Good grief, my ears!

I think my eardrums have just burst and started to bleed. It seems that the Guardian columnists and readers are not too impressed with George Osborne looking to break the national public servant wage structure:

It has not yet been decided if localised pay will apply only to new staff or to existing staff as well, but it was being stressed that no current employee would suffer a pay cut. Instead pay levels will gradually be adjusted to take account of costs, leading to larger pay rises in the south-east where some labour shortages exist.

Please, please apply it to all staff. Otherwise you're going to have apartheid between older (unsackable) staff with the higher wages and new staff with the regional variation. What happens when staff compete for a promotion? No, the only feasible way I can see to manage this is going to be for the poorer regions to freeze public sector worker pay for longer until public sector wages are roughly aligned with local private sector wages.

The comments are truly a treasure. Formboy pithily expresses a common sentiment:

I hope Gideon hasn't forgotten that public servants in some of the more deprived areas in this country serve some of the most needy people in the UK. But then again he probably doesn't give a flying fuck.

I think Gideon is acutely aware that the needy people in the richer segments of the country get screwed over by a desperate lack of good public servants (teachers, nurses etc.) as the buying power of their wages are uncompetitive compared with the same job and same salary in e.g. Cornwall or Staffordshire. Since public sector workers are outnumbered by private sector workers by something like 5 or 6 to 1, there's a greater overall societal benefit in Gideon's approach.

The thing is, my social conscience chums, George is right. If this works out, it's going to be much easier for a hospital, police authority or LEA to pay more to attract staff to fill a local shortage - they have no such ability as it stands, and are at the mercy of Whitehall. Swan17 makes the point:

When I was a London-based Civil Servant I had to travel to other parts of the country as part of my job. I can still remember spending a week in Newcastle and discovering that my wage would put me in the top 10% of the area whilst I was still fairly junior. Yes, I know that London Weighting does help a bit but National Rates are not always the answer.
Companies can do it so why should the Civil Service be different?

Though a mischievous thought does occur that it would be interesting to weight MP's salaries according to a multiple of a standard Civil Service grade in their constituency's main city...

Mutant mammoths

Oh lordy, they're at it again. Russian scientists plan to resurrect mammoths by injecting mammoth DNA into elephant ova. This DNA has been hanging around since the woolly mammoth went extinct several thousand years ago. What could possibly go wrong?

Greg Smith and the Squid

I've been enjoying the coverage of Greg Smith's very public resignation from Goldman Sachs this morning. Man, if you're going to do something, do it in style.

A few things to note:

• "Executive director" (ED, also known as VP) at GS London is one notch below Managing Director; these guys are well paid but not paid a fortune and have very little in the way of people managing duties. They form about 40% of the GS workforce. Greg was somewhat overhyping his position, but heck who wouldn't?
• GS paid out its annual bonuses in early February, and bonus season this year was very bloody: few people outside the big producers got much. That makes me think they paid Greg badly, but weren't intending to fire him any time soon (otherwise they'd be paying nearly a year's salary in severance) so he saw little point in hanging on.
• Greg almost certainly didn't get any significant share units in this or recent bonus seasons, otherwise he'd have hung on until later this year when they vest. This makes me think that accusations that he is only resigning now that he's flush with bonuses are somewhat wide of the mark.
• No chance anyone in the Street is going to hire Greg for anything meaningful now, he's burned his bridges; but he's a a big boy and doubtless knew what he was getting into.
• Resigning from GS, instead of being fired, means Greg can more or less say and write what he likes about life at GS. I give it 48 hours max before he signs a book deal, and 1 month max before the book comes out; he's used to working 70+ hour weeks, and there's a definite payoff if he can get a reasonable book out before the echos of this story fade.

I note that GS shares dropped 3.8% today, where MS was down 2.1%. So that's a 1.7% drop (about $1.90/share) likely attributable to Greg. GS market cap is about $62bn, so Greg cost shareholders just over $1bn. Oopsie!

