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Some insights into the thinking of Robert Rubin from an interview by Ken Brown and David Enrich with the former Treasury Secretary in the Clinton administration about the 2008 financial crisis. As Justice John Paul Stevens. the longest serving Supreme Court justice on the bench once said, those who administer the judicial system form the backbone of the law. In a like manner those who administer the financial and economic system form its backbone, which is why Rubin faces some tough questions in this interview. At the time he was Treasury Secretary, the NYT magazine ran a story on Robert Rubin, as the kind of person who liked to put things down rationally on a note pad, and think things through on the basis of this rational analysis. This is how he approached the Mexican financial crisis of 1994 and the 1997 Asian financial crisis. Here is some of that note pad Rubin, in the context of CDO's and risk taking, with something gone awry. Risks that according to this NYT report Rubin encouraged at Citigroup in 2004 and 2005, on the basis of the idea that Citi's competitors were taking on more risk and making bigger profits. His note pad approach appears to have led to conclusions by Rubin that considering the additional profits that could be made by Citi by ramping up the risk taking in 2004 and 2005 and afterwards like its competitors, it could lead to losses if things went wrong, but these losses would'nt come close to wiping out the profits made during the good times. The cyclical downturn he expected to see in 2004 and 2005 when he is reported to have added his voice to others that the bank take on more risk, was a cyclical downturn of the type he had seen during the 1994 Mexican devaluation and the 1997 Asian financial crisis. He had no idea that it would be a cyclical undervaluing of risk added on to a housing bubble, and to a triple A ratings issuance that was misguided. Rubin says here that there was hardly anyone who saw that low-probability event as a possibility. Was the housing bubble a low probability event, and were the issuance of ratings by the credit ratings agencies compromised by the drive for more business a normal pattern, or would some digging up of facts and some innate skepticism of the prevailing current in favor of one's own instincts that something was overdone missed in the notepad analysis of a supposedly rational approach? Or was there a feeling that somehow the U.S. with its long tradition of technology, its work ethic and sophisticated financial system was somehow immune to something as severe as what the Asian countries were experiencing in 1997, or what happened in the 1930's. Asked about his view of what happened Rubin says that looking back there was an enormous amount that needs to be learned. Rubin is also in a quandary when he has to respond to the public concerns about excessive executive compensation. Rubin made $115 million in pay since 1999, excluding stock options, while under his purview as the highest ranking board member Citigroup let some of the problems that it faces now accumulate. As Citigroup faces $20 billion in losses in 2008, a bear raid on its stock by short sellers who ironically were able to do this because of some of the lax regulation set in motion in the Rubin Greenspan years leading to the suspension of the Uptick rule, and the $45 billion government bailout last week. Rubin may have helped Citi but in a different sort of way. He was able to persuade Treasury- Treasury Secretary Paulson was a fellow executive at former employer Goldman Sachs- through the days before the bailout, ensuring government help was on its way. Citigroup shares had dropped to $3.77 a share in the third week of November 2008, losing 50% of their value in one week, as the discussions took place. ...

