A good idea

Prairie onion cohousing

Setting the stage for the next oil crunch

The massive spill in the gulf has led to:
- A moratorium on new deep water drilling in the gulf of Mexico.
- The probable acceleration in decline in the amount of oil coming through the Alaska pipeline: http://online.wsj.com/article/SB10001424052748704067504575304942111464272.html?KEYWORDS=Alaska+pipeline
- Norway banning new oil and gas drilling "until the investigation into the explosion and spill in the US Gulf of Mexico is complete"

The oil industry is already struggling very hard to keep oil production steady.

Demand for oil is growing in China, India and throughout the developing world.

The economy is improving slightly in the developed world.

Something has to give. I forsee either another 2008 run-up in prices (147/barrel or worse), the recession coming back tanking oil demand, or something in the middle. This article from the oil drum is very good:

http://www.theoildrum.com/node/6574#more

The ownership society

The story:

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Utah Jazz fans sue over new seating policy

SALT LAKE CITY (AP)—A group of well-heeled Utah Jazz fans has sued the team’s corporate parent, claiming a new seating policy has caused their VIP seats to plummet in value.

Members of the Jazz 100 Club, in their complaint filed Friday in 3rd District Court, are seeking more than $19 million in damages.

The dispute stems from a January policy change allowing all season-ticket holders to also transfer ownership rights to their seats in EnergySolutions Arena.

Previously, only 220 courtside seats that were held by the 50 to 60 club members could be sold or bequeathed, an exclusivity that increased their value.

Club members say their seat positions that once sold for as much as $200,000 now go for $20,000, a drop of 90 percent.

Jazz officials say they take the matter seriously.
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Commentary
Once again we see how the insiders, the elite, the privileged first rig things in their favor and then scream bloody murder if anyone attempts to undo the rigging.

Much of American society has sadly become like this. Anyone with an ounce of intellectual honesty can see that we have become a class society with serious privileges afforded to the top. In this case they can sell their asset (the season ticket) but others cannot (or could not). That's a pretty serious difference. A consequential difference. A class difference. In this case literally.

The average fan could buy but not sell, the real power and real ownership of those seats resided with the team owners. They retained *real* ownership. The "Jazz 100 Club seats" on the other hand afforded real ownership to the purchaser. Team owners and "Jazz 100 Club" in one class and other fans in another.

This is a metaphor for our so called "ownership society" which has always been a fraud. Like the majority of Jazz season ticket holders, people have been made to *feel* like owners but were never really *made* owners nor awarded the true privileges of ownership. In the case of the stock market the difference is one of scale not class. The middle class is given 401ks and ESOPs while the top brass is given stock grants and options that are orders of magnitude bigger.

Ownership is not real unless it's sizable.

When average Joe purchases 100 shares of stock he's not an owner in the same way that top brass are when they get grants of 10s of millions of shares. Imagine being able to purchase a corner of a cupboard in 10 million dollar home. That's what most of us get in the stock market. Technically it's "ownership" but not really.

The upper classes have always been about privilege: getting it, maintaining it and expanding it. Be it through an explicit class (like the Jazz 100 Club), through more informal manifestations of class, or through scope (the CEO gets 35 million shares, the ESOP gives you 100) they have it and always want more. When some sort of class privilege is ended it costs those in that class money.

The "ownership society" sounds like a great idea. If there was ever a sincere effort to engineer a *real* ownership society it would be a very good thing but all that we have done so far is window dressing and feel good stuff.

The next point will make for entire post at a later time. The change in corporate compensation over the last 30 to 40 years which gives top brass most of their compensation in stock has been in my opinion one of the most severe and cynical manifestations of class warfare in our nations history. Before this changeover direct comparisons of salaries provided a rigor that has been swept away with the stock option granting game. Say senior executive X makes 85,000 and an assembly line worker makes 5,000 (think 1970). The comparison is easy. But fast forward to 2010 and the senior executive makes most of his compensation via a maze of stock options and grants and it's not so simple. And there is of course an intellectual slight of hand going on whereby it's implied that the executives are not so much being *paid* as "made owners" (which is OK!). They are getting an ownership stake and that's a good thing because that "aligns their interests with those of the company."

This would imply of course that without these extra inducements the senior executives might actually operate in a way opposed to the company? Does that make any sense? CEO's and other top brass were secretly sabotaging their companies in 1970 because they didn't make enough money? This is of course absurd. If there is any class of employee who we can realistically expect to "have his interests aligned with the company" to begin with it's the senior management team. Any compensation system based remotely in reality that sought to "align the interests of employees to those of the company" would start at the bottom, because it is there that common sense dictates employees are most likely to not have their interests aligned with those of the company to begin with. OK maybe they don't matter and are easily replaceable. How about skilled workers, salespeople and engineers. Wouldn't it be a good thing if we made sure *their* interests were aligned with the company? Well that's not what happened, the stock option windfall goes overwhelmingly to senior managements - the one group that we should expect to *already* have their interests aligned with the company.

What is going on of course is class warfare perpetrated relentlessly by the top 2% to 5% on the rest of us.

This group is the biggest impediment to a *real* ownership society and will have to be fought tooth and nail if it is to ever happen.

The truth about immigration

http://www.newsweek.com/2010/05/27/reading-ranting-and-arithmetic.html
http://www.msnbc.msn.com/id/37493275/ns/world_news-americas

If you love your freedom thank Ben Joravsky

So often we are told something like "if you love your freedom thank the troops".

Thank the troops. Thank the soldiers. Thank the military. Thank the vets. Without them we would not have freedom.

Funny but Saddam Hussein had lots of troops and Iraqi's were never free under him.

General Noriega had lots of troops but Panama was not free under him.

The Soviet Union had lots and lots and LOTS of troops but they were never free.

The truth is that troops are tools of the state. Tools that can be used for good, bad or indifferent purposes. It's pretty obvious if you look around that a large supply of available troops is not really the deciding factor in whether a nation is free or not.

Arguably the nation with the greatest relative supply of willing troops -in all of history- and a potent high tech military machine to effectively use them was Nazi Germany.

Generally when a nation indulges in excess militarism it's a bad sign. Right now the U.S. spends more on military expenditures than the rest of the world combined.

Saying "if you love your freedom thank a vet" is kind of like "We Americans are the good guys". It's a sign that you have "drank the cool aid". Obviously we are not inherently good or bad, we are what we make ourselves to be. We have the same DNA as all other humans and the same needs and passions. We are a very powerful country that has done a lot of good and (of course)some bad.

This brings us to Ben Joravsky. My opinion is that it's guys like Joravsky who are the real difference between free societies and and totalitarian societies or just corrupt societies. Jaravsky has spent considerable time and effort in examining the TIF system in Chicago. A system that was justified on the basis of "helping the poor" but whose benefits have gone overwhelmingly to the rich and well connected. In fact it has clearly redistributed (property tax) wealth from the poor to the rich all the while politicians tell us (over and over again) that it's for the benefit of the poor. The TIF system is corrupt. The way it is structured almost guarantees it will benefit the wealthy areas of the city because only they typically have the means to create a TIF district - which is the nucleus of the TIFF benefit system. Ben Joravsky has been pounding away on this for quite some time. Exposing the truth and the exposing the hypocrisy and lies. Without guys like Joravsky there would be no counterbalance to this kind of thing.

How does this bring us to war and freedoom? Little corruptions lead to big corruptions and the biggest corruption of all is unnecessary war.

A nation at war cannot be a free nation. War and freedom cannot exist simultaneously for long. Actually this idea (freedom or war not both) would make for another whole post.

Guys like Joravsky were there before and during the American Revolution. They were there fighting slavery. They were there in the labor movement. They were opposing the Vietnam war. It' is THEY and not "the troops" who have made and kept us free so far. It is THEY who have steadfastly fought corruption and that fight has for the most part prevented our freedom from evaporating.

Technically I'm talking about extortion

Within a month or so Lebron James will start to negotiate a new contract. It's believed that he will be able to command well over 30 million dollars per year. Regardless of how much he ends up making we will be told by many that he is "worth it" because he will deliver even more value to the team and city where he chooses to play. The line will be something like "If James delivers 50 million per year in benefits to...[fill in the blank city/team] and he only gets 30 million in return then he is a bargain." Of course if he goes somewhere else he *costs* the city and team who *could* have had him.

Recently some articles came out examining compensation for bankruptcy lawyers. Some have been making over 1000/hour. Many analysts have called the compensation justified based on the logic that if a law firm delivered X dollars of assets to it's client and only billed a fraction of that (at *whatever* per hour it does not matter) then the client came out ahead. 1000/hour might even have been a bargain if the client recovered enough money from the court.

We routinely hear of what seems like massive CEO compensation being justified on the basis of what the CEO can "deliver" and the negative ramifications to the company if he or she left. When these discussions occur we often hear that compensation is a means of "keeping score" and "keeping score" is one of the fundamental things we must do in a capitalistic, competitive society. Keeping score ensures people work hard and provides necessary motivation. It's important. It's right. It's a key part of what generates prosperity.

Right now we have a massive oil spill in the gulf of Mexico. Perhaps the most devastating oil spill in history. Oil is gushing out of a broken well under 5000 feet of water and wreaking havoc on the gulf coast. As I write this the flow has not been arrested. A group of the best engineers and scientists in the world have been assembled to work on the problem. Would it be appropriate for them to demand (lets say) 1500/hour before even flying to Houston. If they applied the same logic as the other professions I mention above they might say "lets face it we are a little more important to society at this moment than bankruptcy lawyers who just got 1000.hour, our skill and dedication may mean the difference between survival or death for several whole *industries* on the gulf coast for a generation. Our skill and dedication could be make a multi billion dollar difference to the entire economy of the gulf coast. Our skill and dedication could be the difference between moderate damage and a Chernobyl type of disaster that compromises an entire ecosystem for generations. The value of a bankruptcy lawyer getting some money from or a creditor just pales in comparison. Hence we are worth *at least* 1500/hour and we won't get on the plane to Houston without an agreement to give us that".

