Mike Kueber's Blog

October 30, 2010

Barack Obama’s replacement – Chris Christie or Lindsey Graham?

Filed under: People,Politics — Mike Kueber @ 5:20 pm
Tags: , , ,

Unless Barack Obama’s performance improves dramatically next year, Americans will be looking for a new president in 2012.  Assuming that the Democrats will not jettison Obama, America’s alternative will come from the Republican Party.  Who do they have in the offing? 

The Republican Party has a tradition of requiring that candidates pay their dues.  An upstart like Obama would never win the Republican nomination.  Based on that tradition, the logical standard-bearer would be Mitt Romney, who finished second to John McCain during the last primaries and has been running ever since, or Sarah Palin, who was the party’s vice-presidential candidate during the last election and recently announced on Entertainment Tonight that she would run “if there is no one else to do it.”  Other leading contenders are governors Tim Pawlenty (Minnesota) and Bobby Jindal (Louisiana), whom McCain seriously considered for his running mate before throwing a Hail Mary with Palin, and former governor Mike Huckabee (Arkansas).  Personally, I hope the Republican Party looks past the also-rans from the previous campaign and takes a gander at New Jersey governor Chris Christie or Senator Lindsey Graham of S.C.

Although Christie is a hefty man, his C.V. is undeniably thin (as thin as Palin’s).  He has been governor only since 2009, and before that he was the U.S. Attorney for New Jersey.  But he connects well with people, and his conduct as governor has been remarkable under challenging circumstances. 

Education has been his biggest issue.  He supports school vouchers and charter schools and has taken on teacher unions over accountability.  (“Teacher accountability” has become a euphemism for testing students and firing ineffective teachers, just like “comprehensive immigration reform” means a path to citizenship for illegal immigrants.)

Another big issue of late for Christie is the NJ/NY tunnel.  This tunnel to Manhattan was the biggest public-works project in America, and recently Christie just shut it down because of projected cost-overruns.  The NYTimes has strongly suggested that Christie should find the necessary $3-7 billion by raising its relatively low gas tax, and it ridicules him for slavishly keeping his promise of no new taxes.  (Christie hasn’t forgotten what happened to Bush-41’s pledge.)   

Lindsey Graham is a slight man, but his C.V. is indisputably hefty.  He has been a senator since 2002, and has played a leading role in reaching across the aisle on issues like immigration, judicial selection, and climate change.  Prior to his time in the Senate, Graham was a congressman for eight years and came to fame for the leading role he played in the impeachment of Bill Clinton.  And he has six years of active-duty service as an Air Force lawyer. 

I like Graham’s modest temperament, but I wonder if he has the charisma and fire that Christie seems to have.  I’m still a Romney man, but Christie and Graham are worth keeping an eye on.

October 29, 2010

Arizona’s Proposition 200 and the Halloween haunting by Sandra Day O’Connor

It is fitting that during Halloween week, Supreme Court justice Sandra Day O’Connor has decided to haunt again America’s conservatives.  As you may recall, in one of her most monumental decisions – 2003’s Grutter v. Bollinger – she ruled that affirmative action in higher-education admissions was an evil that America should try to phase out in the next 25 years or so.  Until then, she concluded that the benefit of classroom diversity outweighed the evil of reverse discrimination.

Full-blooded conservatives may have felt relief when moderate conservative O’Connor retired and was replaced by stalwart conservative Alito.  In her retirement, however, O’Connor would occasionally serve as a guest judge on the Ninth Circuit Court of Appeals, and as luck would have it, she was guesting as part of the three-judge Ninth Circuit panel that earlier this week overturned a critical part of Arizona’s Proposition 200.  Gonzalez v. State of Arizona, 08-17094 (Ninth Circuit, October 26, 2010). 

Proposition 200 was passed by the people of Arizona in 2004.  The critical part of the proposition requires people who are registering to vote to show proof of their citizenship – e.g., driver’s license or birth certificate.  That seems like a reasonable requirement, especially in a state like Arizona with a huge number of non-citizens.  After all, citizenship is still a requirement to vote in America.

Advocates for Mexican-Americans didn’t think Proposition 200 was reasonable.  In fact, they thought it stifled Mexican-American participation in the electoral process and, more importantly, was void because it conflicted violated the National Voter Registration Act (NVRA), which only required that voter applicants give their word about their citizenship.  As Ronald Reagan didn’t say, “Trust, but don’t bother verifying.”

On October 26, 2010, a three-judge panel for the Ninth Circuit agreed 2-1 with the Mexican-American advocates, and Sandra Day O’Connor was part of the “2.”  Although she didn’t write the opinion, she concurred in Judge Ukuta’s opinion that the NVRA superseded Proposition 200.

Although I was skeptical as I started reading the Judge Ukuta opinion, I came away thinking that the decision was correctly made.  The first important point in the opinion was that the matter was controlled, not by the Supremacy Clause in the Constitution, but rather by the Elections Clause:

“’The Times, Places, and Manner of holding Elections for Senators and Representatives, shall be prescribed in each State by the Legislature thereof; but Congress may at any time by Law make or alter such Regulations, except as to the Place of chusing Senators.’  U.S. Const. art, I, § 4, cl. 1. In a nutshell, the Elections Clause gives state governments initial responsibility to regulate the mechanics of national elections, but only so far as Congress declines to preempt state legislative choices.”

This is an important distinction because a court’s analysis under the Supremacy Clause attempts to maintain a delicate balance between state and federal governments and to preserve state authority where possible.  By way of contrast, a court’s analysis under the Elections Clause does not involve two competing sovereigns, but rather one dominant sovereign (the feds), with the states having delegated, not reserved, authority. 

After deciding that this matter would be controlled by the Elections Clause, it was only a short jump for the court to decide that requiring proof-of-citizenship conflicted with the easy-to-register procedures established by the 1973 NVRA.  As the court noted, the NVRA was a comprehensive law that included the infamous “motor voter” provision and even forbade states from requiring that any registrant statements be notarized.  (The law was obviously the brainchild of the same type of Congress that contributed to the financial crisis of 2007-2008 by pushing for everyone in America to own a home, including the $14,000 strawberry picker in California who obtained a government-backed home mortgage for $700,000.)

An interesting nuance to the Gonzalez decision is that it applies only to registration for federal elections.  State and local jurisdictions are free to establish different requirements for their non-federal elections.  In fact, I read last week that there are several northeastern jurisdictions in the process of enabling legal non-residents to vote in local elections.  If the federal government refuses to amend the NVRA, perhaps Arizona should consider limiting Proposition 200 to non-federal elections.

Personally, I have always believed that increased voting should be an objective and a benchmark of America’s civic-mindedness.  But I don’t believe in artificially increasing participation by dumbing-down the process.  Instead of making it easy to vote, let’s make it something that people care about, at least as much as football.

Campaign 2010 – Iraq and Afghanistan

Filed under: Issues,Politics — Mike Kueber @ 12:09 am
Tags: , , ,

Earlier in the week, Tom Brokaw contributed an Op-Ed piece to the NYTimes titled, “The Wars That America Forgot About.”  He complained about the paucity of campaign consideration of the wars in Iraq and Afghanistan despite the wars’ duration (nine years) and cost (5,000 lives and $1 trillion).  In Brokaw’s opinion, the dearth of discussion is due to the fact that few Americans are affected by the wars – i.e., the all-volunteer military is less than 1% of the population, and America’s non-military are not even asked to pay for the wars.       

Today, a headline in the NYTimes read, “In 2010 Campaign, War Is Rarely Mentioned.”  In the accompanying article, the author Helene Cooper concludes, however, that the absence of coverage is the fault of politicians.  She opines that politicians in both parties have strategically decided that discussion of the war would not be helpful to them.

I suggest that Brokaw and Cooper are conveniently overlooking a major, obvious cause for the lack of coverage.  No, it’s not the apathy of the American public, and, no, it’s not the fecklessness of politicians.  But rather, it is the political bias of the media.

Obama campaigned for president by promising to quickly end the bad war (Iraq) and to fully engage in the good war (Afghanistan).  Unfortunately for him, Bush ended the bad war before Obama had a chance to end it, and the good war deteriorated badly.  Because the media completely bought into the Obama presidency, they have no motivation to undermine him by adding Afghanistan to his pile of difficulties.  The media was downplaying the wars and bringing their correspondents home long before the 2010 campaign. 

So, Tom and Helene, when you wonder why the wars aren’t being covered, look to your brethren.

October 28, 2010

Don Imus

Imus in the Morning has been my favorite talk show for many years.  I love Don Imus’ interviews with reporters, columnists, politicians, and authors.  I love his repartee with news guy Charles McCord, resident redneck Bernard McGuirk, sports guy Warner Wolf, and comedians Rob Bartlett and Tony Powell.  And I love his politics – left and right of center, at the same time.  Although he can be mean, sarcastic, and narcissistic, his heart is in the right place.   

