Movement

The CM visits the Beggars Colony in the city and which ultimately results in headline from DH:

Plight of beggars in colony moves CM

So one expects a lot of sympathy and a firm commitment to help improve the plight of the people in the colony. Instead one realises that the CM was so moved that all he could think of was to move the colony to some other, "better", place:

The government is now contemplating to shift the Colony to a new location, a better place. The Chief Minister has now proposed to shift the Beggars’ Colony and establish a ‘Mini-Lalbagh’ along with a government hospital on a five acre land in the location.

“Being in the centre of the City and worth around Rs 1,000 crore, the land can be used for various purposes. This would be decided in the next Cabinet meeting,” he said.

Land worth Rs 1000 crores! The possibilities are endless and the imagination goes wild. Will be interesting to see how and to whom they sell it off.

America: Where Even The Prostitution Is Better

From the NY Times:

Prostitution in America isn’t as brutal as it is in, say, India, Nepal, Pakistan, Cambodia and Malaysia (where young girls are routinely kidnapped, imprisoned and tortured by brothel owners, occasionally even killed).

But the only problem is, it isn't!

“If you don’t earn enough money, you get beat,” said Jasmine, an African-American who has turned her life around with the help of Covenant House, an organization that works with children on the street. “If you say something you’re not supposed to, you get beat. If you stay too long with a customer, you get beat. And if you try to leave the pimp, you get beat.”

The Nuclear Deal

And all that it was to do for the Indo-US partnership are in reality far from the touted ideal. Who could have known!

The United States-India nuclear deal was promoted as a transformative initiative — one that would put the bilateral relationship on a much-higher pedestal. In his valedictory speech, President George W. Bush declared: “We opened a new historic and strategic partnership with India.” By contrast, Prime Minister Manmohan Singh has not made a single statement on the deal — not even to Parliament — ever since the vaunted deal came to fruition, othe r than to admit recently that he got his party to back the deal by threatening to resign.
...
Seven months after the deal’s realisation, there is no sign of its transformative power. Rather, doubts have arisen over the supposed “global strategic partnership” with America. The policy frame in which Washington is viewing India is not the larger Asian geopolitical landscape, but the southern Asian context. But even on regional matters of vital interest to India, the U.S. has sought to ignore New Delhi or pursue antithetical policy approaches. To the chagrin of Indian neocons — who ingenuously marketed the nuclear deal as a U.S. move to build India as a world power and counterweight to China — Washington has declared that its “most important bilateral relationship in the world” is with Beijing.

Link.

The Class Dialectic

Class:

Declasse:

It's Official, The Banks Own the US Government

DURBIN: And the banks -- hard to believe in a time when we're facing a banking crisis that many of the banks created -- are still the most powerful lobby on Capitol Hill. And they frankly own the place.

And that's a serving Senator speaking, no conspiracy theorist. Link.

Update: And the Vice-Chairman of Berkshire Hathaway thinks so too:

May 2 (Bloomberg) -- Berkshire Hathaway Inc. Vice Chairman Charles Munger, whose company is the largest private shareholder in Goldman Sachs Group Inc. and Wells Fargo & Co., said banks will use their “enormous political power” to prevent changes to the industry that would benefit society.

“This is an enormously influential group of people, and 90 percent of that influence is being spent to gain powers and practices that the world would be better off without,” Munger, 85, said yesterday in an interview with Bloomberg Television. “It will be very hard to accomplish the kind of surgery that would be desirable for the wider civilization.”

...

Munger said the financial companies spent $500 million on political contributions and lobbying efforts over the last decade. They have a “vested interest” in protecting the system as it exists because of the high levels of pay they were earning, he said. The five biggest U.S. securities firms, only two of which still exist as independent companies, paid their employees about $39 billion in bonuses in 2007.

Our Media

From The Hindu:

Over the last few months, just as the economy entered its current recessionary phase, the mainstream media, which till then had been uniformly unswerving in their antipathy to NREGA (National Rural Employment Guarantee Act), suddenly began to sing its praises.

Because rural people don't really matter till they are required to bail out the economy!

