The Audit

  1. February 3, 2012 06:44 PM

    Audit Notes: Minimum Wage and the Recession, Facebook’s Numbers, Most Powerless

    By Ryan Chittum

    The Wall Street Journal runs an editorial today criticizing Mitt Romney for his support for increasing the minimum wage and indexing it to inflation.

    Few policies are as destructive as the minimum wage at keeping the young and least skilled out of the job market. By setting an arbitrary wage floor, politicians make it impossible for businesses to hire people for many entry-level positions. The jobs simply disappear.

    In 2007 the Pelosi Congress passed a minimum-wage increase in three stages that coincided with the recession. The jobless rate for teenagers has since exploded to 23.1% from under 15%, and for minorities to 15.8% from close to 9%. For black teenagers, the jobless rate is still an incredible 39.6%.

    This is a devious one.

    The Journal's not so brazen as to say that the jump in unemployment for these groups was entirely due to the minimum-wage increase (signed by President Bush, it should be noted). There was that whole financial crisis thing after all. So it says it "coincided with the recession." And thus it gets to imply both that the minimum wage increase caused a good chunk of the unemployment and that it helped cause the recession—without quite saying that.

    Hey, they're good at what they do.

    (h/t Bill Grueskin)

    — Reuters looks at the skeptical case on Facebook's stock. But it makes an apples to oranges comparison between how the market values Facebook's and Microsoft's earnings streams:

    "We had some clients call and once we step them through the numbers, they sober up," he said. "The valuation is 100 times earnings in a stock market that is trading at 12."

    "At the end of the day, if you have a small amount of money that you are in a position to lose a chunk of it and you want to speculate on Facebook, go ahead," he added. "But don't use money that you really need to save to do it. I would put it in Microsoft, which is dirt cheap right now."

    To be sure, most technology analysts would argue that Facebook's growth potential far exceeds that of Microsoft Corp, whose stock has largely traded between $20 and $30 in the past decade.

    That Microsoft's stock price has traded between $20 and $30 doesn't tell us much of anything, particularly about its valuation. If its earnings went down during that time but its stock stayed the same, say, then its multiple would actually go up. It would be better to tell us the range of its price-to-earnings ratio. Reuters gets around to telling us that Microsoft's P/E is 11, but it's down at the bottom of the story.

    — This is three weeks old, but worth a read.

    The Village Voice tired of obnoxious power lists in New York, ran a cover story on the "100 Most Powerless New Yorkers."

    There are some frivolous ones here, like Howard Stern and Tina Brown, thrown into keep people reading, but most are pretty good. Here are a few:

    10. Food-delivery people

    Not only is a food-delivery person (typically a Chinese or Hispanic immigrant) usually murdered every year, but also far more are killed in bicycle accidents. Moving through the city while carrying large sums of cash, they are easy targets for theft and assault. Because many are undocumented, their assailants think they're too powerless to go to the authorities...

    14. Mary Lee Ward, an 82-year-old being evicted in Bed-Stuy

    "Ms. Ward," as she's affectionately known in Bed-Stuy, received a predatory loan in 1996 of $10,000. Despite never receiving the money (and the broker losing his license and his firm being shut down by the state for predatory practices), Ward's loan was considered delinquent, was bundled and repackaged multiple times, and resulted in her home being sold at auction last year. She has only evaded being kicked out because of Organizing for Occupation's eviction blockades around her house, which started in August. Almost as powerless is Shameem Chowdury, who bought Ward's house at auction in 2008. Because Wells Fargo, who sold the home to him, couldn't provide the actual deed, he might not legally be the owner of the house he paid hundreds of thousands of dollars for...

    94. Ex-cons

    Despite Mayor Bloomberg's "Young Men's Initiative," few men (and they're mostly men) who spend time on Rikers Island will ever get jobs, especially with such high unemployment. Three-quarters of all ex-cons will go back to jail.


  2. February 3, 2012 02:41 PM

    NYT With More on the SEC’s Soft Touch With Big Banks

    By Ryan Chittum

    The New York Times has an excellent investigation today that shows in a new light how the SEC lets Wall Street off the hook despite repeated fraud.

    Edward Wyatt reports that the SEC has given banks waivers 350 times in the last ten years that allow it to avoid "the full force of the law" supposed to govern what happens when laws are broken—penalties that are "specifically meant to apply to fraud cases."

    JPMorganChase, for example, has settled six fraud cases in the last 13 years, including one with a $228 million settlement last summer, but it has obtained at least 22 waivers, in part by arguing that it has “a strong record of compliance with securities laws.” Bank of America and Merrill Lynch, which merged in 2009, have settled 15 fraud cases and received at least 39 waivers.

    What are these waivers? Exemptions that allow banks to continue to tap capital markets without delay (and government approval), to manage mutual funds, and to help small firms raise capital. They also continue to get certain protections from class-action lawsuits.

    To put this coddling in context, recall Wyatt's November story tallying how often the SEC let banks promise never again to violate a law they'd broken, break the law again, and then promise again never to break the law again. It turned out there were fifty-one recidivist cases over the past decade and a half.

    So the question becomes: What does a bank have to do to not get a waiver?

    The agency usually revokes the privileges when a case involves false or misleading statements about a company’s own business. It does not do so when the commission has charged a Wall Street firm with lying about, say, a specific mortgage security that it created and is selling to investors, a charge Goldman Sachs settled in 2010. Different parts of the company — corporate officers versus a sales force, for example — are responsible for different types of statements, officials say.

    Of course, if you have one rogue broker or something, that's one thing. But repeated violations alone are an indication that something's wrong with a company's culture, but when it's pervasive wrongdoing, as we've seen in the housing bubble, and the consequences of that wrongdoing are so enormous, that's something altogether different.

    How it plays out is that lying to yourself is much worse than lying to others, in the eyes of the SEC. The logic is faulty, as a Times source points out:

    JPMorgan received three waivers related to that case for privileges that it otherwise would have lost. But the S.E.C. said the company’s fraudulent actions didn’t involve misleading investors about JPMorgan’s business.

    “That distinction doesn’t do it for me,” said Richard W. Painter, a corporate law professor at the University of Minnesota and the co-author of a casebook on securities litigation and enforcement. “If a company has trouble telling the truth to investors in one batch of securities it is underwriting, I would not have confidence that it would tell the truth to investors about its own securities.”

    Good reporting.

