We have to remember one thing -- BP bought 10 years ago, Amoco, Arco, a very large American corporation with a lot of people working for BP today. And the retirees are pensioners from the Amoco and Arco days. So by cutting the dividend we're penalizing completely innocent people that worked very hard for many years. And now, the dividend is the way they support themselves. So, I don't understand."

The complete meltdown of the financial system seems to have abated, but we are still living with the uncertainty that the Panic of '08 generated. The uncertainty comes from the revelation that our largest financial institutions, and their regulators, were built on a house of cards, rather than the solid citizens that their marketing and regulatory filings had suggested. The panic may have passed, but the suspicion remains that there are significant weaknesses in our government and financial system. What to do? Well, we could always muddle through. But some are not satisfied with this and propose more radical surgery, such as abolishing the Federal Reserve: End The Fed? A Not So Crazy Idea

The Fed's apologists suggest otherwise, of course. They note that the US spent nearly half the years between 1854 to 1913 in recession, as opposed to just 21 percent of the time since the Fed's establishment in 1913. Who would want to go back to those bad old days?

But consider: the US economy has actually grown less rapidly since 1914 than it did before. And inflation has been much worse, despite both the Civil War, which featured the nation's worst inflation, and the Great Depression, which featured its severest deflation!

What's more, the frequent downturns before 1914 were due, not to the lack of a central bank, but to foolish government regulations. Topping the list were bans on branch banking, initiated by state governments and then incorporated into federal banking law.

(snip )

But the Federal Reserve plan proved to be a poor substitute for deregulation. By granting monopoly privileges to the Federal Reserve banks, it allowed them to inflate recklessly: By 1919, the US inflation rate, which had cleaved close to zero ever since the Civil War, was close to 20 percent! Yet the Fed was also capable of failing to supply enough money to avert crises. The first downturn over which it presided – that of 1921 – was among the sharpest in US history. Still it was nothing compared to the unprecedented monetary contraction of 1929-1933.

Would asset currency have been any better? Canada's was: Between 1929 and 1933, for instance, 6,000 US banks failed, and a third of the US money stock was wiped out. In contrast, and despite a fixed Canadian-US dollar exchange rate, Canada's money stock shrank by just 13 percent, and no Canadian bank failed.

While it's fun to consider the idea of abolishing the Federal Reserve (an idea that has kicked around on both the hard left and hard right over the years), I think anyone advocating this needs to admit that this would strike many Americans as being on a par with abolishing the FBI, simply because the Fed has been part of the national landscape for so long. On the other hand, most regular folks don't have a clear idea of what the Fed does all day, beyond setting interest rates. But, while the Fed seems permanent, it's important to remember that it is solely a creature of statute. There is no specific provision in the Constitution that allows for the creation of a central bank. Thus, the seemingly solid Fed could be legislated out of existence tomorrow if necessary (I don't think this should happen, but it could).

More disturbing is the question of what to do with our ever-increasing load of public debt. No matter how many times Paul Krugman might talk about multipliers and the like, our pojected debt is politically and financially unsustainable. Voters hate the idea of running huge deficits, and eventually, bond holders will refuse to continue to purchase US Treasuries. We could always cut spending and lower taxes, but that always manages to be "impossible." So, we are left with vague statements from policy makers about "keeping our options open," which mollify for a minute, but do nothing to settle the great unstated unease out there.

Some are already looking to the future to see what can be done. There is Jeffrey Rogers Hummel's prediction that, in order for the US to escape it's massive debt load, it will need to either inflate its debt away, or default on our national debt. Given the domestic political turmoil that would follow hyperinflation, Hummel thinks that a default would be much more likely: Why Default on US Treasuries Is Likely

It is not literally impossible that the Federal Reserve could unleash the Zimbabwe option and repudiate the national debt indirectly through hyperinflation, rather than have the Treasury repudiate it directly. But my guess is that, faced with the alternatives of seeing both the dollar and the debt become worthless or defaulting on the debt while saving the dollar, the U.S. government will choose the latter. Treasury securities are second-order claims to central-bank-issued dollars. Although both may be ultimately backed by the power of taxation, that in no way prevents government from discriminating between the priority of the claims. After the American Revolution, the United States repudiated its paper money and yet successfully honored its debt (in gold). It is true that fiat money, as opposed to a gold standard, makes it harder to separate the fate of a government's money from that of its debt. But Russia in 1998 is just one recent example of a government choosing partial debt repudiation over a complete collapse of its fiat currency.

The cause of all this is not the the Iraq War or "de-regulation." It arises from a combination of the current economic depression, the Fed's bailouts, the incredible national debt racked up in the last year, and the implacable, vurtually unrestrained rise in entitlement spending. As in CA, there is a crisis of Big Government and the welfare state that is gathering, and may already be here:

A century of experience has taught us that the client-oriented, power-broker State is the gravity well toward which public choice drives both command and market economies. What will ultimately kill the welfare State is that its centerpiece, government-provided social insurance, is simultaneously above reproach and beyond salvation. Fully-funded systems could have survived, but politicians had little incentive to enact them, and much less incentive to impose the huge costs of converting from pay-as-you-go. Whether this inevitable collapse of social democracies will ultimately be a good or bad thing depends on what replaces them.

Hummel is talking about nothing less than the end of the political arrangements that have defined US politics since 1932. We may be a center-right country in theory, but in practice the liberal-left defines our government's spending priororties, and sets out the parameters of political debate. This is not something that will be resolved in 2012, nor is it something that Rush Limbaugh and Sarah Palin can cook up on the Internet. But, this is the project: to transfer out of our unsustainable welfare state to one that returns the federal government to its ideal low-tax, limited government state.

Here's a peculiar article that ran on the front-page of the NY Times Sunday Business section. It claims to be about BB&T chairman John Allison IV, but it's really an extended critique of Ayn Rand. As Rand has had a mini-resurgence since the commencement of Obamanomics, this could not be allowed to stand.

BB&T has survived the chaos of the last year, although it did accept TARP money at the specific request of Hank Paulson, who wanted to bailout Citibank, but did not want to give the appearance of having done so. Allison has retired as BB&T's CEO, and is now barn storming the country denouncing the Wall Street Bailouts and spreading the message of Randian Objectivism. He may be the most prominent person in public life who is speaking to the great unease many feel about the increased corporatization of government, and the increased nationalization of the corporate sector.

If Mr. Allison’s speech sounds vaguely familiar, it’s because it’s based on the philosophy of Ayn Rand, who celebrated the virtues of reason, self-interest and laissez-faire capitalism while maintaining that altruism is a destructive force. In Ms. Rand’s world, nothing is more heroic — and sexy — than a hard-working businessman free to pursue his wealth. And nothing is worse than a pesky bureaucrat trying to restrict business and redistribute wealth.Or, as Mr. Allison explained, “put balls and chains on good people, and bad things happen.”

Ms. Rand, who died in 1982, has all sorts of admirers on Wall Street, in corporate boardrooms and in the entertainment industry, including the hedge fund manager Clifford Asness, the former baseball great Cal Ripken Jr. and the Whole Foods chief executive, John Mackey.

But Mr. Allison, who remains BB&T’s chairman after retiring as chief executive in December, has emerged as perhaps the most vocal proponent of Ms. Rand’s ideas and of the dangers of government meddling in the markets. For a dedicated Randian like him, the government’s headlong rush to try to rescue and fix the economy is a horrifying realization of his worst fears.

Indeed, so many bad things are happening that many followers of Ms. Rand, known as objectivists, believe that the ugly scenario in her 1957 novel “Atlas Shrugged” — in which the government takes over industry as the economy progressively collapses — is playing out in real life.

I'll be honest here: despite many years' worth of comments that I would "really love" Ayn Rand, I have never felt any great need to read her books. She was famously "read out" of the conservative movement by Whittaker Chambers decades ago. I think there's something to the critique that her philosophy encourages a sort of grasping selfishness. Mostly, she strikes me as the sort of writer that most people read and love in college, and I am no longer in college.

Nonetheless, I can understand why so many businesspeople and political conservatives find her appealing. If you are looking for a serious, literary exploration of conservative themes, you will find very little in 20th century literature that is satisfactory. 20th & 21st century literature, indeed virtually all serious art from the past 100 years, is almost uniformly liberal or progressive in its orientation. You literally have to go back to Trollope, Tolstoy and (especially) Dostoyevsky* to find the greatest conservative fiction. It's very easy to get a liberal arts education in a typical American college and have at least a passing familiarity with leftist thought, but not once hear the names Burke, Hayek, Rand, etc. in a classroom setting.

The NY Times, of course, goes out of its way to denigrate Rand, trotting out the usual philosophy pundit to give the reliable conventional wisdom that Rand was not a "real" philosopher.

The enduring popularity of Ms. Rand bewilders her many detractors, who complain that her writing is melodramatic, heavy-handed and intellectually bereft.

“To describe her as a minor figure in the history of philosophical thinking about knowledge and reality would be a wild overstatement,” says Brian Leiter, director of the Center for Law, Philosophy and Human Values at the University of Chicago. “She’s irrelevant.”

Professor Leiter conducted an informal poll in March on his philosophy blog, asking, “Which person do you most wish the media would stop referring to as a ‘philosopher’?” The choices were Jacques Derrida, Ms. Rand and Leo Strauss. Ms. Rand won by a landslide, with 75 percent of the roughly 1,500 votes cast.

Professor Leiter says Ms. Rand’s views on moral philosophy and objective reality are “simple-minded in the extreme.”

“She doesn’t understand the historical positions of thinkers on these issues, such as Hume and Kant,” he says. “Even the minority of philosophers with some sympathy for her celebration of the virtues of selfishness usually find her general philosophical system embarrassing.”

That is pure intellectual snobbery in action. I agree that Hume and Kant are deeper thinkers than Rand, but have read enough Kant to state categorically (hee hee) that he has little, if anything, to offer to the average businessman looking for the consolation of philosophy. Rand, on the other hand, is just what the doctor ordered. Is she perfect? Of course not. But a person who is naturally inclined to a pro-business, limited government position has to make a real effort to find contemporary literary or intellectual works that speak to his interests. Rand, at least, has the virtue of having been a best-selling author with a well-developed system of thought. The shame is not that people are reading Rand; it's that there is an unspoken cultural embargo against conservative thought, such that someone like Rand is the only conservative writer that the average person is likely to have heard of.

*one of the best kept secrets of literature is Dostoyevsky's conservatism, which is present in virtually all of his great works. Famed literary critic Laura Bush is one of the few people who have discussed this publicly.

This may not seem like a big deal, but it certainly is in my line of work (I represent people who are being sued by their credit card companies). The National Arbitration Forum is shutting its doors: Credit Card Disputes Tossed Into Disarray

Two major arbitration firms are backing away from the business of resolving disputes between customers and their credit-card and cellphone companies, throwing into disarray a controversial system that prevents unhappy consumers from filing lawsuits.

The American Arbitration Association said Tuesday it will stop participating in consumer-debt-collection disputes until new guidelines are established. Its decision came two days after another big group, the National Arbitration Forum, said it would stop accepting new cases as of Friday.

(snip)

Although arbitration long has been controversial, the current situation developed rapidly starting last week when the Minnesota attorney general's office sued the National Arbitration Forum, based in St. Louis Park, Minn., over the way it handled disputes. Among other things, the lawsuit contended that NAF didn't disclose that it has financial ties to the debt-collection industry, violating Minnesota laws against consumer fraud, deceptive trade practices and false advertising.