Talking Movies (Not Really)

It may seem tame considering what has come since, but Henry Levin's 1960 teen romantic comedy Where the Boys Are was fairly revolutionary for its time.

... the movie tells the tale of two college co-eds, Merritt (Dolores Hart) and Melanie (Yvette Mimieux) on spring break in Fort Lauderdale, Florida. Merritt hesitates on taking the penultimate step in the game of what she calls "backseat bingo" in order to win the heart of a special beau; Melanie fairly explicitly affirms (for the time, anyway) that she intends to show no such restraint.

Of course, it ends very badly for Melanie. Lured to a party at aroadside motel where she believes that her new boyfriend will be present along with other desirable young Ivy League "Yalies", she is next seen wandering aimlessly in the middle of a busy highway, hair and clothes disheveled - as the then movie morals code would not allow the word that described her obvious violation to be explicitly uttered, the audience was left to draw the obvious inference as to the terrible price she paid for her licentiousness.

She gets hit by a car; in the hospital, she confesses the worst part of her sin to Merritt. "They weren't even Yalies!" she sobs.

But it is not really about the movie.

Thirty eight years later, in 1998, US Commodity Futures Trading Commission chairwoman Brooksley Born, in seeking to uphold the integrity of the financial system, was similarly accosted. However, in contrast to poor Melanie, the gang that attacked her possessed just about the highest imaginable academic pedigrees. They were the then deputy secretary of the Treasury (and now the chair of President Barack Obama's National Economic Council) Laurence Summers (BA Massachusetts Institute of Technology, Phd Harvard); Federal Reserve Board chairman Alan Greenspan (BA, MA Columbia, Phd New York University); and the leader of the gang, Treasury secretary Robert Rubin (BA Harvard, LLB Yale - yes! he was even a Yalie). After the attack on chairwoman Born, the gang carelessly hopped into their souped-up hot rod and proceeded to further make the preparations for their rich-kid, thrill-kill firebombing of the world financial system we see occurring today.

Lessons From The Crisis

One interesting thing about the global screw-up is that one sees how things work more clearly. One sees what clothes the various emperors are wearing, with the help of people in the know. Like former IMF chief economists.

The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.

Oligarchy

When will the revolution happen here? Or has it already occurred and we don't even know about it?

The reality is that the worldwide economic meltdown and the bailout that followed were together a kind of revolution, a coup d'état. They cemented and formalized a political trend that has been snowballing for decades: the gradual takeover of the government by a small class of connected insiders, who used money to control elections, buy influence and systematically weaken financial regulations.

Link.

Cloning Mr Reddy. a.k.a. The West Knows Best!

From The Business Line:

For adhering to the general view more staunchly than was expected by a mere governor of a central bank, the Reserve Bank of India and its then Governor, Dr Y. V. Reddy, drew enormous flak. Such was the bad blood that was created — largely by hired guns — that even his deputy governor, Dr Rakesh Mohan, was not spared. In the end, the campaign came in the way of his becoming Governor.
He was, it is reliably learnt, seen as being a “Reddy clone”. Ironically, today, every central banker in the world is dying to be labelled a “Reddy clone.”

And these are relevant questions too:

Why is it that if India has an approach to something, Indian economists wait for it to be validated by the West before they accept it? Indeed, why do they attack the Indians who advocate that view before such validation is bestowed by the West? I genuinely believe that the Finance Ministry, which funded the Mistry report, and the Planning Commission, which funded the Raghuram Rajan report, have some serious explaining to do. As indeed do the economists who toed their line and kept up LeT like attacks on the RBI.

Could it be because we have our own share of maroons, blowhards, people with hidden agendas, and people talking their books? Or is it just that we believe the west knows best?

Corruption

From FT:

There was a steady erosion in business ethics and moral standards in commerce and trade. Regulatory capture and corruption, from petty corruption to grand corruption to state capture, became common place. Truth-telling and trust became increasingly scarce commodities in politics and in business life. The choice between telling the truth (the whole truth and nothing but the truth) and telling a deliberate lie or half-truth became a tactical option. Combined with increasing myopia, this meant that even reputational considerations no longer acted as a constraint on deliberate deception and the use of lies as a policy instrument.

