December 23, 2008, 4:30 p.m.
Greed and Corruption Ultimately Plant the Seeds
of Revolution
(Brought to you by FromDC2Iowa.blogspot.com*)
The Federal Reserve Chairman Ben Bernanke gives what is apparently $7.7 trillion of taxpayers' money to his friends in the banking business and then refuses to reveal who they are, how much he gave to each, what he got for the taxpayers in return, what that was worth, and what was accomplished with the gift. For sources see, Nicholas Johnson, "Forget Madoff, Focus on Bernanke," December 17, 2008.
The fellow behind what is perhaps the largest fraud in history, a $50 billion loss for investors in his Ponzi scheme, turns out to be Bernard Madoff, a former chairman of the NASDAQ Stock Market. The $50 billion fraud was never noticed by reviewing officials at the SEC.
On December 23 we learned that Darrel W. Dochow, the Treasury's Office of Thrift Supervision western regional director, who "played a central role in the savings-and-loan scandal of the 1980s, overriding a recommendation by federal bank examiners in San Francisco to seize Lincoln Savings, the giant savings and loan owned by Charles Keating [and] one of the biggest institutions to collapse," was not merely allowed to keep his job.
This year, in a repeat performance, he "allowed IndyMac Bank to receive $18 million from its parent company on May 9 but to book the money as having arrived on March 31 [thereby allowing] the backdated capital infusion . . . to plug a hole that its auditors had belatedly found . . . [without which] its reserves would have slipped below the minimum level that regulators require for classifying banks as well capitalized . . . two months before IndyMac Bancorp collapsed in July, at a cost of $8.9 billion to taxpayers."Edmund L. Andrews, "Irregularity Uncovered at IndyMac,"New York Times, December 23, 2008; and see Binyamin Appelbaum and Ellen Nakashima, "Regulator Let IndyMac Bank Falsify Report; Agency Didn't Enforce Its Rules, Inquiry Finds," Washington Post, December 23, 2008, p. A1.
We read of Congress' submission to the threats from Wall Street and acquiescence in the first $700 billion bailout, with little more questioning, attention to detail, or insistence on conditions than it gave to President Bush's insistence on the urgency of undertaking an unprovoked war on Iraq.
We saw the pictures of the CEOs of Detroit's Big Three auto manufacturers getting out of their private planes before walking into a committee room with their tin cups, asking (initially) for $25 billion of our money. Numerous senators and members of Congress supported the gift -- notwithstanding the absence of anything remotely resembling a business plan explaining how these billions (ultimately $17 billion from the president) could possibly reverse the 40% decline in automobile sales.
Meanwhile, neither the President, the Democratically controlled Congress, or the Obama Transition Team has done one lick to stem the rising tide that's sinking all boats: the unemployment (and underemployment) that results from massive layoffs, and the mortgage foreclosures that are turning former homeowners into the growing ranks of the homeless.
And since the bankers obviously aren't using our money, the taxpayers' money, to help the American people, what are they doing with it? Read on.
Banks that have their hands out in Washington this year were handing out multimillion-dollar rewards to their executives last year.
The 116 banks that so far have received taxpayer dollars to boost them through the economic crisis gave their top tier of executives nearly $1.6 billion in salaries, bonuses and other benefits in 2007, an Associated Press analysis found.
That amount, spread among the 600 highest paid bank executives, would cover the bailout money given to 53 of the banks that have shared the $188 billion that Washington has doled out in rescue packages so far. . . .
Benefits included cash bonuses, stock options, personal use of company jets and chauffeurs, home security, country club memberships and professional money management, . . ..
Such bonuses amount to a bribe for executives "to get them to do the jobs for which they are well paid in the first place," said Rep. Barney Frank, the Massachusetts Democrat who chairs the House Financial Services committee. . . .
The AP review . . . found that the average paid to each of the banks' top executives was $2.6 million in salary, bonuses and benefits.
Among other findings:
- Lloyd Blankfein, president and chief executive of Goldman Sachs, took home nearly $54 million in compensation last year. The company's top five executives received a total of $242 million. . . .
It received $10 billion in taxpayer money on Oct. 28 [2008]. . . .
- John A. Thain, chief executive of Merrill Lynch, topped all corporate bank bosses with $83 million in earnings last year. . . .
Like Goldman, Merrill tapped taxpayers for $10 billion on Oct. 28.
The AP review comes amid sharp questions about the banks' commitment to the goals of the Troubled Asset Relief Program, a law designed to buy bad mortgages and other troubled assets. . . .
The program . . . did not limit salaries and bonuses unless they had the effect of encouraging excessive risk to the institution. . . .
At Bank of New York Mellon Corp., chief executive Robert P. Kelly's stipend for financial planning services came to $66,748, on top of his $975,000 salary and $7.5 million bonus. His car and driver cost $178,879. Kelly also received $846,000 in relocation expenses, including help selling his home in Pittsburgh and purchasing one in Manhattan, the company said.
Goldman Sachs, paying as much as $233,000 for an executive's car and driver, told its shareholders that financial counseling and chauffeurs were needed so executives would have more time to focus on their jobs.
JPMorgan Chase chairman James Dimon ran up a $211,182 tab for private jet travel last year when his family lived in Chicago and he was commuting to New York. The company received $25 billion in bailout funds. . . .
[Rep. Brad Sherman, D-Calif.] wants them to come before Congress, like the automakers did, and spell out their spending plans for bailout funds.
"The tougher we are on the executives that come to Washington, the fewer will come for a bailout," he said.
Frank Bass and Rita Beamish, "AP study finds $1.6B went to bailed-out bank execs," Associated Press, December 22, 2008, 10:06 a.m. EST.
So what's my point with all this?
It is that there are limits to how much greed and corruption -- or width of the gap between the rich and the rest of us -- any nation's people will accept before they resort to measures other than free speech to vent their frustration.