My sense is that if they played hardball like this they actually *could* command 1500/hour right now. If the same logic was applied to them as applied to professional athletes, CEO's and bankruptcy lawyers 1500/hour would be a huge bargain. But they wont make such a demand because the engineering and technical professions simply have no history in doing this kind of thing nor any infrastructure to support it. Infrastructure like agents in the case of professional sports, captive/friendly compensation consultants in the case of CEO's and controlled access to the legal system brought to you courtesy of the legal profession.

The engineering/tech sector is arguably the *only* profession in America that regularly stands in a position to do this kind of thing but does not - and in so doing hurts itself in my opinion.

From Forbes Magazine: "according to government data released Monday, doctors, on average..have the best-paid jobs in the country." Considerable evidence exists to show that medical costs passed on to the patients are far higher than "intrinsic" costs and are high (and rising) because of "the ramifications". IE if you are really sick and you don't get help you may well die. Or be crippled. Hence you will pay just about anything and hence the medical profession can charge you just about anything and they do.

Some rankings from Forbes:
1. Surgeon
Average Annual Pay: $219,770
One-Year Change: +6.2%

2. Anesthesiologist
Average Annual Pay: $211,750
One-Year Change: +7.1%

3. Oral and Maxillofacial Surgeon
Average Annual Pay: $210,710
One-Year Change: +10.6%

and on and on. Notice the big increases in pay even in the depths of the worst recession since the great depression. So much for restraint. Whatever taboo that existed in the medical profession about "monetizing" their position is obviously long gone. Is part of the reason for the high salaries to balance the need for exorbitant liability insurance? Of course. But the whole liability/lawsuit thing is really just another manifestation of (for lack of a better word) extortion. If you are a doctor and you don't have liability insurance and something goes wrong (and it will given the nature of the world) then you can lose all your money in court. By force. Judgment against you. If you get sick and don't get treatment you may well die. Or be crippled. That is a strong axis from which to extract a lot of money - and it's exploited to the n'th degree by the medical and legal professions both.

Back to the notion that compensation is a means of "keeping score" and "keeping score" is really important and hence people should do whatever is necessary to get whatever they can.

Are we really serious about that?

If we are serious about this, then the engineers and scientists headed to the gulf of Mexico really *should* demand all they can get. Otherwise they are selling out their profession. They are shirking their (capitalistic) duty not to.

Arguably engineers and scientists are every bit as important to society as doctors, lawyers, professional athletes and CEO's. If doctors, lawyers and professional athletes can engage in (for lack of a better word) extortion then a case can be made that engineers and scientists should also. Otherwise they are degrading their profession and giving young kids a disincentive to join their ranks. If "keeping score" so vital then the profession should do whatever is necessary to score more.

This country faces a critical shortage of people going into math, science and engineering. Could it be that low prestige and pay (relative to other similarly skilled professions) could be a factor? Could it be that bears crap in the woods?

A more interesting question is whether the low prestige and pay are partly the result of an antiquated taboo on (for lack of a better word) extortion. A taboo that has been long cast off by other professions that are competing for scarce talent.

Demolition in Detroit

"Detroit Shrinks Itself, Historic Homes and All"
http://online.wsj.com/article/SB10001424052748703950804575242433435338728.html

in a nutshell Detroit will be demolishing 10,000 vacant homes including historic homes like the boyhood house of Mitt Romney. The reason is that they have become "eyesores" and are "bad for the neighborhoods" and so forth. Federal stimulus money will pay for much of the demolition work.

This strikes me as wasteful and profligate. Paying money to destroy assets. These homes could not be fixed up? They could not be given away in return for pledges to fix them up?

I'm sure that the big homebuilders lobbied Michigan, Detroit and Washington to do this - spend federal money on demolishing existing housing stock. Guys like Pulte, KB and the National Association of Homebuilders. Existing homes demolished will mean new homes are needed. Don't be fooled by the "green space" wool (as in over your eyes). This is about reducing supply so when the economy turns there will be a need to build NEW homes.

Afghan Payola

http://online.wsj.com/article/SB10001424052748704250104575238442531337592.html?mod=WSJ_hp_editorsPicks

Synopsis of the facts:
- Afghan farmers are being paid (by U.S. taxpayers) to plant crops, spray pesticides, harvest crops etc.
- The effort is part of an attempt to undermine the Taliban.

What is implied in the article:
- The U.S. is trying to help the economy and the Taliban is trying to destroy it. IE "we are the good guys."
- The effort is working, it's catching on.
- The really important aspect of the current efforts in Afghanistan is the military activity, this economic effort is just an adjunct to that effort.

Lets focus on this last point a bit. The primacy of the military. Note the following sentence: "Kandahar and Helmand, the southern provinces where the bulk of this money is spent, are the focus of this year's U.S. military surge that seeks to roll back Taliban advances." See the key word in there? It's not just a surge, it's a military surge. We saw the same focus on the military aspect of the surge in Iraq in 2007.

Military aspects were barely touched upon in the article yet the effort was described as a "military" surge.

My opinion is that our nation has become tragically hooked on war and military solutions. I think this dates back to WWII. Ironically the "good" war may have set us up for being seduced by the "glorious" aspects of war and it's benefits to the winning side. More recently the Soviet Union collapsed and we have a very successful war in Iraq in 1991. We don't really fear war any more. Without something like the Soviet Union to contend with war is again tempting. War against much weaker opponents who we don't much like anyway and have something that we want.

Think Iran.

Of course the long term costs of war and occupation are an issue but notice how -even now- just throwing in the word "military" tends to insulate against critical examinations of cost. Imagine the howls of protest if $360 million dollars was spent on generic foreign aid in some similar context. But throw in the word "military" and cost containment goes out the window.

What is going on in Afghanistan is really "payola". Locals are being paid to do what we want and not join or aid the Taliban. That is the backbone of this "military" surge and that was the backbone of the Iraqi surge in 2007.

Everything will be fine as long as we continue to pay them roughly what they ask for.

Sex offenders can be kept in prison, justices rule

A new Supreme Court ruling allows federal officials to indefinitely hold inmates considered "sexually dangerous" after their prison terms are complete.

See this article for a full description:
http://www.msnbc.msn.com/id/37190594/ns/us_news-crime_and_courts

It strikes me that this is a very dangerous kind of power to give to federal officials. The problem is that the question of whether someone is "sexually dangerous" or not is subjective and hence this opens the door to arbitrary usage of this.

It would seem to me that this ruling could seriously undermine our whole system of criminal justice, our system of jury trials where the holding (or not) of a person is determined by a judge and jury - not "federal officials."

If someone can be held for being "sexually dangerous" that what about holding someone based on some other kind of "dangerousness".

How about if federal officials deem someone "violent and dangerous" and hold him on that basis. What's so special about "sexually dangerous", it seems "violent and dangerous" is just as bad. What about dangerous in other ways. What about a known gang member.

The problem is that the government is being given arbitrary power here. "Federal officials" somewhere determine the outcome not a judge and jury.

We are seeing some basic tenets of our criminal justice system come under assault from both sides really. Bush essentially repealed Habeas Corpus in cases of "terrorism" meaning someone can be held with no charges, and now the supreme court has ruled someone can continue to be held if they are deemed "sexually dangerous."

I don't think it's an exaggeration to say that the importance and centrality of the jury trial is being chipped away and in it's place comes arbitrary decisions by "federal officials".

Particularly disturbing is Elena Kagan's role in this ruling as well as her reasoning:
"Solicitor General Elena Kagan successfully argued the government's case in front of the Supreme Court. Kagan has now been nominated to replace the retiring Justice John Paul Stevens.

Kagan in January compared the government's power to commit sexual predators to its power to quarantine federal inmates whose sentences have expired but have a highly contagious and deadly disease.

"Would anybody say that the federal government would not have Article I power to effect that kind of public safety measure? And the exact same thing is true here. This is exactly what Congress is doing here," she said. "

So the justification is "public safety?" "Public safety" voids a key element of the the sentence (it's end!) and renders moot a presumption of innocence? If you are going to base the reasoning on "public safety" then it opens the door for application of this to all sorts of things. How about someone with a history of drunken driving accidents.

Elements in our government that really really want to hold someone (for whatever reason) would seem to have picked up some pretty big trump cards over the past couple of years.

"Getting even" can serve a purpose

Why This Traveler's Outrage Feels So Right
by Charles Wheelan, Ph.D.
Monday, May 10, 2010

United and Continental are merging to create the world's biggest airline. Congratulations. Now give me my $25 back.

I just filed what may be the world's smallest lawsuit against what will soon be the world's biggest airline.

At the beginning of May, I sued United Airlines (soon to absorb Continental) in New Hampshire district court for $25. (Yes, it cost me $72 to file the suit, but I'll get to the logic of that in a moment.)

The grounds for my lawsuit are, I believe, airtight. In March of this year, I checked a bag on a United flight from Toronto to Manchester, N.H. To do so, I paid $25. My understanding was that both the bag and I would arrive in Manchester later that evening.

I arrived. The bag did not. Gone. Nearly six weeks later, it's still missing. Which is why I want my $25 back.

True, the bag had a lot of valuable stuff in it -- clothes, shoes, even an olive oil and vinegar decanter that I was bringing back as a gift. Obviously I want that stuff back, too, or compensation for the lost possessions. But I'm willing to wait on that, as United claims to be still looking for the bag. If it never turns up, we'll have to haggle over the value of the contents. Fine.

