• Opinion: The story BCG offered me $16,000 not to tell

    The city was strange and the society unnerving, but what disturbed me the most about my experience in Dubai was my job as a business consultant.
    By Keith Yost
    STAFF COLUMNIST
    April 9, 2010

    The city was strange and the society was unnerving, but what disturbed me most about my Dubai experience was my job as a business consultant for the Boston Consulting Group.

    I really had no idea what to expect, going in. In my mind, consulting was about answering business questions through analysis. It was supposed to be Excel sheets and models, sifting through data to discover profit and loss, and helping clients make decisions that would add the most value for themselves, and by extension, society.

    It was worrisome to enter a new job without any guarantee that I would be qualified. I assumed BCG would train me, and that as it had been with MIT, intelligence and hard work would prove sufficient. Still, I wondered what I would do if for some reason it turned out that I couldn’t get my head around the analysis? In hindsight, analytical skills should have been the least of my worries.

    Stretching reality

    The first clue that my mental picture of consulting was off came with “training” in Munich. I expected instruction in Excel programming, data analysis, and business theory. Instead, Munich turned out to be little more than a week long social outing with other recently matriculated consultants and analysts within the BCG’s European branches. We donned name tags, shook hands, and drank often. Classes were fluffy, and mostly consisted of discussion of high-level, almost philosophical topics. I got along well — as both an American and a member of the Dubai office, I was doubly foreign and therefore double the curiosity.

    After a pleasant week of pseudo-partying, I returned to Dubai and was assigned to writing case proposals. In the consulting business, it is standard practice for clients to write requests for proposals, describing the question they would like answered. The consulting firm in turn writes a case proposal: We will answer A by having Consultant B do X, Y, and Z. A well written case proposal promises much, but is deliberately vague about what concrete things the consultants will produce.

    Case proposals were despised by the rank and file — one had a dozen bosses, unclear objectives, and virtually no coordination with co-workers. But in one sense, the proposals were good practice for real case work. Both involved stretching reality to fit whatever was assumed the client desired.

    Despite having no work or research experience outside of MIT, I was regularly advertised to clients as an expert with seemingly years of topical experience relevant to the case. We were so good at rephrasing our credentials that even I was surprised to find in each of my cases, even my very first case, that I was the most senior consultant on the team.

    I quickly found out why so little had been invested in developing my Excel-craft. Analytical skills were overrated, for the simple reason that clients usually didn’t know why they had hired us. They sent us vague requests for proposal, we returned vague case proposals, and by the time we were hired, no one was the wiser as to why exactly we were there.

    I got the feeling that our clients were simply trying to mimic successful businesses, and that as consultants, our earnings came from having the luck of being included in an elaborate cargo-cult ritual. In any case it fell to us to decide for ourselves what question we had been hired to answer, and as a matter of convenience, we elected to answer questions that we had already answered in the course of previous cases — no sense in doing new work when old work will do. The toolkit I brought with me from MIT was absolute overkill in this environment. Most of my day was spent thinking up and writing PowerPoint slides. Sometimes, I didn’t even need to write them — we had a service in India that could put together pretty good copy if you provided them with a sketch and some instructions.

    Burning out

    I worked hard at MIT. I routinely took seven to ten classes per semester and filled whatever hours were left in the day with part-time jobs and tutoring. It was a fairly stupid way of going about my education, and I missed out on many of the learning opportunities that MIT offers outside of classes. I don’t recommend what I did to anyone. But as stupid as carrying double course loads was, it had one advantage: After all the long hours I put into MIT, I believed I was invincible. If MIT couldn’t burn me out, nothing else ever could.

    It took roughly three months before BCG disproved my “burn-out proof” theory. Putting together PowerPoint slides was easy, the hours were lenient, and the fifth day of every week usually consisting of a leisurely day away from the client site. By all accounts, I should have been coasting through my tasks.

    What I learned is that burning out isn’t just about work load, it’s about work load being greater than the motivation to do work. It was relatively easy to drag myself to classes when I thought I was working for my own betterment. It was hard to sit at a laptop and crank out slides when all I seemed to be accomplishing was the transfer of wealth from my client to my company.

    I’m a free marketeer. I believe that voluntary exchange is not just a good method of incentivizing people to provide their labor and talents to society, but a robust moral system — goods and services represent tangible benefit to people, market prices represent the true value of goods in society, and wages represent the value that a worker provides to others. Absent negative externalities or monopoly effects, a man receives from the free market what he gives to it, his material worth is a running tally of the net benefit that he has provided to his fellow man. A high income is not only justified, but there is nobility to it.

    My moral system is organized around a utilitarian principle of greatest good for the greatest number — that which adds value cannot be wrong. It did not bother me therefore when I was handed consulting reports that had been stolen from our competitors. If the information in those reports would help us improve our client, then who could say we were doing wrong? Like downloading MP3s, it was a victimless crime.

    What I could not get my head around was having to force-fit analysis to a conclusion. In one case, the question I was tasked with solving had a clear and unambiguous answer: By my estimate, the client’s plan of action had a net present discounted value of negative one billion dollars. Even after accounting for some degree of error in my reckoning, I could still be sure that theirs was a losing proposition. But the client did not want analysis that contradicted their own, and my manager told me plainly that it was not our place to question what the client wanted.

    In theory, it was their money to lose. If they wanted a consulting report that parroted back their pre-determined conclusion, who was I to complain? I did not have any right to dictate that their money be spent differently. And yet, to not speak out was wrong. To destroy a billion dollars is to destroy an almost unimaginable amount of human well-being. Spent carefully on anti-malarial bed nets and medicine, one billion dollars could save a million lives. This was a crime, and failing to try and stop it would be as bad as committing it myself. And if I could not prevent it, then what reason was I being paid such a high salary? How could I justify my income if not by prevailing in situations such as these?

    Sit down, shut up

    Early on, before I began case work, one manager I befriended gave me some advice. To survive, he told me, I needed to remember The Ratio. 50 percent of the job is nodding your head at whatever is being said. 20 percent is honest work and intelligent thinking. The remaining 30 percent is having the courage to speak up, but the wisdom to shut up when you are saying something that your manager does not want to hear.

    I spoke up once. And when it became clear that I would be committing career suicide to press on, I shut up.

    With a diligent enough effort, one can morally justify nearly anything. It was clear that the client was going to go forward with their decision regardless of how I acted. How could I be responsible for a foregone conclusion? And if I had no power to change things, then why shouldn’t I take the course of action that lets me keep my job? Who would it benefit for me to give up my paycheck? With my salary, I could make large and regular contributions to Red Cross or Doctors Without Borders — without it I would just be another unemployed bum.

    But there is a large difference between telling yourself a story and believing it. Ultimately, the core reason I stayed silent wasn’t altruistic, but selfish. At my salary level, and with my expected advancement path, I could comfortably retire in my thirties. That would mean nearly a full lifetime at my disposal, a solid forty years to find true love and raise a family without distraction. It was the opportunity to travel, to achieve great things, to self-actualize. It was the prospect of living a life free of want and need. Who was I kidding? I wasn’t going to donate half my salary to Red Cross. I was going to deposit it into an index fund and speed off as soon as I was sure there was enough gas in the car.

