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Posts Tagged ‘Regulation

More Crooks

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Jake Tapper at ABC News’ Political Punch looks at a number of potentially crooked Republicans who have been associated with Sen. Steven’s gravy train.

Names included in his post are Senators Collins (R-Maine), Dole (R-NC), Smith (R-Ore), Sununu (R-NH), and Minnesota’s own Norm Coleman.

A lot of these donations are party of normal practice in politics, but this doesn’t make them right by any means. ALSO: just because we’re knocking Republican Senators here, let’s just remember that this happens to all politicians. The question is whether its easily visible or cloaked with smoke and mirrors. There is a reason why politics is the “second oldest profession.” (The first being prostitution.)

Depending on your level of cynicism, you might find very little difference between the two.

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Written by walonline

August 1, 2008 at 8:07 am

Open Thoughts

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I’m not normally the one to dream up conspiracies. For example, I’ll call you delusional if you’re one of the folks that believes the Bush Administration set up the attacks on 9/11. On the other hand, people would probably call me crazy for saying “Wag the Dog” and Bill Clinton’s interesting tendency to make military strikes when the heat was on him for, er, domestic issues, are strikingly similar–more so than Oliver Stone‘s movie could ever be.

My thoughts:

Used under a Creative Commons License. Crooked Door by Skinnyde (Flickr)

What chance is it that there are politician motivations for the indictment of Sen. Ted Stevens to take the heat off Justice Department employees embroiled in the politically-motivated hiring policies of the Gonzalez Justice Department?

Politics is far reaching, and a connection here–although it wouldn’t really matter or be significant–would not surprise me one bit. I probably am going crazy, though. If some of these stories surrounding Stevens are true, he needs to go:

On Tuesday a federal grand jury charged Stevens with failing to report gifts from Veco, including cars and free labor for a home in Girdwood, Alaska the senator called “the chalet.”

Maybe it will serve as an example for other Politicians and they’ll at least be a little more careful to conceal their dealings. In fact, the article I linked to above speculates on the involvement of other officials:

[Stevens] isn’t the only U.S. lawmaker whose fortunes are likely threatened by his ties to an obscure oil services company […].

Am I going crazy, or just being a little too cynical? Any thoughts of your own on this?

Also, I’m adding a new category for just this sort of discussion (because it makes me all sorts of angry): “Crooks!”

UPDATE 7/31 @ 8:50a: It appears that I’m not the only one that thinks this. White Collar Crime Prof Blog has been considering whether this indictment was used to take the head off the Department of Justice also.

Written by walonline

July 30, 2008 at 7:08 pm

Some People Finally Get It

with 5 comments

Gristmill, an environmental news blog, has an interesting post on the inefficiencies of gasoline blended with ethanol and how more people are catching on:

In Oklahoma, some vendors are refusing sell ethanol-spiked gasoline. And they’re winning customers with signs like “No Corn in Our Gas” and “Why Do You Put Alcohol in Your Tank?” the Times claims. In Oregon, new rules requiring the state’s fuel supply be E10 — a mix of 90 percent ethanol and 10 percent gasoline — are being associated with sputtering boat engines and failing weed whackers.

Used under a Creative Commons License. "Gasohol (Ethanol)" by Todd Ehlers (via Flickr).

Used under a Creative Commons License. "Gasohol (Ethanol)" by Todd Ehlers (via Flickr).

The idea that ethanol is less efficient than straight gasoline is easy to document: drive your car to or from a state with an ethanol blend from one with the opposite. Check your milage going either way. Even with other factors (such as wind), you’ll notice a marked difference. I did this at the beginning of the month, travelling from the Minneapolis area to Nebraska and back.

This is nice to hear, since I wrote on this back in April. And my accounting theory professor railed on it numerous times last fall. Gristmill also gets into it. What makes this policy so sickening are the huge amounts of taxpayer dollars being poured into a policy that raises food prices. This effects our nation’s (and the world’s) poorest people–not exactly something any politician would consider politically expedient. Portfolio.com‘s Felix Salmon is writing today with regards to a World Bank report sayng that:

The combination of higher energy prices and related increases in fertilizer prices and transport costs, and dollar weakness caused food prices to rise by about 35-40 percentage points from January 2002 until June 2008.

Salmon also notes:

According to Chakrabortty, World Bank president Bob Zoellick tried to suppress publication of the report – something which, if true, probably only served to draw further attention to it.

Its not exactly like I was expecting a World Bank president clean of politics.

Written by walonline

July 30, 2008 at 12:40 pm

Irony?

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An interesting bit from the Freakanomics blog at the NY Times, which pointed out some of the companies mentioned in the book Good to Great:

[…] I began reading the book on the very same day that one of the eleven “good to great” companies, Fannie Mae, made the headlines of the business pages. It looks like Fannie Mae is going to need to be bailed out by the federal government. If you had bought Fannie Mae stock around the time Good to Great was published, you would have lost over 80 percent of your initial investment.

Another one of the “good to great” companies is Circuit City. You would have lost your shirt investing in Circuit City as well, which is also down 80 percent or more. Best Buy has cleaned Circuit City’s clock for the last seven or eight years.

