Thursday, April 4, 2013
Anything you can do I can do better,
I can do anything better than you.
Irving Berlin, Annie Get Your Gun
Now that North Korea has declared war on the United States it is time for an historical analysis of how we have arrived at this state of affairs. To do that we must go back at least one month and, for the true history buffs, back as far as 2010 when the United States and South Korea conducted exercises like the ones they are now conducting and for the buffest of all, all the way back to 1951 when members of my generation were given the opportunity to engage in prolonged stays on the Korean peninsula at no personal financial expense, a privilege still accorded more than 28,000 U.S. service personnel. For our purposes, however a one-month analysis would seem to be more than adequate. First a bit of perspective on the two principal players-the United States’ Barack Obama and North Korea’s Kim Jong-Un.
Mr. Obama is the president of the United States who has governed the country for more than four years, has a lovely wife and two daughters. He attended school in the United States and received an excellent education that has stood him in good stead while acting as president. Kim Jong-un is the leader of North Korea, sometimes described as the “dear respected Marshal” and the “brilliant commander of Mt. Paektu.” He attended both a private and a public school in Switzerland but the pacific characteristics of that country did not rub off on him nor did his education seem to have stood him in good stead. He has a young beautiful wife who spends little time in the western limelight.
Following his father’s death in 2011 he became the Supreme Leader of North Korea or, in some North Korean releases “Marshal Kim Jong Un, the greatest ever commander,” thus equaling if not eclipsing both his father and his grandfather. He is a belligerent sort who has barely, if yet, attained age 30. Here is the chronology of how it happened that Mr. Kim declared war on the United States.
It started on February 12, 2013, when North Korea conducted a successful nuclear test that greatly annoyed the United States, South Korea and others. In response to the test, on March 7, 2013, the United Nations Security Council imposed new economic timeline published March 30, 2013.) Alarmed by North Korea’s unpleasant behavior, on March 19th the administration (quite unnecessarily some would say) decided to see how far a nuclear B-2 stealth bomber could fly without landing. The plane flew non-stop from the United States to the Korean Peninsula and back, dropping inert munitions on a range off South Korea’s coast. Some thought the administration could have used a calculator to seer how far the planes could fly that far without actually doing it. Of course that would not have had the desired effect described by Gen. Martin E. Dempsey who said: “Those exercises are mostly to assure our allies that they can count on us to be prepared and to help them deter conflict.” Although actions speak louder than words it is unclear that these actions did more than words could have done. What is clear is that the flight really upset Mr. Kim. To make matters worse and add insult to injury, on March 25th South Korea said that if North Korea “provokes South Korea . . . . the South may respond with a military strike on [among other things] statues of the North’s nation founder, Kim Il-sung and his son Kim Jong-il.” That plus the mock bombing raid was too much for Mr. Kim.
He said North Korea was now in a state of war with the United States (even though the U.S. had not threatened the statues) and a statement was issued that said in part: “Now the heroic service personnel and all other people of the DPRK are full of surging anger at the U.S. imperialists’ reckless war provocation moves and the strong will to turn out as one in the death-defying battle with the enemies and achieve a final victory of the great war for national reunification true to the important decision made by Kim Jong Un. . . . They [U.S.] should clearly know that in the era of Marshal Kim Jong Un, the greatest-ever commander, all things are different from what they used to be in the past. The hostile forces will clearly realize the iron will, matchless grit and extraordinary mettle of the brilliant commander of Mt. Paektu that the earth cannot exist without Songun Korea. Time has come to stage a do-or-die final battle. . . .” This is only a short segment from a many hundred-word declaration.
In a war of words with the United States Mr. Kim is the clear winner and the United States should acknowledge defeat by withdrawing from the field of battle. Insofar as the war of belligerent gestures is concerned it’s a tie. One can’t help wondering what would happen if the United States and its allies withdrew from that battle as well. We’ll probably never know.