    The conscience is a pesky thing. It was no consolation that I had gotten the moral calculus to work out in my favor. I should have been the most relaxed man on the planet, and yet every day I went back to my hotel room and spent most of my time nervously pacing. I couldn’t sleep at night. I’d fill up a bathtub and scream into it. I couldn’t get over the feeling that this was not how I was supposed to spend my life.

    Staying silent was agonizing. Nominally, my job was to provide advice and aid in my client’s decision-making process. In practice, my job consisted of sitting quietly and resisting the urge to dissent. Each day was like a punishment from Greek mythology; with every meeting my liver would grow anew to be eaten again by eagles.

    I was reminded of the Milgram experiment. I wanted to quit. I didn’t want to have any hand in this, I didn’t want the responsibility of being the destroyer. But the man in the lab coat was telling me that the experiment must continue. Burnout soon followed.

    It wasn’t just that I lost all motivation for my job; it was also that it is much harder than one would expect to do unsound analysis. There is an interesting kabuki dance to be done when crafting figures to fit a conclusion. The conclusion may be wrong, but you still need to make it believable. You still need numbers to fill out your PowerPoint slides, and the numbers need to have enough internal consistency not to throw up red flags at a casual glance. Honest analysis, even when it has weak areas, is easy to defend. If the numbers look fishy, there’s an explanation — you didn’t have direct data on such and such and had to use estimates from another report, or made a reasonable assumption somewhere. But when the numbers actually are fishy, and there’s no underlying logic to defend, you can’t have any rough areas for others to poke at. And when you know everything is fishy, you can’t tell what will look fishy to someone who hasn’t seen any numbers before.

    This leads to what I like to call, “Find me a rock” problems. The classic “find me a rock” story is as follows: A manager goes to his engineer one day and asks for a rock. “A rock?” asks the engineer. “Yes, a rock. That isn’t going to be a problem, is it?” replies the manager. The engineer laughs and tells the manager he’ll go pick one up during his lunch break and it will be no problem. After lunch, the manager visits the engineer again and the engineer shows him the rock. The manager looks at it for a moment before telling the engineer, “No, that one won’t work at all. I need a rock.”

    “Find me a rock” problems sound dead simple, but in actuality have requirements that are poorly stated or unknown. You never know what you’re looking for; you only know that you’ll know it when you see it.

    When you disconnect analysis from reality, it would seem like you are freeing yourself up to do your job any way you like. In actuality, you are exchanging one set of clear objectives and rules for another that is complex and ill-defined. At one point my manager said to me, “Change the numbers, but don’t change the conclusion.” Of course, there’s no trouble in changing the numbers — it’s not as if there was much of a basis for this set of numbers over another — but change them how, and to what? Who knows? Find me a rock.

    I don’t know if I’ll ever have kids. Still, when I find myself in a moral quandary, I like to think it through by imagining how I would explain the situation to my future, hypothetical children. What would I say? How would they react? Could I justify my actions as having been in their best interest?

    I wasn’t sure at the time, but having had enough free time of late to ponder such questions, I think I’ve come to the conclusion that having a father who can pay for a top-notch education outweighs the disadvantage of being raised by a hypocrite. Sticking with the job for the sake of a paycheck passes the children test.

    I was not surprised the day I lost my job. The writing was on the wall. BCG’s management might have been releasing reports claiming countries like Dubai would be islands of stability in the world’s rough financial seas, but to the ground troops, it was obvious the economy was not doing well. From the very beginning of my employment, I hadn’t met a single employee who planned on staying with the company — all of them were scrambling for lifeboats, trying to land cushy jobs with cash-stuffed clients or find their way back to their home countries.

    What did surprise me was the offer BCG made to me as I was on the way out the door. In exchange for me signing an agreement, BCG would give me the rough equivalent of $16,000 in UAE dirhams. Much of it looked boilerplate, like any common compromise agreement used in Europe — in return for some money, I would stipulate that I hadn’t been discriminated against on the basis of race or gender, etc.

    But the rest was very clearly a non-disclosure agreement, and it made me uncomfortable. I signed a non-disclosure agreement when I first took the job, but that only covered BCG’s intellectual property and client identities, things that seemed entirely reasonable to protect. This agreement went much further. Not only did it bar me from making any disparaging comments about BCG or my work experience, but I wouldn’t even be allowed to reveal the existence of the non-disclosure agreement itself. The implication was clear: I could either be a cheerleader for BCG or stay silent, but anything else would bring swift legal retribution. When I asked to have the non-disclosure clauses removed, I was told that the agreement was a standard offer to employees, and that its terms were non-negotiable.

    As hard as it was to decide whether or not to stay at my job, it was easy to pass up the hush money. Mistake or not, my future hypothetical children deserved to hear their father’s story, and $16,000 did not seem like a lot of money in the grand scheme of things. After rejecting the offer, I enjoyed a full night’s rest.

    This is the third in a four-part series on the author’s experiences as a consultant in Dubai.

    http://tech.mit.edu/V130/N18/dubai.html






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  • McDonald's Germany Accused of 'Harassment and Pure Manipulation'

    By John Goetz, Andreas Wassermann and Peter Wensierski


    DDP

    An informant to the former East German secret police held a management position at McDonald's for years. The man with Stasi ties is believed to have spied on a restaurant operator. Were managers at the fast-food chain looking for ways to terminate contracts with franchisees without having to pay them?

    There's a hint of the smell of deep-frying fat in front of the McDonald's restaurants, even though such odors are not supposed to be detectable. "It's the filters," says Ulrich Enzinger, "it's time to change them again." The odor isn't very strong, but 49-year-old Enzinger has a keen sense of smell, honed by 18 years of experience at McDonald's.

    One of his restaurants was in Lindau, a town on Lake Constance in southwestern Germany, in a prime location adjacent to the on-ramp for the autobahn to Munich. Unnerved, he gave up the business a year ago.

    The restaurant is busy on this Monday morning, as Enzinger parks his car in one of the few empty spaces, locks the door and walks toward the entrance. Suddenly a dark sedan pulls up next to him, the passenger window opens and a voice says: "You are barred from the premises. Please leave."

    The incident is reported to McDonald's German headquarters in Munich on the same day. More trouble with the franchisees -- a common problem for executives at McDonald's Germany these days.

    Many of the company's franchise operators are at odds with management. They feel that they are being spied on and put under pressure or, as Munich attorney Horst Becker puts it, "systematically forced out." In the last few years, Becker alone has represented two dozen McDonald's franchisees.

    A Market Shakeout

    The list of accusations is long and includes manipulation during restaurant inspections, harassment and targeted spying. The company even hired detectives to spy on a Frankfurt franchisee it didn't like, and one case is even under investigation by the public prosecutor's office in Munich. With a network of McDonald's restaurants in German that has grown even denser than that in the United States, the company is emphasizing efficiency these days rather than growth.

    Attorney Becker speculates that McDonald's hopes to get rid of franchisees -- its independent business partners who pay a fee to operate one or more restaurants -- as cheaply as possible. The goal, at least according to company documents, is to reorganize the market so that fewer franchisees operate a greater number of restaurants.

    But it isn't quite that easy. The franchise agreements are concluded for the long term, generally with 20-year contracts, and in many cases the restaurant operators have invested millions, making buyouts potentially very expensive. It's cheaper for the company to find ways to terminate its existing agreements.