  3. February 3, 2012 11:15 AM

    NYT Paywall Datapoints of the Day

    By Felix Salmon

    Ken Doctor has a very smart and interesting take on the news that the NYT now has 390,000 paying digital subscribers — plus another 16,000 at the Boston Globe. It’s unambiguously good news, on many fronts.

    First, and most importantly, digital ad revenues went up by 10% in the area of the business with the paywall, while plunging by 26% at About Group, which doesn’t have one. The big worry about the paywall was always that it would eat into ad revenues, and that really doesn’t seem to have happened. Of course, it’s impossible to know what the NYT’s digital ad revenues would have done sans paywall. But my gut feeling is that it’s a net positive: it allows for much more targeted advertising and therefore higher ad rates.

    What’s more, the NYT still has massive reach outside the paywall: it has at least an order of magnitude more unique visitors each month than it has paying subscribers. The NYT can still sell those other visitors just as it always could; they certainly haven’t become less valuable since the paywall went up.

    The only possible cloud in this picture is in overall traffic growth: the NYT doesn’t give pageview numbers, but sites like Quantcast and Compete say that they see no real growth in traffic to nytimes.com, and possibly a small decline. Again, the counterfactual is impossible to know: would traffic have been bigger had the paywall not been in place? I don’t think that the paywall has reduced traffic very much, but I do think that the amount of time and money and editorial effort which went in to constructing the paywall might well have found its way into other innovations, had the paywall not happened, which would have made the NYT an even better and more popular product.

    That said, the paywall has probably paid for itself already, and with luck some of the extra cashflow it throws off will be reinvested in more consumer-friendly innovations.

    The other big news today is this:

    Churn is less with digital than print customers: Skeptics opined that people might sign up, but then flee after sampling the paid digital product. The opposite appears true: Smurl says digital churn is less than print churn.

    I didn’t expect this, but I believe it, and it’s really great for the NYT. It’s easy to cancel a NYT subscription, but by the same token it’s easy to keep one, too. And it seems that once you’ve taken the plunge and started paying for the NYT, you keep on paying — even more than with a print newspaper.

    The result is that the NYT’s digital subscribers are a bit like a bank’s depositor base: although in theory they could leave at any time, in practice they’re an incredibly stable funding source. Much more stable, to be sure, than any advertiser.

    But while I’m happy about this state of affairs, I still don’t really understand it. Here’s Doctor, again:

    It took about 12 seconds for Times’ readers to figure out the new subscription math, when the company when digital-paid last year. When they did the math and saw they could get the four-pound Sunday paper and “all-digital-access” for $60 less than “all-digital-access” by itself, they took the newsprint. Which stabilized Sunday sales, and the Sunday ad base. Then the Times was able to announce a near-historic fact in October: Sunday home delivery subscriptions had actually increased year-over-year, a positive point in an industry used to parsing negatives. Now, Sunday is emerging a key point of strategic planning.

    This is great news for the Sunday newspaper, which is highly profitable for the NYT. But it also raises the obvious question: why are 390,000 NYT readers eschewing a Sunday paper they could get for less than nothing? Some are IHT subscribers who don’t have that option; others are naturally peripatetic. And the cheapest digital subscription is actually still cheaper than the Sunday-only delivery.

    It seemed to me, when I entered into my ill-fated bet with John Gapper, that NYT readers would go for the free access bundled with the paper, rather than plump for digital-only access. But increasingly it seems that readers actively dislike having to manage a physical paper, and are willing to pay for making the whole experience virtual.

    If that’s the case, then the least the NYT can do is to continue to invest in its iPad app. Right now the website is still superior to the app, except for offline reading. The app desperately needs search, and it needs to retain hyperlinks from the original articles, and it needs to somehow build in the sense of serendipity and of relative importance which newspaper readers love so much. It’s hard to tell what’s important, in the app, once you move off the front page. And it’s hard to have your eye caught by a great story you didn’t know you wanted to read. But those things will come, I’m sure. If only because there’s now a very healthy income stream — Doctor estimates it at more than $80 million per year — which can pay to help develop them.

  4. February 3, 2012 12:29 AM

    Audit Notes: CDO Charges, Facebook’s Board, Deficits

    By Ryan Chittum

    Sure enough, the Justice Department charged former Credit Suisse CDO executive Kareem Serageldin with fraud for allegedly artificially inflating CDO values. Two of his underlings pleaded guilty and say Serageldin orchestrated the scheme.

    The NYT:

    The government’s case against the former Credit Suisse traders depicts a brazen scheme to artificially increase the price of bonds on their books to create fictitious profits just as the housing market was seizing up.

    In one instance, the team, facing an inquiry from Credit Suisse’s internal controls group in August 2007, tried to justify their mortgage bond portfolio’s inflated value by seeking “independent” marks from other banks’ trading desks, according to the government.

    After learning that the marks at Deutsche Bank and Barclays Capital were substantially lower than their own marks, they looked elsewhere.

    Mr. Siddiqui, the junior trader, subsequently secured sham “independent” marks from a friend who worked at a small investment bank.

    — Bloomberg News's Carol Hymowitz makes a good catch, noting that while 58 percent of Facebook's users are women, 0 percent of its board members are:

    The disconnect puts the social-media company at odds with others in the industry that have at least one female director, including LinkedIn Corp. and Google Inc., and from most big public companies in the U.S. Just 11.3 percent of the Fortune 500 had male-only boards last year, according to Catalyst, a New York-based nonprofit that researches women and business issues.

    There's usually ten or twelve people on a board, and we've still got fifty-six major companies that can't find a single spot for a woman, much less multiple spots?

    A Catalyst survey of Fortune 500 companies found that those with three or more female directors outperformed those with fewer between 2005 and 2009, achieving on average 43 percent better return on equity. As Facebook prepares to raise $5 billion in an initial public offering, the composition of its board shows its business strategy is faulty, said Susan Stautberg, co-founder of New York-based Women Corporate Directors, which promotes female board membership.

    “It doesn’t make sense for a company that claims to be so forward looking to not have any women directors,” she said. “If they just have an old boy’s network in the boardroom, they won’t have access to diverse ideas and strategies.”

    Facebook, at least, does have a woman in a prominent executive position: COO Sheryl Sandberg.

