Thursday, September 26, 2002

When the Times was shining its spotlight on Enron, its critics were quick to claim political partisanship. But they're being just as hard on Tyco, which isn't nearly as politically connected. (Remember, Enron was at one point almost running Dubya's energy policy).

What the two have in common is that they provide an interesting look at modern American corporate governance, the major differences being that the frauds at Tyco were so much more transparent, and that there is (so far) more direct evidence of actual malfeasance by members of the board of directors at Tyco. (Though at Enron, the board's own report on the shenanigans there showed that it was, at best, shockingly lax in its oversight of the company's affairs).

Even as the scandal unravels, they're still at it: the Times today reports that they awarded their former CFO a compensation package worth nearly $45 million while he was already known to be under a grand jury investigation, which later quickly resulted in an indictment. This package was approved by two board members on the compensation committee, and was not disclosed to shareholders.

Nice work if you can get it.

Wednesday, September 25, 2002

Last year, when Enron was going down, some conservative bloggers found a silver lining in the cloud: no longer, they claimed, would "liberals" be able to grouse that Enron was responsible for the California energy crisis --- if they were running a scam, how could they go broke?

The logic here was never quite clear (things certainly didn't work out that way for Boston boy Charles Ponzi), but in any case, we now know that Enron was running several scams, not a few related to the California energy market. Nor were they the only ones --- the entire energy industry seems to have ganged up on California, while Dubya's FERC, staffed by his friends from the oilpatch, was refusing to intervene, and telling the state to bend over and take it. Over the past little while, we've had news of:

  • Enron's schemes to, among other things, tie up transmission lines with bogus transactions, to run transient local shortages into price spikes, by making sure they couldn't be relieved from elsewhere.
  • A report that companies running generators were playing the same game --- deliberately withholding available generator capacity (in plants which they had reported to the market regulators as in current working order, and ready to go).
  • Most recently, a similar scheme by El Paso involving its natural gas pipelines --- again, withholding capacity, with the obvious goal of running up the price.

Well, don't all rush to apologize at once.

An interesting sidelight is watching economists come to terms with what was clearly a massive failure of market machinery. Brad Delong notes that it's "[e]conomists' conventional knee-jerk belief" that scams like this shouldn't work --- "it almost never pays a company to withhold output unless it has a durable monopoly" --- and relays some analysis from his colleague Severin Borenstein, a specialist on energy markets, on structural reasons why they are peculiarly subject to this sort of manipulation. With all due respect to Profs. Borenstein and Delong, there's more going on; if all we have to consider are structural issues which are common to all energy markets, wouldn't we have seen the same massive wholesale price run-ups in, say, Pennsylvania?

What's odd is that there's an obvious factor which Delong hasn't bothered to mention yet: the California energy market failed because it was rigged to fail. Energy company lobbyists, particularly from Enron, were heavily involved in writing the legislation which created the market, and were directly responsible for some of its peculiar features, particularly the lack of transparency which enabled some of Enron's trading games. And while it's not been clear to me exactly who was responsible for the outright ban on long-term energy contracts, which power retailers otherwise might have used to limit their exposure to short-term price fluctuations, the energy suppliers certainly didn't disabuse the legislature of that notion, nor hesitate to take advantage after the fact.

Economists sometimes describe markets as natural phenomena. Personally, I think of them as carefully engineered human artifacts; it makes it easier to pose the questions, engineered by whom and for what...

ESPN's John Clayton is at it again. A few weeks ago, he posted an article gushing about the sudden new maturity of Vikings' star wideout Randy Moss, who was poised to assume a dramatic leadership role on the offense. Gee, isn't that the quarterback's job?

Well, last game, in another loss, the quarterback was chewing Moss out for once again quitting on his routes. And, speaking of his new maturity, he's been arrested for dragging a traffic control officer half a block with his car.

Tuesday, September 24, 2002

So, let me get this straight. The Dubya doctrine is that we should launch preemptive wars against dictatorial regimes which sponsor terrorism, possess weapons of mass destruction, and promote regional instability which could cause a strategic threat. Mere suspicion in the halls of power is enough; Rumsfeld's house testimony the other day derided the whole notion of having firm evidence of a threat before launching an attack to preempt it as "unrealistic". We must go by straws in the wind.

Well, if you buy that, then our course is clear --- we should launch an immediate war against Pakistan. Ahmed Rashid's overview of the situation there provides all the necessary evidence against Pervez Musharraf's regime. The particulars:

  • Dictatorial regime: check. Rashid proclaims Musharraf "unique" in the sad history of Pakistani military strongmen "in that he has sought no allies among civilians; he apparently holds them all in virtual contempt". After the coup that brought him to power, and a rigged plebiscite to extend his presidential term, fig leaf elections are still scheduled, but he's trying to set up his own party, and candidates of the largest existing parties in the country are finding it difficult or impossible to run. And Musharraf has uniliaterally rewritten the constitution to allow him to dismiss any elected government at will.

  • Sponsorship of terrorism: check. As a general, Musharraf was an enthusiastic supporter of Kashmiri separatists; in fact, he sent his own Pakistani regular army forces into an incursion into the Kashmiri border territory of Kargil, touching off a small war, which Musharraf personally would have liked to turn into a larger one, believing he could have won it. Post-9/11, he's been forced by American pressure into "roundups" of Kashmiri separatists, but says Rashid, from the streets of Lahore, he has effectively pulled an Arafat here:

    The larger Islamic parties that have been most involved in the fighting in Kashmir, and have large networks there, have barely been touched by the army's crackdown. Their leaders are being held in comfortable house arrest and their armed militants have been told to lie low for the time being. ... Their militant followers know they will be needed to help disrupt the [late September] elections in Kashmir.