    Help from a Former Stasi Informant

    Enzinger learned this the hard way. In 2005, he met Bernd R., the man in charge of the McDonald's market in southern Germany. R. had some unusual experiences under his belt. As a cook in the National People's Army of communist East Germany in 1980, he spied on fellow soldiers who had been stealing preserved fruit from the regiment inventories. Officials at the Ministry for State Security (Stasi), East Germany's secret police, were so impressed by the soldier that they recruited him as an informer. His code word for establishing contact with the Stasi was "Gulaschkanone," German for field kitchen). "Intellectually speaking," his managing officer commented, R. was qualified to "complete operational tasks."

    "Roland," as he was also known, then started his career -- first as an employee in the central council of the Free German Youth (FDJ), East Germany's official youth organization, and later as a restaurant manager for one of the main organs of the East German regime. He had plenty to report during the latter assignment. "The candidate said, without hesitation, that he intended to continue supporting the MfS (Ministry of State Security)," one Stasi report stated. From then on, "Roland" reported internal information from the waiters working in the government restaurant. He met with his managing officer for the last time on Nov. 23, 1989, two weeks after the opening of the Berlin Wall.

    R. admits that he worked for the Stasi, but he insists that he did it because he was "put under pressure by supervisors and employees" at the secret police. He also claims that he reported "nothing but banalities" to his managing officer. McDonald's had also been made aware of R.'s past as an informer after it received an anonymous letter. According to a McDonald's spokesman, the company then gained access to the official files, with R.'s permission, and had attorneys review them. They apparently concluded that his Stasi past didn't pose a problem.

    It appears that R. attended to associates who had fallen out of favor at company headquarters in Germany. One of them was Ulrich Enzinger, who was operating five restaurants at the time. Business was booming, and he was sending millions in franchise fees to the Munich offices every year. Nevertheless, he was apparently a thorn in the side of the McDonald's family of restaurants.

     

    Part 2: 'These Are Stasi Methods'

     

    That may explain why R.'s inspectors, dubbed "field consultants," acted more meticulously than usual when they began paying visits to Enzinger's restaurants. They found plenty to criticize, from the menu photos on the counter next to the cash registers, which weren't being displayed in accordance with company rules, to excessive waiting times at the register.

    R. apparently paid personal attention to one of Enzinger's restaurant managers. The former Stasi informer used a McDonald's cruise in the western Mediterranean to get to know the woman. The company had booked a cruise with AIDA, a German cruise line, to reward deserving restaurant and district managers for their performance. For R., it was apparently a good opportunity to develop a closer relationship with Enzinger's restaurant manager.

    R. apparently met with the woman several times after the cruise. Enzinger suspected nothing at first and continued to rely heavily on the woman, who was his most important employee. "I trusted her implicitly," he says today. "We had no secrets when it came to business matters."

    On Oct. 27, 2006, Enzinger was summoned to Munich for a meeting. The man sitting on the other side of the desk was R., who, as Enzinger recalls, wasted no time in getting to the point. The results of the inspections, R. said, were clear enough, and they constituted violations of the franchise agreement. According to Enzinger, the McDonald's employee told him that he wouldn't have any trouble selling his restaurants. He also pointed out that he wasn't management's "watchdog." R. disputes Enzinger's account.

    Enzinger was perplexed. He had in fact referred to R. as management's watchdog, but it was in a private conversation with the female restaurant manager. "These are Stasi methods, I thought to myself at the time," Enzinger, who has a background in hotel management and a degree in business, recalls. He spent the next two years fighting for his restaurants, but eventually became so demoralized that he simply gave up.

    'An Absolutely Isolated Case'

    According to a McDonald's spokesman, Enzinger violated "the restaurant management guidelines." R., says McDonald's, "had discussions with Mr. Enzinger to bring about improvements," which led to "a mutual agreement on the sale of the restaurants." The Enzinger case is by no means symptomatic of the company's relationship with franchisees, says the spokesman, who insists that there is no strategy to force franchisees out of their agreements.

    But the company doesn't seem to be taking the reports as calmly as the spokesman's response might suggest. Bane Knezevic, President and CEO of McDonald's Germany, apparently alarmed by SPIEGEL's inquiries, recently went on the offensive. In an interview with the Frankfurter Allgemeine Zeitung newspaper, Knezevic admitted that mistakes had been made. He said that the company's hiring of detectives to investigate a franchisee was an "absolutely isolated case, and I was only made aware of it after the fact." Knezevic denied the claims of manipulation of inspection results, saying that these complaints were the result of "communication problems and not deliberate manipulation."

    But these so-called isolated cases are enough to fill entire file folders in the office of Munich attorney Becker. His clients include franchisees from all over Germany -- mostly from the southern part of the country, but some of the cases occurred in the states of Hesse and Thuringia in the east and in Hamburg and Schleswig-Holstein in the north.

    'They Wanted Me to Spy on My Boss'

    Another franchisee who was apparently targeted by the McDonald's German headquarters was Matthias Koerber. Like Enzinger, Koerber, a native of northern Bavaria, had a long history with the fast-food chain. He was already flipping burgers and filling French fries into bags at 18, and in 1993 he acquired the franchise for a restaurant in the Bavarian town of Bad Neustadt. Nine years ago, he added a restaurant in nearby Bad Kissingen.

    Andrea Kappel, who worked as a manager in the Bad Kissingen restaurant, had apparently been approached on Dec. 16, 2008 to help provide McDonald's information it needed to get rid of her boss. A field consultant from R.'s team had invited Kappel to a meeting in a caf?, supposedly to discuss her career opportunities at McDonald's. According to Kappel, however, the inspector was only interested in discussing invoices, work schedules and Koerber's legal troubles. "They wanted me to spy on my boss," she says. But she refused, grabbed her purse and abruptly left the caf?.

    From then on, the inspectors began turning up in Koerber's restaurants more and more often. According to several affidavits the Munich public prosecutor's office has obtained from Koerber's employees, the inspectors spent months taking apart the business.

    'Harassment and Pure Manipulation'

    On Jan. 15, 2009, the field consultant and a coworker spent an entire day in the Bad Kissingen restaurant. During the course of the day, the inspectors objected to one employee's tattoos and another worker's shoes, and complained that one worker was too well dressed while another looked too unkempt. As they were leaving, they told Kappel, the restaurant manager, that she ought to be demoted to shift manager, because she was "apparently not up to the requirements."

    During subsequent visits to a Koerber restaurant, the McDonald's inspector found fault with a broken icemaker, questioned whether the restaurant was in compliance with the required schedule for replacing the deep-frying fat, and had the freezer locked temporarily, even though it was a hot July day. When a new delivery arrived that evening, the frozen goods were left outside in the hot sun for 10 minutes. The McDonald's inspector promptly pulled out a thermometer and took a temperature reading: -13.8 degrees Celsius (7 degrees Fahrenheit), which was too warm, by company standards. The product, he said, therefore had to be considered spoiled. "It was harassment and pure manipulation," says Koerber.

