Image by Getty Images via @daylife

Don’t these people ever learn?

There’s a heartbreaking piece in today’s New York Times that chronicles how at least half of these United States, grappling with underfunded budgets, are cutting back on home-care services for the elderly and disabled. First — and second, and third — of all, that’s unconscionably cruel. But fourth of all, it’s fiscally irresponsible.

As the article lays out, it costs one heck of a lot less to care for someone in their home than to maintain them in a nursing or assisted living facility. And it certainly costs less than to care for them in a hospital, after they fell, or became malnourished, or didn’t take their meds. In Oregon — once an exemplar of how to effectively care for people at home, now one of the state’s cutting back — nursing homes cost an average of $5,900 a month. Home and community based services cost $1,500 — about 25%!

The problem, as usual, is boneheaded law. States are required to provide nursing home care to receive federal Medicaid money. They aren’t required to provide home care. So, home care is the only place they can conceivably cut back with impunity.

The piece’s kicker grafs say it better than I ever could:

For states, having to cut the Medicaid programs is a double loss, because they come with matching dollars from the federal government. This creates state jobs and much-needed revenue.

Without these, said James A. Davis, a gerontologist at Marylhurst University and executive director of United Seniors of Oregon, “it really is a death spiral.”

“So often the programs to go are the early interventions that save money and keep people healthy,” Professor Davis said. “That comes back to bite you.”

The timing on this, of course, is pathetically ironic. I mean, part of Obamacare — which I still heartily endorse — calls for removing copayments for preventive medicine, things like well-baby checkups and such. Everyone knows the cost of that will be way less than the cost of caring for people who ignored their health. The economic principles behind providing home care are the same. What’s wrong with these people???!!!

On a different (you’ll see the connection) but more heartening note, the Times has an editorial applauding the growing number of states who are recognizing the stupidity of barring ex-cons from municipal jobs. Some progressive cities — the Times cites Boston, Chicago and San Francisco — long ago abandoned that rule. And now, Connecticut, New Mexico and Minnesota have passed laws protecting the employment rights of former offenders.

The Times suggests other states follow. I heartily concur. If you don’t do it on humane grounds, then do it on economic ones — if these folks can’t get jobs, the chances they’ll go back to crime are huge. And the crimes themselves will be a cost to society — as, of course, will be the cost of incarcerating them yet again.

Noone is suggesting that we put convicted pedophiles in day care centers, or burglars as home care attendants. But there are plenty of “safe” jobs to offer these folks. I’ll give the Times the final word:

Confining people with criminal convictions to the very margins of society is unfair and self-defeating. These sensible new laws recognize that.

Image via Wikipedia

I just got a press release from the American Accounting Association that shocked the bejeezus out of me: Contrary to what every cynical bone in my body dictates, shareholders at some companies really have tackled the issue of excessive pay, and directors have actually heeded their complaints.

I don’t have the actual study — that’s being released at the association’s annual meeting early next month — but I have the summary findings. And wow, are they heartening.

Few companies have granted shareholders proxy access to float their own slate of directors, or even given them a non-binding say-on-pay. But apparently, a growing number of shareholders have used tried-and-true political tools to approach the issue differently: They’ve mounted “vote no” campaigns, persuading other shareholders to vote the heads of overly generous compensation committees off the board. According to the association’s study, such campaigns resulted, on average, in a drop of 38% in CEO pay for that year.

Nor was this confined to any one industry. The list of companies the association offers as examples include Toll Brothers,Yahoo, UnitedHealth, United Natural Foods, Sanmina-Sci, Saks Inc, Sprint, Qwest Communications, Legg Mason, Lennar, KB Home, Constellation Energy, and Apple. If you can spot a pattern here, tell me.

And the study turned up another heartening factoid: Institutional investors, which presumably have a lot of savvy and ample ability to apply it, have begun to insist on an active role in designing pay packages. What the press release calls “pay-design proposals” by such investors resulted in average pay reductions of about $2.3 million in companies with “excessive CEO pay” — defined as “an amount greater than what would be expected on the basis of a number of standard economic determinants, including firm size, return on assets, stock performance, and industry.”

The institutional investors were smart enough not to dictate dollar amounts, simply to design packages that strengthened the link between pay and performance, between bonuses and profits, between stock grants and shareholder value.

I’ve always said that nothing will change until shareholders are allowed to vote directly on pay. The study concludes differently:

The findings would seem to bode well for the increase in shareholder say on pay likely to result from the major financial-reform bill that President Obama signs into law today.
<…>
“This study casts doubt on the two most frequent criticisms of increased shareholder say on pay — either that it will be largely ineffective or that it will lead to radical changes dictated by unions or other special-interest groups,” comments Fabrizio Ferri of New York University, who carried out the new research with Yonca Ertimur of Duke University and Volkan Muslu of the University of Texas at Dallas.

This is one of those cases where I want so badly to shout “I was wrong, I was wrong!” Fingers crossed, eyes crossed…

And on a related note…

According to today’s NYTimes, Goldman Sachs is — by its standards, at least — cutting back on excess pay.

For a second quarter in a row, the investment bank’s pay ratio was 43 percent of revenue; in the past, Goldman paid out around 50 percent to staff. For ordinary mortals, the numbers are still staggering: on an annualized basis, $545,000 is being set aside for each of the firm’s employees. But it does look like Goldman might finally be listening to its critics.

The piece goes on to suggest that shareholders move to lock in the lower pay ratios. 24 hours ago I’d have snorted and said, Fat chance!. But now that I see this study…well, repeating myself, fingers crossed, eyes crossed…

div class=”zemanta-pixie”>

Image by Getty Images via @daylife

If this weren’t such a deadly serious issue — and one fraught with such danger down the road — I’d be getting a huge giggle out of the way mandatory health care is twisting on the spit of hairsplitting definitions.

