Author Archives: Lila

Mankiw’s Negative Fed Rate Proposal

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This excerpt from a column on April 18 by Greg Mankiw (“It May be Time for the Fed to Go Negative,” New York Times)  has been raising howls in the blogosphere:

“At one of my recent Harvard seminars, a graduate student proposed a clever scheme to [make holding money less attractive].

Imagine that the Fed were to announce that, a year from today, it would pick a digit from zero to 9 out of a hat. All currency with a serial number ending in that digit would no longer be legal tender. Suddenly, the expected return to holding currency would become negative 10 percent.

That move would free the Fed to cut interest rates below zero. People would be delighted to lend money at negative 3 percent, since losing 3 percent is better than losing 10.

Of course, some people might decide that at those rates, they would rather spend the money — for example, by buying a new car. But because expanding aggregate demand is precisely the goal of the interest rate cut, such an incentive isn’t a flaw — it’s a benefit….”

My Comment

I didn’t see this until today because I haven’t followed the economics blogosphere very closely recently. Post-TARP, it’s been awash with all sorts of schemes and proposals built on very flimsy foundations.

The numero uno objection to all of them is the notion that the economy is something that can be manipulated like a board game. It’s not.

Objection two is also obvious and also foundational.  Any grand scheme based on taking illegally from someone what they’ve earned honestly (and I think it’s safe to say at least a few people here and there have earned their livings honestly) is morally wrong. What’s morally wrong on an individual level cannot be morally right on a grand scale, even if we allow for all sorts of prudential calculations, reservations about “the public good” and so on.

Objection three is that a crisis caused by excessive borrowing and spending is not plausibly solved by more spending and borrowing.

Objection four is  that degrees in economics do not give you an understanding of how proposals might actually work in the real world. That takes common sense and some experience of how human beings actually function and build businesses.

Objection five is that theories are only very nebulous and hazy road maps with no correspondence to the actual terrain underneath.  A theory which has never been tried before, let alone produced the results touted, is a very flimsy guide to follow.

Mish Shedlock takes on Mankiw here in more detail but quite unnecessarily, since the proposal is on its face absurd and impracticable.

You can see, however, that on this, the New York Times (ostensibly more left-ish) and the Washington Post (ostensibly more centrist) are both singing from the same page.

In my previous blog post, “Bernays and Citizen Parrot” I cited a Wash Po article, “When You’re Flush But Acting Flat Broke,” by Michael Rosenwald (April 16) that referenced the work of Robert Cialdini, a scholar of marketing.  The Post piece was slanted to getting the consumer to go out and spend.

So, keep that in your mind. The two things the establishment wants right now are:

(1) Increased consumer spending

(2) Nationalization of banks

More spending means what? Putting your money (one of the few forms of control you exert over your circumstances) into someone else’s pocket. (I’m not opposed to this if you’ve got plenty saved, are getting a good deal and need what it is you’re buying, but that’s not the kind of savvy spending the powers that be are looking for).

Nationalization means what? Allowing the government to control the people in charge of lending you money…who are also the people holding your savings….who are also the people mainly responsible for getting us into this mess.

Forget all the deep explanations, economics theories, and punditry.

Just focus on those two things. Do they make sense to you right now, right here?

No? I thought not…..

De Crevecoeur: Letters From An American Farmer

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The following is a description of Nantucket from De Crevecoeur’s Letters From An American Farmer, a literary account of the political principles informing the Declaration of Independence and Paine’s Common Sense:

“My simple wish is to trace them throughout their progressive steps from their arrival here to this present hour; to enquire by what means they have raised themselves from the most humble, the most insignificant beginnings, to the ease and the wealth they now possess; and to give you some idea of their customs, religion, manners, policy, and mode of living.

This happy settlement [Nantucket] was not founded on intrusion, forcible entries, or blood, as so many others have been; it drew its origin from necessity on the one side and from good will on the other; and ever since, all has been a scene of uninterrupted harmony. Neither political nor religious broils, neither disputes with the natives, nor any other contentions, have in the least agitated or disturbed its detached society. Yet the first founders knew nothing either of Lycurgus or Solon; for this settlement has not been the work of eminent men or powerful legislators forcing nature by the accumulated labours of art.

