Infinite Jeff

Economics & Finance, Law, Photography & Design, Politics banks, dodd-frank, obama, photoshop, proprietary trading, volcker rule

Recommended reading – Steven Harper’s article in this month’s American Lawyer about the results of the midlevel associates survey.  Money quote:

The prevailing business model has distorted some concepts of value and jettisoned others. At most big firms, productivity equals billed time, without regard to the efficiency of the worker or quality of the end product. Meanwhile, anything that can’t be measured—mentoring, creating a sense of community, delegating important client relationships to young attorneys, and encouraging balanced lives that make better lawyers—gets discounted or lost altogether.

That’s the real theme permeating midlevel associate dissatisfaction. Running big firms according to metrics aimed at increasing short-term profits is deceptively objective and relatively simple. But it risks ignoring important things that can’t be quantified. […]

As a result, behavior that would enhance institutional stability and intergenerational transition yields to the self-interested development of portable books of business. Add enough laterals, and any partnership can quickly lose itself. Client-filled partner silos don’t promote the shared identity that provides a sense of community. Relying on current profits to be the glue that holds everything together can quickly make a strong firm fragile. Just ask lawyers who once worked at Heller Ehrman, Howrey, or, for history buffs, Finley Kumble.

Among large-firm equity partners, a revolution of rising expectations has continued for two decades. Recessions come and go, but somehow average equity partner earnings have trended skyward as associate satisfaction has tanked. With new attorneys flooding the market, where’s the incentive for those who reap staggering rewards to reconsider the human impact of their business models, especially on the youngest and most vulnerable?

[…]  The question for large firms is whether they can continue to attract the best and the brightest even when top recruits truly understand the work they’ll do, the culture of short-term thinking they’ll endure, and the failure most will encounter in their bids for equity partnership.

The tragedy, as I see it, is that the people most responsible for creating the winner-take-all law firm culture, and most capable of correcting it, will read this and either (i) not care (“I’ve got mine, Jack”), because worrying about the institutional legacy is for chumps, or (ii) not recognize themselves, because they believe their own recruiting hype and would vehemently deny pursuing short-term profits über alles or asset-stripping the firm before they retire.

Economics & Finance, Law law firms, lawyers, myopia, productivity

On November 19, 2010, the Securities and Exchange Commission (SEC) issued proposed rules relating to provisions of the Dodd-Frank Act that expand the SEC’s regulatory authority over investment advisers to include many more investment advisers to private equity and hedge funds, subject to certain exemptions.

Later, a non-U.S. investment adviser went to the SEC’s Division of Investment Management to get a Foreign Private Adviser Exemption, as described in the Dodd-Frank Act.

This is the story of that investment adviser.

Economics & Finance, Law, Politics dodd-frank, exemption, hedge fund, investment adviser, private equity, sec, xtranormal

You are a true believer. Blessings of the state. Blessings of the masses. Thou art a subject of the divine. Created in the image of man, by man, for man. Let us be thankful we have commerce. Buy more. Buy more now. Buy more and be happy.

Short of direct stimulus spending, a payroll tax holiday — at least with respect to the employee’s portion of Social Security and Medicare taxes — looks like the best, fastest and most politically feasible way to put money into the hands of people who will actually use it to buy more. A holiday on the employer’s portion of payroll taxes, albeit a necessary (if not sufficient) condition for Republican support, is going to be less effective stimulus.  To the extent the employee’s portion gets spent, the increase in aggregate demand is likely to have a greater impact on hiring decisions than the reduction in employers’ cost per employee.

Let us be thankful we have an occupation to fill. Work hard, increase production, prevent accidents, and be happy.

Either way, of course, a tax cut that actually works to stimulate the economy is the last thing the Republicans want. Republican congressmen will accuse Obama of raiding the Social Security and Medicare trust funds so he can buy free lunches for illegal immigrants and build a mosque in your home town, and New York Post readers will believe.  Republican advisors will argue that only regressive tax cuts create jobs, and Fox News Channel viewers will believe. Republican lobbyists will say that because a payroll tax holiday is only temporary, it results in more “regime uncertainty” and further undermines business confidence, and Wall Street Journal readers will believe.  And all the true believers will know, on some level, that two more years of slow-or-no growth and high unemployment is the key to Republican hopes in 2012.

