If Only These Banks Were Teachers

From the NY Times:

For most people, pleading guilty to a felony means they will very likely land in prison, lose their job and forfeit their right to vote.

But when five of the world’s biggest banks plead guilty to an array of antitrust and fraud charges as soon as next week, life will go on, probably without much of a hiccup.

The Justice Department is preparing to announce that Barclays, JPMorgan Chase, Citigroup and the Royal Bank of Scotland will collectively pay several billion dollars and plead guilty to criminal antitrust violations for rigging the price of foreign currencies, according to people briefed on the matter who spoke on the condition of anonymity. Most if not all of the pleas are expected to come from the banks’ holding companies, the people said — a first for Wall Street giants that until now have had only subsidiaries or their biggest banking units plead guilty.

...

The guilty pleas, scarlet letters affixed to banks of this size and significance, represent another prosecutorial milestone in a broader effort to crack down on financial misdeeds. Yet as much as prosecutors want to punish banks for misdeeds, they are also mindful that too harsh a penalty could imperil banks that are at the heart of the global economy, a balancing act that could produce pleas that are more symbolic than sweeping.

Holding companies, while appearing to be the most important entities at the banks, are in less jeopardy of suffering the consequences of guilty pleas. Some banks worried that a guilty plea by their biggest banking units, which hold licenses that enable them to operate branches and make loans, would be riskier, two of the people briefed on the matter said. The fear, they said, centered on whether state or federal regulators might revoke those licenses in response to the pleas.

Behind the scenes in Washington, the banks’ lawyers are also seeking assurances from federal regulators — including the Securities and Exchange Commission and the Labor Department — that the banks will not be barred from certain business practices after the guilty pleas, the people said. While the S.E.C.’s five commissioners have not yet voted on the requests for waivers, which would allow the banks to conduct business as usual despite being felons, the people briefed on the matter expected a majority of commissioners to grant them.

In reality, those accommodations render the plea deals, at least in part, an exercise in stagecraft. And while banks might prefer a deferred-prosecution agreement that suspends charges in exchange for fines and other concessions — or a nonprosecution deal like the one that UBS is on the verge of losing — the reputational blow of being a felon does not spell disaster.

Maybe if these banks had cheated on some standardized tests, real criminal penalties and jail time would be handed out.

Accountability: Wall Street Edition

This is NOT what I would call taking responsibility for your mistakes:

Former Lehman Brothers Chief Executive Officer Richard Fuld is blaming the feds again, saying his defunct company only went bankrupt because it didn’t get adequate support from the Federal Reserve and Treasury officials.

In prepared remarks before the Financial Crisis Inquiry Commission Wednesday morning on Capitol Hill, Fuld, a key figure in the 2008 financial meltdown, planned to repeat statements he’s made before that blame the government, rather than Lehman's risky investments, for the company's failure.

“Lehman was forced into bankruptcy not because it neglected to act responsibly or seek solutions to the crisis, but because of a decision, based on flawed information, not to provide Lehman with the support given to each of its competitors and other nonfinancial firms in the ensuing days,” he plans to say.

“Had Lehman been granted that same access as its competitors, … Lehman would have had time for at least an orderly wind down or for an acquisition which would have alleviated the crisis that ensued.”

Fuld argues that the demise of the 158-year-old investment bank was out of its hands, caused by rumors that Lehman didn’t have the necessary capital to back its investments. He says the company was not alone in underestimating problems in the subprime mortgage market, pointing out that many government officials overseeing markets didn’t spot the crisis that was brewing.

Fuld also questions why Lehman was forced to file for bankruptcy when other companies, like Wachovia, were saved because they were deemed “too big to fail.”

Fuld is wrong to blame the government rather than himself and the others who ran the company into the ground with risky investment schemes and other kinds of jive.

He is right to wonder why it was Wachovia and others were deemed "Too Big To Fail" while Lehman was not, however.

