saying that the Pell Grant program is perfect; maybe it should be changed. But I am saying that this model is all about money and helping these online universities figure out which students will be most profitable. I’m familiar with constructing such models, because I was a quant at a hedge fund once and I know how these guys think. You can bet this model is proprietary, too- you wouldn’t want people to see into how they are being funneled too much, it might get awkward.
The article doesn’t she away from such comparisons either. From the article:
The project appears to have built support in higher education for the broader use of Wall Street-style slicing and dicing of data. Colleges have resisted those practices in the past, perhaps because some educators have viewed “data snooping” warily. That may be changing, observers said, as the project is showing that big data isn’t just good for hedge funds.
Just to be clear, they are saying it’s also good for for-profit institutions, not necessarily the students in them.
I’d like to see a law passed that forced such models to be open-sourced at the very very least. The Bill and Melinda Gates Foundation is funding this, who know how to reach those guys to make this request?
How Big Pharma Cooks Data: The Case of Vioxx and Heart Disease
This is cross posted from Naked Capitalism.
Yesterday I caught a lecture at Columbia given by statistics professor David Madigan, who explained to us the story of Vioxx and Merck. It’s fascinating and I was lucky to get permission to retell it here.
Disclosure
Madigan has been a paid consultant to work on litigation against Merck. He doesn’t consider Merck to be an evil company by any means, and says it does lots of good by producing medicines for people. According to him, the following Vioxx story is “a line of work where they went astray”.
Yet Madigan’s own data strongly suggests that Merck was well aware of the fatalities resulting from Vioxx, a blockbuster drug that earned them $2.4b in 2003, the year before it “voluntarily” pulled it from the market in September 2004. What you will read below shows that the company set up standard data protection and analysis plans which they later either revoked or didn’t follow through with, they gave the FDA misleading statistics to trick them into thinking the drug was safe, and set up a biased filter on an Alzheimer’s patient study to make the results look better. They hoodwinked the FDA and the New England Journal of Medicine and took advantage of the public trust which ultimately caused the deaths of thousands of people.
The data for this talk came from published papers, internal Merck documents that he saw through the litigation process, FDA documents, and SAS files with primary data coming from Merck’s clinical trials. So not all of the numbers I will state below can be corroborated, unfortunately, due to the fact that this data is not all publicly available. This is particularly outrageous considering the repercussions that this data represents to the public.
Background
The process for getting a drug approved is lengthy, requires three phases of clinical trials before getting FDA approval, and often takes well over a decade. Before the FDA approved Vioxx, less than 20,000 people tried the drug, versus 20,000,000 people after it was approved. Therefore it’s natural that rare side effects are harder to see beforehand. Also, it should be kept in mind that for the sake of clinical trials, they choose only people who are healthy outside of the one disease which is under treatment by the drug, and moreover they only take that one drug, in carefully monitored doses. Compare this to after the drug is on the market, where people could be unhealthy in various ways and could be taking other drugs or too much of this drug.
Vioxx was supposed to be a new “NSAID” drug without the bad side effects. NSAID drugs are pain killers like Aleve and ibuprofen and aspirin, but those had the unfortunate side effects of gastro-intestinal problems (but those are only among a subset of long term users, such as people who take painkillers daily to treat chronic pain, such as people with advanced arthritis). The goal was to find a pain-killer without the GI side effects. The underlying scientific goal was to find a COX-2 inhibitor without the COX-1 inhibition, since scientists had realized in 1991 that COX-2 suppression corresponded to pain relief whereas COX-1 suppression corresponded to GI problems.
Vioxx introduced and withdrawn from the market
The timeline for Vioxx’s introduction to the market was accelerated: they started work in 1991 and got approval in 1999. They pulled Vioxx from the market in 2004 in the “best interest of the patient”. It turned out that it caused heart attacks and strokes. The stock price of Merck plummeted and $30 billion of its market cap was lost. There was also an avalanche of lawsuits, one of the largest resulting in a $5 billion settlement which was essentially a victory for Merck, considering they made a profit of $10 billion on the drug while it was being sold.
The story Merck will tell you is that they “voluntarily withdrew” the drug on September 30, 2004. In a placebo-controlled study of colon polyps in 2004, it was revealed that over a time period of 1200 days, 4% of the Vioxx users suffered a “cardiac, vascular, or thoracic event” (CVT event), which basically means something like a heart attack or stroke, whereas only 2% of the placebo group suffered such an event. In a group of about 2400 people, this was statistically significant, and Merck had no choice but to pull their drug from the market.
It should be noted that, on the one hand Merck should be applauded for checking for CVT events on a colon polyps study, but on the other hand that in 1997, at the International Consensus Meeting on COX-2 Inhibition, a group of leading scientists issued a warning in their Executive Summary that it was “… important to monitor cardiac side effects with selective COX-2 inhibitors”. Moreover, in an internal Merck email as early as 1996, it was stated there was a “… substantial chance that CVT will be observed.” In other words, Merck knew to look out for such things. Importantly, however, there was no subsequent insert in the medicine’s packaging that warned of possible CVT side-effects.
What the CEO of Merck said
What did Merck say to the world at that point in 2004? You can look for yourself at the four and half hour Congressional hearing (seen on C-SPAN) which took place on November 18, 2004. Starting at 3:27:10, the then-CEO of Merck, Raymond Gilmartin, testifies that Merck “puts patients first” and “acted quickly” when there was reason to believe that Vioxx was causing CVT events. Gilmartin also went on the Charlie Rose show and repeated these claims, even go so far as stating that the 2004 study was the first time they had a study which showed evidence of such side effects.
How quickly did they really act though? Were there warning signs before September 30, 2004?
Arthritis studies
Let’s go back to the time in 1999 when Vioxx was FDA approved. In spite of the fact that it was approved for a rather narrow use, mainly for arthritis sufferers who needed chronic pain management and were having GI problems on other meds (keeping in mind that Vioxx was way more expensive than ibuprofen or aspirin, so why would you use it unless you needed to), Merck nevertheless launched an ad campaign with Dorothy Hamill and spent $160m (compare that with Budweiser which spent $146m or Pepsi which spent $125m in the same time period).
As I mentioned, Vioxx was approved faster than usual. At the time of its approval, the completed clinical studies had only been 6- or 12-week studies; no longer term studies had been completed. However, there was one underway at the time of approval, namely a study which compared Aleve with Vioxx for people suffering from osteoarthritis and rheumatoid arthritis.
What did the arthritis studies show? These results, which were available in late 2003, showed that the CVT events were more than twice as likely with Vioxx as with Aleve (CVT event rates of 32/1304 = 0.0245 with Vioxx, 6/692 = 0.0086 with Aleve, with a p-value of 0.01). As we see this is a direct refutation of the fact that CEO Gilmartin stated that they didn’t have evidence until 2004 and acted quickly when they did.
In fact they had evidence even before this, if they bothered to put it together (in fact they stated a plan to do such statistical analyses but it’s not clear if they did them- or in any case there’s so far no evidence that they actually did these promised analyses).
In a previous study (“Table 13”), available in February of 2002, the could have seen that, comparing Vioxx to placebo, we saw a CVT event rate of 27/1087 = 0.0248 with Vioxx versus 5/633 = 0.0079 with placebo, with a p-value of 0.01. So, three times as likely.
In fact, there was an even earlier study (“1999 plan”), results of which were available in July of 2000, where the Vioxx CVT event rate was 10/427 = 0.0234 versus a placebo event rate of 1/252 = 0.0040, with a p-value of 0.05 (so more than 5 times as likely). This p-value can be taken to be the definition of statistically significant. So actually they knew to be very worried as early as 2000, but maybe they… forgot to do the analysis?
The FDA and pooled data
Where was the FDA in all of this?
They showed the FDA some of these numbers. But they did something really tricky. Namely, they kept the “osteoarthritis study” results separate from the “rheumatoid arthritis study” results. Each alone were not quite statistically significant, but together were amply statistically significant. Moreover, they introduced a third category of study, namely the “Alzheimer’s study” results, which looked pretty insignificant (more on that below though). When you pooled all three of these study types together, the overall significance was just barely not there.
It should be mentioned that there was no apparent reason to separate the different arthritic studies, and there is evidence that they did pool such study data in other places as a standard method. That they didn’t pool those studies for the sake of their FDA report is incredibly suspicious. That the FDA didn’t pick up on this is probably due to the fact that they are overworked lawyers, and too trusting on top of that. That’s unfortunately not the only mistake the FDA made (more below).
