Author: southwerk

I am a 53 year old teacher. I have double major in Speech and Criminal Justice resulting in a Bachelor's degree from Northeastern State University in Oklahoma and a law degree.

Finance Industry Laments New Curbs on Securitization (via The Fiscal Times)

On By southwerkIn business ethics1 Comment

Yesterday, I was explaining to my students that the word, securities, had become an oxymoron. (I am a reality based instructor.) Ironically, within 24 hours, I run into this article which says that the problem of securities being a highly speculative investment has abated somewhat. If the numbers are accurate, things have improved.

From The Fiscal Times (from an article by Zachary A Goldfarb) –

For nearly two decades before the financial crisis erupted in 2007, the securitization market allowed Wall Street to manufacture all manner of financial products. The most basic of these were bundles of home, auto and credit card loans that were turned into single investments that firms and countries worldwide could buy.

But then things got more complicated. Wall Street found ways to allow investors to speculate on Hollywood films, patents, lawsuits, airplane sales, and fast food revenues. The most infamous financial engineering, of course, involved the creation of seemingly high-quality investments that were in fact backed by high-risk home loans, extended to people with weak finances.

These subprime mortgage-backed securities helped doom the financial system starting in 2007, and the securitization market has been working to make its way back ever since. Although it has had some success, particularly in auto and student loans, participants at the ASF conference here said that they expect financial engineering to play a far smaller role in the markets for years to come.

“Banks will be utilizing securitization less in the future than they have in the past,” said Bianca Russo, managing director at J.P. Morgan Chase.

In total, there was $145.3 billion in securitizations in 2010, compared with $875.5 billion in 2005, and far below the number even a decade ago, according to industry newsletter Asset-Backed Alert.

Every time I explain what a security based on home loans looks like broken down into its parts, my students are amazed that anyone would buy them. But then I show them what the paperwork looked like to an investor. If you can divide the home loans between, prime and sub-prime, only then can you see how much trouble you are in. But the poor investor can only see a list of smaller investments perhaps of thousands of mortgages which for accurate knowledge need to be researched individually. The investor would have felt that they needed no such investigation because the security was  rated as triple A by an international ratings corporation like Moody’s. Investment firms like Goldman Sachs are not required by law to disclose risks with an investment they are selling. So, the investor was swathed in assurances that he was making a good investment when for all intents and purposes he was driving blind in a snowstorm. And in 2007, they hit the wall.

James Pilant

Regulatory Tsunami!

On By southwerkIn business ethics

From CBS news –

“This regulatory tsunami, occurring hastily and at a time when the U.S. economy is struggling to emerge from a deep recession, is hindering investment and job creation” wrote Larry Burton of the Business Roundtable. He added that environmental regulation, financial reform and health care are the group’s primary concerns.

My favorite phrase is this one, Regulatory Tsunami.

Let’s put this in perspective. If the current administration’s regulations can be considered a regulatory tsunami, the little yellow duckie in your bath tube is a yellow, fanged, fiend from Hell.

“when the U.S. economy is struggling to emerge from a deep recession.” Would that by any chance be the recession caused by the collapse of the financial system to corporate incompetence and misconduct? Would that be the recession whose recovery has been severely curtailed by private interests particularly banks refusing to invest their often record profits from investing in America?

This is a different take on reality. I don’t recommend it.

James Pilant

Community Improvement District Lets Business Impose Sales Tax For Improvements

On By southwerkIn business ethics7 Comments

From KAKE in Wichita, Kansas –

Owners of a popular east Wichita shopping center want to make improvements. In turn, they want shoppers to pay more in sales tax.

Eastgate Shopping Center at Kellogg and Rock Road will ask the Wichita City Council to establish a Community Improvement District for the area. Plans call for facade renovations, and parking and store improvements.

The cost for the project will run more than $53 million. Eastgate developers say a one cent sales tax would be in place over a 22 year period to pay for the renovations.

Kansas

A privately owned shopping center can petition the city to impose a tax and give it to them?

Is the private becoming the public? or the public, the private?

Tax money will directly pay for improvements to this shopping center in the form of a sales tax. Is this wise? At what point does a government cease being government of the people and morphs into a subsidiary of private interests offering its citizens up for their business value?

The one thing that I find most ironic is that Kansas is considering cutting its corporate tax rate, but it is okay for a business to apply for and receive a tax increase on the citizens of that same state.

James Pilant

Tri-State University Scandal, Small Story In The United States

On By southwerkIn business ethics6 Comments

There are two aspects of this story that I would like to talk about. The first that in the American media, this story is not front page news. It’s buried in the middle of the newspaper. The big coverage is in India.

The second thing I want to talk about is here – today, I read this. From DNA Daily News and Analysis based in Mumbai, India. –

The large-scale mushrooming of fake Indian agents working on behalf of lesser-known foreign universities are to blame (my emphasis) for students falling prey to fraudulent institutions like Tri-Valley University (TVU) in the US, say experts.