It seems the lesson that should be drawn from this is twofold: the stock price does not necessarily reflect a good (if high/rising) or bad (if low/falling) company and it depends on which time period is observed. Maybe Good to Great needs a second volume for co’s dealing successfully with this period. Maybe these companies indicate a systemic problem.

At the base of it, Fannie Mae (details on the scandal are near the bottom of the Wikipedia entry) should have been cut from the book when the company’s leadership (Raines, Howard and Spencer) were accused of 101 counts of manipulating earnings for the sake of their bonuses. Surrounding this was also a $6.3 billion earning restatement.

Also, this may be a lesson that serves to discourage people from buying best-seller management books.

Written by walonline

July 29, 2008 at 7:15 pm

Hidden Excel Columns: Who’s Negligent?

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The Management Blog at the Financial Times has an interesting post on a recent SEC complaint and subsequent settlement. The gentleman who settled was said to have covered up his work (normally checked via printed versions of spreadsheets) by using white text on white backgrounds and hiding columns.

The meat of it:

The SEC claimed that Mr Hirth – whose lawyer declined to comment this afternoon – exploited the fact that accounting checks used printed copies of spreadsheets rather than on-screen versions. It alleged that Mr Hirth used a “hide” function on his spreadsheet program that meant certain fictitious entries were invisible when printed.

In another spreadsheet, the SEC claimed, the company’s running tally of expenditure on commissions was distorted by a $4.1m cell entry located well away from the other figures. Because it was in white font on a white background, this entry – which had no basis, according to the SEC – could not be seen when a hard copy of the spreadsheet was printed.

This is interesting. Yet another addition to an auditor’s constant need to look for reasonableness of materials. All auditors should still foot any column and subtotal any row of numerical information submitted by a client. They also look for entries on non-business days (such as Christmas Day, New Years Day, Independence Day, etc.), strings of zeros (“000’s”) and other simple-looking numbers that normally don’t appear in business. Now auditors (and anyone reviewing financial work) should be selecting the entire worksheet and setting all of its text to black. Double-checking formulas may not be out of the question.

The comments, as in many financial blogs, are filled with good commentary. Most notably from Grenville Croll, EuSpRIG Chair, who lists a number of helpful links:

You can find ways to avoid spreadsheet risk if you look at the non-profit European Spreadsheet Risks Interest Group (www.eusprig.org).

EuSpRIG offers Risk Managers independent, authoritative & comprehensive information on Spreadsheet Risk Management. You can see published peer-reviewed conference proceedings on Cornell University’s moderated scientific repository www.arxiv.org

Some relevant papers:

On the problem of Spreadsheet Errors: http://arxiv.org/abs/0802.3457

On the Impact of Errors: http://arxiv.org/abs/0806.3536

Protecting Spreadsheet against Fraud: http://arxiv.org/abs/0801.4268

On the Scale of the problem: http://arxiv.org/abs/0709.4063

Testing Spreadsheets: http://arxiv.org/abs/0807.3187

Also, “G. Moore“:

Yet another example of why firms need to implement and control accounting and reporting systems that actually do accounting and reporting. The case here, most probably, is of yet another firm that cut corners on their system implementation/process and accepted having to finish the (reporting, etc.) job in Excel. There really is no reason to do any formal financial statement publication via Excel. Seriously, a $150 off the shelf accounting package can provide both reasonable reporting AND an audit trail.

And finally, “Chris Wilson” who rather negatively notes:

[…] when I worked at a Big Four accounting firm (tax, not audit), the culture from the manager level up was always on hard copies, always purportedly on the big picture. I sometimes got the feeling they felt they were entitled to be so far removed from the actual work because of their position on the totem pole. At any rate, the only hope for quality control on spreadsheets was in junior level peer review, and I imagine that’s true at a lot of firms.

Nasty. Just another reason to look closely at the numbers (and those that might not be visible).

Written by walonline

July 29, 2008 at 8:10 am

Just For Perspective

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Running back through my starred items on Google Reader, I came across an interesting post from Accrued Interest posted on May 19 on the GSEs (Fannie Mae, Freddie Mac, etc.).

Let’s just say the markets have known about the Fannie and Freddie mess for a while. This post might be from a few months ago, but different people have been calling to phase out these out-dated institutions for quite a while.

Written by walonline

July 27, 2008 at 9:53 am

Moving Liabilities off Balance Sheet Nothing New

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Via Greg Mankiw, The New Yorker looks at how LBJ moved Fannie and Freddie off the government’s balance sheet (making them public) in order to fund the Vietnam War. What’s interesting in this is twofold:

  1. During this housing crisis, mark-to-market rules have caused the iBanks to recognize securities that they have moved off the balance sheet.
  2. Issues with both LBJ’s decision and the more current mortgage security situation have come to light in the current market.

This just goes to show that a lot of bad policy can be covered up as markets expand. Maybe its a good thing that the housing bubble popped. Now we know about these problems and can make decisions with them in mind.

UPDATE @ 11:55a: I don’t know what happened with the title. It was missing the final word. Now it makes a little more sense than before.

Written by walonline

July 23, 2008 at 9:08 am