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There's a running debate on the merits of a liberal arts education. Detractors generally claim that it's useless in "the real world" and supporters generally counter that it "teaching you how to think" or provides some non-monetary worth. But there are times when being moderately well-read could have some financial benefit.¹

Today's NYPost reports that the Manhattan DA's office is investigating fraud related to the demolition of the 9/11 damaged Deutsche Bank building. Thus far the demolition process has compounded tragedies from the worst of political bureaucracies to the fire which claimed the lives of two firefighters. WSJ's Daniel Henninger covered the negligence in detail.

But aside from the general risks of government waste, there were some more obvious red flags. As the NYPost reports:

The construction site's manager, Bovis Lend Lease Corp., which was contracted by the Lower Manhattan Development Corp. to oversee the entire $150 million project, retained the John Galt Company to demolish the building and remove hazardous materials from it.

The LMDC, which purchased the land and the building for $90 million, was under pressure to get the demolition moving because the building was slated to be replaced with a new structure and remained a bitter eyesore next to Ground Zero.

"They were in a bind and wanted it done," one of the sources said.

"They did not ask too many questions, and that may be why there was room for f- - -ing around."

As it turned out, Galt was little more than a corporate entity utilizing officials from two other companies working on the site: Regional Scaffolding and Hoisting Co., and Safeway Environmental Corp., which had its own questionable histories and little experience.[Emphasis added]

Readers of Ayn Rand's Atlas Shrugged will immediately recognize the name "John Galt" as one of the stories main characters. But since "John Galt" is a normal enough name and not as well known literarilly it would be easier to pass off than "Dumbledore and Associates" or "Hamlet Incorporated." But had anyone literate been paying attention, someone should have at least asked if it was a legitimate company. On the other hand, given the irony of The John Galt Company being instrumental in government waste and special interest pandering, it's possible the founders were just being postmodern.²

In either case, the lesson here is that liberal arts can be rewarding - either in identifying fraud, or apparently, perpetuating it pretentiously.

1. Excluding quiz shows.
2. It's possible they could have been referring to the Scottish novelist, but I find this reference more ironic.

We recently mocked big business for outsmarting themselves in the subprime crisis, but it seems that there's plenty of criticism to go around. Take for example, this powerful New York Times article of the subprime crisis' impact on communities. To be sure, people are living scared and are understandably nervous about losing their homes and even treading financial water. And we can even grant that lenders have and still do engage in predatory lending practices, including student loans.

But just as we must hold big businesses accountable for their unethical practices, we must also examine the motivations of the affected individuals involved as well. Specifically, while big businesses are motivated by profit, many "victims" sought to maximize consumption with minimum immediate and therefore minimum visible cost. For example, the article reports that one person facing foreclosure, "bought her Bronx home for $535,000 with no cash down." For many people, myself included, $535,000 is a great deal of money. To "purchase" a house for that amount entirely on credit demonstrates not just a lack of financial acumen, but the immature mentality of expectation and entitlement i.e. that desires ought to be satisfied immediately.

Worse is that people aren't even learning from their mistakes. The article continues:

In some cases they cannot even work up the money to furnish their homes. Few customers have visited Boston Road Furniture, despite a handwritten come-on taped to the window that promises anyone can “Get Up to $3,000 Instantly No Job No Credit Check.”

The proprietor adds:

“We need a government loan,” he said. “This country is falling apart. We need customers. We need some help. So many ‘For Sale’ signs in this neighborhood. People just have to leave their homes and run.” [emphasis added]

The communal mentality is firmly entrenched in credit as a normal way of operation. True credit and financial liquidity are an essential part of economic systems, but here we have the epitome of short term financial thinking. Immediate interests are always satisfied, while the inevitable costs are simply ignored and disregarded - out of sight, out of mind.

Big businesses did take a hit for their own corporate greed to the tune of several billion dollars, and deservedly so. But while there are no doubt actual victims of the subprime crisis, there are also affected individuals who are now facing the consequences of their own materialism.