This singular establishment has been effected by means of that native industry and perseverance common to all men when they are protected by a government which demands but little for its protection, when they are permitted to enjoy a system of rational laws founded on perfect freedom. The mildness and humanity of such a government necessarily implies that confidence which is the source of the most arduous undertakings and permanent success. Would you believe that a sandy spot of about twenty-three thousand acres, affording neither stones nor timber, meadows nor arable, yet can boast of an handsome town consisting of more than 500 houses, should possess above 200 sail of vessels, constantly employ upwards of 2000 seamen; feed more than 15,000 sheep, 500 cows, 200 horses; and has several citizens worth 20,000L. sterling! Yet all these facts are uncontroverted. Who would have imagined that any people should have abandoned a fruitful and extensive continent filled with the riches which the most ample vegetation affords; replete with good soil, enamelled meadows, rich pastures, every kind of timber, and with all other materials necessary to render life happy and comfortable, to come and inhabit a little sand-bank to which nature had refused those advantages, to dwell on a spot where there scarcely grew a shrub to announce, by the budding of its leaves, the arrival of the spring and to warn by their fall the proximity of winter?

Had this island been contiguous to the shores of some ancient monarchy, it would only have been occupied by a few wretched fishermen, who, oppressed by poverty, would hardly have been able to purchase or build little fishing barks, always dreading the weight of taxes or the servitude of men-of-war. Instead of that boldness of speculation for which the inhabitants of this island are so remarkable, they would fearfully have confined themselves within the narrow limits of the most trifling attempts; timid in their excursions, they never could have extricated themselves from their first difficulties. This island, on the contrary, contains 5,000 hardy people who boldly derive their riches from the element that surrounds them and have been compelled by the sterility of the soil to seek abroad for the means of subsistence. You must not imagine, from the recital of these facts, that they enjoyed any exclusive privileges or royal charters or that they were nursed by particular immunities in the infancy of their settlement. No, their freedom, their skill, their probity, and perseverance have accomplished everything and brought them by degrees to the rank they now hold.…”

“Letters From an American Farmer,” by J. Hector St. John Crevecoeur (1735-1813) reprinted from the original ed., with a prefatory note by W.P. Trent and an introduction by Ludwig Lewisohn. New York, Fox, Duffield, 1904.

The Gita On Equanimity

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“Neither by study of the Vedas, nor by austerity, nor by charity, nor by ritual, can I be seen in this form as you have seen Me. (11.53)
However, through single-minded devotion alone, I can be seen in this form, can be known in essence, and also can be reached, O Arjuna. (11.54)
The one who does all works for Me, and to whom I am the supreme goal, who is my devotee, who has no attachment, and is free from enmity towards any being attains Me, O Arjuna.”

Bhagavad Gita, translated by Ramanand Prasad, Chapter 11: 53-55

My Comment

Free from enmity…well, you try. And what if you free yourself of enmity, but your enemies don’t remember to free themselves?

The teaching of equanimity in the Gita is very hard for me. Very much in the western tradition, I like my emotions…and cultivate them. But there are times when the Gita’s teaching becomes overwhelmingly necessary. Now is one of those times.

Black Swans and Nationalization: More On Media Memes

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(This is the second half of the earlier post on Taleb cut and reposted here so as to be more readable)

As  I wrote in my earlier post, I agree with everything in Taleb’s list of “black swan proofing” the economy, except two points:

As I see it,

(1) This financial crisis had NOTHING to do with Black Swans (and Taleb himself says so elsewhere, so this piece confuses me).

(2) Nationalization (which he seems to be supporting here…and it may be he has a different understanding of what is involved)  is not the the right response, in my opinion.