So, who cares, right? Well, you probably should. The Forum was a place credit card companies could go to obtain money judgments against their customers without going through the fuss and muss of actually proving their cases. If there was a procedural abuse you could conceive of, the Forum practiced it. Notices to appear would show up in people's mailboxes with no information about the date, time and place of the hearing. Hearings often took place in Minnesota, even if the defendant lived thousands of miles away. If some luckless defendant had the temerity to try to participate, their attempts to file documents would be rebuffed for failing to conform to Forum rules. The defects, as well as the underlying rules supposedly broken were, of course, left unstated. The Forum also relied on good old-fashioned "sewer service" to notify defendants of a pending hearing. In many cases, people had no idea an arbitration had taken place, and an award entered against them, until they got a notice informing them that their credit card company was attempting to enforce a big money judgment against them.

There is legitimate business activity and then there is abuse, and the Forum engaged in abuse. The MN attorney general's suit against the Forum is amazing to read. The Forum was set up by the card companies and some of the more prominent debt collection firms. Creditors attorneys practicing in front of the Forum worked for firms whose partners were part owners of the Forum. It was a corrupt system, and certainly emblematic of the abuses and rip-offs the underlay a significant part of the growth in the financial sector.

The Chamber of Commerce spin is that this will throw credit card litigation into "disarray." Don't believe it. You can still arbitrate a case to your hearts' content. You just can't do it in front of an arbitration factory where the results are pre-ordained. My default position is to be pro-business, but I am not going to blindly support this sort of consumer abuse. The Forum is gone and America's financial sector is better off for it.

The NY Times profiles JP Morgan's James Dimon, but completely misses a bigger story within the story sitting right there on the front page: In Washington, One Bank Chief Still Holds Sway

Jamie Dimon, the head of JPMorgan Chase, will hold a meeting of his board here in the nation’s capital for the first time on Monday, with a special guest expected: the White House chief of staff, Rahm Emanuel.

Mr. Emanuel’s appearance would underscore the pull of Mr. Dimon, who amid the disgrace of his industry has emerged as President Obama’s favorite banker, and in turn, the envy of his Wall Street rivals. It also reflects a good return on what Mr. Dimon has labeled his company’s “seventh line of business” — government relations.

The business of better influencing Washington, begun in late 2007, was jump-started just as the financial crisis hit and the capital displaced New York as the nation’s money center. Then Mr. Obama’s election brought to power Chicago Democrats well-known to Mr. Dimon from his recent years running a bank there.

One of them is Mr. Emanuel, who has accepted the invitation to speak to the board pending a review by the White House counsel.

Rahm, you don't need advice from the White House counsel; you need a clout in the ear. There is no way that this is a good idea. People already think there is an untoward relationship between the Bailed Out and Big Government. Indeed, Simon Johnson's idea that the government's balance sheets have essentially been captured by corrupting financiers trying to protect their positions has come dangerously close to becoming a mainstream idea. Now you propose to "address" a board meeting (behind closed doors, naturally) for a bank that has profited handsomely from last year's chaos at the expense of its less well-connected rivals, while bragging about its robust DC lobbying efforts?

For a Republican chief of staff, this would be a no-brainer; he wouldn't speak in front of this bank's board of directors. The "GOP Culture of Corruption" headlines write themselves. I know that progressives think that their platitudinous politics insulate them from the sort of "corruption" charges that are the part of any GOP politicos' resume'. But, Rahm, I don't think there are enough Gay Pride Parades for you to march in to protect you from the appearance of impropriety here.

Dimon, unsurprisingly, is described as a major donor to the Democratic Party, and comes complete with the inevitable "Chicago connection." And you say he is Obama's "favorite banker?" Imagine that.

Despite (or because of) being the nation's largest retailer and one of the most successful US companies of the last 30 years, Wal-Mart has developed an "image" problem, especially among the sort of people who wouldn't be caught dead shopping in its flourescently-lit aisles. Well, Wal-Mart, consider your image burnished! Retailer's Image Moves From Demon To Darling

In the past four years, Wal-Mart Stores has undergone a stunning metamorphosis -- from whipping boy of the political left to corporate leviathan now welcomed with open arms by a Democratic White House.

In the summer of 2004, several Democratic congressmen running for reelection, including Vice President Joseph Biden, made anti-Wal-Mart rhetoric a key part of their campaign speeches. They cozied up to labor unions by excoriating Wal-Mart's labor practices, health benefits and general business dealings.

They had plenty of ammunition.

They sure did, but not from customer complaints or wide-scale employee dissension. Rather, Wal-Mart was the object of a wide-ranging, though probably uncoordinated, assault by various left-wing interest groups. From trial lawyers bringing class action suits to protectionist politicians to union-sponsored TV ads attacking Wal-Mart's health care plan to journalists following the "Nickel & Dimed" template, the bad publicity geneated by media savvy interest groups was more than enough to counter-act millions of satisfied customers.

Perhaps the worst were urban activists, who used zoning laws and plain old misinformation, in a fight to keep Wal-Mart out of the inner cities despite the fact that a Wal-Mart would have improved the lives of the inner-city poor , both through retail jobs and its famous "everyday low prices." In the fog of the media war, Wal-Mart's image couldn't help suffering, just as the relentless attakcs on George W Bush eventually reached a tipping point.

In a completely unrelated and wholly coincidental sideline to all of this, Wal-Mart also began making large donations to the Democratic Party and to their union allies. Image problem solved! Such a coincidence is too coincidental for real life! Now, Wal-Mart is getting with the program; signing on to health-care reform (which will create high barriers of entry to potential competitiors) and even promising to undertake a comprehensive effort label its products "green."

For Wal-Mart, an era has ended. On the one hand, it will no longer be distracted by shake-downs from do-gooder progressives. On the other, it is now tied inextricably to Big Government. Expect the company that once brought disaster relief to Louisiana faster than the federal government to become bigger, dumber, and slower as it spends its time lobbying in DC, rather than tending to its customers.

In the rise and fall of Great Powers, there is the inevitable descent into decadence and decay, as corrupt sons and grandsons squander the wealth and opportunities into which they are born. Such is the case with GM.

