WSJ: "How Iceland Rattled the World"

Yesterday, at the tail end of a post about Ukraine, I wrote that I still didn't fully understand what happened in Iceland. Well, speak of the devil: today, the WSJ ran a long article (starting on A1, stretching across two pages inside) which broke it down pretty well:

DECEMBER 27, 2008
The Isle That Rattled the World:Tiny Iceland Created a Vast Bubble, Leaving Wreckage Everywhere When It Popped
http://online.wsj.com/article/SB123032660060735767.html

I'll post some key excerpts later..but the short story is:

• massive growth in the banking sector via leverage--via debt and deposits--but a lot of those liabilities were denominated in foreign currencies (e.g., loans from German banks, deposits from English individuals)
  
• once the global deleveraging started over the summer, and banks around the world pulled back their credit, the Icelandic banks were unable to roll over their funding, esp as those sources of funding lost confidence in the Icelandic currency
• this then led to a crisis of confidence among their deposit base...

What I'm Reading: Robert Caro, Jane Jacobs, James Grant, Robert Shiller, Paul Krugman, Niall Ferguson, Dostoyevsky

1) The Power Broker: started this over the summer, and was making good progress for a couple months.  But I've been picking it up only intermittently since Sept--still a few hundred pages to go.  I'm only getting to the post-war period now.  Amazing stuff--esp to be reading it while in NYC.

2) Death & Life of Great American Cities: figured it would be a good companion piece to (1).  But similar story: been picking it only intermittently.  Last time was Oct in Philly--when I had a good day walking to Franklin, Washington, and Rittenhouse Squares while re-reading that section of the book.

3) The Trouble With Prosperity: this one I also started over the summer..slowly been absorbing it, as Grant requires a couple read-throughs to really absorb. 

4) The Subprime Solution: got this one in Oct, and finally almost finished with it.  Essential.

5) The Age of Diminishing Expectations: this one I picked at from the public library, after reading all the buzz about his new one (an updated version of The Return of Depression Economics).  A great intro to the central issues of economics.

6) Empire: this one I just started yesterday.  I bought it as a gift for my father-in-law--borrowing that copy back to read it myself.  I've been meaning to read Ferguson for a while..

The odd thing is that I used to read much more fiction than non-fiction.  The only fiction I've got going now is:

7) The Brothers Karamazov: been bogged down in this since Sept..thanks to Krops!

thought/links about the financial crisis in Ukraine

A couple blog posts about the economic situation in Ukraine popped up recently. They naturally caught my eye, since I have a connection to the place. My sister is there now with her husband, visiting his family..and I visited there (Kyiv and Odessa) a few years ago.

A couple days ago, there was this on Dealbreaker, titled, with tongue firmly in cheek, "It's Better in Ukraine", which was really just a quote of an AP story from Kyiv:

One thing that we would really like to see more of here in the United States is protests over economic and market conditions. We aren't quite sure why Wall Street types don't take to well... Wall Street after a 400 point drop in the Dow and start blowing their horns in unison.

For our money, the Ukraine has got it figured out:

Thousands of car drivers in the Ukrainian capital angrily blew their horns for several minutes Monday, protesting what they call incompetent and corrupt government policies that led to a devastating financial crisis.

The Ukrainian currency has lost some 40 percent of its value since September as a fall in the export of steel, the heart of the economy, led to a shortage of foreign currency. That was coupled with a loss of confidence in the hryvna and the banking system.

"We've had enough of the authorities," said one protester, Ihor Ratushny.

Damn authorities.

More sobering was this post from Krugman's blog, titled "The Second Great Depression Has Arrived..", which posts a graph of recent Ukrainian monthly industrial output, and compares it with an index of US industrial production--from 1928 to 1933. Take a look:
http://krugman.blogs.nytimes.com/2008/12/25/the-second-great-depression-has-arrived/

What has happened in Ukraine? I'm ashamed to say that I still don't really know/understand in detail; what I do know is that the country's fiscal sitation has been battered by the financial crisis, with the currency collapsing and the government seeking an IMF loan to stabilize the financial system. Somehow this is tied to the global deleveraging we're going through--but again, I don't know the details. The Dealbreaker item included above cites a drop in steel exports as the primary cause..but seems to me that the story is more complex than just that.

Here is a WP article from Oct headlined "Ukrain Seeks IMF Help to Weather Financial Crisis"...
http://www.washingtonpost.com/wp-dyn/content/article/2008/10/17/AR2008101702051.html

..but like it gives less ofe an explanation. It lists some of the problems--a crash in the Ukrainian stock markets, a fall in the value of the currency, a run on the banks, and mentions the steel thing--but doesn't explain how the global financial crisis came to Ukraine.

For that matter, I don't fully understand Iceland either...

Paul Krugman interview from "Big Think" (video)

I've started following The Big Picture (Barry Ritholtz's blog), which posted this on Monday--the 1st of 10 short video segments of Paul Krugman speaking about the financial crisis and "the return of depression economics" (which is the title of a recently updated book of his:
http://www.amazon.com/Return-Depression-Economics-Crisis-2008/dp/0393071014).



(from http://www.ritholtz.com/blog/2008/12/paul-krugman-on-the-return-of-depression-economics/)

Most of this 3min segment is about Japan in the 1990s--what Krugman says is the closest parallel to the United States today.

