Philip Greenspun’s Weblog

Merrill Lynch executives wrote themselves $4 billion in bonus checks for their work in 2008, on top of already lavish salaries. All of this money is coming from the U.S. taxpayer through the TARP program, as previously discussed here. Looting $4 billion might not sound like that big a deal next to the $700 billion being thrown down the TARP drain, but how does $4 billion compare to other federal expenditures? Let’s look at some of the stuff the Feds typically do with $4 billion…

• fund all National Science Foundation research for nearly one year (total 2008 research spend was $4.8 billion)
• fund the National Park Service for almost two years (2008 budget $2.4B)
• fund the National Transportation Safety Board (NTSB) and its accident investigations on land, air, and sea for approximately 50 years (2008 budget was $79 million)
• fund the Drug Enforcement Administration for more than two years (2008 budget $1.8B)
• fund the FBI for about 8 months (2008 budget $6.5B)

Now that Wall Street generates only losses, can the U.S. taxpayer afford to take over responsibility for paying Wall Street executives their boom-era salaries and bonuses?

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My friend Paul sent me this book review of The Decline and Fall of the British Aristocracy. The review author compares the decline of the British rich of the 19th Century with our current decline. One thing that he fails to note is that today’s imperiled aristocrats have $700 billion (so far) in TARP money coming to them (more or less directly into their pockets, at least in the case of Merrill Lynch’s executives).

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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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