prosperity
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Posts posted by prosperity
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Would this work? It's not "cool" as in eco-friendly, but it seems "cool" as in the potential for really cheap gasoline that we don't have to pay a dictator for and don't have to worry about nature destroying our refineries down south if we did drill for more oil:
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I suppose that House is a kind of make-believe character who couldn't exist in real life. But he sure is funny! In the recent hostage episode, he rigged Cutty's desk so her drawer bottomed out, being a jerk to show his affinity for her. And she liked it! Ridiculous but hilarious!
Isn't that the grown up version of a "love punch"? Like when Wilson sawed half-way through his cane and house took a spill while walking down the hall?
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If there is such a thing as philosophical treason, Greenspan I think could be guilty of it. The fact that he is willing to smear Ayn Rand is, IMO unforgivable:
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Where did this idea that it started come from? I don't think it's self-evident that it must have started...
Wouldn't this be some form of determinism? "scientific determinism"?
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It is true that for higher level abstractions an act of mental judgment is involved in deciding if they are similar or not -- i.e. is fascism similar to capitalism. Both are similar in that they are economic-political systems, but that is not something that one is aware of by direct perception of entities; one has to think about it.
When it comes to the lowest level of getting similarities, I think that is available via direct perception of the objects under consideration. For example, is this similar to this THIS? One can perceive that they are similar on several levels, the actual letters and the colors, and that is given in perception. I wasn't claiming that the similarity is an object, but rather similarity is someone one notices about the entities on the perceptual level. On the margins, there is an act of judgment involved, is this similar to this and similar to this? To me, the first two look more blue, while the last one looks more green, but that is why one must have a context even on the perceptual level. Against the background used on this forum, they all look similar, but on some other background color they might not.
So, similarity on the perceptual level is given via perception and is the starting point for abstracting and conceptualizing. I do think sometimes that Kant has so screwed up the language that some people don't look or observe to see the similarity. They falsely think that everything the mind does is a conscious judgment, when it isn't on the perceptual level.
...after going back over ITOE and re-reading and re-reading again certain passages, perhaps I may make a comment...
I think the "similarity" refers to measurement. That is how you perceive similarity in objects like, for example, "tables". You see these objects which are of similar measurement (and, like you referenced earlier within a certain range)...for example, length, or in the example you provided in this post, similarity in color (which we can know implicitly even without an understanding of the wavelengths or the electromagnetic spectrum).
I think the example used by ITOE was a match, a pencil, and a stick. The "similarity" as it were is in the length of the objects.
The relationship of similarity to measurement I think would also tie into making similarity objective as versus subjective.
Edit: for clarity, correct possible mistake
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House is a pragmatist, but I really do enjoy his show and I genuinely do like the character. I am kind of wondering what others on this forum think of him though.
The dichotomy of House is a peculiar one. In his professional career, he is pretty close to being the ideal human being. In his personal life, he is a wreck. Personally, I think it is awful that the creators did this to such a great character.
If he applied his rationality of his professional career to his personal career, I think it would be the best show on T.V. I like the show despite House's flaws, but mainly because of the fact that he is such a great doctor.
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Last week, I walked into class and my teacher asked how I was doing. I said that since happiness is not dependent on external factors, I am doing well. She told me that happiness was indeed dependent on the surroundings, and that the world of Ayn Rand was a fantastical "perfect little world." Over this weekend, I have written a response to her. Please comment and tell me is anything is missing. Thanks.
First of all, why are you talking about Ayn Rand in school? I'm not saying you shouldn't, I'm just curious why this would come up (unless you are reading A.S. in one of your classes)?
Second, and this is perhaps my own personal opinion, that letter is not something I would sent to my teacher.
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I have a friend who is a socialist and we really got into it several days ago. We're all good now, but for a second I thought it could go down that road where we just weren't compatible because of our philosophic ideas.
You're compatible? If you are an Objectivist, you are advocating ideas that demand personal responsibility in every area of your life. The Socialist, if they are a true socialist, demands the exact opposite.
I'm curious. In what areas do you find compatibility?
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The range covered by a concept is determined by the context. For example, for tables, the context is something that fits in a house and is useful for sitting at to have dinner. A 200 foot table wouldn't fit in a house, and a two foot table would not serve the same function as a table where one can pull a chair up to it and sit comfortably.
Similarly, the concept atom includes the context of something rather small that is the fundamental physical make-up of material things. The range in this case is the number of protons, neutrons, and electrons. However, if it turns out that, say, a black hole, or even a neutron star, is similar in some respects to an atom, one wouldn't call them an atom because their size is too large.
So, it is important not to just go by the definition, but the total context of the concept that gave rise for the need for that concept in the first place.
Thank you for the clarification. You know, I have to admit that I feel a little silly asking this question now because that explanation seems vaguely familiar, but I do not recall where I read it last and I am in the middle of the chapter on Epistemology in OPAR (but I didn't want to forget that question in my mind so I left my book to turn on oo.net). It's been many years since I've read ITOE and OPAR.
...although, would the context be that of just having dinner? What about coffee tables? Or is that...that would be a classification, wouldn't it?
...so then, by that reasoning, I could assume that the concept "house" also exists within a specific context that would disallow a 3 mile high home (single family of course). This would be consistent with the idea that knowledge is contextual. In this case knowledge of the concept "table" and "home"?
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I was re-reading OPAR and started thinking about something that Rand had written (rather Peikoff) about the process of concept-formation.