But at the end of the segment, as part of his response to "Why do you hope people read this book?", Krugman says:

I think it's a fascinating story, just aside from everything else. I'm horrified, I'm scared, but I'm also just professionally awed and fascinated by what's going on. Every macroeconomist, which is what I am--well, half of me is a macroeconomist--every macroeconomist sort of has a lingering desire to live through the early stages of the Great Depression, to know what it was like..and here we are."

Web 2.0 101: Using Twitter

I've been toying with the idea of a set of "101" series: hence the Stats 101 post I did previously (here; although it was more esoteric and less expository that I'd planned such 101 posts to be).  Also was thinking about: Math 101, Finance/Economics 101, maybe NYC 101.

And also Web 2.0 101.  So here's one on Twitter:

So what the hell is Twitter?  If you're on Facebook, think of it as status updates w/o the hassle of the rest of Facebook.  You still have "friends" of a sort (i.e., there is a social network framework), but on Twitter you "follow" others, and others can follow you*.

Beyond that, it works pretty much like FB status updates: you fill in a short message (famously, less that 140 characters), and that gets broadcast to your contacts (your followers, i.e., people who are following your Twitter feed)--it shows up on their Twitter home page (and also can get texted to their mobile device, if they're set up for that).

To get started: Go to https://twitter.com/signup and create an account.  Then post something.  And look around for people to follow (vlick on "Follow" for any of the Twitter acconts listed below to follow them yourself..it's easy enough to undo later if you decide you don't want to follow them anymore.)

One advantage of stripping away all the other stuff that Facebook includes--the photos, personal details, etc--is that you can follow people you have no social relationship with..in fact, it may not be a person per se.  For example, I'm following the following:

http://twitter.com/astorwines (a wine store in Manhattan)
http://twitter.com/BrianLehrer (a local NPR talk show host)
http://twitter.com/freakonomics (a NYT blog)
http://twitter.com/CityRoom (ditto)
http://twitter.com/BarackObama (you know who that is)
http://twitter.com/upperplayground (an apparel store/art gallery in SF)

In addition, I am following about 20 or so actual individuals.  Most are friend "IRL" (in real life), but a couple are random twitter feeds I saw references to somewhere and added.  See my whole list of "following" here:
http://twitter.com/suman_ganguli/friends

And in the other direction, I currently have 24 followers:
http://twitter.com/suman_ganguli/followers

Finally, you can view my 106 updates ("tweets") here..about 100 of those since ~Nov 6, when I decided to give it a try:
http://twitter.com/suman_ganguli

I update from 3 sources:
1) from http://twitter.com
2) from my phone, via SMS (you set up your account with your mobile device #, then simply text the Twitter number, 40404)
3) my new new thing: when I want to post a link, I've started using http://bit.ly/ , a very web2.0-ish url shortener: bit.ly provides a shorted url, and I have my bit.ly account set up so that post the link and a message to my Twitter account right from there

Finally, I've installed the Twitter application on Facebook, so that any Twitter update I post also updates my Facebook status.

Seems Twitter is finding a lot of interesting applications--its affecting politics, media, marketing.  But all that will have to wait for a 2nd Twitter 101 (Twitter 102?) blog post.

*Regarding followers from being followed: to get a bit technical, you could say that the network relationship on Twitter is non-commutative, or is directional: just because I follow you, it does not mean that you're following me.  This is unlike friend relation in Facebook, where if you and I are friends, you get my status updates and I get yours.

Statistics 101: ARCH/GARCH

I had planned to finally post at least a part of the Obamanomics "annotated summary" (see here), but once again got caught up doing some other stuff.

At least today it was "productive" stuff: spent a bit of time looking at models of "heteroskedasitcity", i.e., time-varying volatility:

http://en.wikipedia.org/wiki/Heteroscedasticity

http://www.investopedia.com/terms/h/heteroskedasticity.asp

The standard models for heteroskedasticity are ARCH & GARCH, which are imposing acronyms:

ARCH = AutoRegressive Conditional Heteroskedasticy
GARCH = Generalized AutoRegressive Conditional Heteroskedasticy

Here is the wikipedia entry, though I don't think it's particularly good (heavy on the most general equations, light on intuition):

http://en.wikipedia.org/wiki/Autoregressive_conditional_heteroskedasticity

More useful for me was reading through Jorion's brief overview in

http://www.amazon.com/Value-Risk-3rd-Ed-Benchmark/dp/0071464956

Ch 9 of the 3rd Edition (Ch 8 in the 2nd Edition which I have) is titled "Forecasting Risks and Correlations", with a subsection on "Modeling Time-Varying Risk", which has sub-subsections on "Moving Averages", "GARCH Estimation", Long-Horizon Forecasts with GARCH", and "The RiskMetrics Approach."

The latter refers to the firm RiskMetrics; the approach the Jorion generously attributes to them is an exponential weighted moving average (EWMA) method:

http://en.wikipedia.org/wiki/Moving_average#Exponential_moving_average

Here is a paper I found by searching for "GARCH" on the RiskMetrics website:

Exploring alternative 1-month volatility forecasting techniques

I should really be more familar with this stuff that I am, given that I took a course on financial econometrics.  I need to dig out those lecture notes..and the associated Matlab code.  We didn't have a good text for the course; ostensibly it was the infamous Campbel, Lo & MacKinlay:

http://web.mit.edu/alo/www/Books/efm_desc.html 

http://www.amazon.com/Econometrics-Financial-Markets-John-Campbell/dp/0691043019

Slumping South Carolina

Odd coincidence: over the weekend, I was on the Center for American Progress website (liberal/Democratic think tank, run by John Podesta--former chief of staff for Bill Clinton, and now helping run Obama's transition):

http://www.americanprogress.org/aboutus

I had visited at least once before, when I was searching for intro material on carbon emission cap-and-trade.  Conveniently, they'd put together a Cap-and-Trade 101 document:

http://www.americanprogress.org/issues/2008/01/capandtrade101.html

Looking through their econ stuff, I came across this interactive map showing unemployment rates state-by-state:

http://www.americanprogress.org/issues/2008/12/state_unemployment.html

Not surprising that Michigan is top at 9.6%; somewhat surprising is that the next three were California, South Carolina (both at 8.4%) and Oregon (8.1%).  