Except that unlike Fuld, I don't think taxpayers should have been put on the hook for all the "Too Big To Fail" firms they bailed out.

Frankly they should have gone the way of Lehman Brothers and those running them should be in jail doing ten to twenty for fraud.

Which is also where Dick Fuld belongs.

It's For The Good Of The Kids

The salary and benefit cuts, I mean:

BRIDGEWATER -- The 1,360-member Bridgewater Raritan Education Association voted to approve $1.4 million in concessions today, a move that will save 16-full time teaching positions and help soften the blow created by millions of dollars in state-aid cuts to the Bridgewater-Raritan School District.

The BREA did not specify how the give-backs will affect teachers' salaries for the coming school year, but said the teachers and maintenance union agreed to waive $403,000 for tuition reimbursement. Teachers will also pay 1.5 percent of their salaries toward the cost of health benefits next year.

BREA President Steve Beatty said the move was necessary to preserve the quality of education in the district, but blasted Gov. Chris Christie for criticizing the union last week when it appeared contract talks had stalled.

“Our members care about our students and our community,” said Beatty. “It’s unfortunate that the governor’s cuts are requiring the people who work in public schools to make even more concessions than they already have in order to preserve as best we can our excellent public schools.”

“We reject the governor’s attempts to deflect blame for his devastating cuts onto our members,” said Beatty. “He could restore districts' funding just by reinstating the tax on millionaires and dedicating those funds to our public schools.”

Governor Christie can't restore the millionaire's tax - that would hurt the kids, specifically the kids of millionaires as well their wealthy parents.

But teachers have to take salary and benefit cuts or be scapegoated as "hurting the kids..."

This story is from Jersey, but it's coming to a school near you in New York State too once the fall-out from Paterson's budget cuts and failure to pay the districts their state aid hits home.

You can be sure UFT members will be asked to pay for health benefits, take salary cuts or 0% "raises," okay the firing of the ATR's and make other concessions to the city and the state or be scapegoated as selfish, mean-spirited grinches who are "hurting the kids."

You'll note that all of this is happening to schools and school staffs even as Bloomberg hands out $700 million dollar no-bid contracts to crooks and bonuses to city managers while the City Council staff get 4% raises.

Not to mention the billion dollar bonuses Wall Street is handing out with either TARP money or money made from the 0% interest loans Uncle Ben Bernanke and President Accountability have made available through the Federal Reserve ATM machine for Too Big To Fail Institutions like Goldman and Chase.

But we have to give out all these bonuses and no-bid contracts and salary increases to politicians and their staffs while cutting school budgets, cutting school staff, and forcing the ones still around take salary and benefit cuts.

Otherwise the terrorists win. Or something like that.

And most importantly, it's for the good of the kids.

Treasury Timmeh Shills For Financial Firms

From Huffingtonpost:

An arm of the Federal Reserve, then led by now-Treasury Secretary Timothy Geithner, told bailed-out insurance giant AIG to withhold key details from the public about overpayments that put billions of extra tax dollars in the coffers of major Wall Street firms, most notably Goldman Sachs.

Read the rest of the piece. Treasury Timmeh Geithner made sure AIG's counterparties got 100 cents on the dollar even when they were willing to take a lot less, then wanted to make sure those sweetheart deals were kept secret.

It's clear Geithner must resign from Treasury and President Obama must explain what he knew about Geithner's dealings during the period between November 21, 2008 when Geithner was picked to succeed Hank Paulson at Treasury and Geithner's Senate confirmation on January 26, 2009.

Reports about the 100 cents on the dollar sweetheart deals engineered by Geithner for Goldman, Merrill, et al. weren't made public until March but may have been circulated behind the scenes before that.

At the very least, President Accountability should have asked his pick for the Treasury Department just how he handled the AIG bail-out and why.