I watched Imus on MSNBC for years while reading the morning paper and getting ready for work.  Then on April 4, 2007, he and McGuirk decided to insult the appearance of the girls on the Rutgers’ basketball team, with Imus calling them “nappy-headed hos.”  Jesse Jackson and Rev. Al Sharpton called for Imus’ head; even Barack Obama piled on.  One week later, Imus was fired. 

Although I was devastated by the firing, I had to move on.  But nothing really took his place.  Eventually, Imus in the Morning returned to an obscure TV network (RFD) that my cable provider didn’t provide.  Then last year, when the show moved to Fox Business News, I thought I was in luck, but instead I was disappointed to learn that my Time Warner cable package, which included hundreds of stations, didn’t include Fox Business News.  Although I could purchase another tier of stations that included Fox Business News for only $7, I kept putting off the purchase until I finally got around to doing it a couple of months ago. 

Purchasing the cable tier that included Imus in the Morning was one of the best purchases I have made in a long time.  Happy days are here again.  Although I still enjoy listening to Mike & Mike in the Morning, a sports talk show on ESPN2 at the same time, I usually prefer political talk over sports talk, especially following a weekend when both the Vikings and Longhorns lost. 

Last week, one of Imus’ guests asked him where he went to college, and Imus responded that he never went to college.  Neither did Charles McCord, he said.  That shocked the guest and me because Imus comes across as well read and cosmopolitan, and most of us associate those things with a college education.  But it didn’t shock my conservative friend, Kevin Brown, who says that popular talk-show hosts typically don’t have college educations.  He mentioned Sean Hannity, Glenn Beck, and Rush Limbaugh.  By way of contrast, he suggested than unpopular talk-show hosts have elite educations – e.g., Anderson Cooper went to Yale, Rachel Maddow went to Stanford, and Keith Olbermann went to Cornell.  Coincidence?  I think not.  Popular and elite don’t mix.  Just ask John Kerry.

October 27, 2010

Regrets, I’ve had a few.

Earlier this week, I was channel surfing and stumbled across a debate between the two gubernatorial candidates from Florida – Alex Sink (female) and Rick Scott.  Other than noticing how the candidates were clearly not ready for primetime (they were uncomfortably ill-at-ease), I was struck by their pathetic responses to a predictable question from CNN moderator John King – “What’s your biggest regret?” 

Because that type of question is commonly posed to politicians, I was surprised that Sink and Scott gave such feeble answers.  Sink looked like a deer in headlights and struggled to find an answer until she finally gave a phony answer in blatant political babble – i.e., she doesn’t have any regrets because she is a person who prefers looking forward instead of looking backward.  I wonder what she thinks about those who don’t learn from history are condemned to repeat it.

Scott’s answer was not much better even though his response sounded prepared.  He smugly responded that he wished he had more kids and explained by saying he loved his girls.  That’s so deep.  I wish John King would have followed up by asking why he and his wife didn’t have more kids.

These politicians should have realized that King’s question was serious and not to be trifled with.  Haven’t they heard that famous “Regrets” song?  No, not “My Way” by Frank Sinatra.  I’m referring to Kenny Chesney’s, “A Lot of Things Different.” 

People say they wouldn’t change a thing,
Even if they could.
Oh but I would.
Oh, I’d done a lot of things different.
I think we’d all do a lot of things different

In the song (written by Whisperin’ Bill Anderson and Dean Dillon), Kenny lists a lot of things he would have done different.  Things like:

  • I‘d spend a lot more time in the pouring rain without an umbrella covering my head.
  • And I’d stood up to that bully when he pushed and called me names, but I was too afraid.
  • And I’d a gone on and saw Elvis that night he came to town, but mama said I couldn’t.
  • And I’d ‘a went skinny dipping with Jenny Carson that time she dared me to, but I didn’t.
  • I wished I’d ‘a spent more time with my dad when he was alive.  Now I don’t have the chance.
  • I wish I had told my brother how much I loved him before he went off to war, but I just shook his hand.
  • And I wish I had gone to church on Sunday morning when my grandma begged me to, but I was afraid of God.
  • And I wish I would’ve listened when they said Boy, you’re gonna wish you hadn’t, but I wouldn’t.
  • There was this red dress she wanted one time so bad she could taste it.
    And I should’ve bought it, but I didn’t.
  • She wanted to paint our bedroom yellow and trim it blues and greens, but I wouldn’t let her.  Wouldn’t ‘a hurt nothin’.
  • She loved to be held and kissed and touched, but I didn’t do it not nearly enough.
  • And if I’d ‘a known that dance was going to be our last dance, I’d ‘a asked that band to play on and on, on and on.