And then today, Krugman had a blog post today titled "Southern Discomfort", linking to a NYT article from today's paper about Columbia, SC.  Writes Krugman (http://krugman.blogs.nytimes.com/2008/12/22/southern-discomfort/):

Heartrending story in the Times about the woes of South Carolina. In fact, unemployment rates in the Southeast have risen more than in the United States as a whole; there's a sort of Slump Belt extending from the industrial Midwest down to the Carolinas.

Why is this happening? The Slump Belt does sort of look like the "auto corridor"; maybe what we're seeing is the geographical location of cyclically sensitive manufacturing industries. Anyway, it's striking that the worst of the crisis is hitting states that largely didn't experience a housing bubble.

  

Nocera (NYT): "How India Avoided a Crisis"

Nocera is almost always worth reading, and now he's writing from Mumbai. My father-in-law pointed this one out--yesterday's column: on how India largely avoided the subprime/credit crisis.

How India Avoided a Crisis

In India, banks usually don't lend money to people who lack the means to pay it back. Any lessons to be learned, class?

December 20, 2008

Some of the factors Nocera describes are cultural, but the bulk of the essay (the 2nd more substantive half) is all about India's central bank/er:

"India had a bank regulator who was the anti-Greenspan. His name was Dr. V. Y. Reddy, and he was the governor of the Reserve Bank of India...in the irascible Mr. Reddy, who took office in 2003 and stepped down this past September, it had exactly the right man in the right job at the right time."

and at the end:

"Our regulators, unlike theirs, just stood by and let it happen. The next time we're moving into bubble territory, perhaps we can take a page from Mr. Reddy's book — sometimes it's better to apply the brakes too early than too late. Or, as was the case with Mr. Greenspan, not at all.

•

None of this is to say that the global credit crisis hasn't affected India. It certainly has. I'll be back after the holidays with more columns from India, including how Sept. 15 — the day Lehman Brothers defaulted — changed everything, even here, on the other side of the world."

Certainly looking forward to that..

NYT: "Wonderful? Sorry, George, It’s a Pitiful, Dreadful Life"

Something to read if you're going to be doing a holiday season viewing of "It's a Wonderful Life", or if you just happen to come across it while flipping channels..

Wonderful? Sorry, George, It's a Pitiful, Dreadful Life
By WENDELL JAMIESONPublished: December 18, 2008
"It's a Wonderful Life" is a terrifying, asphyxiating story about growing up and relinquishing your dreams. Was this what adulthood promised?
http://www.nytimes.com/2008/12/19/movies/19wond.html

I started reading it as I was going thru this week's pile of newspapers: it's featured prominently on the front page of yesterday's Weekend Arts section, taking up the entirety of page C1 above the fold. That's an impression you don't get via the online version; OTOH, you get the info that people are reading it, and feeling it: it's currently #3 on the most e-mailed list for all of nytimes.com

If you're in NYC, the article notes that IFC in the Village (on 6th Ave, right next to the 4th St subway stop) shows it annually, so you can see it on the big screen. It's there thru Xmas Day:
http://www.ifccenter.com/film?filmid=3836

Cell phones/text messaging for development

I'm looking at some links/info on this topic b/c a friend is involved with an organization called the Flip Flop Foundation, and is interested in if/how they can use cell phones in Zambia as part of their mission:
http://www.flipflopfoundation.com/

I remembered seeing this article in the NYT earlier this year, about how a Reuters employee named  saw an application for mobile phones and text msg'ing in providing market data to rural farmers in India; Reuters is currently testing the program, called "Reuters Market Light":

"Market Data, Far From the Market"
http://www.nytimes.com/2008/06/29/business/29essay.html

A Google search led to a number of news piece about how text msgs are being used in S Africa in a public health context.  This 2003 BBC piece describes how individuals who suffer from TB and/or HIV are reminded to take their medication:

"Text messages prove a life-saver"
http://news.bbc.co.uk/2/hi/technology/2698533.stm

A related initiative in S Africa is using the extra space left in "PCM" ("Please call me") text msg's to ask people to get tested and treated for HIV; both these articles from the past few months describe this "Project M" (M is Masiluleke, which apparently means "wise council" in Zulu):

"Texts used to tackle South Africa HIV crisis"
http://www.cnn.com/2008/HEALTH/12/01/hiv.text.messages/index.html

"The Transformative 120: Text Messages Prove a South African HIV Lifeline"
http://www.worldchanging.com/archives/009090.html

Here is the link to the Project M's homepage:
http://www.poptech.org/project_m_the_challenge/


Google also led me to this interview with a guy named Ken Banks, who has been working on applying mobile technologies to development--in particular in Africa--for a number of years:

"Cell phones, text-messaging revolutionalize conservation approaches: An interview with IT conservation expert Ken Banks"
http://news.mongabay.com/2007/0415-banks_interview.html