This past April 2008, before the seriousness of the last four months' global economic collapse was widely comprehended, I began writing a series of blog essays that ultimately became Part IX of my new book, Are We There Yet? Reflections on Politics in America.
Here are some excerpts from one of the first entries on April 12.
Increasing income disparity, despair. . . I am not a conspiratorial theorist, nor am I charging that anyone truly desires to turn the United States into a third world country, in which the top 1% of super rich rule over a 90% in abject poverty. All I would observe is that what is happening -- as a result of what will be spelled out in this series -- is not that different from what would be happening if that were the goal of government officials and the ruling elite.
[F]rom the late 1980s to the mid-2000s . . . inequality increased across the country. . . . No state has seen a significant decline in inequality during this period. . . .
On average, incomes have declined by 2.5 percent among the bottom fifth of families since the late 1990s, while increasing by 9.1 percent among the top fifth.
Pulling Apart: A State-by-State Analysis of Income Trends, Center on Budget and Policy Priorities, April 9, 2008.
And see, for Iowa data, David DeWitte, "Report finds income gap growing in Iowa," GazetteOnline, April 9, 2008, 11:40 a.m. ("The income gap between rich and poor is growing faster in Iowa than in most other states, according to a new report, which found a 49.3 percent average income growth in the wealthiest Iowa households over the past two decades. . . .")
. . . and Revolution. I recall reading many years ago -- where it was I would have no way of recalling now -- that there is a rough mathematical formula for predicting the point at which a growing income disparity will ultimately produce a revolution.
No, I don't think we're yet there in the United States.
But I am one of those who thinks Senator Obama was right when he said, "Lately, there has been a little, typical sort of political flare-up because I said something that everybody knows is true, which is that there are a whole bunch of folks in small towns in Pennsylvania, in towns right here in Indiana, in my home town in Illinois who are bitter. . . . They are angry. . . ." Perry Bacon Jr. and Shailagh Murray,"'Bitter' Is a Hard Pill For Obama to Swallow; He Stands by Sentiment as Clinton Pounces," Washington Post, April 13, 2008, p. A6. . . .
It's reminiscent of Ben Stein's story about his visit with Warren Buffett.
Buffett, one of the nation's -- if not the world's -- wealthiest men, had just completed a study of the relative tax rates paid by his secretaries and clerks compared with his own.
It turned out that Mr. Buffett, with immense income from dividends and capital gains, paid far, far less as a fraction of his income than the secretaries or the clerks or anyone else in his office. . . . “How can this be fair?” he asked . . ..
Even though I agreed with him, I warned that whenever someone tried to raise the issue, he or she was accused of fomenting class warfare.
“There’s class warfare, all right,” Mr. Buffett said, “but it’s my class, the rich class, that’s making war, and we’re winning.”
Ben Stein, "In Class Warfare, Guess Which Class Is Winning," New York Times, November 26, 2006.
Those who refuse to acknowledge what's happening in America [do] little to assuage the anger of those on the losing side of this warfare.
And when that anger is permitted to seethe long enough the news from elsewhere can serve as a reminder of the limits that ultimately come to constrain the greed of oppressive governments and the super rich elite.
Barbara J. Fraser, "As Economy Grows, Income Disparity in Latin America Widens," Catholic News Service, August 3, 2007 ("a two-day general strike in the region was called to protest government economic policies. . . . The incident was one of many around Peru in mid-July, as teachers, farmers and others took their discontent to the streets . . .. Despite six years of steady economic growth, mainly from the export of minerals such as gold and copper, most Peruvians, especially those in rural areas, say they are not feeling the benefits.")
Thu-Trang Tran, "A new peasant revolution – is China learning from its past?" Inside Asia, June 1, 2006 ("Although the Chinese government may not wish to confront nor discuss the social unrest and violence of the Cultural Revolution, it seems the government is wary of history repeating itself. The government is concerned about the simmering social tension resulting from the widening wealth gap as the giant economy powers its way to the top spot.")
Associated Press, "Egypt: American freelance photojournalist and translator detained while covering riots," International Herald Tribune, April 10, 2008 ("Thousands of Egyptians angry over high food prices and low wages have been rioting this week in Mahallah, a Nile Delta city that is home to the Middle East's largest textile factory. Rising prices have struck hard in Egypt, a U.S. ally where 40 percent of the people live in or near poverty.")
. . .
We need to take the impact of our economy and governmental policies on ordinary Americans much more seriously than I sense our leaders and media are willing to do. Why? For starters, because I think it is the decent, just and humane thing to do.
But also for all the reasons I have laid out here . . ..
While I can't really say I'm surprised that America is where it is today after the last four months, I don't mean to leave the impression that when I wrote the series in April I had anticipated the economic collapse would occur when it did.
And I still believe as I wrote in April with regard to imminent revolution, "No, I don't think we're yet there in the United States."
But I've read a blog entry today in "The Hal Turner Show" that causes me concern, one that we may look back upon as among the first tiny tremors that should have alerted us to the earthquake to come, alerted us to the reality that what greed and corruption may be bringing us is something far worse than the mere statistics on unemployment and the homeless -- as awful and heart-wrenching as they may be.
Please understand that what follows, with some of the expletives deleted, was neither written nor endorsed by me. I am not personally urging the action suggested. Nor do I believe, today, that it represents a real threat to bankers or our country. I do think it is worth reproducing, comment, and concern.
December 21, 2008
$1.6 Billion of bank bailout money went to Executive bonuses, stock options and Country Club memberships! It's time to start kicking asses - LITERALLY
Washington, DC -- The government's General Account Office reports that $1.6 Billion of the taxpayer bailout money given to banks, has been spent on executive bonuses, stock options and country club memberships!
This grotesque and reprehensible mis-use of our hard-earned tax money has caused me to blow a gasket in anger. Who the hell do these rich banker f**ks think they are to use our tax money in such a way after they literally BEGGED us for help, claiming their banks would go broke without it?