    To make sure that he would have sufficient evidence of these methods in the future, Koerber videotaped the inspectors during subsequent inspections. McDonald's responded by seeking a court order to prohibit him from videotaping, because it was allegedly an "infringement of personal rights." Koerber's contract with McDonald's has since been terminated without notice.

    While Koerber continues to fight for his restaurants, Bernd R., the manager of the McDonald's southern German market, no longer works in inspections. He now operates three thriving restaurants in Bavaria that the company had offered to him.

    Translated from the German by Christopher Sultan






    in WorldLife
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  • Promiscuous females 'could prevent species becoming extinct'

    Promiscuous females could prevent their species becoming extinct, scientists have found

    According to research by the Universities of Exeter and Liverpool, females that have multiple mates reduce the risk of producing a brood of offspring without males.

    The study, published today in Current Biology, says an all-female brood could occur when all the 'male' Y chromosome sperm are killed before fertilisation, because of a sex-ratio distortion (SR) chromosome.

    Scientists believe all-female broods will pass the chromosome on to their sons, which will in turn produce more female-only broods and eventually there will be no males and the population will die out.

    Known as 'polyandry' among scientists, the phenomenon of females having multiple mates is shared across most animal species, from insects to mammals.

    For this study, the scientists worked with the fruitfly Drosophila pseudoobscura.

    They gave some populations the opportunity to mate naturally, meaning that the females had multiple partners. The others were restricted to having one mate each.

    Several generations of these populations were bred so researchers could see how each fared over time.

    Over 15 generations, five of the 12 populations that had been monogamous became extinct as a result of males dying out.

    The SR chromosome was far less prevalent in the populations in which females had the opportunity to have multiple mates and none of these populations became extinct.

    Having multiple mates can suppress the spread of the SR chromosome, making all-female broods a rarity, the researchers suggest.

    This is because males that carry the SR chromosome produce only half as many sperm as normal males. When a female mates with multiple males, their sperm will compete to fertilise her eggs.

    The few sperm produced by males carrying the SR chromosome are out-competed by the sperm from normal males, and the SR chromosome cannot spread.

    Lead author Professor Nina Wedell, of the University of Exeter, said: ''We were surprised by how quickly - within nine generations - a population could die out as a result of females only mating with one partner.

    ''Polyandry is such a widespread phenomenon in nature but it remains something of an enigma for scientists. This study is the first to suggest that it could actually save a population from extinction.''

     






    in Interesting Theory
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  • Tracking a new kind of civil disobedience

    “What is the worst wrong here?’’ asks BC professor Lisa Dodson: managers aiding workers or an unjust economy.
    “What is the worst wrong here?’’ asks BC professor Lisa Dodson: managers aiding workers or an unjust economy. (Joanne Rathe/Globe Staff)
    By Kathleen Burge Globe Staff

    As Newton resident Lisa Dodson, a Boston College sociology professor in the thick of a research project, was interviewing a grocery story manager in the Midwest about the difficulties of the low-income workers he supervised, he asked her a curious question: “Don’t you want to know what this does to me too?’’

    She did. And so the manager talked about the sense of unfairness he felt as a supervisor, making enough to live comfortably while overseeing workers who couldn’t feed their families on the money they earned. That inequality, he told her, tainted his job, making him feel complicit in an unfair system that paid hard workers too little to cover basic needs.

    The interview changed the way Dodson talked with other supervisors and managers of low-income workers, and she began to find that many of them felt the same discomfort as the grocery store manager. And many went a step further, finding ways to undermine the system and slip their workers extra money, food, or time needed to care for sick children. She was surprised how widespread these acts were. In her new book, “The Moral Underground: How Ordinary Americans Subvert an Unfair Economy,’’ she called such behavior “economic disobedience.’’

    As Dodson’s questions grew more pointed, she began to hear fascinating stories. Andrew, a manager in a large Midwest food business, said he put extra money in the paychecks of those earning a “poverty wage,’’ punched out their time cards at the usual quitting time when they had to leave early for a doctor’s appointment, and gave them food.

    Andrew had decided that by supervising workers who were treated unfairly - paid too little and subjected to inflexible schedules that prevented them from taking care of their families - he was playing a direct role in the unfair system, and so he was morally obligated to act.

    Dodson concluded that Andrew and many like him were following the American tradition of civil disobedience - this time, against the economy - and creating a “moral underground.’’

    But her book, which came out late last year, has provoked debate about the morality of such acts.

    After Dodson talked about her book on a radio program, American Public Media’s “Marketplace,’’ some listeners posted comments on the show’s website arguing that supervisors like Andrew are cheating their employers.

    Referring to the show’s host, a listener from Leesburg, Va., wrote, “I was surprised that throughout the entire interview, neither Tess Vigeland nor Ms. Dodson touched on what would seem to me a rather crucial point - that these ‘Ordinary Americans’ are stealing from the companies who employ them.

    “The examples Ms. Dodson gave . . . are acts of theft from the companies, yet they are described as if somehow moral and virtuous. It’s one thing for me to see someone in need and open my wallet; its quite another to address that need by giving something I’ve stolen from my neighbor.’’

     

    Although Dodson makes clear where she stands - the subtitle of her book includes the phrase “unfair economy’’ - she said she believes the debate is important.

    “I think that this is a really important conversation that we should have in this country,’’ Dodson said. “What is the worst wrong here? Is it to break a rule or to pass some food over, or is it that we have tens of millions of children and people in families that are working as hard as they can and they can’t take care of their families?’’

    Not all supervisors felt troubled by the plight of those who worked under them. Dodson interviewed supervisors who said they had no obligation beyond the bottom line of their company; some complained bitterly about the work ethic of those who filled low-wage jobs.

    Dodson has had an unusual career trajectory for an academic. She was a union activist and an obstetrical nurse in Dorchester before she began teaching, first at Harvard and now at Boston College. In her first book, “Don’t Call Us Out of Name: The Untold Lives of Women and Girls in Poor America,’’ Dodson studied how women and their families coped in the face of welfare reform as their safety net vanished.

    This time, though, she was drawn largely to the stories of those Americans who worked with the working poor, suggesting that the difficulties of that group also affect the lives of those who intersect with them.

    “I feel as though there’s this tendency is this society to kind of think about low-income people as those people over there,’’ she said, “as though it’s an experience that’s sort of marginal and distant from those of us who are not poor.’’

    In her new book, some of the most wrenching stories are about women who cannot afford child care and leave their children unattended at home, asking older children to watch the younger ones. They feared social service agencies would investigate them for neglect, but they felt they had no choice if they were going to keep their jobs.

    “It was very common for parents to tell me that their kids spent a lot of time all by themselves at home,’’ Dodson said. “That puts the parent into just an untenable position: You’re a bad worker or you’re a bad parent.’’

    Kathleen Burge can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it






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  • God would be an atheist: Why can't we all be Japanese?

    COLUMN By MARTIN FOREMAN
    From God would be an atheist...

    Several weeks ago, a ground-breaking study on religious belief and social well-being was published in the Journal of Religion & Society. Comparing 18 prosperous democracies from the U.S. to New Zealand, author Gregory S Paul quietly demolished the myth that faith strengthens society.

    Drawing on a wide range of studies to cross-match faith ? measured by belief in God and acceptance of evolution ? with homicide and sexual behavior, Paul found that secular societies have lower rates of violence and teenage pregnancy than societies where many people profess belief in God.

