The Ongoing Saga of JPMorgan Chase
January 14, 2015
Today (January 14, 2015), JPMorgan Chase announced weaker than expected 4th quarter 2014 earnings.
The reaction in the Market was quick and harsh.
The price of JPM stock slid down minus 3.45% today, wiping out some $7.63 Billion in shareholder value, overnight!
Analysts, prognosticators and pundits weighed in on various aspects of weakness in the franchise and potential management failures.
Meanwhile, seemingly oblivious to our real world, the folks in Corporate Responsibility at JPMorgan Chase released a report on declining summer jobs for youth, perhaps as a means to soften or divert attention away from the stock price and management failures?
https://finance.yahoo.com/news/summer-jobs-young-people-decline-150000168.html
Are they kidding?
The folks they cite in this report who are disparately impacted — “low-income youth and young people of color face diminished opportunities to gain work experience and skills, limiting potential for economic advancement” are the very same young people who are most likely to come to the table with blemishes, bruises and with clear and obvious symptoms of “the achievement gap.”
I think the folks at JPMorgan Chase must have abandoned the concept of using available research and institutional knowledge to help impact solutions in local communities to pursue a much higher-level approach which relies on a premise that is based on “research grants” paid to Aspen Institute and Brookings Institution which are intended to help discover hidden nuggets that otherwise might be overlooked.
If you read the footnotes to this particular report (http://www.jpmorganchase.com/corporate/Corporate-Responsibility/document/54887-jpmc-summeryouth-aw2.pdf), you will find references to 2 basic sources: (1) The Brookings Institution, and (2) Northeastern University.
While no one could legitimately doubt the likely veracity of these sources, would this approach pass the smell test at any legitimate academic institution?
Seems that when a major institution is stepping up to be recognized as a Thought Leader, they ought to at least use decent quality paint to cover over the façade they are trying to use as their primary lead.
The Wizard of Oz would have it no other way!
The ongoing saga of Koch Industries
October 1, 2014
No surprise that the Koch Brothers and Koch Industries have gone on the defensive following the publication of Tim Dickinson’s lead story in the September 24 issue of Rolling Stone (“Inside the Koch Brothers’ Toxic Empire”).
The full text of the original article, the response, and various links to source documents is located here:
Below is an excerpt from the Koch Industries response related to the original article:
10. North Pole refinery shutdown. Response:
“In February 2014, Flint Hills Resources (FHR) made the difficult decision to shut down its refining operations and convert its North Pole, Alaska refinery to a terminal. While some employees unfortunately were laid off, FHR retained approximately 40 employees at the site and offered to find the other employees roles in other Koch companies. This resulted in several of the former FHR Alaska employees receiving job opportunities at other Koch facilities in the US. Federal, state and local authorities acknowledged the regulatory and competitive issues that drove FHR’s difficult decision. For example, Senator Begich recognized the “competitive challenges” facing FHR in a letter to Alaska Governor Parnell. Senator Begich later noted the issues concerning the environmental contamination that existed long before FHR’s ownership and the appropriate regulatory standards concerning the remediation also needed to be resolved in order to encourage another owner to operate the refinery. The City of North Pole likewise expressed its frustration concerning the competitive and regulatory challenges that drove FHR’s decision.
There is no question that the off-site contamination existed long before FHR bought the refinery in 2004 – contamination that was not disclosed to FHR by the prior owner. No one had done anything about the situation until FHR discovered it and quickly and voluntarily began providing alternative water to the community. During the time since it discovered the issues, FHR has tried to work cooperatively with the state of Alaska and the prior owner to remediate these issues, while ensuring our neighbors were not adversely affected. As part of this process, FHR raised an administrative challenge to the cleanup level set by ADEC personnel. The Commissioner of ADEC agreed with FHR that the agency had not adequately supported the cleanup level and the agency is now studying the matter further. FHR remains committed to doing the right thing, while also ensuring that the prior owner lives up to its contractual obligations to FHR and its obligations to the community.”