The government reports that 600 banking executives got the money. If I had my way, I would ask 600 of my fellow taxpayers to walk up to each of those 600 bankers and punch the living s**t out of them wherever they could be found.
I wouldn't care if they were in their offices, walking on the street or at their homes in front of their wives and kids. These scumbags deserve a physical beating. They deserve to be hit in the face with a baseball bat.
I gotta tell ya, I'm REALLY pissed. So pissed that I will be researching the home addresses of these particular 600 people and will release those addresses publicly.
I wonder if I can incite enough anger against these bastards that folks just might go out and hurt them? It might be an interesting thing to try. I think it is worth a shot!
WARNING TO BANKING EXECUTIVES: If you do not return the bonuses, stock options and country club memberships bought with taxpayer bailout money, YOUR NAME AND ADDRESS will be made public in a manner designed to "incite" a reaction by the public. (Special emphasis on the word "incite!)
You have until Friday, December 26, 2008 to return the money. There will be no negotiating, no obeying of court orders of protection, no way to prevent being dealt with harshly.
I don't care about your employment contracts, I don't care about your civil rights and I sure as s**t don't care about the law or the courts.
You guys have f****d this country for the last time. It's time for you to be paid back and I intend to see that you receive your payback.
(color and emphasis in original; this entry in the "Hal Turner Show" came to my attention from a reference in Karl Denninger's The Market Ticker, "To Our Government: You Must Act Now," December 23, 2008.)
Let us hope that those in the Congress and Executive Branch, banks, Wall Street, corporate board rooms, and CEO offices will take these concerns to heart -- from whatever source they may come to them.
Whatever you and I may think of Thomas Jefferson's belief that a little revolution from time to time is a useful thing, I'm not convinced this is such a time for America. Nor am I convinced it's about to happen. I do think, however, that those who believe it's an impossible scenario are irresponsible gamblers.
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* Why do I put this blog ID at the top of the entry, when you know full well what blog you're reading? Because there are a number of Internet sites that, for whatever reason, simply take the blog entries of others and reproduce them as their own without crediting the source. I don't mind the flattering attention, but would appreciate acknowledgment as the source -- even if I have to embed it myself.
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December 22, 2008, 6:30 a.m.
The Toyota Way
The Toyota Way is a book studied and applied by businesses around the world, as well as the name of the management and operational philosophy of the company that makes those top-rated Toyota automobiles. Jeffrey K. Liker, The Toyota Way: 14 Management Principles from the World's Greatest Manufacturer (McGraw-Hill, 2004).
So when Toyota President Katsuaki Watanabe announces the company's first loss in 71 years(!) ($1.7 billion) will be reported next March, and says “We’re facing an unprecedented emergency situation. Unfortunately, we can’t see the bottom,” it tells you more about the global economy than it does about Toyota.
After all, "The Toyota Way" is as sound as it ever was. The company opened its seventh auto-assembly plant in North America just this month. It's cutting executive pay, and laying off some "contract" workers, but so far as I know not yet any of the lifetime workers or executives. Unlike the American auto companies, Toyota made $28 billion last year and has $18.5 billion in cash on hand.
Nonetheless, Watanabe candidly acknowledges that “The change in the world economy is of a magnitude that comes once every hundred years.” Martin Fackler, "Toyota Expects First Loss in 70 Years," New York Times, December 22, 2008.
But with sales down 34% in both the U.S. and Europe, and both the dollar and Euro falling compared with the Yen, Toyota is now in the same shape it last was in March of 1938. See, Naoko Fujimura and Tetsuya Komatsu, "Toyota Forecasts Its First Operating Loss in 71 Years," Bloomberg, December 22, 2008.
Given Toyota's stellar record as a company, if 1938 is the closest analogy to the shape it's now in we're all in much worse shape.
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December 21, 2008, 5:20 a.m.
Dominique Strauss-Kahn is No Dr. Feelgood
(Brought to you by FromDC2Iowa.blogspot.com*)
Earlier this morning the BBC reported that International Monetary Fund chief Strauss-Kahn says the IMF has lowered its global growth forecast, and will likely lower it further in January. We should be concerned not only about "social unrest" but because "all the whole society is going to suffer," he says in the story excerpted below.
In a way there's nothing new in what he says. This has seemed to me a reasonable forecast since at least a year ago, and I've been writing about it here for months. But there's something about the assessment coming from a guy who's in contact with the financial ministers of the world's nations, and who has some responsibility for helping them out of the cataclysmic mess our "deregulate the markets" ideologues have made for the world's 6.7 billion people, that should get our attention.
While our governments -- from international, to national, to local -- are picking winners (investment bankers and auto executives) and losers (all the rest of us) I hope that someone is addressing the what-if economic scenarios. We have plans, nationally and locally, for dealing as best we can with chemical or biological terrorist attacks, tornadoes and floods, food or medical shortages, and so forth.
President-elect Obama is now being told by his economic advisers that unemployment may reach 9% next year, instead of 7% or 8%, and that his proposal for 2 million new jobs may need to be expanded if it's to benefit what may turn out to be an additional 3.5 million without jobs.
("President-elect Barack Obama has expanded his goals for a massive federal stimulus package to keep pace with the increasingly grim economic outlook, aiming to create or preserve at least 3 million jobs over the next two years.
The more aggressive target, up from 2.5 million jobs set a month ago, comes after a four-hour meeting last week in which Obama's top economic advisers told him the economy is now expected to lose as many as 3.5 million jobs over the next year. Obama was told that could drive unemployment, currently at 6.7 percent, above 9 percent, a figure not seen since the recession of the early 1980s." Lori Montgomery, "Obama Expands Stimulus Goals; As Economic Outlook Grows More Dire, Early Target for Job Growth Is Bolstered," Washington Post, December 21, 2008, p. A1.)
