Thursday, July 28, 2016

Wednesday, July 27, 2016

A Sense of Decency

A Sense of Decency

Who today will have the courage of Joseph N. Welch, chief counsel for the United States Army, who faced down Senator Joseph McCarthy?  At the Army-McCarthy hearings, Mr. Welch asked the Senator a simple question during a televised hearing that marked the beginning of the end of McCarthyism.  Mr. Welch was defending a young attorney from the Senator’s accusations when he said:

Let us not assassinate this lad further, Senator. You've done enough. Have you no sense of decency, sir? At long last, have you left no sense of decency?

The Republican Party is more than entitled to attack the policies of the Democratic Party, and the qualifications and character of the party’s nominee, Secretary Hillary Clinton.  Political campaigns are meant to use colorful language and paint caricatures of opponents.  This is the American political process.

However, Donald J. Trump has gone far beyond those accepted bounds.  He is making statements that are detrimental to the national security interests of the United States of America and the fundamental values of our country.[1]  As a private citizen, Mr. Trump had every right to make those inflammatory and controversial statements.  America takes Mr. Trump’s campaign seriously.  After all, we provide Mr. Trump with secret service protection and are about to trust him with our most sensitive intelligence information.

Mr. Trump isn’t likely to change course, so the question is whether Senator McConnell, Speaker Ryan, or Governor Pence will put country first and ask Mr. Trump, whether he has any sense of decency.


Monday, July 25, 2016

Friday, July 22, 2016

A Cynical Response: The Treasurer’s staff will study her conflict of interest

A Cynical Response:  The Treasurer’s staff will study her conflict of interest

North Carolina Treasurer Janet Cowell tacitly admitted that her membership on two corporate boards might be inappropriate.   This came to light at a recent meeting of the trustees of the state’s retirement system.  However, the Treasurer expressed her view in a way that is very disappointing.  Rather than resigning from the boards of Channel Advisors and James River Group Holdings, she had her acting General Counsel read a statement that calls for her staff to prepare proposals to prohibit the practice in the future.  The Treasurer was reacting to concerns expressed by two board members, John Aneralla and Michael Mebane.   She was not at the trustees’ meeting.[1]

A couple of years ago the Treasurer used the same tactic to fend off questions about her role as sole fiduciary.  She put together a study group, asked for recommendations, and didn’t reach a conclusion on the issue.  She’s doing it again.  While indicating that she has sympathy for Mssrs. Aneralla’s and Mebane’s concerns, Treasurer Cowell is initiating a process that won’t have any substance.   She has asked her staff to develop recommendations that will result in a lot of discussion and no change.  Moreover, Treasurer Cowell has further muddied the waters by expressing her preference that any policies cover other Council of State members (i.e., the Governor, Attorney General, Secretary of State). 

The Treasurer is right that public employees shouldn’t serve on corporate boards.  Given
the Treasurer’s role as sole fiduciary and as the state’s banker, her office should be the first one to be barred from serving on corporate boards.  It doesn’t require any study or delay.  The Treasurer simply needs to send out a couple of resignation letters.   Her successor, Dale Folwell or Dan Blue, III, have promised not to join any boards, so it’s only Treasurer Cowell who has created a potential conflict of interest.

Managing a public pension should involve as little politics as possible.  Unfortunately, Treasurer Cowell has taken a completely political and cynical position.  While she’s agreed that public officials and fiduciaries shouldn’t accept private board positions, she’s started a process that merely deflects political pressure.  Meanwhile she gets to keep her board positions, cash compensation, and stock grants.


Friday, July 15, 2016

A Lesson From France: The Peloton

A Lesson From France:  The Peloton

The closest I get to the Tour de France is my daily encounter with a stationary bike.  I haven’t been on a regular bike in decades.   Nonetheless, I’ve been an avid follower of the Tour for over 20 years.   You may wonder why I would watch a sport that has been rife with scandal.  Despite the scandals, the scenery is always spectacular, and the sprints and breakaways are exciting.  But that’s not why I watch the Tour.  It’s all about the peloton.

The peloton is the main field of the bike race that typically contains a hundred or more closely bunched riders.  In its ideal form, the peloton operates like a well-structured society.  The peloton can move farther and faster than any individual or small group of riders.   As the wind shifts, the peloton changes its shape like a flock of birds.  Within the peloton, individual riders understand their respective roles.  At the head of the peloton, certain riders pace the peloton and cut through the wind.  Inside the peloton, other riders convey drinks and food from the support cars to the riders.

When the peloton hits crosswinds, it faces the greatest danger to its existence.  Crosswinds force the bikers to form a diagonal pattern and bunch even closer together to shelter from the wind.  Teams compete to find a safe haven from the wind.  At some point the pressure in the peloton becomes too great, and the peloton shatters.   Serious accidents are common and scores of riders are left to fend for themselves along the road.  The small number surviving bikers wind up gaining a huge advantage over the rest of the field.

We’re facing gale force crosswinds in our society.  We should be slowing down and attempting to stay together.  However, our leaders seem intent on blowing up the peloton.  A few of us will win and the rest of us will be big losers.  In the Tour all that is at stake is a yellow jersey.  We have a bit more at stake. 

Thursday, July 14, 2016

The NYT reports long after alternative investors captured state government

The NYT reports long after alternative investors captured state government

In my days as a columnist for the News & Observer and a regular blogger, I wrote extensively about personal finance companies and their connection to hedge funds and state government.  It’s been over three years since my first blog post and the New York Times[1] has finally written the same story. 

 For those unfamiliar with personal finance loans, they are a form consumer credit doled out in relatively small amounts to the working poor.  The loans are laced with high interest charges and fees.  State legislatures, including the North Carolina General Assembly, have given these companies and their hedge fund and private equity backers all sorts of valuable relief.

There’s one important factor missing from the New York Times article:  a major source of the capital being deployed by hedge funds and private equity firms comes from state pensions.    In other words, public employees are basically funding the industry that preys on the working poor, including I’m sure, many state and local employees.

For those interested in the background, go to: