Month: September 2009

The Problem With Higher Education in the United States

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This picture really says it all

Felix Salmon uses this chart to suggest that colleges are using these prices increases to become dropout factories, since it’s cheaper to educate a freshman than a senior, but you get the same tuition.

I think that problem comes down to a number of things:

  • Federal aid for college education, particularly the guaranteed student loan program, has been subsidizing increases in tuition and fees for years.
  • The program was introduced in the Higher Education Act of 1965, at the height of the Vietnam war, so the alternative to going to college was to go to the ‘Nam and get shot.
    • When your product is competing against going to war, people will buy your product.
  • The top end schools have been colluding on tuition and fees, along with student aid awards for decades, and this monopolistic behavior is inherently inflationary.
    • In the interest, my step-mother, a former college president, has always maintained that this is not an issue, it’s just a way of “freeing” students from making the choice on anything but quality, and that colleges supply a lot more than they did in, say, 1960.
      • I have always responded that this is classic monopoly theory.  It’s not that competition ends, it’s that price competition ends, so you end up with gold plating.  It’s one of the reasons that professors’ salaries have skyrocketed: Without financial constraints, you get bidding wars.

The real solution is to implement cost growth containment measures in order to show price increases, to require with excessive endowments (Harvard, Yale, etc.), and to keep government aid flat until inflation catches up.

Of course, this won’t happen, because the Ivy league has a death grip on governance in Washington, DC, and because business likes to have its employees in debt peonage.

Economics Update

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Unemployment Chart Pr0n Courtesy Calculated Risk

Well, we have the initial unemployment claims out now (government link), and it appears to point to improvement. Initial claims were 550,000, a decrease of 26,000 from the revised figure of 576,000 (but the initial figure was 570,000, so the drop is 20K, not 26K apples to apples), the 4 week moving average was 570,000, down from 572,250, and the continuing claims number(seasonally adjusted) was 6,088,000, down 159,000 from last week’s revised level of 6,247,000 (only continuing claims were revised up from 6.23m, so the apples to apples drop is actually 142K, not 159K).

Anyone else knowing a pattern in revision numbers, or is it just me?

BTW, note that the continuing claims number drops as people lose benefits or move to emergency unemployment claims.

In any case, with foreclosures up 18% year over year, and poverty rate hitting an 11 year high, 13.2%, things really don’t indicate a rapid improvement.

The weekly claims number needs to be below 400K before we will start seeing increases in employment.

Additionally, we have a leading indicator in Japan, machinery (capital) orders are in the toilet, with orders being the lowest since the start of the survey in 1987.

I’d also stay out of the stock market, as insiders selling continuing to go crazy, and when people sell their own stocks it’s because they know something, even if this knowledge is not sufficient to trigger an criminal or civil investigation.

In the world of central banking, the Bank of England is leaving its benchmark unchanged, and continuing with bond purchases (quantitative easing).

Bonds did fairly well today, with the yields on mortgage backed bonds and US treasuries prices rising, which means that the yields are falling………Unless, of course, you are talking about Polish government bonds, which look to be heading into the world of hurt that their Baltic Republic neighbors are feeling.

Meanwhile, a week inventory report has pushed crude oil up, and the US dollar was up marginally, though whether this is a turn, or just a breather, is unclear.

GM Bails Out Angela Merkel’s Reelection Hopes

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They decided to sell to Magna, whose bid had been anointed by Merkel and the CDU party.

I’m not sure that Merkel can lose now.

Of course, with the SDP categorically refusing to form a coalition with the Left Party, we’re likely to end up with the status quo after elections anyway: The SDP gets the most seats and votes, but by refusing to ally with the Left Party, it means that the CDU-FDP coalition has more seats than the SDP-Green coalition, and the SDP is once again forced to be a junior coalition member.

This may have been “responsible” in 2005, when the last elections happened, but in 2009, after pretty much every single complaint of the LP about the excesses of capitalism have proved true, it’s just stupid.

An Endorsement

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I have added Rob Miller to Matthew Saroff’s Act Blue Page.

You may not know who he is, but he is running for Congress in SC-02 against incombent Joe Wilson (R). Joe Wilson is the guy who shouted, “You Lie” during Obama’s speech.

The ironic part is that if he had said that in response one of the most objectively true assertions during the whole speech.

Miller appears to have raised something like $100K in the past 12 almost 300K in the past 16 hours over $300K in the past 18 hours.

Aw hell…Is there a way to dynamically embed this data?

Ahhh, here we go:


Had to use the depreciated “iframe” tag to make it work in IE.

Any hints on how to make the “embed” tag, aka proper HTML, work in MicroFlaccid’s browser?

Economics Update

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Good news everyone!

I invented a device that makes you read this in your head using my voice!

Well, the Fed’s Beige Book, more formally known as the “Summary of Commentary on Current Economic Conditions”, came out today, and they are seeing signs of improvement (also here).

It seems to me that we are talking about evidence of a bottom, or at least a moderation, as opposed to improvement, but it could be a prelude to a recovery, or a breather on the way down, but either way, it’s good news.

We still have CRE and insurance meltdowns to deal with.