    Top of the class, in both atheism and good behavior, come the Japanese. Over eighty percent accept evolution and fewer than ten percent are certain that God exists. Despite its size ? over a hundred million people ? Japan is one of the least crime-prone countries in the world. It also has the lowest rates of teenage pregnancy of any developed nation.

    (Teenage pregnancy has less tragic consequences than violence but it is usually unwanted, and it is frequently associated with deprivation among both mothers and children. In general, it is a Bad Thing.)

    Next in line are the Norwegians, British, Germans and Dutch. At least sixty percent accept evolution as a fact and fewer than one in three are convinced that there is a deity. There is little teenage pregnancy , although the Brits, with over 40 pregnancies per 1,000 girls a year, do twice as badly as the others. Homicide rates are also low -- around 1-2 victims per 100,000 people a year.

    At the other end of the scale comes America. Over 50 percent of Americans believe in God, and only 40 percent accept some form of evolution (many believe it had a helping hand from the Deity). The U.S. has the highest rate of teenage pregnancy and homicide rates are at least five times greater than in Europe and ten times higher than in Japan.

    All this information points to a strong correlation between faith and antisocial behavior -- a correlation so strong that there is good reason to suppose that religious belief does more harm than good.

    At first glance that is a preposterous suggestion, given that religions preach non-violence and sexual restraint. However, close inspection reveals a different story. Faith tends to weaken rather than strengthen people?s ability to participate in society. That makes it less likely they will respect social customs and laws.

    All believers learn that God holds them responsible for their actions. So far so good, but for many, belief absolves them of all other responsibilities. Consciously or subconsciously, those who are "born again" or "chosen" have diminished respect for others who do not share their sect or their faith. Convinced that only the Bible offers "truth", they lose their intellectual curiosity and their ability to reason. Their priority becomes not the world they live in but themselves.

    The more people prioritize themselves rather than those around them, the weaker society becomes and the greater the likelihood of antisocial behavior. Hence gun laws which encourage Americans to see each other not as fellow human beings who deserve protection, but as potential aggressors who deserve to die. And hence a health care system which looks after the wealthy rather than the ill.

    As for sex? Faith encourages ignorance rather than responsible behavior. In other countries, sex education includes contraception, reducing the risk of unwanted pregnancies. Such an approach recognizes that young people have the right to make their own choices and helps them make decisions that benefit society as a whole. In America faith-driven abstinence programs deny them that right -- "As a Christian I will only help you if you do what I say". The result is soaring rates of unwanted pregnancy and sexually transmitted infections.

    Abstinence programs rest on the same weak intellectual foundation as creationism and intelligent design. Faith discourages unprejudiced analysis. Reasoning is subverted to rationalization that supports rather than questions assumptions. The result is a self-contained system that maintains an internal logic, no matter how absurd to outside observers.

    The constitutional wall that theoretically separates church and state is irrelevant. Religion has overwhelmed the nation to permeate all public discussion. Look no further than Gary Bauer, a man who in any other western nation would be dismissed as a fanatic and who in America is interviewed deferentially on prime time television.

    Despite all its fine words, religion has brought in its wake little more than violence, prejudice and sexual disease. True morality is found elsewhere. As UK Guardian columnist George Monbiot concluded in his review of Gregory Paul?s study, "if you want people to behave as Christians advocate, you should tell them that God does not exist."

    I might express that another way. The flip side of Monbiot's argument is that God would be an atheist...

    Martin Foreman is the author of "God would be an atheist," a syndicated print column. For information about syndicating this column, visit www.godwouldbeanatheist.com to contact the author






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  • Summary of research in the area and definitions of terms

    Main articles: Religiosity and Intelligence

    Intelligence is an umbrella term used to describe a property of the mind that encompasses many related abilities, such as the capacities to reason, to plan, to solve problems, to think abstractly, to comprehend ideas, to use language, and to learn. There are several ways to define intelligence. In some cases, intelligence may include traits such as creativity, personality, character, knowledge, or wisdom. However, some psychologists prefer not to include these traits in the definition of intelligence .

    A widely-researched index or classification of intelligence among scientists is Intelligence Quotient (I.Q.). I.Q. is a summary index, calculated by testing individuals' abilities in a variety of tasks and producing a composite score to represent overall ability, e.g., Wechsler Adult Intelligence Scale. It is used to predict educational outcomes and other variables of interest.

    Others have attempted to measure intelligence indirectly by looking at individuals' or group's educational attainment, although this risks bias from other demographic factors, such as age, income, gender and cultural background, all of which can affect educational attainment.

    Dissatisfaction with traditional IQ tests has led to the development of alternative theories, all of which suggest that intelligence is the result of independent abilities that contribute to human performance. In 1983, Howard Gardner proposed the theory of multiple intelligences, which claims a broadening of the conventional definition of intelligence is needed, since, if intelligence is defined as the cognitive or mental capacity of an individual, this would logically include all forms of mental qualities, not simply the ones most transparent to standardized I.Q. tests. The categories of intelligences Gardner proposes are logical, linguistic, spatial, musical, kinesthetic, naturalist, intrapersonal and interpersonal intelligences.

    Jean Piaget developed stages as an alternative to IQ after studying the nature of the wrong answers on items. The Model of hierarchical complexity was formed as an alternative to IQ. Performance on the items varying in hierarchical complexity from 0 to 14, is absolute, and does not require norms. Because the orders are content and context free, they can be used to measure performance in any domain, including the ones mention by Gardner and Goleman.

    Religiosity is a sociological term referring to degrees of religious behaviour, belief or spirituality. The measurement of religiosity is hampered by the difficulties involved in defining what is meant by the term. Numerous studies have explored the different components of religiosity, with most finding some distinction between religious beliefs/ doctrine, religious practice, and spirituality. Studies can measure religious practice by counting attendance at religious services, religious beliefs/ doctrine by asking a few doctrinal questions, while spirituality can be measured by asking respondents about their sense of oneness with the divine or through detailed standardized measurements. When religiosity is measured, it is important to specify which aspects of religiosity are referred to.

    Studies comparing religious belief and I.Q.

    In 2008, intelligence researcher Helmuth Nyborg examined whether IQ relates to denomination and income, using representative data from the National Longitudinal Study of Youth, which includes intelligence tests on a representative selection of American youth, where they have also replied to questions about religious belief. His results, published in the scientific journal Intelligence demonstrated that on average, Atheists scored 1.95 IQ points higher than Agnostics, 3.82 points higher than Liberal persuasions, and 5.89 IQ points higher than Dogmatic persuasions. "I'm not saying that believing in God makes you dumber. My hypothesis is that people with a low intelligence are more easily drawn toward religions, which give answers that are certain, while people with a high intelligence are more skeptical," says the professor.

    The relationship between countries' belief in a god and average Intelligence Quotient, measured by Lynn, Harvey & Nyborg.

    Nyborg also co-authored a study with Richard Lynn, emeritus professor of psychology at the University of Ulster, which compared religious belief and average national IQs in 137 countries. [6] The study analysed the issue from several viewpoints. Firstly, using data from a U.S. study of 6,825 adolescents, the authors found that atheists scored 6 g-IQ points higher than those adhering to a religion.