Some nice commentary going on. Of all the spoofs, I liked Andy Borowitz's apology from Goldman to its clients best:

And as you read his words, you no doubt asked yourself this troubling question: how could Goldman have hired such a person?
At Goldman, we pride ourselves on our ability to scour the world’s universities and business schools for the finest sociopaths money will buy.

The main point of interest is that GS execs refer to clients as "muppets" in internal email. That's pretty stupid. Calling clients "muppets" in private conversation is rude, even if accurate sometimes, but you can get away with it. Writing it in an email that gets permanently stored and is discoverable in legal actions - well, let's just say that even Fabulous Fabrice Tourre wrote his stupid emails from his private account, which is several notches of stupidity lower than this behaviour.

Update: Interesting reactions from former GS employees on this situation.

I can't help thinking that this episode makes GS very vulnerable to another Congress-induced investigation, if some politician or Attorney General somewhere feels like making hay in the sunshine. (And why wouldn't they?)

Insanity on inter-racial adoption

This is going to be a good one. Professional playwright Lemn Sissay weighs in on the issue of inter-racial adoption.

Lemn argues, or perhaps "rants" describes it better, that the Government is reversing all the good work done in the past 25 years for black children in care:

These policies play into the popular misconception that colour blindness is a goal when in fact it is a disability. In this context, a disability is used to make those of colour and their needs invisible.

So seeing people for who they are rather than what the colour of their skin is a bad thing? Didn't we, the citizens of the Western world, just spend 40 years trying to fix that very problem?

He's keen to blame the authorities of course:

The point made in 1983 still stands: why has the government not put as much energy into finding black adopters?

Well, the Government can only do so much. If a black married couple want to adopt, they can put themselves forward. If they're not putting themselves forward, what should the Government do - bang on their door and demand they volunteer?

And besides, why say a family environment is all a child in care needs as quickly as possible when 50% of children in care have fled an abusive family environment as quickly as they could?

I'd like to think that we take a little more care these days in checking out couples who wish to adopt. Indeed, from the experience of my friends who attempted to adopt, you would get a less exacting examination if you went through airport security with a large lump of Plasticine studded with wires and batteries. The record of criminal behaviour of children who went through care is appalling. Heaven knows, I don't envy them the experience. If we can do something to put them in a stable home environment then who gives a flying fox what colour skin the adopting parents have?

Lemn also fails to note that colour is not a discrete thing. Should a child from Nigerian parents have a West Africa adopting family? What if one parent is Nigerian and the other is a Scottish Islander with red hair and green eyes? How about Vietnamese-Indian? Who produces the scheme for ranking parents' ethnic origins for each potential ethnic mix?

And why say care is a bad thing – rather than "we can make it better" – if it is care under your watch?

Well, we've tried to fix care and we failed. The general problem seems to be that no-one is really invested in its success. Perhaps there really is no substitute for a real family who cares for a child, even if the child is not biologically theirs.

Lemn, you're either very hard of thinking, or you're just an asshole who doesn't care what damage your ideas do to kids as long as they're right-on.

[hat tip: NickM at the Kitty Counters]

Free the banks - problem solved?

An interesting post in The Atlantic on how to fix the banking system by Pascal-Emmanuel Gobry. He argues that one of the basic reasons for the financial crisis was the principal-agent problem: many of the people involved knew that what they were doing was going to lead to a blow-up, but their incentives were such that continuing as long as possible made financial sense. No argument here.

His proposed solution is to re-introduce the partnership model in financial firms, removing the public shareholder financing of their activities in order to insure that those with skin in the game have a direct mechanism to rein in excesses in risk of their firm; that this necessarily restricts the size of firms (and hence increases their number) is regarded as a feature, not a bug. Having considered this at length, I think I'm sympathetic. It will of course increase costs to some extent (loss of economies of scale) but it will be very interesting to see the degree to which this happens. I have a sneaking suspicion that there's a lot of "the customer will pay what we ask" going on currently.