A Black Swan refers to an unpredictable event. The financial crisis was predicted repeatedly, was completely foreseeable, and was indeed foreseen by Austrian theorists in writings throughout this century. 

The financial industry spin doctors (I’m not including Taleb in this group – but I think his writing may be put to that use) have been working overtime to associate this mess with the notion of “black swans,” hence the centrality given to accounts of the blow-up by industry insiders, who have acted as if it were something unforeseeable (Greenspan and others – I’ll find the links).

Why?

Saving face could be one reason. But considering the level of corruption and malfeasance that we’ve seen so far, it’s more likely that the angle is being worked as a diversion  from the obvious fact that the whole business seems at least partly engineered.

Equally important: by emphasizing the “unknown risk” angle, the industry also makes more control, regulation and centralization the natural option.

Do you see that?

Taleb is right about risk and Black Swans otherwise.

He’s a very smart guy and he certainly warned a lot about unknown risks and the foolishness of conventional wisdom.But he didn’t give the kind of detailed specific step-by-step account that Austrian economists, journalists, and theorists have done, not just in the last two years but for decades, predicting what would happen once the country went off the gold standard.

My own suspicions about Fannie and Freddie had nothing to do with risk or financial models. They arose from the clear and widespread evidence of fraud oozing in every direction from Goldman Sachs and the rest of the banking cartel, with Fannie and Freddie at the center. It didn’t need rocket science to see that. Just common sense and  the ability to see through jive talk. “Don’t dazzle me with bull shit,” as an acquaintance of mine used to say, making up for any lack of metaphoric aptness with dead-on accuracy about human nature.

I’m not knocking Taleb whom I greatly admire. I’m knocking what’s being pushed through his writing.

As I said in an earlier blog post, the whole establishment is for nationalization. The same fellows who drove the bus that just wrecked itself.

Why listen to them?

Stick your fingers into your ears – NO NATIONALIZATION

This is not about ideology. It’s about transparency.

Nationalization in a small, incorrupt, transparent state of Vermonters is one thing.

Nationalization in the American empire, circa 2009, is another. It’s cover for a power grab. The reason it’s being pushed so hurriedly is because something is unraveling and a few too many people are catching on.

Don’t take my word for it.

Ask yourself why one of the savviest investors, Warren Buffett, thinks that the banking industry is on the verge of tremendous profitability.

Buffett has a stake in the banks, of course. But is what he’s saying entirely about chatting up his investment?

Ask yourself why Nouriel Rubini first advocated nationalization as though it were diametrically opposed to the position (private-public partnership) held by Larry Summers and Tim Geithner.

Ask why he didn’t let the public know he was in business with Summers .

Ask why it is that since that business connection was revealed,  Roubini has now started saying that “nationalization” can proceed even with “private-public partnership”?

[Note: Roubini’s warning about the economic crash, made in September, 2006 to the IMF doesn’t seem to be available on the IMF site and any links I found on the web didn’t work. The closest I got to the actual speech was a reference at the IMF website in September 2007 to the 2006 speech.

Here’s an extended bio of Rubini at the IMF site that mentions the 2006 speech, but again there are no links.

Rubini’s own site has a link to his September 2007 speech which warns of a hard landing but no 2006 link.

On wiki, as well, there are no links to any 2006 predictions although there is a NY Times interview with Roubini from Sept. 2006 about the housing bubble, where he anticipates a housing bubble burst, with prices down 5-10% in a year in New York and perhaps 20-30% nationally. Honestly, in September 2006, everyone was saying that. Yours truly is on record calling the peak of the housing bubble in July 2005, as you can check from this website. And was much more detailed about it too. And I’m not an economist in the heart of the global financial order like Roubini.

Bottom line, except for this 2006 piece, which is very narrow in scope, limited to the housing bubble and quite modest in its predictions, there really is no other prediction of apocalypse I could find from2006 that would qualify Roubini for the title Dr. Doom, a title that more appropriately belongs to the Asia-based fund manager and commodities guru, Marc Faber, who is an Austrian and who was far more prescient and detailed in his warnings. Again, you have to wonder if the “Doom” moniker wasn’t intentionally applied to Roubini to coopt the libertarian Faber’s argument into the statist Roubini’s policy prescriptions.