What we're now going through is the beginning of the beginning, not the beginning of the end. Nothing the government has done so far -- including the trillion-dollar-plus generosity of Paulson and Bernanke for their banker friends -- has done any good. Virtually all the estimates of downturn and future economic projections have turned out to be wrong -- on the optimistic side. It would appear to the casual observer that none of the geniuses currently in place know what the hell they're doing.
What if it ends up being twice, or four times, as bad as is now being projected? What if unemployment goes from 10% to 20%, or even 40%? What if it takes us not one or two years, but 10 or 20 years, to recover from the ravages of greed by the wealthy and profliget "credit card" spending by everyone from nations to consumers?
Are such scenarios likely? I don't think so. I'm certainly not advocating fear and gloom for their own sake.
It's not likely that an airplane is going to crash in my neighborhood either (although one once did) just because we live under a flight path, or that railroad freight cars are going to fall off the tracks near the neighborhood (although that once happened, too). But it's still worthwhile for local officials, and residents, to give a little thought to how we might respond if those things or others did happen. Indeed, we have mock exercises in Iowa City regarding possible local disasters that test the plans our emergency workers, local hospitals and communications systems have for dealing with them.
That's all I'm suggesting. That someone in Iowa City, and in Des Moines (for Iowa), and Washington (for the entire country) should be thinking through the worst case economic scenarios to see if there are things we should be doing, now, that would help, at least to some degree, should things turn even worse than the "experts" are today predicting. Pain is pain, whether medical or economic, and we're all going to suffer in one way or another. But there are clearly some ways of dealing with it that make more sense than others. It's not too early to start figuring out what they are.
From the BBC:
Dominique Strauss-Kahn said . . . the IMF has already cut its forecast for global growth next year, and he said the next projection, due in January, would be even worse.
Mr Strauss-Kahn spoke of "2009 as really being a bad year".
"I'm specially concerned by the fact that our forecast, already very dark... will be even darker if not enough fiscal stimulus is implemented," he said in an interview with BBC Radio 4.
He said it would take a spending stimulus equivalent to about 2% of global Gross Domestic Product, or about $1.2 trillion, to make a real difference. . . .
"The question of having social unrest has been highlighted by journalists and I can understand that, but it's only part of the problem," he said.
"The problem is that all the whole society is going to suffer."
In November, the IMF lowered its global economic growth forecast to 2.2% from 3%. . . .
"IMF urges spending to spur growth; More spending by governments will be needed to stimulate worldwide economic growth, the head of the International Monetary Fund (IMF) has told the BBC," BBC World Service, December 21, 2008.
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* Why do I put this blog ID at the top of the entry, when you know full well what blog you're reading? Because there are a number of Internet sites that, for whatever reason, simply take the blog entries of others and reproduce them as their own without crediting the source. I don't mind the flattering attention, but would appreciate acknowledgment as the source -- even if I have to embed it myself.
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October 22, 2008, 7:25 a.m.
Personal Note and Update
For the past couple weeks, in addition to my regular teaching at the University of Iowa College of Law, I've been involved with preparation for and presentation at the "Carterfone and Open Access in the Digital Era" conference put on by the High Technology Law Institute of the Santa Clara University School of Law in California.
It's amazing how well the world was able to keep on turning without my daily blog entries during that time. Also rewarding is the extent to which the 500-plus entries in this blog have apparently now become a reference source for users with or without daily additions; the daily hits remained pretty solid.
And at least some progress can be reported with regard to a number of the issues we track that is at least consistent with this blog's recommendations.
Here, then, are mostly mini-entry updates about a range of subjects: Global economic collapse; Afghanistan/Pakistan; Bars, Booze and Binge Drinking; Corporate Welfare; Sexual Assaults; Carterfone; and the Dysfunctional Airline Industry.
Global economic collapse. Since first making the suggestions that the first Paulson plan (approved by Congress) was flawed, and that the taxpayers should be getting an equity interest for their money (following the Swedish example from 1992), both the U.S. and Brits have moved in that direction. Similarly, more attention has been given to helping mortgage-struggling homeowners rather than just greedy bankers, holding down the personal compensation paid to the CEOs of bailed banks, the need to get a jobs program ready to roll out (which could do double duty in the repair and building of the long-ignored infrastructure featured on PBS last evening), the need for more prosecutions of those responsible for our current plight, some long term fixes, and an awareness that we're heading into an unprecedented and unknowable global recession/depression involving far more than the financial sector.
No; I suffer no illusion that any of these movements have been affected in the slightest by anything I wrote. But it is always reassuring to see one's early instincts and writings sort of confirmed by subsequent events, or the comments of those who really do know what they're talking about.
Afghanistan/Pakistan. Similarly, the evidence continues to mount, as I have earlier written, that there is no "military solution" to the problems we confront in Afghanistan/Pakistan (or Iraq for that matter). Indeed, the presence of our troops is in many ways counter productive -- angering local civilians, turning off both "hearts and minds," destroying rather than building a sustainable local economy, and contributing to the recruitment of terrorists. Most recently, yesterday, over the protests of the Kabul government, our continued bombing resulted in the killing of nine more Afghans -- this time soldiers fighting alongside Americans. Meanwhile, our relations with Pakistan, and our military activities there, have contributed to the disintegration of Pakistan's government and economy -- to the point that Pakistan (a nation with nuclear weapons) is probably now, potentially, the single most dangerous country in the world so far as America's national security is concerned. Not because it's leadership is "anti-American," but because it is a country where joblessness and chaos means starvation, and eventually uncontrollable revolution.
Bars, Booze and Binge Drinking. The City Council is taking another look at the social and economic costs of alcohol abuse that its policies, and those of the University, have permitted to increase over the years. It remains to be seen how effective any ultimate proposals may be -- the Council refuses to even consider a proposal that those who cannot legally buy alcohol should be required to leave the bars at 10 p.m. (erroneously called "21-only") -- but I'd rather the Council at least be addressing the problems than continue the "see-no-evil-hear-no-evil" approach.