Her approach was, and I am trying to capture the essential process, that a unit of measurement must exist in some quantity but may exist in any quantity. This was named as an essential process for concept formation. Still, within the same paragraph (I think, I don't have it right in front of me), there was a qualifying statement - something to the effect of "within an appropriate range" or something to that effect.
The example I can remember is that of forming the concept "table".
When forming the concept "table", as I understand it, we are differentiating it from other things that are not similar to it (similar in measurement), and integrating 2 or more instances of that "thing" and omitting the specific measurements...
BUT, we are told that this applies within an appropriate range...a table, for example (and I hope my example is accurate) that a table can be 4' high, but not 200' feet high.
My question is, what is meant by "appropriate"? Appropriate to whom? What makes it "appropriate" as vs. "inappropriate"?
I think this would have some relationship to "similar", which I understand as "similar in measurement". But, just how similar? At what point do objects become "dissimilar"?
For example, you can integrate "tables" that are 4', 5', and 8' tall into the same concept "table"...but what about a 10' tall "table"? What about a 2" tall table?
Perhaps what I am asking is "what makes "similar" or "appropriate" in this context objective as versus subjective?"
I hope my question makes sense.
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Just a point of ettiquette here. I hope you asked him before you chose to quote from back-channel sources. Otherwise, I think you should deal with the arguments within the thread.
Your post takes on a "look what else this numbskull said to me, privately" sort of air.
Well...I was aware that it might come off that way...but he stopped posting to this thread, and I really just wanted to share the argument I was having to show the line of reasoning on this issue.
I believe he is still roaming the forum, so he is free to respond. If it is of any consequence, he did insult me via PM, implied that I meant a few things that I did not express (nor was my intention) so I'm not really that concerned about etiquette with regards to this particular person, but I've strained to keep that in the PMs between me and this particular individual.
Though, in the interest of obeying the rules, for the record, I really am trying to show the line of thinking between what I would call a "closet Determinist" and one who accepts free will.
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This was a book I was considering reading, but I wanted to check and see if anyone else here (Objectivists only please) has read it and if so...is it worth the read?
http://www.amazon.com/Social-Transformatio...e/dp/0465079350
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I just realized that this thread existed. I could have probably saved myself a correspondence of about 9 PMs to this guy "aleph_0".
In an early PM, he had said:
Take a man who is predetermined and he has the following determined mental and conceptual experience: He sees fruit, when he's hungry he eats it. He identifies it in his mind, without choosing to, he goes over to it, without choosing to, and he eats it, without choosing to. He held the belief that it was food and he was right. If asked, "Will eating the fruit cure your hunger and make you healthy, wealthy, and wise to eat the fruit?" he responds, "Naturally. It's delicious and nutritious." And he is right. And he arrived at the conclusion with a process of [determined] concept-application.In this example, he applied the concept, yet where did the concept originate from? No answer. He continues with his insanity:
He "formed" or "acquired" the concept by being shown many fruit as a youth, and the concept of fruit came into his awareness. No active will. Moreover, he does the same for motor oil. You ask him, "Is motor oil salutary?" and he responds, "But of course. A barrel a day keeps the doctor away." Which he did by the same process described above, but which proceeds erroneously. In the former, he was rational; in the later, irrational. In the former, he was right and must have been right and could not have been wrong; in the later, he was wrong and must have been wrong and could not have been right.He uses the word "erroneous", but how can his straw man be wrong? He ate the fruit because he had to eat it. He's not right or wrong, he's a robot. He allegedly "acquired" (again not explanation as to how he acquired, he just did) the concept by being shown over and over again. What aleph is describing but dares not say is that his straw man was programmed, with such concepts like "nutritious" and "fruit". There is no wrong...he does it because he cannot help it and he cannot do otherwise.
What is seriously disturbing is that aleph is demanding morality from this robot-man even though he cannot help what he does. What results is a sick, twisted vision of justice in which a man could be judged as being wrong for actions which he had no control over! And...aleph sees nothing wrong with this!
Later, in the chat room, he says (in response to my saying that his view does not allow morality to exist):
Al_0: Yeah. You can, instead of thinking of ethics as deriving from man's primary causation, think of it as the study of what is best for an individual (minus the free will). You can thus still use the language of "should" (for instance, "you should eat fruit" will just mean, "fruit will be good for you") without appealing to a non-caused cause in man.According to aleph, man would have to be reduced to the level of a non-conscious being - a robot of sorts (one that is capable of being destroyed), or that of a talking horse. Having values, but not having the ability to choose them. He claims that somehow reason and determinism are compatible.
His view of reason is, according to him, the ability to form concepts without reference to reality (after all, you do not have the ability to focus on one thing as versus another because there are no alternatives in your mind and no choices).
And...to make things worse, he insists that there is no contradiction in his assessment.
By the second to last email, he responds (to my demonstration that volition is axiomatic and the alternative of focusing or not focusing one's consciousness is the primary choice):
That just shows that one's mind sometimes comes into focus and sometimes does not. No volition involved.He did not see the absurdity in such a claim. Apparently, man is conscious, but he does not direct his consciousness. Man is a raving lunatic detached from his mind, along for the ride, and unable to control what he does and does not think, what he focuses and does not focus on.
He describes the act of volition: "one's mind sometimes comes into focus and sometimes does not" and in the very next sentence asserts that the fact that there is an alternative open to man's mind is not evidence that volition exists and by acting on one of those alternatives demonstrates the validity of volition (somehow it didn't dawn on him that validity depends on volition).
:dough: :dough: If it were "determined", what proof would there be? Determinism always demands that there is an outside force controlling one's actions but offers no proof of this controlling force. It rejects the notion that volition is a type of causation.