That page in turn led me to the website for Kiwanja.net, which Banks founded:
http://www.kiwanja.net


Finally, to bring this back around, both Banks and the Reuters employee who developed Reuters Market Light did so through the Reuters Digital Vision Program at Stanford:
http://www.rdvp.org/
http://rdvp.org/archives/2006/08/18/mans-olof-ors-05-and-project-market-light-in-timesonline/
http://rdvp.org/fellows/2006-2007/ken-banks/

"The Day John Lennon Died"

I am loving Google Reader.  Just added subscriptions for two NYT blogs: City Room and Freakonomics (http://cityroom.blogs.nytimes.com/ & http://freakonomics.blogs.nytimes.com/) 

Which led me to spot the City Room roundup included below (which I e-mailed to myself from within Google Reader, and then forwarded to the blog here..click on the title below (or above) to get to the CityRoom post)..

Which made me realize that John Lennon was shot 28 years ago today, here in NYC.  Which led me to the Wikipedia entry, http://en.wikipedia.org/wiki/The_death_of_John_Lennon, which says that Lennon was shot in the entrance to the Dakota, which is on 72nd St @ Central Park West.  The Wikipedia entry has two photos of the building..as well as the police artist's drawing of the murder.

Which in turn led me to Google Maps, to try to figure out how I could share the exact location of the Dakota.  I discovered one can create a map and share it..this could be another time sink for me:

http://preview.tinyurl.com/5slm56

Anj and I were in that neighborhood just over a week ago.  On the Sunday morning following Thanksgiving, we took the D to Columbus Circle and walked up CPW to 71st St, in order to visit http://www.vedanta-newyork.org/index.htm, which I think we'll be revisiting periodically on Sunday mornings..

PS: you can use the link below to "Get Started using Google Reader"--which I strongly recommend if you read blogs at all..

 

 

Sent to you by Suman via Google Reader:

 

 

The Day John Lennon Died

via City Room by By Emily S. Rueb on 12/8/08

Blogtalk: An anniversary; Obama and Caroline; Saigon Grill's popularity; slumming Bill Murray; and more New York links.

 

 

Things you can do from here:

• Subscribe to City Room using Google Reader
• Get started using Google Reader to easily keep up with all your favorite sites

 

 

DiMaggio from NorCal

Following up on an exchange that came up at brunch w Arun, that arose out of the SF Seals T-shirt I'm wearing today, I claimed that the DiMaggio brothers came out of SF and came up playing for the Seals.

Turns out I was almost right; according to the current version of the Wikipedia entry (http://en.wikipedia.org/wiki/Joe_DiMaggio), Joltin' Joe
DiMaggio was born in Martinez, CA, which is in the SF Bay Area (specifically, "Martinez is located on the south side of the Carquinez Strait in the San Francisco Bay Area, directly facing the city of Benicia" http://en.wikipedia.org/wiki/Martinez,_California)

The first few paragraphs of the Wikipedia entry for Joe Dimaggio are included below:

DiMaggio was the eighth of nine children born to immigrants Giuseppe (1872–1949) and Rosalia (Mercurio) DiMaggio (1878–1951), delivered by a midwife identified on his birth certificate as Mrs. J. Pico. He was named after his father; "Paolo" was in honor of Giuseppe's favorite saint, Saint Paul. The family moved to San Francisco, California when Joe was one year old.

Giuseppe was a fisherman, as were generations of DiMaggios before him. Joe's brother, Tom, told Joe's biographer Maury Allen that Rosalia's father, also a fisherman, wrote to her that Giuseppe could earn a better living in California than in their native Isola delle Femmine, an islet off the coast of Sicily. After being processed on Ellis Island, he worked his way across the country, eventually settling near Rosalia's father in Pittsburgh, California. After four years, he was able to earn enough money to send for her and their daughter, whom was born after he had left for the United States.

It was Giuseppe's hope that his five sons would become fisherman. Joe recalled that he would do anything to get out of cleaning his father's boat, as the smell of dead fish made him nauseous. Giuseppe called him "lazy" and "good for nothing." told Giuseppe's opposition was due to not understanding how baseball could help Joe "get away from the poverty" and make something of himself.

Joe was playing semi-pro ball when Vince, playing for the San Francisco Seals, talked his manager into letting Joe fill in at shortstop; he made his professional debut on October 1, 1932. From May 27 – July 25, 1933, he got at least one hit in a PCL-record 61 consecutive games: "Baseball didn't really get into my blood until I knocked off that hitting streak. Getting a daily hit became more important to me than eating, drinking or sleeping."

Sent via BlackBerry from T-Mobile

Chase Manhattan Plaza - 40 Wall St

Chase Manhattan Plaza - 40 Wall St
Originally uploaded by shooGu

I haven't blogged a photo in a while..here is a shot of 40 Wall St from the backside, taken from Chase Manhattan Plaza: 40 Wall is the bldg on the right.

More on 40 Wall in the future..a whole chapter of Grant's "The Trouble With Prosperity" is centered around the history of this bldg.

My most popular-interesting Flickr bits

"This is a view of your 200 most popular bits, ordered by interestingness."