Corporate Welfare. Surprise, surprise, the Sheraton has just been given -- for free, so far as I can gather from the papers -- a 13-foot swath of formerly public street and land. This was described as a "license." That sounds an awful lot like Senator Ted Stevens' effort to draw a distinction between a "loan" and a "gift" of property (e.g., a $2500 chair, a generator) he received, and didn't report on the ethics forms. Iowa City's taxpayers, who once owned Dubuque Street, had retained a 25-foot swath of it under the Sheraton for a public walkway. The City Council has just told the hotel it can capture 13 feet of it to expand its lobby. And while I'm on this subject, what's the deal about turning over public sidewalks to restaurants to expand their seating capacity? Do they pay to use that public property, or is that more of the Council's generosity with our land?
Sexual Assaults. The Regents and their universities are moving ahead with the effort to come up with new organizational arrangements and procedures for handling sexual assaults. It remains to be seen what they'll come up with -- beyond the Stolar Report recommendations. One of the toughest issues involves respect for the alleged victim's wishes. If she ends up deciding not to file a complaint with the police the university (especially if athletes are involved as alleged perpetrators) is open to speculation that it played a role in encouraging her to do so. If they don't report it on their own they can be charged with a "cover up." If they do report it on their own they can be charged with interfering with the alleged victim's rights of privacy.
Carterfone. As an FCC commissioner, most of the some 400 opinions I personally wrote were dissents or concurrences, explaining why I thought some or all of what my fellow commissioners were doing was wrong. One of the most significant opinions I wrote, however, was a unanimous opinion for the majority -- much more far reaching in its effect than anyone could have known at the time, myself included. Sufficiently so that a conference was held at Santa Clara University last Friday to celebrate its 40th birthday. Sometime early next year there will be a book-length collection of the papers presented, so I can't summarize all of the issues here in a blog paragraph -- even those addressed in my own keynote address.
It was decided at a time when AT&T had as close to a complete monopoly as any company in America. It both manufactured and owned all the telephone handsets, the cable, the switching stations, the long distance lines -- all of it. And it had an FCC tariff to insure it stayed that way. Nothing could be attached to the telephone network that was not AT&T's -- up to and including even a plastic cover on a telephone book, also called a "foreign attachment."
Tom Carter, a Texas cattle rancher, wanted to be able to take and place phone calls while out riding fences. He invented a device that enabled him to do it. The Carterphone could receive radio communication from his transceiver, hold a telephone handset, and switch back and forth as the parties spoke.
AT&T fought it as a violation of its tariff. The FCC, through the opinion I wrote, found the tariff illegal. It took another 10 years to implement the decision (with "Part 68" regulations), but ultimately Americans could buy telephones in drug stores, and almost unnoticed began using "modems" resembling Tom Carter's device, with "acoustic cups" for a telephone handset, to connect their early desktop computers to what became "the Internet."
Among the issues we confront today, some 40 years later, are whether the principles (or even precedent) of the Carterfone decision are relevant to resolving some of the bottlenecks and impediments the major cell phone carriers are imposing on their customers, and the suppliers of new devices (that sometimes take the form of computer "software" rather than "hardware"), in an age when cell phone ("wireless") carriers are rapidly becoming the primary on ramps to the Internet.
You'll have to wait for the book (or movie) to get the whole story, but that will give you some idea of what I've been up to while away from the blog.
Dysfunctional airline industry. Meanwhile, getting to California and back was just a further reminder of how dysfunctional our airline industry has become. This is not a new observation for me, nor I suspect for you. So much so that when Mary and I were going to Denver last August we opted for the train.
What a treat! We actually had a roomette, but I'm not sure I'd bother next time. The coach seats on a train are better than the first class seats on a plane. They go back further, and with foot rests make sleeping possible. They and tray tables don't have to be "put in their full upright position" every time you enter a station. Large picture windows in every car -- not to mention the lovely "observation cars" -- let you see (rather than merely imagine) what the countryside looks like. You can walk around whenever you please (the full length of the train if you wish), rather than be buckled in. Get food whenever you want at reasonable prices. Read, write on your laptop, make cell phone calls, nap.
Airline travel never was a big thrill for me, but I never experienced any fear of flying, and found it generally pleasant enough during the latter half of the Twentieth Century. Going to Japan with some regularity, it was often possible to find six empty seats where you could stretch out. On domestic flights there were enough flight attendants on board to bring you food and drink and be otherwise pleasant and attentive without being stressed. The seats, and space between rows, were wider and more comfortable -- with often an empty seat beside you where you could spread out papers and such. My memory is the seats went back further, too. Flights were usually on time; baggage usually came through safely. There were few delays for last minute "maintenance" or otherwise cancelled flights. There was little concern about hijacking or terrorists. A flight was a time to relax, away from phones and other interruptions. On the rare occasions when a canceled flight required an overnight stay, the airlines would pay for your hotel and meals until you could leave the next day.
There was a time when I represented American Airlines as a lawyer. And I later became almost a United Airlines groupie -- buying a lifetime Red Carpet Club membership (during a very narrow window of time when it was an incredible bargain -- never then imagining that my own lifetime might end up lasting longer than that of United), carrying a United Visa card, piling up my Mileage Plus miles, and usually travelling often enough to build a nearly complete collection of each month's issue of Hemispheres magazine. I even bought a little stock (which rose rapidly in value and then, of course, became virtually worthless).
What a difference "deregulation" and a few bankruptcies can make.