Alzheimer’s Study
So the Alzheimer’s study kind of “saved the day” here. But let’s look into this more. First, note that the average age of the 3,000 patients in the Alzheimer’s study was 75, it was a 48-month study, and that the total number of deaths for those on Vioxx was 41 versus 24 on placebo. So actually on the face of it it sounds pretty bad for Vioxx.
There were a few contributing reasons why the numbers got so mild by the time the study’s result was pooled with the two arthritis studies. First, when really old people die, there isn’t always an autopsy. Second, although there was supposed to be a DSMB as part of the study, and one was part of the original proposal submitted to the FDA, this was dropped surreptitiously in a later FDA update. This meant there was no third party keeping an eye on the data, which is not standard operating procedure for a massive drug study and was a major mistake, possibly the biggest one, by the FDA.
Third, and perhaps most importantly, Merck researchers created an added “filter” to the reported CVT events, which meant they needed the doctors who reported the CVT event to send their info to the Merck-paid people (“investigators”), who looked over the documents to decide whether it was a bonafide CVT event or not. The default was to assume it wasn’t, even though standard operating procedure would have the default assuming that there was such an event. In all, this filter removed about half the initially reported CVT events, and about twice as often the Vioxx patients had their CVT event status revoked as for the placebo patients. Note that the “investigator” in charge of checking the documents from the reporting doctors is paid $10,000 per patient. So presumably they wanted to continue to work for Merck in the future.
The effect of this “filter” was that, instead of it seeming 1.5 times as likely to have a CVT event if you were taking Voixx, it seemed like it was only 1.03 as likely, with a high p-score.
If you remove the ridiculous filter from the Alzheimer’s study, then you see that as of November 2000 there was statistically significant evidence that Vioxx caused CVT events in Alzheimer patients.
By the way, one extra note. Many of the 41 deaths in the Vioxx group were dismissed as “bizarre” and therefore unrelated to Vioxx. Namely, car accidents, falling of ladders, accidentally eating bromide pills. But at this point there’s evidence that Vioxx actually accelerates Alzheimer’s disease itself, which could explain those so-called bizarre deaths. This is not to say that Merck knew that, but rather that one should not immediately dismiss the concept of statistically significant just because it doesn’t make intuitive sense.
VIGOR and the New England Journal of Medicine
One last chapter in this sad story. There was a large-scale study, called the VIGOR study, with 8,000 patients. It was published in the New England Journal of Medicine on November 23, 2000. See also this NPR timeline for details. They didn’t show the graphs which would have emphasized this point, but they admitted, in a deceptively round-about way, that Vioxx has 4 times the number of CVT events than Aleve. They hinted that this is either because Aleve is protective against CVT events or that Vioxx is bad for it, but left it open.
But Bayer, which owns Aleve, issued a press release saying something like, “if Aleve is protective for CVT events then it’s news to us.” Bayer, it should be noted, has every reason to want people to think that Aleve is protective against CVT events. This problem, and the dubious reasoning explaining it away, was completely missed by the peer review system; if it had been spotted, Vioxx would have been forced off the market then and there. Instead, Merck purchased 900,000 preprints of this article from the NE Journal of Medicine, which is more than the number of practicing doctors in the U.S.. In other words, the Journal was used as a PR vehicle for Merck.
The paper emphasized that Aleve has twice the rate of ulcers and bleeding, at 4%, whereas Vioxx had a rate of only 2% among chronic users. When you compare that to the elevated rate of heart attack and death (0.4% to 1.2%) of Vioxx over Aleve, though, the reduced ulcer rate doesn’t seem all that impressive.
A bit more color on this paper. It was written internally by Merck, after which non-Merck authors were found. One of them is Loren Laine. Loren helped Merck develop a sound-bite interview which was 30 seconds long and was sent to the news media and run like a press interview, even though it actually happened in Merck’s New Jersey office (with a backdrop to look like a library) with a Merck employee posing as a neutral interviewer. Some smart lawyer got the outtakes of this video made available as part of the litigation against Merck. Check out this youtube video, where Laine and the fake interviewer scheme about spin and Laine admits they were being “cagey” about the renal failure issues that were poorly addressed in the article.
The damage done
Also on the Congress testimony I mentioned above is Dr. David Graham, who speaks passionately from minute 41:11 to minute 53:37 about Vioxx and how it is a symptom of a broken regulatory system. Please take 10 minutes to listen if you can.