	#1: bob marley - haight @ central •  702 views  /  3 people count this as a favorite  /  4 comments
	#2: We Deliver - 19 July '05 •  300 views  /  1 person counts this as a favorite  /  1 comment
	#3: Tookie Taken by my friend Pete in LA, shortly after the execution. •  301 views  /  1 person counts this as a favorite  /  1 comment
	#4: Mad Society Kings - 2 •  195 views  /  3 people count this as a favorite  /  0 comments
	#5: haight @ central - 1 •  287 views  /  4 people count this as a favorite  /  4 comments
	#6: 565 SVN - 19 July '05 •  243 views  /  Nobody counts 565 SVN - 19 July '05 as a favorite  /  1 comment
	#7: 18th @ SVN - straight up •  253 views  /  Nobody counts 18th @ SVN - straight up as a favorite  /  0 comments
	#8: 20th @ Bryant - 14 July '05 •  264 views  /  2 people count this as a favorite  /  1 comment
	#9: union HQ - 18th & Shotwell •  231 views  /  Nobody counts union HQ - 18th & Shotwell as a favorite  /  1 comment
	#10: MSK - Duboce freeway •  352 views  /  1 person counts this as a favorite  /  0 comments

Google Reader + "Rubin's Teflon Finally Wears Off"

Two birds with one stone, so to speak:

(1) I set up Google Reader over the weekend. This is Google's "RSS reader." What does that mean? Practically speaking, it means it can collect posts from blogs all across the web into one place, allowing you to scan and read right there (namely, at http://www.google.com/reader) instead of at a bunch of different blog sites.

Google's is certainly not the only or first RSS reader. They've been around a number of years--I have an account at Rojo.com that I was using for a second (http://en.wikipedia.org/wiki/Rojo.com). Though just now I find that that url gets redirected to Blogs.com..I hadn't used it in a couple years.

(What is RSS? Read http://en.wikipedia.org/wiki/RSS_(file_format) ... basically every blog creates an "RSS feed" which RSS aggregators can read and pull in. In fact, not just blogs..from the wikipedia entry: "RSS is a family of Web feed formats used to publish frequently updated works—such as blog entries, news headlines, audio, and video"..hence newspapers, photo-sharing sites like Flickr, YouTube, etc--all of them have RSS feeds which you can pull into an RSS reader)

As a friend put it, Google's isn't necessarily the best RSS aggregator, but it is (or will be) the most widely used, for a couple reasons: it's Google, so if you've got a Google (gmail) account, you can start right away, just by hitting "Reader" at the top of any Google page. Plus it knows about your Gmail contacts, which leads to a powerful feature of Google Reader: it's easy to share any item (a blog post, a headline, etc) with any of your contacts.

For example, I e-mailed myself the following Portfolio.com blog post just now. It's from Felix Salmon's "Market Movers" blog--something I started reading about a year ago, but haven't been keeping up with over the past few months. Now that I've got Google Reader set up, I think I'll be able to keep up (other blog feeds I subscribed to: The Big Picture, Minyanville, Krugman's blog, Mankiw's blog, Brad Delong's blog..as you may be able to infer, mostly finance/econ so far.)

Probably it's not 100% kosher to republish Felix Salmon's blog post in its entirety, so I manually cut it off below after a few paragraphs. Click on the title links to go to his blog and read the rest of the post, if you're interested.

(2) I thought this post about Rubin was interesting, and wanted to post it anyways..

----- Forwarded Message ----
From: My gmail address
To: Me
Sent: Monday, December 1, 2008 1:42:16 AM
Subject: Rubin's Teflon Finally Wears Off

Sent to you by Me via Google Reader:

Rubin's Teflon Finally Wears Off

via Portfolio.com: Market Movers by Felix Salmon on 11/29/08

In one of the most ill-advised pieces of PR I can remember, Bob Rubin has given an on-the-record interview to the WSJ, in which he takes no blame or responsibility for anything which has gone wrong at Citigroup. The reaction in the blogosphere has been, predictably, swift and brutal, helped along by the fact that Rubin's famous charm clearly hasn't worked on his interviewers, Ken Brown and David Enrich. Here's their lede:

Under fire for his role in the near-collapse of Citigroup Inc., Robert Rubin said its problems were due to the buckling financial system, not its own mistakes, and that his role was peripheral to the bank's main operations even though he was one of its highest-paid officials.

It just gets worse from there: by refusing to admit to any mistakes at all, Rubin has garnered himself zero sympathy. Rubin has been surprisingly bulletproof until now: while he's had many critics, his reputation has largely remained intact. But with this interview, it's disappeared at a stroke: no one can read it and think of him as anything other than a pompous and out-of-touch plutocrat, puffed up with much more self-regard than common sense.

For instance, he's quick to the not-my-bailiwick defense:

Mr. Rubin said it is a company's risk-management executives who are responsible for avoiding problems like the ones Citigroup faces. "The board can't run the risk book of a company," he said. "The board as a whole is not going to have a granular knowledge" of operations.

But board members don't get paid $115 million. If he wasn't playing a central role when it came to Citi's risk book, what was he doing for the money? It's not clear, but his comments don't help much:

Mr. Rubin said his pay was justified and that there were higher-paying opportunities available to him. "I bet there's not a single year where I couldn't have gone somewhere else and made more," he said.

Justified? What does that possibly mean? And as for making more money elsewhere, I suspect that many Citigroup shareholders wish that he'd done precisely that. But not only was Rubin incredibly well-paid, he also had to all intents and purposes tenure at Citigroup: as a member of the board, he was an employer of the CEO rather than an employee, so there was really no one who could fire him.