Roubini’s cv also rings some alarm bells for me. His thesis adviser was Jeffrey Sachs and Roubini still admires him the most of all his colleagues; he’s worked closely with Larry Summers; he’s been on Clinton’s advisory team at Treasury; he was involved in the Asian crisis; he’s worked in a number of positions at the IMF (which is being pushed as the new global central bank). Now he’s been brought in as “Dr. Doom” (effectively co-opting bearish commentary on the market) and he’s pushing nationalizatio,n like every other establishment figure.

This is not a confidence-builder.

To return to my caveat: why set up nationalization and PPP as as an either/or alternative if they can work as complements?

Either/or is the binary switch which propagandists use to turn individuals into mobs. Scare the public and tell them, either you do this…OR you suffer that.

Either/or provokes people into instinctive responses. It makes them scared or angry. It forces them into flight (panic) or fight (anger).

It’s us or them.

We’re seeing all that now. Some very clever people are pushing those two buttons over and over.

This is one of those snakes and ladders games where you move left, and a green snake swallows you and you’re back on square one.

So you move right and a ladder takes you up four rows and then a green snake swallows you and you’re back on square one.

Solution? Stay where you are and let the snakes sort it out for themselves.

Instead of rooting around for fixes for the problem, we should be investigating the chicanery that led to it, and finding out legal ways to undo or challenge the legislation that gave us TARP etc.

Bernie’s Web: Who Dunnit & Where’s the Dough

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There have been some interesting developments in the Madoff business recently, all of which have confirmed my early insight that the Madoff fraud was much more than a solo effort.

[In my opinion, it is likely an international criminal conspiracy tied to the financial crisis. You can reference my Madoff posts through the search function and also through my last three articles at Lew Rockwell which indirectly address the issue].

The Madoff business is why I’ve come down squarely against nationalization. It’s not because of ideology. Or pig-headedness.  Or from a desire to pander to the neanderthal crowd (is there any other kind?)….

It’s because as long as the ties between all these corrupt financial deals and dealers are not clear, any move made by the government is guaranteed to set precedents that will in the long run be against the public interest. To all the libertarians who will rush to tell me there is no such thing as the “public interest”  but only the “aggregated individual interests of many people” – yes, of course, but we’ll do the abstract cud-chewing at another time.  What I mean is that public money (tax money) will go to private interests.

Which is why unraveling the Madoff -banking cartel story is the most needful thing right now.

Here are some recent developments.

(1) Talking Points Memo, January 4

If the Feds ever get around to realizing Bernie’s brother and thirty-year business partner, Peter B. Madoff, was in on the scam, they might want to take look at his holdings.

Craig Kugel, a long time Madoff employee, is involved in Essex Realty Development LLC, registered in NYS on 12/10/07 to an address at 34 Pheasant Run, Old Westbury. 34 Pheasant Run is one of Peter Madoff’s primary residences along with a W. 53rd St apartment and a Palm Beach house.

While much has been made of Ruth Madoff, Bernie’s wife, being sole owner of her Palm Beach estate, no one has said anything about Peter and Marion Madoff transferring ownership of their Palm Beach property solely to Marion in 11/06 which is probably when the Madoffs got serious about giving it up.”

and

“David Kugel, I believe, is Craig’s father. They both live in the same North Shore neighborhood on Long Island and they may be related to the Madoffs.

Madoff Technologies, L.L.C. was registered in NYS in 10/98 in care of Craig Kugel at 885 Third Ave.

In 2003, Craig Kugel was identified in another Trader Magazine photo as being with Primex Trading. Primex was registered as Primex Holdings, L.L.C. in NYS in 10/98. Primex is a joint venture between Bernard L. Madoff Investment Securities, Goldman Sachs and other brokerage firms and involves a digital trading auction which operates out of Bernie’s 18th floor office at 885 Third Ave.

