"Locally Owned" BP Station

"I Didn't Do It!"

I guess if I owned a BP gas station, I'd do the same thing: buy a big banner reading "Locally Owned," and display it -- prominently -- in front of my gas station.

Which is exactly what I saw in front of the BP station on Excelsior Blvd. in St. Louis Park the other day.

Reminds me a bit of what post-Watergate Republicans did in Minnesota to distance themselves from Nixon: changed their name to "Independent-Republicans."

I think that lasted for about a decade, until Ronald Reagan made it OK just to be a "regular" Republican again . . .

Obamas' Hyde Park Home

Now That's a Tough Comp

Not since Richard M. Nixon lived in a New York City apartment has the market tried to assess the value of immediate proximity to the president in a dense, urban neighborhood.

--Susan Saulny, "Hyde Park House for Sale Comes With a View: The Obamas; The NY Times (9/15/09)

As I've been posting recently, pricing a home -- whether it's done by a Buyer, Seller, or appraiser -- is all about the comp's.

The magic number is three -- as in three, recently closed homes similar in style, size, and condition to what's called the "subject home."

To clients, their home is always "one of a kind"; to them, there's nothing as inviting, beautiful, functional, etc.

Usually, they're wrong about that.

Not this time.

Complicating matters further in the case of the Obamas' neighbor (pictured above): the home is a complete 'fixer (as in fixer upper).

"Washington as a Ghost Town" -- Really

Closer to Constituents, Further From Lobbyists

What if Washington Were a Ghost Town?

--Headline, Peggy Noonan Op-Ed piece; The Wall Street Journal (8/1/09)

My thoughts exactly . . . almost 16 years ago.

In fact, that was the thrust of my own 1993(!) Op-Ed piece:

Here's an excerpt:

In an era of jet travel, teleconferencing, and faxes, why not bring Washington to the people? Specifically, let members of Congress work out of their home districts, under their constituents' watchful eye. Such an approach would have several benefits, and surprisingly few drawbacks.

First, it would make members of Congress less accessible to lobbyists and special interests. Lobbying Congress now is like shooting fish in a barrel: All you need is a Washington branch office staffed by a few employees, and a well-heeled political action committee ("PAC") . .

Conversely, locally-based members of Congress would be more accessible to constituents. The most successful businesses are the ones that "get closest" to their "customers." Politicians' "customers," the voters, are scattered across the United States, not based in Washington.

--Ross Kaplan, "Congress Come Home: Faxes Can Do the Talking on Capitol Hill"; Star Tribune (9/27/1993)

Little did I anticipate that in the intervening almost two(!) decades, advancing technology would make the aforementioned proposal even more feasible -- and Washington-Wall Street dysfunction make it even more necessary.

Nor did I anticipate that the presumed reason for bringing legislators together -- that proximity would promote comity, consensus, etc. -- would have even less sway.

So, is that what Peggy Noonan is championing?

Unfortunately, no.

The headline of her piece has to do with imagined advice that FDR and Richard Nixon would give President Obama dealing with today's myriad policy "challenges."

(Im)plausible Deniability

Wall Street Who-Dunnit: No One??

Victory has a thousand fathers, but defeat is an orphan.

--John F. Kennedy

Hurricane Katrina was an act of nature. The economy's Wall Street-triggered financial collapse is not. If and when anyone is actually held accountable for that, you can expect to hear variants (combinations?) of the following defenses.

(Im)plausible Deniability, or, "The Enron Defense"

Ken Lay, Enron Chairman, famously argued that he was out of the loop at the company he ran.

If you don't recall, Enron was a financially engineered house of cards -- complete with opaque, off-balance sheet entities -- that spectacularly imploded (sound familiar?). The resulting mess cost investors, creditors, and company employees about $100 billion -- a number that seems positively quaint by today's standards.

At trial, Lay argued that he was above it all, and didn't really understand all the complex transactions that led to the company's undoing.