He claims a conservative estimate is that 100,000 people have had heart attacks as a result of using Vioxx, leading to between 30,000 and 40,000 deaths (again conservatively estimated). He points out that this 100,000 is 5% of Iowa, and in terms people may understand better, this is like 4 aircraft falling out of the sky every week for 5 years.
According to this blog, the noticeable downwards blip in overall death count nationwide in 2004 is probably due to the fact that Vioxx was taken off the market that year.
Conclusion
Let’s face it, nobody comes out looking good in this story. The peer review system failed, the FDA failed, Merck scientists failed, and the CEO of Merck misled Congress and the people who had lost their husbands and wives to this damaging drug. The truth is, we’ve come to expect this kind of behavior from traders and bankers, but here we’re talking about issues of death and quality of life on a massive scale, and we have people playing games with statistics, with academic journals, and with the regulators.
Just as the financial system has to be changed to serve the needs of the people before the needs of the bankers, the drug trial system has to be changed to lower the incentives for cheating (and massive death tolls) just for a quick buck. As I mentioned before, it’s still not clear that they would have made less money, even including the penalties, if they had come clean in 2000. They made a bet that the fines they’d need to eventually pay would be smaller than the profits they’d make in the meantime. That sounds familiar to anyone who has been following the fallout from the credit crisis.
One thing that should be changed immediately: the clinical trials for drugs should not be run or reported on by the drug companies themselves. There has to be a third party which is in charge of testing the drugs and has the power to take the drugs off the market immediately if adverse effects (like CVT events) are found. Hopefully they will be given more power than risk firms are currently given in finance (which is none)- in other words, it needs to be more than reporting, it needs to be an active regulatory power, with smart people who understand statistics and do their own state-of-the-art analyses – although as we’ve seen above even just Stats 101 would sometimes do the trick.
Today is Volcker Day
This is a guest post by George Bailey, who is part of Occupy the SEC. I just want insert here a congratulations to Occupy the SEC for submitting their public comments letter yesterday, and to point out that the organization SIFMA below is the same SIFMA I mentioned here and here (those guys are everywhere, defending the interests of the banks).
Today is “Volcker Day” and Paul Volcker was on a tear.
Mr Volcker added in a formal submission to regulators Monday that “proprietary trading is not an essential commercial bank service that justifies taxpayer support,” and that banks should stop “stonewalling.”
He went on:
“There should not be a presumption that evermore market liquidity brings a public benefit,” Volcker, 84, wrote in a letter submitted yesterday to regulators in defense of the rule curtailing banks’ bets on asset prices with their own money. “At some point, great liquidity, or the perception of it, may itself encourage more speculative trading (see here and here for the full story).
But then Jamie Dimon came along and bitch slapped Tall Paul. Ouch.
“Paul Volcker by his own admission has said he doesn’t understand capital markets,” Dimon told Francis in the Fox Business interview. “He has proven that to me.”
SIFMA, on behalf of the industry, took over to explain in detail just what it is that Mr. Volcker doesn’t understand in their comment letter. They reiterate their dire warning about the devastating effects on ‘corporate liquidity’’ from the Volcker Rule. Yet surprisingly, no non-financial corporate bond issuers filed any comments to acknowledge or object to this danger.
In fact, there are no comment letters from any non-financial companies. They did haul out the widely lampooned Oliver Wyman study to bolster their comment that ‘corporate’ America would suffer horribly if Volcker is enacted. But that just serves to remind us again that the corporate bond liquidity that will be affected is the liquidity in dodgy financial company ‘corporate’ bonds, like CDOs and other drek. They conclude the only solution is a rewrite . They request the rule makers go back and start all over again.
The SIFMA comment letter runs to 175 pages. I haven’t read all the other financial company letters, but the ones I’ve skimmed conform to SIFMAs position.
The Occupy the SEC comment letter logs in at 325 pages and oddly enough draws the exact opposite conclusions to each of SIFMAs objections. It’s an interesting contrast. For some reason (some familiarity with the subject matter and public interest primarily) the group seems to have understood and articulated Volcker’s (and the electorate’s) intent pretty effectively.
Of the comment letters received about 90% are from financial institutions, and another 5% are from foreign governments objecting to the priority the US regulators have gifted to US traders in US Government Bonds. The remaining 5% are from ordinary folks, like Mr. Volcker, Occupy the SEC and other public interest groups.