But in the meantime, one thing is absolutely, positively clear: I didn't pay $25 to have the bag disposed of. I paid $25 to have the bag delivered to its ultimate destination. That didn't happen. Come on Glenn Tilton (who as United CEO is the named party in the lawsuit), these bag fees are irksome when the bag does go where it's supposed to go. They're really hard to justify when it doesn't!

When I try to explain this to the United baggage claim representatives, I just end up deeper in call center hell. After yelling at about the ninth person (people who admittedly bear no responsibility whatsoever for my lost bag), I opted to seek justice the American way: in small claims court. The Web site explaining the New Hampshire small claims process actually says: "The 'People's Court' television show is a very good example of how most courts handle small claims cases."

My only disappointment is that I won't be eligible for a jury trial, since the claim is less than $1,500.

Remarkably, there are some important economic concepts lurking within my otherwise silly $25 lawsuit. The first is the explanation for why the major airlines (with the notable exception of Southwest) increasingly treat passengers like inmates in a medium security prison (though presumably there are fewer added fees in prison). Because they can.

The airline industry is not a perfectly competitive market. If it were, then each one of us who has had a bad customer service experience would simply choose a different airline next time. But that's usually not possible. Both regulations and gate availability constrain the number of carriers that serve most markets.

If I found a dead rat floating in my soup at a restaurant, I could credibly claim that I was never coming back. There are plenty of restaurants to choose from, even in a small town. Airlines are different. I can't credibly claim that I'll never fly United again, as it's often the only option to some of the places I need to go, at the times I need to fly. The sad reality is that I've had to book two new United flights just since my bag was lost.

Firms that don't face meaningful competition tend to take their customers for granted. Of course, the industry will become even less competitive once the United-Continental merger is consummated -- a fact that regulators are now scrutinizing.

The second relevant economic point is that recent research has demonstrated that there is nothing particularly stupid about paying $72 to file a $25 lawsuit. In fact, it explains an important aspect of human evolution.

Until recently, economists assumed that no rational person would do anything that makes them worse off -- such as filing a lawsuit that can't possibly be worth the cost of my time, even if I win. But economists should have been reading more Shakespeare. It turns out that vengeance, or harming oneself in order to inflict harm on someone else, is both explainable and important.

Scientists can now literally watch our brains as we go about different activities. Getting even with someone who has done you harm stimulates the same pleasure centers in the brain as other enjoyable activities. When participants are put in experimental games in which they are treated unfairly by a fellow player, the victims are perfectly willing to give up their own resources in order to inflict harm on the wrongdoer -- because it makes them feel good.

Evolutionary biologists believe this warm, fuzzy feeling related to vengeance plays a crucial role in human development. Our economic and social advancement depend on cooperation among groups of people; some of those people cheat, shirk or provide unpleasant customer service. Vengeance ensures that we will punish these perceived wrongdoers, even if it exacts a personal toll on us in the short run.

In the long run, this willingness to punish cheaters and shirkers makes for fewer of them, which in turn promotes cooperative endeavors. Vengeance also appears to be uniquely human. New research shows that when monkeys play laboratory games involving food, they will not sacrifice their own consumption in order to punish another monkey who has acted "unfairly."

So, if nothing else, my lawsuit proves that I'm smarter than a monkey. And win or lose, it makes me feel good.

Something interesting from Harvard in the 19th century

Th following is from
http://en.wikipedia.org/wiki/Charles_William_Eliot

Eliot's opposition to football and other sports

During his tenure, Eliot opposed football and tried unsuccessfully to abolish the game at Harvard. In 1905, The New York Times reported that he called it "a fight whose strategy and ethics are those of war", that violation of rules cannot be prevented, that "the weaker man is considered the legitimate prey of the stronger" and that "no sport is wholesome in which ungenerous or mean acts which easily escape detection contribute to victory."[2]

He also made public objections to baseball, basketball, and hockey. He was quoted as saying that Rowing and Tennis were the only clean sports.[3]

Eliot once said, "Well, this year I'm told the team did well because one pitcher had a fine curve ball. I understand that a curve ball is thrown with a deliberate attempt to deceive. Surely this is not an ability we should want to foster at Harvard."[citation needed]

Infinite wealth creation

We do not need to maximize wealth creation in every sector. More wealth is indeed created in the transport sector with an auto centric, suburb to suburb commuting model than would be created with a mass transit centric model.

Our wealth maximizing auto based transport system is a bad bad thing.

1) The system trashes the planet. oil spills, CO2, wars for scarce oil, huge wasting of space, pollution from drilling, smog. And on and on and on.

2) Wealth creation possibilities overall are unlimited hence there is no reason to maximize wealth in any given sector. I think a case could even be made that *minimizing* wealth per sector should be a goal: that means humanity has the resources to undertake the maximum number of tasks. Lets say the number of persons employed in transportation is decreased from 25 million to .5 million. Some would say this would be a disaster. But what if the 24.5 million who "lost their jobs" in the transport sector are doing other things that are not being done by *anyone* at the present time - like implementing a nanotechnology cure for cancer and hundreds of other tasks - and lets say the .5 million people still employed in the transport sector are able to move people as fast and with as much convenience as now. Lets say the new transport sector is massively more efficient and uses a fraction of the energy that it does now. This would be a very good thing!

Moving from the current auto/oil/steel based transport system to a much more efficient transport system is not likely to happen with our current socio-political-economic system barring some sort of a great depression 2 type disruption.

Decreasing the size as I have suggested above means decreasing power, clout, influence. Decreased CEO paychecks for the top guys. Fewer jobs *in the sector*. That just isn't going to happen without a fight or disruption. People are to greedy and short sighted.

Fees flourish in bankruptcy cases

Perhaps as societies get richer it's inevitable that there will be more and more incentive to spend time, money and energy on taking wealth from someone else vs. creating it. Perhaps this is a key cause of stagnation and decline. Read on.


Fees flourish in bankruptcy cases
Professionals reap millions as cases get more complex; debtors, creditors and judges seem resigned to the trend

By Michael Oneal, Tribune reporter

March 28, 2010

Kevin Carey isn't likely to win any awards for reining in runaway bankruptcy fees. But at least he took a stab at it.

Carey was the U.S. bankruptcy judge in Delaware who last year warned lawyers in the Tribune Co. case that they had better think twice about charging more than $1,000 an hour.

Chicago's Sidley Austin, the lead debtor's attorney, filed a top rate of $925. New York's Chadbourne & Parke, which represents unsecured creditors, charged $955.

Both firms have managed to do pretty well anyway.

In the 15 months since Chicago-based Tribune Co. filed for bankruptcy, law firms and other professionals have billed the media conglomerate $138 million, or about one-quarter of the company's cash flow last year, an analysis of court documents shows.

Sidley's take alone is pushing $25 million, and the case is far from over.

As big as those numbers are, experts agree, the spending is hardly unusual.

Major cases in recent years — Enron ($793 million), United Airlines ($296 million), Delphi (just under $400 million) — have been colossally expensive. And the monstrous Lehman Brothers case, now under way in New York, will dwarf all of those. After just 17 months it has generated fees of $457 million, and that jumps to more than $700 million if you include management fees earned by restructuring specialist Alvarez & Marsal.

Bankruptcy fees have been rising at a rate of 8 percent to 10 percent annually over the past decade, far outpacing inflation, estimates Lynn LoPucki, a bankruptcy scholar at the University of California at Los Angeles law school. And the upward pressure is likely to build in the coming years as more companies try unsuccessfully to refinance a mountain of bubble-priced debt in a weak, reluctant market.

"It's very troubling," said Robert White, a retired bankruptcy specialist with O'Melveny & Myers in Los Angeles. "In the last 15 or 20 years it's gotten a lot worse."

Despite some grumbling, debtors, creditors and judges seem resigned to the trend.

With the exception of Carey's early flash of concern, neither he nor the U.S. Bankruptcy Trustee charged with overseeing fees in the Tribune Co. case have blinked at the millions of dollars flowing out of the estate each month. Stuart Maue, the St. Louis firm hired to examine fee applications, has challenged a tiny sliver of the billings so far, and its own $812,642 in fees are almost triple the $265,869 in savings it has found.

The only serious challenge to the Tribune Co. fees has come from junior bondholders. They are contesting an out-of-court agreement under which Tribune Co. paid $25 million to cover professional fees incurred in just the first 10 months of the case by the banks that provided the financing for the company's failed 2007 leveraged buyout. The move has generated lots of claims and counterclaims — and even more fees — but Carey has yet to rule.

For the law firms, attention tends to focus on those eye-popping top rates pulled down by a handful of partners like lead attorneys James Conlan of Sidley (who recently got a raise to $950) and Howard Seife of Chadbourne (now at $965). But the real cost stems from the army of professionals deployed. More than 160 people at Sidley have spent the equivalent of 4.6 years on the Tribune Co. case at an average rate of about $500 an hour.

Sidley's Conlan acknowledges that the costs are high but says they are market rate. The complexity of the case, he said, demands wide and diversified legal resources, and "it would be difficult to argue that Chapter 11 isn't the best way to preserve value."

Nevertheless, some costs are hard to fathom. Sidley has spent $110,000 making copies. The top four professional firms in the case have billed a total of $1.2 million to cover the cost of preparing those bills.

Don Liebentritt, chief legal officer at Tribune Co., which owns the Chicago Tribune, said he has little choice but to pay up.

"Would we like it to be less expensive?" Liebentritt asked. "Sure. But you need to retain the best people possible to do what you need to do. … What I have to pay is determined by the market."

Many bankruptcy experts connect the rising costs to the fact that cases have become infinitely more complex in the years since the federal Bankruptcy Reform Act of 1978 gave corporate managers the ability to design their own restructurings and negotiate solutions with creditors.

Early on, the process was relatively orderly. Debtors obtained a high degree of control over their fate. Unsecured creditors got a single voice in negotiations through a creditors committee paid for by the estate. The senior creditors were usually one or two big banks that presented a unified front. Lawyers tended to follow a regular set of strategies to forge a workable compromise.