There is also good news from Moody’s, that there is no expectation that they will cut the ratings on sovereign debt for any of the major industrialized nations, so the ratings of, “U.S., U.K., Germany, France. and Spain,” are safe.

Then again, if they are so safe, why did they even have to make this statement?

We also have further evidence of the credit markets thawing, with the 3-month Libor interbank lending rate hitting a record low, and the TED Spread, basically the interest rate spread between public and private debt, falling.

The dropping interest rates, kicked mortgage applications to a 3 month high.

Still, in the real world, single family home prices fell by 0.5% in July, and bankruptcy filings are up 22% in August year over year.

In energy we are now seeing statements from OPEC that there will be no changes to quotas which drove prices up 21¢ to $71.31/bbl, despite increases in inventories.

In currency, the dollar fell to a near 10-month low, despite a slight bump following the release of the Beige Book, to $1.4562:€1.0000 and $1.0000:¥91.61.

Live Blogging Barack Obama’s Healthcare Speech (With Generous Cynicism)

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8:05 pm Watching MSNBC, talking heads going on and on.

8:12 pm Elvis has entered the building…..He is in the doorway.

Now He is walking in, shaking hands, smiling….Mitch McConnel looks like he has just eaten a lemon.

8:16 He’s started talking.

8:18 Talks about recovery and creating jobs….He’s claiming victory, in “pulling the economy back from the brink” (rolling my eyes)

8:22 States obvious: Only modern nation without coverage, etc.

8:23 Talks about how insurance companies sucked, cutting off coverage, etc. Also mentions how it inhibits entrepreneurial activity and business competitiveness.

8:26 Takes a shot at the left about how “disruptive” single payer is. I guess it’s the audacity of nope.

8:28 Accusing people of politics, without naming who is playing the politics….Wimp.

8:29 Claims that his plan will save cost, expand coverage, etc.:

  • No change of coverage is required.
  • Make pre-existing condition coverage denial illegal (what about jacking up the rates?)
  • Will make rescission illegal.
  • Eliminate annual and lifetime caps.
  • Limit on out of pocket expenses.
  • Coverage of routine diagnostic procedures.
  • Will create an “insurance exchange”, after 4 years….What a damn cop out.
  • Tax credit based on need.
  • Tax people who don’t buy healthcare.
  • Tax businesses who do not supply healthcare.
  • 95% of small differences will not have to pay tax, whicm means something like 30% of employees, feh.

8:39 Calling some lies as lies: No “death panels” no coverage for illegal aliens, and he just sold abortion rights down the river. Go Cheney your self.

8:40 Comes out for public option, mentions that there are monopolies in most states, but is there a veto threat for no public option?

8:40 Says that only 5% of of people would take public option, a convenient lie, and says that there would be no tax dollars spent on the system. He minimizes its impact.

8:44 Calls the public option is only a means to an end. Translation: He is willing to throw public option under the bus. Says that he won’t back down on a “choice,” but mentions alternate plans, like the wimpy co-ops as possibilities.

8:46 Promises not to sign a plan that adds “one dime” to the deficit. Wants a “Paygo” provision in the health plan. Thinks that most of cost can be covered by elimination of waste in the system.

8:48 Time to pander to the AARP. Just eliminate waste, and reduce prescription drug payments at the same time.

8:52 Will tax “Cadillac” insurance plans…..Camel’s nose is under the door, it will work its way down.

8:53 Sells plaintiff’s lawyers down the river. “Malpractice reform” is bullshit, just look at the most plaintiff unfriendly state, Texas, and McKinney (IIRC) which is among the most expensive area in the nation.

8:55 What’s with the sour looking dude holding the paper in the air?

8:56 Says that he will call out liars…..I’ll believe it when I see it.

8:57 Invokes Ted Kennedy.

8:58 Invokes America’s “rugged individualism”….I take the Dilbert view, “rugged induhvidualism”.

9:02 “We did not come to fear the future, we came to shape it.” Very nice turn of phrase.

Final assesment: Well delivered, well written, but he’s clearly willing to sell a public option down the road, but wants to be a deficit hawk.

He gives good speech, but the content is lacking.

The End of the Ratings Agency?

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We are seeing two things going on here.

First, we have a crisis in confidence in the ratings agencies, best exemplified by the decision of state insurance regulators reviewing their reliance on ratings agencies:

State regulators scheduled a hearing to review their reliance on ratings firms in grading insurers’ financial strength and whether changes are needed after the plunge of top-ranked bonds exposed flaws in credit scores.

If people no longer believe in ratings agencies, then they no longer have a business.

They business is quite literally a confidence game.

This, however is a long term problem.

The more immediate problem is that the Courts have finally got a clue, and determined that in the presence of evidence, email messages specifically, that these agencies were “putting lipstick on a pig,” that the ratings agencies can be held liable for fraud, and that these opinions, which they sell not subject to 1st amendment protections.

There are clear indications, emails and the like, that the ratings agencies were deliberately issuing inaccurate ratings in order to boost market share and consulting income.

David Einhorn explains why the recent suit against the ratings agencies is so catastrophic:

Their ratings business is entirely dependent on a lack of legal jeopardy, and they have now lost this.

