Krugman on "Math in Economics"

I guess Paul Krugman has done a little math in his career. He responds to critics who have painted him with the broad brush as an opponent of mathematical modeling in economics.

Kurgman Blog Post

What I objected to in the mag article was the tendency to identify good math with good work.

Sources:

Paul Krugman blog, September 11, 2009.

Phony Wells Fargo "Profits"?

If we've only learned one thing from the financial industry melt-down it's that we can't trust the establishment. Can't trust the big financial institutions, can't trust most of the regulatory agencies, can't trust the White House or Treasury (regardless of which party is in power), can't trust the rating companies, can't trust the establishment media to give us the truth.

So, when I read the headline "Stocks jump on Wells Fargo surprise profit announcement" I'm very suspicious. And we have reason to be.

That's because, you can't trust Congress or the little known Financial Accounting Standards Board (FASB) either. The FASB may be perpetuating the shell game under pressure from Members of Congress that represent the big financial institutions.

In short, during a hearing of the House Financial Services subcommittee on March 12, FASB chairman Robert Herz was strong-armed to let banks, say Wells Fargo, inflate the value of their assets, with the hammer coming down in this final exchange:

Chairman Rep. Paul Kanjorski (D-PA): You do understand the message that we’re sending?

Herz: Yes, I absolutely do, sir.

Here's the way Democrat Kanjorski wants the shell game to be played.

Assigning (Marking) Value to Bank Assets: The value of financial industry assets can be determined in a couple of ways. One way is to let the market determine the value... see what someone will actually pay for the assets. That's known as marking the value of the asset to market (Mark-to-Market).

Another way of assessing value is to create a mathematical model of the value and use that model to mark the asset's value (Mark-to-Model).

Guess which way Kanjorski was pressuring the FASB chairman Herz to let the banks mark their asset values? Mark-to-Model. Tweak the model to assign a little more value to the assets and voila, Wells Fargo "surprisingly" reports a profit.

Bloomberg offers the take from former Lehman Bros. managing director, Robert Willens:

“By letting banks use internal models, instead of market prices, and allowing them to take into account the cash flow of securities, FASB’s change could boost bank industry earnings by 20%.”

Read More Details...

Psssst... Do Something

• Contact the Broadcast Media
  
• Contact the Newspapers
  
• Contact the US Senate
  
• Contact the House of Representatives

Sources:

Wiskey and Gunpowder, Tomorrow Mark-to-Model Returns with a Vengeance, Samantha Buker, April 1, 2009 (no fool'n).

Bethany McLean: Role Model

Here's a good role model for girls and young women. Bethaney McLean, 34, exposed the Enron scandal as a writer for Fortune magazine. She's now a contributing editor at Vanity Fair and gets invited to be on the Daily Show with John Stewart and PBS NOW with David Brancaccio just to name a couple.

Co-author of "The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron," McLean was about 25 in March 2001 when her article in Fortune titled, "Is Enron Overpriced?," was the first in a national publication to openly question the company's dealings. The book was eventually turned into a video documentary.

Here's a short video of Bethany McLean on the Daily Show:

The Daily Show With Jon StewartM - Th 11p / 10c

Bethany McLean

Daily Show Full Episodes
Important Things With Demetri Martin

Funny Political News
Joke of the Day

Aspiring journalists and others might find this interview with Bethany McLean on journalism jobs.com worth reading.