We are intimately familiar with the lifestyles of GM's useless executives, whose lavish salaries and opulent perks were inversely proportional to the actual work they did managing their company. But GM's unionized work force did just as much to slowly destroy their employer. GM's financial problems are management's fault, of course. But, GM's more basic troubles - bad build quality, reliability problems - can be traced straight to the factory floor. In a largely sympathetic article about the decline of the black middle class in Detroit, the NY Times inadvertently gives us a glimpse of what has been going on at GM's factories: GM, Detroit and the Decline of the Black Middle Class

A practicing Christian, Powell was taken aback by what he saw taking place around him. The plant was a world of temptations unto itself, with drugs, alcohol, numbers runners, bookies and even “parking-lot girls” who would come to the plant during lunch breaks to service male workers. “Anything you can find outside the plant, you can find inside the plant,” Powell says. “You either get caught up in it, or stay apart from it.”

Powell gradually settled in at Pontiac Assembly and was soon piling on as much overtime as he could. In a good week, he worked four 12-hour days and a 16-hour day. Overtime was especially abundant between the beginning of November and Christmas, when hunting season caused rampant absenteeism at the plant.

Charming. There's nothing like a "Last Days of Pompeii" atmosphere to add to the portrait of American manufacturing gone deeply wrong.

The problems that arise from the UAW's monopoly on labor are not just limited to excessive pay, unsustainable pensions, and the use of union dues to buy political protection from the Democrats. On a more basic level, unions ruin the work ethic of its employees, who can't be fired, and who spend their days whiningly adhering to the letter of their work rules, rather than simply putting in an honest days' work. Read the above again and ask yourself if the same is going on at a typical Toyota plant. The answer is "No," at least with regard to Toyota's Japanese factories. I will make no great claims for the quality Toyota's American workers.

Good luck learning that either in the media or popular culture, by the way. In the newspaper, the bad guys are always management. In songs and movies, the guys "on the line" are always noble and "gettin' the shaft," while management conducts their business in sinister undertones. The unions get Bruce Springsteen and John Sayles, while management gets unreadable 1000-page Ayn Rand novels. The last movie I can remember that took a critical look at unions was "F.I.S.T." That was 30 years ago. Since then, it's been "My Hometown," "The Boss Man giving you Hell," etc.

Unions - like many favored progressive institutions - benefit from favorable media portraits that let them wear a cheap chrome halo, while the grubby truth goes unreported and largely unremarked.

In the chaos of last fall's panic in the financial markets, a fascinating tale went nearly unremarked in this country: the attempt by Porsche to acquire Volkswagon through an immense short squeeze. The attempt itself was audacious (Porsche is much smaller than Volkswagon), and for a time it looked like it might have succeeded. Porsche, however, has come crashing back to earth and now the mouse that roared has found itself trapped in the cat's paw. Tables Turn in Transaction of Two Auto Giants

When Wolfgang Porsche learned that his family’s sports car company would need an emergency cash infusion from its giant rival Volkswagen, he “went absolutely white.”

It was as though he’d heard someone died,” said one person briefed on the secret meeting between executives of the two companies.

The meeting, at the offices of the governor of Lower Saxony state, where Volkswagen is based, effectively ended the company’s audacious bid for Europe’s largest automaker. It also was the beginning of the end of Porsche’s cherished independence.

A day after the meeting, on March 23, fax machines around Germany spit out papers for Volkswagen’s board members to sign: an emergency loan of 700 million euros from Volkswagen, about $950 million at the time.

“This is becoming a reverse takeover on a financial level,” said Arndt Ellinghorst, head of automotive research at Credit Suisse in London. “Porsche has debt and VW has the luxury of cash.”

OK so the rich alpha German male (the name "Wolfgang Porsche" is probably enough to ensure a steady supply of nubile women) has had his comeuppance, as has Porche, which didn't acquit itself well during the short squeeze last fall. Porsche essentially kept mum about the size of its holding of Volkswagon stock, thus luring a number of short sellers to go short on VW. When Porsche strategically revealed the true extent of its holdings, all hell broke loose, and for a time VW was the most valuable company in the world while Porsche's owners became overnight billionaires. Sounds fun, but in many countries (like the supposedly "deregulated" US), such behavior is illegal. I guess they do things differently in Germany where, for all its noisy "social democracy," there is still a rich industrial elite that treats companies like BMW and Porsche as their personal duchies.

At heart, though, the role reversal — where Porsche turned from Volkswagen’s predator to its prey — is the latest scene in a family saga.

“In the end, this is about clans,” said Stefan Bratzel, head of the automotive research center at the University of Applied Sciences and Economics in Bergisch-Gladbach, near Cologne. “It is the Porsche clan versus the Piëch clan who belong to a single familial line, but maybe that makes the conflict that much harder.”

Both families descended from Ferdinand Porsche, who created the Volkswagen Beetle in the 1930s.

After World War II, Ferdinand’s son Ferry set up his own company, which became Porsche.

Meanwhile, Ferdinand’s daughter Louise married Anton Piëch, a Viennese lawyer; their son, Ferdinand Piëch, is now chairman of Volkswagen and has a seat on Porsche’s board.

In the early 1980s, the Porsche and Piëch clans beat back an effort by an errant cousin, Ernst Piëch, to sell his shares to a Kuwaiti investor. Instead, the Porsches bought him out, which allowed Wolfgang Porsche’s eventual appointment as chairman years later.

Four years ago, Porsche acquired a 20 percent stake in Volkswagen. Porsche’s chief executive, Wendelin Wiedeking, called the move defensive, and said that it was aimed at protecting one of his company’s most important partners from a hostile takeover.

But as time passed, it became clear that Porsche wanted full control of VW, so that the tiny carmaker could share the costs of developing new technologies with the much larger VW.