    Meantime, this Bloomberg headline oversells the story on how much Facebook CEO Mark Zuckerberg will be worth once company goes public:

    Zuckerberg Tops Google Founders With $28.4 Billion Facebook Haul

    He hasn't gotten the haul yet, and that's the high end of the IPO range, as Bloomberg points out in the lede. At the low end, his haul would be $21.3 billion (on paper). The headline implies the valuation is already set. It's not.

    — The Atlantic's Derek Thompson cobbles together the most important charts from a new Congressional Budget Office report on the economic outlook for the next decade.

    This one shows what would happened if Congress followed current law:

    The CBO's "baseline projection" sounds like a sober prediction. It's not. It's a fantasy. For example, the baseline projects that the Bush tax cuts are will expire next year (not!). For a dose of reality, the CBO also calculates spending and taxing under an "alternative scenario." This is the scenario to pay attention to. It anticipates that Congress will delay both tax increases and spending cuts currently scheduled in the law -- a very reasonable assumption.

    What if Congress sat on its hands and let current law rule? The deficit would fall by 60 percent to $500 billion in 2013, and it would stabilize by the middle of the decade. But nobody wants that to happen. Conservatives don't want to raise taxes, and liberals don't want to soak up stimulus by $500 billion in one year. So we'll keep having high deficits through the decade.

  5. February 2, 2012 07:21 PM

    The WSJ’s Sony Story Is a Page-One Dud

    By Ryan Chittum

    News that Sony's board has picked a new CEO gets page-one play in The Wall Street Journal, apparently because Kazuo Hirai gave the paper an exclusive interview.

    But the story is weak, almost entirely from Hirai's and the company's perspective, and it probably should have been stuck somewhere inside the paper. There's not even much news value here, much less real insight into the company.

    For one, Sony is hardly the important company it once was. Its shares have cratered 88 percent from their peak in 2000 and the company's market value is just north of $17 billion, a bit more than maternity retailer Mothercare PLC and a bit less than health-care REIT HCP Inc.

    Perhaps that's why the Journal hypes the headline:

    New Sony Chief Executive Reveals Fast-Forward Plans

    Hirai does nothing like that, alas. He doesn't reveal anything at all, really. The most interesting thing he says is "Holy shit" in response to a question on how messed up one divison was.

    The WSJ's first four paragraphs tell us that "the leadership change comes at a critical juncture," that Hirai "promises to forge a new path," and that he "wants to cut costs and shake up the corporate structure."

    That's great and all, but those stock phrases could apply to just about any change of leadership. Rare is the new CEO who comes aboard talking about "stay the course."

    There's some good color here:

    At ease in both English and Japanese, Mr. Hirai peppers his conversations with equal doses of "dude" and corporate jargon: It is "important to right-size the business"...

    In his first job at CBS/Sony Inc., a now defunct music joint venture between the U.S. network and Sony, he served as a translator for such bands as the Beastie Boys and Journey during their visits to Japan.

    And there's some reporting on what Hirai has done as a Sony executive.

    But the Journal doesn't quote or paraphrase anyone besides Hirai, his deputy, and the CEO he's replacing, which makes the story awfully one-dimensional. It feels like we're missing something, and we surely are.

    At least the Journal talked to somebody, though. The New York Times doesn't quote anyone beyond Sony's statement, but it puts its story below the fold on B1 (the Financial Times only paraphrases analysts in its brief story, but mercifully sticks it inside the second section).

    It's true that Sony's board only voted on Wednesday to pick Hirai as CEO, but Hirai's selection wasn't a surprise and it isn't even really news.

    The Japanese press reported it a month ago and it was picked up here. The Financial Times wrote that he was the next CEO last week. The Journal itself wrote last March that it looked like Hirai would be the next CEO.

    That was plenty of time for the Journal and the Times to get some quotes from somebody outside Hirai's inner circle. Bloomberg did it.


  6. February 1, 2012 06:41 PM

    The Old-School Value of Facebook

    By Ryan Chittum

    The New York Times's curtain-raiser on the Facebook IPO this morning asks, "Personal Data’s Value? Facebook Is Set to Find Out."

    But is that really what Facebook is set to find out? The Times says about all this private data: "It is a siren to advertisers hoping to leverage that information to match their ads with the right audience."

    You would think so.

    But perhaps there's a more basic and old-media explanation for why Facebook is expected to debut at a $75 billion to $100 billion valuation: It's a fast-growing company with lots of eyeballs that already make the firm tons of cash, even if it's curious why they don't make it more.

    Facebook made a billion-dollar profit last year on $3.7 billion in revenue, which jumped 88 percent from 2010. It has 845 million monthly users, up 39 percent from 2010. And no wonder, with a business like this:

    Facebook has deftly kept more and more users on its site for hours every day. Its users can stream music, read the news, play virtual games, check horoscopes or upload family pictures — all without leaving Facebook’s orbit. They reveal to the company not only their names (Facebook prohibits pseudonyms) and hometowns, but also their friends and family members and their tastes on everything from pop music to politics.

    Facebook offers advertisers a giant basket of information so they can find precisely the audience they covet: a Boston woman who posts that she is “engaged” may be offered an ad for a wedding photographer on her Facebook page, while a Bombay bride-to-be might see ads for wedding saris. Similarly, every press of a “like” button on Facebook signals a consumer’s preferences and shapes the ads that are shown. The Facebook Connect service allows users to log into millions of sites using their Facebook username and password — and it can report back about their activity on those sites, amassing even more data for Facebook’s trove.

    It certainly doesn't seem that Facebook's hoard of private data is making its ad space worth more than others'. Indeed there's another way to look at this: Why does Facebook makes so little money off each of its users?

    That $3.7 billion in revenue last year comes to about $4.38 for every user of the service, or a bit more than a penny per day. You can look at this a couple of ways: One, it's so low that the company has got a lot of upside. Two, why isn't it already much higher?

    After all, old-school media companies like newspapers, after all their woes, still take in hundreds of dollars in ads per reader per year, with relatively primitive data. More to the point, the newspaper industry takes in more than ten times the ad revenue per reader online that Facebook does (I'm talking about the amount of revenue of all newspaper sites combined from an average single reader).

    Now, granted, I'm using Facebook's average global numbers. A user in Uruguay is presumably worth far less in ad revenue than one in Utah. Facebook says 44 percent of its revenue came from outside the U.S. That would imply roughly $1.77 billion of its ad revenue came from the U.S. Roughly 150 million to 160 million Americans (the company combines U.S. and Canada numbers) use Facebook every month. That works out to about $11.80 in ad revenue per user per year. Facebook surely has far more data on its users than newspaper industry does and they click many more of its pages and spend more time on its site than they do for the newspaper industry combined. So why aren't advertisers paying more for its eyeballs and data? I wish the Times had asked this.