(2) The New York Daily News, March 12:

“The timing of her [Ruth Madoff’s] $15.5 million in withdrawals – as he was becoming aware of his problems, and then on the day before his arrest – is very suspect,” Massachusetts Secretary of State William Galvin told the Daily News. Galvin, the top securities regulator in the state, calls Cohmad a feeder fund in Bernie Madoff’s empire. Representatives for Cohmad didn’t return calls. Galvin ridiculed Bernie Madoff’s claim of having executed the complex, decades-long global banditry alone. “There are only two questions that exist right now: Where’s the money? And was there anybody else involved?”

Ruth Madoff has not been accused of wrongdoing. Still, she has fueled outrage by trying to claim a $69 million personal fortune unconnected to her husband’s booty, which will be subject to court-ordered forfeitures….”

(4) Talking Points Memo, April 8

[Steve ] Labaton [of the New York Times] understates the NSX case. According to a 5/19/2005 SEC  administrative ruling, NSX openly and flagrantly violated SEC regulations year in and year out for more than six years. As a result, NSX brokers made untold millions cheating their customers.

NSX encouraged the cheating by failing to enforce “compliance by its dealer firms (known as “designated dealers”) with two important provisions of its rules: the market order exposure (“MOE”) rule and the customer priority (or trading ahead) rule”.

On top of trading violations, NSX destroyed email correspondence that was supposed to be retained for five years.

What punishment did Eric Swanson “aggressively” mete out to NSX for cheating customers and destroying evidence?  NSX was required to set aside a million dollar reserve for an independent audit and David Colker, NSX CEO, was censured. A slap on the wrist.

As an aside, anyone who claims the Madoffs operated the brokerage side of the business honestly is full of crap. Bernie and Peter knew NSX was violating SEC regulations and they profited from those violations. Destruction of email correspondence is right up the Madoff alley, too, as we now know.

Peter and Bernie were certainly closely associated with NSX. In January 2004, NSX sponsored a Swiss ski trip for the Madoffs and a dozen of their friends and business associates……..

Labaton again understates the case. Peter Madoff was a member of the A.G. Edwards board of directors. A. G. Edwards is headquartered in St, Louis and, outside of New York, Missouri is the only other state where Bernard L. Madoff Investment Securities LLC is registered.

Shana Madoff wasn’t on the compliance committee of just any old industry group. She was appointed to the NASD Market Regulation Commitee in 2003..”

(4) The New York Daily News, April 18:

“Hedge-fund founder Ezra Merkin was warned years ago that Bernie Madoff wasn’t on the level but still invested and lost tens of millions in his Ponzi scheme, it was charged in court papers unsealed Friday. Among the documents were e-mails from former Merkin employee Victor Teicher who said he told Merkin several times in the early 1990s that Madoff’s consistently high profits weren’t possible year after year.  The claimed profits “were inconsistent with what could possibly take place in reality,” he said. Teicher, a former financial analyst and convicted felon, also said Merkin’s former accountant Andrew Gordon reported that Madoff’s investment scheme “looked like a fraud to him.”

Nassim Taleb On Black Swans and “Nationalization”

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Thanks to Rolf Dobelli of GetAbstract for sending me the link to a post by Nassim Taleb at the Financial Times:

1. What is fragile should break early while it is still small. Nothing should ever become too big to fail. Evolution in economic life helps those with the maximum amount of hidden risks – and hence the most fragile – become the biggest.

2. No socialisation of losses and privatisation of gains. Whatever may need to be bailed out should be nationalized; whatever does not need a bail-out should be free, small and risk-bearing. We have managed to combine the worst of capitalism and socialism. In France in the 1980s, the socialists took over the banks. In the US in the 2000s, the banks took over the government. This is surreal.

3. People who were driving a school bus blindfolded (and crashed it) should never be given a new bus. The economics establishment (universities, regulators, central bankers, government officials, various organisations staffed with economists) lost its legitimacy with the failure of the system. It is irresponsible and foolish to put our trust in the ability of such experts to get us out of this mess. Instead, find the smart people whose hands are clean.