But the increasing sophistication of financial markets and corporate financial structures has turned the system on its head, said Douglas Baird, a restructuring scholar at the University of Chicago Law School. There are more classes of debt underwritten in ever more intricate ways. Markets have developed to trade them all, with banks routinely splitting up loans to sell in pieces to other investors. Rules emerged allowing any holder of a claim in Chapter 11 to trade it freely, inviting hedge funds and distressed-debt investors to buy securities on the cheap, hoping to boost their value in bankruptcy court by exerting whatever influence they can over the restructuring plan.

The end result is an aggressive street fight — litigation on steroids, some practitioners call it — with a new breed of professional creditor matching wits against others to see who can carve out the most value from the estate. Each side has its own set of lawyers, investment bankers, consultants and accountants. With motivations and incentives splintered, the consensual restructuring that the Chapter 11 statute is supposed to encourage has become increasingly difficult and expensive to achieve. While the estate only pays for those employed by the debtor, the creditors committee and sometimes the senior group, the legal imbroglio drives up costs for everyone.

"Once you're in that kind of spiral it's very difficult to turn it around," said Jack Butler, co-leader of the restructuring practice in the Chicago office of Skadden, Arps, Slate, Meagher & Flom.

The cost of fighting in court can be seen plainly in Sidley's Tribune Co. billings. For the first eight months of the case, Sidley spent $1.3 million on litigation-related issues. But after the case began to focus on charges by junior bondholders that the 2007 LBO was improper, litigation fees jumped to $4.2 million over the next five months.

One byproduct of all these changes is that bankruptcy court became a magnet for the sort of highly paid gladiators who flocked to mergers during the 1980s. Big firms built major practices, creating scarcity value by offering capabilities smaller firms couldn't match.

In Chicago, that has paid dividends as firms like Sidley, Kirkland & Ellis and Skadden carved out major national franchises rivaling New York for big cases.

"Bankruptcy has become an elite practice," Baird said. "There's a superstar phenomenon like in all professions."

One reason the fee issue is so difficult to solve, said Seton Hall law professor Stephen Lubben, is that the outcomes of Chapter 11 arguably justify the costs. Companies with billions in assets and thousands of employees emerge with unencumbered balance sheets and a new lease on life. Despite the chaos, creditors of all kinds can also get their day in court, or choose to sell into a liquid market.

The problem, critics argue, is that incentives to control costs may be getting lost. Theoretically, all sides are hurt if fees whittle away the value of the bankruptcy estate. So all should be prudent in launching new litigation and vigilant over a sprawling posse of attorneys and investment bankers working by the hour.

But in practice, it is more complicated. Motivations can become so fragmented in a complex case that relying on each party's self interest to protect the estate doesn't always work. Management may be more interested in survival than trimming lawyer fees. If a hedge fund buys a bond for 10 cents on the dollar, the goal may be to simply double its money by fighting for a recovery of 20 cents. The long-term fate of the company may not figure into the calculation at all.

"If somebody thinks they can get more of a recovery in a courtroom than in a conference room, that means complex litigation at a high cost," Butler said.

Adding to the problem is the industry's reluctance to police itself.

To hold down costs in the Lehman case, for instance, the court formed a fee committee composed of representatives from the debtor, the creditors, the U.S. Trustee and Kenneth Feinberg, President Barack Obama's pay czar.

Feinberg has issued more challenges than the average fee examiner. But he has been met with howls from high-profile firms like Weil, Gotshal & Manges and Jones Day, which have successfully pushed back. Filings show that the biggest battle has been waged over how to account for the hours spent preparing fee applications.



source:
http://www.chicagotribune.com/business/ct-biz-0328-fees--20100328,0,3790460.story

And from the NY Times:
More:

May 3, 2010, 3:02 am
Who Knew Bankruptcy Paid So Well?

More than $263,000 for photocopies in four months. Over $2,100 in limousine rides by one partner in one month. And $48 just to leave a message. Explanations for these charges? Priceless.

The lawyers, accountants and restructuring experts overseeing the remains of Lehman Brothers have already racked up more than $730 million in fees and expenses, with no end in sight, Nelson D. Schwartz and Julie Creswell report in The New York Times. Anyone wondering why total fees doled out in the Lehman bankruptcy alone could easily touch the $1 billion mark merely has to look at the bills buried among the blizzard of court documents filed in the case.

They’re a Baedeker to the continuing bankruptcy bonanza, a world where the meter is always running — sometimes literally: in the months after Lehman’s collapse in September 2008, the New York law firm Weil, Gotshal & Manges paid one car-service company alone more than $500 a day as limo drivers cooled their heels waiting for meetings to break (and this in a city overflowing with taxis).

While most of corporate America may be just emerging from the Great Recession, bankruptcy specialists have spent the last two years enjoying an unprecedented boom. Ten of the 20 largest corporate bankruptcies in recent decades have occurred over the last three years, according to BankruptcyData.com, with Lehman snaring honors as the biggest corporate belly-flop in American history.

These megacases — Lehman, General Motors, Chrysler and Washington Mutual, to name a few — are orders of magnitude larger than most bankruptcies in the past, and their size and complexity have created a feeding frenzy of sorts for those asked to sort them out. To date, Weil, the lead law firm representing Lehman, has billed the Lehman estate for more than $164 million.

Analysts, lawyers and others involved in the larger bankruptcy boom say that some fees are legitimate — and that others are, at a minimum, highly questionable.

“There’s clearly pressure on people to create more revenue,” says Robert White, a former bankruptcy partner at O’Melveny & Myers who retired in 2006 after practicing for 35 years. At one deposition he attended last year, each law firm sent two or three lawyers when one would have sufficed. “They were just sitting there on their BlackBerrys and talking to other people,” he said.

With first- and second-year associates charging more than $500 an hour in some of these bankruptcy cases, according to court records, that can amount to some pretty expensive downtime. At several firms, including Weil and Milbank, Tweed, Hadley & McCloy, partners now charge $1,000 an hour or more for their bankruptcy services.

But billable hours explain only part of the run-up in costs. In the seven months after the bankruptcy filing of G.M., which taxpayer dollars helped keep afloat, various law firms and other advisers received nearly $90 million. Lawyers from Weil, which has accounted for nearly $16 million of fees in that case, put in for $364.14 in dry cleaning as well as more than a week at the Sherry-Netherland hotel in Manhattan last summer, where one lawyer’s room cost $685 a night.

In court documents, the firm responded that it could be tough to find hotel rooms in New York City for $400 or less and that dry-cleaning or laundry bills were appropriate for out-of-town lawyers required to stay in New York for 9 or 10 days.

Think the lawyers are expensive? Meet the consultants. Alvarez & Marsal, a turnaround firm that is essentially running what remains of Lehman, has billed more than $262.1 million.

No charges have been too big, or too small. The Huron Consulting Group, a management consultancy involved in Lehman, charged $2.54 for “gum in airport.” In the G.M. case, Brownfield Partners has billed $230,209.55, including an $18 fitness-club charge at a hotel.

A Brownfield partner said an employee didn’t realize that there was a separate charge to use the fitness club and didn’t notice it on the hotel bill. The firm agreed to remove the charge after the examiner brought it to the firm’s attention.

Analysts say that nickel-and-diming might be worth a laugh or two — if some of the larger fees weren’t snowballing so quickly as well. They say these bounteous fees reduce the money left for creditors in the bankruptcy cases. In the Lehman case, some unsecured creditors, including bondholders, banks and vendors, are likely to get just 14.7 cents on the dollar for their claims, according to Lehman’s proposed reorganization plan. Nor will they get their money quickly — some experts say they believe that the Lehman case could drag on for three to five more years.

Lawyers and restructuring pros who are picking up the pieces of companies swamped by the bankruptcy wave say that their fees are well deserved and that their services help make the bankruptcy process more efficient. And they say the pay is more than made up for by a tidier resolution of a financial debacle — or, as in G.M.’s case, the revivification of a wounded company.

“The legal skill we used to sell Lehman’s North American capital markets business to Barclays saved 10,000 jobs and preserved the business itself, capturing value that otherwise would have been lost,” said Harvey Miller, 77, a Weil partner who is considered the dean of the bankruptcy bar.

Many people in the industry agree that Lehman, in particular, is a huge case that tests even the most experienced lawyers. “Lehman is a sufficiently complicated company that it would be safe to assume that if it weren’t for equally sophisticated professionals running the Chapter 11 case, that the creditors would essentially receive nothing,” says Stephen J. Lubben, a professor at the Seton Hall University School of Law. “In those situations, it makes sense for sophisticated professionals to handle the case.”

Others, however, have a distinctly different perception about the fees that advisers are harvesting in bankruptcies.

“It violates any sense of proportion,” says Kenneth Feinberg, the Washington lawyer who serves as the “pay czar” for banks bailed out by the government and whom the court appointed last June to monitor fees associated with the Lehman bankruptcy. The court asked him to participate after concerns were raised in the news media about the soaring fees in the Lehman case.

“Unemployment is over 9 percent, and to be paying first-year associates $500 an hour angers the public,” he observes. “People read about all of this and say that lawyers and the legal system are one more example of Wall Street out of control.”

Despite the rise in bankruptcy fees over the years, there was little or no public criticism or pushback until recently. Lawyers were reluctant to challenge their peers, fearing retaliation. Analysts say watchdogs from the United States Trustee’s office, a part of the Justice Department that oversees bankruptcy cases and monitors billing practices and possible conflicts, were overworked and outgunned. Even as its workload has increased, the Trustee’s office has seen its staffing fall to 1,323 in 2010 from 1,468 in 2007.

Meanwhile, judges, many of whom used to work at the firms now benefiting from the bankruptcy boom, were also reluctant to challenge the status quo. All of this, analysts say, has fed a legal culture with few restraints on billing for bankruptcies.