    I'd say much of this is because Facebook is still a young business figuring out how to sell ads and figuring it how aggressive it can get without ticking off users.

    But it's worth noting that the rate of Facebook's ad revenue growth is slowing significantly. Facebook's fourth-quarter ad revenue grew 44 percent from a year ago. Impressive, yes, but much slower than the growth rates of the third quarter (77 percent), second quarter (83 percent), and first quarter (98 percent).

    You expect growth rates to slow down as a company matures, but that fourth quarter number is a pretty big slowdown in growth. That comes even though Facebook is still growing its user base, implying that the growth of ad revenue per user is much lower even than that 44 percent (nd because it's so huge, user base's growth rate will have to decline).

    At base, what investors are paying for is something very old-fashioned for a media business: Eyeballs—and lots of them.

  7. February 1, 2012 01:30 AM

    Audit Notes: Finally, Fraud Charges; Gee Whiz Wired; Freddie

    By Ryan Chittum

    The Wall Street Journal reports, and as far as I can tell, scoops that the Justice Department is preparing to file criminal charges against mortgage-bond traders at Credit Suisse for fraud. The WSJ says two traders will plead guilty, which would be the first such convictions of the crisis.

    That's a big deal, even if I suppose we shouldn't be surprised that, as Tom Adams notes, the charges are for defrauding their own bank and its shareholders. It's also worth noting that it took nearly four years for Justice to get around to filing its case despite serious red flags back then:

    The planned Credit Suisse charges involve alleged activity in February 2008, a month before Bear Stearns collapsed. That is when Credit Suisse suspended four traders in connection with a $2.85 billion overvaluation of asset-backed securities. The dismissal of the traders came as the Swiss-based bank said it would take write-downs of $2.85 billion, shaving $1 billion from its first-quarter earnings that year.

    The Journal says it's not known who will be charged. When I flagged this story way back in Ye Olde Opening Bell in February 2008, the Financial Times had reported that the bank's chief of collateralized debt obligations Kareem Serageldin was one of the people suspended by the bank at the time.

    The Journal says more is on the way:

    In recent months, federal prosecutors and regulators have stepped up their scrutiny of the area and are preparing additional cases, people familiar with that effort say.

    What's taken so long?

    — Wired goes long on something called plasma gasification, which turns landfill garbage into energy, reducing the space needed for waste, while creating a new energy source.

    Problem is, as Wired is wont to do when covering novel technologies like this, there's a bit too much "gee whiz" and not enough "to be sure." The story tracks a company that thinks it may invented a process that makes plasma gasification viable on a mass scale.

    This graph is stuck down toward the bottom (emphasis mine):

    The actual plant built by S4—a wholly owned subsidiary of InEnTec—is still so new that it remains to be seen whether the quality and quantity of Surma’s syngas matches the predictions and test data gathered so far. “The goal is to take waste and produce a product that is used for energy or for some other process,” says Tom Reardon, a vice president with the waste consultancy Gershman, Brickner & Bratton. “They’ve proven they can produce a syngas. But from it, can they produce the fuel they’re supposed to?”

    You can write stories about startups and new technologies, of course, and this is mostly a good one. But this is kind of a giant "to be sure" to bury.

    — In comments over at Felix Salmon's blog at Reuters, ProPublica's Jesse Eisinger responds to criticism of his and Chris Arnold's report thatFreddie Mac is placing multibillion-dollar bets that its homeowners won't be able to refinance their mortgages.

    First, though some bloggers see nothing wrong with these trades, the FHFA did. They had them stopped. And there is a lot we still don’t know from the agency’s statement. Why did the agency stop the trades? What were its concerns about Freddie’s risk management? In all the critiques, we have seen little engagement with this FHFA statement, which essentially confirms our story, while saying that Freddie had an even greater amount of inverse floaters than we had reported.

    Several bloggers, even the critics, have also agreed with the central premise of the story: That Freddie (like Fannie) has an enormous conflict of interest between helping homeowners and maintaining the value of its investment portfolios. With these trades, we wrote, Freddie exacerbated that conflict.

    I liked the story but wondered whether Freddie's position was a hedge. Eisinger argues that it probably wasn't:

    As far as the argument that perhaps these inverse floaters were used to hedge other risks in Freddie’s portfolio, bond traders we spoke with say that Freddie could have easily bought options or swaptions to hedge its prepayment and/or interest rate risk. Entering into inverse floaters as a hedge - or to offset a hedge - seemed to these traders to be cumbersome and expensive for Freddie. One said comparing inverse floaters to hedging tools is not just apples and oranges - it’s more like apples and cars. They just have nothing to do with each other.
  8. January 31, 2012 07:14 PM

    Bloomberg’s Big Miss in Silicon Valley Hiring Story

    An analysis forgets mergers and acquisitions

    By Ryan Chittum

    Bloomberg News reports on the hiring spree in Silicon Valley, possible evidence of "Web Bubble 2.0."

    But it makes some big mistakes that undermine its the story's credibility thesis.*

    Bloomberg says that about half of $100 million market-cap companies increased their workforces by more than 50 percent over a two-year span:

    Among U.S. technology companies with a market value of more than $100 million, almost 50 increased employment by more than half in the most recently reported two-year period, according to data compiled by Bloomberg. Some small and mid-size businesses boosted payrolls by almost fivefold, underscoring the resilient demand for Internet services, software and electronics.

    It's interesting, but all by itself it doesn't tell us a whole lot. Wouldn't we expect growth companies to have volatile employment figures? Are these numbers different now from the previous two-year period? Were these really all hires or were they added in deals?

    The latter is the big gaffe here: Bloomberg doesn't take into account the effects of mergers and acquisitions. It counts jobs added by a company because of deals as new hires. But these aren't new jobs. They're just consolidated jobs.

    These paragraphs, for instance, are a combo of misleading and false information:

    Web.com Group Inc. (WWWW), a Jacksonville, Florida-based provider of website services to small businesses, grew the most on the list in percentage terms. It has 1,148 employees, according to its most recent annual report, a 380 percent gain from two years earlier.