I had asked him for similar proof regarding similar assertions about this alleged outside control, yet received none. The most I received was a response stating that when he received proof, he would pass it along to me. So, in other words, he'll always be "on the fence" on this one as it cannot be proved.
But, what's more, I received the 'ole "you prove free will exists" and "I reject volition as axiomatic". He wrote this blanking out the fact that he had to direct his consciousness first to 1) read my PM and 2) respond. There was an alternative, which he never acknowledged in all of our correspondence...and that was to ignore my PMs.
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All bank balance sheets are inherently runable, regardless of whether time deposits are involved. This most recent crisis had nothing to do with time deposits, and yet the potential to create a panic still exists. You don't resolve that by going to 100% reserves. IN a class at OCON 06 (dont'remember which) I remember the discussion coming up and the general though of the instructor is that you let banks decide. Some will got o 100% and some might not, but the idea that 100% suddenly provides intrinsic safety is a poor one.
One can and should make the case that the level of fractional reserves shouldn't be arbitrarily set by fiat, but that is certainly not the same thing as calling them immoral, per se.
Paul doesn't seem to understand this. btw I tried to listen to the vid, but the incredibly distracting effect of delivering a lecture while driving a car was more than I was willing to stomach. Yes, Paul, you can give a lecture while driving, spinning plates, and rubbing your stomach in a circle....
This is an interesting point because before there was a Federal Reserve, banks operated in an almost free market...and still expanded their money supply. I believe the reason for having a precious metal as a backing and not as the physical money itself was a lot of convenience. The same reason checks used to be used, and now credit/debit cards.
But also...the reason for expansion of the money supply, if my memory serves me correctly, was to reduce the damage caused to a bank by a bank run.
The main difference was that back then they had gold backing their reserves. If too many depositors came to withdrawal too much...they could remain solvent by inflating their currency...now, this also devalued it and the market responded...so you still had to be careful not to seriously inflate your bank notes.
On a local/small scale the system would have appeared to have worked perfectly - or as perfectly as you could expect given human beings are not infallible. The problem was that, by law, no bank was allowed to branch across State lines (aside from the 1st and 2nd United States Banks).
This created a huge problem because it prevented banks from developing clearinghouses and exchanges across what would eventually become the U.S.A.. So...let's say that you live in NY and you do your banking locally (which means that you have locally issued currency). You either spend that money with someone or perhaps you decide to go wagons east...the farther you traveled from the source of issue...you found that your bank notes declined in value due to the fact that there was not an easy way to exchange them for other local currency (and your local bank is not allowed to operate outside of NY).
Another problem was that banks were forced, again by law, to hold Government bonds (State bonds), which were - for all intensive purposes - illiquid investments...no good if you and enough of your buddies want to cash in your banknotes.
...another problem was that banks were forced to hold reserves against their deposits...which you would think is good...but this actually worked against the free flow of money and in some respects added to the liquidity problem.
...I'm sure you can see the problems of the early so-called free banking system. It worked to the extent that Government didn't stick its nose into private banking. The reason for those initial regulations is easily understandable give the fact that banking and the practice of usury has never really been looked favorably upon (thank you religion for instilling that in the people).
A bank with potential liquidity problems is a bank in trouble...customers get nervous if they know that they may not be able to convert their banknotes to "cash", i.e. to gold or some other precious metal.
When more and more serious bank runs began to occur...the Government was called upon to "do something"...and well...here we are today...the details from then till now are just the piling on of more regulations.
It's interesting to note that Canada had a freer banking system than the U.S.. The only restriction was that Canadian banks were not allowed to issue bank notes in excess of their paid-in capital. Eventually this became a problem, but not until about 1908...then the Canadian Government decided that adding more laws would fix the problem...and the rest is history.
So...I mean, all in all...the 100% reserve system doesn't work in the way I think some people think it works. There was expansion of the money supply before the FED...but it actually helped ease bank runs by providing liquidity. BUT, the system worked because of supply and demand. The greater demand for a bank's banknotes, the more they could (and would) issue...up to a point. Obviously there is a plateau. You couldn't expand your money supply arbitrarily the way the FED does now.
I just don't think main issue is - as a lot of folks believe - whether or not there is something backing the currency...which is still necessary to have so that you have some kind of value represented...but it doesn't have to be gold. Just something of value that is homogeneous, divisible, a luxury, and rare. A bigger issue, I think, is that trying to suspend the law of supply and demand caused a major problem. You were suspending the right to property (and the right of those banks to create and use their property - i.e. their banknotes - as they saw fit).
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To be happy, one has to study morality and hence philosophy. Philosophy has many classes of moral conducts, so the reader still has to refine these different moral in order to happy. A person who does not read and think will obtain his morals from daily life and his childhood and teen years which will be messy and not systematic. If he study from wrong sources, it would be worse.
Well, happiness has to be learnt also. Like many things, it needs to be studied, practised and experimented.
other forms of happiness include more commonsensical answers like eating ice cream, drinking a cold water when thristy, sex, singing freely, being massaged, eating nice food and having a nice conversation with friends.
I was thinking along these lines also...because what happens if the standard upon which you try to find happiness is irrational?
...say, you find "happiness" in the torture of other people? You'd have a tough argument with such an individual using what has been provided so far as an explanation of happiness...
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If Obama gets elected I hope he hammers away at this slogan for the next 4 years. I hope that every time he raises taxes or institutes another big brother government program he claims that it is selfish to not willingly give. I want him to build his socialist nightmare state as a treatise against the self, against all reason and against real morality...
He may be the antithesis of Objectivism, but that may prove to be his greatest value to us.