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All sides had to make concessions to reach a new agreement on a restructuring of Greece's debt, and new terms for loans to Ireland and Portugal. The agreement was reached after negotiations between France, Germany, the ECB, and eurozone countries with a declaration issued on July 21, 2011. The powers and financing of the European Financial Stability Facility (EFSF) were expanded to be the main mechanism for channeling EU funding to reduce the burden of Greece's debt. Germany will provide new funding and be open to additional commitments, something German chancellor Angela Merkel had resisted since the beginning of the crisis in 2010. Earlier funding had come with high interest rates and only when the situation had reached a crisis, with Germany insisting on the punitive rates and conditions as a way to discourage countries from taking advantage of cheap borrowing. In exchange for commitment of German funds Ms Merkel had insisted that banks and private creditors share in the losses. Private bondholders resisted but finally agreed to take a loss of 20% of principal on a small portion of the bonds. Their larger concession was to take lower interest rates and extend the maturities to 15 years and 30 years on new bonds which are guaranteed by the EU. The specific terms of the agreement are as follows: The EFSF and the IMF will lend Greece 109 billion euros over 3 years at 3.5%. Private creditors including German and French banks will "voluntarily" turn in their old bonds for new ones that mature over 15-30 year periods. These new bonds include 15 and 30 year Greek bonds with varying coupons. Some of the bonds would have a 20% discount on principal. EU leaders say the private sector contribution amounts to 37 billion euros through 2014 and 106 billion euros through 2019. Another part of the program is for the EFSF to buy back some of the Greek bonds on the secondary markets, which would mean Greece would now owe a smaller amount to the EFSF on these bonds. The EFSF will now have additional financial support from Germany and other EU countries and be authorized to provide aid to countries before a crisis situation arises. It would also have power to buy Greek bonds at prices on secondary markets to reduce the Greek debt burden. Ireland and Portugal are also assisted in the agreement. The interest rate for EU aid to Ireland and Portugal is taken down to 3.5%. Ireland is paying about 6% on the EU portion of its 67.5 billon euros bailout and efforts to reduce the rate were resisted earlier. The main theme behind these concessions and provisions is to give Greece, (and Ireland and Portugal) a chance to grow. High interest rates came under strong criticism because it only increased the size of the debt burden of these countries with a shrinking economy and high unemployment. The failure to come together behind a broad and sensible agreement with all parties making serious concessions, the EU, the ECB and the political leadership in these countries especially Greece, was undermining confidence in the euro and the eurozone itself. By mid-July Italy and Spain were feeling the effects of contagion in the financial markets, U.S. debt ceiling negotiations were unsettling global financial markets, the pressure was intense to come up with the workable agreement achieved on July 21, 2011. ...

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David Wessel points to some problems with the Paul Ryan budget proposal. Ryan's plan does not balance the budget till after 2030, and Congress would have to raise the debt ceiling each year till then. The changes to Medicare Ryan proposes would limit how much the government spends, but the savings from this do not come for a decade, as people expected to retire in the next 10 years will still have Medicare. Ryan's proposal shows how deep the cuts will have to be if deficit reduction is done without raising taxes. Pete Domenici and Alice Rivlin who developed a deficit reduction plan, said they were disappointed that the Ryan plan "fails to address the need for new revenue," which they consider crucial for truly tackling deficit reduction. The Obama budget failed to offer a comprehensive deficit reduction plan, leading to openness for new ideas. The health care delivery system in the U.S. needs to be efficient and costs need to come down. Ryan's proposal gives no idea where the efficiencies will come from. Would they come from competition between private insurers? How will escalating healthcare costs be controlled. Another consideration is that even with its problems Medicare is less costly to administer than private insurance. Everything depends on seniors shopping vigorously for the best premiums because risks and costs are borne by seniors, with the idea that this will somehow control escalating medical costs....

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Matt Bai's interview with Mario Cuomo, former governor of New York. The conversation covers different topics: Mario Cuomo's speeches, the affinity and the dissonance with his son Andrew Cuomo's idea of liberalism and his own, about the kind of triangulation practiced by Clinton and Obama, and his sense of being a liberal in the old fashioned way. The talk goes to a speech Mario made about helping the poor without crushing the middle class and the sense today that the task ahead is about helping the middle class without crushing the poor. Mario mentions a conversation with Bill Clinton about an offer to join the Supreme Court. Mario said he told Clinton he would not be able to debate and talk freely about his views if he accepted that position. Considering Mario Cuomo's speeches this is sincere. He is torn between the struggles experienced by his father and others of the most ordinary working men and women of the period between the wars, the idea that there had to be a better way, and the difficulties of making that better way work in the real world in the postwar period. There is a sense that one has been forgotten or is now out of place- the dissonance with the times- when a serious contribution was made at one time and place that will always be there. One generation taking over from the last, adapting in its own way, the values timeless....

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A technology that has been known for years but with problems to solve before it can go on the road is being developed by automakers. It will increase fel economy by about 15% and reduce emissions of oxides of nitrogen a key smog component. GM is working on getting HCCI which stands for Homogenous-charge Compression- Ignition to work in a gasoline engine. For it to work the combustion process in such an engine has to meet certain conditions, the mixture of air an fuel has to be homogenous and be at certain temperatures. Once this is achieved combustion occurs without a spark. The trick is to get the temperature and gas mixture to just the right homogenous levels so that it sparks and burns efficiently, which at this time is being achieved by computer controls keeping the engine rpm within a certain optimal range of 1000-3000 rpm which covers typical driving. Problems that remain to be tackled are the faint rattling type noise when the engine shifts to spark ignition when its outside this range of rpm, and the emissions reduction at low loads, and handling a range of fuels. GM has made progress upto the advanced engineering and road test phase for the Saturn Aura. German automakers Mercedes and VW are perfecting there own versions of HCCI and Honda is developing its version and its a top priority for these automakers. ...

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Roubini at NYU and Rosenberg at Merrill Lynch see serious damage this time- prolonged and serious downturn. Roubini sees the auto loans and credit cards next as another bubble unraveling. The consumer may have already been affected and the effects there may be serious and lasting in 2008 and 2009. Exports may not boost manufacturing that much as to make up for the severe impact of a number of things-tight credit, consumer spending declines, housing bust, and escalating oil prices. The losses from the housing and mortgage bubble has been estimated at around $400 billion, Roubini thinks that the figures approaching $100 billion that the candidates are saying they would stimulate the economy by are nowhere near the $300-$400 billion needed and the government cannot afford that magnitude of stimulus. Experts are saying that the losses of firms are not revealed as firms are not saying much, and there is a lot more to come which will act as a further drag on growth. Roubini thinks this one will be severe and a recovery may not be in the works to 2010 or 2011. Some stimulus after the election and rate cuts may just make it appear that things may reverse themselves, but there is just too much going on. The consumer has human feet that are bound to falter at some point with all this burden stacked onto him....

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During the early weeks of the Libyan people's struggle the Wall Street Journal was one of the rare voices that stood up for freedom in Libya, saying the U.S. had to have the will and was not so overstretched that it could make a difference working with its allies in NATO. It took some time for the Obama administration to make up its mind by which time the Gaddafi forces would have entered Benghazi. It was the leadership of Sarkozy of France and Cameron of Britain that made the decisive difference at the right time. And as the tide turned it was the young people of Libya who could be seen in the video footage who showed bravery against the organized heavily armed forces of the Gaddafi regime. The lesson from the U.S. support for the Libyan people's movement for democratic government is that the U.S. can make a moral difference and a strategic difference when it follows the right instincts that have guided the country since its founding.

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Pearlstein quotes Dickens in "Oliver Twist," about the law being an ass, and the constitutional law exercize in the Supreme Court of the U.S. giving a sense of a failure of the so-called best and brightest in reasoning out the issues. He points out that a serious problem is that American business which is burdened with high health care costs for employees is seriously missing in this debate after years of complaining about high costs. The National Federation of Independent Businesses is actually one of the plaintiffs questioning the constitutionality of the Obama health care law. Pearlstein says business wanted an end to the fee-for-service medicine that increases consumption of medical services and pushes up cost relentlessly, and that Obama's health care law does this. This is not the case as both Democrats and Republican administrations have failed to resolve this side of the cost issue, and this is the hidden reason for the loss of credibility for both sides in this debate, leaving health care problems to be resolved in future administrations. ...

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Should age be a factor for running for president of a country. In the U.S. the main candidates are all in their seventies. Elizabeth Warren is the exception. She is 70 yeas but looks much younger with a lot of energy. Sanders even at his age of 78 is giving it all he's got with gusto and nerve, and so is Warren at 70, and Trump at 76. So how does one decide in favor of youth with inexperience as compared with age with experience and belief in oneself and ideas. It is also pertinent that old can become new again. Corbyn is trying to take UK back to a quieter more stable period post war. The young can get pragmatic or lose authenticity and connectedness.

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By carrying only 150,000 passengers of its normally 42.4 million passengers and grounding all but a few aircraft Ryanair Europe's largest airline, will show a loss of 100 million pounds. It will resume operations by July when it expects about half of the 42.4 million passengers for the quarter. Routes will be cut and prices adjusted with profits expected by September 2020. It expects full recovery of the airline industry to take about 2 years. For the financial year ending March 2021 it expects about 100 million passengers for the year down from 154 million passengers normal for the year. Ryanair is one of the only airlines that was able to plan this far. It has laid off one sixth of its 18,000 staff.