The most astonishing instance of Rubin failing to justify his salary, however, comes later:

Mr. Rubin was deeply involved in a decision in late 2004 and early 2005 to take on more risk to boost flagging profit growth, according to people familiar with the discussions. They say he would comment that Citigroup's competitors were taking more risks, leading to higher profits. Colleagues deferred to him, as the only board member with experience as a trader or risk manager...
At the time, Mr. Rubin was saying in speeches that most assets were overvalued. He would quote a noted investor he knew as saying that "the only undervalued asset class in the world is risk."
But it wouldn't have been right for the board to act on his concerns, Mr. Rubin said in the interview: "I wouldn't run a financial institution based on someone's view about what markets would do."

The cognitive disconnect here is simply staggering. Rubin's going around saying that institutions are taking on too much risk, but he's also telling the Citi board that it should take on even more risk. He had no problem with the board following his lead when he said he wanted Citi to take extra risks, but he says that he would have had a problem with the board listening to his concerns about doing so. For this he thinks his $115 million is justifiable?

[go to Market Movers for the rest]

Related Links
Trouble Sticks to Teflon Bob
Pandit Named Citi Chief
Shake-Up, then Break-Up?

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Coming soon: Steadyblogging's 1st annotated summary--"(Advanced) Obamanomics"

I've only done ~10 blog posts over the past two months, and pretty haphazardly at that. One goal for the summer/fall was to do some more focused and substantive writing. Now it's a goal for the winter..

But at least I think I've settled on a format and topic. Coming up with original content is (a) difficult, and (b) almost pointless, given how much content is already out there. Indeed, one reason I haven't sat down and wrote (generated content) is that I spend way too much time reading (consuming content).

As a result, many of my blog posts have been just compilations of links (or even lazier, interesting stuff that lands in my inbox, which I just forwarded to the blog!). Often they're longer and pretty substantive news or magazine articles (typical sources are: NYT, WSJ, New Yorker, The Atlantic; i.e., what we're subscribed to and get delivered as hard copies--I've found I don't read newspapers and magazines online, esp now that I'm not tied to a desktop computer 10 (or 12, or more) hours per day.

But people have told me that they usually don't have the time to follow those links..and hence they're not getting to the interesting content that I'm trying to direct them to.

Meanwhile, I'm reading thru this stuff..and people who know me know I like to chime in. Hence, what I've decided I'll start doing is post "annotated summaries" of some of these longer and interesting articles.

I've got the first one almost done, at least in draft form (version 1.0)--a walk thru this longish piece that was the cover story of the NYT Magazine in August, titled "(Advanced) Obanomics." I found it very informative and stimulating when I finally read it (at the beginning of November--I'd saved that issue of the magazine for all those months, to ensure I would eventually get to it!):

How Obama Reconciles Dueling Views on Economy

By DAVID LEONHARDT

Barack Obama is both more left-wing and more right-wing than many people realize. A 15-year debate among economics experts in the Democratic Party helps explain why.

So, I should have a summary of this up by Tuesday. I also have a growing list of articles I'd like to tackle in a similar manner. I'm interested in getting some feedback about which of the following would be of interest to people. Make a comment, or e-mail me directly..


The New Liberalism
How the economic crisis can help Obama redefine the Democrats.
by George Packer
The New Yorker
November 17, 2008
http://www.newyorker.com/reporting/2008/11/17/081117fa_fact_packer


Anatomy of a Meltdown
Ben Bernanke and the financial crisis.
by John Cassidy
The New Yorker
December 1, 2008
http://www.newyorker.com/reporting/2008/12/01/081201fa_fact_cassidy?yrail


The Confidence Game
by James Grant
WSJ
October 18, 2008
http://sbk.online.wsj.com/article/SB122428355436946301.html


Economics: Which Way for Obama?
By John Cassidy
NY Review of Books
June 12, 2008
http://www.nybooks.com/articles/21491


After Musharraf: What the future holds for Pakistan—and for America
by Joshua Hammer
The Atlantic
October 2007
http://www.theatlantic.com/doc/200710/musharraf


Behind the Indian Embassy Bombing
by Robert D. Kaplan
The Atlantic Unbound
August 1, 2008
http://www.theatlantic.com/doc/200808u/kaplan-pakistan


Behind Mumbai
by Robert D. Kaplan
The Atlantic Unbound
November 2008
Robert D. Kaplan offers insight into the Hindu-Muslim tensions festering within India.
http://www.theatlantic.com/doc/200811u/mumbai


The Lawless Frontier
by Robert D. Kaplan
The Atlantic
September 2000
The tribal lands of the Afghanistan-Pakistan border reveal the future of conflict in the Subcontinent, along with the dark side of globalization.
http://www.theatlantic.com/doc/200009/kaplan-border

Where Europe Vanishes
by Robert D. Kaplan
The Atlantic
November 2000
http://www.theatlantic.com/doc/200011/kaplan-georgia

Mumbai: "Slumdog Millionaire" + live SAJA webcast

Just got home, after a full day in the city--centered around a viewing of "Slumdog Millionaire."  More on that later..but just checked my e-mail to see that there is a live webcast about the events in Mumbai, so listening to that now.

This is already the 6th such webcast that SAJA has hosted.  Looks like they will be doing these every 12 hrs.  Here is their archive of webcasts and their posts on the Mumbai events:
http://www.blogtalkradio.com/saja
http://www.sajaforum.org/mumbai-attacks

For good measure, here is SAJA's post from a couple weeks ago about "Slumdog":
http://www.sajaforum.org/2008/11/film-slumdog-millionaire.html

Hope/plan to write more on "Slumdog" and Mumbai soon..