I refer all others to SNL'a helpful advice.

In the world of competitive finance, there's never a bad time to make money. Sure the subprime market has many feeling the pinch, but the real opportunists find ways to profit in any circumstance. For example, one strategy is short selling or in other words, betting on a loss. In a must read NYTimes article, Ben Stein examines Goldman Sach's practices of knowingly creating and selling flawed financial investments while covering themselves in the process.

But it's not just the Big Guys who are getting all the breaks. In my favorite story of the subprime fiasco, some people are fighting foreclosures with impressive Talmudic reasoning:

A Federal Court Judge rejected 14 foreclosure claims by Deutsche Bank, which was trying to collect on securitized sub-prime mortgage loans it acquired. The judge stated that the Bank did not really own the “bad loans” because it acquired them after defaults had already occurred. He asked the bank to prove it held the mortgage at the time of the foreclosure notices or said he will dismiss its claims.

The snowballing effect of subprime defaults is the result of repackaging, revaluing, and reselling various debts to various investors. However, once the debt is securitized and resold it can be difficult to track down who owned what and when. As a result Deutsche Bank not only loses on the initial investment, but cannot even recoup the losses through the typical hedge of property foreclosure.

Almost makes you feel sorry for them.

I just received this unfortunate e-mail:

Dear All:

Barukh Dayan Ha-Emet. I am sorry to note the passing of Rebbetzin Sifra Tendler, wife of Rabbi Dr. Moshe D. Tendler, shlita, (rosh yeshiva at RIETS) and daughter of Rav Moshe Feinstein zt"l.

The funeral will take place today at three PM at Rabbi Tendler's shul in Monsey.

3 PM Community Synagogue of Monsey
89 West Maple Avenue
Monsey, NY 10952

Shiva will be observed at the Tendler residence
4 Cloverdale Lane
Monsey, NY 10952

HaMakom yenachem et'chem b'toch shar avay'lay Tzion vee'Yerushalayim.

Rebbitzen Tendler had been ill for some time, most recently with a relapse of cancer (I believe lymphoma). Our wishes and condolences are with the entire Tendler family.

New Scientist reports on an advancement in painkillers which might seem hard to swallow:

Saliva from humans has yielded a natural painkiller up to six times more powerful than morphine, researchers say.

The substance, dubbed opiorphin, may spawn a new generation of natural painkillers that relieve pain as well as morphine but without the addictive and psychological side effects of the traditional drug.

On the downside, it kind of gives new meaning to "lohesh 'al hamaka" (M. Sanhedrin 10:1), so if you're planning on taking this, just don't say anything.

Remember the Swiss banks' billion dollar settlement to Holocaust survivors back in 2000? Turns out things are far from settled. New York Magazine has an excellent article detailing the battle over legal fees, currently at $4,760,000.

The short version is that Burt Neuborne, and NYU law professor, took the case pro bono for the litigation. However, after the settlement was reached the question became how to distribute more than $1 billion to hundreds of thousands of people, understandably, not a minor undertaking. According to the article, "Neuborne declared that he had worked 8,178 hours since 1999, at $700 an hour. After applying a 25 percent discount, he staked out his bottom line: $4,088,500." When word got out and people complained, "he removed 1,600 disputed hours from his bill, but he also removed his discount, raising his fee by $671,500 in the process. The bill now comes to $4.76 million."

And that's just Neuborne's side of the story, and we're not even giong to get into how he calculated those 8,178 (or the 6,578 adjusted) hours.

The article does an excellent job covering the murkier sides of legal wrangling and deal-making. For one juicy example:

Then Judge Korman (largely following the proposal of a special master tasked with devising a plan) decided that the looted-assets survivors would get nothing at all. There were just too many of them, he reasoned, and how could anyone prove which looted assets ended up in Switzerland? Korman ruled that using their $100 million share of the settlement to help destitute survivors would be the "next best thing." He ordered that 75 percent of the aid for Jewish survivors be spent in the former Soviet Union, where he considered the needs overwhelming; 21 percent would go to other foreign nations. Only 4 percent would be used to help survivors in the U.S. And that's the root of the trouble.