Its interesting that 95% of the comments reflect the views of the 1%, and the views of the 99% are embodied in the comments of the remaining 5% of commenters. I’m confident the regulators will recognize that, for all its complexity, the rules are comprehensible and can be refined to serve the public’s demand for control over a runaway financial system.
What’s going on: Greece and mortgages
There are two very confusing but important issues that you should be paying attention to in the news right now. Luckily, Naked Capitalism is covering this stuff for you (and for me).
First, it’s the mortgage settlement which was agreed on yesterday or maybe two days ago, which sucks in a lot of ways for poor homeowners but not for the banks. To see the top twelve reasons to hate the mortgage settlement, check out this post from Naked Capitalism.
Second, the Greek debt situation is not yet under control, and no matter what they do over there in Europe they can’t seem to admit it. Here’s a Naked Capitalism post from a couple of days ago, coupled with a new Bloomberg article that kind of says how awful that situation is.
I took all our money out of the money market account a few days ago because it’s not FDIC insured and because I really really don’t know what’s going to happen in Europe. Just saying.
As predicted: watered down insider trading bill
Yesterday I posted about the insider trading bill which, in addition to making it illegal for politicians to trade on their insider knowledge, was also going to force “political intelligence firms” to register as lobbyists. Note that this is simply a form of transparency- they, people who work mostly for hedge funds and private equity, didn’t have to stop getting insider information, they’d just need to admit that they were getting it. But I guess that’s TMI from their perspective. From the Wall Street Journal article:
Rep. Eric Cantor, the No. 2 House Republican, plans to bring his version of the Stop Trading on Congressional Knowledge Act, or Stock Act, to the floor of the GOP-controlled chamber on Thursday, using a procedure that will prevent lawmakers from voting on major amendments. It is expected to pass by a wide margin.
…
At issue are changes Mr. Cantor made shortly before midnight Tuesday, when he unveiled his amendment to a bill that sailed through the Senate last week.
Most notably, Mr. Cantor cut a provision that would require people who mine Washington for market-moving information to disclose their activities in the same fashion as lobbyists. The provision covering what is known as the political-intelligence industry was opposed by Wall Street and its Washington lobbyists, including the Securities Industry and Financial Markets Association (SIFMA), which mounted an effort to kill it.
Just to be clear on who is writing legislation nowadays: they are called SIFMA, and they represent the players in the financial industry. You may remember them from this post, where they hired the research firm Oliver Wyman to investigate the impact of the Volcker Rule for a congressional hearing. Shockingly, that research firm thought the Volcker Rule should be watered down.
What exactly is the argument this guy Cantor is using to defend this change? I’d love to hear him come out and say, “I did it because SIFMA told me to”. How come we don’t get to see that argument made and defended? No wonder people don’t like or trust Congress. Even so I’ll give the last word to one of their members:
The House Democrat who has pushed for the legislation for the past six years—Rep. Louise Slaughter (D., N.Y.)—opposed the GOP-backed changes.
Ms. Slaughter said in a statement that the Cantor-backed version of the insider-trading bill was crafted “in secret, behind closed doors, brokering deals for special interests.” She added: “How ironic—insiders now appear to be writing a bill meant to ban insider trading.”
#OWS upcoming events
Here ye, here ye, there will be an Occupy Town Square event this coming Saturday. Please come and help us reconstruct Zucotti Park inside a church at 86th and Amsterdam for the afternoon. Here’s the flyer:
Also, there will be a march from Liberty Plaza to the Fed and the SEC to celebrate very own Occupy the SEC’s submission of their Volcker Rule public comments, next Monday, February 13th, at 4:30pm.
Here’s the schedule:
4-430pm: Assemble at Liberty Plaza
5pm: March to the Fed (33 Liberty Street )
5:30pm: March to the SEC’s NY Office (3 World Financial Center, Suite 400)
Finally, the Alt Banking working group now has a twitter feed.
Politicians and insider trading
There’s shit going down in Washington now around the proposed ban on insider trading of politicians (which for some weird reason up til now hasn’t been illegal). According to this New York Times article, the proposed legislation would also require certain “political intelligence firms” to register as lobbyists, and that gotten them up in a huff. From the article:
“Hedge funds, private equity funds and investment advisers — many of which are not currently registered under the Lobbying Disclosure Act — might now be required either to register or to alter their business practices to avoid the need for registration,” the bulletin said. “If, for example, a hedge fund calls a Congressional committee staffer to gather information about the status of a bill that relates to the fund’s investment decisions, the fund may need to register.”