Thursday, March 28, 2013
“It is well enough that people of the nation do not understand our banking and money system, for if they did, I believe there would be a revolution before tomorrow morning.”
— Attributed to Henry Ford
JP Morgan Chase did a good thing and everyone should applaud. Its good thing was noted at the same time its bad things were making news. A good thing too. The good thing came within days of Senate hearings that would have caused all but Jamie Dimon to think there was little good to be said for the institution.
On March 15, 2013, the United States Senate Subcommittee on Investigations issued a 307 page report entitled “JPMorgan Chase Whale Trades: A case History of Derivatives Risk and Abuses.” The report was issued on the same date the subcommittee was conducting a hearing on the same subject. The hearing and report focused on the bank and its top executives as a result of the multi-billion dollar trading losses it suffered in 2012. Credit for the losses was primarily given to the activities of outsize derivative trades effected by one of the bank’s traders known as the “London Whale.” In the “Overview” of the report that appears in the Executive Summary, the Subcommittee states that the investigation determined, among other things, “that JPMorgan Chase’s Chief Investment Office used its Synthetic Credit Portfolio (SCP) to engage in high risk derivatives trading; mismarked the SCP book to hide hundreds of millions of dollars of losses; disregarded multiple internal indicators of increasing risk. . . . and misinformed investors, regulators , and the public about the nature of its risky derivatives trading.“ A lay person would not think well of an institution that engages in that kind of activity (to the extent a layperson understands things like “Synthetic Credit Portfolio”). The report then goes on for 304 more pages to describe in some detail the activities in which the bank engaged. It observes that in April 2012 when media reports were beginning to circulate about the financial difficulties of the bank, Jamie Dimon, Chief Executive Officer of the bank described those reports as a “tempest in a teapot.”
Responding to the report and the Senate hearing Joe Evangelisti, a spokesman for the bank, who may have been hired as much for his name as his skills, said: “Our management always said what they believed to be true at the time. In hindsight, we discovered some of the information they had was wrong.” Three hundred seven pages of the senate report consist of hindsight. The teapot to which Mr. Dimon had earlier referred was probably the bank and as a result of the tempest some of its tea leaves were removed by the board. Mr. Dimon’s 2012 compensation went from $23 million to $11.5 million. $11.5 million in tea leaves is not chicken feed but as Mr. Dimon jokingly told a questioner at a bank investor day in February, “I’m richer than you.” It is not clear from press reports that either Mr. Dimon or the bank is chastened. Nonetheless, they should be given credit for their good works. The bank has parted company with other large banks and cracked down on payday lenders.
Payday loans are loans designed to give momentary financial relief to workers and permanent relief to those making the loans. According to the Center for Responsible Lending, pay day loans interest rates can run as high as 465%, a rate that benefits the lender more than the borrower. Banks have joined the typical store front payday lenders and arrange with debtors for automatic withdrawals from the borrower’s checking accounts in order to repay the borrowed amounts. That is a real convenience for the borrowers since they don’t have to do anything except make sure there are adequate funds to repay the loan on payday. If the checking account does not have adequate funds to repay the loan the banks charge overdraft fees and continue to attempt to collect from the borrowers’ checking account, adding an additional overdraft fee each time the payment is declined. The bank is, of course, pleased to generate the income from the overdraft fee and the borrower is pleased that it got the money it needed before pay day and slightly less pleased at the fees charged when the loan is not repaid in a timely fashion. There are presently six banks, including Wells Fargo and US Bank that engage in payday lending. And here is JPMorgan Chase’s good news.
JPMorgan Chase has decided to place limits on procedures involving payday loans, both those made by the bank and those made by storefront lenders. Beginning in May the bank will limit overdraft fees that can be collected and will permit customers to close accounts or have stop payment orders promptly enforced. Heretofore customers found it could be impossible to put an end to automatic withdrawals by terminating the authority or closing the account with the result that fees continued to mount. JPMorgan will now make it easier to close accounts even when there are accrued charges. It goes to show that even an institution as venal as JPMorgan appears to have been, occasionally gets something right.
