Month: May 2012

I have to say I'm relieved that, out of a possible ten years in prison, Dharun Ravi got 30 days. Money quote:

“You lied to your roommate who placed his trust in you without any conditions, and you violated it,” the judge, Glenn Berman of State Superior Court, said. “I haven’t heard you apologize once.”

In addition to jail, Judge Berman sentenced Mr. Ravi to three years’ probation, 300 hours of community service, counseling about cyberbullying and alternate lifestyles, and a $10,000 probation fee, to be used to help victims of bias crimes.

He was cruel; he was out of line; he was homophobic. But he did not murder someone. And if we seriously start criminalizing this kind of sick prank, we beckon a crazy future. (And for the thousandth time, being gay is not an "alternate lifestyle," whatever that is.)

Readers sound off on the Cory Booker row:

I don't find what's so remarkable or Yglesias Award-worthy about a Newark mayor saying, "Don't insult Wall Street." It's like an Arkansas politician saying, "Don't be mean to Walmart," or one from Seattle saying, "Be nice to Boeing." New York, for all its size and self-important grandeur, is somewhat of a company town for Wall Street. And all politicians for company towns (or states), regardless of party, will defend their gravy-train above their party.

Another writes:

Booker's comparison of attacking Bain and attacking Rev. Wright is not apt because Obama is not touting his membership in Wright's church as a reason to vote for him.

Another:

Obama is not attacking private equity. He's attacking the record of a man who claims to be a business wiz and job creator extraordinaire when what he really was was a man whose only business was to found a company who purchased up other businesses, sucked out all the equity and spit them out.

He built nothing but his own bank account. If Romney were running on his record as governor (oops can't do that) and could somehow use his Bain experience to prove he used his acumen to create jobs in MA – then that would be one thing. But he made sure his state was 47th in the nation on job creation. And just like with Bain, as soon as he could add the word "governor" to add to his resume, he ditched them and got out. Bain is totally fair game because the business model is the model for Romney's entire mindset.

Other than that I do find the political climate nauseating. But Obama didn't start this fight. Romney and Citizens United did. And Cory Booker knows that. He should stick with rescuing neighbors from burning buildings instead of rescuing Mitt Romney.

Another:

I have to take exception with your reader who argued that neither side gets the private equity story right.  In reality, the left's story is generally correct, though incomplete, while the right gets the story wrong because, well, it has to.  In addition, a completely accurate telling of the story would include the terms "financial engineering" and "dividend recapitalization."

Financial engineering is the alchemy that drives the entire private equity industry – by rejiggering a company’s capital structure, a private equity firm purports to "create value" that previously didn’t exist.  Like all other forms of alchemy, if it actually happened that simply, it might not be a bad thing.  Unfortunately, the processes that create that value for the private equity firm – levering the company’s balance sheet with borrowed money, reducing headcount, cutting costs and, yes, tax arbitrage – tend to whipsaw a company by depriving it of any margin of error (because it has to spend its cash flow on interest payments) while also diverting resources away from future profit-maximizing initiatives (because all of its cash is being spent on interest payments). 

This is the legendary "discipline" that private equity apologists cite in these conversations, but there is very little focus on making the business, as the business, run better.  Instead, the focus is on freeing up enough cash to service the debt and return cash to the new owners.  The end result tends to be a less ambitious company with a far smaller footprint (employees, plants, etc.) and a reorientation away from investment in the future growth of the business and toward like as a "cash cow."  This is the case even when private equity "works."

Dividend recapitalization is the most insidious subset of financial engineering – the owners take out a loan backed by the assets of the company and use the proceeds from the loan to write themselves a dividend check of roughly the same amount.  The company is again forced to focus all of its attention on servicing this new debt, frequently groaning under the pressure.  When it fails in that mission and tumbles into bankruptcy, the private equity backers toss the keys to the creditors and walk away, having already recouped most, if not all (or, in some cases, many multiples of all) of their investment.  Loans are, fundamentally, supposed to be used to boost investment in productive enterprises, but in this case, the financial/private equity industry has bastardized that premise to funnel money away from productive uses and straight into their coffers. 

I have worked around the private equity industry for nearly a decade, and I have never met anyone in it who can tell me with a straight face what productive ends the dividend recap serves (like your other reader, I do not consider tax arbitrage "productive").

All of this (including the cash cow and tax arbitrage concepts) is complicated stuff that requires a familiarity with finance that not many voters possess, which is why the left has such a hard time explaining what is really going on and instead leaves itself open to charges of demagoguery by focusing on the human cost of Bain’s investments and follow-on decisions.  That’s unfortunate, but it does not render false the left’s substantive critiques on the topic, regardless of what Cory Booker and Harold Ford say.