Oh, it'd be helpful if he started claiming it was gods will close to the end of his term...
And with the new Ayn Rand Center in Washington, there will be champions of individual rights to oppose him
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I found one more that was too good to pass up:
"My first priority will be to reinstate the assault weapons ban as soon as I take office. Within 90 days, we will go back after kitchen table dealers, and work to end the gun show and internet sales loopholes. In the first year, I intend to work with Congress on a national no carry law, 1 gun a month purchase limits, and bans on all semi-automatic guns."
--Barack Obama, VPC Fund Raiser 2007
My friend just went and got his license with the thinking that he could buy a gun anytime after that. In NY, I guess once you have it you have it...
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Hmm interesting. Well I went googling for sources and I found an article similar to what you described. It's worth a read I think:
http://www.cfo.com/blogs/index.cfm/l_detail/12586812
It is astounding to me that people who respect themselves don't try to stand up to their accusers and state the facts when it is just so very wrong. But such is the muffling power of altruism I suppose.
Interesting. I read about it first on National Underwriter and couldn't resist.
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In my first post I referenced the Martin Act. If you don't live in NY and you are not familiar with it's regulatory environment, this should enlighten you to how things work here:
The Sword of Spitzer
Source: http://www.legalaffairs.org/issues/May-Jun...on_mayjun04.msp
A little-known law called the Martin Act gives New York's attorney general extraordinary power, yet for 75 years this Excalibur has been left to rust in its scabbard. Now, Eliot Spitzer is wielding it against the biggest players on Wall Street. Should such a powerful weapon be left in anyone's hands?
By Nicholas Thompson
FOR THREE-QUARTERS OF A CENTURY, an unspoken gentleman's agreement bound the moneymen of Wall Street and the New York attorney general's office. The AG got to use an astonishingly powerful state securities law called the Martin Act, but not against the big boys. Acceptable targets through the years included shady pharmacists, Ponzi schemes, and peddlers of fraudulent Salvador Dali lithographs.
Two years ago, Eliot Spitzer, New York's current attorney general, broke the deal. He took the Martin Act, the securities legislation that is the legal equivalent of King Arthur's Excalibur, and plunged it into the guts of Merrill Lynch. Then he turned his saber on Salomon Smith Barney and the rest of New York's investment banking industry. This past fall he speared several large players in both the hedge fund and mutual fund industries. Others worry that they will face similar fates in the remaining two years of Spitzer's present term. They should.
The purpose of the Martin Act is to arm the New York attorney general to combat financial fraud. It empowers him to subpoena any document he wants from anyone doing business in the state; to keep an investigation totally secret or to make it totally public; and to choose between filing civil or criminal charges whenever he wants. People called in for questioning during Martin Act investigations do not have a right to counsel or a right against self-incrimination. Combined, the act's powers exceed those given any regulator in any other state.
Now for the scary part: To win a case, the AG doesn't have to prove that the defendant intended to defraud anyone, that a transaction took place, or that anyone actually was defrauded. Plus, when the prosecution is over, trial lawyers can gain access to the hoards of documents that the act has churned up and use them as the basis for civil suits. "It's the legal equivalent of a weapon of mass destruction," said a lawyer at a major New York firm who represents defendants in Martin Act cases (and who didn't want his name used because he feared retribution by Spitzer). "The damage that can be done under the statute is unlimited."
Spitzer and his allies, of course, see the law the opposite way, lauding its unlimited capacity for good. Given the deep slumber of the SEC and other important financial regulators since 2000, the glaring improprieties of mutual funds and stock analysts—improprieties that disproportionately harm small, trusting investors—might not have been documented and addressed if Spitzer hadn't forcefully applied the Martin Act.
Either way, there's no question that a little-known New York law, intentionally rendered anemic when first passed in 1921, has morphed into something remarkable, helped along the way by ambitious supporters, neglectful opponents, and generous court rulings. The Martin Act has also given Spitzer the stature he needs to run for governor of New York in 2006—and perhaps, one day, something higher.
THE FIRST STATE STATUTE CRACKING DOWN ON FRAUD IN SECURITIES, or speculative investments, was passed in Kansas in 1911. It was nicknamed a "blue-sky" law after hustlers who, the story went, would sell shares of the blue sky if they could. Other states quickly followed, pushed by public concern about fraud as well as by self-interested lobbying from small banks, which worried that money which would otherwise be deposited was being put into securities.
By the end of World War I, the state that served as home to the world's financial capital decided it had to join in. Swindlers stalked Gotham's streets, fleecing the people who were investing with solo speculators and putting money into the stock market for the first time in a burst of postwar patriotic fervor. Much as when shares of Amazon.com hit the NASDAQ, newcomers were everywhere—and they quite frequently lost their bowlers.
New York's legislature was one of the last to pass a blue-sky law, letting through a deliberately enfeebled version. It gave the AG power to counter fraud once it was committed, but left that office with minimal control over who could sell securities in the first place. To the big financial companies that dominated New York politics, a registration law was a bureaucratic burden to be avoided. A simple fraud statute seemed like a good way to swat down small-time sharks and keep the field open for themselves. The weak law went into force in May 1921, bearing the name of Louis M. Martin, its sponsor in the state assembly.
New York barely made use of Martin's act for the first four years of its life, spending almost nothing on enforcement. The attorney general did try to apply it on several occasions in 1923, going after firms like the Multi-Insert Mailing Machine Corporation, which sold stock after spuriously claiming to have developed machines that addressed, folded, and handled envelopes. But he was tripped up by a clause in the Martin Act that granted automatic immunity to anyone who testified under it or even answered questions. "It is said that the Martin law has teeth. It has, but they are an ill-fitting set of false teeth," snapped New York City's district attorney Joab Banton to The New York Times.