“This is sad but true. In India, we have no regulatory mechanism to monitor agents working for foreign universities. These agents work for lesser-known or fraud universities abroad and dupe Indian students. They mislead students into joining fake universities abroad like TVU in the US,” says Manjula Raman, a career counsellor and principal of Army Public School, Bangalore.

It required a great deal of effort for this scandal to happen. Yes, there were agents in India exploiting these students but the American tolerance for sham universities and colleges is the other half of the equation. One make the other possible.

I personally know of some sham schools. Most people here do. Colleges spring up with signs in store front windows and four room buildings. Usually some religious education designed to train you as a minister or get you a certificate for office work.

My suspicion is that overseas, one American college looks very much like another.

Agents in India are taking advantage of how the American educational works (or doesn’t work). But there were a good number of Americans involved as well.

Fraud

I want the people responsible in India for these students’ plight to go to jail.

I also want the Americans defrauding these students to go to jail.

James Pilant

What Mendel tells us about thinking (via The Hannibal Blog)

On By southwerkIn ethics2 Comments

My students are bombarded with my lectures on good decision-making. They suffer through seemingly endless talk about why reason is better than opinion, how the facts are better than speculation. All this because I believe that critical thinking is at the heart of an effective education.

I believe in thinking. We live in a time where people can say, “I go with my gut,” and people treat them as if they had leadership ability when the intelligent response is to say, “That’s nice.” and ease them away from any position of authority.

The American Experience is a brief piece of history but its significance has been huge. It is an attempt at allowing a free people to make the critical choices in their lives. America is based on Enlightenment philosophy. This philosophy teaches that humans are capable of improvement and that with the tools of human reason they can free themselves from superstition and false beliefs. These ideas are embedded in the Declaration of Independence and the Constitution. Not only that but our educational system, our laws and every idea of improvement espoused by any self-help book are all based on those beliefs.

Give some attention to the Hannibal Blog and what he has to say about thinking.

James Pilant

What Mendel tells us about thinking Find quietude. Observe whatever is around you. If it seems banal, discover it to be fascinating and mysterious. Ignore distractions, otherwise known as ‘everybody else’. Ask simple questions that puzzle you. Be patient in pondering them. That is how I imagine Gregor Mendel might answer us today if we asked him: How  — I mean how! — did you achieve your stunning intellectual breakthroughs, on which we today base our understanding of biology? Put … Read More

via The Hannibal Blog

Winner-Take-All Politics (via Chasing Fat Tails)

On By southwerkIn business ethics

Here is a review of the book: Winner-Take-All Politics by Jacob Hacker and Paul Pierson. I have addressed the issues of concentration of wealth and government inaction on several occasions most notably Can You Still Get Ahead in America , Casino Banking and Financial Rouletter: America Loses.

There are other reviews here, here and here.

James Pilant

So I just finished reading Jacob Hacker and Paul Pierson’s provocatively titled Winner-Take-All Politics: How Washington Made the Rich Richer – And Turned Its Back on the Middle Class. Before I go on any further, I just have to disclose that, yes, I am biased: I took a class with Paul Pierson when I was an undergrad at Berkeley, and I found him to be a very good professor. So I might be predisposed to find the arguments of this book persuasive. T … Read More

via Chasing Fat Tails

Oklahoma charity sues ex-chief, claiming porn, bribes (via NewsOK)

On By southwerkIn ethics

 Is charity giving a wise decision? We are encouraged constantly to give money for any number of causes. Most people being altruistic and kind do give money. And much of the time, the money performs used well, but not all the time. Nevertheless, giving money for the needs of others and the benefit of your fellow citizens is a wise decision. We are helping build a society. We are reasoning  in terms of our relation to each other instead of just self-interest.

There are many, many worthy causes and charites that try to help and the money given to these organizations often serves a useful purpose. But what proportion of the money given is used for that purpose? I have read of organizations that used 99% of their funding on promotion and salaries. 

Food Bank

Those organizations on television, that use mailings and bombard the internet have to use considerable resources to do so. Have you considered giving your charity donations to local charities? Right now, all over the country, churches are having trouble maintaining food banks. Some churches (disclosure – My father and step-mother participate in a free clinic at a Methodist Church.) have medical clinics where all the staff and the doctors work for free. Giving to these kind of organizations means that close to 100% of the money goes to the purpose of your donation, helping those in need.

We don’t have to look far for the needy right now. Unemployment is about 9% officially and closer to 16.5% in the world of reality. Give your money to develop the ties that bind. We are trying to build a better place for all human kind. Help with that struggle.  

From NewsOK –

Larry Jones took bribes and hid hard-core porn magazines at the charity, Feed The Children is alleging in a countersuit against its fired president. The charity also is accusing Jones in the civil case of other misdeeds, including misspending charity funds, pocketing travel money, keeping gifts from appearances and misusing a charity employee as a nanny. Jones, 69, denied wrongdoing.