Air travel never did make a lot of sense as a transportation system. (Can you imagine how Bob Newhart might have played the banker being pitched by the world's first airline for a loan?)
o Moving a multi-ton container off the Earth, into the atmosphere, takes an enormous amount of fuel -- not to mention the harm done to the ozone layer and greenhouse effect from the exhaust.
o Any transportation system that depends on favorable weather conditions is inherently unreliable -- especially when its marketed "advantage" is the "speed" represented by an on-time arrival that can so easily be affected by snow, sleet, ice storms, fog, dangerous winds, and other conditions that are mere inconveniences for travel by train, bus or automobile.
o Aside from the fact that "your seat cushion becomes a flotation device" when your plane falls into the drink, the container does not "become a boat" when that happens, nor is there any other "fail safe" option (as with a car simply going into a ditch) if the system fails.
o Part of the reason I pushed containerization when Maritime Administrator is that I early on discovered 90% of the cost of moving cargo was incurred within 10 miles of the port; the trip across the Pacific was virtually free. So it is with air travel. You need to allow a margin of error for (a) the time it takes to pack the car and leave the drive (or wait for the shuttle) and get within the vicinity of the airport (allowing for the possibility of traffic congestion, accidents, or a train parked on a railroad crossing), (b) find a place to park and drag your bag to the bag check, (c) the line at the check-in counter which can take anything between 2 and 45 minutes, (d) ditto for the security check that requires you to remove all metal along with your shoes and laptop, and then dress and repack, and (e) the walk to the gate. (f) This is on the assumption there is actually a plane at the gate. For any one of a long list of reasons it may not yet have arrived. Or, if it's arrived, there may not be a crew. (g) Then there's the sitting on the tarmac waiting for clearance to take off. (h) The delay, and possible cancellation, because of maintenance needs. (i) Any possible delays during the flight due to weather or other factors, and (j) congestion at the destination airport, or (k) the fact there is no gate to park at, or jet walkway at the gate. At which point there's a similar routine regarding (l) your connecting flight, or if your destination, (m) waiting for your bag (which may not have arrived), (n) getting ground transportation, and (o) the time of the trip to your ultimate destination. Not to mention the high prices for tickets, and the nickle-and-dime extra charges for checking a bag ($15), or avoiding starvation.
o On my flight to California there were four legs: a flight from the Eastern Iowa Airport (CID) to a regional hub, the flight to San Jose, the flight from San Jose to a regional hub, and the flight back to CID. On three of those four flights there were cancellations or delays (in one case the necessity of transferring to another airline) because of the last-minute discovery of necessary repairs. One involved a defective switch that controls the part of the plane that provides the lift necessary to get it off the runway. Another involved a defective brake -- necessary to keep the plane from going off the runway. And the third was something I've never encountered before: (a) the need to remove fuel because there was too much on board and (b) the necessity to balance up the fuel in the tanks because it was so much out of balance that the plane couldn't fly. Now I ask you, could none of these problems have been anticipated or discovered prior to the moment of take off?
o While I'm on this rant, here's one more. If you buy 100 head of cattle and only get 87, or a dozen bagels and there are only 10 in the bag, you -- and the person who sold them to you -- expect that you will ask for, and receive, either a refund or the additional goods. What are you buying with an airline ticket? Speed of travel; arrival at a fixed time. As a result of the maintenance work, and necessary change of airlines, I missed an event in California I was scheduled to attend -- and for which I had allowed plenty of extra time in the travel schedule. When you do not arrive at your destination at the scheduled time -- for whatever reason -- you are not getting what you purchased. There is a "loss" associated with that delay -- for everyone on the plane. We can argue about how we should go about calculating the economic value of that loss, but that there has been a loss is clear. The question is, how should it fall; who should bear it?
If it is important to you to have something constructed by a particular time you can build into a construction contract provision for a bonus if it is finished on time, or a penalty if it is not. But we don't have such a provision in our contracts with the airlines -- nor do we have the bargaining power to negotiate for it. So the entire loss falls on us, the customers, those who have the least responsibility for the delay.
In sum: The airlines have become dysfunctional. Just one more reason why, while we're about the business of rebuilding our disintegrating early-Twentieth Century infrastructure we need to give really serious consideration, and funding, to rebuilding our passenger rail transportation system.
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October 10, 2008, 7:30 a.m., 12:30 p.m.
Which Do You Want First, the Bad News
or the Bad News?
To help get your mind off of the coming global depression, let's take a look at Afghanistan.
[Photo credit: European Pressphoto Agency; as reproduced in New York Times, October 9, 2008; "Zabiullah Majahid, front, of the Taliban, led his group in the mountains of Helmand Province."]
Once again we are learning that, as I put it to President Lyndon Johnson with regard to Vietnam, "You can't play basketball on a football field."
Once again we are learning why I am only half joking when I say we need "military control of the civilians, rather than a government in which civilians dictate to the military."
Once again we are learning that the bumper sticker's observation -- "whatever is the question, war is not the answer" -- while overly simplistic, is right more often than it is wrong.
There are many differences between Vietnam, and Iraq, and Afghanistan, and Pakistan. But as important as it may be to recognize and respond to those differences, it is equally important not to ignore their similarities.
It is very difficult to "play war" when:
o You are only the latest in a long line of outside invader/occupiers (most of whom have been no more successful than you are about to be)
o The "enemy" is not a "country" in the sense we normally think of it, but an area where borders are both porous and disputed and central governments may be corrupt, weak (or engaged in civil war)
o You don't understand the country -- its people, tribal loyalties, history, culture, geography, and most importantly, language
o There are no "front lines" or battlefields (in the WWII sense) -- territory gained at considerable cost can easily and quickly be lost
o The "enemy" refuses to wear easily identifiable uniforms, dresses and looks like your "allies" in the fight, and can easily fade into the local population
o The loyalty of your supporters is thin, and shifts with who's paying them and their (understandable) urgent sense of personal survival
o The resulting "collateral damage" (innocent civilian deaths and injuries) are counterproductive in "winning hearts and minds" and actually contribute to the increased recruitment of terrorists
o Genuine local economic and infrastructure needs -- roads, bridges, hospitals, schools, water and electricity -- go unattended, and are made worse, by military action and the resulting shift to a drug-based economy
These are but my instincts and observations. But they have often turned out to have been later echoed by military officers and others who really do have some credentials, experience, and on-the-scene observations.