    Secondly, the authors investigated the link between religiosity and intelligence on a country level. Among the sample of 137 countries, only 23 (17%) had more than 20% of atheists, which constituted “virtually all the higher IQ countries.” The authors reported a correlation of 0.60 between atheism rates and level of intelligence, which is “highly statistically significant.” This portion of the study uses the same data set as Lynn's work IQ and the Wealth of Nations.

    Commenting on the study in The Daily Telegraph, Lynn said "Why should fewer academics believe in God than the general population? I believe it is simply a matter of the IQ. Academics have higher IQs than the general population. Several Gallup poll studies of the general population have shown that those with higher IQs tend not to believe in God,"

    Studies comparing religious belief/behaviour and Emotional Intelligence

    A small 2004 study by Ellen Paek empirically examined the extent to which religiosity, operationalized as religious orientation and religious behaviour, is related to Emotional Intelligence.[8] Paek surveyed 148 church-attending adult Christians and found that religious orientation was positively correlated with overall EI and its subcomponent emotional understanding. While the number of religious group activities was positively associated with EI, years of church attendance was unrelated. Significant positive correlations were also found between level of religious commitment and EI. Both attitudinal and behavioral measures of religiosity were significant predictors of EI, particularly the former.

    In their 2002 article, entitled “Linking emotional intelligence, spirituality and workplace performance: Definitions, models and ideas for research”, Tischler, Biberman and McKeage (2002) reviewed literature on both EI and various aspect of spirituality and found that both appear to lead to similar attitudes, behaviours and skills, and that there often seems to be confusion, intersection and linking between the two constructs. [9]

    Studies comparing religious belief and educational attainment

    In 1975, Norman Poythress studied a sample of 234 US college undergraduates, grouping them into relatively homogeneous religious types based on the similarity of their religious beliefs, and compared their personality characteristics. He found that "Literally-oriented religious Believers did not differ significantly from Mythologically-oriented Believers on measures of intelligence, authoritarianism, or racial prejudice. Religious Believers as a group were found to be significantly less intelligent and more authoritarian than religious Skeptics." He used SAT's as a measure of intelligence for this study.

    In the US, according to raw data from the 2004 General Social Survey, those with graduate degrees were the least likely to believe in the afterlife or the Bible as the word of God, suggesting a link between religious belief and lower educational attainment.

    A weak negative correlation between education and Christian fundamentalism was found by Burton et al. (1989), a small study comparing the religious beliefs and educational achievements of white, Protestant residents of Delaware County, Indiana. Contrary to the researchers' expectations, fundamentalist converts were not less educated people.

    Studies comparing religious behaviour and educational attainment

    In Australia, 23% of Christian church attenders have earned a university or postgraduate degree, whereas the figure for the general population is 13%. Christianity is the predominant religion in Australia, although adherence is falling. Commentators on the Survey attribute the educational levels to sociological factors, such as age, class and income, making no claims about intelligence.

    Studies of Mormons in the US also display a high positive correlation between education levels and religiosity. Survey research indicated that 41% of Mormons with only elementary school education attend church regularly. By contrast, 76% of Mormon college graduates attend church regularly and 78% of Mormons who went beyond their college degrees to do graduate study attend church regularly.

    ® http://en.wikipedia.org/wiki/Religiosity_and_intelligence






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  • Utah Proposes Scrapping 12th Grade; Nevada Rations Diapers; Harrisburg Heads For Bankruptcy; NBA Lockouts Loom

    Here is a quick roundup with a general theme of "Hard Times".

    12th Grade Optional

    Utah considers cutting 12th grade -- altogether

    At Utah's West Jordan High School, the halls have swirled lately with debate over the merits of 12th grade. The sudden buzz over the relative value of senior year stems from a recent proposal by state Sen. Chris Buttars that Utah make a dent in its budget gap by eliminating the 12th grade.

    Buttars has since toned down the idea, suggesting instead that senior year become optional for students who complete their required credits early. He estimated the move could save up to $60 million, the Salt Lake Tribune reported.

    The proposal comes as the state faces a $700-million shortfall and reflects the creativity -- or desperation -- of lawmakers all over.

    "You're looking at these budget gaps where lawmakers have to use everything and anything to try to resolve them," said Todd Haggerty, a policy associate with the National Conference of State Legislatures. "It's left lawmakers with very unpopular decisions."

    "The bottom line is saving taxpayer dollars while improving options for students," said state Sen. Howard A. Stephenson, a Republican and co-chairman of the Public Education Appropriations Subcommittee. "The more options we give to students to accelerate, the more beneficial it is to students and taxpayers."

    Jordan Utah School District To Lay Off 500

    Jordan District to lay off 500 employees because of $30M shortfall

    The Jordan School District will lay off 500 employees by July 1 as part of an effort to make up for a $30 million shortfall.

    By a 6-1 vote, the Jordan Board of Education approved options to reduce the 2010-11 budget, which include personnel cuts, programs and services cuts, transfer of expenditures to other programs, compensation adjustments, class-size increases, and possible tax increases.

    Between now and the end of March, the board will determine which positions and programs will be eliminated. As many as 250 teaching positions and 250 administrative/support staff positions will be cut.

    Not a single teacher need be cut. All it takes is unions to lower salary demands and/or pensions. Any cuts are the direct responsibility of the Teachers' union.

    Harrisburg Pennsylvania Heads For Bankruptcy

    Harrisburg excludes debt payments from 2010 budget

    Harrisburg, Pennsylvania, moved a step closer to defaulting on a bond payment when its city council passed a 2010 budget that does not include $68 million in debt repayments on an incinerator.

    Without the debt provision in the $65 million budget, the state capital may miss a March 1 payment of $2.072 million, a rarity for a municipal bond issuer.

    Joyce Davis, a spokeswoman for Mayor Linda Thompson, confirmed the council's decision -- taken at a special session on Saturday -- and said the mayor is not commenting for now on the implications of exclusion of the debt payments from the budget.

    The council also defeated a plan to sell city assets to help pay down the debt which is guaranteed by the city on behalf of the Harrisburg Authority, a separate municipal entity that owns the incinerator. Council members also rejected Thompson's plan to raise property taxes and water rates.

    N.B.A. Lockout Likely

    Falk Says N.B.A. and Players Headed for Trouble

    A year ago, during a wide-ranging interview to promote his book, Falk — the N.B.A.’s first superagent and a longtime confidant of Michael Jordan’s — warned that the league was in economic distress, that the owners would be seeking huge concessions from players and that a lockout was possible, perhaps even likely.

    Falk predicted then that the N.B.A. would seek a hard salary cap, shorter contracts, a higher minimum age for incoming players, elimination of the midlevel cap exception and an overall reduction in the players’ percentage of revenue.

    When the N.B.A. and the players union opened negotiations this weekend in Dallas, every item on Falk’s list was in play, as part of the league’s initial proposal.

    Billy Hunter, the union’s executive director, called the proposal oppressive Friday, after a 90-minute negotiating session that he described as contentious. Predictions of a lockout are common among players and owners.

    the signs are troubling, and the sides have rarely seemed so far apart. About half of the league’s 30 franchises are losing money, according to some estimates. Owners want a radical restructuring of the economic system, starting with a hard salary cap to replace the current soft-cap system. The union is in favor of maintaining the status quo.