Regulatory Capture is defined as:

... situations in which a government regulatory agency created to act in the public interest instead acts in favor of the commercial or special interests that dominate in the industry or sector it is charged with regulating.

State Capture is defined as:

State capture is the phenomenon in which outside interests (often the private sector, mafia networks, etc.) are able to bend state laws, policies and regulations to their (mainly financial) benefit through corrupt transactions with public officers and politicans. The notion of state capture deviates from traditional concepts of corruption, in which a bureaucrat might extort bribes from powerless individuals or companies or politicians themselves steal state assets (see kleptocracy). State capture is recognised as a most destructive and intractable corruption problem, above all in transition economies with incomplete or distorted processes of democratic consolidation and insecure property rights.

We're not talking about transition economics though. We're talking about the US & UK - submerging economies. So it is only to be expected that it would be called something else, rather than just 'corruption'.

'Slumdogs and Negative Lists'

Ramesh Ramanathan from livemint:

As the film Slumdog Millionaire graphically depicts in an early scene, the plight of the urban poor can be sickeningly sad. Unfortunately, policymakers believe that the challenges of poverty are still in rural India, and the market finds urban India’s burgeoning middle class too attractive to pay attention to the urban poor.

I want to focus on a practice in the banking industry—relatively unknown outside the sector—that I believe can cause enormous damage to the lives of the urban poor: negative lists in credit appraisals. A negative list is a list of areas of a city that a bank has identified where residents would not qualify for credit approval, just by virtue of the location.

This is a relatively new development in India. Historically, banks relied on customer relationships and on-the-ground assessments by local staff to make credit decisions. However, a more rule-based approach to the credit approval process, de-emphasizing individual judgement and focusing on credit scores is now being practised, led apparently by some foreign banks and private sector banks (and possibly some public sector banks as well). Such a process can—while delivering many risk management benefits and scale economies—create an insidious form of systemic discrimination against the poor.

The data on negative lists is very hard to come by, given that much of this is proprietary within each bank, and no formal paper trail can really be established. However, the urban microfinance organization that I am involved with has stitched together some sketchy information for Bangalore, and the results are troubling:


*
There are a total of 153 negative list areas, spread across 43 pin codes accounting for about 40% of the total pin codes in the city.
*
These are common to many banks since they use common local agents.
*
A qualitative analysis of the negative list areas indicates high overlap with the low-income and slum areas of the city.
*
Factors that apparently go into the definition of the negative list include crime statistics.

To put it bluntly, negative lists are discriminatory. Consider the implications.

Lack of access to formal credit can have damaging consequences—on a personal level, it can drive people into debt traps from informal sources who can charge interest rates up to 10% a day. On a larger level, though, the consequences are even more destructive. As formal funds get sucked out of these areas, commerce gets bogged down, the entire neighbourhood deteriorates, driving a downward spiral of economic decay where the whole community—residents, traders, labourers— become dependent on an informal ecosystem of financial support to keep them afloat. This is the breeding ground for the mafia and criminal networks.

I’m not trying to sensationalize the problem. The US had a practice similar to our negative lists, called “redlining”, where areas of a city that were poor or dominated by blacks were credit-quarantined. Consider this quote from a book titled When Work Disappears—The World of the New Urban Poor by William Julius Wilson, professor of social policy at Harvard, “Redlining paralysed the housing market, lowered property values and further encouraged landlord abandonment. Abandoned buildings would serve as havens for drug dealing and other illegal activity.”

I don’t believe there is a sinister motive behind negative lists—just a natural evolution of seemingly logical business rules to ensure a systems-based process for low-risk credit growth in banks. This is especially true given that we don’t have reliable information on individuals, and credit history data is just beginning to get systematically compiled and shared. Unfortunately, we don’t always understand the downstream consequences of our actions.

Given the seriousness of the negative list issue, it needs to be stopped. This is not going to happen with corrective action from market forces—it will require policymakers to enact legislation to set the right framework, and then enormous patience, persistence and creativity to ensure compliance.