No one could effectively deny that the Kochs – and their legal and PR teams – possess great imaginations, and are blessed with amazing creativity. It’s almost as though Lewis Carroll has returned to write more poems for us to ponder!
Hedge Fund Managers Achieve Record Earnings
May 10, 2014
The news this week included a report from Institutional Investor which tells us that the top 25 Hedge Fund Managers took home a combined $21.2 Billion in 2013, a significant increase over 2012, when earnings totaled just $14.1 Billion, the lowest sum since the 2008 financial crisis.
If I did the math correctly, the average wage of these 25 individuals computes to $407,692.31 per hour, somewhat above our current $7.25 per hour minimum wage.
What is it that Hedge Fund Managers do that makes them the highest paid people in the world?
Do Hedge Fund Managers create economic value? Do they create jobs? Do they make products or deliver services which make our world a better place?
Unfortunately, they seem to do none of the above.
Hedge Fund Managers look for opportunities to exploit temporary weaknesses, gaps, flaws or aberrations in the operations of a specific company or in an economic sector overall.
They typically have billions of dollars of resources at their disposal, and by creating and taking well-crafted and strategic financial positions, they have the ability to move markets, generally to their own benefit.
The film “Other People’s Money”, starring Danny DeVito and Gregory Peck, was released in 1991. Danny DeVito plays the role of “Larry the Liquidator” providing us a crude but quite accurate roadmap of what Hedge Fund Managers do every day.
In the 19th century, we called this sort of activity “Piracy” and we labeled the perpetrators “Pirates”.
In the 20th century, we called this sort of activity “Organized Crime” and we labeled the perpetrators “Mafia” or “Gangsters”.
Here we are in 2014, clearly well into the 21st century.
Our Hedge Fund Managers are out in the open, creating outcomes which seem to have no potential for positive impact on the U.S. or world economy, and we are giving them not just permission to operate (no regulatory oversight), but also preferential tax treatment on their booty (known as ‘carried interest’).
Hedge Fund Managers typically receive their compensation in 2 ways – an overall management fee equal to 2% of assets under management, and a 20% share of any profits on the assets under management.
It is the tax treatment of that 20% fee — categorized as Carried Interest — which is currently taxed at 20% — versus the 39.6 percent rate which business owners must pay on their earned income — that has created somewhat of a firestorm in Washington.
None of this makes any sense to me: does it make sense to anyone?
Separate and Unequal
April 27, 2014
Westchester County in New York State seems to attract a great deal of attention in the media.
Not long ago, we learned from a posting on Zillow that property owners in Westchester County pay more in property taxes than the typical resident of any other major American county. The average property tax bill for a single family home in Westchester County comes to $14,829 a year (vs. the U.S. median of about $2,800).
There are a number of reasons why property taxes in Westchester County NY are the highest in the nation, but the primary reason is property taxes levied to support public schools.
In a county with a population of just under a million residents, Westchester County taxpayers are supporting some 47 completely autonomous public school districts!
Very recently, Westchester County Executive Rob Astorino made headlines because he continues to battle the US Department of Housing and Urban Development (HUD) over compliance with a consent decree approved in 2009 which requires Westchester County to take an active and affirmative role in desegregating local villages and towns in the county which have miniscule populations of African American and Hispanic residents.
Some commentators have applauded Astorino for defying the federal government under the guise that, “(Astorino) is doing his job by protecting the neighborhoods of those who worked very hard to live where they live!”
I’m fine with the notion that people ought to be able to live where they want to live.
However, because New York State allows and encourages public school districts to form around — and to exclusively serve residents of — villages, towns and cities, the impact of this ‘home rule’ approach to public education has created de facto segregation which has produced more egregious and dangerous consequences than the issues debated in the Brown vs. Board of Education case which was decided in 1954 – 60 years ago!
We can clearly witness that “Separate and Unequal” has become the standard in Westchester County.
It becomes very clear from reviewing NYS Education Department statistics that economic and racial segregation in housing translates directly to school inequality and results in disparate student outcomes.