Since I am a politician (albeit currently unemployed), I need to be ready for the question, “What are your major regrets?”  My response will be:

1.   Dating.  I wished I had dated more in high school.  There are a variety of reasons or explanations for why I didn’t (I was raised on a farm in a family of all boys, I didn’t have a car or a lot of money, my friends did minimal dating, and I wasn’t interested in girls), but I should have been interested in girls and I should have realized that life without girls in it is not nearly as full as a life with girls in it.  All of which reminds me of a Brooks & Dunn song – “Put a Girl in It”:   


You can buy you a brand new truck
Chrome it all out, jack it way up
You can build you a house up high on a hill
With a pool and a pond and a view to kill
You can make all the money in sight
But you aint livin the good life

Til you put a girl in it
You aint got nothin
What’s it all worth
Without a little lovin
Put a girl in it
Some huggin and some kissin
If you’re world’s got somethin missin
Just put a girl in it

You can buy a boat and a shiny set of skis
Have some fun in the sun, float around in the breeze
You can lay out on a blanket by the lake
Drink a cold beer, polish off another day
Kick on back and watch the sky turn red
A sunset aint a sunset

Til you put a girl in it
You aint got nothin
What’s it all worth
Without a little lovin
Put a girl in it
Some huggin and some kissin
If you’re world’s got somethin missin
Just put a girl in it

You can write you a country song
The DJ wont put it on
They wont dance or sing along

Til you put a girl in it
You aint got nothin
What’s it all worth
Without a little lovin
Put a girl in it
Some huggin and some kissin
If you’re world’s got somethin missin
Just put a girl in it

If you’re ridin in your truck
Put a girl in it

If you’re gonna have a party
Put a girl in it

If you wanna live the good life
Better put a gir-r-rl in it 

2.   Notre Dame.  When I was a senior in high school, I received a four-year Army ROTC scholarship, which would provide me with a free education at virtually any major college in America (only a few Ivy League schools didn’t have an ROTC program).  At that time, I was a huge fan of Notre Dame and had dreamed of going to school there.  But I was also a small-town/farm kid who had never been away from home.  I obtained the application from Notre Dame, but never sent it in because I didn’t have the courage to move that far away from home.  Instead, I applied to the University of North Dakota, which was only 50 miles away.  I have no idea how my life would have been different if I had gone to Notre Dame, but that’s the path I should have taken.

 3.   Law School.  I went to college while the Vietnam War was coming to an end, and I was heavily influenced by the anti-war movement.  A major philosophical component of that movement was the pursuit of personal freedom and the rejection of materialism, imperialism, and conformity.  With that philosophy, I found it difficult to strive for excellence in during my years in law school.  Although my work ethic prompted me to work solidly and earnestly, I didn’t have the ambition and drive to excel that I have always had, both before and after law school.  I have no idea how my life would have been different if I had taken better advantage of the opportunity to learn law at the University of Texas, but I should have taken that path.  

Although I regret the decisions described above, I don’t regret my chosen path because everything has worked out to my satisfaction.

October 26, 2010

The Big Short, by Michael Lewis – a book review

In his landmark book, Outliers, Malcolm Gladwell suggested that the rice-growing tradition in Asia (satisfying, meaningful work) resulted in hard-working kids with practical intelligence.  I have previously suggested that the farming tradition in America similarly provided the foundation for America’s Greatest Generation – the most productive in its history.  After reading Michael Lewis’ The Big Short – Inside the Doomsday Machine, I feel sick about how far the American way of life has deviated from rewarding productivity. 

The Big Short describes the financial crisis of 2007-2008 from the perspective of several Wall Street types who saw it coming and did the what Wall Street types do – i.e., they profited from it.  How do you profit from disasters – you sell “short.” 

According to Wikipedia:

  • “Short selling (also known as shorting or going short) is the practice of selling assets, usually securities, that have been borrowed from a third party (usually a broker) with the intention of buying identical assets back at a later date to return to the lender. The short seller hopes to profit from a decline in the price of the assets between the sale and the repurchase, as the seller will pay less to buy the assets than the seller received on selling them. Conversely, the short seller will incur a loss if the price of the assets rises.”

Thus, while the background for The Big Short is the scandalous market for sub-prime mortgages in 2005-2007, the actual story is about several people who were smart enough to bet/gamble millions of dollars that the sub-prime market would fail and who won billions in return.   