While the whole saga is completely understandable, it is no less simultaneously disturbing on many levels, just what you'd expect when you mix the legal system with Jewish cultural politics.

Jack Abramoff is about to be sentenced for that whole messy lobbyist scandal thing. Not surprisingly, here comes the support from the rabbi:

The former Republican superlobbyist may have fleeced clients such as Indian tribes of millions of dollars, but Abramoff often donated half or more his income each year to charities and community projects, religious leaders told the court.

Abramoff was "driven in a material world yet sought to find some balance and channel his considerable energy and creativity for a more noble purpose," Rabbi Kalman Winter wrote U.S. District Judge Paul C. Huck, who will sentence the lobbyist in the Florida case.

Ignoring for a moment the laws of mitzvah haba'ah b'aveira (fulfilling a commandment through a sin), I am wondering exactly what type of message this sends and what is really the appropriate "Jewish" response. Mr. Abramoff committed several felonies which challenged the very fabric of our legislative system, but then again the man isn't completely evil and isn't motivated entirely by avarice as evidenced by his numerous "good deeds."

This case is actually a very good example of a much larger problem in Modern Jewish Ethics. When previously respectable people have their transgressions publicized, it is not uncommon to hear the "but he did so much good" defense to somehow mitigate the offense. In its most extreme form, the "good deed" defense can actually lead people to overlook or even deny the offense itself. For one extreme example, see the case of Baruch Lanner where his devoted followers ignored even the most damming of evidence to support their leader.

Naturally, our perspectives of the ethics involved would be different if we knew the people involved. It's quite possible that if we met Mr. Abramoff in shul he would be cordial and maybe invite us for lunch. If we have known someone well for a longer period of time, and we have found that in that time this person has always acted with integrity, we would be disinclined to believe accusations which challenged our empirically reinforced perceptions.

But when our friends or acquaintances fall from grace, what should the reaction be? Paraphrasing Shel Silvertein's poem The Zebra, are they good people with bad traits or bad people with good traits?

I suggest that the good and bad need not be contradictory, but rather necessary parts of a person. Kohelet 7:20 says that no one is entirely righteous such that he will not ever sin - i.e. no one is perfect. As such we would need to evaluate what was done (assuming it can be proven) and remember that even good people can make significant mistakes. It is unfair and unethical to simply characterize people as being entirely good or entirely evil since no one can live up to those standards.

But we must also remember that consideration for good deeds does not necessarily exempt someone from facing the consequences of his/her actions. To his credit, R. Winter is not asking for exoneration, but clemency in the form of a lenient sentence. I have not read the letter in its entirety, but it's likely R. Winter explains Abramoff's actions without actually justifying them. This difference is crucial in that the good and the bad are taken as a unit in a complete context as opposed to the simple dichotomies which many of us prefer.

Mr. Abramoff's role in developing Red Scorpion or Red Scorpion 2 is a separate matter entirely...

UPDATE: The sentence was just announced at 5 years, 10 months, but that could be reduced pending cooperation in other cases.

There's a great article in the L.A. Times about a diamond deal gone bad. What makes this so fascinating is that the diamond industry is one of the few which relies primarily on trust and where "word is bond." Normally such scandals are rare since as the article notes, even the mere filing of lawsuits is enough to tarnish one's reputation. I'm curious if the increase of globalization will turn the diamond trade into just another business.

For those with Lexis-Nexis or good Library access, I highly recommend the authoritative academic study by U of C law professor (and really cool person) Lisa Bernstein, "Opting Out of the Legal System: Extralegal Contractual Relations in the Diamond Industry," 21 Journal of Legal Studies 115 (1992).

