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The Financial Times has reported on where $4 billion of the TARP money went…. to pay bonuses to the executives who bankrupted Merrill Lynch (story). They deposited $10 billion in TARP money in October and wrote themselves $4 billion in bonus checks a couple of days before Bank of America took over the insolvent firm. We can no longer say that the $350 billion first round of TARP money sank without a trace. Now Bank of America needs another $20 billion in TARP money to make up for this and some other losses from Merrill that it didn’t expect.

One interesting aspect of the story is how weak is the correlation between pay and performance. Merrill paid its people 6 percent less in 2008 than it did in 2007, when the firm’s numbers still looked pretty good. If total incompetence and driving a company into bankruptcy yields 94 percent of the pay of doing a great job, what incentive is there to try to turn a profit for shareholders?

More: Guy works at Merrill for three months, gets paid $25 million, quits and buys a $37 million apartment in Manhattan.

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This week’s New Yorker has an interesting article on how various countries developed their national health care systems. A few morsels…

“Yes, American health care is an appallingly patched-together ship, with rotting timbers, water leaking in, mercenaries on board, and fifteen per cent of the passengers thrown over the rails just to keep it afloat. But hundreds of millions of people depend on it.”

“There is no dry-docking health care for a few months, or even for an afternoon, while we rebuild it. Grand plans admit no possibility of mistakes or failures, or the chance to learn from them. If we get things wrong, people will die. This doesn’t mean that ambitious reform is beyond us. But we have to start with what we have.”

We’ll have to see what our friend Steve says about the author’s praise of the VA system (long known to be the most efficient user of IT in the health care world, though that’s rather like being a dwarf among midgets).

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Some new research results on red wine and health from the January 26, 2009 New Yorker: Mouse Au Vin

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Imagine going before a jury and saying “This airplane was so badly designed that it survived only 58 years of salt water corrosion and pounding through rough waves at 80 knots.” That’s the argument some folks in Florida are making against Northrop Grumman in connection with the 2005 crash of a 1947 Grumman seaplane. More: Miami Herald.

[This ties in loosely with my economic recovery plan.]

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As Barack Obama is inaugurated president today, an event the media has declared to be an historic moment, I recall a conversation that I had with a woman in Cambridge a few months ago. She asked me who I’d voted for in the Primary. I replied “Barack Obama, mostly because I wanted to make sure that my weblog prediction of his victory in the general election came true.” She snorted in disgust: “What a surprise. You voted for another tall man.”

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It may be instructive to review George W. Bush’s January 2001 speech to see whether he lived up to his pre-inauguration promises.

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The Boston Globe carries an interesting article on Al-Jazeera and their coverage of the recent battle in Gaza. The author is a Harvard graduate student living in Syria, so he is much closer to the locals than a typical Hilton-dwelling journalist.

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I got an email today from kiva.org and it prompted me to review my portfolio. I put $650 in on July 4, 2007. I’ve made 7 loans totalling $1000 to folks in Ecuador, Peru, and Tanzania (some of the money that I put in was loaned out, paid back, and loaned out again). How much did these farmers, shopkeepers, and hairstylists pay back? All of the $1000 minus two cents, since my current account balance is $649.98.

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Barney Frank, one of Massachusetts’s contributions to our Congress, had put a provision into the latest bank bailout bill that would have forced recipients of federal money to give up their business aircraft. It sounded like a war on corporate excess and it would have been a righteous war if all operators of business jets were like John Kerry, Frank’s fellow Democrat from Massachusetts. Instead of hopping the Metro to National Airport and taking one of the hourly commercial flights to Logan Airport, then hopping the T to his Beacon Hill mansion, Kerry has himself limoed out to Dulles Airport (National is closed to private aircraft), flown up to Hanscom Field, and limoed 15 miles to Beacon Hill. He doesn’t save any time compared to flying commercial, but he avoids rubbing elbows with the rabble who keep reelecting him.

Consider a bank, however, that has been paying big rents and big salaries in downtown Boston, Chicago, or New York City. Workers in a small town in Maine, upstate New York, central Indiana, or central Pennsylvania might be much cheaper to employ, but there wouldn’t be any commercial airline service to their small towns. If the bank has a bizjet, however, it can set up a facility in a place that is otherwise impractical to reach. Executives can fly in and out for meetings (a surprising number of small towns have a jet-ready airport). Take away the bizjet and those small town workers will have a more difficult job competing with workers in the biggest cities that have frequent commercial airline service.

Frank’s attempt to suppress business aviation would have had the effect of favoring his constituents (all of whom live close to Boston’s Logan Airport, a very busy travel hub) and harming people in small-town America. So far, however, members of Congress from states such as Kansas are successfully fighting what are effectively restrictions on banks doing business anywhere other than in our larger cities.

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According to the press coverage of the US Airways floating tour of the Hudson River, the Airbus A320 has been certified for single-pilot operation. In the old days this airplane would have flown by a crew of two pilots, one titled “Captain” and one with the job title of “First Officer”. One of the two pilots would have been handling the stick and rudder while the other pilot worked the radio, flaps, slats, landing gear, pressurization controls (very critical in this case, since a jetliner ditching usually involves dumping the cabin pressure and then sealing the cabin just before impact). Generally these roles are swapped after each leg of a trip. The “pilot monitoring” role can be tougher than the “pilot flying” role when things go wrong. The stick and rudder stuff is what pilots have been doing since their first flight in a Cessna. Furthermore, all airplanes respond in a similar way to stick and rudder commands. The systems and switches on a modern airliner, however, are extremely complex and unique to a particular airplane type. For knowing what switch to push and in what order, experience gained on a previous airplane is of no value.

From reading the New York Times, we learn that Chesley B. Sullenberger III was the pilot of US Airways 1549 and he was apparently working everything in the cockpit by himself, a truly remarkable achievement.

[A reader of the London Times, by contrast, would have learned that the A320 is flown by a two-pilot crew and that the first officer was Jeff Skiles (profile).]

[News accounts have not spent a lot of ink on the people who did the toughest job in this incident: Shelia Dail, Donna Dent, and Doreen Welsh, the flight attendants. Being a pilot is a fairly straightforward job in a tightly controlled environment (except when both engines quit!). The flight attendants, however, face unique situations depending on who shows up as a passenger. In their training and drills they have to evacuate a fully-loaded airplane within 90 seconds.]

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