What Do Sarajevo, Quito and Winston-Salem Have in Common?

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Winston-Salem made the Mercer's list of "World's Cheapest Cities for Expensive Living 2011" along with cities like Quito, Sarajevo and number one on the list Karachi, Pakistan. Here's the description of Winston-Salem:

This city of 230,000 people is the least-expensive U.S. city in Mercer's survey. Winston-Salem, home to Reynolds American (RAI)—the holding company of cigarette maker R.J. Reynolds Tobacco—as well as Wake Forest University, Wake Forest University Baptist Medical Center,Novant Health, and Hanesbrands (HBI), has a median household income of $41,979 and a poverty rate of 13.5 percent, according to U.S. Census Bureau data.

The description also says this:

Monthly rent, unfurnished 2-br luxury apartment: $500

So I guess you'll have to take the list with a grain of salt.

Investor Ethics

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Seth Godin argues that businesses can't be ethical, but people can:

It comes down to this: only people can have ethics. Ethics, as in, doing the right thing for the community even though it might not benefit you or your company financially. Pointing to the numbers (or to the boss) is an easy refuge for someone who would like to duck the issue, but the fork in the road is really clear. You either do work you are proud of, or you work to make the maximum amount of money. (It would be nice if those overlapped every time, but they rarely do).

"I just work here" is the worst sort of ethical excuse. I'd rather work with a company filled with ethical people than try to find a company that's ethical. In fact, companies we think of as ethical got that way because ethical people made it so.

I worry that we absolve ourselves of responsibility when we talk about business ethics and corporate social responsibility. Corporations are collections of people, and we ought to insist that those people (that would be us) do the right thing. Business is too powerful for us to leave our humanity at the door of the office. It's not business, it's personal.

Godin makes a great, if uncomfortable, point. No business can be ethical in and of itself, but it can be a reflection of the ethical decisions of the people who run it.  Earlier in his post Godin wrote this:

The unhappy theory of business ethics is this: you have a fiduciary responsibility to maximize profit. Period. To do anything other than that is to cheat your investors. And in a competitive world, you don't have much wiggle room here.

If you would like to believe in business ethics, the unhappy theory is a huge problem.

So the problem appears to be that since a business manager's fiduciary duty is to maximize the profit of the shareholders then it's almost impossible to do the right/ethical thing if it's not in the best interest of the shareholders.  It's an argument we've heard often throughout the recent past in our country and here's my problem with it: it absolves investors from having their own ethics.

There is nothing that I know of that stops investors from saying to the company's managers that keeping its employees on the payroll is a higher priority than returning a 10% profit.  Investors can also tell the company's managers that preserving the environment is a higher priority than higher profits, that avoiding taxes by playing offshore games will not be tolerated, etc.  Sure, at some point you might have to make some hard decisions in order to help the most people – as Godin writes The local store gets very little long-term profit for its good behavior if it goes out of business before the long-term arrives – but investors can at least let it be known that layoffs are the last consideration, not the first.

*Side note – I do understand that some investors are institutional investors, but guess what?  Institutional investors are managed by people wo when you think about business you have to remember that at the top of the pyramid there is always a person or team of people making decisions.*

To be clear, I'm not disagreeing with Godin.  He's absolutely right that all of these "business decisions" are really a series of individual decisions made under the "it's only business" cover.  What I'm honing in on is this penchant for business writers/commentators to bemoan the complexity of the issue because managers must do everything they can to maximize profits because that's what investors demand.  That's probably true, but as Godin pointed out the managers chose to work there and I pointed out that investors chose to set the tone/goals for the organizations in which they invested.  The reality, as most of us have sensed for years, is that many of those "business decisions" are actually individual decisions made by the people who are directed by one very basic human motivation: greed.

This is Breathtaking – Not in the Good Way

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The GAO has released its report about the actions of the Fed during the economic crisis and I have to tell you that I think even the most cynical of us will be blown away by some of the findings, or at least some of the numbers.  I don't care who you are – $16 trillion is a LOT of money.  From a press release by Sen. Bernie Sanders:

Among the investigation's key findings is that the Fed unilaterally provided trillions of dollars in financial assistance to foreign banks and corporations from South Korea to Scotland, according to the GAO report. "No agency of the United States government should be allowed to bailout a foreign bank or corporation without the direct approval of Congress and the president," Sanders said.

The non-partisan, investigative arm of Congress also determined that the Fed lacks a comprehensive system to deal with conflicts of interest, despite the serious potential for abuse.  In fact, according to the report, the Fed provided conflict of interest waivers to employees and private contractors so they could keep investments in the same financial institutions and corporations that were given emergency loans.