Now the the transit strike is finally over, analysts are now trying to figure out what if anything can be learned from the strike. As you might expect, what you'll find is subject to the spin of the source. The NYTimes blames both sides and hits the classic liberal trifecta calling the strike a "clash of race, culture and class." Others discuss the ramifications of the pensions, with the NYPost taking the perspective of the city and MSNBC covering the viewpoint of the workers.

In discussing the economics of the strike, it is tempting as many outlets have done, to focus exclusively on the Government and the Union. In this dichotomy, the Government gets the role of the Big Corporation while the Union represents the downtrodden. Fortunately, others have recognized that there is a third economic group involved - the people of New York. Yes, everyone covered that the people were thoroughly inconvenienced, but there has been a growing awareness among that not all "workers" are equal. Compared to many of their fellow New Yorkers, the TWU actually have fairly sweet deal already. As Forbes reports:

According to the Manhattan Institute, the average bus or subway driver--the most-skilled job in the union by most standards--is already paid $63,000 a year. The person who sits behind the bullet-proof glass in what used to be called a token booth, and who now says for most purchases you have to use the metro-card machines, takes down an average of $51,000. And the least-skilled work, though certainly the dirtiest, is the subway cleaner who clocks in at an average of $40,000.

Compare that with the average New York worker. Take out Wall Street, where mega-bonuses skew the average unfairly, and the average private sector worker earns $49,000. Peel off the college-educated (which you don't need for most transit jobs) and the average income drops to well below $35,000. That includes everyone from a skilled factory worker to the clerk in Bloomingdale's.

Nationwide, according to the Bureau of Labor Statistics, the average unskilled worker (we'll put the cleaners in that category) earns $23,753 a year in the private sector; in the public sector that jumps to $30,056, but is still ten grand less than a New York subway cleaner. The disparity jumps even further when you look at the nationwide "transportation workers" as a specialty. There the average annual wage is $30,846 in the private sector and $34,611 in the public sector. Clearly, it pays to work for the government. But it pays even better to work for the MTA (Metropolitan Transit Authority)--indeed 80% better. New York is expensive, but not that expensive.

Note that this doesn't even account for the guaranteed pensions and that Transit Workers can retire at 55, thereby cashing in even more.

Despite the occasional socialist rantings, maybe there really is a class warfare going on in New York, but it's not simply between the Big and Little Guys - the haves and have nots. Bloomberg implied as much saying, "You've got people making $50,000 and $60,000 a year keeping people who are making $20,000 and $30,000 a year from being able to earn a living. That's just not acceptable."

Perhaps it's time to acknowledge that unions may deserve their own economic class to account for their financial and political security which is disproportionate to skill or education.

On some level, the public is starting to realize just how different the regular workers are when compared to the unions. The TWU itself reminded the New Yorkers of this by causing many to not work or lose business. As a consequence, it's possible that the public's response could extend beyond vitriol to the point where the Unions may actually lose political capital as well.

It's been a while since I've written about politics, but today's New York Times carries a really disturbing editorial. The Times argues against Israel's position to bar East Jerusalem Arabs fom voting in the PA elections in which Hamas is on the ballot. For the Times, such an action violates the fundamental principles of democracy:

The messy thing about democracy is that people tend to vote for the candidates they want - a point that seemed lost on Israel...Israel is concerned about a strong showing by Hamas. That's understandable, but democracy doesn't work this way.

Of course, the Times conveniently forgets that Hamas is not just a political party, but an officially designated terrorist organization. For the Times, Hamas achieving power democratically "is the lesser evil because any movement, once in power, is compelled to supplement its bluster with deeds." Considering that one of their "blusters" is that "Israel will exist and will continue to exist until Islam will obliterate it, just as it obliterated others before it," are we to assume that the Times then is advocating the destruction of Israel?

The issue here is not merely on the rights of democracy, but of responsibility. Thomas Jefferson famously declared "the price of freedom is eternal vigilance,"and legitimizing a terrorist organization as a policital party hardly demonstrates vigilance.

Hitler also rose to power through the democracy of the Weimar Republic, and we see how well that worked.