While interesting for the boardroom drama involved, this story also gives some insight into a possible future of US auto manufacturing, should the US's involvement in Chrysler and GM continue over the long-term. Porsche was able to make its play for VW because of the peculiar nature of its equity ownership: the German state of Lower Saxony is a 20% shareholder of VW's. It doesn't vote its shares (I think) and it it certainly has no intention of selling them. Thus, 20% of VW's equity is essentially inert leaving a much lower hurdle for a play such as Porsche's. And yet, the government is still intimately involved in VW's business. Note that the penultimate meeting described above took place in the office of the governor of Lower Saxony. VW's union is also intimately involved in its management and ownership, although not as much as the state.

Now, all of this doesn't mean that VW is some sort of moribund Leyland or "Government Motors." Indeed, between VW's ownership of VW, Audi, and now Porsche, I think we can say that it is much better positioned for success than GM has been in for at least 30 years, if not longer. For whatever reason, the combination of state interference, union management, and private ownership has resulted in a car company that still manages to make universally appealing cars for both the luxery market and the middle class. But this ownership structure also seems to encourage the sort of mischief that Porsche and VW engaged in, where rival members of families descended from Ferdinand Porsche could engage in a 21st century version of jousting. Really, with the spector of two rival "clans" fighting for the spoils of a car manufacturing kindom, while their unionized employees toil in their golden shackles of "lifetime employment," one wonders if Germany can truly be said to have moved beyond its feudal past.

The question for the US is: should this be the result we want for our state involvement with US car companies? 20 years from now, do we want to hear about stock shenanigans involving well-connected American investors while the US goverment is still a majority shareholder? Are we preserving a few score thousand union jobs for the sake of the few wealthy persons who can worm their way in as equity owners? I hope not.

Charming HMO fraudster Richard Scrushy has finally attained a sort of immortality. A judge hearing the civil suit brought by Scrushy's former company has hit him with a $2.9 Billion (with a "B") judgment. It may be the largest judgment ever entered against a single individual. Richard Scrushy, Ex-Chief of Health South, Loses Civil Suit

Four years ago, Richard M. Scrushy, the former chief executive of HealthSouth, walked out of a federal courthouse in Alabama and thanked God that he had been acquitted of criminal charges that he defrauded the company. But on Thursday, a state judge still found Mr. Scrushy responsible for the fraud and ordered him to pay $2.9 billion to the company’s shareholders.

In his decision, the judge, Allwin E. Horn, declared that Mr. Scrushy knew about and took part in concocting false financial statements that inflated HealthSouth’s earnings to meet Wall Street’s expectations and to buoy the stock.

The fraud ran for seven years, totaled $2.7 billion and was “remarkable and perhaps unique” in its size and scope, the judge wrote.

I'd hate to be Scrushy's attorney right now. No matter how many times you bitch about how "the judge got it wrong!," you would hate to face your client after losing on a $2.9 billion verdict.

This being a NY Times story, they leave out some information even as they provide "just the facts:"

Mr. Scrushy had already been sentenced to nearly seven years in prison for bribing a former governor of Alabama, and he spent much of the civil trial in a holding cell away from the courtroom, lawyers said. He appeared in court only to testify in his own defense.

Yeah, that's right. But, I don't think it would have killed them to mention that the "former Alabama governor" was Don Seligman, a corrupt Democrat who accepted a $500,000 bribe from Scrushy for a seat on Alabama's hospital licensing board. Corruption in government health care?! I don't believe it! Seligman tried to weasel out of trouble by blaming a Rovian plot that was explicated on an absurd 60 Minutes segment, which I wrote about here.

There certainly was a political prosecution in this case, and the objects were Karl Rove and the Bush White House. You may recall a certain 60 Minutes report that breathlessly reported the supposed doings of Rove in orchestrating the Seligman prosecution. The whistleblower was a freakishly disturbed "Republican operative" (is there any other kind?) whose ill-fitting wig should have been a sign of her complete lack of credibility. Instead, she was hailed as a brave warrior of democracy. Where is she now? And, where are the politicians and editorial boards who once hailed her BS bravery? Well, they are now the ones in charge of our suddenly fragile nation. Funny how that worked.

Scrushy was scum, of course. But he was a sort of scum who thrives in the sweet spot where Big Business and Big Government collide. That he made his $$ in a health care related accounting fraud should be a warning to anyone contemplating increased government interference in health care. That it's very difficult to learn the truth about someone like Scrushy and his political enablers shows how determined the proponents of the "single payer" system are to make sure voters can't learn the truth about the sort of corruption that would inevitably arise under such a system.

"Fortune" Magazine is running a story on its cover about the next great investment frontier: farmland! You may recall that we already discussed this issue here. But, if "Fortune" is writing about it, you know it's hit the mainsteam. How close are we to hedge funds investing in hard liquor and cigarettes, the ultimate bearish investments? Betting The Farm: The Land Grab For Arable Farmland

Over the past few years hedge fund gurus like George Soros, investment powerhouses like BlackRock, and retirement plan giants like TIAA-CREF have begun to plow (har har! - Psota) money into farmland - everywhere from the Midwest to Ukraine to Brazil. Canadian private equity firm AgCapita, which raised $18 million in 2008 to invest in Saskatchewan cropland, estimates that as of the first quarter of 2009, more than $2 billion of private equity money had been raised for farmland investments globally, and another $500 million was planned.

The growing flow of money into farms has persisted despite a major drop in the commodities markets last fall, prompted in part by the global financial crisis. In the spring of 2008 spiking grain prices caused food shortages and rioting in dozens of countries before falling some 50% by December. In fact, that crash has obscured a broader trend. Even after the correction, grain prices remain above their 20-year average, and food stocks around the world are still near 40-year lows. For many investors, last year's shortages are a preview of what could lie ahead.