    On the other border, the Pakistani government created the Taliban, and turned a blind eye towards its increasingly close ties with al-Qaeda. Which was, in effect, of a piece with their Kashmir strategy:

    ... most Pakistanis are fed up with the Kashmir issue and would much prefer that the money spent on the 500,000 strong Pakistani army be spent on roads, schools, and hospitals. But even today, voicing such opinions in Pakistan is considered treasonable by the army, which views Kashmir as a sacred Islamic cause.

  • Weapons of mass destruction: check. They've got nukes, thanks to our friends in China. They've got missiles, thanks to the folks we're constructively engaged with in North Korea. Enough said.

  • Strategic threat: check. The mess they've created in Afghanistan (with our sponsorship, no less) has already blown up in our faces once. They have historical ties to a lot of the warlords who are making life impossible for the Karzai regime we installed there to try to clean up the mess. They nearly started a war this spring, with heavy sectarian overtones, and with the potential to drag in Arab powers, and both India and China (which has its own disputed sliver of Kashmir to consider) --- a most unwelcome trifecta.

Pakistan has had democratic elections in the past --- imperfect ones to be sure, and the leaders of both major political parties have well-earned reputations as corrupt slime. But if we try to "impose democracy" here, we will have some experience to draw on, rather than starting with nothing, as in Iraq.

If Pakistan seems like less of a threat to you than the Iraqis, ask yourself why.

Is it because of Saddam Hussein's association with the Islamist fanatics of al-Qaeda? The evidence for that connection seems to vanish whenever anyone tries to take a good look at it --- and Saddam's single worst enemy is the fanatical sectarian regime currently running Iran. Pakistan, on the other hand, has been working with Islamist fanatics hand in glove since the 1970s, if not earlier.

Is it because of the WMD threat? Pakistan's are nastier. Also, we know Saddam Hussein is susceptible to deterrence, as he was in fact deterred from using chemical weapons in the gulf war by the threat of overwhelming retaliation. Some Pakistani generals don't sound as reasonable.

Or is it because Musharraf right now is our "bastard in the region", and seems to be helping us out? Dubya bought his cooperation after 9/11 in part with threats which he surely resents, and in part with promises of favorable trade actions (particularly, rescinding protective tariffs on textiles) which we have already reneged on. Thugs can't be bought, only rented. Musharraf won't be our thug forever --- or for long, if we don't pay the rent. Our "bastard in the region" used to be Saddam Hussein.

Update: If you thought that those Kashmiri elections which the Pakistani militant groups are supposed to disrupt would have to be happening right about now, well, you're right.

Also, I edited up top slightly for aid to the irony-impaired...

More news from Boston:

Towards the end of the life of Red Sox slugger Ted Williams, he was lauded and celebrated so much that people had to pause every once in a while to consider how the reporters of his day could possibly have written all those nasty things about him --- as they did, in abundance.

Manny Ramirez is rapidly shaping up as the Ted Williams of his generation. Not as the best pure hitter ever (though he's among the best of his generation). But in so many other ways.

Like Williams, he plays left field, but he's an indifferent fielder at best --- by which I mean not so much that his skills are mediocre (though they are), as that he just doesn't seem to care. (Williams was notorious for rehearsing his swing in the field between pitches). That's compounded by what's perceived as disrespectful gestures towards the fans --- Williams famously refusing to tip his cap, Ramirez sending a song with drug references to be played as intro music on the stadium PA.

It's a comparison which could be stretched too far. The personalities, at least in public, are completely different --- Williams, intense, driven, and abrasive; Ramirez, who is infamous among reporters for dismissing just about any question with a shrug and a cheerful "don't matter". (Though some of that could be an act; Ramirez, like Williams, is reported to prepare intensely for his at bats, putting in hours of work studying film and working on his swing in the batting cage).

And, oh yes, the press hates his guts, and isn't shy about showing it.

Monday, September 23, 2002

The administration's blank check draft war resolution isn't the only security-related matter before Congress these days. The Homeland Security agency bill still languishes under a veto threat from Dubya. The new agency would sweep up huge amounts of the federal government, some of which have little or nothing to do with security per se. The veto threat comes from Dubya's demand that none of the government employees in this department should have civil service protections. He cites the need to rapidly respond to changing conditions in a security emergency, but that's at best disingenuous --- existing national security exemptions to civil service rules would almost certainly apply, and if not, the cure is broader exemptions, not ditching civil service. (And, as Max Sawicky has noted, he has yet to cashier even one major officer at the FBI or CIA for their increasingly manifest failings before Sept. 11th).

In the meantime, criminal justice scholars are noting that the Justice Department's statistics collection groups are getting thoroughly politicized. And they're doing the same thing to science panels throughout the government. Some of the Justice statistics jobs are being privatized; one of the major complaints about ex-Gov. Weld's privatization initiatives here in Massachusetts was that Weld seemed to be using it as a way to steer state boodle towards his friends, which civil service rules kept him from doing within the government.

Which brings us back to Homeland Security, where Dubya stands pat, threatening a veto unless Congress waives civil service rules entirely, even though they've given him just about everything else he asked for --- thus opening another battlefront in the war that this administration has been fighting hard since it entered office, the War on Accountability. How much longer does this have to drag on before it becomes obvious that for Dubya, ditching civil service rules is the point of the bill, and all that security stuff is an afterthought?

(Links via Atrios, Uncertain Principles, and others).