For more enjoyment and greater efficiency, consumption is being standardized.

Economics & Finance, Politics demand shortfall, fiscal stimulus, longport, payroll tax holiday, thx 1138, unemployment

What the income-inequality denialists and “politics of envy” critics don’t want to see:  pre-tax income and wage data compiled by Thomas Piketty (Paris School of Economics/EHESS) and Emmanuel Saez (Department of Economics, UC Berkeley, Director, Center for Equitable Growth, 2009 John Bates Clark medal winner).

From which data we’ve created a few visual displays of income concentration among the top 1% of U.S. families (the “merely rich”), the top 0.1% of U.S. families (the “very rich”) and the top 0.01% of U.S. families (the “filthy rich”) from 1950 to 2007.  Headlines for 2007:

• The merely rich — 1,498,750 families with incomes of at least $398,900 — had a 23.50% share of all U.S. family income.
• The very rich — 149,875 families with incomes of at least $2,053,000 — had a 12.28% share of all U.S. family income.
• The filthy rich — 14,988 families with incomes of at least $11,477,000 — had a 6.04% share of all U.S. family income.

The income shares of the merely, very and filthy rich in 2007 were all much, much larger than they were in 1950 — 12.82%, 4.39% and 1.22%, respectively.  Compared to the previous secular peak for income concentration in the late 1920’s, the 2007 income share of the merely rich was just shy of the 23.94% record set in 1928.  The 2007 income shares of the very and filthy rich, however, were well in excess of  the previous highs (also set in 1928) of 11.54% and 5.02%, respectively.

If the increase from 1950 to 2007 in the income share of the merely rich was remarkable, the increase in the income share of the very rich was truly exceptional and, as for the filthy rich … un-fucking-believable:

• From a 12.82% income share for the merely rich in 1950 to a 23.50% share in 2007 — an increase of 83%.
• From a 4.39% income share for the very rich in 1950 to a 12.28% share in 2007 — an increase of 180%.
• From a 1.22% income share for the filthy rich in 1950 to a 6.04% share in 2007 — an increase of 395%!

Looked at another way, the increase from 1950 to 2007 in the share of U.S. family income going to the top 1% as a whole was mainly attributable to increases in the income shares going to the very and filthy rich:

• The income share of the top 1%, excluding the filthy rich (i.e., the 99%–99.99% fractile), increased only 51% from 1950 to 2007.
• The income share of the top 1%, excluding the very along with the filthy rich (i.e., the 99%–99.9% fractile), increased only 33% from 1950 to 2007.

The accelerating growth of income concentration within the top 1% is evidence of nothing less than the emergence, especially since the 1980s, of an income plutocracy in the United States:

• As a percentage of the income going to the top 1.0% of U.S. families, the share of the very rich increased from 34.25% in 1950 to 52.23% in 2007.
• As a percentage of the income going to the top 1.0% of U.S. families, the share of the filthy rich increased from 9.52% in 1950 to 25.68% in 2007.

Economics & Finance, Politics filthy rich, income distribution, income inequality, piketty & saez, plutocracy

Economics & Finance, Law, Politics banks, dodd-frank, econolypse, proprietary trading, volcker rule

Economics & Finance, Law banks, dodd-frank, econolypse, proprietary trading, volcker rule

From today’s paper, the U.S. counterinsurgency strategy in Afghanistan reduced to meaningless chartjunk:

As if Edward Tufte’s diagnosis of the state of our verbal and statistical reasoning in the era of PowerPoint — “Power corrupts; PowerPoint corrupts absolutely” — needed any confirmation.

Make sentences, not bullet points.

Economics & Finance, Law, Politics afghanistan, counterinsurgency, powerpoint, tufte

Geithner re-announces his public-private plan for toxic assets.  Leaving aside the boring details, the plan amounts to what?

 •  corporate statism

•  crony capitalism

•  lemon socialism

•  Groucho Marxism

The answer, of course, is … all of the above.

Economics & Finance, Politics banks, geithner, ideology, public-private fund, TARP

Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as the result of animal spirits — a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities.

— John Maynard Keynes, The General Theory
of Employment, Interest and Money (1936)

— Jacket art by Edward Koren from
Akerlof & Shiller, Animal Spirits (2009)

Economics & Finance akerlof, animal spirits, econolypse, keynes, recession, shiller