Sub-prime mortgages are mortgages to borrowers whose ability to repay the loan is suspect.  Why would anybody want a sub-prime mortgage? 

From a borrower’s perspective, this type of loan (often with a 2-year teaser interest rate that adjusts higher) makes sense because the expected rise in the value of the home can be used to finance subsequent payment obligations.  As they say, nothing ventured, nothing gained.  Especially when you have nothing to lose (little or no down payment). 

From the lender’s perspective, this type of loan (often with no documentation of income – “no doc” mortgages) makes sense if the risk of default can be shifted to someone else. 

The process worked fine while the easy credit from the Fed caused the value of houses to rise ever more steeply.  People profited from buying more house than they could afford, and many started buying additional houses as an investment.  But inevitably, the housing bubble burst, home values fell, and the people with the sub-prime mortgages defaulted. 

Who was left holding the bag of defaulted mortgages?  The secondary mortgage industry was left holding the bag. 

A big part of the secondary-mortgage industry is the federal government, through GSEs Fannie Mae and Freddie Mac (government-sponsored entities).  Although The Big Short doesn’t spend much time detailing the role of the federal government in creating the real-estate bubble (by pressuring the GSEs to guarantee loans to low- and moderate-income people), it is well documented elsewhere (a) that politicians in 2005 had decided that increasing home ownership would improve America and (b) that politicians now agree that home ownership should not be given to people before they prove themselves to be financially responsible.

But big investment banks wanted a big piece of the secondary mortgage market, too, and they can’t blame their stupid actions on political pressures.  Rather, they thought they could make big money.  The banks’ strategy was to create what the author called a Doomsday Machine to package thousands of sub-prime mortgages that didn’t qualify for a GSE guarantee into bonds, derivatives, and CDOs (collateralized debt obligations) that were so confusing (mezzanine tranches) that outgunned and conflicted rating agencies (Moody’s and S&P) would give them a AAA rating without understanding the junk beneath them.  Conservative investors were willing to buy the AAA securities, especially when they could buy cheap insurance against default (credit default swaps) from mega-insurer AIG and other gullible investors who didn’t realize there was junk beneath the AAA rating.  Only when the underlying sub-prime mortgages started defaulting did the chickens come home to roost.       

The ostensible heroes in The Big Short recognized that the mortgages would inevitably fail and that the investors left holding the bag would fail.  Although there was already a technique for betting against the institutions left holding the bag (selling their stock short), the heroes had to create a market for selling short the CDOs.  Much of The Big Short involves the creation of that shorting niche, and although it makes an interesting story, I question its significance other than to provide another example of unproductive activity.

All of which brings me back to my initial concern with rewarding unproductive activity in America.  Much has been written about Wall Street taking the best & the brightest kids from the Ivy League schools and directing their energy and intelligence to essentially unproductive activity.  Shorting (like day-trading, arbitrage, and gambling) seems like an especially unproductive activity, even though Seth Klarman has argued that shorting provides a useful counterweight to the widespread bullishness on Wall Street, and my personal guru Warren Buffett says short sellers are useful in uncovering fraudulent accounting and other malfeasance at companies.  In my opinion, capitalism is riddled with similar inefficiencies, but interference with the market is usually counter-productive.      

The author of The Big Short, Michael Lewis, has been around the block before.  He first gained fame in 1989 by writing Liar’s Poker, a popular book about the lifestyle of mortgage brokers and the creation of mortgage bonds by his employer, Solomon Brothers.  He has written several other books, including two sports books – Moneyball, a 2003 book about the use of statistics (sabermetrics) in making baseball decisions, and Blind Side, a 2006 book that served as the basis for award-winning football movie.

October 25, 2010

Assimilation vs. multi-culturalism

Filed under: Culture — Mike Kueber @ 7:07 pm
Tags: , , , , , , ,

I have a friend, Sakina Hassonjee, who emigrated from India to Staten Island when she was 13-years old.  She subsequently went to college at NYU and law school at Brooklyn Law.  After a few years working in Chicago for Allstate, she found her way to San Antonio and USAA because her sister’s family lived here. 

This past weekend, Sakina invited me to an event for Diwali, which is a five-day Hindu celebration.  The event was presented by the India Association of San Antonio (IASA) at the majestic Scottish Rite Auditorium and consisted of 30 performances, mostly dancing with some singing.  The performers were primarily children of all ages dressed in traditional, dressy Hindu garb.  The women in the audience were similarly dressed, while the men had the option of wearing Hindu garb (much more casual looking than female garb) or a coat & tie.  A few went western casual. 

