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 Anat vs Eric: Take Your Pick

By Shlomo  Maital

  Cantor      Admati

Eric Cantor                                             Anat Admati

  Yesterday’s (August 10) New York Times has an editorial, along with a business section article, that offer stark contrast between two people, two world views, and what is wrong and right about America today.

   Eric Cantor is the former Republican House Majority Leader.  He lost a primary election in his district last June, in a stunning and almost unbelievable upset, despite his high visibility and infinite money.   Why did he lose?  Because from Day One, says the Times, he “courted the favor and donations of Wall Street”, becoming the “top congressional recipient of its generosity”. In other words, the top money raiser in Congress lost a PRIMARY (not even an election).  His close ties to big money led to his defeat, apparently, as his opponent focused on that issue.

    Now, Cantor is about to cash in.  He resigned his seat as of August 18, even though he has several more months to serve until the new Congress convenes in January.  Why?  He’s going to work for the same Wall St. firms that he helped so much, as House Leader. He’s going to make money.  He has little real financial genius. But connections?  Infinite.  And Wall St. will pay big money for that. Eric Cantor will be a multi-millionaire faster than you can say,  Public Service?????

   Admati is a Stanford University finance professor, and an Israeli.  She did complex financial modeling until 2008, and published in academic journals.  When the financial system collapsed (or WAS collapsed by the banks, and Wall St.),  she became a powerful advocate of tighter government regulation, battling weak regulators and the incompetent Obama administration.  Admati, says the Times, even took a course on how to write opinion articles that people understand.  She has lunched with Obama and has a powerful simple explanation of what is broken on Wall St. and how to fix it.  And Wall St. despises her.  Guess why.

      Here is what she claims.  1.  We the people lend money to the banks by depositing it.  We don’t worry about how the banks use our money, because the Federal Deposit Insurance Corp. insures each deposit account for up to $250,000.  FDIC is of course the government, which is us.  And FDIC uses OUR money; when it runs out, in bad times, the government refills the coffers.  2.  The banks take large undue risks with our money when they lend and invest it, as they did during 2001-2008,  investing in sub-prime mortgages for instance, because they are “too big to fail” and because if they get in trouble, as they did in 2008-10, they know the government will bail them out.  They get the profit from their risk taking, if it works out; and they dump the losses on us if it doesn’t.  Good deal.  And nothing really has changed in this crackpot system since 2008.   3. The solution?  Regulate not how banks lend and invest their money, but how much they borrow (from us).   

Wall St. absolutely hates that idea, because the money machine that borrows from us at 1 per cent and lends at 5 per cent is a sweetheart of a deal, especially when government bears the risk of that 5 percent. So they deeply dislike Admati as well.

      Admati vs. Cantor.  From public service to millionaire overnight; and from academic professor to public advocate, serving the public, also overnight.

       Take your pick.  Which do YOU prefer?    



 Noona the Mind Reader – What About Us?

By Shlomo  Maital   

  Noni very small

  In Orit Gidali’s new children’s book, Noona the Mind Reader, illustrated by Aya Gordon-Noy,  a little boy says to Noona, “You have the legs of a flamingo!”   And Noona, “even though she does not know exactly what a flamingo is, she is insulted.  A lot.”   (For now, it is only in the Hebrew language).

     Her mother hugs her, and goes to find “a magical device”, for days when there is not enough magic.  

    “Noona picks up the magic device that her mother gave her, and suddenly she can see behind everything people say, what they are thinking, but not saying”.

     Noona sees that people do not always say what they think.  Or think what they say they are thinking,  or say what they think they are saying.  

     “I understand!”  Noona shouts.

     “You have the legs of a flamingo!”.   The little boy means, according to Noona’s magical device, “when you’re around everything is rosy”,  and “wow, am I smart, to know how to say ‘flamingo’ “.  

     “Nya, who wants to be friends with YOU!”, means “I do”.   “I don’t want to play soccer” means “I don’t want to lose again.”

      And so on.

      Years ago, Harvard psychologist Chris Argyris pointed out that people have two columns on their pages.  In the right hand column,  what they say. In the left hand column, what they mean.  And he ran clever exercises, getting people to reveal their left hand column – which many people found very distressing. 

     What if we all had Noona’s mother’s magical device?  What if we knew what people really meant, not just what they said?  What if we knew BOTH their left hand and right hand columns?    People would then have to tell the truth.

     It’s not necessary to injure or hurt people by always saying what  you think.  You don’t have to say,  Yuk, that’s an ugly dress!    You don’t have to say it.  But maybe the world would be better, maybe there would be more trust among people, if we pretended that we all had Noona’s device.  If we built trust by telling the truth and saying what we mean. 

     There are countries where it is regarded as polite to be oblique, obtuse or even say the opposite of what you mean, to spare people’s feelings.  I live in a country where people are usually quite blunt.  Those who don’t understand us find this very rude, sometimes.  I think, in the end, it is good.

        What if Noona’s device were replicated and distributed, say, to the European Parliament or the U.N. General Assembly?    Or to the press at Obama’s press conferences?     What would we hear?  What would we understand?  And how would politicians and politics change forever?!

Paul E. Singer and U.S. Hedge Fund Rules the World (And May Destroy It)

By Shlomo  Maital


 If you believe as I do that increasingly, money rules the world, not ethics, policies, governments, or ordinary people,  then this week you got confirming decisive evidence.

  A hedge fund manager named Paul E. Singer, right-wing libertarian and Republican, who runs Elliott Management, a $25 billion hedge fund,  bought up large amounts of Argentine government bonds after Argentina defaulted on its bonds in 2001 (because the IMF wanted to impose stringent conditions on a bailout loan, a huge mistake).    Then he went into U.S. District Court in Manhattan (like a fixed prizefight, he got to choose the venue most convenient and most likely to get a favorable decision) and won a decision from a judge, stating: “unless Argentina pays up the face value of bonds bought by Singer, it cannot legally pay interest on its bonds to its main bondholders”. 

   The result:  Because a $539 million interest payment was not made (it could not be made, because of that District Court Judge, who by the way is ELECTED!), by Argentina,  S&P rating agency declared Argentina in default.  This likely means that the government of Argentina is barred from raising capital in global capital markets.   Argentina’s economy is in recession,   in large part due to the Sterling law suit.  You cannot run any business, or any country, without borrowing money in capital markets.

    Singer has won.  Argentina and its 41 million people lose, and so does the world. Why?  Because investor panic regarding Argentina will impact other nations, like Portugal, and make their borrowing more expensive. 

    Argentina’s President Cristina Fernandez de Kirchner has made many mistakes.  But this time, the villain is not her but Singer.   And America, whose courts allow him to do whatever he wants for personal gain, damn the whole world.

     If we do not get control of our lives and our money  back from capitalists like Singer,  some day Occupy Wall St. will seem like a kindergarten birthday party.  

Blog entries written by Prof. Shlomo Maital

Shlomo Maital
August 2014
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