In 1925, the law found its first aggressive user, Attorney General Albert Ottinger, who was also successful in pushing for legislation that dramatically limited the act's immunity provisions. Spitzer's forebear in many ways, Ottinger sought out high-profile fraud cases and used the Martin Act to shut down the Consolidated Stock Exchange, a lowbrow offshoot of the New York Stock Exchange. His actions riled major financiers and led to several prominent court challenges. "In this proceeding, if such it may be called, the Attorney General is . . . the complainant, the prosecuting officer and the magistrate before whom the proceeding is instituted," wrote Louis Marshall, a prominent constitutional lawyer, who led the charge against the act.
But Ottinger beat Marshall in the courts and continued his crackdown. At the end of his term, the AG summed up his political record as follows: "Hammer, hammer, hammer, at every manner and means of fraud and dishonesty, the prevention and assertion of which the Legislature has assigned to the Attorney General." Despite the popularity of Ottinger's hammering, however, he lost a close race for the governor's office in 1928 to a former assistant secretary of the Navy named Franklin Delano Roosevelt.
Ottinger left a two-part legacy for Spitzer. He'd set an example for how an AG could use the Martin Act with vigor. And the court challenges he'd faced ended up bolstering the law. The judges who heard them believed that fraud was so endemic that the law needed to be broadened. In the 1926 case People v. Federated Radio Corp., the New York Supreme Court declared proof of fraudulent intent unnecessary for prosecution under the act. Following up, in People v. F.H. Smith Co., the court gave prosecutors a practically blank check by saying that the act should "be liberally and sympathetically construed in order that its beneficial purpose may, so far as possible, be attained." Since then, courts have liberally interpreted every important term in the act—including "security," "material," "public offering," and "fraud"—and have declared that they don't have the authority to review the attorney general's discretion under the act because he is the state's chief law enforcement officer.
Despite its broad powers, the Martin Act was left dormant in the 1930s and 1940s. Then, in 1955, another hyperambitious attorney general, Jacob Javits, hurdled into office. Javits hadn't campaigned against securities fraud, but he saw a great political opportunity. He quickly assigned a lawyer named David Clurman, three years out of Columbia Law School, to rewrite the statute. Clurman decided to make the law as fierce as he could, using as his template mail-fraud statutes written by Learned Hand early in the century before he became a judge. The bluntness of Hand's laws intrigued Clurman. "They just said, 'thou shalt not commit fraud,' " he observed in a recent interview.
Clurman drafted a provision giving the attorney general the power to prosecute people criminally, in addition to civilly, and inserted clauses relieving the AG of the responsibility to prove that any buyer was actually defrauded or that any sale actually took place—allowing the AG to prosecute scams before they had any victims. Clurman also wrote in the broadest definitions of fraud he could think of. And he did his best to avoid ambiguity about the law's intent. "If I repeat myself three times in one paragraph, the court knows what I'm talking about," he said. "I'm not interested in writing well. I am interested in winning cases."
Javits didn't get to use his new weapon. Like Ottinger before him and Spitzer after, he had his eye on a higher office, and two years after becoming AG he moved on to the U.S. Senate. His successors, Louis Lefkowitz and Robert Abrams, largely left the dignitaries of Wall Street alone over terms that together spanned 36 years. With two exceptions from the '70s—Lefkowitz's investigation of financial auditors for failing to conduct surprise audits and his arrest of several American Stock Exchange traders for cooking their books—both AGs limited their focus to quirky hustlers.
A 1978 report sums up the state of the Martin Act before Spitzer. In the late 1950s, the AG's office "was concerned with uranium boiler rooms and promoters of shady Canadian mining stock," wrote Orestes Mihaly, a lead prosecutor under both Lefkowitz and Abrams. Over the years, criminal prosecutions under the Martin Act had expanded to cover "cheats and swindlers" including "the perpetrators of Ponzi schemes upon upstate New York farmers" as well as "rock festival promoters" and "commodity option boiler rooms." In the mid-1970s, Mihaly added, the AG's office was "investigating the latest in investment scams—diamonds and worm farms."
These investigations benefited the public, and often they were daringly carried out. But they used the act only as a tool to go after small-time fraud. And by the end of Abrams's term in 1993, budget cuts had severely reduced the staff of lawyers prosecuting Martin Act cases, sending the act into hibernation. Asked why he didn't use the law aggressively, Oliver Koppell, Abrams's successor, noted that no one on his staff proposed a Martin Act charge to him. He added, "I didn't know it had all these powers."
The act's long siesta helps explain its current strength. A conservative court or one aligned with Wall Street could well have blunted much of the law's edge. But few high-profile cases have come before New York's courts at times when they might have been inclined to dull the Martin Act's sharpest elements. The law's laxity about registering sellers of securities also helped. Always loath to make doing business tougher, Wall Street has had a compelling reason not to call for the Martin Act's replacement with, for example, the Uniform Securities Act, a standardized blue-sky law followed in 37 other states and jurisdictions that has higher registration standards than the Martin Act but vests much less power in the state AG.
All of this history meant that in 1998, the Martin Act lay ready and resting, waiting for the right young knight to take it into battle.