4. Do not let someone making an “incentive” bonus manage a nuclear plant – or your financial risks. Odds are he would cut every corner on safety to show “profits” while claiming to be “conservative”. Bonuses do not accommodate the hidden risks of blow-ups. It is the asymmetry of the bonus system that got us here. No incentives without disincentives: capitalism is about rewards and punishments, not just rewards.

5. Counter-balance complexity with simplicity. Complexity from globalisation and highly networked economic life needs to be countered by simplicity in financial products. The complex economy is already a form of leverage: the leverage of efficiency. Such systems survive thanks to slack and redundancy; adding debt produces wild and dangerous gyrations and leaves no room for error. Capitalism cannot avoid fads and bubbles: equity bubbles (as in 2000) have proved to be mild; debt bubbles are vicious.

6. Do not give children sticks of dynamite, even if they come with a warning. Complex derivatives need to be banned because nobody understands them and few are rational enough to know it. Citizens must be protected from themselves, from bankers selling them “hedging” products, and from gullible regulators who listen to economic theorists.

7. Only Ponzi schemes should depend on confidence. Governments should never need to “restore confidence”. Cascading rumours are a product of complex systems. Governments cannot stop the rumours. Simply, we need to be in a position to shrug off rumours, be robust in the face of them.

8. Do not give an addict more drugs if he has withdrawal pains. Using leverage to cure the problems of too much leverage is not homeopathy, it is denial. The debt crisis is not a temporary problem, it is a structural one. We need rehab.

9. Citizens should not depend on financial assets or fallible “expert” advice for their retirement. Economic life should be definancialised. We should learn not to use markets as storehouses of value: they do not harbour the certainties that normal citizens require. Citizens should experience anxiety about their own businesses (which they control), not their investments (which they do not control).

10. Make an omelette with the broken eggs. Finally, this crisis cannot be fixed with makeshift repairs, no more than a boat with a rotten hull can be fixed with ad-hoc patches. We need to rebuild the hull with new (stronger) materials; we will have to remake the system before it does so itself. Let us move voluntarily into Capitalism 2.0 by helping what needs to be broken break on its own, converting debt into equity, marginalising the economics and business school establishments, shutting down the “Nobel” in economics, banning leveraged buyouts, putting bankers where they belong, clawing back the bonuses of those who got us here, and teaching people to navigate a world with fewer certainties.

My Comment

I hesitate to critique something by Taleb, as smart and terrific a writer/trader as he is.

But since it’s my job here to examine the commentariat (this is not my own phrase, but I wish it were…) with skepticism, here goes.

I agree with everything that Taleb says here, except for the bit about nationalization and the  implication that this financial crisis had to do with “Black Swans”. He himself has said clearly elsewhere that the financial crisis had nothing to do with black swans, so I think  the heading (given by some one else?) is misleading.

Recent Review of “Mobs”

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From a recent review of “Mobs, Messiahs and Markets”

It was an excellent read, similar in some respects to one of my all-time favorite investment

books: Extraordinary Popular Delusions and the Madness of Crowds delves into human psychology and crowd behavior. Mobs, Messiahs & Markets is like a modern-day version with emphasis on investing and explores popular delusions like “real estate never goes down”, “stocks always go up”, “deficits don’t matter”, “you are either with us or against us”. When rational, intelligent human beings become part of a group, they are fine. However, as soon as they become part of a crowd, they lose all rationality and turn into blockheads! I found the book quite entertaining, with great wit and sarcasm to keep me amused. The book talks about people who were determined to make the world a better place by making it conform to their delusions. People like Hitler for example! The authors also talk about how crowd think leads to wars and how wars are futile and never worth the cost. There’s also a complete chapter making fun of Thomas Freedman and his banal book “The World is Flat”. I never liked that book and apparently neither did the authors. There’s also a full chapter devoted to Alan Greenspan which was particularly eye-opening….”

