financial fraud and corruption in high places

February 11th, 2016

Phil Angelides, a former state treasurer of the US State of California, chaired a commission that “uncovered evidence of widespread fraud and corruption in the US mortgage market”. He wants to know why, after five years, not one senior bank executive has been charged or punished.

Since his report appeared in February 2011, America’s biggest banks have paid tens of billions of dollars in fines for misconduct in the packaging and sale of mortgage-backed securities, while the DoJ [Department of Justice] has gone after thousands of borrowers, brokers and appraisers for lying on mortgage applications. But no senior bank executive has been charged with wrongdoing. In a letter to Loretta Lynch, US Attorney General, Mr Angelides has challenged the DoJ to take action before the ten-year statute of limitation expires.

“I ask a simple question: how could the banks have engaged in such massive misconduct and wrongdoing without a single individual being involved? In a sense, it’s the immaculate corruption,” he told the FT. “It defies common sense, and the people of America know this.”

Ben McLannahan, “Charge senior bank bosses, says former commissioner“, Financial Times, 10 February 2016 (metered paywall).

Could this be why Bernie Sanders’ message of close ties between Wall Street and politicians resonates with voters?

(under)funding the NHS

February 11th, 2016

Britain’s National Health Service (NHS) is in crisis because the institution lacks adequate funding, writes FT columnist Philip Stephens. The NHS budget has, it is true, increased somewhat faster than the rate of inflation, but it has been falling as a share of GDP, at a time when increasing demands are placed on it.

Things are about to worsen. … NHS spending is budgeted to fall to 6.6 per cent of gross domestic product in 2020 compared with 7.3 per cent in 2014. …. So a society that is at once becoming wealthier, older and demanding more healthcare will be spending less and less.

International comparisons tell the same story. Those who laud the French or German health systems usually overlook the fact that these countries spend about 11 per cent of GDP for the service. If private spending is added to the NHS budget the figure for Britain is 8.5 per cent. Little wonder the NHS lags behind its neighbours on performance in treatment such as cancer care.

Philip Stephens, “Doctors cannot be blamed for the NHS cash crisis“, Financial Times, 10 February 2016 (metered paywall).

the Sanders attraction

February 10th, 2016

Bernie Sanders does not appeal to wealthy or older voters.

According to New Hampshire exit polls, Mr Sanders trumped Mrs Clinton among female voters 55 per cent to 44 per cent. Indeed, he beat her among nearly every demographic group, with the exclusion of voters who were over the age of 65 or who had an annual income of more than $200,000 a year.

Courtney Weaver, “Sanders victory in New Hampshire forces another Clinton rethink“, Financial Times, 11 February 2016 (metered paywall).

Among young voters (aged 18 to 29) “Mr Sanders won by a margin of nearly five to one” over Hillary.

Bernie and Hillary debate Wall Street

February 6th, 2016

Throughout the Democratic primary, Mr Sanders has managed to keep much of the focus on Wall Street, a contrast from the Republican side where Wall Street regulation has rarely figured in debates. ….

On Thursday [4 February] she [Hillary Clinton] attempted to portray Mr Sanders’ focus on Wall Street as narrow minded.

“If all we are going to talk about is one part of our economy, and indeed one street in our economy, we’re missing the big oil companies, we’re missing the other big energy companies. We’re missing the big picture,” she said.

But Mr Sanders was ready with a retort. “Madam Secretary, it is not one street. Wall Street is an entity of unbelievable economic and political power,” he replied.[Emphasis added.]

When Mrs Clinton went after Mr Sanders and accused him of suggesting that her speeches had made her corruptible to Wall Street’s influence — something she called “an artful smear” — the studio audience at the debate booed.

Courtney Weaver, “Bernie Sanders brandishes his Wall Street weapon“, Financial Times, 6 February 2016 (metered paywall).

Bernie’s weak socialist credentials

February 6th, 2016

Socialists complain that Bernie Sanders is not a real socialist, that he is “Socialist In Name Only”. They have a point. Bernie likes to call himself a socialist (perhaps to shock voters!), but he is actually a social democrat.

Socialism is government ownership of the means of production. A US example is Veterans Affairs, a government agency that owns and operates hospitals. Medicare is an example of social democracy, as the government pays the bill for services provided to older persons mainly by private doctors and hospitals. Bernie’s promise of “Medicare for all” is a call for expansion of social democracy, not socialism.

Incidentally, Bernie has received a surprising amount of money from small donors, without a dollar of cash from Wall Street or large corporations. This alone is an incredible achievement. (See the chart below.)

Clinton and Sanders debate

Source: Financial Times.

Jimmy Carter prefers Trump over Cruz

February 6th, 2016

Jimmy Carter, the former Democratic president, weighed in on the Republican race, telling the House of Lords in London that faced with a choice between Donald Trump and Ted Cruz, he would prefer to see the New York property mogul as president because he is “malleable”. The Texas senator lost almost no time converting the back-handed endorsement into an attack ad against the tycoon who leads in New Hampshire.

Demetri Sevastopulo, “White House countdown: Jimmy Carter prefers Trump“, The World,, 5 February 2016 (un-metered link).

Mr Sevastopulo is Chief of the Financial Times Washington Bureau. The FT graciously allows unmetered access to all its blogs (free registration required). There is much more at the link above, for example this curious “Soundbite”:

“Well, I don’t know. That’s what they offered” – Hillary Clinton, when asked about accepting $675,000 in speaking fees from Goldman Sachs (Washington Post)


Paul Collier on Syrian refugees

February 5th, 2016

Oxford economist Paul Collier has harsh words for Angela Merkel’s offer of free entry to Germany for an unlimited number of Syrian refugees. He believes that her approach is ineffective, and harmful for Syria.

[As] Ms Merkel’s offer of an open door … did not come with a means of reaching Germany, those wanting to flee had to buy passage to Europe from criminals. At the time of the offer, the going price was around $6,000.

That price has since fallen as the people-trafficking business has reaped economies of scale. Which refugees were able to raise such money and how were they able to do it? It was mostly those who had property in Syria. They raised money quickly by selling their homes at a deep discount. So it is the better-off who have reached Germany — and they can never go back.

This is a disaster for Syria: it has been gutted of the very people it will need to lead its post-conflict recovery.

Paul Collier, “Angela Merkel’s open door has harmed those it was meant to help“, Financial Times, 4 February 2016 (metered paywall).

Professor Collier favours an alternative approach: Offer refugees temporary housing and the opportunity to work in safe havens located in neighbouring countries such as Lebanon or Jordan. The tab for this would be picked up by richer countries.

Is this an unrealistic option? Perhaps. But so is entry of millions of refugees into the European Union, with little prospect of them ever returning to Syria.

Sir Paul Collier (born 1949) is former director of the Development Research Group of the World Bank, and author of The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done About It (Oxford University Press, 2007).

revolt of the masses

February 4th, 2016

FT columnist Martin Wolf writes that, in the west, a rebellion against economic and technocratic elites is in progress. The increasing gap between the income of the elites and that of the masses “hollows out realistic notions of democracy”.

We are not Chinese. Maybe even the Chinese will not remain content to hand responsibility for public affairs to a self-selecting elite. ….

As a recent OECD note points out, inequality has risen substantially in most of its members in recent decades. The top 1 per cent have enjoyed particularly large increases in shares of total pre-tax in­come. This divergence between the success of the economic elite and the relative lack of success of the rest has been particularly striking in the US. Thus, notes the OECD: “Between 1975 and 2012 around 47 per cent of total growth in [US] pre-tax incomes went to the top 1 per cent.” As the US has developed a Latin American-style income distribution, its politics have grown infested with Latin American-style populists, of both the left and the right.

How should those in the centre respond? Successful politicians understand that the people need to feel their concerns will be taken into account, that they and their children enjoy the prospect of a better life and that they will continue to have a measure of economic security. Above all, they need once again to trust the competence and decency of economic and political elites.

Martin Wolf, “Bring our elites closer to the people“, Financial Times, 3 February 2016 (metered paywall).

martin wolf

Europe’s immigration crisis

January 28th, 2016

Here are two paragraphs from a piece written by FT columnist Philip Stephens. It provoked a mostly negative reaction from 107 readers before editors closed the conversation to further comments.

Historians will scratch their heads as to how the arrival of 1m people in such a rich, large continent became an existential threat. The newcomers account for just 0.2 per cent of the EU’s population. A sudden influx was always going to be destabilising, but tear apart half a century of integration among some of the world’s most advanced democracies?


Winston Churchill once observed that the public mood in regard to the treatment of criminals is among the “unfailing tests of the civilisation of any country”. Today one could substitute migrants for criminals. Europe will always have its Islamophobes and anti-Semites, but by and large its democracies are rooted in humanity. [Emphasis added.]

Philip Stephens, “Hard-headed humanity can save Angela Merkel“, Financial Times, 28 January 2016.

dissidents in Cuba and in colonial America

January 26th, 2016

This, for me, was the best Alphachat podcast of the past year. FT journalist Cardiff Garcia chats with Miriam Leiva about the life of her late husband, dissident economist Oscar Espinosa Chepe. The first segment of the one-hour podcast, with Miriam Leiva, is followed by two less memorable segments: “A free travel zone for Mexicans to shop in Arizona” and “Hamilton!”, the musical. Read the rest of this entry »