For example, the CEO of JP Morgan Chase served on the New York Fed's board of directors at the same time that his bank received more than $390 billion in financial assistance from the Fed.  Moreover, JP Morgan Chase served as one of the clearing banks for the Fed's emergency lending programs.

In another disturbing finding, the GAO said that on Sept. 19, 2008, William Dudley, who is now the New York Fed president, was granted a waiver to let him keep investments in AIG and General Electric at the same time AIG and GE were given bailout funds.  One reason the Fed did not make Dudley sell his holdings, according to the audit, was that it might have created the appearance of a conflict of interest.

I haven't read the whole GAO report, but just browsing through it I found this nugget of "holy s***!" in Appendix III: Assistance to American International Group, Inc. found on page 162 of the report:

The AIG RCF and SBF have closed and were fully repaid and FRBNY expects full repayment on amounts outstanding on its loans to Maiden Lane II LLC and Maiden Lane III LLC. The Federal Reserve Board authorized changes to the borrowing limit and other terms for the AIG RCF over time, and AIG fully repaid amounts outstanding from the AIG RCF in January 2011. AIG’s borrowing under the AIG SBF peaked at $20.6 billion before the AIG SBF was fully repaid in connection with the creation of Maiden Lane II LLC in December 2008. As of June 29, 2011, $8.6 billion and $12.3 billion in principal and accrued interest remained outstanding on FRBNY’s senior loans to Maiden Lane II LLC and Maiden Lane III LLC, respectively. As discussed below, FRBNY recently began to hold auctions to sell parts of the Maiden Lane II LLC portfolio. According to FRBNY staff, the AIG life insurance securitization option was abandoned for a number of reasons, including that it would have required FRBNY to manage a long-term exposure to life insurance businesses with which it had little experience… 

While AIG has repaid its direct assistance provided by FRBNY, FRBNY’s loans to Maiden Lane II LLC and Maiden Lane III LLC remain outstanding and Treasury continues to have significant equity exposure. We have issued several reports that provide additional background on the federal government’s assistance to AIG.

I think what this is saying is that all the direct assistance to AIG has been paid back, but some of the money that the Federal Reserve put into two special purpose vehicles (Maiden Lane II, LLC and Maiden Lane III, LLC) established to help AIG, about $8.6 billion in principal and $12.3 billion in accrued interest has not been repaid yet.  The Fed expects to start recouping the money soon, but it's kind of mind blowing that we're still on the hook for almost $21 billion for AIG alone.

(h/t to Ed Cone for the link)

Lost in Translation

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One of the things I have set up at work is a system to monitor feeds from various information sources like Google Alerts, RSS Feeds, Twitter feeds, Facebook feeds, etc.  One thing I've noticed is that some of the local media outlets let errors creep into their headlines when they translate them for their social media feeds.  I know they try to get out a lot of info in a short amount of time so I understand typos and bad grammar creeping into the stories themselves, but I don't think it's too much to ask that headlines be done right.   Lest you think I'm referencing one or two isolated incidences let me just stroll through my Twitter feed and give you a sampling from the past week, followed by my initial thoughts upon reading the offending headlines:

@myfox8: High Point Police Officer Seriously Injured After Being Rescued from Wrecked Patrol Car http://t.co/BfEhYWK
"Please God don't let me be rescued by the same people."

@WXII: Homes Evacuated By Gas Leak At Vacant House http://bit.ly/p2qBzY  
"What does a gas leak look like when it goes door-to-door?"

Here's an interesting comparison; look at the previous gas leak story headline and compare it to this one at myfox8:
@myfox8: Hwy. 70 Closed in Whitsett Due to Gas Leak http://dlvr.it/bpXgc 
A little more accurate wouldn't you say? 

@myfox8: Fire Closes Wright Brothers Visitors Center Temporarilyhttp://dlvr.it/bx7SR 
"Did the fire have a key?" 

@myfox8: Overturned Grain Truck Closes I-40 Ramp on US 421http://dlvr.it/bvSyt 
"It's a helluva truck that can pick itself up and direct traffic like that."

To be fair, with the possible exception of the first headline, the questionable construct of the headlines won't cause you to misinterpret what the stories are about.  Also, there are probably 100 stories linked to on Twitter without questionable headlines for each headline that contains the kind of error that would make your average 8th grade English teacher turn red with frustration. And, again, I understand how much info they're processing and getting out to their respective audiences, but I still think there must be a lot of old-school editors out there shaking their heads in wonderment at what has become of their industry. 

So, is it unrealistic to hold media companies to the same editorial standards for their social media as we do for their traditional media?

A Couple of Interesting Developments at JournalNow

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The Winston-Salem Journal's online operation caught my eye a couple of times this past week.  First they integrated Facebook with their comment system in an effort, I assume, to deal with some pretty nasty/terrible anonymous commentors on the site.  I haven't studied it in depth, but the move seems to have helped with the tone of the comments.  Truth be told they couldn't have made the situation any worse so I think it was a good move.