Wednesday, March 20, 2013
And why beholdest thou the mote that is in thy brother’s eye, but considerest not the beam that is in thine own eye?
The Gospel According to St. Matthew
Now that most of the world’s problems are close to being resolved (except for the treaty regulating global trade in conventional arms) the United Nations can begin to focus on non-violent internal affairs in member nations such as the United States. (The United States, Russia and China have, until now, refused to sign the treaty, the United States because of, , among other things, opposition from the NRA that fears the treaty might be used to undermine the beloved second amendment and Russia and China that refuse to sign because of concerns about language banning the sale of weapons to human rights violators. They believe it is too subjective since one country’s human rights’ violator is another country’s freedom fighter. Negotiators convened on March 18, 2013 to try to reach final agreement on the treaty.) Thus it was that those who live in places like Colorado and Washington found themselves the focus of its attention.
The United Nations’ attention to Colorado and Washington came about as a result of the 2012 election when voters in those states, heedless of the consequences for the rest of the world, voted to approve the use of recreational marijuana. Responding to the election results, on November 29, 2012, Raymond Yanss, the head of the United Nations’ International Narcotics Control Board, weighed in on the election results. In an interview with the Associated Press, Mr. Yans was quoted as saying that he thought Attorney General Holder should take all necessary steps to overrule the will of the voters. In a statement released by the UN Information Service on November 15, 2012, Mr. Yanss said: “these developments [the election results] are in violation of the international drug control treaties, and pose a great threat to public health and the well-being of society far beyond those states”. (Mr. Yans is Belgian. In Belgium marijuana is illegal but possession of up to 3 grams or one female plant, or use in one’s home is tolerated. Presumably such a small amount does not “pose a great threat to public health and the well-being of society far beyond [Belgium]”). Whereas Mr. Yanss said that the election results threatened public health and well being “of society far beyond those states,” others had a slightly different reaction to the election. They believe that gradual legalization of the drug throughout the United States may eventually reduce the black market trade for the drug in Latin American countries that are now affected by the drug wars, eventually, perhaps, bringing them to a close.
The foregoing notwithstanding, it was good of Mr. Yans, as a representative of the United Nations, to share his thoughts with the voters in those two states. Indeed, his thoughts may help Attorney General Eric Holder, who seems to be temporarily paralyzed, decide how to address the will of the voters in those two states.
The timing of what we next learned about goings on in the U.N. was purely a coincidence and does nothing to diminish Mr. Yanss’ concerns. On March 4, 2013, scarcely four months after Mr. Yanss chastised Colorado and Washington voters for legalizing the use of marijuana, Joseph Torella, the U.S. ambassador for management and reform at the United Nations, weighed in on the use of alcohol. His concern was not the 18th Amendment to the United States Constitution kind of concern, a concern that manifested itself in adoption of that amendment. His concern was its use at the United Nations during negotiations. According to reports, budget negotiations can be tense at times and to relieve the tension some members of the negotiators known as the Group of 77 have discovered that one way to relieve tensions is to drink quite a bit of alcohol prior to and during the meetings of the committee. (A casual observer would be tempted to wonder whether the U.S. Congress might get a good bit more done with budget negotiations if its members were inebriated. They could hardly do worse drunk than they do when sober.) According to one report in Slate, a meeting of the United Nations budget committee last December was accompanied by so much alcohol consumption that one negotiator became ill. Commenting on the meeting one of the participants said: “There has always been a good and responsible tradition of a bit of alcohol improving a negotiation, but we’re not talking about a delegate having a nip at the bar.” Addressing his colleagues, Ambassador Torella suggested that those who participate in budget negotiations at the United Nations should undertake their tasks when sober. He suggested that: “As for the conduct of negotiations, we make the modest proposal that the negotiation rooms should in future be an inebriation-free zone.” He should probably also suggest that the use of marijuana would not be considered an acceptable substitute for using alcohol. Just in case.