“I don’t think professionals cheat the client, but in a number of ways they can talk themselves into doing things that they wouldn’t do for clients outside of bankruptcy,” says Nancy B. Rapoport, a former bankruptcy lawyer at Morrison & Foerster who teaches law at the University of Nevada, Las Vegas. “If you send eight people to a hearing because there is an outside chance they might have to speak at that hearing and you try that outside of bankruptcy the client will go ballistic.”

Now, however, a handful of fee examiners in several high-profile bankruptcies are taking a harder line on such charges, setting the stage for a confrontation with lawyers and consultants opposed to the moves. Both Mr. Feinberg and the examiner in the G.M. case, Brady C. Williamson, for instance, have suggested reductions in hourly fees charged by some firms.

That’s the kind of precedent that sets some of the bankruptcy industry leaders’ teeth on edge. “Mr. Feinberg doesn’t know what he’s talking about,” says Mr. Miller. “We don’t generally give discounts. Just because bankruptcy has been the hot legal area for the last 19 months doesn’t demand you cut fees.”

If Mr. Feinberg and others succeed in reining in certain fees and expenses, the outcome could reverberate through the bankruptcy universe.

“This is a very important test case; it’s bigger than just Lehman,” observes Mr. Feinberg. “The culture of bankruptcy is unique.”

So what, asks Bryan Marsal, co-founder of the restructuring firm Alvarez & Marsal. “I don’t care whether Feinberg or Moses comes into this case, you’re not going to get me to apologize,” he says. “If you look at this case in the context of the billions of dollars that has been recovered and the billions of dollars in claims that have been managed, just because the case was big doesn’t mean it was operated inefficiently.”

On the evening of Sunday, Sept. 14, 2008, Mr. Marsal was sitting in his study in Westchester County, N.Y., when the phone rang.

Calling was Mark Shapiro, who ran Lehman’s restructuring practice. He told him that Lehman’s lawyers were preparing a bankruptcy filing and that the board wanted Mr. Marsal’s firm to oversee the bankruptcy and eventual liquidation after Barclays and others bought pieces of the firm.

Since receiving that call, Mr. Marsal’s firm has been billing $13 million to $18 million a month in fees and expenses for its work on Lehman, a 160-year-old name on Wall Street.

Mr. Marsal says the firm will most likely bill at $13 million a month through October, just after the second anniversary of Lehman’s collapse. After that, rates will begin to decrease, although Alvarez & Marsal will also earn an incentive fee at the end of the case, which could total more than $50 million.

A jovial, self-deprecating man who points out a coffee stain on his shirt and, later, jokes that he wants to put on a blazer to hide a rotund midsection, Mr. Marsal is unapologetic about the fees that he and his staff are earning. Those fees pay for the salaries of the 150 people from Alvarez & Marsal now working inside Lehman (down from a peak of 185), including Mr. Marsal himself. He serves as Lehman’s C.E.O., while John Suckow, an Alvarez & Marsal managing director, is Lehman’s president and chief operating officer.

“The size of this case justifies the size of the fees,” says Mr. Marsal, shrugging as he sits in a conference room at Lehman’s headquarters in Midtown Manhattan. Mr. Marsal and Mr. Suckow estimate that they have increased the potential recovery value for Lehman creditors by $4 billion to $5 billion in the last year.

Indeed, deciding whether these firms and their sky-high fees are justified is difficult because the bankruptcy trade is in uncharted territory. Several of the companies that went bankrupt in the last two years were significantly bigger than Enron, in terms of assets, when it collapsed in late 2001.

As if the magnitude of the bankruptcies weren’t enough, there’s also the matter of the complex financial instruments that some of the companies held.

“There was commercial real estate, bank loans — all of that stuff is pretty well known to our team, but derivatives? We hadn’t had much experience in derivatives,” acknowledges Mr. Marsal, who added that his firm hired two subcontractors to work through Lehman’s derivatives book.

Mr. Miller adds that those derivatives, even today, are taking up a lot of time and energy. “We’re still in the process of unwinding them,” he says, “which raises all sorts of difficult and novel legal issues.”

In April, Lehman filed a plan with the court that would create an asset-management business, called Lamco, that would manage Lehman’s real estate and private-equity assets for five years.

By not selling some assets at fire-sale prices, the estate will be able to recoup much more money for creditors, notes Mr. Marsal.

“The money that’s going to the creditors is my money,” he says, pointing out that he’s aligned with the creditors’ goals. That’s because, at the end of the case, Mr. Marsal’s firm will receive an incentive fee that is based on a percentage of the money returned to creditors.

Mr. Marsal says critics should be careful about identifying where problems lurk in bankruptcy fees. He says the savings that result from making sure that no one is flying first class to Europe are “peanuts.”

“You should be much more worried about the two or three lawyers who are overbilling and whether they should even be in attendance at a meeting,” he says. “I think the fee committee and the fee examiner is a lot of hooey.”

IF anyone is a master of getting to yes, it’s Kenneth Feinberg. As a mediator, he brokered settlements in long-running product liability suits brought by those who said they were victimized by Agent Orange, asbestos and the Dalkon Shield. More recently, he managed to win praise on delicate assignments like determining how much the Sept. 11 Victim Compensation Fund should pay out — or what is an appropriate salary for an executive at a financial institution that the government propped up with taxpayer funds.

But he says that challenging bankruptcy lawyers is tougher in some ways. “In the 9/11 case, the country was behind me; as pay czar, there was a lot of support for what I was doing,” he says. “This is more problematic.”

In particular, Mr. Feinberg is perplexed by why fees keep rising in the Lehman case, even though it’s no longer the chaotic affair it was in the weeks and months after the bankruptcy filing. “Now the emergency is over; it is more like a traditional bankruptcy,” he says. “Yet the fees are higher than ever.”

Mr. Feinberg has managed to get under the skin of the lawyers in the case. And he is equally frustrated. His voice rising and Boston accent thickening (think “debt-ah” and “credit-ah”), he says that bankruptcy professionals “still haven’t gotten the message.”

The four-member Lehman fee committee, of which Mr. Feinberg is chairman, has disagreed about how to rein in fees, he says. But he declines to elaborate. Mr. Miller says it’s because creditors and debtors are willing to pay well so they can get “the best representation possible.”

On a rainy summer day last year, Mr. Feinberg journeyed to the plush offices of Mr. Miller in the General Motors building in Manhattan. His pitch was simple: Cut 10 percent to 15 percent right off the top of the fees being billed.

Mr. Miller and Dennis Dunne, a partner at Milbank who represents creditors, told him, “You don’t know how complicated this is; you don’t know how difficult it is,” Mr. Feinberg recalls.

Mr. Miller doesn’t dispute Mr. Feinberg’s account, and Mr. Dunne declined to comment for this article.

Despite these frictions, a deal was eventually struck.

Among the new fee rules being enforced are these: Air travel must be in coach class only. Ground transportation is limited to $100 a day, and only after 8 p.m. Hotel rooms are capped at $500 a night. Photocopy charges are limited to 10 cents a page. Late meals can’t be more than $20 each.

“If you continue to violate the very guidelines that are in place, 50 percent of the disputed amounts will be deducted,” says Mr. Feinberg. After that, the full amount will automatically be deducted, he added.

The lawyers reserve the right to challenge the fee committee’s decisions at the end of the case, but the ultimate call will be up to the bankruptcy judge, James Peck. He declined to comment.

Mr. Feinberg has so far challenged a very small percentage of the fees and expenses in the case. But he is intensifying his efforts. In March, the court increased his monthly budget to $250,000 from $75,000, giving Mr. Feinberg more accountants, examiners and others to pore over records and to zap overcharges. His firm and the fee committee have billed the Lehman estate $645,000 in fees for services through March.

Already, he’s called out Jones, Day, saying it charged $70,800 extra for photocopying and spent $2,856 too much on taxi rides last summer. According to court filings, a Jones, Day partner, William Hine, claimed more than $2,100 for late-night rides home in one month. Milbank, according to court filings, charged $148,426 just to compile its bills and time records — a move akin to a doctor charging a patient to prepare a bill after expensive, complex surgery.

“Lawyers don’t charge for invoice preparation except in bankruptcy,” Mr. Feinberg says. “I’ve prepared bills my entire professional life. You don’t charge a fee. Most people would argue that charging anything is inappropriate.”

Jones, Day and Milbank both declined to comment.

Like the restructuring executives, bankruptcy lawyers seem defiant and want to make sure precedents aren’t set that would make it easier to curb fees in the future.

“When people work late and they want to go home, we don’t like to send people in the subway at midnight or thereafter,” Mr. Miller says. “I don’t believe it’s appropriate to require people to fly coach for 15 hours and then go to a meeting.”

Nevertheless, Mr. Miller is going along with Mr. Feinberg’s guidelines.

“Those are the rules; we’re going to abide by the rules and pick up the difference,” Mr. Miller says.

FOR all his annoyance at Mr. Feinberg’s role in the Lehman case, Mr. Miller saves his real vitriol for Mr. Williamson, the fee examiner in the G.M. bankruptcy, which Weil also worked on. In the case’s first seven months, Weil accounted for $16.5 million of the $90 million in fees paid. Mr. Williamson objected to a small portion of the expenses. Weil, according to court documents, agreed to deduct $500 in expenses relating to the cancellation of a vacation, and said that any first-class travel charges were included “inadvertently” and reduced. It also agreed to pay for any meals in excess of $20.

Mr. Williamson also recommended that a 5 percent cut in Weil’s overall rates would be “appropriate,” especially given that several other large firms in the case already provided discounts.

“Williamson is way off base,” says Mr. Miller. “He perceives himself to be a sage, giving advice to the world, and that is not his role.”