Some of this is what you would expect. George Soros buying farmland in Argentina. The Chinese leasing land in Africa. Hedge funds dedicated to farmland opening their doors. But some investors are getting into bed with some shady operators in their pursuit of yield, crop or otherwise:

(Phil Heilberg) is putting his money into Sudan, Africa's largest country and one of its least stable. And he's hardly shy about the many ways his investment could go wrong. "I like to point out that it's a failed state, it's been sanctioned by the U.S., and it has a peace agreement that could unravel at any time and lead to armed conflict," he says. "The good thing is that you know what most of the risks are, and you can get paid for them."

With hundreds of thousands of acres of lush, undeveloped land in the Blue Nile and White Nile valleys, Sudan has the raw potential to develop into an agricultural powerhouse. Investors from Abu Dhabi, Qatar, Saudi Arabia, and Kuwait have already reportedly made deals to lease land in the predominantly Muslim northern part of the country. But in January, Heilberg raised a lot of eyebrows by announcing that he had agreed to lease roughly 1 million acres of undeveloped land - an area the size of Rhode Island - in Mayom County in southern Sudan

Heilberg is protecting his investment in the manner of colonialists the world over: he has hired the local warlord:

(Heilberg) makes no apologies for his associates on the ground, including the aforementioned Gen. Paulino Matip Nhial, 67, a hardened veteran of the long civil war between north and south Sudan who is now the deputy commander of the army in the south. Both Matip and one of his allies, Gen. Peter Gatdet, are on Jarch's advisory board. An Amnesty International report in 2000 recorded accusations that troops under Matip's command committed war atrocities. "One man's warlord is another man's freedom fighter," says Heilberg. "If you want to be in power over there you have to control territory, and listen, that involves tribal battles. You just have to recognize who is a good man and who isn't - who's doing it for power and who's trying to better his people. Matip is a good man."

Color me reassured!

Heilberg is clearly another rich amoral lefty; note his use of the Moorian formulation for a terrorist. Even worse, he worked for AIG! And, he knows where to go to find like-minded connections in DC.

Heilberg has cultivated connections to Washington. His vice chairman is former ambassador Joe Wilson, the husband of onetime CIA agent Valerie Plame and the man who blew the whistle on the Bush administration's obfuscations about Iraq
and yellowcake uranium. Another executive is a former CIA operative.

It's good to see Ol' Joe Wilson has landed on his feet, and is as morally dubious as ever. He might be striking land deals with warlords in a pariah state that once provided a safe-haven to Osama bin Laden, but he does have good intentions!

Wilson characterizes their approach as a version of doing well by doing good. "This is a deal that's certainly fraught with political risk," he says. "But we think that it has enormous potential to open an avenue of economic development for the southern Sudanese and make them shareholders in a positive outcome. That's my theory as I look at this."

"Theory" is one word for this, I guess. Another might be "rationalization," if Joe is capable of such mental gymnastics.

To add insult to injury, Detroit is losing not just its status as the "Motor City," it is also losing some of the basic accoutrements of urban living, like grocery stores: Retailers Head For Exits In Detroit

They call this the Motor City, but you have to leave town to buy a Chrysler or a Jeep.

Borders Inc. was founded 40 miles away, but the only one of the chain's bookstores here closed this month. And Starbucks Corp., famous for saturating U.S. cities with its storefronts, has only four left in this city of 900,000 after closures last summer.

There was a time early in the decade when downtown Detroit was sprouting new cafes and shops, and residents began to nurture hopes of a rebound. But lately, they are finding it increasingly tough to buy groceries or get a cup of fresh-roast coffee as the 11th largest U.S. city struggles with the recession and the auto-industry crisis.

No national grocery chain operates a store here. A lack of outlets that sell fresh produce and meat has led the United Food and Commercial Workers union and a community group to think about building a grocery store of its own.

Frankly, a union based solution is hardly what Detroit needs. Unions have dominated Detroit's politics and economy since the Thirties. While there might have been short term benefits for a couple lucky generations of workers, the host has been sucked dry, leaving a dry husk.

Detroit's woes are largely rooted in the collapse of the auto industry. General Motors Corp., one of downtown's largest employers and the last of the Big Three auto makers with its headquarters here, has drastically cut white-collar workers and been offered incentives to move to the suburbs. Other local businesses that serviced the auto maker, from ad agencies and accounting firms to newsstands and shoe-shine outlets, also have been hurt.

The city's 22.8% unemployment rate is among the highest in the U.S.; 30% of residents are on food stamps

Those are not what you would call Demographics of Destiny

While all of southeast Michigan is hurting because of the auto-industry's troubles, Detroit's problems are compounded by decades of flight to the suburbs.

Hundreds of buildings were left vacant by the nearly one million residents who have left. Thousands of businesses have closed since the city's population peaked six decades ago.

Navigating zoning rules and other red tape to develop land for big-box stores that might cater to a low-income clientele is daunting.

I have it on good authority that journalistic trade craft requires that any reporter writing about Detroit must mention "decades of flight to the suburbs" - the dreaded "White Flight" - as if people left for the suburbs in a dastardly plot to destroy Detroit. It is apparently journalistically incorrect to mention decades of inner-city dysfunction, which reached its apogee with the corrupt "hip-hop mayor" Kwame Kilpatrick, in searching for the source of Detroit's ills.

In fact, there is very little effort to look at what really killed Detroit and other formerly prosperous cities in the Rust Belt. These were Democratic strongholds, dominated by corrupt Machine politics, overweening unions, and tax-happy politicians. They are beset with welfare dependents, drugs, slums, and crime. This did not happen overnight. But, slowly but surely, the economically productive portions of the economy funded all of government inertia that ruined the manufacturing heartland of the US until the money-makers were finally bled dry.

If the stock market falls, then there is a rush to the podium to declare the failure of the free market and an end to "illusory GOP growth." But when government policy fails, it seems there is never anyone wlling to demand less government, rather than more, as a solution to the destruction of a once-vibrant economic region. That last bit about retailers having difficulty navigating red tape might be the most ridiculous symbol of uselessly destructive government. What is the point of zoning laws and red tape when the city has been economically decimated? Where is the condemnation when a political philosophy ruins a region like this? Who is left to lift the shackles off of Detroit and its brethren?

