Shots in the Dark

The New York Post reports on The Inside Job, a new documentary that examines the financial collapse of 2008 and in particular the role of the economics profession.

“Inside Job,” which will make its debut at the New York Film Festival on Oct. 1, shows two of the nation’s top thinkers — Frederic Mishkin and Glenn Hubbard, the dean of the business school — squirming under questioning from filmmaker Charles Ferguson.
The movie, narrated by actor Matt Damon, opens in a nearly bankrupt Iceland. Later, Ferguson connects the opening scene with a report Mishkin wrote in 2006, titled “Financial Stability in Iceland.” The Iceland Chamber of Commerce paid Mishkin $124,000 to author the study, according to the film, but there was no mention of that in the influential paper.

“The report did not explicitly state that I was paid by the Iceland Chamber of Commerce because it is common knowledge that when an organization publishes work, there is often a fee or honorarium paid to the author,” Mishkin told The Post.

Really? Common knowledge among what people?

Note too the hedge-words in that defense: “explicitly state” rather than just “state”; “fee or honorarium” rather than just “fee.”

Mishkin sounds—and I quote—guilty, guilty, guilty!

And if you think he sounds that way, just look at how he, well, looks. (Hat tip to Alex Beam for linking to this on Facebook.)

Note the responsibility-avoiding use of the second-person plural….”You go in with the information you had…”

The New York Times and everywhere else report that Harvard’s endowment was up 11% for the fiscal year that ended June 30.

(This makes me feel good, by the way, because it means that, through a brilliant mix of ETFs and index funds, I beat Harvard’s returns-and I didn’t even need a seven-figure salary to do it!)

Ms. Mendillo said that the endowment had not changed its overall approach, which is of a diversified portfolio that includes alternative investments in private equity, hedge funds and real estate, but it now has about 10 percent more of its portfolio in more liquid instruments.

Which is understandable given the cash crunch in which the University found itself in 2008, but unfortunate given that you wanted to be in the markets between June 2009 and June 2010….

Mendillo has also changed the timing of her money managers’ pay announcements, so as to make it harder to understand how much they are paid and defuse potential controversy.

(To be fair, that’s not quite how she put it.)

Ms. Mendillo said that the endowment had always reported compensation for managers’ calendar year to the Internal Revenue Service in May and that this new approach provided consistency.

And Harvard hired a consulting firm to study the compensation issue. It reported that Harvard had saved millions by using more internal than external managers.

Which is a shock, because consulting firms so rarely conclude what their client wants them to.

All kidding aside, 11% seems…well, we’d all take it.

But how will it compare to other universities? And should Harvard have done better—or is Mendillo out-performing?

The most informed analysis of this comes from Harvard Magazine, which writes this assessment:

The arithmetic—gross endowment gains, less distributions, equals net endowment growth—is important. HMC’s fiscal 2010 investment return handily exceeded its long-term goal of 8.25 percent annual gains. After distributions in support of University spending (the endowment now provides about 35 percent of operating revenues), this return, plus gifts, enabled the endowment to grow at about half the rate of the investment return. That is, reassuringly, above the current low rate of inflation: it represents real growth. But it implies a very extended period of recovery after the $11-billion decline in fiscal 2009…..

Harvard Mag has also posted a conversation with Drew Faust in which La Presidente sounds cautiously optimistic.

Harvard, she said, must “build on our strengths no matter what” ensues. That said, Faust cautioned the community not to assume that the University had quickly moved “back to where we were” before the current recession began. “For a considerable time,” she said, Harvard would be “more constrained.”

The mag also landed something of a scoop by getting DGF to speak (at last) on the subject of Marc Hauser.

“This is something at the core of who and what we are. We must support scientific integrity. We must assure scientific integrity.”

There’s more….

Bloomberg reports that Bob Rubin was one of a handful of Citigroup officials “who knew 2007 losses were mounting on mortgage assets that U.S. regulators have faulted the bank for not disclosing.”

…Rubin whose job was to meet with clients and advise on “strategic and managerial issues,” told the panel that warning signs of a crisis “were not obvious” and that he didn’t remember learning of the bank’s mortgage-linked collateralized debt obligations until the fall of 2007.