So tell us, Mr. President: What did you ask Geithner about his doings in the bailout mess before you picked him to run Treasury, what did you learn about his doings during the AIG bailout and when did you learn that Geithner ensured Goldman, Merrill, et al. would get secret100 cents to the dollar sweetheart deals at taxpayer expense?

The answers better be good, Mr. President.

There are a lot of angry people out there watching you give away the store to Wall Street and the Too Big To Fail firms while you raise taxes on middle and working class Americans.

Applying Financial "Innovations" To Public Education

Via Barry Ritholtz at The Big Picture, here are six lessons from the collapse of the economy in 2008-2009 that Economics Nobel Laureate Joseph E. Stiglitz says we haven't learned yet:

1. Markets are not self-correcting, and without adequate regulation, they are prone to excess.

2. There are many reasons for market failures. Too-big-to-fail financial institutions had perverse incentives: Privatized gains, socialized losses.

3. When information is imperfect, markets often do not work well – and information imperfections are central in finance.

4. Keynesian policies do work. Countries, like Australia, that implemented large, well-designed stimulus programs early emerged from the crisis faster

5. There is more to monetary policy than just fighting inflation. Excessive focus on inflation meant that some central banks ignored what was happening to their financial markets. The costs of mild inflation are miniscule compared to the costs imposed on economies when central banks allow asset bubbles to grow unchecked.

6. Not all innovation leads to a more efficient and productive economy – let alone a better society. Private incentives matter, and if they are not properly aligned, the result can be excessive risk taking, excessively shortsighted behavior, and distorted innovation.

Notice number six on the list. Stiglitz elaborates:

While the benefits of many of the financial-engineering innovations of recent years are hard to prove, let alone quantify, the costs associated with them - both economic and social - are apparent and enormous.

Indeed, financial engineering did not create products that would help ordinary citizens manage the simple risk of home ownership - with the consequence that millions have lost their homes, and millions more are likely to do so. Instead, innovation was directed at perfecting the exploitation of those who are less educated, and at circumventing the regulations and accounting standards that were designed to make markets more efficient and stable. As a result, financial markets, which are supposed to manage risk and allocate capital efficiently, created risk and misallocated wildly.

President Obama and Mayor Bloomberg are helping to bring the kinds of financial "innovations" Stiglitz is talking about above to public education.

Neo-liberals like Obama and Bloomberg privilege the "free-market" and want to bring "free-market principles" like merit pay, standardized test tracking and the Race to the Top zero sum competition for funds (12 states win, 48 states lose) to public education in order to shake things up and force what they see as entrenched schools and educators to innovate.

But as Stiglitz notes about the financial markets, if unregulated, they bring short-sighted action and greedy behavior that is harmful to individuals and society as a whole. That's the kind of action we're seeing in public education these days as cities and states try all kinds of unproven innovations, like closing whole swaths of schools in cities like Chicago and New York and reopening them as charter schools.

Mayor Bloomberg has closed over 50 public schools in the last three years. He says more closures are to come in the next four years of his third term. He closes these schools for low test scores and low graduation rates as measured by the Department of Education (some schools with lower scores and rates remain open, however, so the process is not very transparent.) President Obama likes that school closure policy and has institutionalized it as part of his Race to the Top zero sum/winner take all education funds competition.

Leaving aside how some of the most recently closed schools in New York City used to have higher test scores and higher graduation rates before hundreds of at-risk students from other schools were dumped on them, let's note that fear of closure will have all kinds of harmful effects on how schools and educators operate.

You can be sure this year's Regents exams will get extra special attention from the graders when grading time comes. You can also be sure that teachers will feel the pressure from assistant principals and principals. For the ELA Regents exam, essays that should be graded a "2" will get a "3" and perhaps even a "4" if a student is right under a 65 score for the test. With the stakes so high, grade inflation will be rife throughout the system. And merit pay creates the same kind of grade inflation/cheating environment that the school closure policy does, only on the individual level for teachers.