The four BRIC countries - Brazil, Russia, India, and China - are trying to move from a random acronym first decribed by an economist at Goldman Sachs (boooo!) to an actual trading bloc. Emerging Economies Meet In Russia

Leaders of the four largest emerging market economies discussed ways to reduce their reliance on the United States at their first formal summit meeting on Tuesday. But they concluded with only a cautious statement suggesting a move away from the dollar’s role in global commerce and a call for greater representation of developing countries in global financial institutions.

That's nice. Is it rude to point out that three of these four (India being the exception) have repeatedly expressed semi-hostile views about the United States, including Brazil's Lula blaming the financial crisis on "blue-eyed devils?"

Along with its good relations with the US, India is in many ways the odd man out in this group:

Russia’s president, Dmitri A. Medvedev, said the main point of the meeting was to show that “the BRIC should create conditions for a more just world order.”

The four countries produce about 15 percent of the world’s gross domestic product and hold about 40 percent of the gold and hard currency reserves, but they are not a unified bloc and do not do enough business among themselves to justify a trade alliance.

Russia and Brazil export natural resources, China exports manufactured goods and India bases its growth primarily on domestic demand. As such, India is not as concerned with the status of the dollar and is by no means as intent on scoring ideological points against the United States as is Russia.

Actually, the fact that these countries have been roped together in the BRIC is the least of their areas of common interest. In addition to being the most successful among the world's emerging economies, the BRIC are also among the world's most populous; China, India, and Brazil rank 1st, 2nd, and 5th, I believe. All are the dominant powers in their regions. All but India are at least quasi-socialist in their governance, with India having only recently moved away from the sway of socialism. And for all the talk of emerging middle classes in each country, the reality is that each of the BRIC countries has teeming masses of very poor people, with a small population of wealthy folks on top.

Still, it's not as if this is some ideologically cohesive group. Mostly what they are interested in is business, not politics.

Mr. Medvedev encouraged China, the world’s largest holder of dollar reserves, and other nations to put their money in some other currency or financial mechanism. He also urged members of the Shanghai Cooperation Organization to use their national currencies in conducting bilateral trade.

“There can be no successful currency system, and particularly a global system, if the financial instruments that are used are denominated in only one currency,” Mr. Medvedev said. “Today, this is the case and the currency is the dollar.”

The question of what sort of currency should be used in global trade is an interesting one, and is very much up in the air at this point. Short of a war or catostrophic economic collapse, it's hard to imagine that this will be the vehicle for a change in global finance.

Robert Farago, who blogs over at the excellent Truth About Cars, has hit the bigtime (for a blogger) with an op-ed in the W$J about the prospects of political influence at GM. Farago is a voice worth listening to since, unlike all of the stakeholders at GM and the pros in the business world, he was calling BS on GM's self-reform years ago; and, starting in 2007, declared loudly and lengthily that GM would go bankrupt: Washington Can't Be 'Hands-Off' With GM

Many commentators worry that this new, nationalized GM will answer to politicians rather than profit and loss. They fear that this could lead to a $100 billion quagmire. Their fears are not without reason.

GM's post Chapter 11 decision to continue developing the Chevrolet Volt, its technologically dubious plug-in hybrid, is Exhibit A. The Volt is the same experimental vehicle that the president's automotive task force excoriated in its analysis of GM's federally mandated turnaround plan. The hybrid's survival shows that the company's new political taskmasters are ready, willing and (now) able to put green dreams ahead of commercial reality.

But there's a far greater danger to taxpayer interests than a plethora of unloved, environmentally-friendly cars: GM itself.

GM's management caused its failure. Its corporate culture lacks anything even remotely resembling accountability. Many of the same people who drove the company into the dirt are running the company now on the federal government's dime, continuing their failed death-by-downsizing turnaround plan.

Moving forward, the auto task force will either leave GM's sclerotic corporate culture intact -- as it is currently doing by allowing Mr. Wagoner's hand-picked successor, Fritz Henderson, to run the show -- or it won't.

What is striking about GM is how it is such a fundamentally lazy company. From the guys reading newspapers at the Jobs Bank to the folk wisdom that you should avoid buying GM cars made during hunting season to the executives who did nothing beyond half-measures to remedy GM's many ills until it was too late (and then ran to the gov't, rather than take drastic measures on their own), GM's corporate culture was one in which work-avoidance was many people's daily goal. Oh, I'm sure they kept BUSY. On certain summer days, they may have even broken a sweat. And, even at its lowest point, GM was still generating tremendous amounts of cash (I believe it was #7 in the Fortune 500 last year). It's just that it was burning cash at a much higher rate, and no one seemed willing to put out the fire.

It's not enough to blame the union's unreasonable pay structure, work rules, and retirement benefits. There are plenty of unionized manufacturers in the United States (Boeing being the most obvious) that still manage to remain competitive and innovative despite an equally obstreperous union. GM's management simply lacked the will and the energy to confront the UAW when it counted.

I don't approve of the gov't/UAW takeover of GM. I certainly don't approve of Congressmen raising a stink over the closing of plants in their districts (what are they, military bases?). But, if the gov't really is going to own GM, then let's at least try to cure its dysfunctional corporate culture. Move GM out of Detroit. Change the work rules. Make it easier to fire bad employees. Something! Sadly, I think that it the last thing the gov't is willing to do.

Leave it to the Japanese to create a tax-dodge so elaborate it dwarfs anything that America's creative accountants ever came up with. I read through this article twice, and still don't understand exactly what was going on. It doesn't help that the journalists telling this story essentially tell it backwards: Religious Group Hid Love Hotel Income

A religious corporation that operates "love hotels" concealed 1.4 billion yen in income over seven years through February 2008 as tax-exempt donations from amorous couples, sources said.