The Village of Scarsdale is one of the communities identified in the Housing Agreement (consent decree) as racially segregated, and thus a priority area for new units of fair and affordable housing.
A report released in late April from US News and World Report reveals that Scarsdale High School was ranked among the very best high schools in Westchester County; in New York State; and across our nation.
In Scarsdale, no students at the High School receive subsidized meals, and just 9% of students are Black or Hispanic. About 8% of Scarsdale students have been classified with a disability, and 68% of those students spend 80% or more of their school time in regular classroom settings. Most recent total per-pupil spending across the Scarsdale schools was $27,219, with $17,450 focused on general education students.
Meanwhile, just 5 miles south of Scarsdale High School is Mount Vernon High School, where 70% of students receive subsidized meals, and where 95% of students are Black or Hispanic.
About 16% of Mount Vernon Students have been classified with a disability, and just 48% of those students spend 80% or more of their school time in regular classroom settings.
Most recent total per-pupil spending across the Mount Vernon public schools was $23,560, with just $11,641 centered on general education students.
The real test may be in graduation rates. For the class of 2012, 95% of Scarsdale seniors graduated with Regents diplomas; at Mount Vernon High School, just 52% of seniors graduated with a Regents diploma.
The attitudes and actions of public officials should set a positive example for all people, affirming that our elected leadership is fair, honest and forward thinking.
There really is no place in our current society for personal private agendas – working against the general public good – on the part of our elected officials.
Municipal and school district consolidation seems to be the only rational resolution — why is this solution so difficult to discuss and resolve?
New York State: Land of Highest Property Taxes
April 10, 2014
I live in Westchester County, NY – the place they say has the highest property tax burden in the U.S.
Our Governor – Andrew Cuomo – also comes from Westchester County — and he has made it his mission to support effective ways to reduce and/or eliminate the government waste which necessitates the high property taxes we pay.
The incredible inefficiency of having 400+ independent government entities operating within Westchester County certainly is a primary culprit for the dubious honor of being named the highest taxed county in the U.S.
The largest portion of property taxes paid is attributable to funding public schools — 41 regular school districts in a county with less than 1 Million in total population.
Each of these districts is ‘self contained’ in that they have their own administration, buildings, and all of the fixed cost infrastructure which gets paid for whether there 275 students served (Pocantico Hills at an average per-pupil cost of $42,000) or 25,000 students (Yonkers at an average per-pupil cost of $19,600).
Contrast this to Montgomery County, Maryland — about the same physical size as Westchester, and with a very diverse population of just under 1 Million, demographically quite similar.
Montgomery County has just one school district which educates all of the 150,000 public school students in the county at an average per-pupil cost of $15,421.
Just about every year, Maryland Public Schools are ranked at the top in the nation. http://www.washingtonpost.com/blogs/maryland-schools-insider/post/maryland-schools-ranked-number-one–again/2012/01/11/gIQA7NEqrP_blog.html
While Montgomery County — perhaps due to its ethnic, racial and economic diversity — is not number one in the state, it seems to consistently score in the top 10, and compares very favorably against the composite Westchester score.
It’s really time for the taxpayers in NYS to put aside the political rhetoric and to find a way to reduce overall costs, whether through actual mergers and consolidations, or through consolidation of services which are not directly related to the classroom.
We can do better, and we must!
Does Citizens United violate US antitrust regulations?
March 29, 2014
There seems to be little argument that one primary outcome from the Citizens United decision was the opening of our campaign finance system to a deluge of anonymous money.
It’s been reported that special interest groups spent more than $1 Billion in elections across the country in the last election cycle, and there is virtually no transparency or accountability.
The very essence of “one man, one vote” is on the chopping block.
Throughout recorded history, we can see multiple examples of societies which inadvertently allowed a very small group of people to slowly and carefully seize extraordinary power from the masses.
Looking back to late 19th century America, we can observe the activities of a very elite group of industrialist-capitalists known commonly as the “Robber Barons.”