“They fired me wrongfully,” Jones said Tuesday evening. “What they’re trying to do is build a case up against me so that will hold up. It won’t hold up … I didn’t do anything. … If I had … done anything wrong, you better believe I would have taken everything out of the office … because I knew I was probably going to be fired. “This is crazy,” he said. “I’m not saying they can’t live without me, but everywhere I go, people say, ‘Feed The Children is Larry Jones and Larry Jones is Feed The Children.’ And what they’re trying to do is bury me … with all these trumped-up charges.” He specifically said the alleged bribes were above-board payments to him and that the magazines were research for a new novel, “The Zipper Disease,” about AIDS in Africa.
I do not know the proportion of money used by Save the Children that goes toward administrative cost. I have no preference in whether you give to the organization or not.

I put this article up to show that charities are not simple organizations and can be quite controversial.

I am calling for your good judgment, not asking you to stop giving to this or any other charity.

I want you to consider giving to local churches during this cold winter with so many in need.

James Pilant

United States May Re-instate The Immigration Status Of Tri-Valley Indian Students

On By southwerkIn ethics

There is motion in the case of the Tri-Valley University students. Most of these students are fromIndia and while they retain their visas, they have lost the right to attend other schools or work at a job in the United States. For more background, you can read my post –  The Saga Of The Students From India And Tri-valley University Continues.

From the Economic Times article, ICE indicates it may reinstate Tri-Valley students’ visas. –

The US Immigration and Custom Enforcement (ICE) has indicated that it is ready to consider reinstating the immigration status of those Indian students, who have lost their student visas due to the closure of a California-based “sham” university.

“We received a message from ICE today, in which they indicated that they would consider the possibility of reinstatement of their (students) visa status through I-539,” Susmita Gongulee Thomas, Consul General, Indian Consulate San Francisco, told PTI.

I-539 is the form used by US Citizenship and Immigration Services (USCIS) for visa extension and change of immigration status.

When one is out of the visa status for one reason or the other under a particular law of the US and the individual is not in criminal violation, USCIS may agree to give the reinstatement of his or her status under this form.

It would appear that things are moving in favor of the Indian students. But let’s not celebrate just yet. This could be a “trial balloon” to see what the reaction is to the idea, for instance whether or not the government of India will consider this an adequate response to their complaints. Let’s give it a few days. I’ll stay on it.

James Pilant

Why Elizabeth Warren Is Still the Best Choice for CFPB Director (via Rortybomb)

On By southwerkIn business ethics

Just like the writers at Rortybomb I have long believed that Elizabeth Warren was the best choice.

I have written about this before. You can read my July 26, 2010 post – Elizabeth Warren Should Be The Head Of The Consumer Financial Protection Bureau or the July 24th, 2010 post –  Treasury Makes A Mistake – Claiming They Are Not Blocking Elizabeth Warren (via The Baseline Scenario).

Please read the post and add Rortybomb to your favorites.

James Pilant

Why Elizabeth Warren Is Still the Best Choice for CFPB Director The Consumer Financial Protection Bureau just launched its website. Meanwhile, Shahien Nasiripour has a story that found “… if the White House can’t get a nominee through the Senate by July, the bureau will lack the authority to supervise nonbank lenders, according to a Jan. 10 report by the inspectors general of the Treasury Department and Federal Reserve obtained by The Huffington Post.” One of the main reasons for creating a Consumer Financi … Read More

via Rortybomb

NJ | Sheriff’s Officers Accused Of Emptying Wrong Home In Botched Foreclosure (via Foreclosure Fraud – Fighting Foreclosure Fraud by Sharing the Knowledge)

On By southwerkIn business ethics3 Comments

There are few assaults upon our dignity as crushing as the theft of all of our possessions. It is not so much the large items like refrigerators and televisions that are missed. Humans attach value to the strangest things. Instead of the microwave they lament the loss of their wedding pictures. When logic would dictate the loss of the computer should be the first cause of regret, they think of the old worn chair that has sat in the living room for years. Considering the great value placed upon personal privacy and possessions, would it not seem logical and prudent that those entrusted with the safety of the public should investigate and seek to punish the guilty. But the investigators would only need a mirror to discover the perpetrator of this crime, law enforcement itself.

It seems unfair that the bank never has to worry about these mistakes in judgment. It seems unfair that the bank, should use so many public resources to serve its interests.

The victim is asking $500,000 dollars in damages.

That seems fair, first, to recompense her for damages and second, to discourage the sheriff and his deputies from any more random home raids.

James Pilant

NJ | Sheriff’s Officers Accused Of Emptying Wrong Home In Botched Foreclosure Sheriff’s Officers Accused Of Emptying Wrong Home In Botched Foreclosure HILLSIDE – A 76-year-old Hillside woman has filed a claim for damages against Union County, alleging that officers of the county sheriff’s department illegally entered her home and removed the entire contents because they had the wrong address of a foreclosure. In the document, obtained by Tina Renna of The County Watchers, Ozzie Leak claims that Union County Sheriff Ralph F … Read More

via Foreclosure Fraud – Fighting Foreclosure Fraud by Sharing the Knowledge