My Comment

There. That’s what I like to hear.  And I’d like it even more if you decided to buy our book off this website, thus giving me a few measly pennies, via Amazon. I don’t need to  mention that this will not support me in my old age, but it will make me feel appreciated and more inclined to take the sticks and kicks of public bloggery.

Liberals Prefer Bureaucrats to Citizens…

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“A less publicized case of arrogant disregard for people occurred in Carmel Valley, California, during the 2008 fires. Ivan Eberle, a well-known wildlife photographer, was commended for heroism in saving the Monterey Institute for Research Astronomy observation station on Chews Ridge from a raging wild fire. A few days after the fire, he was visited by six Monterey County Sheriffs and charged with the crimes of battering a firefighter and interfering with a firefighting crew in the line of duty.

Calling the charges “ironic” and “truly bizarre,” Eberle said he felt that his “constitutional rights were violated to an egregious degree.” To him, the charges filed by the fire department were in retaliation for his public criticism, as he had spread the word that the firefighters refused to help him save the observatory, which is also his home. To Eberle, the firefighters were acting with “willful negligence or dereliction of duty.”

Eberle believes the bogus charges stem from his quick actions to save the observatory. When a large tongue of flames raced toward propane tanks next to a grove of pines, he unrolled a fire hose from the facility’s hydrant and bumped into a sleep-deprived firefighter. Although the observatory is the only structure on Chews Ridge, Eberle single-handedly saved it. Nobody from the fire department would help. Similar to the theme of Fahrenheit 451, the firefighters seemed to have forgotten their primary purpose.

So how could such arrogant misconduct occur? Some have pointed to the consolidation of local volunteer fire departments with more formal, government-operated ones. Years earlier in 2001, the Valley Volunteers Inc. in Carmel Valley Village merged with a government fire department in the Mid-Valley area. The merger quickly turned sour. In 2004, the volunteer fire department circulated a petition for “detachment,” arguing that their privately raised million-dollar fund had been squandered and that the two groups had different philosophies on how to operate a fire department. Although explicitly told that a detachment could easily be arranged if either side found the merger unsatisfactory, the LAFCO government agency in charge of such disputes refused to allow the separation. Many of the citizen firefighter quit the department, saying that they were being “treated as subordinates” by the new consolidated fire department.

The most dangerous threat from Vichy liberals is that they do not trust ordinary people to do the right thing. Instead, government control and bureaucracy are substituted to run society. Politics and officiality overshadow anything that citizens attempt to do, preventing society from self-organizing into a system to which people are willing to dedicate valuable time and money. Unfortunately, as consolidation grows, so does an attitude that only government can solve problems, leaving the citizenry defenseless and dependant. Obviously, government has gotten too big for it britches, and its arrogance is showing through….”

“The Arrogant Self-righteousness of Vichy Liberals,”

L.K. Samuels, Libertarian Perspectives, Dec. 28, 2008

Freddie Mac CFO dead…(Updated 9:13 PM)

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“The acting chief financial officer of mortgage financier Freddie Mac, David Kellermann, was found dead this morning, police said. Police are investigating the death as an apparent suicide…”

More here

ABC reports (http://abcnews.go.com/Business/story?id=7399376&page=1) that Kellerman was found hanging in his basement.

Notable point in the piece:

“Prior to this role, he served as senior vice president, corporate controller and principal accounting officer. ….Before that, Kellermann served as the senior vice president and business area controller. As business area controller, he led the organization responsible for all accounting and finance for Freddie Mac’s lines of business. Kellermann has been with Freddie Mac for more than 16 years….”

In short, he was the guy in charge of Freddie’s books.

He also got a bonus recently, for $800,000 (about $170,000 paid and with the rest to come).

My Comment

I’ll post anything pertinent as it comes up.