Some of the 19th century names include: Andrew Carnegie; Jay Gould; Andrew Mellon; J.P. Morgan; John Rockefeller; and a dozen more.
None of these folks were ever indicted or found guilty of illegal activities, and history tells us that they produced some positive outcomes over the long term. They built steel mills; they built and operated railroads; they made oil and gasoline widely available.
Yet, our elected representatives at the time were so concerned about the potential for future abuse should large sectors of our economy get consolidated into monopolies or oligarchies, Congress passed the Sherman Antitrust Act almost unanimously in 1890, and it remains the core of U.S. antitrust policy.
The Act makes it illegal to try to restrain trade or to form a monopoly. It takes its name from Senator John Sherman who said, “If we will not endure a king as a political power we should not endure a king over the production, transportation, and sale of any of the necessaries of life”.
We can learn from history and halt the ability of a very small group of people to seize political and economic power from the American people, and we need to start right now.
Many of us who watch this issue (myself included) focus in on the Koch Brothers and their well-documented, ultra-conservative positions – including the activities of their Super PAC, Americans for Prosperity.
We should continue to carefully watch what AFP is up to – they have very deep pockets and a singular agenda which seems to be very self-serving.
Super PACs and anonymous money strategically use private economic power to create ‘reasonable doubt’ across a group of voters regarding an issue or a candidate.
In the past 5 years, we’ve witnessed a number of successful multi-media campaigns fueled by anonymous deep-pocket donors which were based on dubious ‘facts’ and which may not be in the best, long-term interests of the majority of our citizens.
One recent example which reflects the incredible power of anonymous money is that of Ted Cruz, a relatively unknown lawyer from Houston, Texas who leaped into the national spotlight after winning a landslide upset election to U.S. Senate in the 2012 election cycle. Cruz and his campaign committee spent some $14 Million, raised in a relatively short time, making it one of the top-performing Senate campaign committees for candidates running for open seats.
In contrast, Paul Sadler who opposed Cruz on the Democratic line raised about $700 K, just 5% of the Cruz total.
However, that $14 Million was just direct spending by the Cruz campaign.
The extra power of unlimited Super PAC spending on behalf of political position advertising favoring Ted Cruz (and/or opposing his opponent) enables behind the scene power brokers the opportunity to influence with impunity.
Does the Citizens United decision violate our U.S. Antitrust regulations?
Not in fact, because the framers of antitrust regulations had no way to imagine the potential abusive power of a Super PAC on our free enterprise system.
I argue that the Citizens United decision infringes on the intent of several prior Supreme Court decisions supporting the “one man, one vote” doctrine, and further is in violation of the intent of our Constitution and of our antitrust regulations.
It is incumbent upon our elected officials to reform existing U.S. antitrust policy and regulations to encompass political activities in such a way that clearly and unequivocally prohibit unlimited and/or anonymous donations to enable spending on political and/or ideological positions.
I hope others will join me in helping us return to a ‘one man, one vote republic’, in fact and in practice.
Paul Ryan & Saint Patrick
March 17, 2014
The majority of us know Saint Patrick as the Patron Saint of Ireland, and each year, many of us celebrate his Day — March 17.
Saint Patrick was active as a missionary in Ireland during the second half of the fifth century — and each year which passes makes his legacy a wee bit more fascinating and powerful!
The Walrus — descended from primarily Irish heritage — has heard many stories of great and grand Irish heroes.
One individual we generally don’t talk about is Sir Charles Trevelyan, a 19th century British bureaucrat who worked as a colonial administrator. Trevelyan is remembered in the annals of history as the individual who was charged with administering relief to the many thousands of Irish peasants who were left starving due to the impact of The Great Famine.
About one million lives were lost to the Famine. At it’s peak, Trevelyan described the Famine as an “effective mechanism for reducing surplus population” and “the judgment of God”.
“Dependence on charity,” Trevelyan said, “is not to be made an agreeable mode of life.”
Fast forward to the 21st century: the year 2014 to be exact.