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Mexico's newly elected president Lopez Obrador says spending for a new airport was not in the interest of a country with Mexico's social needs. He voted to cancel the project in favor of using a military airbase north of Mexico City and building new runways to complement the existing airport. The aiport project was a key effort by the outgoing administration of Pena Nieto. About $5 billion spent on the airport would be written off, and bondholders holding $6 billion in bonds could ask for payment.

The airport cost originally estimated at $10 billion is now expected to cost $13.3 billion. Mexico City airport handled 44 million passengers last year and the new airport was intended to handle future congestion.

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New York City and Northern Virgina are selected as the second and third locations for Amazon headquarters. Amazon will evenly split operations for the HQ locations between Long Island City and Arlington County's Crystal City locations. About 25,000 employees will be hired for each location. The location in Northern Virgina is close to Washington Reagan International Airport and metro stops making it appealing. Long Island City was a former industrial neighborhood that is going through a residential housing boom with 16,000 new apartments built since 2006. It is close to airports and subway lines.

Amazon had as criteria for the selection that the locations have flights with easy access for Seattle, job creation impact, and prominence as the main company in the area.

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This report in WSJ shows that AI or Artificial Intelligence cannot work without human intelligence behind it. As the Facebook Russian episode of inauthentic accounts shows it can lead to dire results. Human have to play a active and constantly overseeing role for it to work. In fact the bigger the AI effort the bigger the need for humans to actively conduct and monitor it and back it up with human intelligence. Truckloads of human intelligence are needed for a primitive AI system to be able to sort out data and process it. The process continues once a AI system is created or it will likely fail with disastrous results. Context is critical. Oxford University experts say hundreds of thousands of people are involved in human intelligence to make AI work.

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Indian prime minister Modi says India "will go above and beyond" the 2015 Paris climate change accord. He said at a news conference with French president Macron that it was "our duty to protect Mother Earth." He said after the meeting that the Paris accord was "the common heritage of the world," and "a gift that this generation can give." India has set ambitious goals for solar and wind energy as costs of solar become competitive with coal. Because India desperately needs energy for over 200 million people who lack electricity, India's shift away from reliance on coal may be a lesson learned from the damage to air and water in China's two decade industrial expansion based on coal.

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The Medicare for All movement in the U.S. gathers momentum after the U.S. midterm elections with states. Governor Newsom of California says he will seek federal authority to setup a state single payer plan for health insurance. An expert at Georgetown University says there is a new burst of energy for broader coverage or universal health coverage. States with new governors or seeing this momentum are California, Washington, New Mexico, Maine, Nevada, Delaware, Oregon, Connecticut, Wisconsin, Michigan, Illinois. Polls show a large majority of Americans now support Medicare for All as a form of universal health coverage for all Americans, a system that prevalent in Canada for the last 50 years. Two hearings will be held in Congress on Medicare for All in 2019.

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Ivan Rogers, Britain's former ambassador to the European Union says ideas about liberation are fantasies, just fantasies. There would be endless negotiation on every issue. After 2 years of negotiations most of the tough questions about Britain's future trading relations with the European Union remain unanswered.

Some just want to get on with the job, including Mrs. May. But the tough questions are not going away as a cross party group in parliament seeks to take control of the process and call for an extension under Article 50 for the March 29 deadline. In addition to the intra party divisions and lack of cooperation from the Labor party, there are doubts in Scotland, Ireland and Northern Ireland about future relations.

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Imagine a place that is rural, far from industrialization, and facing high levels of air pollution. In Gaborone, Botswana, the social prestige of driving cars and increasing car population is creating levels of air pollution from second hand older cars with poor emissions control. People driving cars see cyclists as coming from poor families and simply drive them off the road. 

See how cycling to work is being promoted as normal and dignified by a Swede who is the Ambassador of the EU to Botswana, and how many in the middle class and colleges are cycling to work to promote a return to older ways of doing things that make sense as healthier for the environment and for one's health.
 

 

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The new iX3 will run 497 miles on a single charge and shows BMW's effort to reinvent the car from the ground up says it's CEO. Mercedes electric GLC will run for 457 miles on a single charge, competing at $80,000 with the Model Y of Tesla which does 387 miles at over $60,000. Mercedes GLC price is still to be decided. Tesla has lost a third of it's market volume in the European market. The newer versions of Mercedes and BMW join VW's own models that compete at the lower end of the price range which today is close to $30,000-$40,000. Earlier reports in WSJ show the German models are competing for dominant share in Europe.