A bit of comparative history is useful. When the redlining practice in the US became public in the 1960s, there was enormous pressure for several years to get corrective policies. The Fair Housing Act of 1968 and the Community Reinvestment Act of 1977 were seminal pieces of legislation that addressed redlining discrimination.

We need to initiate a similar process here in India. First of all, RBI needs to formally confirm the existence of the practice of negative lists. The onus is then on RBI and the ministry of finance to establish the necessary regulatory checks to protect against this.

Discriminating on the basis of location means not giving people an equal shot at improving their lives. In this sense, these people are doubly damned: first by their birth into a poor household— what Warren Buffett evocatively calls the “ovarian lottery”—and second, by our systematic biases in denying opportunities to them. If India is to be a country where we want to embrace the power of the market, we need to ensure that the rules of the game are fair: that is, everyone gets equal opportunity to fulfil their full economic potential.

Udayan Asks For $10 Bn

He wants the government to spare this amount and buy up what the FIIs are selling. Let's see. The government buys up all those shares in all those private firms. I'm guessing that it then becomes a major shareholder in said firms. So, it can decide what they should do and not do. Like keeping cement prices low.

I say, just do it.

Free Markets 0, Greenspan 0

...in a tense exchange with Representative Henry A. Waxman, the California Democrat who is chairman of the committee, Mr. Greenspan conceded a more serious flaw in his own philosophy that unfettered free markets sit at the root of a superior economy.

“I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms,” Mr. Greenspan said.

Referring to his free-market ideology, Mr. Greenspan added: “I have found a flaw. I don’t know how significant or permanent it is. But I have been very distressed by that fact.”

Mr. Waxman pressed the former Fed chair to clarify his words. “In other words, you found that your view of the world, your ideology, was not right, it was not working,” Mr. Waxman said.

“Absolutely, precisely,” Mr. Greenspan replied. “You know, that’s precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well.”

OK, that's that then.

Welcome To The USSRA!

Man is this guy angry! Nouriel Roubini (who's he, eh? Let's just say, The Man Who Saw The Future, or since we are already in it, The Man Who Saw The Present Before Almost Anyone Else. More info here, and here, and indeed here):

For the last twenty years after the collapse of the USSR, the fall of the Iron Curtain and the economic reforms in China and other emerging market economies the world economy has moved away from state ownership of the economy and towards privatization of previously stated owned enterprises. This trend was aggressively supported the United States that preached right and left the benefits of free markets and free private enterprise.

Today instead the US has performed the greatest nationalization in the history of humanity. By nationalizing Fannie and Freddie the US has increased its public assets by almost $6 trillion and has increased its public debt/liabilities by another $6 trillion. The US has also turned itself into the largest government-owned hedge fund in the world: by injecting a likely $200 billion of capital into Fannie and Freddie and taking on almost $6 trillion of liabilities of such GSEs the US has also undertaken the biggest and most levered LBO (“leveraged buy-out”) in human history that has a debt to equity ratio of 30 ($6,000 billion of debt against $200 billion of equity).

So now Comrades Bush, Paulson and Bernanke (as originally nicknamed by Willem Buiter) have now turned the USA into the USSRA (the United Socialist State Republic of America). Socialism is indeed alive and well in America; but this is socialism for the rich, the well connected and Wall Street. A socialism where profits are privatized and losses are socialized with the US tax-payer being charged the bill of $300 billion.

Read it all.

Convincing The Great Unwashed

And how the US government does it. From the New York Times.

In the summer of 2005, the Bush administration confronted a fresh wave of criticism over Guantánamo Bay. The detention center had just been branded “the gulag of our times” by Amnesty International, there were new allegations of abuse from United Nations human rights experts and calls were mounting for its closure.

To the public, these men are members of a familiar fraternity, presented tens of thousands of times on television and radio as “military analysts” whose long service has equipped them to give authoritative and unfettered judgments about the most pressing issues of the post-Sept. 11 world.

Hidden behind that appearance of objectivity, though, is a Pentagon information apparatus that has used those analysts in a campaign to generate favorable news coverage of the administration’s wartime performance, an examination by The New York Times has found.

