I have a confession to make. I am a math addict. My parents introduced me to it when I was about 3, and after I tried it a few times, I was hooked. By the time I was 4, I had moved on to the harder stuff, multiplication and division, and I don't just mean 5x3, I was doing the hard stuff, multi-digit multiplication and division, and I didn't need a pencil or paper, just straight to my head.
When my kindergarten teacher found out, wow! He marched me straight down to the vice principal and interrupted a meeting. Needless to say, the VP was shocked to find such a young math addict in his school. My teachers tried to help me, but I was always a step ahead of them. I was doing exponentiation by 2nd grade, algebra by 5th grade, trigonometry by 6th, it seemed that nothing would stop this addiction.
They kept trying to help me, but I just kept right on doing math. Sometimes my grades would drop because I was bored, or didn't like the teacher. They kept putting me in tougher environments, but I just kept on doing it. In jr high, a friend introduced me to computers. I realized these things could make it faster and easier to do really hard math. You know the story, "Hey Geoff, check this out...."
By the time I got to high school, it was really bad, joined a "math club" and started doing "number sense". And, I was completely hooked on computers. My junior year was the worst, I was taking 3 credits of math, second, third, and 4th period, every day, including "computer math".
I was so addicted by my senior year that when I only got a 760 on the SAT math, I decided to do it again because I should have gotten higher. The second time, I hit 800. I was up to doing AP Calculus, the really hard stuff, and still, no one could stop me. I didn't pay attention in class, didn't do my homework, and yet flew through every test they dropped on me. They couldn't catch me or stop me.
But it all came crashing down in college, the hard math there was only available at 8:30 in the morning, and my brain just wasn't working at that hour. They had me doing stuff called Calc II, Calc III, & Differential Equations, and always timed tests. But it wasn't the math that got me, it was those early hours. My brain just can't handle those early hours.
After college, I cut way back on the hard stuff, went back to the basics, including some prime number theory. But I was working as a computer programmer, so I was doing math at work every day, and usually at home on the weekends. I started experimenting with other types of math, hashing, encryption, compression, you name it, I probably experimented with it. It wasn't hard, but without a computer, it would have been very tedious.
Yes, I've been a math addict for over 40 years now, and I don't think I'll ever quit. Parents beware, introducing your children to math at a young age can lead to a lifelong addiction.
P.S. This is a true story, although some of the details might be exact, it's all from memory.
Tuesday, August 28, 2012
Sunday, August 26, 2012
Too Big To Fail, Never Again
I'm tired of hearing about the "onerous and oppressive regulations being imposed upon the financial services industry". They are specifically referring to the "Volcker rule" that is part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Now, I'm not here to argue the benefits or weaknesses of the specifics of the Volcker Rule. I haven't read it's 300 pages, as I'm not in that industry, it may very well be a flawed piece of legislation.
I'm here to point out that the banking industry has only themselves to blame for this situation. First, they lobbied for, and successfully got key provisions of the Glass-Steagall Act repealed, allowing commercial and investment banks to merge and share assets and liabilities. These provisions were repealed as part of the Gramm-Leach-Bliley Act (GLBA) in 1999. This was strongly supported by Alan Greenspan, then Chairman of the Federal Reserve, the financial services industry, and particularly, by Sanford Weill, CEO of Citicorp, which later became the largest bank (Citigroup) when it merged with Travelers Group, and many others in Congress and the banking industries.
After passage and several mega-mergers of commercial and investment banks, they began engaging in the practice of making high risk sub-prime mortgages, funding the "housing bubble" of escalating prices, sold mortgage-backed-securities (MBS) to other investors assigning them a AAA rating, while simultaneously making investments that those MBS would go down in value. In short, they engaged in manipulation of the market for their own enrichment, at a cost of many hundreds of billions to millions of homeowners, and trillions to the overall economy. Only a massive USD$700 billion bailout saved them from bankruptcy.
And then there is the still pending possibility of another financial crisis from the "derivatives" market they created, a crisis that could very well be larger than the problems so far.
So, in summary, they lobbied for deregulation, got it, then proceeded to engage in risky, and possibly fraudulent practices that resulted in a loss of hundreds of billions or trillions of dollars to people who we not part of the investment scheme. And now, they want to complain about the new regulations being imposed upon them. They haven't even admitted fault for causing the problem, and none have been held financially or legally accountable for these practices. They were in effect, gambling with "our" money, and indeed, the entire US and world economy.
Sorry, but until they take responsibility for their actions and the damage they've done, anything they say about how "onerous and oppressive" these new regulations are will fall on deaf ears. They've demonstrated that they aren't trustworthy to self-regulate, nor hold themselves accountable for their manipulations. I, and I suspect most of the US public, have no sympathy for them, and no trust in their categorization of these new regulations.
Many of the primary backers of the repeal of Glass-Steagall, including Alan Greenspan, Sanford Weill, and others have since said it was a mistake, that "the big banks should be broken up", that "too big to fail" is too big a risk to the economy and the country, and that self-interest and self-regulation can not be relied upon in keeping the industry in line.