Apparently, our Constitution, as interpreted by opponents to health care reform, prohibits our government from requiring that everyone, sick or healthy, young or old, have health insurance — or pay a penalty if they don’t. That interferes with commerce, the naysayers insist, and thus is a no-no for the federal government to do.

Ah, but what if we say that everyone must buy health insurance or pay an extra tax instead? That’s perfectly okay, federal government certainly has the right to tax.

What’s so irritating about this is that of course it’s not a tax. Who ever heard of selective taxation on people who refuse to buy a product? Allowing the government to so thoroughly broaden the definition of a tax — and thus, broaden its ability to levy more of them — opens a ghastly can of worms.

But allowing young, healthy people to go without insurance opens an even larger can of even uglier wrigglers. This is one of the few issues on which I side with the insurance industry: If we are going to force them to insure everyone, despite preexisting conditions, they have got to be able to bring their costs down by insuring a pool of folks whose health care needs won’t exceed their premiums. That’s simple economics.

So yeah, if we have to call it a tax to get it passed, then do it. But I don’t have to like it.

Image via Wikipedia

I’ve had a couple — really, only a couple — of people push back at me when I’ve said that CDOs and other exotic financial instruments exist only to enrich their creators, and are societally useless at best, destructive at worst.
Okay, you defenders of useless paper, let’s hear you make a case for box office futures.

Then again, don’t bother. A little-noted part of the financial reform bill that just passed nipped that particular disaster in the bud.

You will recall, of course, that a bunch of entrepreneurial financiers (financial entrepreneurs? what expression am I looking for?) wanted to create yet another futures market, that of movie box office receipts. You can bet that a new movie will open big, or you can bet that it will tank.

It’s gambling, pure and simple, with no redeeming boost to any segment of the economy. I mean, if you are investing in pork belly futures, you at least have the option of taking delivery on the product. What exactly do you do with your box office future?

Movie studios and theater owners lobbied fiercely against it. So much for the lame argument that it gives film producers an opportunity to hedge their bets.

And, in fact, it’s probably easier to cheat at this than it is to count cards in casinos. The opportunities to bribe critics to praise or pan a movie — or the ability of critics to trade in insider information — is boundless. The ways to find out in advance how many theaters plan to screen a new movie — or maybe even to influence that number — are legion.

It is unlikely that this particular betting vehicle had the potential to bring down the larger economy. And truth? I’m not sure I know what gives the government the constitutional authority to ban it.

But I’m glad it did, anyway. No amount of Wall Street gambling is totally risk free to society. And there is the opportunity cost — money not bet on futures could be going out in loans to legitimate businesses, to home-seekers, to students. I’m fed up with feeling (rightly or wrongly) as though my tax dollars — and my stock portfolio — are being held hostage to “innovations” that are of benefit only to the already-rich.

The idea of movie box office futures should have been scotched a nanosecond after it was suggested. But better late than never.

Image via Wikipedia

So I said all along Blankfein would keep his job as Goldman Sachs’ chief, no matter what happens — the firm has made yacht-loads of money under his leadership, and when all is said and done, that’s all the Goldman partners and their shareholders care about. Moreover, if they fired the chief, they’d be admitting that they did something wrong — and considering that they settled the SEC suit so they could get on with business as usual, that’s something they are simply not going to do.

So, has Goldman learned anything from this whole horror?

I doubt it. Lots of reporters have been referring to this as a “humbling settlement” for Goldman. No matter where I look, I don’t see any “humbling” going on. Way I see it, the firm has yet more proof that there is absolutely no down side to getting rich on the broken backs of others.

First of all, the $550 million fine. Yeah, that’s huge by normal-people standards, and it’s huge by SEC standards, too. But it’s not a lot of money when seen in the context of the record profits Goldman’s been raking in (almost $13.4 billion last year). We’re talking maybe half a month’s earnings here, no more than that. Goldman can absorb that expense as easily as normal folk can absorb the cost of an occasional over-priced dinner.

And even if it couldn’t — Goldman shares went up more than 5% when the settlement was announced, adding a lot more than $550 million to Goldman’s market cap. (Yeah, the stock price could plunge again, while the fine is a concrete outlay, but still….)

But maybe the most disheartening aspect of Goldman closing this chapter is that it doesn’t have to tinker with the plot-line of its book.

Remember, Goldman was charged with defrauding its own clients by persuading them to buy a mortgage security that Goldman itself knew would tank.

Goldman denied it had done anything wrong — but it did NOT deny that it had withheld the fact that it had created the toxic security for the sole purpose of letting John Paulson, a mega-respected investor, bet against it. That’s kinda like telling me to invest my 401K in a new class of stock without mentioning that it was created just so that Warren Buffett could short it. Goldman’s grudging admission: it was a “mistake” to withhold the information, a mistake it regrets.

So have clients fled the firm in disgust? No sign that’s happened. Apparently, what looks like fraud and malfeasance to people like me looks like the kind of sophisticated savvy that existing and prospective Goldman clients want on their side.

Are shareholders fleeing? Nah, as I noted above, they’re bidding up Goldman stock. And they don’t even seem overly upset that Goldman didn’t immediately tell them that it was being investigated by the SEC (definitely material information). Sure, a few have sued — but many more are applauding.

Nor am I seeing any signs that Goldman will be forced to give up its bank holding company status. Remember, it switched to that so it could have access to real cheap money,even as it got rich from bailout funds and AIG payouts. Wanna bet it continues with that, too — unless new financial rules make that onerous. If that happens, Goldman will find yet another way to turn back the clock, publicly offering “regrets,” privately patting itself for another job well done.

It’s all pretty depressing, dontcha think?