----- Forwarded Message ----
From: Sree Sreenivasan <ss221@columbia.edu>
To: saja@columbia.edu
Sent: Friday, November 28, 2008 8:46:45 PM
Subject: MUMBAI & phonecast: Webcast #6 - novelists + business implications

[PLEASE SUPPORT SAJA: Help us meet our new $15,000 challenge grant:
http://saja.org/articles/saja-group-receives-prestigious-challenge-grant

Download the new SAJA application on your iPhone or iPod Touch (search "SAJA" in the App Store) or on your BlackBerry - FREE! - http://saja.polarmobile.com ]

SAJA is hosting live discussions with journalists and experts in
Mumbai and the U.S. about the terrorist attacks.

See our webcasts below. Every 12 hours!
Webcast #6: Friday, 10 pm-midnight (8:30-10:30 am India time Saturday)

Webcast #7: Saturday, 10-11:30 am (8:30-pm 10 pm India time Saturday)
(a discussion focused on terrorism)

===> Join us for Webcast #6
Friday 10 pm-midnight (8:30-10:30 am India time Thursday)
Listen via computer:
http://www.blogtalkradio.com/saja/2008/11/29/Terrorist-attacks-in-Mumbai-6
or via phone: +1-347-324-5991 or via the live chatroom

We are doing two back-to-back themed shows.

* First hour: Writers and novelists with Mumbai connections talk about the city they love.

- Vikram Chandra, author of two landmark Mumbai books, "Sacred Games" and "Love and Longing in Bombay" - calling from Mumbai (more at http://www.vikramchandra.com)

- Thrity Umrigar, author of "Bombay Time" and "The Space Between Us" - calling from Cleveland (more at http://www.umrigar.com)

preceded by a news update

* Second hour: The Business Implications for India, the US and Beyond

- Anuj Puri, chairman and CEO of Jones Lang LaSalle Meghraj, the Indian arm of international real estate services firm Jones Lang LaSalle.

- Betty Wong, global managing editor, Reuters

preceded by a news update

Hosts: Arun Venugopal, SAJAforum editor and WNYC Radio reporter; Aseem Chhabra, freelancer and SAJA-NY coordinator; Sree Sreenivasan, professor, Columbia Journalism School and WNBC-TV tech reporter

See the full archive of webcasts at http://www.blogtalkradio.com/saja

If you want to subscribe to the SAJA webcast as a podcast via iTunes,
go to "Advanced" within iTunes, then select "Subscribe to podcast"
and type http://www.blogtalkradio.com/saja/feed and hit OK.

Download the new SAJA application on your iPhone or iPod Touch (search "SAJA" in the App Store) or on your BlackBerry - FREE! - http://saja.polarmobile.com

Follow us on Twitter: http://twitter.com/sajahq

See all our posts below in the MUMBAI ATTACKS category -
http://www.sajaforum.org/mumbai-attacks

* Critiquing the media
* Breaking news coverage and commentary
* Sources available
* Statements from US orgs

Signup for our mailing lists: http://saja.org/resources/emaillists

Here are two ways you can support SAJA's work:

1. donate money to the $15,000 challenge grant - no amount too small
and it will be matched:
http://saja.org/articles/saja-group-receives-prestigious-challenge-grant

2. become a paid member or renew as a member:
$10 for students
$20 for journos
$40 for non-journos
$250 for lifetime, journos; $400 for lifetime, non-journos
you don't have to be south asian to be a member.

http://www.saja.org/membership

Thanks, as always, for your support of SAJA...

Thomas Friedman: "Finshing Our Work" (5 Nov 2008), New Yorker profile

I'm still going through the piles of newspaper that have accumulated on our dining table over the past 10 days.  Just today I finally got to Thomas Friedman's morning-after column:
http://www.nytimes.com/2008/11/05/opinion/05friedman.html

The title, "Finishing Our Work", refers to the American Civil War.  The opening two paragraphs:

And so it came to pass that on Nov. 4, 2008, shortly after 11 p.m. Eastern time, the American Civil War ended, as a black man — Barack Hussein Obama — won enough electoral votes to become president of the United States.

A civil war that, in many ways, began at Bull Run, Virginia, on July 21, 1861, ended 147 years later via a ballot box in the very same state. For nothing more symbolically illustrated the final chapter of America's Civil War than the fact that the Commonwealth of Virginia — the state that once exalted slavery and whose secession from the Union in 1861 gave the Confederacy both strategic weight and its commanding general — voted Democratic, thus assuring that Barack Obama would become the 44th president of the United States.

Unfortunately, the bulk of the column does not expand on this theme, since I am interested in reading/thinking more about it.  Instead, Friedman offers some ideas on how Obama won the election, and quotes at length a Harvard political philosopher, Michael Sandel.  Some excerpts I found interesting:

There may have been something of a "Buffett effect" that countered the supposed "Bradley effect" — white voters telling pollsters they'd vote for Obama but then voting for the white guy. The Buffett effect was just the opposite. It was white conservatives telling the guys in the men's grill at the country club that they were voting for John McCain, but then quietly going into the booth and voting for Obama, even though they knew it would mean higher taxes.

[...]

Why? Some did it because they sensed how inspired and hopeful their kids were about an Obama presidency, and they not only didn't want to dash those hopes, they secretly wanted to share them. Others intuitively embraced Warren Buffett's view that if you are rich and successful today, it is first and foremost because you were lucky enough to be born in America at this time — and never forget that. So, we need to get back to fixing our country — we need a president who can unify us for nation-building at home.

And somewhere they also knew that after the abysmal performance of the Bush team, there had to be consequences for the Republican Party. Electing McCain now would have, in some way, meant rewarding incompetence. It would have made a mockery of accountability in government and unleashed a wave of cynicism in America that would have been deeply corrosive.

And later, towards the end of the column:

Bush & Co. did not believe that government could be an instrument of the common good. They neutered their cabinet secretaries and appointed hacks to big jobs. For them, pursuit of the common good was all about pursuit of individual self-interest. Voters rebelled against that. But there was also a rebellion against a traditional Democratic version of the common good — that it is simply the sum of all interest groups clamoring for their share.

"In this election, the American public rejected these narrow notions of the common good," argued Sandel. "Most people now accept that unfettered markets don't serve the public good. Markets generate abundance, but they can also breed excessive insecurity and risk. Even before the financial meltdown, we've seen a massive shift of risk from corporations to the individual. Obama will have to reinvent government as an instrument of the common good — to regulate markets, to protect citizens against the risks of unemployment and ill health, to invest in energy independence."

This does seem to be Obama's mandate--a post-partisan, post-ideological reconception & reinvention of government as an instrument of common good.  Perhaps the central problem that the Republican party has is that, over the past couple decades, it abandoned the idea that government has any capacity to contribute to the common good, as Friedman describes.  

On the other hand, it will be a challenge for Barack to say no to the traditional Democratic agenda; case in point, the first issue and political battle that's come to the fore in the two weeks since his election--a potential bailout of the Detroit auto companies, which congressional Democrats and, of course, the big labor unions, are pushing for strongly.  It's worth noting that the labor unions helped elect Barack--but also worth noting that they were up in arms when Barack named Jason Furman his main economic policy guy (see this news article from June: http://www.nytimes.com/2008/06/12/business/12econ.html ; and also http://www.nytimes.com/2008/11/07/us/politics/06furman.html)

(A couple links on Michael Sandel, the prof who's quoted by Friedman: 

http://www.gov.harvard.edu/faculty/msandel/

http://en.wikipedia.org/wiki/Michael_Sandel

It's not clear to me if Friedman's quotes are from an interview or some recent writing.)

Finally, here is a length profile of Thomas Friedman that ran in the New Yorker a couple weeks ago, and also Friedman's own website:

http://www.newyorker.com/reporting/2008/11/10/081110fa_fact_parker

http://www.thomaslfriedman.com/

Fw: Barack Obama is now following you on Twitter!

I thought this was pretty cool..

----- Forwarded Message ----
From: Twitter
To: Me
Sent: Friday, November 7, 2008 12:55:23 PM
Subject: Barack Obama is now following you on Twitter!

Hi, suman_ganguli.

Barack Obama (BarackObama) is now following your updates on Twitter.

Check out Barack Obama's profile here:

  http://twitter.com/BarackObama


Best,
Twitter

--
Turn off these emails at: http://twitter.com/account/notifications

Fw: UChicago News for Alumni and Friends

Lots of interesting news out of the UofC: David Booth, Studs Terkel, Nate Silver, Raghuram Rajan, and of course Barack.  Just uncovered the Sept/Oct issue of the Chicago magazine, which has a photo of Barack, with the headline: "How UofC is Barack Obama?":

http://magazine.uchicago.edu/0810/features/obama.shtml

More on that forthcoming..

If you're having trouble viewing this email, you may see it online.

November 11, 2008
Top Stories Testament of Booth David Booth, MBA'71, and his family have given $300 million to the GSB. Recognizing the largest gift in University history, the GSB is now the Booth School of Business. Historic election's local angle For the University community, the 2008 presidential election was up close and personal. Read about U of C reactions. Project Bamboo's latest shoots The new multi-institutional project, based at Chicago, works to answer a big question: How can we advance arts and humanities research by developing shared technologies? Chicago in the News New York Times: Finding fame with a prescient call for Obama. Math whiz Nate Silver, AB'02, of FiveThirtyEight.com, ran the numbers months ago (November 9, 2008) Wall Street Journal: Learning for everyone. The WSJ reviews Boston Globe columnist Alex Beam's new book on Chicago's Great Books movement. The Times of India: GSB Professor Raghuram Rajan to advise prime minister. Ex-chief economist of IMF appointed economic adviser to prime minister of India (November 3, 2008) New York Times: Studs Terkel, PhB'32, JD'34, listener to America, dies at 96 (October 31, 2008) From the Editors We invite members of the University of Chicago community to share your thoughts about former Law School lecturer Barack Obama's election as the 44th president of the United States, whether stories of your election-day experiences or thoughts about the election's impact, locally and globally. Discuss the Election Results	CONNECT Wednesday, Nov. 19 Harper Lecture Christine Stansell and Deborah Nelson No Hard Feelings: Legacies of Feminism & the Role of Emotion in American Public Life 6 p.m. San Francisco Wednesday, Dec. 3 Business Forecast 2009 In the first of an eight-city series, Chicago business faculty and alumni offer insights on the economic year ahead 11:30 a.m. Chicago View all events PERSPECTIVE In His Own Words During Alumni Weekend 2004, legendary Chicago journalist Studs Terkel, PhB'32, JD'34, held forth in a conversation with WFMT's critic-at-large Andrew Patner, X'81. Listen in Read alumni appreciations
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Email Uchicago-magazine@uchicago.edu with any questions or comments.