While I was watching the performances, I thought of a recent column in the SA Express-News that suggested America needs to think about its process for assimilation of immigrants.  The author, Esther J. Cepeda, who seemed to favor robust immigration, acknowledged that, although assimilation has a negative connotation, it was still to be preferred over multi-culturalism.  http://www.mysanantonio.com/opinion/nurturing_melting_pot_key_to_immigration_issue_105387488.html.  I wondered whether Diwali and IASA were consistent with assimilation or multi-culturalism.

San Antonio probably has the largest assimilation problem of any major American city because of its large Hispanic population and its proximity to Mexico.  By contrast, the assimilation of Indians fits typical historical patterns of immigration.  Sociologists evaluate the assimilation of immigrants based on four factors: socioeconomic status, geographical distribution, second language attainment, and intermarriage. 

Based on my personal observations in San Antonio, Hispanic immigrants who are here legally seem to be making a lot of progress toward assimilation; illegal immigrants, not so much.  Americans are open and welcoming to those newcomers who want to be a part of this great country.  The problem with illegal immigrants is that they, by necessity, must live in the shadows as second-class residents.  This causes distrust and resentment between those here legally and those here illegally.  

Based on my experience with Diwali and IASA, they are not an obstacle to assimilation by Indians in America.  Indians already have a huge head start toward assimilation because so many of them speak English.  Although the songs at Diwali 2010 were sung in Hindi, virtually all of the speech was in English.  Although Indians may tend to cluster in some parts of town, they are already geographically distributed widely throughout SA.  Because many Indians are highly educated, they already populate the middle and upper classes.  Like Hispanics, Indian parents generally prefer intra-marriage, but this is more of an obstacle for Indians because they are more deferential to their parents than Hispanics are.

Getting back to Esther Cededa’s column – San Antonio is showing that America can avoid the multi-culturalism that afflicts Europe, especially if we avoid regressing into a welfare state.  Free enterprise is the principle that units us – immigrants and native born.

NPR and Juan Williams

There are two reasons why I’ve never listened to NPR (formerly National Public Radio).  The most important is that I prefer listening to popular music; the other is that NPR has a reputation for being high-brow, while I’m generally known as a philistine.  Although I am not an NPR listener, I still take umbrage at its decision this past week to fire Juan Williams for his comments about airplane passengers in Muslim garb.  

Some liberals have defended Juan’s firing by arguing that freedom of speech doesn’t guarantee a person’s job, but this is clearly a straw-man argument.  No one is arguing that a media company shouldn’t be able to fire someone for saying something controversial.  See my main man, Don Imus.  Most reasonable people (and the law) accept that an employment-at-will relationship can be severed by either party for whatever reason (except for illegal discrimination, etc.)  But just as an employee must be willing to accept the possibility of termination for exercising his free-speech rights, a media company must be willing to accept public disapproval for exercising its employment-at-will rights. 

Public disapproval is pounding on NPR for two reasons:

  • Juan William’s comments weren’t controversial.  He merely expressed a common human failing, that of his emotions over-riding his reasoning.  Jesse Jackson made a more problematic statement a few years ago when he said he got worried at night if he noticed several black males walking behind him.
  • NPR’s claimed reason for the firing (the controversial statement) was a pre-text.  As Fox News has reported, there is a long record at NPR for its analysts to say controversial things, but only if they are attacking conservative positions:
    • Cokie Roberts called Glenn Beck worse than a clown and more like a terrorist.
    • Nina Totenberg wished for Jesse Helms’ grandkids to get AIDS and has suggested that the Citizen decision from the U.S. Supreme Court could lead to another Watergate.
    • Daniel Schorr wrote that the Bush v. Gore decision was a coup and junta by a “gang of five.”

NPR receives about $3 million a year from the federal government, which is only 2% of its budget, but its network of subscriber stations receives a significantly larger portion of their budgets from the federal government.  All of this funding is jeopardized if NPR reveals itself to be left-leaning, and the firing of Juan Williams certainly puts gas on that fire.

October 23, 2010

Credit reports and FICO scores

Credit scoring was created in the 1950s to help lenders determine if an individual was credit-worthy.  The CA company that developed the credit score was Fair, Isaac and Company, and it titled its product – FICO score. 