Public education needs to be a collaborative enterprise where teachers help each other and schools work together to educate children. But with the Obama/Bloomberg school closure policies, schools will compete to enroll students who are either at or above grade level while finagling to get at-risk students, ELL students, or support services students off their enrollment lists. Why should a school take a chance having test scores and graduation rates drop and have Mayor Bloomberg order them closed when they can simply exclude "problem" students (as so many of the charter schools do)? On the individual level, why should teachers take on "at-risk" students in their classrooms and risk low test scores when their pay is contingent upon the scores? Even worse, why should teachers take on at-risk students if the safety of their jobs is contingent upon scores, as both Obama and Bloomberg want to do by tying standardized test tracking to teacher evaluations?

As for the data being used to evaluate students and teachers, that too is suspect. Stiglitz notes that "When information is imperfect, markets often do not work well – and information imperfections are central in finance." Well, the same can be said for education. Test scores can be a part of the picture of how a student or a teacher is performing, but they are certainly not the whole part. And considering how easily manipulated the current battery of state tests are, I'm not sure they are even a part of the picture at all. Even Secretary of Education Arne Duncan admits that the tests as currently constructed are imperfect and not a terribly good measure of student or teacher performance. But he also says they're the best we have, so we have to use them. The data fetish itself is a troubling thing these days, but the fact that the data fetishists insist upon using the data even though they admit it is suspect is even more troubling.

Finally, paying students merit pay for test scores seems designed to perpetuate the Wall Street mentality that nothing counts as progress unless it goes up every quarter and pays you a bonus. And I think that's the idea behind all these hedge fund managers and financial wizards getting into the public education sphere. It's simply another revenue grab by the robber barons who already own this country, have already been bailed out by middle and working class taxpayers and make ridiculous amounts of money for the task of moving paper around at the nation's most expensive casino on Wall Street.

You would think that after the hedge fund managers and financial wizards created the worst economic crisis since the Great Depression, they would be shunned from public policy discussions instead of being given a seat at the education reform discussion table and given another taxpayer-provided punch bowl to devour.

Bringing Financial Industry Innovation To Public Education

So many education "reformers" these days come straight from the financial world - billionaire media tycoons like Mayor Moneybags, billionaire monopolists like Bill Gates, billionaire philanthropists like Eli Broad, and all those hedge fund managers/education reformers we met in last week's Style section of the Times.

They like to talk about how important it is we bring MBA management techniques, business innovation, deregulation and of course competition to public education.

You see, collaboration is Communist and the old way of managing schools is so 19th century and what we need to do is bring some of that brash thinking and knack for innovation the boys in finance have brought to the financial markets and the banks.

It sounds great, of course, until you realize that the brash thinking and knack for innovation the boys in finance have brought to the financial markets and the banks also brought us the Tech Bubble, the Enron scandal, the Housing Bubble, the 2008 financial collapse, the bailouts, and crooks like Bernie Madoff.

I'm a public school educator, so I know I'm suspect when I make snide and probably Marxist remarks about the disasters the financial geniuses have caused in the past twenty years.

But what about when Paul Volker, former head of the Federal Reserve and the man widely credited with bringing the U.S. out of the 70's/80's stagflation mess, says it:

Speaking at the Wall Street Journal's Future of Finance Initiative yesterday, former Federal Reserve chairman Paul Volcker looked to finance's recent past and saw little to like, noting that he has yet to see any evidence that financial market innovations have provided any benefit to the economy.

Apparently, Volcker thinks the industry reached a peak when it invented the ATM and, given what's happened over the last year or two, it's hard to disagree with that view.

Yeah, the list of innovations emanating from the financial industry that Volker likes has one item on it - the ATM machine.

All the other innovations he says not only did not provide any benefit to the economy, they "took us right to the brink of disaster."

If the best thinking of the MBA class and the financial industry types brought us the Tech Bubble, the Enron scandal, the Housing Bubble, the 2008 financial collapse, the bailouts, Bernie Madoff, and "right to the brink of disaster," maybe, just maybe, we want to take the innovations they offer for public education with a healthy shaker of salt too.