ELIOT SPITZER FIRST RAN FOR ATTORNEY GENERAL IN 1994, at age 35. He had decent qualifications: The son of a very rich real-estate tycoon, he'd excelled at Princeton and Harvard Law School and gained some prominence while working for Manhattan district attorney Robert Morgenthau. There, Spitzer ran a sting on the Gambinos, a mob family that controlled shipping in New York City's garment industry. Ingeniously, the assistant DA set up and managed his own sweatshop, which enabled him to penetrate the family and then bust it for illegally restraining trade.
But Spitzer wasn't a natural politician. "I thought that Eliot would be a professor or a mergers-and-acquisitions lawyer," said Alan Dershowitz, whom Spitzer had helped represent the accused murderer Claus von Bulow after law school. In his first race for AG, Spitzer spent millions of his family's money and campaigned on some creative ideas that now seem ahead of the curve, like stamping numbers on bullets to make them traceable. But he never got traction and showed no common touch. When asked about his favorite Beatle, for example, he mentioned Brahms. He came in fourth out of four in the Democratic primary.
Undeterred, he ran again in 1998. "He felt it was better to lose for a good office and try again if he must than to win for a lower one and rot away," said Dick Morris, a Spitzer family friend and Bill Clinton's former political adviser. Spitzer spent millions more of his family's money and ultimately won a nasty race against the incumbent Republican, Dennis Vacco. At the end, trailing in the polls, Spitzer claimed that his opponent had insulted Hispanics and, he implied, Jews as well. Ironically (it now seems), Vacco accused Spitzer of violating the Martin Act by borrowing money against an apartment building he owned without telling the tenants.
Once in office, Spitzer showed the same tactical creativity and original thinking he had shown in the sting that nailed the Gambinos. He used an obscure section of the Clean Air Act to challenge Midwestern power plants that were polluting New York's air. He sued gun manufacturers under public nuisance laws, which no state had done before. When he took on General Electric for defiling the Hudson River in 1999, he didn't accuse the company of pollution, for which the evidence was mixed. Instead, he charged GE with disrupting river traffic, a move that led the company to agree to dredge the river's most contaminated section.
Given his tenacity and cleverness, Spitzer was perfectly positioned to rediscover a little-known law that gave the AG extraordinary powers. When a securities lawyer and fellow Morgenthau alum named Eric Dinallo talked about the Martin Act during a job interview, Spitzer grasped its potential in a way that his predecessors hadn't. Not long after, Spitzer and his team demonstrated the law's force and effect when they went through the e-mails of a blowhard stock analyst at Merrill Lynch named Henry Blodget.
IN JANUARY 2001, DINALLO SENT A MEMO TO SPITZER laying out proposed priorities for the coming year. Investigating stock analysts was at the top of the list. Two months later, a Queens pediatrician named Debases Kanjilal brought a case against Merrill, arguing that following Blodget's advice about Internet stocks had led him to lose half a million dollars.
The AG's office started a Martin Act investigation in April. But it didn't crank into full gear until July, when Merrill settled the case on terms highly favorable to Kanjilal, suggesting that the company had something to hide. After that settlement Spitzer's team got in touch with Kanjilal's lawyer, Jacob Zamansky. "They really needed to be walked through the business, so I basically drew a map for them, where the bodies were buried, where the conflicts were," the lawyer said.
Early documents and interviews yielded little, but Spitzer's team kept digging and subpoenaing more information. It called in Blodget for lengthy interviews late that summer.
Under the Martin Act, any refusal by Blodget to answer a question posed in the interviews would, unless rebutted, count as proof that he had committed fraud. In addition, Blodget had no right to counsel. Spitzer let him bring a lawyer to the interviews, but the rule still had an effect. "When you are in one of these sessions, they make it clear that you don't have a right to be there and you are there at their pleasure," said a defense lawyer.
Eventually, after subpoenaing every e-mail Merrill's Internet analysts had sent since 1997, the Spitzer team found the mother lode: e-mails from Blodget and others showing that their stock recommendations were influenced by whether the companies in question had promised banking business to Merrill. At one point, in a fit of pique, Blodget had written to the head of Merrill's research department threatening to "just start calling the stocks . . . like we see them, no matter what the ancillary business consequences are."
With that smoking gun in hand, Spitzer soon had Merrill negotiating over possible settlement terms, including how the e-mails should become public and what the company could do to rebuild the wall between its analysts and its bankers. In early April 2002, though, the two sides hit an impasse. With negotiations stalled, Merrill pulled out a big weapon, dispatching former New York mayor Rudy Giuliani to lobby Spitzer. The attorney general, however, pulled out Excalibur.
The same morning that he spoke with Giuliani, Spitzer quietly sent Eric Dinallo to see a New York state supreme court justice, bearing a 38-page complaint against Merrill. With the justice's signature, the Merrill investigation would be conducted under a different section of the Martin Act, and the private negotiations would be replaced with a public investigation—to be analyzed nightly on CNBC.
By midday, to the company's utter surprise and consternation, Spitzer had put out a press release about "a shocking betrayal of trust by one of Wall Street's most trusted names." Merrill's stock price plummeted and its market value dropped $5 billion in a week. For a few anxious hours until a judge stayed his order, Merrill thought that it would have to shut down its entire division that managed assets because of a law that prohibits such activities while a company is under court order. Imagine a wrestler in a tight spot who gets the referee to tie his opponent's legs together: Like that wrestler Spitzer suddenly found himself with all the leverage. Merrill could do nothing but settle on Spitzer's terms. The deal was done within a few weeks.
With Wall Street trembling over Merrill's fate, Spitzer used the Martin Act to bring a similar public case against Salomon Smith Barney and then against the entire investment banking industry. New York's 10 biggest investment firms were forced to pay a total of $1.4 billion in fines. Spitzer next deployed the act to crack down on hedge funds. Then, reacting to a tip from an insider, he nailed the mutual fund industry for its practices of late trading and market timing, which skimmed profits from small investors while passing windfall profits to a lucky few big ones.