    Silicon Graphics International Inc. ranked second, increasing its employment 372 percent to 1,500, followed by Kit Digital Inc. at 319 percent and Riverbed Technology Inc. (RVBD) at 208 percent. Apple, which started with a larger employee base, grew 76 percent. That amounted to 26,100 new jobs.

    All of these companies made major acquisitions in the last couple of years. Web.com bought Register.com in 2010, nearly doubling the company's revenues. Web.com also doubled its market cap by buying Network Solutions in October, adding hundreds of employees. These aren't new jobs created (lots were cut, actually), just jobs newly under the same roof.

    Moreover, Bloomberg is imprecise in telling us what timeframe it's examining. It says the numbers are from "the most recently reported two-year period" and "the past two years." I don't think there is such a thing as "the most recently reported two-year period." I do know what the "past two years" means, and it's not Bloomberg's meaning.

    Bloomberg is apparently looking at the past two annual reports. I know that only because I pulled Silicon Graphics's annual reports to try to back into Bloomberg's numbers—something readers obviously shouldn't have to do. SGI reported it had 318 employees on January 3, 2009 and 1,500 employees on June 24, 2011, which gets you the 372 percent gain Bloomberg tallies.

    But again, this shows how Bloomberg's story is misleading. This number is just wrong. Silicon Graphics merged with Rackable, which bought it out of bankruptcy and took its name, in April 2009. The original Silicon Graphics already had 1,200 employees. Rackable already had 300 at the time.

    In reality, Bloomberg's reported 372 percent jobs gain at SGI is actually 0 percent, and it's probably negative, since Silicon Graphics has also made several other acquisitions during that span, including SGI Japan, which added 272 employees to the company.

    Kit Digital's 319 percent gain is also wildly inflated. Here's a list of that firm's 2009-2010 acquisitions: Narrowstep, Benchmark Broadcast Systems, Nunet, The Feedroom, Multicast Media, Megahertz Broadcast Systems, Accela Communications, and Brickbox Digital Media. These companies had at least 500 employees between them, according to the companies' press releases and prospectuses, and Kit has 720 workers, according to its August 2011 annual report. Kit had 172 employees as of April 1, 2009, which means it has added fewer than 30 net jobs. That would be roughly 4 percent, not 319 percent—and that's assuming I haven't missed any acquisitions.

    Similarly, Riverbed Technology has made at least three acquisitions in Bloomberg's two-year span.

    None of this is mentioned in Bloomberg's story (though it does note the effect of Intel's deals on its employee count), and that undermines the credibility of the whole piece.

    * The faulty anecdotes undermine the credibility of the story's argument, not Bloomberg's credibility. I've changed the second paragraph to better reflect what I meant.

  9. January 30, 2012 07:56 PM

    Audit Notes: Data Pool 3, The UK Prints, Copyright

    By Ryan Chittum

    Scotland Yard arrested four top current and former Sun journalists and a cop. The Guardian's Nick Davies gives us the context and says it's a major development:

    And technicians have retrieved an enormous reservoir of material from News International's central computer servers, including one particularly vast collection that may yet prove to be the stick that breaks the media mogul's back. It is known as Data Pool 3.

    It contains several hundred million emails sent and received over the years by employees of the News of the World - and of the three other Murdoch titles. Data Pool 3 is so big that the police are not even attempting to read every message. Instead, there are two teams searching it for key words: a detective sergeant with five detective constables from Scotland Yard working secretly on criminal leads; and 32 civilians working for the Management and Standards Committee, providing information for the civil actions brought by public figures and for the Leveson inquiry and passing relevant material to police.

    For News International, Data Pool 3 is a nightmare. Firstly, no one know what is in there. All they can do is wait and see how bad it gets...

    Third - and most nightmarish - Data Pool 3 could yield evidence of attempts to destroy evidence the high court and police were seeking. Data Pool 3 itself was apparently deliberately deleted from News International's servers.

    — Bloomberg View's Mark Whitehouse replies to Paul Krugman's column on the failure of British austerity:

    That doesn't, however, mean the U.K.'s austerity plan is a failure.

    True, the U.K. economy shrank in the fourth quarter of 2011, and by at least one measure -- change in real gross domestic product since the recession began -- Britain is in worse shape than it was in the wake of the Great Depression.

    But by another measure -- the cost of insuring sovereign debt against default -- Britain is doing a lot better than other European nations that didn’t implement similarly ambitious deficit-reducing measures. The cost of insuring U.K. government debt currently stands at about 80 basis points (meaning 80,000 pounds a year to insure 10 million pounds of UK government debt for five years). By contrast, the same insurance on Italian and French debt costs 400 basis points and 165 basis points, respectively.

    But Britain prints its own money and so is far less likely to default on its debt (which is what triggers a CDS event) than France and Italy, which don't and are tethered to the euro, which is dominated by a country with an inflation phobia.

    A better comparison would be the U.S., which also prints its own money. In this chart, the U.S. is the orange and the U.K. is the green:

    — Paul Carr has a fun piece noticing how the tech community likes copyright when it's their copyright. One tech firm swiped some software code from another one and sparked outrage amongst the info-wants-to-be-free set:

    Do a quick search on Twitter for Curebit and behold at the self-righteous rage at the original crime and the extremely grudging acceptance of the inevitable apology. The last time we saw this kind of outpouring of rage amongst tech people was when — uh — the government tried to clamp down on copyright theft.

    SOPA was a bad law, and good riddance to it. But consider the tenor of the conversation around Hollywood, cable TV and intellectual property in general right now. The prevailing view, outside of Hollywood, seems to be that IP creators need to accept that copying is here to stay and that criminalising a “victimless” activity is stupid. Make it easy for us to pay for stuff and we won’t have to steal it.

    And yet when the victim isn’t a big evil Hollywood mogul (or one of the tens of thousands of people who work for him) but one of our own… well, then IP thieves should be dragged through the streets until they tearfully apologise. What’s the difference?


  10. January 30, 2012 04:34 PM

    ProPublica and NPR on Freddie Mac’s Conflicts

    By Ryan Chittum

    Why haven't Freddie Mac and Fannie Mae been much more aggressive about refinancing the mortgages they hold?

    That's a $50 billion question. ProPublica and NPR have a $3.4 billion possible answer.

    Jesse Eisinger and Chris Arnold report that Freddie Mac has placed a huge bet that homeowners in its loans won't be able to refinance their mortgages. Around the same time the bulk of the bets were being placed, the company made it harder for homeowners to refinance their mortgages, something even the Federal Reserve criticized as "difficult to justify."