The effort, which began with the buildup to the Iraq war and continues to this day, has sought to exploit ideological and military allegiances, and also a powerful financial dynamic: Most of the analysts have ties to military contractors vested in the very war policies they are asked to assess on air.

Those business relationships are hardly ever disclosed to the viewers, and sometimes not even to the networks themselves. But collectively, the men on the plane and several dozen other military analysts represent more than 150 military contractors either as lobbyists, senior executives, board members or consultants. The companies include defense heavyweights, but also scores of smaller companies, all part of a vast assemblage of contractors scrambling for hundreds of billions in military business generated by the administration’s war on terror. It is a furious competition, one in which inside information and easy access to senior officials are highly prized.

Yawn. So who didn't know that?

A Nation Of Hypocrites

Ramesh Ramanathan writing in Mint (no link):

A Nation of Hypocrites

I read a news report a few weeks ago of a terrible incident that took place in Delhi: a 12-year old boy whose bicycle was damaged by a car that was part of a wedding reception.  When he asked for compensation so that he could repair his cycle, the people in the party took offence, beat him up and burned him to death in a nearby field.  The story was buried in the regional pages, and generated hardly any public outcry.

A few days later, there was a story of a 2-year old child who had been trapped in a borewell – a common occurrence across the country.  Incidents like these capture the public imagination, and the media obligingly provides a minute-by-minute report of the rescue efforts.

I wondered at these two occurences and reached an uncomfortable conclusion.  We Indians are a nation of hypocrites.  Our inconsistencies are not always in such stark and horrific terms, but in thousands of other ways, small and big.

Let me begin with a list of my own inconsistencies: I got my MBA from a prestigious American University, whose founder made his money by profiting from India's colonisation.  I fly business class, even though I profess to work on issues concering the urban poor.  I guiltily let the water run when I shave because I find the sound of running water comforting – small trickle, but still.  I talk about power sharing in the work that I do, but at home, I struggle to share power with my children.

There are more examples, but this isn't a therapy session.  The point is that I don't want to sound like a sermonising moral high-grounder; I just want to talk frankly about the challenges we have as Indians. Hypocrisy is a big issue in most societies, but it's a particularly problematic one in India.  We believe that "mamatha" - a mother's affection - is a sacred emotion, and yet unflinchingly inflict horrors upon our women.  We take bribes, and then hope to wash away our sins by thrusting thousands down the slit-eyed hundis of our temples.  We speak of compassion, but show little for the household help who toil away in our homes.  We study "moral science" in our schools – whoever coined that phrase – and are tested to see if we got the spelling right when we have the essence wrong. 

We learn about civics and citizenship, and yet are often asked – and ask ourselves – why we have such a strong sense of family, but such a poor sense of a larger community: how can our homes be so clean, and our streets so littered with garbage?  Clearly, I am generalising here - there are thousands of Indians who would justifiably take offense at being called hypocrites, and for good reason.  But they are a minority in today's India.

Every day, in every sphere – business, politics, social work or sports - across the length and breadth of this country, millions of Indians indulge in acts of hypocrisy that collectively add up to an epidemic.

And yet, it seems that there was some noble past, a link between thought and action, where values were cherished.  The signs are there: in the sublime music, in our dance forms, in the incredibly sophisticated material about human spirituality, and so on.  So how can a country with so much collective wisdom and spirituality be broken in so apparent a fashion?

It feels that we got massively unhinged somewhere along the way.   What is left today is only a frustrating graffitti of greatness: each artefact by itself a tantalising glimpse into a life that was, but somehow dismembered, leaving more questions than answers. 

We have lost a sense of individual agency in our thoughts and actions.  Like children of over-achieving parents, we seem overwhelmed by the legacy of great ideas in our society.  It's almost like we need to exfoliate these oppressive layers of crusted wisdom that have settled upon our consciousness, and discover our own morality for ourselves.  To see the relationship between values, thoughts and actions, and agitate over the inconsistencies that we see in ourselves. To acknowledge that words like "honesty" and "caring" and "respect" are most powerful when displayed in action, not recited by rote.