FICO scores became controversial in the 1990s when car-insurance companies started using FICO scores to calculate an individual’s car-insurance rates.  As a lawyer for a large insurance company during that time, I spent a lot of time trying to justify this practice to legislators and regulators.  I argued that people with good credit deserved preferred rates because it was a statistical fact that they were less likely to have accidents.  Of course, that wasn’t the problem.  The problem was that people with bad credit deserved higher rates because they had more accidents.

Consumer groups rose to the defense of those with bad credit.  Their two principle arguments were that (1) credit scoring has a disproportionate negative effect on the poor and minorities because they are more likely to have been subjected to predatory credit practices, and (2) it is not fair for an individual to be judged a bad risk on the basis of something that has nothing to do with driving.  Ultimately, however, legislators and regulators have grudgingly accepted the use of credit scores in insurance pricing and underwriting.  If it’s OK to rate and underwrite based on age or sex (things over which you have no control), then it’s OK to consider your credit record, which you can control.        

What’s next for FICO scores?  A recent column by Washington Post columnist Michelle Singletary reports that FICO scores are often being considered by employers before making hiring decisions.  See http://www.washingtonpost.com/wp-dyn/content/article/2010/10/23/AR2010102300314.html?hpid=topnews.  Michelle reports that over 60% of employers use credit reports with some hiring decisions and 13% use them in all decisions.  Consumer advocates are urging the EEOC to prohibit this practice, and, déjà vu, they are making the basically the same arguments that were previously made to and rejected by insurance legislators and regulators. 

Michelle, however, does not consider this matter to be resolved, res judicata.  Instead, she tweaks the arguments and urges a different answer.  According to Michelle, allowing the use of credit scores in hiring decisions will inevitably let to a vicious cycle – people with bad credit (poor and minorities) will be prevented from getting a job, and their inability to get a job will drive their credit scores further down.  Michelle also claims that the essential question is “whether workers with money troubles have a propensity to steal from their employers,” and then she asserts that there is independent research to answer the question. 

Michelle’s question is missing the point.  A FICO score does more than indicate the likelihood of an applicant being a thief.  It might also indicate whether the applicant will do a good job and be responsible.  Is it such a leap to think that individuals who are responsible with their finances will be responsible workers?  What is wrong with rewarding a job to the applicant with a responsible credit history over the applicant with an irresponsible credit history?  One of the most important economic principles is that incentives matter.  I believe the American way of life will be enhanced if there is more incentive for living responsibly.

October 22, 2010

The Special Section at UT Law – Class of 1979 – and Ron Kirk

September 1976, I drove into Austin, Texas and pointed my $300 1963 Ford Galaxy toward the famous Tower.  After finding a parking spot, which happened to be on the famous “Drag,” I walked to the University of Texas Law School, which happened to be on the opposite side of the famous “40 acre” campus.  Later in the day, I found a sleeping room a couple of blocks off the Drag. 

Although I was driving a $300 car, I wasn’t poor.  I had strung pipe all summer for Northern Pipeline of Bemidji, MN.  We didn’t have a single rain day, and I averaged over 70 hours a week at $4 an hour, plus time and a half for overtime.  A couple of months later, I would sell the Galaxy to a friend, Mikel Vigus, for $300, and I would buy a 1969 red MGB convertible for $1,500 from a law-school classmate, Robert Brownrigg, who had married and needed to settle down.  His loss was my gain.    

When I matriculated, there were more than 500 kids in the UT Freshlaw class.  (Only Harvard had more.)  In an effort to create a more collegial atmosphere, the law school administration randomly assigned the Freshlaw students into six sections of almost 100 students each.  The principal technique applied to create collegiality was to have all of the kids in a section take their first-year classes together.  In most respects, the sections were identical, except for the sixth section, called the Special Section.  As a lucky guy, I ended up in the Special Section.

The main difference with the Special Section was that there would be less focus on grades, a bane of law school.  In the three core first-year courses – Property, Torts, and Contracts – there would be no testing or grades until the end of the year.  Only Civil Procedure would be tested in December because it was a one-semester course, and then it would be replaced in our curriculum by Constitutional Law. 

I assume the Special Section was a grand academic experiment, but I don’t recall what we were told about that.  Other than the absence of testing, I don’t recall anything unique about the Special Section.  The professors – Alan Rau for Contracts, David Filvaroff for Torts, and Cohen for Property – did not seem particularly popular or unpopular, but their personalities and teaching styles were exceptionally unique.  Rau was socially uncomfortable and given to mumbling; Filvaroff was a passionate proponent of socio-economic mobility; and Cohen came off as an urbane elitist.  Their only shared interest was a willingness to teach first-years students with a lessened focus on tests and grades. 