    That raises, yet again, the conflicts at the heart of the public-(formerly) private hybrids:

    But the trades, uncovered for the first time in an investigation by ProPublica and NPR, give Freddie a powerful incentive to do the opposite, highlighting a conflict of interest at the heart of the company. In addition to being an instrument of government policy dedicated to making home loans more accessible, Freddie also has giant investment portfolios and could lose substantial amounts of money if too many borrowers refinance.

    That's the big social conflict. The company is supposed to make mortgages more affordable, but if everybody refinances it will lose lots of money, which means taxpayers will eat the losses.

    There's another potential conflict here too: Freddie's traders made big bets on an outcome (less refinancing) that other Freddie executives were about to make more likely:

    Freddie began increasing these bets dramatically in late 2010, the same time that the company was making it harder for homeowners to get out of such high-interest mortgages.

    Freddie insists that the traders who placed the $3.4 billion in bets are separated by a Chinese wall from the folks at Freddie who decided to make refinancing less likely, but surely it's worth asking whether the traders knew what was coming down the pike (to be sure, it appears most of the bets were placed after the new refinancing rules came about).

    Now, perhaps this "bet against American homeowners," as ProPublica calls it, is just a run-of-the-mill hedge used by Freddie to balance its risk portfolio. Freddie doesn't help itself by refusing to comment on the issue, while Eisinger and Arnold report that the trades increased the portfolio's risk.

    But it doesn't look good.

  11. January 27, 2012 06:14 PM

    Audit Notes: Fukayama on the Crisis, WSJ on Exec Pay, Nonprofit News

    By Ryan Chittum

    The Browser has a great interview with Francis Fukayama on his five favorite financial-crisis books.

    Here he is on whether companies like Goldman Sachs were really capable of committing systematic fraud:

    It depends what you mean by systematic. Lloyd Blankfein doesn’t get up in the morning and say, “OK. How are we going to defraud people today?” but I do think the relationship of these banks to social rules is fairly dodgy. Rules are viewed as potential obstacles that you try to get around if that maximises your profit. This is a deeper social issue that I think has to do with the economisation of a lot of thinking. Economists have this model of rational utility maximisation - that social benefit comes out of everybody pursuing their private rational self-interest. This has shaded over - imperceptibly over the past couple of generations - to a downplaying of social norms as constraints on behaviour. You see this in a number of places. In business schools, for example. Back in the 1960s and 70s, business schools regarded themselves as professional schools along the lines of law schools or architecture schools. They were meant to inculcate a certain sense of professional responsibility, that you have obligations to society at large. But as a result of the economisation of a lot of what was taught in these schools, individual profit maximisation began to displace this normative sense, and this spilled over into the behaviour of the people who went on from these programmes into the financial sector. In their minds, they weren’t deliberately trying to defraud people, but if they saw an opportunity to take advantage of less sophisticated buyers of subprime mortgages, they would go ahead and do it.

    Here's Fukayama riffing on Simon Johnson and James Kwak's excellent book 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown:

    I’ve got this very simple view, which is that I don’t think regulation of the Dodd-Frank sort is going to work. The investment banks have got way too much talent, are way too creative and way too nimble for regulators ever to keep up. Therefore the real solution all along should have been to break these big banks up into smaller pieces, which is essentially what Glass-Steagall and the interstate banking regulations of the 1930s did. Once the banks are no longer too big to fail, then you can just let the market work the way it’s supposed to. If people take outsized risks and they get into trouble, then they just go bankrupt, and that is essentially what happened to MF Global. It hurts people, but it’s not a systemic crisis.

    That option was never seriously considered. We briefly toyed with the idea of nationalising the banks in the depths of the crisis. In the debate leading up to Dodd-Frank, there was actually one really interesting roll call vote. There was an amendment proposed that would have limited the size of financial institutions. It was defeated something like 60 to 30, and if you look at the list of the people who voted against it, it includes Chuck Schumer and all of these liberal Democrats. They’re the ones who should have been leading the charge against this kind of concentrated power, but given where they get their money, they weren’t willing even to consider it. That’s why we still haven’t solved this problem. In that one specific respect, Johnson is completely correct. It’s not just a matter of corrupt money bribing people; it’s also a case of intellectual capture. People just can’t think outside the parameters that are set by this community and just don’t entertain certain kinds of potential solutions to it.

    — The Wall Street Journal investigates what bankrupt companies pay their executives, looking at how firms skate around a 2005 law that says they can't pay retention bonuses to executives.

    The paper analyzed twenty-one of the biggest 100 bankruptcies from 2007 to mid-last year and found those companies paid their CEOs a combined $350 million, a median pay that nearly matches median pay for CEOs of nonbankrupt S&P 500:

    In 2006, the company attempted during bankruptcy proceedings to get approval for millions in future bonuses to be paid to six executives. The payments would be made if the executives remained with Dana until it exited bankruptcy and the company achieved certain valuation milestones.

    U.S. Bankruptcy Judge Burton Lifland initially rejected the plan. "Using a familiar fowl analogy, this compensation scheme walks, talks and is a retention bonus," he wrote.

    But then Dana returned to court with a different plan—one calling for the company to meet specific earnings targets. In that round, the judge ruled Dana's proposal was an "incentive plan" not governed by the new law limiting retention bonuses.

    The Dana decision, lawyers say, helped provide a legal road map for other companies, which soon started crafting "incentive" plans and arguing in court that payments were part of their ordinary course of business and a sound exercise of their business judgment.

    — Some good news from the nonprofit-news and future-of-news front: MinnPost took in more money than it spent last year, reports Nieman Journalism Lab's Andrew Phelps.

    Just 21 percent of its $1.5 million in revenue came from foundation support. Half came from advertising, sponsors, and memberships.

    Traffic to MinnPost.com grew, too. Pageviews rose 20 percent over the year before. The number Kramer prefers, though, is visits from Minnesotans: 3.7 million in 2011, versus 2.8 million the year before.

    Unfortunately, Voice of San Diego has had to lay some staff off after falling short last year, Phelps reports.

  12. January 27, 2012 06:06 PM

    Evangelicals, Mormons, and Mitt Romney

    By Ryan Chittum

    The New York Times runs an op-ed headlined "Why Evangelicals Don't Like Mormons," which takes on an important issue but glosses over the critical role fundamentalism plays in the phenomenon.