Mr. Williamson wrote in an e-mail message: “Courts appoint independent examiners to help ensure transparency and accountability, most recently where tax dollars and significant economic issues are at stake. Not everyone, unfortunately, always appreciates either the role or the rules the examiner is bound to apply.”

Mr. Miller sees his own work as a battle between corporate life and death, with the money spent on photocopies and dry cleaning an insignificant detail.

“If you had cancer and you were going into an operation, while you were lying on the table, would you look at the surgeon and say, ‘I’d like a 10 percent discount,’ ” he explains. “This is not a public, charitable event.”

Go to Article from The New York Times »

http://dealbook.blogs.nytimes.com/2010/05/03/who-knew-bankruptcy-paid-so-well/?pagemode=print

AC Transit bus fight

Fascinating is not a word most would use to describe the now famous "AC Transit fight" and the subsequent discussion and analysis. But I would.

Especially the discussion and analysis. It's fascinating what people do not see when blinded by passion - even if it's right under their nose. Passion in this case being prejudice (racial and otherwise).

"The truth" is of course not a simple matter of one person being right, the other wrong "and here's the proof." It's much more interesting than that.

Both of the guys in this fight were wrong.

For those who have not seen it, here is a quick synopsis. A black and white man are arguing on a bus and their is a racial overtone to the argument. The white man walks away, sits down at the front of the bus. Words continue to be exchanged and the black man walks to the front to confront the white man, throws a punch, is counter attached and beaten up.

If that was all there was to it it would not be very interesting.

The white man is 67 (or so he says) and the black man is much younger.

Looks like a young black thug gets beaten up by an older white man who was just defending himself and it's an open and shut case, right?

Of course there is much more to it - and that's what makes it an interesting a story. The black man is hardly blameless but the story is just beginning.

If you haven't already watched it, please do so now. The url is here:
http://www.youtube.com/watch?v=lQJFv9SMSMQ&feature=PlayList&p=F5A1728DEE29C0EE&index=0&playnext=1

Notice that we don't see how the discussion started. The argument is already under way at the start of the clip. But if you look closely you pick up something pretty important that starts to change how you must look at the situation. The white man asks "what did you just say when you walked by me" and then a few seconds later the black man says "take your ass back up there and get the fuck out of my face right now", and then repeats it. The white man walks back to the front of the bus and sits down. Sits down where he was clearly sitting before.

That means the white man must have followed the black man to his seat after the black man walked past him after getting on the bus.

Otherwise their conversation makes no sense.

It had to have happened in roughly this way: the white man was already on the bus, sitting at the front when the black guy got on. Words were exchanged as the black guy walked past and then the white guy got up, followed the black man to his seat and sat down opposite him. Go back and watch the video again. Pay close attention to the words. Many analysts of this situation talk about how the white guy "walked away" and hence the black guy was the aggressor. Totally wrong. The white guy got up from his seat in the first place and followed the black guy to his and confronted him there. True, you didn't see that on the video but you can clearly tell. Unless you really want to see this story follow the "black criminal/white hero" narrative.

Now watch the beginning again and focus on how the black man pulls his bag close to him. Watch how he turns to the side and tries to face away from the white guy. Watch the white guy leaning over and talking much louder than the black guy. Notice how the white man stares down the black guy. His stare does not deviate and is very intense. The white guy is clearly trying to provoke the black guy. He is clearly picking a fight. He succeeds.

The next important point is a single word: "spit." Specifically, "how much you charge me for a spit shine." Not only is there a provocative racial element in that statement but a sexual overtone as well. "Give me a spit shine" is really equivalent to "lick my boots". Spit is a bodily fluid.

It seems likely that the initial dialog went down somewhat like this:
white guy: "hey how much would you charge to spit shine my shoes" (probably really loud so everyone on the bus could hear).
black guy: "what the fuck did you just say?"
white guy: "I'm going to a funeral and need to look real good, so how much would you charge to spit shine my shoes." (the white guy talks about a funeral later in the clip.)
black guy: "I'll spit shine your shoes when hell freezes over".

It's not plausible that a black man (or any man) would would offer to "spit shine" someones shoes out of the blue unless in the context of some sort of homosexual advance. Clearly that is not what was going on here.

The black mans "offer" was clearly along the lines of "I'll spit shine your shoes when hell freezes over".

The 67 year old white guy is the instigator here, not the victim. He is a predator.

67 years old or not, notice how quickly he disposes of the black man in the fight. Notice how big and strong he is. Notice the quick decisive left hand right off the bat - a direct hit. And subsequent sharp short punches that pretty much all find the mark. This is a man who knows how to fight. In contrast look at the so called "punch" thrown by the black man. That is not the punch of a man who wants to fight or even knows how to fight. It's a somewhat pathetic patty-cake thrown by a man who felt he had to "do something", felt backed in a corner and lost his composure. Notice how the white man easily blocks this initial "punch". He does it so effectively because he has been here before. He's been in a lot of fights and is clearly orchestrating the action. He has picked his victim out well in this case. The other man is much smaller than him and is intoxicated. I'm sure he could tell the other man was intoxicated. Also, the black man has a certain look to him. Corn cobs. Sunglasses. No one will side with him.

Smaller, weaker, black and intoxicated. A perfect victim.

But the feedback on the Internet and via call-ins to radio stations is heavily in favor of the white guy who has been deemed "Epic Beard Man" (EBM) and is generally against the black man who has been deemed "Tyrone". Much of the feedback supporting Epic Beard Man is overtly racist. See this for starters:
just see http://www.youtube.com/watch?v=egToL0RZJH0 for starters.

It's quite sad and disturbing to see how much racism and hate remains. Look at the other You-tube clips of "analysis" of this situation. Look at the comments. Notice how much delight there is in seeing a black man "put in his place." Most people who see the clip see the black man as the aggressor and I think they see it that way because they see black men in general as aggressors, in general as criminal. In general deserving whatever they get. "Tyrone" is proxy. But things about this situation that jump out at you if you have your eyes open are just utterly ignored when you have the "black men are criminals and violent" narrative going in your head. Many people are projecting their own racial animosity into this black man. Some of the white people siding with the white man are the types who would call Obama "racist" in the next breath. But remember, the start of this was the white man asking the black guy to "spit shine" his shoes.

EBM has even been elevated to hero status by some. People are making web sites glorifying him, they are making posters of him, t-shirts with his image on it. Radio stations are interviewing him. "Tyrone" is mocked and disbelieved. What "EBM" has said about it has pretty much been taken at face value.

EBM clearly has mental problems. Big problems. That is not obvious in the "fight" clip but it is if you see other videos of him or read about him. He has difficulty controlling his emotions - specifically his anger. He gets into fights regularly. He is a very dysfunctional and violent person, having spent 14 years in prison.

This seems irrelevant to much his fan base many who do acknowledge that he "has problems" but nonetheless give him kudos for "what he did". He knows how to play on racial stereotypes, accusing "Tyrone" of all sorts of horrible crimes - that it turns out are invented. In EBC's rants you can clearly see insanity: paranoia, delusions, confused thoughts. Yet the blogeratti have not just sided with him but many are even putting him on a pedestal. The word "hero" has been bandied about by an Oakland radio station. They are seeing what they want to see facts be damned.

Amazingly, many young aggressive/confident black men have chimed in in favor of EBM and against "Tyrone" who is mocked, derided and deemed fully deserving of the beating.

"Tyrone" turns out to be "Michael" and he goes on the air on Wild 94.9 in Oakland and turns out to be well spoken. He issues an apology. Apologizes to AC transit, apologizes to everyone on the bus. He admits being intoxicated. It's clear that the interviewer is not sympathetic and you can tell that he supports EBM's version of the events, not Michael's. The interviewer cuts Michael off as Michael is describes being baited by EBM and gives the listeners EBM's version: that Michael himself just offered to "spit shine" EBM's shoes. Does the interviewer ask himself why Michael would be angry about the discussion if he had "offered" the service to begin with? Does the interviewer realize how absurd that idea is. EBM is also interviewed by the same guy and his violent hateful rambling is generally approved of. You can see the whole clip here:
http://www.youtube.com/watch?v=4I1r3dhMUO4
As you can see, he issues no apology and just claims he was attacked. He projects anger and rage. The interviewer smiles and nods his approval. The interviewer does not press him about his violent record or 17 years in prison.

The blogosphere has utterly ignored this: the fact that the black man has apologized and conducted himself well in the days after the incident while the white man has continued with violent hateful rants and is looking for additional fights. The fact that the white man has clear mental problems and a violent streak is not really mentioned. The behavior of the two in the days after the fight just does not follow the narrative of the black criminal and the heroic white man standing up to it - and hence is ignored.

But what about all the young black men chiming in in support of the white guy. What about that. Race is on the face of it not the reason for their support. Are they stupid? Just fooled by the obviously absurd "official line?" I don't think so. There seems to be some delight, some visceral satisfaction coming from them as well. My theory is they are just predators (or wannabe predators) taking delight in the successful actions of a fellow predator.

Being a successful predator trumps race.

In America today in the minds of many the predator is what you want to be. For this group of people, if you succeed at it, it trumps all else - even mental illness. "Epic Beard Man" is just sane enough to be a successful predator - at least on this one bus this one time and for that he gets plenty of kudos and plenty of support for that.

This story is rich in irony needless to say (black predators siding with a white predator for starters), and to me there is no better illustration of just how depraved our society has become than the response to this video. Some blinded by racism refuse to see how the black guy was set up, others can see it and approve.

Look the acknowledgment and approval of EBM's behavior in this video coming from a "reasonable" sounding white guy:
http://www.youtube.com/watch?v=1UaVfeXfbN4
look how he even gives deference to EBM and even claims people "identify" with EBM because "they don't want to get pushed around and stuff". In 1932 many Germans identified with Hitler because "they didn't want to get pushed around and stuff."