If you can judge someone by their enemies, then this bill seems kind of like my new best friend. Let’s wait to see how much it’s watered down in the next few days:
House Republicans and their floor leader, Representative Eric Cantor of Virginia, said they would amend the bill, going to the House floor this week, to strengthen it.
But Representative Louise M. Slaughter, Democrat of New York, said, “I think ‘strengthening’ here is a euphemism for ‘weakening.’”
Raise capital gains and stop flying
There are two totally unrelated stories I want to discuss this morning, I hope you’ll forgive me.
First, take a look at this post, written by David Brin, which argues for higher capital gains tax. He points out VC’s or angel investors, in combination with entrepreneurs, are the true “job creators”, and also invest their money in a truly risky way, whereas generic rich people who only invest in established companies are taking risks but not on the same level. Yet these two classes of people are taxed at the same rate. I guess the counterarguments would be that they, the VC’s, also get more payoff (when things work out) and that they couldn’t make their investments without the fleet of passive rich people ready to invest if and when the company succeeds. Even so I think there’s a real difference.
It reminds me that, when I worked at D.E. Shaw and Lehman fell, there were lots of discussions around the water cooler about what the reaction would be by policy makers and regulators. The consensus fear was that the capital gains tax rate for hedge fund workers would be removed within weeks, if not days. Note this tax loophole allows hedge fund quants and traders to pay less taxes on their take-home pay than bankers across the street doing the same job. I don’t really know anyone who defends it, not even people who benefit from it. Please correct me if I’m wrong. Update: mostly people below the MD (managing director) level at hedge funds actually don’t get this benefit. It primarily applies to “buy and hold” people like VC’s, private equity, and long term debt firms.
Another argument I enjoy from Brin’s post is the refutation of lowering taxes in general to entice investment by rich people. As he said:
Supply Side assumes that the rich have a zillion other uses for their cash and thus have to be lured into investing it! Now ponder that nonsense statement. Roll it around and try to imagine it making a scintilla of sense! Try actually asking a very rich person. Once you have a few mansions and their contents and cars and boats and such, actually spending it all holds little attraction. Rather, the next step is using the extra to become even richer. Naturally, you invest it. Whatever the tax rates, you invest it, seeking maximum return.
This is absolutely true, and one of the funny things about (many of) the rich quants I know: they are obsessed with growing their pile, to the point of focusing more on money now that they’re rich than they ever did when they were poor physics or math graduate students. To be fair, to make the whole argument for raising taxes you’d need to consider the global response, whereby rich people essentially arb the tax systems of the various countries in search of the maximum return. Even so, I’m pretty sure the answer is not to try to compete with Caribbean island nations on how low we can tax.
Second, check out this fantastic article from the Wall Street Journal about how people respond to environmental impact issues by consuming more. In the article they describe what’s called the “Prius Fallacy: a belief that switching to an ostensibly more benign form of consumption turns consumption itself into a boon for the environment”. I love it, first of all because it’s completely snarky and second of all because it’s really true and annoying. My favorite line:
Even if you think that climate change is a left-wing crock, this ought to be a matter of gnawing concern. Global energy use is growing faster than population. It’s expected to double by midcentury, and most of the growth will be in fossil fuels. Disasters like the BP oil spill attract world-wide attention, but the main environmental, economic and geopolitical challenge with petroleum isn’t the oil that goes into the ocean; it is the oil we continue to use exactly as we intend.
By the way, I don’t claim to be particularly low-impact on the world myself: I’m flying to Amsterdam in March with my entire family, which definitely puts me on the earth’s shit list (turns out it’s all about airplane travel). For that matter I work at a company that makes it easier for consumers to buy airplane tickets. But at least I don’t pretend that buying a Prius or replacing my kitchen counters with less eco-unfriendly material makes me a good person (by the way, once you’ve got eco-unfriendly kitchen counters the damage is done. The best thing you can do for the environment at that point is never ever remodel your kitchen again. Can you handle that?!).
If I had my way, we’d know the fossil-fuel impact of every activity we engage in, and we’d be able to put ourselves on a fossil-fuel diet. Those people who carefully recycle their milk containers and buy local but also fly to East Asia every chance they get would be in for some major belt-tightening.
mathbabe 