The Kanto-Shinetsu Regional Taxation Bureau has ordered Uchu Shinri Gakkai (Space truth academic society) to pay 300 million yen in back taxes and penalties.

Uchu Shinri Gakkai, based in Tadotsu, Kagawa Prefecture, has filed an objection to the order.

"We actually send money to needy children in the country. We'll fight the tax authorities," said the 46-year-old president of a company in Chikuma, Nagano Prefecture, that processes and sells mushrooms and vegetables.

The love hotels are apparently run by a 71-year-old former president of the company.

Uchu Shinri Gakkai appears to be a religious organization in name only. The vegetable company apparently used the name of Uchu Shinri Gakkai to win tax breaks offered to religious groups, including tax exemptions on donations.

So what we have here is a vegetable processor set up its own religion (the Space Truth Academic Society) to obtain tax exemptions, and then used their religious status to operate a couple dozen "love hotels." And then hid the income from the hotels. I ask you, are there any "Benedict Arnold CEO's" in the United States who would come up with such a daffily elaborate scam?

The best part: the reporters are focusing on the propriety of the "religious group" hiding donations, rather than the propriety of an agricultural concern concocting a fake religion to operate a sexy side business.

Is it too soon to declare a Democratic War on Knowledge? Probe of Google Book Deal Heats Up

The Justice Department has sent formal demands to Google Inc. and publishers for information about a deal that would allow the search giant to make millions of books available online, publishing company executives and people briefed on the matter said Tuesday.

The civil investigative demands, or CIDs, are the strongest sign yet that the Justice Department may seek to block or force a renegotiation of the settlement, which was struck last year and has not yet been approved in court. It's also an indication of the more intense antitrust scrutiny promised by the Obama administration.

Yeah, why would you want to have the contents of the world's libraries accessible through your computer? If there's one thing I hope the people at Google (and any other tech firm) learn, it's this: once your company becomes a success, you might as well re-register as a Republican. Democrats (1) hate successful businesses (2) don't understand innovation and (3) think they are protecting the "little guy" - or businesses that are losing in the marketplace; it's hard to remember which is which. Either way, a Democratic administration always means expensive and disruptive anti-trust actions.

I've said this before, but, if this was a government initiative, there would be enough self-congratulatory speeches to heat every home in the Northeast this winter. But, since it's a (ugh) publicly traded company doing this, it's suspect.

The always charming Chi-Coms are demanding that PC makers provide them with software that prevents computers from accessing "dangerous" websites. The excuse is the ever-popular "pornography," but reality is dangerous (to the regime) political ideas: China Squeezes PC Makers (subscription required)

China plans to require that all personal computers sold in the country as of July 1 be shipped with software that blocks access to certain Web sites, a move that could give government censors unprecedented control over how Chinese users access the Internet.

The government, which has told global PC makers of the requirement but has yet to announce it to the public, says the effort is aimed at protecting young people from "harmful" content. The primary target is pornography, says the main developer of the software, a company that has ties to China's security ministry and military

When the article says "PC makers," they don't mean goofy little no-name Chinese brands. dell and HP are being asked to do this. The best part of this charming initiative is its name: the "Green Dam Youth Escort." Use of the word "green" shows how hip and with it the Chinese are. They promise a "green, healthy, and harmonious Internet environment" that prevents "harmful information on the Internet from influencing and poisoning young people." Thanks Al Gore!

You have no doubt heard about the study purporting to show that 62% of bankruptcies are caused by out of control medical bills. It's been repeated on headlines across the country and is part of the monotonous repetition of talking points by progressive pundits. Isn't it amazing how this study (from Harvard! Oooooo.) came out just in time for our "national debate" about health care reform! Whew!

Well, Megan McCardle has taken the trouble to actually look at the study and has come to a startling conclusion - it's full of s*** and actively leaves out information that would undercut its conclusions: Elizabeth Warren and the Terrible, Horrible, No Good Very Bad Utterly Misleading Bankruptcy Study

Elizabeth Warren has another study out showing that medical expenses contribute to more than half of all bankruptcies--indeed, this time, it's 70%, up from the 50% she found in 2001.

Now, it is possible that this is true. The fact that it seems to disagree with every other study I've ever read that is not authored by Elizabeth Warren, and also, the self-reports of the people in her study (only about a third of whom attribute their
bankruptcy to a health problem) could just be a fluke. It doesn't necessarily mean that it's wrong.

Yet upon closer examination, it turns out that it is not just wrong, but actively, aggressively wrong. Warren and her co-authors have obscured important and obvious facts that call the integrity of the work into serious question.

The text itself raises huge red flags. It's hard to believe that more than half of people who have been pushed into bankruptcy by a medical issue don't understand this fact. Perhaps they are not the brightest bulbs on the Christmas tree, but could it really be true that most people catapaulted into a financial crisis by their medical bills don't even notice that health care expenses are their main problem?

My radar is further engaged by the fact that they're implying a really astonishing surge in medical-bill-driven bankruptcies, in a healthcare environment that just didn't change all that massively

Imagine that. And, that's not the biggest problem. The Warren Study fails to mention a fact that is basic to any analysis of BK frequency: BK's have dropped precipiotously since the 2005 BK Reform:

How could steadily, moderately rising medical bills, a roughly static business and legislative environment, and a small increase in the uninsured, possibly have driven up bankruptcies so massively?

Answer: they didn't. What Warren et. al. neglect to mention is that bankruptcies fellbetween 2001 and 2007. In fact, they were cut in half. Going by the numbers Warren et. al. provide, medical bankruptcies actually fell by almost 220,000 between 2001 and 2007, a fact that they not only fail to mention, but deliberately obscure.

You should really read the whole thing. You should also read McCardle's follow-up Why Warren's New Bankruptcy Study Is So Bad, which pointedly accuses Warren of preparing a misleading study intended to create the scare-headline "62% of Bankruptcies Caused By Medical Bills," to better prep the policy battlefield for the robustly misleading health care debate we're supposedly going to have.