The second thing I noticed was this story on a man who's installed a water capture system at his house.  The story itself was interesting, but what really grabbed my attention was that it was a video.  It was produced by the folks at the Hickory Daily Record, but I could see the W-S Journal doing the same thing with their own reporters.  Seems like a smart move to me – especially with stories that lend themselves to the video format – and now that they've added the ability to share/embed the stories I think they'll be able to really take advantage of their readers' social media activities. (Maybe they've been doing this for a while and I missed it, but either way I think it's a good idea).  Here's embed of the story:

They’ve Got the Power

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Here's our most recent installment of "Truth is Stranger Than Fiction":

Korean scientists think they have determined what caused a 39-story Seoul skyscraper to shake violently for 10 minutes, causing the building to be evacuated for two days.

Earthquake? Nope.

Gale-force winds? Sorry.

Volcanic activity? Unh-uh.

No, the culprit, they say, was 17-middle-aged gym rats working off the midriff bulge in a Tae Bo class.

Apparently, while dancing and boxing to "The Power" by Snap on July 5, the exercisers not only shook their booties, they shook the building.

Read more: http://www.sfgate.com/cgi-bin/blogs/hottopics/detail?entry_id=93459#ixzz1SfpAR13v

 

Tough Times

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In case you missed the news, times are tough.  Ed posts a press release from Greensboro Urban Ministries. In part it says:

Over the past several months, Greensboro Urban Ministry’s Emergency Assistance Program has seen a dramatic rise in the demand for emergency financial assistance, particularly since the beginning of July when Guilford County Department of Social Services outsourced its county financial assistance program.  All of Greensboro Urban Ministry funding for emergency financial assistance comes from private sources such as local congregations, Duke Energy Foundation, Tannenbaum-Sternberger Foundation, other foundations, and concerned individuals.  No city, county, state, or federal funds are used.

In April, our Emergency Assistance Program provided $33,447 for 112 families needing help with rent, mortgage, or utility assistance; in May, $40,996 for 153 families; in June, $47,580 for 199 families.  So far this month through July 18, $19,745 for 86 families has been spent. 

Every morning this month long lines of people have lined up for services with food, clothing, and financial assistance.  Emergency assistance funding aims to help families over a short term crisis, but unfortunately, many of the people coming to us are in long term crisis with no income.  For these people, the solution is to find a living wage job.  Such jobs are in very short supply. 

If you polled all of the local food banks, shelters, job assistance agencies, etc. you'd hear a variation on GUM's story.  Over the last couple of weeks I've talked with the folks from Second Harvest during PTAA's Fill the Stands With Cans events and they've repeatedly said that they're incredibly busy these days and the demand for their services keeps increasing. 

Yes the economy seems to be improving slowly, but here in the Piedmont Triad jobs just aren't coming back at the rate they need to and the social safety nets are getting frayed. It really is very simple – until we get jobs we're going to keep hearing stories like these.

US Debt is Falling

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Here's an interesting blog post at Time.com that points out how overall US debt is falling:

The U.S.'s overall debt – which is government debt plus individual household debt plus corporate debt and bank debt – when compared to our GDP, which is how most economists look at these things, is actually much lower than many other developed nations. Overall, the U.S. and its citizens owe a little over $41 trillion. That, of course, is a lot of money. But when compared to the U.S. GDP, it's not a shockingly bad number. In fact, it's pretty good, when compared to other nations. The U.S.'s debt is equal to 275% of our GDP. That percentage for the United Kingdom is over 450%. Japan's overall debt-to-GDP is about the same as the U.K. Spain comes in at nearly 350%, and France's debt is above 300%. Our debt level is about the same as Germany, which everyone think is pulling off economic miracles these days. But more importantly than that, the U.S. appears to be the only developed country where the overall debt level is falling…

Of course, the reason our overall level of debt has been falling is because of individuals and not government. Government debt is continuing to rise. Private household debt has been falling, in large part because people have been losing those households, and the debt that goes with them. Consumers have also reigned in spending and are now saving at the highest level in years. And that is one of the reasons that the economic recovery has been slower than expected.

But Charles Roxburgh, who did the study for McKinsey, says his point, at a time when there has been a lot of focus on government debt, is that overall debt matters. Private debt – what individuals, banks and companies owe – can become public debt, as we have seen from the bailouts. So the fact that our private debt is falling is a positive in the government debt debate.

Read more: http://curiouscapitalist.blogs.time.com/2011/07/18/surprise-u-s-debt-is-falling/#ixzz1SZlZPQmN