Spitzer's boldness has attracted great attention, and talent, to his office. "When we were prosecuting worm farms, it didn't make the front page of The Times, and law students weren't coming to us," said Assistant Attorney General Elizabeth Block, who has worked in the office since 1978. Now, "it's the attorney general and his staff of 15 lawyers going up against the whole mutual fund industry."
That energy isn't likely to dissipate. With two years left in his present term, Spitzer will probably run the Martin Act through a few more opponents.
THE PUBLIC HAS CLEARLY BENEFITED from Spitzer's merciless investigations. Future stock analysts won't act as scurrilously as Blodget and his colleagues did. Mutual funds will take better care not to siphon money from their small investors. Other hucksters no doubt have been and will be deterred by the flames that engulfed Merrill Lynch.
Just as important, Spitzer acted when Wall Street had hypnotized a number of other watchdogs, in particular the SEC. Harvey Pitt, the SEC chair when Spitzer took on Merrill, was more inclined to serve tea and cookies than subpoenas to financiers. The whistleblower who alerted the attorney general's office to the mutual fund industry scams, Noreen Harrington, says that she approached Spitzer because she didn't trust the SEC to act on her tip.
Spitzer also took a bold political risk, something few Democrats have done in recent years. "You rarely run for attorney general successfully by prosecuting the biggest corporations in your state, represented by the best law firms, with the best PR firms spinning it," said Scott Harshbarger, a former Massachusetts AG.
Spitzer does have sharp critics, particularly off the record. "He's completely reckless and he's completely ruthless. He's a pig and he'll screw you for everything he can to get publicity," said a former director at a major Wall Street corporation. The criticisms may be self-interested, but they have a point to make about Spitzer's overreach. Blodget and his ilk were a sideshow in the dot-com collapse, and their crimes were known to many. A month before Spitzer launched his Martin Act investigation, The New York Times wrote that Blodget was "following Wall Street's custom" when he gave positive ratings to the stocks of companies that chose Merrill to manage their IPOs.
Merrill was certainly in the wrong, but the AG used the Martin Act to almost put one of the nation's most important financial firms out of business for what were venial sins, not mortal ones. When Merrill's customers tried to follow Spitzer's lead by suing the company for losses suffered because of suspect advice—suits that might not have been possible without the documents Spitzer had unearthed—they found themselves tossed out of court. "The facts and circumstances," wrote U.S. District Judge Milton Pollack last July in one such case, "show beyond doubt that the plaintiffs brought their own losses upon themselves when they knowingly spun an extremely high-stakes wheel of fortune."
It's also not clear that Spitzer's fraud squad is the best way to regulate markets, and it's odd that a state-elected official has the power to bring about huge swings in the Nikkei Index, as Spitzer did in April 2002. In addition, the penalties that Spitzer has imposed in the mutual fund case don't seem to match the harms. As part of the settlements with mutual fund companies, Spitzer has demanded that the funds reduce their fees, arguing that the fee structure was inextricably linked to the crimes since small investors were charged relatively more than big ones. That was nice for investors and appealing to voters, but it was a bit incongruous. High fees had little to do with the original problem, and demanding their reduction was a bit like busting a restaurant for health-code violations and then demanding that it lower its prices.
ULTIMATELY, SPITZER MAY LEAVE AN ENTIRELY DIFFERENT LEGACY than his foremost forebear did. Albert Ottinger strengthened the Martin Act, but abandoned a promising political career after losing his bid for governor in 1928. Spitzer, on the other hand, is one of the most popular politicians in the state, thanks to the investigations that the Martin Act made possible. He won re-election in 2002 by 35 points over his Republican opponent, and he has already raised impressive sums for his next race. In the 2004 Democratic primary season, his name was floated for both vice president and U.S. attorney general.
But if Spitzer's timing is good for him, it may not be good for his chosen weapon. He unleashed the Martin Act's wrath on Wall Street at a time when conservatives control most of the country's political system. Last summer, and then again this winter, Congress tried to pass a bill that would have prevented states from settling with Wall Street on terms that differ from SEC regulations. The efforts were beaten back largely because Spitzer called out the Republicans for spending decades trumpeting state power, only to reel in the states once they had taken control of Capitol Hill. Still, expect the federal legislation to have several more lives.
Yet Spitzer is nonchalant about what could happen to the Martin Act once his term ends. At a recent speech to alumni of New York University School of Law, he admitted the potential pitfalls of allowing 50 states to regulate the international financial markets. Diminishing the states' power would be okay, he said, as long as it didn't happen in "the next three years"—a period that conveniently stretches until January 2007, when Spitzer might well have a new job in Albany. Later in the speech, he reiterated his point with striking confidence. "In three more years," he said, "I'll move on to other things."
Spitzer's victories may mark the beginning of the end for the Martin Act. It's also possible, though, that with Spitzer gone the act will return to its former quiescence. Legend has it that after King Arthur fought his final battle, he had Excalibur thrown back into the lake in which he had found it.
Nicholas Thompson is a senior editor at Legal Affairs.
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I don't think we should even give this issue any thought. Who cares what AIG does? The major problem that should be addressed by the media is: Why should AIG be bailed out? Whether they use the money for so-called "proper" purposes or whether they spend it on prostitutes is inconsequential to the underlying principle.
The problem with AIG was always a liquidity problem, not a solvency problem.