    Falk has been a player agent for 36 years, but he shares the view of league officials that the N.B.A.’s economic system is broken. Small-market owners cannot keep pace with their big-market peers. Players with modest skills are making too much money, leading to a decline in the quality of play.

    Falk blames the union, which in its zeal to protect the salaries of rank-and-file players, accepted maximum salaries on superstars in 1999. The result is a system that guarantees tens of millions of dollars to modest bench players like Jerome James and Brian Cardinal via the midlevel exception.

    In the grand scheme of things, will it matter if the N.B.A. folded? Other than vendors selling beer and guys on the cleanup crew etc., most would not miss it. If half the franchises are losing money, the owners only have themselves to blame.

    Owners don't need salary caps, they just need common sense. All they need to do is stop bidding incredible amounts for players. They have a chance to put their foot down now and negotiate a better contract. The ball is in the owners' court. A nice two year lockout would set the appropriate tone.

    Downtown Minneapolis Hooters Hasn't Paid Rent For A Year

    Party over for Hooters downtown?

    The Hooters in downtown Minneapolis owes more than $350,000 in rent, utilities, taxes and penalties, and the landlords are taking the restaurant's owners to court to force them to pay up.

    Block E Realty claims Hooters' owners, John and Steven Marso, haven't paid the monthly base rent of $9,218 for their prime skyway location at N. 6th Street and Hennepin Avenue S. for nearly a year and a half.

    The suit, filed in Hennepin County District Court on Jan. 21, said the restaurant also owes at least $105,000 in operating costs, $58,000 in taxes and $33,000 in utilities, phone lines and other services.

    The Marso brothers operate the downtown Hooters and another one in Burnsville under the name Twin Wings of Minneapolis. The Burnsville restaurant is delinquent on $47,947 in property taxes for 2009, according to Dakota County records. The Hooters that Steven Marso owned in St. Cloud closed in January 2009.

    Nevada To Ration Diapers, Dentures, Hearing Aids

    NEVADA'S BUDGET WOES: Dentures, diapers for elderly out under proposed reductions, officials say

    Poor people eligible for free Medicaid health care no longer would receive eyeglasses, dentures, hearing aids or as many adult diapers under the $109 million in social service spending reductions proposed by Gov. Jim Gibbons.

    "We are down to the ugly list of options of where we can cut," Department of Health and Human Services Director Mike Willden told members of the Legislature's Interim Finance Committee on Tuesday.

    The state would save $829,304 by reducing the number of adult diapers that incontinent disabled and elderly people would receive. The reduction was mentioned repeatedly Tuesday as the most horrendous example of a budget cut.

    Eligible people now receive 300 diapers per month; that would be cut to 186, which, according to the Health and Human Services agency, is in line with national standards.

    But Washoe Legal Services lobbyist Jon Sasser predicted that elderly people will be spending hours per day "with poop in their diapers."

    "It is abhorrent to be discussing this," Buckley said. "Are we really going to tell the elderly we are cutting them off dentures and hearing aids and diapers? I don't know how we can look the elderly in the eye."

    When questioned about the proposal, Gibbons' communication director, Daniel Burns, said the state simply does not have the money. If legislators do not want to take the limit off diapers, the governor will support them if they find something else to cut, he said.

    "The state can't pay for everything," Burns said. "The governor realizes some adults have to wear diapers. This is a serious (recession)."

    Recovery? There is no recovery. Things are going to get worse for states, not better.

    Mike "Mish" Shedlock






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  • U.S. Report Details Money Laundering

    provided by
    The New York Times

    A suitcase containing $1 million in shrink-wrapped bills, hand-carried into New York by the former president of Gabon for his daughter to buy a Manhattan apartment. Purchases of a stretch Hummer H2 armored limousine and C-130 Hercules military transport planes for a civil war in Angola. And a shell company named Sweet Pink used to funnel millions of dollars into the United States from Equatorial Guinea.

    These and other deals and money transfers took place in recent years because of inadequate controls on money laundering at large American banks and unregulated American lawyers, real estate agents and lobbyists, according to a Senate report released late Wednesday.

    The 325-page report by the Permanent Subcommittee on Investigations, which will conduct a hearing on Thursday, sheds new light on how banks like Citigroup, Wachovia and Bank of America unwittingly shifted hundreds of millions of dollars on behalf of African politicians, their relatives and associates.

    The banks ended up closing or restricting the accounts and cooperated with the subcommittee, offering comments on individual transactions.

    In all cases, the Senate report says, the banks ignored controls intended to prevent money laundering and related screens on PEP, meaning politically exposed persons — high-risk clients from corrupt countries.

    The report recommends strengthening regulations against money laundering at banks and revoking exemptions for lawyers and other third parties from restrictions on money laundering in the USA Patriot Act. It recommends that Congress pass laws requiring people who form corporations to disclose the true owners.

    The report, brimming with bank statements and internal e-mail messages, contains four case studies.

    “Together, these four case histories demonstrate the need for the United States to strengthen its PEP controls to prevent corrupt foreign officials, their relatives and close associates from using U.S. professionals and financial institutions to conceal, protect and utilize their ill-gotten gains,” it says.

    The report details how Teodoro Nguema Obiang, the son of Teodoro Obiang Nguema Mbasogo, the president of Equatorial Guinea, used lawyers, bankers, real estate agents and escrow agents, all Americans, from 2004 through 2008 to move more than $110 million into the United States, including $100 million through Wachovia and Citibank.

    Mr. Obiang, the subject of a criminal investigation into charges of money laundering, bribery and extortion, also employed Sidley Austin Brown & Wood, a law firm now known as Sidley Austin, to help him buy a $38.5 million Gulfstream G-5 jet in 2005, the report says.

    Janet Zagorin, a spokeswoman for the firm, did not return telephone calls seeking comment.

    The report says two American lawyers, Michael Berger and George Nagler, helped Mr. Obiang circumvent controls at the banks by setting up accounts for shell companies with names like Beautiful Vision, Unlimited Horizon and Sweet Pink, named on honor of the rapper Eve, Mr. Obiang’s girlfriend at the time.

    Mr. Obiang, Equatorial Guinea’s minister of agriculture and forestry, used the accounts to pay his personal expenses, including chefs and butlers for his home in Malibu, Calif., and bills at Ferrari of Beverly Hills and Dolce & Gabbana, receipts cited in the report show. He also arranged for Mr. Berger to be invited to the 2007 “Kandy Halloween Bash” at the Playboy Mansion, the report says.

    It says Mr. Obiang hired two American real estate agents to help him buy the $30 million home in Malibu, with suspect money transferred from Equatorial Guinea.

    The report also details how in recent years an American lobbyist, Jeffrey Birrell, helped the former president of Gabon, Omar Bongo, buy six armored vehicles, including the Hummer, and obtain United States government permission to buy six C-130 military cargo aircraft to support his government, all suspect transactions. The purchases were routed through accounts set up at HSBC, Commerce Bank and JPMorgan Chase, the report says.

    Another case study details how Jennifer Douglas Abubakar, an American and the fourth wife of the former vice president of Nigeria, helped her husband bring more than $40 million in suspect money into the United States. It says some of the money was then funneled through offshore accounts.