The right, on the other hand, can’t possibly reckon honestly with the pros and cons of private equity, because to do so would be an admission that it consists mainly of financial parlor tricks that benefit a small group of wealthy individuals at the expense of virtually everyone else.  They know how that would play with the voters, and so they obfuscate at best, lie at worst and proclaim "class warfare" at every turn.

Devin Faraci credits The Avengers' massive box-office haul to a post-financial crisis hunger for optimism:

We are living in a time of precipitous uncertainty. Nobody is interested in the grey areas anymore. Much like the 1930s – the time when superheroes were birthed – we’re hungry for something that feels optimistic, something that’s hopeful. Something that tells us it’s all going to be okay. That something is The Avengers. It’s the most relentlessly positive blockbuster in years.

The big conflict in the film isn’t between the Avengers and the Chitauri, it’s between the Avengers.

It’s a movie about squabbling, disparate people coming together to get things done. No character feels extraneous, and everyone has something to do that only they can accomplish. The film's money shot isn't an explosion or a fight scene, it's a shot of the characters standing together, united.  It’s exactly the fantasy that will appeal to a nation divided drastically along seemingly insurmountable partisan lines. It's the fantasy of teamwork.

Compilation of the Dish's take on the mega-hit here. Sonny Bunch focuses instead on the blockbusters that have flopped recently:

If the new normal is a world in which a studio is releasing a $150-$250M movie every single weekend and three of those movies are failing for every one that strikes it rich, the studios are going to run out of money really quickly.

A recent study found that poorer cities have less greenery:

They found that for every 1 percent increase in per capita income, demand for forest cover increased by 1.76 percent. But when income dropped by the same amount, demand decreased by 1.26 percent.

But the poor are the ones who could seriously benefit from more trees:

They shade houses in the summer, reducing cooling bills. They scrub the air of pollution, especially of the particulate variety, which in many poor neighborhoods is responsible for increased asthma rates and other health problems. They also reduce stress, which has its own health benefits. Large, established trees can even fight crime.

A preacher in North Carolina calls for concentration camps, with electric fences, to starve homosexuals and lesbians to death. Update from a reader:

Andrew, you need to watch the actual clip. He does not talk about starving gays. On the contrary, he suggests dropping food to them. His point is that lesbians and homosexuals will die out  eventually because they cannot procreate.  He doesn't seem to consider the notion that gay children will continue to be born to straight parents. His is a twisted world-view already – you don't have to make it worse by misinterpreting the starvation angle.

Gene Thorp shows the ridiculous lengths we've had to go to in order to supply the Afghanistan war while avoiding Pakistan:

Walking in Roman Culture, a new book by Timothy M. O’Sullivan, argues that we have "translated away" how essential walking is to our character:

In ancient Rome how you walked was a sign of who you were. Quite simply, it could be an indication of paternity. When people wondered whether Cleopatra’s child, young Caesarion, really was the son of Julius Caesar, they pointed to his walk (incessus) as much as to his facial features. Gait ran in families. Think, for example, how often those Roman family names (often derived – like Crassus, "Fatty", or Rufus, "Redhead" – from physical characteristics) referred to feet or to odd ways of walking: Plautus, "flat-footed"; Valgus, "bow-legged"; Varus, "knock-kneed". As O’Sullivan observes, "'a family gait’ was no less distinctive than ‘a family nose'".

A classic Internet rant gets a remix:

Francis Fukuyama notes the gap between effective activism and political power:

[Egypt’s liberals] could organize protests and demonstrations, and act with often reckless courage to challenge the old regime. But they could not go on to rally around a single candidate, and then engage in the slow, dull, grinding work of organizing a political party that could contest an election, district by district. Political parties exist in order to institutionalize political participation; those who were best at organizing, like the Muslim Brotherhood, have walked off with most of the marbles. Facebook, it seems, produces a sharp, blinding flash in the pan, but it does not generate enough heat over an extended period to warm the house.

Should the GOP win control of Congress and the White House, Suderman doubts the Tea Party agenda will be enacted:

Republican legislators may talk a big game about federal spending, but that doesn’t mean they vote accordingly. Even amongst the most recent class of House freshmen — the supposed "Tea Party radicals" swept into office in 2010 — seemingly obvious votes against spending cuts, program closures, and corporate welfare boondoggles are far from sure things.

As Cato’s Ted DeHaven notes, last week gave House members three opportunities to vote against federal spending. Yet only 26 and 87 House GOP freshman actually voted against spending cuts in all three cases. The freshman radicals are, for all practical purposes, no different from their conventional, free-spending Republican elders. As The Washington Post reported on Tuesday, GOP "freshmen voted with the fiscally conservative point of view an average of 71 percent of the time — only slightly higher than other incumbent Republicans, who toed the line 69 percent of the time." When it comes to the practical reality of federal spending, the GOP hasn't changed all that much. 

Earlier speculation here.