There should be no deference given to dregs like him EBM. The woman in http://www.youtube.com/watch?v=1UaVfeXfbN4 is absolutely correct. This man is a creep. An angry violent hateful creep who cannot control his emotions and thrives on hurting people. The black man is just a victim here. He was drunk -and during the day-, he also has anger issues that were exploitable. He didn't have the social skills or composure to deal with the situation effectively. But make no mistake about it - EBM was picking this fight. EBM started the commentary about "spit shining". EBM followed the black man to his seat, sat down opposite him and confronted him. You don't see that in the video, but you can tell.

Glorifying people like EBM is exactly what is wrong with this country.

This is the most disturbing thing I have seen for quite some time. Not the video itself but the response. The response indicates growing cultural acceptance (and glorification even) of predatory behavior as well as a lot of remaining racism.

I suppose his cultural trend has been going on for some time but this video and the response really bring it home in a visceral way.

Classic propoganda

The following story which appeared on Fox on Feb 17 really meets the definition of classic propaganda. Speculations or fabrications presented as fact including the completely outrageous "Ahmadinejad has told the world all about his ultimate intentions. He seeks the destruction of Israel and of the United States."

The article was written by
Bradley Blakeman of Freedom's Watch (http://en.wikipedia.org/wiki/Freedom%27s_Watch)
I wonder how much of this kind of propaganda - which is all over the U.S. media at present, is coming from groups like "Freedom's Watch"


Anyway they posit that a nation with an economy less than 1/10 the size of the U.S. and a weak military (no blue water navy, ancient air force) is going to preemptively strike and destroy the United States - the greatest economic and military power in history. This will happen sometime time after the AA Schaumburg fliers sweep the yanks in 4 games to win the world series. It's so absurd it's laughable: it's propaganda. They even claim below that Iran is stating openly that they are going to do this. It's almost to ludicrous to reply to.

I have actually watched Ahmadinejad being interviewed twice. Funny but he never talked about his plan to destroy the U.S. Funny but he never boasted about possessing a nuclear bomb (like the article below states). He DID talk about "peaceful" nuclear technology and insisted that Iran does have a right to "peaceful"
nuclear technology. He also did not deny the holocaust (yet another canard thrown at the man). What he did say about it is why should a middle eastern group (Palestinians) be punished for the sins of Europeans. On the subject of Israel, his responses were a bit vague and creepy and I'm guessing he would probably like to knock Israel back a bit (pre 1967 borders maybe?). If he has any agenda that's it. The destruction of Israel much less the U.S. is absurd. Some folks would clearly like us to THINK that to justify a pre-emptive attack.

Would Ahmadinejad like Iran like to rise up and knock Israel back a bit? Probably. I seemed to detect that kind of an agenda with him. But he will get nowhere. How long will he even last. If we were able to wait out the cold war, we can wait out Ahmadinejad. If a bomb is being constructed, hit it with a drone. My fear is that some elements in America (and maybe Israel) would like to rush to war before Iran even gets a chance to replace Ahmadinejad, therby putting American boots on the ground in the country with the worlds second largest reserve of oil and making another 'statement' that an American/Israel axis rules this planet, does what it wants and anyone who would dare cross it will be destroyed. Iraq was statement 1, Iran could be statement #2.

Pray that it does not go down that way. Hundreds of thousands of innocents would die for nothing (well maybe for Chevron and Exxon) and if you think the budget deficit and the U.S. reputation is bad now...



=================================================================================

Updated February 17, 2010
Iran Must Be Stopped

By Bradley Blakeman


The situation with Iran continues to become more dangerous by the day. How many will needlessly die before we act to prevent a repeat of what the world experienced during the time of Hitler?

President Obama came to power believing that he unilaterally could disarm Iran with his charm and conciliatory demeanor. He was wrong.

The president’s naiveté has given the Iranian government time to step up their nuclear weapons technology and crackdown on pro-democracy dissidents.

Last fall, President Obama held a press conference and announced that Iran was in fact well on their way to building a second uranium-enrichment plant. This was a significant announcement and proves beyond a shadow of a doubt, that Iran, in complete defiance of international law, is well on its way to building a nuclear weapon.

After his announcement did the president call for an emergency U.N. Security Council Meeting? Did he see to it that the most severe sanctions should be brought to bear on the Iranian government? No, he did not. He simply has called for more dialogue. Well, talk is cheap. The president squandered the perfect opportunity to lead the world in stopping Iran from obtaining a nuclear weapon.

Why did the president let the perfect forum to bring the Iranians to task before the world community slip away? Isn’t that what the Security Council is supposed to be for? Is nuclear proliferation by rogue regimes not important enough to convene the Council? The president most surely knew all the facts.

This should have been debated, and Iran should have been called before the Security Council to defend itself.

The president was intentionally derelict or grossly negligent in this missed opportunity. He had the president of Iran in New York. When the president made his announcement this past fall, most of the world leaders who make up the Security Council were at the Opening of the General Assembly in New York. All members of the Security Council should have had their feet put to the fire and either condoned this illegal activity or condemned it and sought serious measures to correct it. Sadly, Obama will turn out to be the Neville Chamberlain of our time.

Just this past week Iran’s president boasted defiantly that his country was a nuclear power. I take him at his word.

Iranian President Mahmoud Ahmadinejad, like Adolf Hitler, is warning the world about his country’s ultimate intentions and his own. Hitler penned "Mein Kampf" in a jail cell. He explained his intentions for the world should he come to power.

At the time he wrote "Mein Kampf," Hitler was a prisoner and was not able to make good on his wishful intent. The world chose to ignore his warnings, let him come to power and then let him implement most of his stated goals. The president of Iran is doing the very same thing.

Ahmadinejad has told the world all about his ultimate intentions. He seeks the destruction of Israel and of the United States. His country is building the instrumentalities by which he could achieve his goals, while the world sits back and watches. Sixty million people perished during World War II, with weapons far more primitive than can be even be produced today. If lone homicide bombers are willing to sacrifice themselves for religious fanaticism, why then is it beyond the realm of possibility, that a leader is willing to sacrifice millions for the same beliefs?

We have seen it before. It has been said that, “If we do not learn from history we are condemned to repeat it.”

Truer words were never spoken.

Hitler wrote the following words in "Mein Kampf" that have been parroted almost verbatim today by the president of Iran: “I believe I am acting in accordance with the will of the Almighty Creator: by defending myself against the Jew, I am fighting for the work of the Lord.” How many will needlessly die before we act to stop a repeat of what the world experienced during the time of Hitler?

Iran must be stopped, and stopped now. Either other responsible nations will join us or we must do the job alone. We have no choice. We must take these rogues at their word and pay attention to their deeds.

Bradley A. Blakeman served as deputy assistant to President George W. Bush from 2001-04. He is currently a professor of Politics and Public Policy at Georgetown University and a frequent contributor to the Fox Forum.

How hedge funds make so much money

This only one of many ways they use to get inside information or peddle influence.

Massive windfall for them...at our expense:


Hedge Funds Hire Lobbyists for Inside Tips on U.S. Legislation

By Kristin Jensen, Mike Forsythe and J.D. Salant

March 16 (Bloomberg) -- Former U.S. Senator John Breaux, who retired in January, is still walking the halls of Congress. Instead of brokering deals with lawmakers, he's serving as a pipeline for a New York hedge fund.

Breaux, a Louisiana Democrat, is one of a growing cadre of lobbyists being hired by U.S. hedge funds to provide instant tips on the progress of potentially market-moving legislation, from the settlement of asbestos lawsuits to allowing oil drilling in an Alaskan refuge. It's a legal way of letting investors benefit from information gleaned from private conversations with lawmakers and aides. And it's a new twist in Washington lobbying because it has nothing to do with influencing laws or policy.

``Anything that affects a company's profitability from a legislative standpoint is information that's important,'' says Breaux, 61, who works for both the Clinton Group Inc. hedge fund in Manhattan and Patton Boggs LLP, Washington's top lobbying firm by revenue.

Hedge funds, which often pursue high-risk, high-yield investments for wealthy clients, are taking on lobbyists such as Breaux to provide political intelligence that allows the funds to buy and sell company stock on information before it's widely known.

The practice is taking place under the radar, because federal disclosure rules only require a person to register as a lobbyist and disclose clients when active efforts are made to affect legislation. And hedge funds aren't interested in talking about it: Companies among the 25 biggest funds, including the Clinton Group, which has no connection to former President Bill Clinton, declined to comment for this story.

`Everything Is for Sale'

``It's a burgeoning area of work,'' says Tony Podesta, 61, a Democratic strategist, lobbyist and the brother of John Podesta, a former chief of staff to President Clinton. Tony's firm, PodestaMattoon, has a hedge-fund client he won't name. ``They would have a different view of this if we had to register,'' he says.

Federal rules prohibit Breaux from lobbying former colleagues for at least a year. There's nothing stopping him from a lunch, cocktail, workout or phone call to Capitol Hill that might yield a tradable tip for a hedge fund.

``In Washington, everything is for sale,'' says Gary Ruskin, 40, director of the Portland, Oregon-based Congress Accountability Project, a group founded by consumer and political activist Ralph Nader that monitors congressional ethics. ``That includes investment advice.''

Taking Risks

Banks and mutual funds have hired lobbyists and employed Washington staff for years. What sets hedge funds apart is their ability to act instantly on news and to employ trading options that allow them to make money whether stocks rise or fall. Hedge funds can take risks that mutual funds, entrusted with retirement savings, typically don't. These methods include short sales, which allow them to borrow securities in anticipation of paying for them when the price drops.

Lobbyists such as Breaux and Podesta use the connections they made while working in the government to get information or insight that's not readily available to most investors, such as whether a bill is going to reach the Senate floor or whether lawmakers are far from a compromise.