Paul Ryan, a fifth generation Irish American, is a congressman from Wisconsin. In a speech during the summer of 2012, Paul Ryan said, “You know, back in the 1850s, the potatoes stopped growing in Ireland, so our great-great-grandfather, with the shirt on his back, made his way to Boston, worked his way on the railroad to get enough money to buy a farm.”
Today, Saint Patrick’s Day 2014, is a heavy day because Paul Ryan has besmirched the Irish people with his arrogant and dismissive talk about school lunch programs, suggesting that supporting programs to feed hungry children might create a setting which could result in ‘a full stomach and an empty soul’ in the very children it was expected to benefit. And, he has gone on to chastise “inner city men” who he claims are not even thinking about working or learning the value and the culture of work.
It is disappointing — that in losing sight of his past — Paul Ryan has distanced himself from the very realities of human behavior gone awry.
This is not a new or unique situation.
History reveals plenty of examples of bad human behavior which began with a glib and facile individual who possessed that magical ability to convince and influence others.
Very early in his presidency (1969), Richard Nixon appealed to the ‘Silent Majority’ — the mainstream citizens who he believed generally stood on the sidelines rather than take a position on issues.
In the late 1970’s, Jerry Falwell was credited with founding the “Moral Majority” — a euphemism for the Christian Right. There are dozens – hundreds – of current and historical examples of religious and/or ideological cults, often led by a charismatic individual who cultivated extraordinary public speaking skills.
The saga of Jim Jones and his “People’s Temple” which culminated in the death of 900+ followers has been memorialized forever with the phrase, “Don’t drink the Kool Aid.”
The current Tea Party movement is slightly different because the message, direction and money comes from behind the curtain — the Koch Brothers and a few others. They have found several eloquent spokespersons — Paul Ryan, Sarah Palin and Michele Bachmann are some — and somehow, they’ve managed to create a message powerful enough to steal the hearts and minds of a small but vocal group of people who: (a) desperately want the outcome of the Civil War to be different; (b) believe that hedge funds, investment bankers and other ‘pirates in suits’ create value in the economy (and create jobs?); and (c) believe that Mitt Romney gives to charity.
I fear the probability of coaxing the truth to the surface is bleak, unless we can mobilize enough critical thinkers to say, “Enough of this crap!”
Let’s stop paying attention to marginal mindless fools.
Let’s live up to our legacy as ‘The land of the free, and the home of the brave!’
Paul Ryan Laments Inner-City Culture Of Not Working
March 13, 2014
Paul Ryan is at it again.
http://www.huffingtonpost.com/2014/03/12/paul-ryan-inner-cities_n_4949165.html
Paul Ryan was born in 1970 in the small city of Janesville, Wisconsin: population 60,000 of whom 95% are white.
He is a product of great intentions gone off course. Brown vs. Board of Education (1954) was intended to eliminate racial and (by association) economic segregation in public schools across the U.S.
Who could have predicted that post-war U.S. euphoria would bring suburban sprawl, fueled by the automobile and the feverish building of highways which enabled the exodus of primarily white, middle-class families out of central cities into first-ring suburbs. By 1960, about half of Americans lived in suburbs vs. city centers, a dramatic shift from pre-war demographics. So, as the population shifted to suburbia, economic and racial segregation became even more pronounced than prior to the Brown decision.
I suspect that when Paul was growing up, attending Parochial Schools in Janesville, he never had a black friend, never spoke with a black person, and was virtually isolated from people who didn’t go to his church and didn’t look like him.
It’s hard to imagine, but I think Paul is probably a decent guy who has been deprived of the opportunity to get to know other people, and to develop an understanding of their culture and the insidious, subtle and generally invisible battles they fight every day.
No excuses here. Just a dose of reality.
Back where I come from they used to say, “Never criticize a man until you have walked a mile in his shoes.”
Despite the grand intentions of the Brown decision, other factors have crept in to render the decision impotent, and Paul Ryan seems to be the poster child for a societal problem we need to fix before the pot boils over and destroys our society.