The professors’ involvement with the Special Section academic experiment was voluntary (I believe), but ours wasn’t.  Perhaps to ameliorate any potential grievance that we might feel, the UT Law administration provided us with the most popular professor in the entire school, Charles Alan Wright, for our second-semester Constitutional Law class.

How did the academic experiment work out?  Not well for me.

Although I studied relatively hard and earned solid grades at the University of North Dakota, I had an inordinate confidence in my ability compete intellectually with others.  While the other kids at UT Law were smart and hard-working, I thought I had an ace-in-the-hole, my 703 LSAT.  This meant that I was in the top 3% of those who took the test and was higher than all but a handful of my classmates.  (We quickly shared this information during orientation.  My son, who attends medical school, assures me that medical students don’t share their MCATs.)  My LSAT, I assumed, would lead me to the upper ranks of my class.  Thus, while my classmates obsessed about study groups and mastering the materials, I stuck to myself, read my assignments, and expected to do well.

The first sign of danger in my assumptions occurred at the end of the first semester, when I took my first test and received a low grade in Civil Procedure.  But everyone said that Civil Procedure was unlike any other law-school class because the focus was on black-and-white technical rules instead of gray-shaded legal concepts.  (A good analogy would be figure skating with its less important compulsory technical skating followed by its more important free-style program.)  Any nascent concern of mine was further ameliorated early in the second semester when Professor Cohen gave us a practice exam, which was intended to give us some exposure to what a real legal test looked like.  Even though the practice exam wasn’t graded, Cohen did provide us with comments, and he also told us that he placed “very good” on about 10-15 of the exams.  I received a “very good,” so everything seemed fine.

Then we have the final exams in May, and I have a rude awakening.  I performed slightly below average on all of them.  Although I was disappointed and a bit embarrassed by the results, they didn’t alter my conduct, and I’m not sure if receiving this feedback early in the first semester would have made a difference.  I was going through a phase of believing that government and big corporations (the establishment) were the cause of many bad things in the world, and I was not inclined to conform to their dictates or respond to their incentives.

I did make some great friends in the Special Section, and several turned out to be prominent.  Rene Oliveira serves in the Texas House and is currently the chairman of the Way & Means committee.  Barbara Radnofsky recently ran for the U.S. Senate as the Democratic candidate against Kay Bailey Hutchison and is currently running for Texas Attorney General.   But the most prominent is Ron Kirk, who is currently serving in President Obama’s cabinet as the administration’s Trade Representative.    

Ron was a nice, quality guy.  After my second year in law school, I made notations in the Class of 1979 directory to rate each classmate’s personality/character, with ++ the highest and — the lowest.  I gave Ron the second highest rating, ++0.  Very few classmates rated a ++.  (Rene rated + and Barbara rated 0+.)

Other than being a nice, quality guy who did not sound intellectually gifted, Ron enjoyed surprising success in athletics.  Special Section had some great athletes (and eventually won the Law/Grad intramural championship for basketball), but Ron Kirk was not one of them.  Although he was tall and fit, he was not particularly coordinated.  So you can imagine our surprise when he was asked to be a part of the Legal Eagles intramural football team.  The team was coached by legendary professor Charles Alan Wright, who was progressive locally, but served for a time as Nixon’s lead Watergate lawyer.  Wright looked and coached like Alabama’s Bear Bryant, and his teams regularly won the Law/Grad intramural football championship by recruiting college-quality football players in the class.  So what was Ron doing on the team?  We watched him play, and he brought minimal skills to the team.  Our only thought was he was politically connected to Wright.  That seemed to be confirmed when soon after graduation Ron went to work for Senator Lloyd Bentsen and then Governor Ann Richards.  And since graduation, I have learned that Ron’s working-class mother was very active in Austin politics. 

Ron’s story sounds a lot like that of San Antonio’s Castro twins.  They were raised by a politically-active, working-class mother and attended Harvard Law School through affirmative action.  The Castro twins claim to be living proof that affirmative action works, but I question whether they are idealistically the proper beneficiaries of such largesse.  I am quite confident that the Castro twins and Ron Kirk (I am guessing that Ron was admitted to UT Law through affirmative action) would have succeeded even without affirmative action because they are talented and were raised to succeed.  All affirmative action did for them was to punch their tickets at an elite school, which enabled them to make connections and to add that gilded credential to their resume.  Sounds like Barack Obama, too.

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