Meanwhile, here are the other deaths/suicides related one way or other to the financial crisis:

Thierry Magon de la Villehuchet, aristocratic French CEO of  Access International Advisors, a money management firm that placed investors in Madoff vehicles. He was stabbed multiples times in the arms and wrists, apparently with a box-cutter, after taking sleeping pills. (December 22, 2008)

Adolf Merckle, German billionaire head of VEM, a corporate empire that included Ratiopharma, the leading European pharmaceutical producer, Cement Heidelberg, one of the world’s leading building materials suppliers, and 120 other companies. Lay down in front of a speeding train near his house in Blaubeuren village not far from the French-Swiss border.(January 5, 2009)

Update: Steven L. Good, the CEO of  Sheldon Good & Co., the largest real estate auction in the country, found dead from a bullet to the head, at the wheel of his Jaguar in a Kane County wildlife preserve outside Chicago, who had commented on the challenging state of the country’s commercial real estate market the previous month.  (January 6, 2009) [I came across this suicide only today and added it at roughly 9 PM April 22] Update: Patrick Rocca, an Irish property investor worth several hundred million who shot himself in the head after losing a large sum in Anglo-Irish bank, which was nationalized by the British government the week before his death  (January 22, 2009)

William Foxton, retired British army major-general who served in the French foreign legion and then in the Balkans in the 1990s on the European Commission Monitoring Mission and as a spokesman for the Organization for Security and Cooperation in Europe. Died from a single bullet to the head in Southampton after reportedly losing all his money (six figures) in Madoff hedge funds. (February 14, 2009).

Huffington Post has an article about what it describes as the increasing levels of suicide related to the financial crisis. It names several less well-known money-managers or home owners who’ve taken their lives as a result of anxiety over finances.

However, this Columbia Journalism Review piece correctly cautions against drawing any conclusions about rising suicide rates and financial crises, noting that the image of ruined financiers throwing themselves out of windows during the crash of 1929 is strictly an urban legend. J.K. Galbraith, the best-known chronicler of the 1929 crash, points that out too.  The CJR piece is also useful in warning against the dangers of copy-cat suicides/killings resulting from the irresponsible linking of deaths/killings/suicides to particular financial events.

(This is one of the reasons I’ve been wary of writing about farmer suicides in India. You would need a very detailed analysis of the statistical picture and demographics of the area to reach any broad conclusion about the suicides).

Update April 23,

I see that Vanity Fair has posted a piece on financial suicides at 4:52 PM April 22, an updated version of an older list.

Briefly, it includes the following:

October 23, 2007
Raymond and Deanna Donaca, of Portland, Oregon; Retired contractor for the U.S. Forest Service (Raymond)
Carbon-monoxide poisoning.

October 24, 2007
James Hahn,  Houston, Texas, Chemist.
Gun shot

November 26, 2007
Rae Cowan,  Toronto, Ontario. Nranch manager at IPC Investment Corp., and he also ran Gibraltar Wealth Management Corp.
Carbon-monoxide poisoning.

January 18, 2008
Walter Buczynski of New Jersey; Vice president, Fieldstone Mortgage.
Jumped from the Delaware Memorial Bridge after killing his wife.

March 5, 2008
Roland Gore of Ocala, Florida
Killed his wife and dog, set his house (in foreclosure) on fire and then took his life

March 10, 2008
Rufus Shaw and Lynn Flint Shaw of Dallas, Texas.
Writer (Rufus); former chairwoman of the Dallas Area Rapid Transit board (Lynn)

Rufus shot Lynn and then took his own life

April 11, 2008
Maurice and Natacha Pereira, Four Corners, Florida.
Gun.

May 23, 2008
Barry Fox of Fort Lee, New Jersey.
Research supervisor, Bear Stearns.
Fox ingested a cocktail of drugs before jumping from his 29th-floor apartment.

June 2, 2008

Scott Coles of Phoenix, Arizona.
C.E.O., Mortgages, Ltd, one of the largest private mortgage lenders in Arizona
Drug overdose

July 15, 2008
Ed Boesen of Davenport, Iowa.
Co-owner of the florist chain Boesen.
Drug overdose—Tylenol.