Really Bad Property Assessment Policy
March 1, 2014
The Walrus recently learned that former Town of Somers Supervisor Mary Beth Murphy was appointed as executive director of the Westchester County Tax Commission by County Executive Rob Astorino, a fellow Republican. The job, which enjoys a six-year term, pays $132,155 a year.
Ms. Murphy told a local media outlet that she was “…very grateful for the opportunity to serve the people of Westchester, I was supervisor for 16 years, and I certainly dealt with tax issues during my tenure there. It brought exposure to multiple levels of government. “
The Westchester County Tax Commission ostensibly serves as the repository for the assessment rolls from the county’s multiple taxing jurisdictions; is tasked to provide advisory services to municipalities concerning assessments and assessment procedures; and produces an annual report to the county Board of Legislators.
Off hand, I’m thinking this person is absolutely unqualified and not fit to serve in this position. But, that is the nature of a system where officials are often elected to office based on a ‘beauty contest’ enhanced by a campaign war chest of dubious origin; then those ‘elected officials’ are free to appoint political hacks into positions which can have dramatic impact on society.
This pretty much says it all, another quote attributed to Ms. Murphy from her tenure as Supervisor in the Town of Somers: “We have a good way of reporting our tax bills, and did not see a desire for it by the constituency. The town has a very good reputation for its tax rate.”
According to what source? And on what standing?
The old “Home Rule” defense rears it’s head again. And, it was a great idea in pre-revolutionary war days. Sometime after the Civil War, Home Rule became obsolete, yet we still follow that logic in 21st century New York State?
Wondering why Westchester County has won the prize to become the highest property tax location in the U.S.? It’s entirely due to Home Rule and the incredible waste and duplication of services which result.
Most egregious? The folks in the wealthy white suburbs who are willing to pay through the nose to fund their quasi-private public schools, town and village police, etc. but who balk at the idea of providing any support at all to County taxes which in turn support social safety net services for their less fortunate neighbors.
More on: Education Funding Inequities in New York State
February 9, 2014
We have some 700 public school districts across New York State, and as Governor Cuomo pointed out recently in an interview, “It’s not about more money gets us more results. Because if that was the case, our students would be doing better than any students in the country, because we are spending more than anyone else.”
No one could successfully argue that the K-12 public education system in New York State is either (a) effective, or (b) efficient.
Designed and governed under assumptions which were likely correct in the 19th century, we continue to operate our schools as though we live in a world where the horse is the primary means of transportation; where oil lamps and candles are used for illumination after dusk; and where young people are needed early and late each day to do chores on the farm.
An article published on February 7, 2014 in The Journal News (http://www.lohud.com/article/20140207/NEWS/302070065/City-rural-schools-say-they-re-underfunded) helps to illustrate some of the complexities in state funding formulas which seem to have disparate negative impact on small city and rural school districts which are more likely to be both ‘high need’ and ‘low resource’.
Digging further into the mystery of school funding in New York State led me to the NYS Association of Small City School Districts, and the December 2013 newsletter, http://scsd.neric.org/newsletters/2013/2013%20SCSD%20Newsletter%20december%202013%20FINAL.pdf.
One of the outcomes of ‘The Campaign for Fiscal Equity’ was a promise made in 2007 by our elected officials in Albany that state funding would be adjusted to take into account both the availability of local resources and the relative “need” of students in each district.
As Governor Cuomo pointed out, we are already spending the most of any state on education, and our overall results are mediocre.
Indeed, it is not how much we are spending, but how the money gets spent. If our elected officials want to constrain education spending, they need to pass legislation which removes costs from the system. One way to accomplish that would be through school district consolidation to remove redundancies and spread fixed costs over a broader base.
Another way to accomplish holding the line on spending would be to divert aid from wealthy, high-performing districts and re-direct that aid to low-resource, under-performing districts.
When it comes to educating our young people, there really doesn’t seem to be any “starve the beast” solution on the horizon.
Let’s pay attention to this issue now, because if we don’t fix it now, it will only continue to fester and act as a drag on the economic and fiscal viability of New York State.
walrus51 