“I feel confident that the relevant personnel believed in good faith that more senior level consideration of these particular positions was unnecessary because the positions were AAA-rated and appeared to bear de minimis risk of default,” he said.

That is what is known as “passing the buck.” Never attractive, the technique would be slightly more plausible if Rubin hadn’t collected $130 million or so of them in a few years of “advisory” work for the bank…

I am reminded of this article in Fortune from January 2008, in which Rubin blamed economic problems on an uneducated populace and avoided any mention of bank failings.

He told a small crowd at Manhattan’s Cooper Union for the Advancement of Science and Art Wednesday that the problems now roiling the markets and forcing the Federal Reserve into a defensive posture are “all part of a cycle of periodic excess leading to periodic disruption,” and that we are not in fact on the verge of a financial meltdown.

And the economic problems that he did acknowledge were blamed on just about everyone but the major U.S. financial players….

Could you be more wrong? Or, given what the Bloomberg article reports regarding Rubin’s level of knowledge in the fall of 2007, more deceptive?

I know that Rubin is sophisticated and polished and charming; these things are cliches about the man. But the track record looks worse and worse, and his personal appeal shouldn’t gild that particular lily.

Is there a public figure in American life with a more inflated reputation than Bob Rubin?

Rock star Morrissey, formerly of the Smiths (who were awesome), has ignited a furor in England by describing Chinese people as a “subspecies.”

In an interview with Simon Arbitage of the Guardian, Morrisey spoke about his reaction to how the Chinese allegedly treat cats and dogs.

“Did you see the thing on the news about their treatment of animals and animal welfare? Absolutely horrific. You can’t help but feel that the Chinese are a subspecies.”

A Brit being racist about the Chinese? Unthinkable.

More to the point, Morrissey’s wrong because all humans treat animals abysmally—it just varies from culture to culture and animal to animal.

Like the Chinese, for example, people of all races and ethnicities slaughter sharks indiscriminately. (The Chinese happen to be worse about it, but you can believe that if white American men thought shark fin soup was an aphrodisiac, they’d do the same.)

This doesn’t mean that Chinese or white people are less than human. Instead, it challenges our idea of human nature, and force us to accept that there remains something primitive and violent across cultures, some evolutionary holdover that, like the appendix, has no remaining use and can only do us harm.

It challenges, in fact, the idea that humans and animals are really so different….

Exhibiting the worst qualities of an investment banker, Humphrey Simmons, who works at Xanthos Investments in Florida, went fishing in the Bahamas over the weekend, and caught a tiger shark, which is, of course, an endangered species.

“While pulling up my line,” he said, “I noticed that it was extra heavy. I called “Boy” [to a companion] and asked him to go get the shot gun.”

Why exactly do you need a shotgun to go fishing?

As soon as the shark reached the surface, Simmons’ friend, Bernard, shot him several times in the head.

This sounds like a wildly dubious rationale for just, you know, shooting a shark—he felt “extra heavy”? Meaning that Humphreys has either caught so many sharks he can accurately guess their weight or that he’s just making the story up as an excuse for having shot the shark?

The weird part of the story is that, having shot the shark, they noticed that it had a human leg inside its mouth.

“We tied the rope around his tail fin, and pulled him towards the boat. We were going to cut the hook out of his mouth and let him go when he regurgitated a human foot — intact from the knee down.”

Hmmm…also strange. If you were going to let the shark go, why shoot it in the head?

Anyway, it turned out that the shark ate a man who had already drowned. In other words, the shark did what sharks do—they clean the oceans.

That didn’t stop The [Bahamian] Tribune from running the headline, “Man Eaten By Killer Shark“…

So wait: A couple of yahoo fishermen with too much money and a violent streak catch a beautiful, rare shark and shoot it in the head a bunch of times.

And the shark’s the killer?

In the Times on Saturday, Christopher Shea wrote about how universities are increasingly reconsidering the idea of tenure.

At a time when nearly one in 10 American workers is unemployed, here’s a crew (the complaint goes) who are guaranteed jobs for life, teach only a few hours a week, routinely get entire years off, dump grading duties onto graduate students and produce “research” on subjects like “Rednecks, Queers and Country Music” or “The Whatness of Books.” Or maybe they stop doing research altogether (who’s going to stop them?), dropping their workweek to a manageable dozen hours or so, all while making $100,000 or more a year.