    The report also details how Pierre Falcone, a native Algerian and known arms dealer now imprisoned in France, used nearly 30 bank accounts at Bank of America’s Scottsdale, Ariz., branch to funnel millions of dollars in suspect money through the United States over 18 years.

    Bernie Becker contributed reporting.






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  • Jim Grant On California And Greece

     

    With Greece getting all the imminent default attention, have we forgotten California? Jim Grant chimes in.

    • Greece: 3% of Eurozone GDP
    • California: 13% of USA GDP

    Rate Curves:

    Greece

    • 3 year: 3.45%
    • 30 year: 6.26%
    • 5 Year CDS: 400+

    California

    • 3 year: 1.89%
    • 30 year: 5.59%
    • 5 Year CDS: 333

    Grant points out Trichet's Jan 14 commentary: "belonging to the euro area, you have an easy means of financing your current account deficit. You share a currency that is credible, so that you have a quality of financing that corresponds to that of a credible currency." Further: "this should be borne in mind, compared with the share of CALIFORNIA, FOR INSTANCE, in the overall GDP of the USA."

    Grants reviews CA's Baa1/A- rating as the worst in the US, the S&P downgrade and the structural not cyclical problem of California.

    • State Revenue up 22% in decade debt service cost +143%.
    • Interest expense to consume 10% of revenues by 2013.

    Howerver Grant's notes that Californida's debt / gdp ratio of "perhaps 25% is dwarfed by Greece 113%"

    Yet as Zero Hedge has pointed out how much does a standalone credit metric such as a state's GDP truly matter? We know CA's trust fund when it comes to funding unemployment benefits is now empty and every month sees greater borrowings from the Treasury.

    Case in point, we present State Unemployment Benefits as seen from the Treasury's (outflow) perspective ($MM):

    Jan-08    3966
    Feb-08    3572
    Mar-08    3673
    Apr-08    3664
    May-08    3123
    Jun-08    3053
    Jul-08    3885
    Aug-08    4650
    Sep-08    5146
    Oct-08    4951
    Nov-08    4341
    Dec-08    7384
    Jan-09    8513
    Feb-09    8808
    Mar-09    10607
    Apr-09    10883
    May-09    9998
    Jun-09    11982
    Jul-09    11979
    Aug-09    11454
    Sep-09    12102
    Oct-09    10749
    Nov-09    10869
    Dec-09    14065

    We expect once the rumored cabal of Goldman and Soros finish their toying with Greece, they will look into the US. Then again, for fears of retribution by the President once it becomes known that a "US bank" (or hedge fund) is actively pushing CA CDS wider, this may be one of the most mispriced securities currently available. To those not fearing the wreath of the UAW, it may be worth the gamble on the short risk side.






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  • College Endowments Suffer Huge Declines

    By AP / ERIC GORSKI

    Students walk through the Harvard Law School area on the campus of Harvard University in Cambridge, Mass. The global economic crisis shrunk the ranks of billion-dollar endowments from 77 to 54 in a year's time. Elite schools such as Harvard, Yale and Stanford absorbed some of the deepest losses.

    CHITOSE SUZUKI / AP

    College and university endowments suffered huge losses in the fiscal year that ended last June, a new report finds, but stronger investment returns in recent months point to a rebound.

    The global economic crisis shrunk the ranks of billion-dollar endowments from 77 to 54 in a year's time, according to a report Thursday that provides the fullest picture yet of endowment performance in the 2008-2009 fiscal year. (See TIME's special report on paying for college.)

    The value of university and college endowments fell almost 19 percent on average during that period in what report authors described as the worst decline since the Great Depression.

    While the downturn hit all types of universities, elite schools such as Harvard, Yale and Stanford absorbed some of the deepest losses. Some of the richest private schools, which rely heavily on endowments to operate and flourished in boom times, have resorted to cutting staff and shelving construction projects.

    "What last year demonstrated is that what goes up does come down — and that's what happened to college and university endowments," said Terry Hartle, senior vice president of government and public affairs for the American Council on Education.

    Things appear to be headed up again, mirroring trends in the stock market and most other investments. In the 2009 calendar year, Duke's endowment grew 8.5 percent and Georgetown's grew 8 percent, school officials said, and other colleges and universities have reported similar gains.

    The swings are part of what has been a volatile decade for endowments, which are managed as permanent assets and are especially crucial for large private schools that don't rely on state funding.

    The average rate of return on endowments soared as high as 17 percent as recently as 2006-2007; endowments on average posted annual gains of 4 percent during the up-and-down 2000s.

    During flush years, colleges and universities have come under pressure to increase spending from their endowments to lessen the burden on students struggling with rising tuition and costs.

    Schools spend 4 to 5 percent of their endowments annually on student aid, faculty, research and other costs.

    On average, schools spent 4.4 percent of their endowments on operating costs in the last fiscal year, up slightly from the year before. More than 7 in 10 schools with $1 billion-plus endowments increased spending.

    "To the extent endowments are there to support the academic enterprise during difficult times, they stepped up to the plate this year," said John Walda, president of the National Association of College and University Business Officers, which jointly issued the report with the nonprofit Commonfund.

    But Lynne Munson, an endowment researcher who has testified before the Senate Finance Committee on the issue, said little evidence exists showing schools with huge endowments are using their wealth to help more students attend college, increase their undergraduate class sizes or deepen research commitments. (See the 10 best college presidents.)

    "They are mostly focused on sitting on those resources," she said. "If you try to sit on too much wealth for too long, you're going to lose a big part of it."

    Republican Sen. Chuck Grassley of Iowa, who has pressed for a minimum payout requirement for endowments, said in a statement he hopes the losses do not lead to tuition hikes or student aid freezes.

    Many colleges "relied on some risky investments, like hedge funds, to get big gains in recent years, and now those strategies are causing losses," he said. "Students shouldn't bear the brunt of colleges' easy-come, easy-go investment strategy."

    Matthew Hamill, a senior vice president at NACUBO, disputed the notion that endowment managers are relying on risky strategies with little regard for the students. He said university endowment managers have posted better returns than major market indexes like the S&P 500.

    "That seems to suggest the investment strategies are very carefully thought through," he said.

    For the first time in several years, smaller endowments outperformed large ones, in large part because of their reliance on fixed-income investments, the report said. More universities and colleges sought to diversify their portfolios by investing in hedge funds, private equity and venture capital.

    Of the universities with supersized endowments, Harvard, the largest, suffered the greatest losses — 30 percent, from $36.5 billion to $25.6 billion in 2008-9. That loss is larger than the entire endowments of all but four other schools.

    Harvard slashed about 275 jobs last year and has announced other cost-cutting moves, including suspending a massive $1 billion expansion project.

    The return on Duke's endowment dropped 24.3 percent to $4.4 billion in 2008-2009, said Michael Schoenfeld, vice president for public affairs and government relations. The private school in Durham, N.C., postponed a major construction project, offered early retirement incentives and isn't increasing salaries for employees making more than $50,000.

    But as with many schools, the last decade has been good to Duke's endowment as a whole — its average annualized returns have been 10 percent, Schoenfeld said.

    "It was certainly not catastrophic to the university's aspirations," he said.






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