Getting rid of these layers takes an enormous amount of introspection, a ruthless sense of honesty, and the courage to act upon the schisms when we encounter them.  These will be painful.  But if we had the perspective to consider our actions, and the courage to correct ourselves, we could rekindle the greatness that our society seems to have once had.  And maybe rediscover our moral compass, one person at a time.

Systemic Banking Crisis In The US?

(via CalculatedRisk): All claws, teeth, and fur (head out to the last paragraph of the PDF)

What will be the consequence of losses of over $1 trillion and, possibly, as high as $2 trillion? That would wipe out most of the capital of most of the US banking system and lead most of US banks and mortgage lenders – that are massively exposed to real estate – to go belly up. You would then have a systemic banking crisis of proportions that would be several orders of magnitude larger than the S&L crisis, a crisis that ended up with a fiscal bailout cost of over $120 billion dollars. And the worrisome part of this scenario is that – with home prices likely to fall by 20% or more – this scenario of systemic banking crisis is becoming increasingly likely.

What impact would that have on Udayan's long bull run?

Drug Companies Rigging The Markets?

From The Hindu:

...the real story goes way beyond the question of Prozac. This new study — published, paradoxically, in an open-access journal — tells a fascinating story of buried data and of our collective failure, as a society, over half a century, to adequately regulate the colossal global $550b pharmaceutical industry.

The key issue is simple. In any situation, to make any kind of sensible decision about which treatment is best, a doctor must be able to take into account all of the available information. But drug companies have repeatedly been shown to bury unflattering data.

Sometimes they bury data that shows drugs to be actively harmful. This happened in the case of Vioxx and heart attacks, and SSRIs and suicidal thoughts. Such stories feel, intuitively, like cover-ups. But there are also more subtle issues at stake in the burying of results showing minimal efficacy, and these have only been revealed through the investigative work of medical academics.

One example came just last month (January). As I reported at the time, a paper in the New England Journal of Medicine dug out a list of all trials on SSRIs that had ever been registered with the U.S. Food and Drug Administration, and then went to look for those same trials in the academic literature. There were 37 studies which were assessed by the FDA as positive and, with a single exception, every one of those positive trials was written up, proudly, and published in full. But there were also 33 studies which had negative or iffy results and, of those, 22 were simply not published at all — they were buried — while 11 were written up and published in a way that portrayed them as having a positive outcome.

But I thought the markets were sifting the wheat from the chaff, rewarding the good companies and punishing the bad. But what do I know.

Pesky Questions

From The Hindu:

The Americans hate to admit that they were wrong - nobody does, for that matter. But few have taken so many undemocratic and illegal actions in world policy as they have. In the United States, those guilty of such actions may face life imprisonment, if not a lethal injection, electrocution or gas chamber (how can democracy be preached by a country where 35 states allow capital punishment by such revolting methods?). Erosion of international law started with Serbia - the bombing of Belgrade in 1999. Iraq followed.

Robbery and murder

In terms of criminal law, these global actions qualify as robbery and murder. In Arkansas and Texas, these crimes are punishable by death penalty. These are home states of the last two Presidents that started wars in Yugoslavia and Iraq in violation of international law. But at home, U.S. Presidents do not behave like this - they are decent gentlemen playing the sax and riding a bike. But once they go outside, everyone had better scatter.

The last two Presidents liked to talk about the U.S. mission before the start of a war: "The United States is called upon to guarantee...." Depending on the situation, they would continue with such phrases as "Kosovo's freedom," "peace and prosperity," or "democracy all over the world." None of them has specified who imbued the United States with this mission and what rights they had for that.

But these are details that ordinary Americans should not go into until someone in their family is killed in action. For the time being, Americans are not dying in Kosovo like they do in Iraq; and for this reason they don't ask who has urged America to help the Kosovars and whether the Kosovars had the right to do so.

Have the Kosovars appealed to the Americans? What if the Basques, Catalans, or Corsicans appeal to them? Quebec has a hard life as part of Canada, and is closer to the United States. Does the United States want to help the Turkish Kurds? Probably not, separatism is a bad word in Turkey.