That is now happening once again.
No, I am not singing "we ain't goin' to study war no more," or saying that there is no role for conventional military action, that we should become a neutral isolationist nation, or that we should eliminate the Defense Department's budget (although there is some evidence we could improve our national security by cutting it by about one-third, and certainly by replacing the Bush Doctrine with the Powell Doctrine. For an explanation of the Powell Doctrine see, Nicholas Johnson, "War in Iraq: The Military Objections," February 27, 2003.).
What I am saying, in passing, is that the McCain Campaign (and some in the media) are doing no one a favor by using the language of WWII to describe the challenges we confront in the Middle East -- "war," "surge," "victory," "winning," and "the white flag of surrender." "Send in the Marines," "these colors don't run," "let's kick some butt," and "nuke 'em" are the very dangerous and costly (in terms of lives, burden on taxpayers, and loss of international reputation) rhetorical chants of elected officials and candidates who are either (a) not very well informed, or (b) devoid of the ethical and moral restraints that might challenge their belief that "there is nothing worth losing an election for."
But what I am mostly saying is not "listen to me" but "listen to our military." Not "follow them blindly," just listen and reflect.
Senator McCain says he wants a "surge" in Afghanistan. He believes the one in Iraq "worked" -- even though it did not bring about (a) the political solutions it was designed to make possible, or even (b) a permanent reduction in insurgency and civilian deaths. The Washington Post reports that he has said, "the same strategy that [Sen. Barack Obama] condemned in Iraq, that's going to have to be employed in Afghanistan."
By contrast, the Post reports, General David D. McKiernan, who led the Iraq invasion and has for four months headed the NATO coalition in Afghanistan, has
stated emphatically that no Iraq-style 'surge' of forces will end the conflict there. . . . "The word I don't use for Afghanistan is 'surge,'" . . ..
"Afghanistan is not Iraq," . . .. [It is] "a far more complex environment than I ever found in Iraq." The country's mountainous terrain, rural population, poverty, illiteracy, 400 major tribal networks and history of civil war all make for unique challenges, he said.
McKiernan [says] what is required is a "sustained commitment" to a counterinsurgency effort that could last many years and would ultimately require a political, not military, solution. . . .
Another facet of the Iraq strategy that McKiernan doubts can be duplicated in Afghanistan is the U.S. military's programs to recruit tribes to oppose insurgents. . . .
Tribal engagement in Afghanistan is also vital, McKiernan said, but . . . "I don't want the military to be engaging the tribes," he said. Given Afghanistan's complicated system of rival tribes and ethnic groups and the recent history of civil war, allying with the wrong tribe risks rekindling internecine conflict, he said. "It wouldn't take much to go back to a civil war." . . .
[T]he violence is more intense than he had anticipated . . .. The U.S. military death toll has risen to . . . a new annual high since the war began in 2001.
Attacks into Afghanistan from Pakistan have escalated, . . .. An influx of foreign fighters across the border is bolstering the Taliban insurgency and has shown a "significant increase from what we saw this time last year," he said, pointing to intelligence that picked up fighters speaking Uzbek, Chechen, Arabic and other languages.
"We are in a very tough fight," he said. "The idea that it might get worse before it gets better is certainly a possibility."
Ann Scott Tyson, "Commander in Afghanistan Wants More Troops," Washington Post, October 2, 2008, p. A19; and see Eric Schmitt, "Joint Chiefs Chairman Is Gloomy on Afghanistan," New York Times, October 9, 2008 ("With security and economic conditions in Afghanistan already in dire straits, the chairman of the Joint Chiefs of Staff said Thursday that the situation there would probably only worsen next year. 'The trends across the board are not going in the right direction,' the chairman, Adm. Mike Mullen, told reporters. 'I would anticipate next year would be a tougher year.'”).
And McKiernan was saying it two months ago
"There is no magic number of soldiers that are needed on the ground to win this campaign," McKiernan said. "What we need is security of the people. We need governance. We need reconstruction and development." . . . McKiernan said, "There is a clear linkage between 'narco' trafficking and financing of the insurgency."
Barbara Starr, "'Surge' May Not be Enough in Afghanistan," Commander Says," CNN, August 8, 2008, 1:35 p.m. ET.
British Commander Agrees: "Taleban will never be defeated;" it's "neither feasible nor supportable"
The departing commander of British forces in Afghanistan . . . Brigadier Mark Carleton-Smith, the commander of 16 Air Assault Brigade, whose troops have suffered severe casualties after six months of tough fighting . . . says he believes the Taleban will never be defeated.
He told The Times that in his opinion, a military victory over the Taleban was “neither feasible nor supportable”. . . .
The brigadier’s grim prognosis follows a leaked cable by François Fitou, the deputy French Ambassador in Kabul, claiming that Sir Sherard Cowper-Coles, the British Ambassador, had told him the strategy for Afghanistan was “doomed to failure” [and that] “the security situation is getting worse, so is corruption and the Government has lost all trust.” He said . . . “we should tell them [the U.S.] that we want to be part of a winning strategy, not a losing one. The American strategy is doomed to fail.” . . .
Brigadier Carleton-Smith . . . indicated that the only way forward was to find a political solution that would include the Taleban. . . . Efforts are being focused on the so-called “tier-two” and “tier-three” Taleban, who are perceived to be less ideologically intransigent.
The brigadier said that in the areas where the Government had no control, the Afghan population was “vulnerable to a shifting coalition of Taleban, mad mullahs and marauding militias.” . . .
He said that there had been a government vacuum for 30 years, . . ..
