Poor Bank Executives Aren’t Getting Their Millions

I know it’s not American when the government limits pay for anyone, but that is precisely what they are doing for executives of banks that required bailouts. After all, they only lost $1.2 trillion worldwide, bringing on the worst world recession since at least 1991. And really, why should the American people control wages of people who had to borrow from us in order to stay afloat? Why don’t these people deserve their $10 mansions, yachts, and airplanes? Oh wait. They get to keep all of that? And they get to keep their jobs? Perhaps there are no qualified people to replace them, although one would think that with over 10% unemployment out there, someone would like to try. Surely the American people would do this for my industry too, so I should be quiet, right? Oh wait. Our industry did have a downturn in 2001. But unlike our industry that brought such hits as pets.com, none of this was the banks’ fault, right? Oh wait. didn’t this start with subprime loans that couldn’t be repaid because the banks were handing money to just about anyone? And weren’t the banks offering housing loans for only 5% down payment where the mortgage didn’t pay back principle? And these people still get to keep their jobs? And they’re complaining about a salary limitation?

How about this: pay back the money we lent you and then you can choose your salaries. Either that or let me buy your mansions and not pay for them.

The Saudis would like some handouts, please.

Oil Here’s a rich idea reported by the New York Times: Pay oil producers for not producing oil. That’s right. Saudi Arabia wants “rich nations” to pay oil producers to help wean themselves from their dependency on oil. That is- oil exports. It’s just like paying farmers not to plant, right? Wrong. In this case, oil producers still sell what the market demands, it’s just that since the market will be demanding less, OPEC and the like will get less. According to the article, the Saudis have in the past gummed up the works on climate change protocols because of other nations’ refusal to accede to this sort of extortion.

Do the Saudis have a real problem? Yes. They and other large oil producers like Libya lack a sufficiently diversified economy, such that when oil prices dip, everyone suffers. This is known as Dutch Disease, and oil exports are right to be worried about it. Dutch disease happens because the demand of oil alone drives up national currencies, making all other industries in that country uncompetitive by price.

So here are a few questions:

Can oil producers wean themselves off of oil without economic assistance? After all, they’re taking in all of this money. Can’t they use some of it to develop other industries? It seems Dubai has been somewhat successful at this.
Would economic assistance actually help? If consuming countries gave them more money to compensate for losses of oil revenue, would producers just become dependent on the subsidy?
Isn’t there a broader picture here surrounding to the West’s relationship to the Middle East? Doesn’t good will count for anything? And don’t we need some of that good will in that part of the world?

Dutch Disease requires complex solutions. Simply providing a subsidy won’t do the job. In fact, providing a subsidy could in fact prop up the national currency and compound problems.

And then there’s the fact that most of us feel as though we’ve been held over a barrel by some of the countries in question, and would like to have done with entanglements in the middle east. Oil or no, however, the people in those countries are not going away. They and we need an equitable way to live together in the future.

We don’t need an opposition; we’re the Democratic Party

CNN reports today that Senator Max Baucus has been targeted in an ad campaign over his current health care proposal. As I live abroad it is hard for me to express strong feelings over the current debate, other than to say that the fastest way to hand Congress to the Republicans is for Democrats to kill health care reform. We can argue over the wisdom of Obama putting this issue front and center, but now that it is, he and the Congress have to deliver or there will be very serious consequences next Fall. In fact, it would be a repeat of 1994, only here the consequences would be worse. Back in 1994 President Clinton didn’t have a filibuster-proof majority in the Senate, and Senator Dole took advantage of that fact.

Open, honest debate is good. It should be something that everyone allows for, and it was something that Republicans have traditionally suppressed. However, that debate needs to be respectful, with a recognition that there are many sides to this very complicated issue. Having seen several national health care systems up close and personal, I’ll just point out that each has its problems. You cannot have both universal healthcare and the choice of every healthcare option for everyone. The numbers just won’t add up. I’ll also mention that in America the argument is not between the government choosing and consumers choosing, but rather between government-regulated insurance choosing and insurance companies choosing. Consumers already have very few choices, and 46 million people have none.

Ground Southwest?

Airplane This Monday’s Wall Street Journal reports that Southwest Airlines has been flying 82 planes for years with parts of unknown quality in potentially critical locations. The report states that the pieces in question are supposed to “protect movable panels on the rear of the wings from hot engine exhaust.” That’s an obfuscated way of saying that the parts protect the aircraft’s flaps. Flaps are deployed at both takeoff and landing. If those fail, several bad things can happen:

If flaps on one wing fail to extend as expected, when the other side deploys, the plane could pitch.
If the flaps on both sides fail to deploy, the plane will not slow to a normal landing speed.
In the most unlikely event that the integrity of the flaps themselves fails, all manner of bad things could happen.

Most failure modes involving flaps are probably recoverable in and of themselves. However, these sorts of failures happen close to ground, leaving little time to react to problems.

The authors write in the article, however, that, “Both Southwest and FAA agree that the parts, some of which have been on the planes for up to three years without causing apparent problems, don’t pose an imminent hazard.”

While it’s good that they’ve not spotted a failure, many failures go undetected for years, during which metal fatigue sets in. Often there are indications of impending failure, such as cracks. Southwest has indicated that they will increase their inspections between now and the time the parts are replaced.

Here’s the rub: because the construction method of these parts is untested, one wonders whether inspections are sufficient to mitigate the problem. This leaves the FAA with a dilemna: make life miseerable for hundreds of thousands of passengers while SWA corrects the problem or take a risk with the lives of a few hundred people.

One way or another, SWA should face a stiff penalty for putting travelers at risk, and forcing the FAA into this situation.

France Eliminates Sunday Work Restrictions

Bureau of Economics The Wall Street Journal reported this week that the French government has relaxed restrictions on requiring retailers to close on Sundays. Americans will find this strange but most European countries are rather quiet places on Sundays, where many retailers are closed. This of course dates back to a time when one was expected to go to church and pray on Sundays, but now it is taken more simply as a day of rest.

Having lived in both the U.S. and Switzerland, I can say that there is something to both having to plan ahead one day so that you’ll have food for Sunday (and breakfast for Monday), as well, as something to be said for not running around one day per week.

Obviously this sounds rather paternalistic on the part of the governments, and it does originate from people who call themselves Fathers, but there is another side to who gets to play daddy. Someone, I think it was George Stephanopoulos, joked early in the Clinton administration, “If you didn’t work 14 hours on Saturday, don’t even bother showing up on Sunday.” The National Sleep Foundation conducted a survey that shows the average American works 46 hours per week, trying to compete with his or her neighbor, and our neighbors to the South, and China, and everyone else. Employers are the new Fathers in this world of globalization. Perhaps such laws pose a limit on employee productivity, and perhaps that’s just as well.