I'll conclude with a quote from a NYTimes article:
Banks (including investment/financial services) occupy a special place in an economy. They have a unique capacity to boost, or collapse entire economies, based upon the actions of a few. It's fundamentally a risk to everyone to allow a private bank to become a significant part of any economy/market. For this reason, the restrictions on banking should be even more limited than anti-trust/monopoly laws for other industries, but the same principles should apply. See my post about free-markets for some thoughts on limits on market share in general, keeping in mind that more stringent limits should be applied to banks.
I'm here to point out that the banking industry has only themselves to blame for this situation. First, they lobbied for, and successfully got key provisions of the Glass-Steagall Act repealed, allowing commercial and investment banks to merge and share assets and liabilities. These provisions were repealed as part of the Gramm-Leach-Bliley Act (GLBA) in 1999. This was strongly supported by Alan Greenspan, then Chairman of the Federal Reserve, the financial services industry, and particularly, by Sanford Weill, CEO of Citicorp, which later became the largest bank (Citigroup) when it merged with Travelers Group, and many others in Congress and the banking industries.
After passage and several mega-mergers of commercial and investment banks, they began engaging in the practice of making high risk sub-prime mortgages, funding the "housing bubble" of escalating prices, sold mortgage-backed-securities (MBS) to other investors assigning them a AAA rating, while simultaneously making investments that those MBS would go down in value. In short, they engaged in manipulation of the market for their own enrichment, at a cost of many hundreds of billions to millions of homeowners, and trillions to the overall economy. Only a massive USD$700 billion bailout saved them from bankruptcy.
And then there is the still pending possibility of another financial crisis from the "derivatives" market they created, a crisis that could very well be larger than the problems so far.
So, in summary, they lobbied for deregulation, got it, then proceeded to engage in risky, and possibly fraudulent practices that resulted in a loss of hundreds of billions or trillions of dollars to people who we not part of the investment scheme. And now, they want to complain about the new regulations being imposed upon them. They haven't even admitted fault for causing the problem, and none have been held financially or legally accountable for these practices. They were in effect, gambling with "our" money, and indeed, the entire US and world economy.
Sorry, but until they take responsibility for their actions and the damage they've done, anything they say about how "onerous and oppressive" these new regulations are will fall on deaf ears. They've demonstrated that they aren't trustworthy to self-regulate, nor hold themselves accountable for their manipulations. I, and I suspect most of the US public, have no sympathy for them, and no trust in their categorization of these new regulations.
Many of the primary backers of the repeal of Glass-Steagall, including Alan Greenspan, Sanford Weill, and others have since said it was a mistake, that "the big banks should be broken up", that "too big to fail" is too big a risk to the economy and the country, and that self-interest and self-regulation can not be relied upon in keeping the industry in line.
“I was an advocate of the deregulation movement and I made -- along with a lot of other smart people -- a fundamental mistake, which is that deregulation works fine in industries which do not pervade the economy,”
- Retired Federal Judge Richard Posner
"I made a mistake in presuming that the self-interest of organisations, specifically banks, is such that they were best capable of protecting shareholders and equity in the firms ...."
- Alan Greenspan, Chairman of the Federal Reserve when the Glass-Steagall Act was repealed in 1999 and he supported it's repeal, testifying to Congress on the banking crisis in Oct 2008.
“What we should probably do is go and split up investment banking from banking,” Mr. Weill, the former chief executive of Citigroup, told CNBC. “Have banks do something that’s not going to risk the taxpayer dollars, that’s not going to be too big to fail.”They created this situation, now they have to deal with the consequences. And until they accept responsibility for it, nothing they say about the new regulations carries any weight. If and when they take responsibility for, or are held accountable for, their actions, there will be room to discuss what level of regulation is appropriate and necessary. But until then, they're simply not believable.
- Sanford Weill, former CEO Citigroup and one of the primary advocates for the passage of GLBA, quoted in the NYTimes article below.
I'll conclude with a quote from a NYTimes article:
"In 2009, John S. Reed, who with Mr. Weill forged the megamerger that created Citigroup, apologized for creating a lumbering giant that needed multibillion-dollar bailouts from the government. Philip Purcell, the former chief executive of Morgan Stanley and David H. Komansky, the onetime leader of Merrill Lynch, two other main figures in the fight to repeal Glass-Steagall, have echoed similar concerns about deregulation."Update: 2015-10-17
- NYTimes
Banks (including investment/financial services) occupy a special place in an economy. They have a unique capacity to boost, or collapse entire economies, based upon the actions of a few. It's fundamentally a risk to everyone to allow a private bank to become a significant part of any economy/market. For this reason, the restrictions on banking should be even more limited than anti-trust/monopoly laws for other industries, but the same principles should apply. See my post about free-markets for some thoughts on limits on market share in general, keeping in mind that more stringent limits should be applied to banks.
- Related Links:
- Causes of the Global Financial Crisis
- Subprime Mortgage Crisis
- State-Wrecked: The Corruption of Capitalism in America by David Stockman
- An accurate history of the Glass-Steagall Act and Gramm-Leach-Bliley Act.
- A post about the strengths and limits of Dodd-Frank
- A post about and an alternative approach
- A Bloomberg article on "too big to jail", which references this video by then Attorney General Eric Holder saying there is no such thing at "too big to jail", but his disclaimers also make it clear that there are considerations about the economic impact when preparing possible charges against large institutions.
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