    David S. Reynolds is writing about the political woes of Mitt Romney in evangelical-heavy primaries in Iowa and South Carolina and trying to explain how evangelicals think in that way that drives flyover folks crazy. Evangelicals are leery of Latter Day Saints, he says, because of the "insecurities of the establishment denominations" faced with a powerful competitor.

    Okay, this isn’t a usual Audit subject, but I can’t resist. I claim a bit of authority having been raised an evangelical in Tulsa (Nazarene church three times a week, no dancing, no drinking, etc.), and, yes, my best friend as a kid was Mormon, so I followed church teaching on LDS particularly closely. As fourteen-year-old nerds, we sat around nights sparring about theology when we probably should have been smoking weed or something. I'd begun rejecting fundamentalism by the time I was eleven or twelve, but it sure was fun to argue about that stuff.

    I don't doubt that, at least at the clerical level, competition, as Reynolds says, is not welcome. But it's worth remembering that mainstream Christian churches have disliked the Mormon Church from the time it had just a few hundred followers. That's how Brigham Young & Co. ended up in Utah.

    And Reynolds gets it wrong when trying to figure how why evangelicals are supposedly more freaked by Mormons than other sects:

    Christian Scientists, for instance, eschew doctors and medicine. Seventh-day Adventists have often set dates for the end of the world that have come and gone, while Jehovah’s Witnesses reject the doctrines of the Trinity and eternal punishment.

    But neither those nor other American-bred religions arouse nearly the degree of anxiety that Mormonism does. Why?

    For one thing, no Jehovah's Witness has yet become a leading candidate for president (unless you count Eisenhower, who ran from his mother's religion), so we don’t know what kind of anxiety that would create.

    But, let's break it down: Evangelicals are mostly Biblical fundamentalists. That's the real issue here. They take a literalist view of the Bible and see Mormons (and Jehovah's Witnesses, for that matter, though not so much Christian Scientists and Adventists) as heretics, who follow a false prophet and believe in a different holy book—a big no-no to people who believe Genesis through Revelation is the Word of God. So the resistance to a Mormon candidate isn’t about competition, at least at base. It’s about theology.

    Some Mormon beliefs just diverge dramatically from core Christian doctrine in the eyes of evangelicals who see the idea that "man can become God-like" and that God once had a god above him, for instance, as akin to blasphemy (For their part, Mormon doctrine holds that the mainstream Christian churches were corrupted by a Great Apostasy*, shortly after Jesus's death).

    And so, most evangelicals see Mormonism as basically a different religion, a non-Christian one (and one that angers them by claiming Christianity). And evangelicals, or at least the ones I know, just aren’t much interested in voting for a non-Christian to be president, at least in a primary with other Christians. It’s that simple. Some evangelicals still believe that Catholics, you know, the ones who started the whole thing in the first place, aren't really Christians. They're not going to vote for a Muslim candidate for president, and certainly not an atheist (a Jew would be more complicated. Let's just say there were three banners on stage at my church: the American flag, the Christian flag, and the Israeli flag). They just believe a Christian, preferably one just like them, should be president. My late East Texas grandfather, for one, voted Democrat every election from 1936 to 1992, except for 1960, when he pulled the lever for Nixon because Kennedy was Catholic.

    Amy Sullivan nailed all this writing for The Washington Monthly way back in 2005:

    His obstacle is the evangelical base--a voting bloc that now makes up 30 percent of the Republican electorate and that wields particular influence in primary states like South Carolina and Virginia. Just as it is hard to overestimate the importance of evangelicalism in the modern Republican Party, it is nearly impossible to overemphasize the problem evangelicals have with Mormonism. Evangelicals don't have the same vague anti-LDS prejudice that some Americans do. For them it's a doctrinal thing, based on very specific theological disputes that can't be overcome by personality or charm or even shared positions on social issues. Romney's journalistic boosters either don't understand these doctrinal issues or try to sidestep them. But ignoring them won't make them go away. To evangelicals, Mormonism isn't just another religion. It's a cult.

    Which is why Reynolds's closing sentiment, much as I agree with it, is just preaching to the right-thinking NYT-readership choir who thinks all this true-believer stuff is silly:

    Amid the passions of this election season, it’s time to revive the tolerant spirit of the founding fathers. Religious competition of any kind, they believed, can breed bigotry, repression and hatred. The founders made an earnest effort to keep religion out of politics. Let’s do the same as we carry out the important work of choosing our next president.

    The reason Romney hasn't done much worse with their votes is that Mormons and evangelicals share nearly identical political views and because there hasn't been a standout social conservative candidate this year.

    There are varying degrees of fundamentalism, and polls have shown that most evangelicals would vote for a Mormon in the primary. But they've also shown that there's a significant group that won't.

    There are limitations, of course. If Romney wins the nomination, they'll fall in line (most of them, I should say).

    For evangelicals, just about anything's better than a pro-choice, pro-gay-rights Democrat, even if it's a formerly pro-choice, formerly pro-gay-rights Mormon Republican.

    * fixed spelling

  13. January 27, 2012 01:13 PM

    Charlie Rose’s Weak Q&A With the SEC’s Khuzami

    By Ryan Chittum

    Audit contributing editor Felix Salmon, writing this morning about Channel 4 reporter Krishnan Guru-Murthy's tough questioning of Larry Summers, asked, "Has Summers ever been asked questions like this, on camera, by an American reporter?

    It seems unlikely. Our interviewers tend to be less Guru-Murthy than Charlie Rose.

    Rose has a new interview in Bloomberg BusinessWeek with the SEC's head of enforcement, Robert Khuzami about the agency's response to the financial crisis. Rose's questions actually include one about whether Wall Street "played a big role in creating the financial crisis," one that he allows Khuzami to dodge:

    I don’t mean to duck the question, but at the end of the day we’re not about that. I saw a lot of the commentary back and forth after the case was filed, and folks of different political persuasions seemed to cite the case as evidence of support for their position. But we’re not about who caused it or didn’t. We have a narrower mission: Did they lie to investors in what they told to them about their subprime exposure?

    Rose's question on whether Wall Street banks helped cause the crisis, along with one asking "Why have there been so few suits against Wall Street CEOs?" are thrown out there without pointing out the elephant in the room: Khuzami was a top lawyer at one of the firms that caused the crisis before he came to the SEC.