Tom Coghlan in Kabul and Michael Evans, "We can't defeat Taleban, says Brigadier Mark Carleton-Smith," The [London] Times, October 6, 2008.
U.S. Army Literally Re-Writes the Book: Mission "Development, Reconstruction and Humanitarian"
The U.S. Army on Monday released a new field manual that for the first time gives nation-building the same top priority as major combat operations in conflicts involving fragile states.
The Stability Operations Field Manual, derived from the Army's experiences in Iraq and Afghanistan, provides commanders and other Army personnel with a guide for supporting broader U.S. government efforts to deliver development, reconstruction and humanitarian aid in war-torn nations.
Army officials described the document as a roadmap from conflict to peace. . . .
The manual mirrors a U.S. defense strategy released in July that says military operations should play a supporting role for "soft power" initiatives to undermine militancy by promoting economic, political and social development in vulnerable corners of the world.
"The greatest threats to our national security will not come from emerging ambitious states but from nations unable or unwilling to meet the basic needs and aspirations of their people," the new Army manual states. . . .
"Army issues new manual for nation-building," Reuters, October 6, 2008, 4:44 p.m. ET
Nor are these kinds of judgments limited to the military generals.
British ambassador in Kabul: "The presence -- especially the military presence -- of the coalition is part of the problem, not the solution."
The British ambassador in Kabul thinks the war in Afghanistan is as good as lost and that current US military and economic strategy there is destined to fail . . ..
Sir Sherard Cowper-Coles, the UK diplomat involved, is also alleged to have said that the only practical long-term solution was for the West to support "an acceptable dictator" to unite the fractured country.
The diplomatic bombshell . . . came on the same day that the senior American military commander in Afghanistan called on NATO to provide more troops . . . in a counterinsurgency battle he said could get worse before it gets better.
The general's downbeat assessment also coincides with a fresh report by UN Secretary-General Ban Ki-moon, who expressed dismay that attacks on aid workers have risen in 2008 despite the presence of more allied troops than at any time since the US-led invasion in 2001. . . .
Cowper-Coles [is quoted as saying]: "The current situation is bad. The security situation is getting worse. So is corruption and the government has lost all trust. . . .
"[T]he insurrection, while incapable of winning a military victory, nevertheless has the capacity to make life increasingly difficult, including in the capital.
"The presence -- especially the military presence -- of the coalition is part of the problem, not the solution. The foreign forces are ensuring the survival of a regime which would collapse without them. In doing so, they are slowing down and complicating an eventual exit from the crisis." . . .
Cowper-Coles, 53, was also quoted as saying that while Britain had no alternative to supporting the United States, the Americans should be told to change strategy.
Reinforcing the military presence against the Taliban insurrection would be counter-productive, he said, and allied governments should start preparing public opinion to accept that the only realistic solution for Afghanistan was to be ruled by "an acceptable dictator."
Ian Bruce, "War in Afghanistan Lost, Says UK Diplomat in Leaked Report," The [Glasgow, Scotland] Herald, October 2, 2008; and see Charles Bremner in Paris and Michael Evans, "British Envoy Says Mission in Afghanistan is Doomed, According to Leaked Memo," The [London] Times, October 2, 2008.
National Intelligence Estimate: Afghanistan in "Downward Spiral" Due to "Lack of Leadership" from Bush Administration
A draft report by American intelligence agencies concludes that Afghanistan is in a "downward spiral" and casts serious doubt on the ability of the Afghan government to stem the rise in the Taliban's influence there, according to American officials familiar with the document.
The classified report finds that the breakdown in central authority in Afghanistan has been accelerated by rampant corruption within the government of President Hamid Karzai and by an increase in violence from militants who have launched increasingly sophisticated attacks from havens in Pakistan. . . .
Its conclusions represent a harsh verdict on decision-making in the Bush administration, which in the months after the Sept. 11, 2001, attacks on the United States made Afghanistan the central focus of a global campaign against terrorism.
Beyond the cross-border attacks launched by militants in neighboring Pakistan, the intelligence report asserts that many of Afghanistan's most vexing problems are of the country's own making, the officials said. . . .
[I]t also laid out in stark terms what it described as the destabilizing impact of the booming heroin trade, which by some estimates accounts for 50 percent of Afghanistan's economy. . . .
Inside the government, reports issued by the Central Intelligence Agency for more than two years have chronicled the worsening violence and rampant corruption inside Afghanistan, and some in the agency say they believe that it has taken the White House too long to respond to the warnings . . . .a "lack of leadership" both at the White House and in European capitals where commitments to rebuild Afghanistan after 2001 have never been met. . . .
The assessment on Afghanistan is the first since the Taliban regained strength there beginning in 2006 and launched an offensive that has allowed them to seize large swaths of territory. . . .
Senior American commanders have recently been blunt in their assessment of the security trends in the country. "In large parts of Afghanistan, we don't see progress," General David McKiernan, the top American officer in Afghanistan, told reporters last week. "We're into a very tough counterinsurgency fight and will be for some time."
It is not just American officials who offer a grim prognosis. A French diplomatic cable leaked to a French newspaper last week quoted the British ambassador to Afghanistan as forecasting that the NATO-led mission there would fail.
"The current situation is bad, the security situation is getting worse, so is corruption, and the government has lost all trust," the British envoy, Sherard Cowper-Coles, was quoted as telling the French deputy ambassador to Kabul, who wrote the cable.
Mark Mazzetti and Eric Schmitt, "U.S. Report Warns of Crisis in Afghanistan," International Herald Tribune, October 9, 2008.
America's interests and role in the world involve a lot more than the overwhelming application of military force. The military itself knows this. Why don't the politicians?
It's time we learned from our wisest military leaders -- and then took up our own responsibilities to let our elected and other officials know how we feel.
What has been attributed to Ghandi is still true: "When the people will lead, their leaders will follow."
Let's lead.
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