That, of course, is simply comparing apples and oranges; it’s not as if the millions of unemployed Americans would, if not for tenure, be happily teaching philosophy at their fine state university.

The better argument is an economic one: With college tuitions passing the $50k a year mark, can universities—or, well, students—really afford tenure?

The cost of a college education has risen, in real dollars, by 250 to 300 percent over the past three decades, far above the rate of inflation. Elite private colleges can cost more than $200,000 over four years. Total student-loan debt, at nearly $830 billion, recently surpassed total national credit card debt. Meanwhile, university presidents, who can make upward of $1 million annually, gravely intone that the $50,000 price tag doesn’t even cover the full cost of a year’s education. (Consider the balance a gift!) Then your daughter reports that her history prof is a part-time adjunct, who might be making $1,500 for a semester’s work. There’s something wrong with this picture.

In related news, Drew Faust delivered another of the bold new ideas that have made her one of the highest profile voices in higher education.

In her baccalaureate address this May, Drew Faust, the president of Harvard, spoke of the parking space theory of life. “Don’t park 10 blocks away from your destination because you think you’ll never find a closer space,” she said, echoing George Costanza’s concentric circle theory of parking….

Salon interviews Cordelia Fine, author of the new book Delusions of Gender: How Our Minds, Society, and Neurosexism Create Difference.”

Why are people so intent on misrepresenting the differences between the male and female brain?

We look around in our society, and we want to explain whatever state of sex inequality we have. It’s more comfortable to attribute it to some internal difference between men and women than the idea that there must be something very unjust about our society. As long as there has been brain science there have been misguided explanations and justification for sex and inequality — that women’s skulls are the wrong shape, that their brain is too small, that their head is too unspecialized. It was once very cutting-edge to put a brain on a scale, and now we have cutting-edge research that is genuinely sophisticated and exciting, but we’re still very much at the beginning of our journey of understanding of how our brain creates the mind.

No word on whether Larry Summers has read it yet…

Sometimes, life is good. A beautiful September Sunday, great seats behind home plate in Fenway, draft beer, and Jonathan Papelbon blowing a well-pitched game by Josh Beckett in the top of the 9th in what one Globe sportswriter called “the worst loss of the season.”

And then the pleasures of driving home the next day, listening to sports radio, hearing Sawx fans rip into their team…. Just like the good old days!

Shadows over the Red Sox

I have taken a break from having fun with the dreadful prose of Globe sportswriter Amalie Benjamin, because I’m nice that way.

But…as I head towards Boston to see the Sox play the Sox this weekend…Benjamin’s writing is having that fingernails-on-a-blackboard effect on me. I must share.

For example, Benjamin’s story today about how the Red Sox managed to beat the worst team in baseball.

So let me get this straight: The Red Sox could have lost the game…except…they didn’t!

Good for the Red Sox!

Good for Amalie!

Except….

…there continues to be less and less hope for this team as the days go by and the standings don’t change. The Sox aren’t willing to give up quite yet.

There continues to be less and less hope?

Let’s try this: “The Red Sox haven’t given up, but they are losing hope.”

Reading Benjamin is like watching a long baseline rally at the US Open; the head turns left, turns right, turns left, turns right…until finally you just want it to end.

It’s true: The Washington Post reports that local fishermen have caught a number of bull sharks in the Potomac River.

This is something about which I have mixed feelings.

On the one hand: How cool that bull sharks are showing up in the Potomac.

On the other hand: They’re being slaughtered for no reason.

Crowder measured the shark (8 feet, 3 inches), took a few photos, then dumped it back into the river, its stomach split open to keep it from floating.

What a civilized species we are.

Now, it’s true that bull sharks are one of the three species (along with great whites and tigers) that are known to attack humans on occasion. But…very rare occasion. Truth is, if you swim in the Potomac, you’re much more likely to die from some pollution-related infection than from a shark attack.

It doesn’t help that the Washington Post headline reads “Cue the ‘Jaws’ Theme.”

People…haven’t we moved on by now?