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Karabell points out that Egypt ranks 137 in the world in per capita income (behind Tonga) and a population in the top 20. Two thirds of the population is under 30 years of age. The young in Egypt have no future with high rates of unemployment and little of the industrial development that you see in other large developing countries such as China, India, and Brazil. The 30 year rule of Mubarak also stifled any opportunity for public participation in the political process. During that rule Mubarak consciously decided to not pursue rapid economic development, something China has done even though it has a lack of public participation in the political process. As a result Egypt simply fell behind while the rest of the developing world improved opportunities in education, incomes and job opportunities.

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Mary Barra, 51, head of global product development, is the new CEO of GM following Dan Akerson. Akerson will retire. She is a electrical engineer who started as a co-op student at GM in 1980. Her experience includes engineering positions, managing a assembly plant, and heading the human resources department in 2009. The president's position goes to CFO Dan Ammann, 41. Former Cummins CEO and chairman, Mr. Solso, will take up the chairman's position at GM. Mark Reuss will assume Mary Barra's position. This completes the transition planned by Akerson as the government sells its remaining shares in GM following the bailout. Akerson says he felt as if he was seeing a daughter graduate from college. It is a significant moment for the U.S. auto industry as a younger leadership looks to the future.

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Mervyn King of the Bank of England and Ben Bernanke both were academics at MIT, and both share the approach they are taking for quantitative easing or credit easing. They are buying up assets like government bonds in the case of Bank of England to reduce the yields, and commerical paper, mortgage backed securities, and consumer debt in the case of the Fed, also to reduce yields and drive up prices. The idea is to act more decisively than the Bank of Japan did during Japan's banking crisis, and flood the system with cash so that there is real impact. There is less danger of inflation in this downturn, which is one of the calculations that the Fed and the Bank of England are both making as they do this.

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Jean-Marie Le Clezio is hailed as "author of new departures, explorer of humanity beyond and below the reigning civilization," by the Swedish Academy. This Frenchman loved to explore foreign cultures from North African immigrants in France to native Indians in Mexico and islanders in the Indian ocean. He wins the Nobel Prize for Literature for 2008. His novels include "Desert," about a Sahara woman and her encounters with European civilization, the "Prospector," and others. Le Clezio's novel "Onitsha," is based in Nigeria during the British colonial period. His father was a British doctor with connections to Mauritius where he also lived. He was born in Nice and studied at Bristol university in the UK and spent a year in Nigeria. He now spends time between Nice, Mauritius, and Albuquerque.

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Steve Jobs anticipated a post PC period when he told a technology conference in 2010 that PC's would retain a lot of their value, but he said they will be used only by one out of so many users. Tim Cook told a Goldman Sachs investor conference recently: "From the first day it shipped, we thought- not just me, many of us thought at Apple- that the tablet market would become larger than the PC market, and it was just a matter of time that it took for that to occur." Analysts see this happening sometime between 2013 and 2017.

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US agricultural exports (corn soyabeans, grains, frozen pork, oilseeds etc) have surged 20% by weight in the 6 months ending Feb 29 according to the Dept of Agriculture. But facts on the ground, at railyards and ports suggest that without the shortage of containers the exports would be much higher. Ports are already congested and one shipping line based in Singapore is divering 10 of its 120 ships away from US ports. One agricultural commodities trader pays truckers to spend the night at railyards in the hope of picking up empty containers. And containers have to be sent hundreds of miles to where they are needed instead of being right nearby as used to be the case. Shipments of lentils and peas are being delayed by months. And in this situation cargo ship operators are raising prices.

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The problems in consumer spending, housing prices remain aeven after the crisis in the credit markets appears to have calmed down. And corporate bankruptcies and bond defaults remain a problem as well as the billions of the $945 billion IMF estimated losses that have not yet been taken. According to Standard and Poors some 122 issuers with debt around $102 billion are vulnerable to default. Even if like Rip Van Winkle one slept through the Bear Stearns crisis and the financial crisis one would things largely similiar to that before the current settling of the credit markets and the dangers to consumer spending and from housing price declines and foreclosures, corporate bankruptcies and corporate bond defaults and more losses not previously revealed, much the same as before and just as dangerous as before.