Unfortunately, that stance was contradicted by multiple pieces of evidence, including the testimony of Lay's own lieutenants, incriminating email's, and Lay's conveniently-timed sale of millions in company stock (even as he was exhorting employees to buy).

Because Lay's claims of ignorance were so roundly refuted, the jury never really got to the far more legally relevant question: whether Lay should have known what was going on at his own company. After all, under corporate law, that's the board chairman's duty. And Lay certainly was paid -- munificently -- to know what was going on.

Knew . . . or Should Have

Fast forward to today.

In an instantly infamous letter run in last week's New York Times, Jake DeSantis, a senior executive at AIG Financial Products ("AIGFP"), argued -- amongst other things -- that he had nothing to do with the toxic credit instruments at the heart of the company's (and financial system's) melt-down.

If Lay's argument was that he was too high in the pecking order to have been in the loop, DeSantis' argument is that he was too low. DeSantis wanted the world to know that he refused to be a scapegoat and a fall guy. Plus, he had other (unspecified) job opportunities -- or did.

So, in a tone reminiscent of Richard Nixon's 1962 valedictory ("you won't have Nixon to kick around anymore"), DeSantis announced that he was resigning -- and donating his $750k after-tax bonus to charity.

Here is Matt Taibbi's take on DeSantis' claim of ignorance (or at least the printable part):

AIGFP only had 377 employees. Those 400-odd folks received almost $3.5 billion in compensation in the last seven years, a very large part of that money coming from the sale of credit default protection. Doing the math, that averages out to over $9 million of compensation per person. Ask yourself this question: If your company made that much money, and the boss of the unit made almost $280 million in just a few years, exactly how likely is it that you wouldn't know where that money was coming from?

Are we supposed to believe that Jake DeSantis knew nothing about Joe Cassano's CDS deals? If your boss and the top guys in your firm were all making a killing selling anything at all -- whether it was rubber kayaks, generic Levitra or credit default swaps -- you really wouldn't bother to find out what that thing they were selling was? You'd really just mind your own business, sit at your cubicle and put your faith in the guys up top to fill you in if there was something you needed to know?

--Matt Taibbi, The Smoking Chimp

Taibbi goes on to make the point that if, however inexplicably, DeSantis is actually clueless about credit default swaps . . . what expertise does he have that would justify taxpayers paying him millions to unwind them?

"I was just following orders" (or, The Eichmann Defense). If Wall Street firms were all headed by Ken Lay's, their subordinates are likely to claim that they were all Adolph Eichmann's.
Sometimes referred to as "the architect of the Holocaust" (and the subject of Hannah Arendt's chilling "The Banality of Evil"), Eichmann argued in his defense that he was merely a subordinate following Hitler's orders.

So, too, one might expect that all but the senior-most Wall Street executives will argue that they were merely implementing directives from higher-up's. To prevail, however, they will likely have to disavow thousands of incriminating email's, eyewitnesses' testimony, and their own extravagant compensation -- often in the hundreds of millions. Unlike Eichmann, who plausibly might have feared for his safety had he opted out, Wall Street's various accomplices -- er, underlings -- faced no such coercion.

Postscript: Eichmann's arguments were rejected, and he was hung.

"Everyone Did It." When you can't deny that you did something, or blame it on others, or otherwise excuse the conduct in question, then what? The predicament reminds me of one of my favorite lawyer jokes:

When a neighbor charges that the lawyer's dog bit him, the lawyer first denies it. When he's shown photos of the bite and the emergency room bill for the neighbor's stitches, the lawyer then argues that the dog attacked in self-defense. When numerous witnesses come forward to testify that the attack was unprovoked, the lawyer says . . . it's not his dog.

Unfortunately, millions in foreclosed homes, trillions in evaporated wealth, 10% unemployment, etc., are not a laughing matter.

A functioning legal system will manage to parse the foregoing defenses, lay blame, and hold somebody accountable. Recovery depends on it.