Doubtless there will be some sort of ratings business, but I expect it to be very tightly regulated, or possibly done by a federal agency.

And then there is this bit of Panglossian crap:

Note the comment at about 6:10,

There has already been a shift. There’s a recognition; there’s potential liability, and any intelligent compliance officer at the investment bank, at the major money managers, are going to say, “We have to do something about this,” and they are in the process of changing their practices.

I would not trust this guy to manage a lemonade stand.

First Comes the Denial

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Case in point, the Federal Housing Administration (FHA), which is now denying that the increasing rates of defaults on the mortgages that it backs will require a bailout.

Next should come a statement of health, then a statement of robust health (or some synonym), and then comes the bailout.

Here is the statement from the FHA commissioner:

We will not comment directly on the FHA’s capital reserve ratio until we receive the annual actuarial study. However, contrary to certain misconceptions, the Congressionally-mandated capital reserve ratio, which the annual actuarial study calculates, measures EXCESS reserves above and beyond projected losses over the next 30 years. Even if that level falls below 2%, FHA continues to hold more than $30 billion in its reserves today, or more than 5% of its insurance in force. Given this reserve level, FHA will not need a congressional subsidy even if the congressional capital reserve ratio falls below 2%. Furthermore, FHA’s full faith and credit insurance means that there is no risk to homeowners or bondholders independent of the congressional capital reserve requirement. New FHA loans being issued today are not only critical to our economic recovery, but in addition, FHA continues to make money for the taxpayer; in fact, we project FHA’s FY 2010 book of business will produce $1.4 billion for the U.S. Treasury.

We believe you…..

Republican Family Values

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Michael Duvall, Assembly Utilities and Commerce Committee Vice Chairman was caught on tape bragging about having affairs with two lobbyists.

The money quote:

I’m getting into spanking her and yeah I like it..

Ummmm….Ewwwwwwww!!!

In any case, he has been removed from two of the committees he serves on, one would assume the ones that the lobbyists “served”.

He also talks about her underwear…..Ummmm…..Ewwwwwww!!!!!

But he’s a family values kind of guy:

Such thinking impressed certain constituencies. Earlier this year, the man who never graduated from high school received ‘100 percent’ approval scores 
by the California Republican Assembly, the state’s leading conservative outfit, and the Capitol Resource Institute (CRI), a fierce guardian of traditional family values.


Great googly moogly…I though that I had rather uninhibited tastes during my single days,* but I had the good sense not to brag to everyone in the room, on a live mike.

*Full disclosure: Said “uninhibited tastes” were mostly in my imagination…I was a geek.

Brazil (Probably) Buys Rafale

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So, Dassault has finally gotten an export sale of its Rafale fighter, to Brazil. (Official announcement in Portuguese on a very poorly configured web server)

There were a number of things that helped with this:

  • The Rafale had already taken off and landed on Brazil’s aircraft carrier (see below).
  • The French agreed to purchase the Embraer KC-390 transport, which the US wouldn’t, and the Swedes couldn’t.
  • The France and Brazil are already collaborating on the Brazilian nuclear attack submarines, which, once again, which the US wouldn’t, and the Swedes couldn’t (or maybe they could, as the collaboration with the French is non-nuclear, and the Gotland class AIP boats would have a systems to a nuke boat).

This breaks the logjam for Rafale, but the customer, which has a significant aerospace industry with indigenous design capabilities and extensive existing ties, is fairly unique.

That being said, we also have this report (Google Translation from Portuguese) saying that the deal may not be completely nailed down yet.

H/t ELP Defens(c)e Blog for the tip/vid that the Rafale has already been launched from, and landed on the Foch, which was sold to the Brazilians and rechristened NAe São Paulo.

Ashcroft Can Be Sued Over Misuse of Material Witness Statute

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There are limits to the immunity of people in law enforcement.

Basically, it comes down to the fact that you can sue someone for being wrongly arrested or imprisoned, but not for being wrongly indicted or prosecuted, so a 3 judge federal appellate panel, by a vote of 2½ to ½, there was a partial concurrence by one of the judges, said that a Lawsuit against John Ashcroft over the misuse of the material witness statute can proceed.

Basically, the purpose of the material witness statute is to ensure that a witness who might otherwise become unavailable, i.e. skip town, will be available to the authorities, but John Ashcroft used it to detain people on his whim, which the judges describes as, “repugnant to the Constitution, and a painful reminder of some of the most ignominious chapters of our national history.”

Because a prosecutor cannot be sued for a prosecution, but he can be for an arrest.

Glenn Greenwald’s take on this is a good read.

This Looks Bad

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So, the Supreme Court will be looking at overturning the bans on corporate campaign contributions.

The last time this hit, it was 6-3 supporting the bans, but 2 of those 6 votes are now Roberts and Alito, whose jurisprudence is politically motivated hypocrisy rather results oriented, which makes it a 5-4 decision which will overturn the most basic campaign finance regulations.

So much for stare decisis. They explicitly lied to congress during their confirmation hearings, but you won’t be able to get a conviction.

I’m just waiting for the first case where a Chinese owned firm uses funds to aid a political campaign.