    He was Deutsche Bank's top U.S. lawyer for five years during the bubble and "oversaw a group of lawyers at his old firm, Deutsche Bank AG, that was closely involved in developing collateralized debt obligations," as The Wall Street Journal reported in 2010. The Journal also said this:

    As part of that job, he worked with lawyers who advised on the CDOs issued by the German bank and how details about them should be disclosed to investors.

    CDO production and sales are at the heart of the crisis and Deutsche was one of the biggest issuers of these toxic securities. Now he heads SEC enforcement. Hello?

    This giant conflict of interest goes almost unmentioned by the press much of the time but it's particularly egregious, if totally unsurprising, from Rose here. We in the States need much more of the nondeferential questioning of the powers that be that they get in Britain.

    Perhaps BusinessWeek can give Rose's column to Krishnan Guru-Murthy.

    Further Reading:

    Fraud Without Fraudsters; Fraud Without “Fraud." The SEC’s settlement with JPMorgan Chase on a Magnetar deal


    The SEC’s Khuzami and That Citigroup Settlement    : An anonymous letter adds to questions about a wrist slap.

    ProPublica Has Questions for the SEC on Its Citi Settlement

  14. January 27, 2012 10:49 AM

    Summers: “Inside Job had essentially all its facts wrong”

    By Felix Salmon

    In mid-2009, I went on a search for apologies, from the people who laid the intellectual and regulatory foundations for the financial crisis. I wondered whether and when Larry Summers, in particular, would apologize for what he did at Treasury, and I was heartened when Bill Clinton came out and said that, with hindsight, he was wrong about derivatives regulation.

    Then, in 2010, Inside Job came out, and demonstrated the need for the likes of Summers to be asked direct questions about their culpability on the record, on-camera. But Summers refused to be interviewed for that film, despite having known its director, Charles Ferguson, for many years. And when he does sit down for a rare on-the-record video interview, these questions never seem to get asked.

    So I was very happy to see that Krishnan Guru-Murthy at least tried to ask Summers these questions earlier this week. Krishnan starts off with standard Summers-interview questions, asking him what he thinks about UK fiscal policy, and Summers gives his standard wise-man answers. But then Krishan gets steadily tougher, asking Summers about the advice he gave the president-elect in 2008, and eventually about his deregulatory tenure at Treasury.

    And Summers doesn’t even come close to apologizing, or admitting that he made any kind of mistake at all. Quite the opposite: he starts getting very touchy, telling Krishnan that he’s reducing complex questions to overly simplistic black-and-white narratives. Halfway through the interview, Krishnan asks Summers whether laissez-faire capitalism isn’t working for the middle classes. And Summers pushes back. “I’m a Democrat,” he says, adding that “I’ve long been someone who favored significant interventions to protect the environment.”

    “Protect the environment?” responds Krishnan. “Didn’t you advise the president not to sign up to Kyoto?”

    “No, no,” replies Summers.

    “You didn’t?”

    “No. I advised that an agreement be designed in order to protect the American economy, and the United States not take on obligations that would render its businesses uncompetitive.”

    Summers never explains how this differs from advice not to sign up to Kyoto, nor does he give an example of any “significant interventions” he pushed for to protect the environment. Because the interview soon moves on to the subject of deregulation, with Summers saying that he “was for moving derivatives to exchanges” — something Krishnan lets stand — and deciding to pick the ground of Glass-Steagal on which to fight, saying that Lehman and Bear Stearns might have survived had they been part of bigger banks.

    Well, yes, they might — but then again, they might also have just created another Citigroup, requiring massive bailouts from the government. Personally, I don’t think that repealing Glass-Steagal was in and of itself a major cause of the financial crisis, but Summers goes further, saying that huge financial supermarkets are a good thing (he holds up Canada as a model).

    Krishnan continues to push. “Even Bill Clinton says that he was wrong to listen to the wrong advice when it came to derivatives. And that was your advice.” (Has Summers ever been asked questions like this, on camera, by an American reporter?)

    Summers responds, again, that “it’s complicated”, and then builds up to attacking Krishnan:

    Would it have been better if the whole of the 2010 financial reform legislation had passed in 1999 or 1998 or 1992? Yes, of course it would have been better. But at the time Bill Clinton was president, there essentially were no credit default swaps. So the issue that became a serious problem really wasn’t an issue that was on the horizon… If you want to assign responsibility, If you take a market that essentially didn’t exist in the 1990s, that grew for eight years from 2001 to 2008, and then brought on a major collapse, if you were looking to hold people responsible, you would look to… officials of the Bush Administration. I’m not going to tell you that I foresaw this crisis in all its dimensions, but without sounding like Newt Gingrich here, for you to read two articles that a researcher handed you and sling this stuff is not really to give your viewers a very clear chance.

    0396m.gif Summers is absolutely wrong about credit derivatives not existing in the late 1990s. He was Treasury secretary from 1999 to 2001; Euromoney magazine had splashed the words “Credit Derivatives” all over its front cover in March 1996. And Brooksley Born, between 1996 and 1999, was literally losing sleep over those things as head of the Commodity Futures Trading Commission. Summers’s response to Born? To make sure she was marginalized, and, eventually, pushed out of her job entirely.

    And of course it’s a bit rich for Summers to criticize Krishnan for asking uninformed questions (they’re not uninformed at all, actually), when he has steadfastly refused to answer informed questions from the likes of Charles Ferguson.

    Eventually, Krishnan attempts another tack. “It’s not to put all the blame on you,” he says. “But you started on a trajectory that was then continued by the Bush Administration.” The reply is a classic:

    “No, no, no, no. That is just not credibly correct.”

    Krishnan then brings up Inside Job and the issue of the revolving door, which of course Summers took full advantage of with his $5-million-a-year job working one day a week for DE Shaw.

    “Inside Job had essentially all its facts wrong,” replies Summers, unbelievably, resorting to an argument based on timing: because he didn’t work in financial services before he was Treasury secretary, and because he waited a few years before taking that job at DE Shaw, Summers says it’s “absurd” to blame the revolving door for any of his actions.

    It’s weird that Summers, who loves debate, generally refuses to sit down in some public forum and answer serious, informed questions about the legacy of his tenure at Treasury; it might well be that this single interview is the closest we’ll ever get. And on the basis of this interview, it’s clear that, far from apologizing for his actions, Summers is going Full Bluster, denying any culpability, and choosing instead to violently reject and belittle any suggestion that he holds any responsibility for the crisis at all.

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