The underlying principle is: should Government be involved in private business affairs. I highlighted the issue that after the Former Chairman left, AIG went crazy trying to replace its competent management. The Attny General helped to create this problem through his power lust, and so the subtle question is: why is Government intervening into the affairs of private business? ...and does a mixed economy really work to the consumer's advantage?
My answer is: Obviously not. When you coerce management into leaving through near dictatorial powers, the end result is chaos.
But beyond that, it is even questionable as to whether they would have even needed that loan...the reason AIG changed its way of doing business can be directly attributed to the fact that Greenberg was pressured to leave by Elliot Spitzer, and that according to Greenberg, the company could have done much better without any Federal Aid.
The AIG "bailout" is a natural consequence of monkeying with free market dynamics. I don't think you were looking back far enough on this issue. The trap was set up when a competent and successful Chairman was replaced and a new ideology swept over the company (no doubt due to the fact that the Martin Act gives NY's Atty General the power to do nearly anything he wants to businesses and suffer no repercussions).
edited: for clarity
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You have no doubt heard about the attacks by the news media on insurance giant AIG over a large (almost $400,000) amount of money that was used to host a conference in Phoenix. The news media dishonestly spun facts out of context, implying that AIG was "partying on taxpayer's money" by being given a bridge loan and then using that money to pay for executives to take a vacation. Several (probably more than several) congressmen are "outraged" at this alleged example of so-called "corporate greed".
For example, U.S. Rep. Elijah Cummings, D-Md., a member of the House Oversight and Government Reform Committee, said that he was “shocked and disappointed” about the conference report.
Now for the facts:
Former American International Group Inc. Chairman Maurice Hank Greenberg was forced out of his position as Chairman under pressure from then Attny General Elliot Spitzer (we know how pro business he is).
With near dictatorial powers given to him by the Martin Act, he could basically do anything he pleased, but that is another story for another time.
After Greenberg left, AIG quote "went wild" according to the former Chairman. It went through 3 different CEOs and according to Greenberg, when asked what happened with the company, he referenced then Attny Gen. Spitzer, saying that some of the problems leading to AIG's crisis were caused:
"by an aggressive attorney general who was seeking to become governor and who tried to take down the biggest names he could find,"The former AIG Chairman went on to say that, quote,:
"A lot needs to be looked at in our justice system, or ‘injustice system"Facts about the conference:
Conferences like these are typically held for top producers in the company, partially as a reward for their productive efforts (as is commonly done in the industry). These producers range from employees of the company to independent financial advisors who write business with AIG. Most of the people at these conferences are independent advisors. This particular conference was designed to court potential financial planners to write business for the company and was planned in advance of the economic crisis.
...additionally, 93% of the bill was paid for by outside sponsors and the attendees themselves. The final analysis of expenditures showed that all but $23,000 was paid for by outside sponsors and the financial planners that were in attendance. The news media chose to ignore that fact, and an ABC affiliate, KNXV, produced a segment to deliberately attack AIG for it's "greed" and "lavish expenditures" at the alleged expense of American taxpayers.
Since independent financial planners were responsible for roughly $200 million of business being brought to AIG this year, it seems nonsensical to criticize the company for doling out $23,000 to attract more planners to write business for the company. According to AIG chairman Edward Liddy, conferences like these are necessary in order to keep communication open, attract new advisors, and write more business.
The bottom line, more business means that the company can repay the taxpayers for borrowing all of that money. Perhaps the news media simply doesn't understand.
reason for edit: Keyboard malfunction and spelling errors. To clarify certain facts
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Everyone needs healthcare! it's a basic right!
Actually I'm waiting for the Government to fully socialize the agriculture and food industry. After all we need to eat, so it should be a right. I brought this up to a liberal once, and they thought it was "ridiculous". HA! It's insane. How does one NOT see the similarities in this line of thinking?!!?
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I have no one to blame than George Bush. Now I truly understand why Leonard Peikoff said he would be apocalyptically bad. He would increase spending and run up a deficit in the name of capitalism and tarnish it's name for the next several years.
George Bush calling any of his policies "Capitalistic" is like looking at a duck and calling it a horse.
As soon as the Socialistic programs begin, I think it would be an awesome time for the ARI to mount an offensive. You could even give it a catchy name like "Restore the Republic" (like the Ron Pual campaign did, except you could make it principled this time and actually EXPLICITLY reject BOTH political parties) ...that'd probably be good about 4 years from now.
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I still don't like the connotations of "ownership." Even if it is voluntary.
I once read a book titled "open marriage"...it's not what the title sounds like. The main theme was that you belong with your partner, not to them. In essence, how to have a relationship and also retain your individuality.
http://www.amazon.com/Open-Marriage-Life-S...s/dp/087131438X
Low Cost Gasoline
in Productivity
Posted
Is this another one of those perpetual motion/infinite energy scam thingies? I thought the algae to gas would be cool, but right now it is way too expensive at an estimated $20/gallon. Still...I was intrigued at the idea of algae being made into gasoline and the long-term potential of really cheap gas. I didn't really pay attention to the carbon-neutral stuff, though I realize the site reeks of ecology/environmentalism ideology.
I heard in an interview once with Rand conducted by Tom Snyder...she was talking about how the Arabs stole U.S. technology. I never did understand the details...of course, this interview was in the 70's...does anyone know the details of how this came about. Obviously at some point these nations nationalized the oil industry and OPEC was formed...maybe we should just take it back if it was stolen.
...which reminds me, I was watching a feature on 60 minutes on Sunday about Saudi Arabia having so much more oil to drill for that it's ridiculous. If that land was really ours, we'd be rich.