Podesta, a former counsel to Senator Edward Kennedy, a Massachusetts Democrat, raises money for Democrats. So does his wife, Heather, a Washington lobbyist with Blank Rome Government Relations LLC. That gives them an avenue to power brokers.

Podesta says he talks to his hedge-fund client about every other week, providing tips or responding to requests on what a bill or new government regulation means. Recently, one investor group asked him about legislation that would ban U.S. companies such as Tyson Foods Inc. and Swift & Co. from resuming imports of Canadian cattle because of concern about the spread of ``mad cow'' disease.

Boosting Egos

``My answer was it probably will pass -- and it probably won't ever end up in law,'' he says. He was on track: The Senate passed the bill March 3 even as the White House issued a statement that President George W. Bush would veto it.

Jonathan Slade, 46, a Washington lobbyist whose clients include New York-based investment firm and hedge fund GoldenTree Asset Management LP, takes advantage of Wall Street's prestige on Capitol Hill. Slade says he likes to set up conference calls and meetings between congressional staffers and the hedge fund executives. It helps boost Washington egos, he says.

``They think it's cool talking to someone on Wall Street, especially if it is a big player,'' says Slade, who spent four years as a congressional aide before becoming a lobbyist in 1986 and is now a principal with the Washington-based Cormac Group. ``They ask them, `What's Wall Street saying?' They love that.''

`Nuance'

Lawmakers and congressional aides are free to share details on legislation with people they know, except on such matters as intelligence and homeland security. Stricter rules exist at agencies such as the Bureau of Labor Statistics, which releases U.S. unemployment figures and bars employees from divulging numbers before they become public.

Lobbyists sometimes act as translators for hedge fund managers, guiding them through the ``nuance'' of Washington politics, says Alex Vogel, former chief counsel to Senate Majority Leader Bill Frist and co-founder of Mehlman Vogel Castagnetti Inc., a Washington lobbying firm.

``Hedge fund managers are very good at understanding the way Wall Street reacts to things,'' Vogel says. ``They are not as adept at understanding how Washington reacts.''

One focus for hedge funds is a $140 billion asbestos proposal by Republican Senator Arlen Specter of Pennsylvania. The bill would compensate U.S. victims of disease caused by asbestos exposure and halt as many as 300,000 pending lawsuits that have bankrupted 70 companies, including W.R. Grace & Co., a Columbia, Maryland-based maker of chemicals and building materials.

`Truth Squad'

Slade says he acts as GoldenTree's ``truth squad'' on asbestos, counteracting overly optimistic assessments about the chances of a settlement from companies that are trying to win over investors.

Last June, Slade, using a network of relationships he's built among lawmakers, staff and other lobbyists, told GoldenTree the settlement wouldn't pass Congress in 2004. That was three months before Frist publicly declared the legislation dead.

Specter says he plans to reintroduce the legislation in the current session.

``Wall Street constantly overreacts or under reacts to information,'' Slade says. ``Legislation is a nine-inning game. The bill being introduced is like the second or third inning. Until you see X, Y, and Z, you can't take any of this seriously.''

Gambling on Bonds

GoldenTree, which manages about $6.5 billion, won't comment. ``Sorry, can't help,'' Chairman Leon Wagner said in an e-mail.

Right now, investing in the bonds of one of the bankrupt asbestos-products makers such as Toledo, Ohio-based Owens Corning, the largest U.S. insulation producer, is risky because there's no guarantee the bonds will pay out. A hedge fund might take the gamble, for example, of buying an Owens Corning note, due in 2009, that Friday was selling for 63 cents on the dollar on a bet that a settlement will allow companies to recover and pay their debts.

The hedge funds that have contacted lobbyist Steve Elmendorf, 44, who helped run Senator John Kerry's campaign for president, have told him they don't care which way the settlement goes, as long as they are prepared.

``They want to know whether to buy or sell,'' says Elmendorf, who has a hedge-fund client he won't disclose. He works for Bryan Cave Strategies LLC, a unit of Bryan Cave LLP, a St. Louis-based law firm.

`In the Loop'

Hedge funds using lobbyists for information should be aware that some firms may have ``a dog in the fight'' -- other clients pushing for a particular legislative outcome, says Robert Johnston, managing director for equity research at New York-based Medley Global Advisors, which advises Wall Street clients including hedge funds.

``There's no question that lobbying firms are very much in the loop on the key issues -- they're actually shaping the legislation,'' Johnston says. ``It's probably wise to try to get lobbyists on all sides of the issue.''

Some hedge funds are looking for more than information on the direction of a bill. Among the largest funds, at least 10 have hired firms to lobby to try to influence the outcome of a policy or bill, according to registrations compiled by Washington's PoliticalMoneyLine, an independent group that tracks campaign finance and lobbying.

Chicago-based Navigant Consulting Inc. says it's lobbying for the asbestos settlement for Dallas-based HBK Investments LP and three New York-based firms, D.E. Shaw & Co., Elliott Associates LP and Och-Ziff Capital Management Group.

Navigant reported $400,000 in fees within 12 months working for the funds and six other clients, lobby registration documents filed with the Senate show.

Soros Fund

``We felt we could play a useful role on the legislative front for companies that supported asbestos-reform legislation,'' Navigant lobbyist Rick Farrell says. ``We believe there will be a successful outcome on the legislation this year.'' HBK, Shaw, Elliott and Och-Ziff declined to comment.

Wilmer Cutler Pickering Hale & Dorr LLP, a Washington- and Boston-based law firm with more than 1,000 attorneys worldwide, filed to represent Chicago-based Citadel Investment Group LLC and billionaire George Soros's Soros Fund Management LLC on hedge- fund regulation.

Greenwich, Connecticut-based Tudor Investment Corp. and New York-based Moore Capital Management LLC have their own Washington offices.

For Breaux, Slade and other lobbyists, working with hedge funds is a welcome break. They don't have to push people to move or kill a bill.

``You are not paying me to lobby,'' Slade says. ``You are paying me for information.''

To contact the reporters on this story: Kristin Jensen in Washington kjensen@Bloomberg.net Mike Forsythe in Washington mforsythe@bloomberg.net Jonathan Salant in Washington jsalant@bloomberg.net
Last Updated: March 16, 2005 00:01 EST

How to dramatically increase energy effeciency of cities

- Avego
- Telecommuting
- Bike delivery services like Kozmo.com
- Human powered jitneys
- Delivery services like Peapod (one truck vs. 17 separate cars going to the store, companies like Peapod can plan for efficient routes).
- Encouragement of using bikes in general.
- Mass transit

Class warfare Goldman Sachs style

As Woodie Guthrie noted: when the poor steal the police can be counted on to arrest them but when the rich steal the police can be counted on to back them up.

Here's a recent theft Goldman Sachs style.

Goldman (and some others) takes a public company (Dollar General) private with borrowed money. Now Goldman and partners own it and promptly pay themselves a $239 million dividend (this is the theft right here). They also charge various "fees" during the process. More theft.

Then they sell off the company and make it public again. Same company but now saddled with a big debt load (debt incurred to take it private in the first place, debt incurred to pay the "dividend", debt incurred to pay various fees. Debt incurred to "re-organize" the company.) "Re-organizing" the company is the cover often used to justify these kinds of thefts.

A look at what happens at different places in the food chain makes clear what is really driving the process.

Lets start at the top. Goldman and other members of the group who engineered this whole thing come away with the $239 million dividend, plus the fees they charge, plus whatever profit they made on the sale of the company. Big big winners. Next are the banks who lent the money to make this happen. They probably win as well. There is a risk that some of the money they lent will not be repaid, but chances are that a default -if it happens- would happen somewhere down the line. After they have made *some* profit. It the loans are paid in full they are big winners also. Their position is not as good as Goldman (who has the "dividend" up front, free and clear) but it's good enough. Next is the upper management of Dollar General. They are in good shape also. They get either a nice golden parachute or a nice retention bonus. Then come retail investors who bought stock in Dollar General (or sold their stock to Goldman when it was taken private). Their position is not so good. They are probable losers. Not big losers, but probable losers. They have stock in a company that now has a huge dept load. But no one had a gun to their head forcing them to buy or sell stock in Dollar General so you can't feel really sorry for them.

Left over at the bottom are the losers. The 72,500 employees of Dollar General. They are hammered. They are screwed. Bigtime. THEY are the ones who will feel the austerity that will be necessary to make the debt payments (used to give Goldman their "dividend"). They are the ones who will have to take pay cuts or forgo pay increases. They are the ones who will suffer layoffs so money will be available to pay the debt. They are the ones who will have to work harder with fewer employees doing more things. They are the ones who will have their lunch hour cut down. They are the ones who will have their health insurance cut or be forced to contribute more to health insurance premiums.

THIS is late 20'th (and early 21'st) century class warfare. This unremitting class warfare has been waged by the elite since the early 80's and is THE reason for the increased gap between rich and poor and the disintegrating position of the middle class. Lets go back to Dollar General for a second. It's not just the checkout people and the janitors who are going to get hammered. It's also the department managers and store managers.

Jessee James robbed banks because "that's where the money is". For Goldman, the money is in looting thousands of vulnerable employees.

Notice that we haven't talked about unions yet. The only plausible mechanism for defense against this kind of thing would be a union. It's no coincidence that the American power structure has waged a 30 year war on unions.

Another facilitator of this kind of thing is misuse of authority - which will make for another full post sometime. In a nutshell, Goldman and it's ilk will present themselves as authority figures on the subjects of economics and finance and lecture the rest of us that these kinds of deals are "good for the economy", "good for shareholders" and so forth. They will say something like "it looks pretty bad only if you don't understand how this is good/necessary for the economy."

They are lying. It's only good for them.


http://www.fool.com/investing/small-cap/2010/01/29/avoid-these-cash-machines.aspx?source=ihpdspmra0000001&lidx=9