Pretty Please With TARP Funds On Top

Larry Summers, the director of the White House’s National Economic Council and President Obama's top economic adviser, appeared on ABC's This Week to explain how the administration plans to get banks lending money again.

They're going to beg them by saying "Please lend money, please, please, please!!!!"

Mr. Summers, Secretary of the Treasury at the end of the Clinton administration, said that “it doesn’t cost anything to encourage banks, as the president will be doing, to meet their responsibilities and expand the flow of credit to small business.” He said the president will remind the bankers of what the federal government did to bail out banks when they were in trouble, “that no major bank would be intact, would be in a position to pay bonuses, if that extraordinary support had not been provided.”

The president, he said, “will be talking with them about what they can do to support enhanced lending to customers across the country.”

”We were there for them and the banks need to do everything they can to be sure they’re there for customers across this country,” he said.

Seriously - that's the plan. We were there for you banksters, now you better be there for us by opening up the coffers and lending to consumers and small businesses again.

Gee, that should work.

Never mind that this administration has done everything in it's power to make sure that the banksters (those politically connected ones, at any rate) got 100 cents to the dollar "owed" to them by AIG, that they have bent over backwards to keep Ben Bernanke printing the money presses at the Federal Reserve night and day to provide liquidity for the big banks, that they have kept "Too Big To Fail" institutions like Citigroup and Bank of America and AIG on life support after they speculated on high risk investments, the best they can do to get banks lending again is to beg them.

No wonder the financial institution people treat Obama with contempt and scorn. If that's the best he can do to them after near financial collapse and trillion dollar bailouts last year, then he deserves to be treated with contempt and scorn.

Now compare how Obama and his merry men treat incompetent banksters and failed financial institutions with how they treat schools they declare "failing" and teachers they say are "bad."

What we hear from President Accountability and Secretary of Education Arne Duncan is that failing schools need to be closed, never mind that the causes behind these supposed "failures" may have nothing to do with how good the teachers and administrators in those schools are but stem from larger socio-economic problems like entrenched generational poverty and family dysfunctions like alcoholism and addiction or more mundane problems like large class sizes and few resources.

We also hear from Obama and Duncan how bad teachers need to be fired, never mind that these teachers may have been doing just fine a few years ago before their schools were handed hundreds of "at risk" students with low test scores and troubling graduation rates from other schools that have been closed.

I guess Obama and company suffer from the same fetish so many in America suffer from - that is, the businessman fetish. No matter what happens, the businessman must always be listened to, the businessman always knows best, because he's a, you know, businessman.

Years ago, I used to listen to WFAN, the all-talk radio station, and at least a dozen times a day some know-nothing loud mouth from Jersey or Queens would call to say this is what the Yankees or Mets need to do with the line-up or the pitching staff or whatever. And when the host would say, "What you're saying is stupid and idiotic and makes no practical sense," the callers would say "Hey, I know what I'm talking about. I'm a businessman who runs a __________ business and what works in my place will work for the Yankees. What do you know, you're just a radio DJ!!! I'm a businessman!!!!"

So now some of these same idiots who call sports radio to offer their "business expertise" to their favorite teams are now telling professional educators with actual experience with actual students (usually about 340 a year) in an actual classroom how to educate children. And the rest of us, rather than pointing out the dismal record of business and businessmen in general the past 15 years (think Tech Bubble, think Enron, think Housing Bubble, think 2008 financial collapse, think Bernie Madoff) and noting how they ought to clean up their own messes before creating more of them in other areas of the public sphere, allow these know-nothing loud mouths and their allies in government and the press to call public education "failed."

And of course so much of it starts at the top, where President Accountability lectures teachers about what a bad job they're doing while he rewards the failed financial institutions and the incompetent and/or corrupt banksters who run them by handing them trillions and then begging them to lend some of it out.