He does assume that available credit will reduce massively, which seems like a fair assumption: less risky behaviour means less attractive returns means less money available. But perhaps this is merely a consequence of investors realising that they will bear their risks alone:

I think it was The Epicurean Dealmaker who said on Twitter that the mandatory disclosure/warnings for anyone who signs a financial document should be a slap in the face and the phrase "CAVEAT EMPTOR!" shouted into their face drill instructor-style.

You can just imagine it, with apologies to R. Lee Ermry:

Are you quitting on me? Well, are you? Then quit, you slimy fucking walrus-looking piece of shit! Get the fuck off of my SIV! Get the fuck down off of my investment ve-hi-cle! NOW! MOVE IT! Or I'm going to rip your balls off, so you cannot contaminate the rest of the S+P 500! I will motivate you, Mr. Smyth-Jones, IF IT SHORT-DICKS EVERY CANNIBAL ON THE CONGO!

They have Freddie Mac, we have Davie Cam

After the sterling success of the US Government's guarantee of homeowner loans, the UK Government wants to join the party.

What could possibly go wrong?

Oh boy, the usual suspects just love this:

Despite the political emphasis on first-time buyers, the guarantee scheme will be open to everyone, meaning that existing homeowners could use it to trade up to larger properties.
Nonetheless, the Council of Mortgage Lenders has backed the scheme as "good news for home-buyers".

I think they meant "good news for homeowners and mortgage lenders" there. If you want to make houses more affordable for first time buyers, all you have to do is make it cheaper and easier for them to be built (new supply) and more expensive to own-to-rent (freeing up existing holdings). All this will do is artificially hold up headline house prices, benefiting current owners and those who have written mortgage notes against houses.

I see the estimable Mark Wadsworth hasn't yet commented on this: I expect he's probably in surgery to repair a very recently ruptured spleen. I look forward to what he has to say...

Update: Mr. Wadsworth does not disappoint.

Flood, glorious flood

Is that the high-pitched whine of rent-seeking that I hear? The government has the audacity to suggest that householders in flood-prone areas pony up for their own flood defences and this doesn't go down too well with the householders in question:

The Joseph Rowntree Foundation has also released a report at the conference that argues against insurers pricing out flood-hit households purely based on risk [my emphasis] and calls for further government intervention

If insurers are not pricing purely based on risk, my friends, then they are not actually providing insurance. They're either penalising or (in this case) subsidising the affected households. And since the insurers aren't going to eat the cost of that extra subsidy, it's going to come from householders that were sensible enough not to buy a house in a flood-prone area...

The rent-seekers are out in force:

Charles Tucker, chairman of the National Flood Forum, the charity running the conference, said: "We believe this gives overwhelming weight to the case for government to step up to the plate to ensure that the market in flood insurance is fair and equitable.

If householders pay according to the actual risk of flood damage, that seems pretty fair to me. Now what do you mean by 'equitable', Charles? I think you mean "we want Government cash". And since governments don't have any money themselves, this is actually taxpayer cash.

I would be in favour, however, of sticking the bill for flood damage to recently built homes on a combination of the builders who built in a flood risk area and the surveyors who said it was OK. I give you, for instance, all the homes around Tewkesbury and Evesham which went under water; the area floods annually, so flooding risk should at least have been on the builders' radar:

A handful of those I meet recount a telling anecdote about a new housing development in the nearby village of Mitton which was originally called the Water Meadows; in the wake of the floods, they say, the word "water" disappeared from the signs for it.

But caveat emptor: if you buy a house in a flood-prone area, it's up to you to mitigate or pay for the flood risk. The Government is merely taking a principled stance on the matter. I may have to have a lie-down.

If you haven't read GS Elevator tweets, you should

Follow the travails of harried and overworked financial nerds here.

For reference, I don't believe more than half of those quotes really came from within a bank, let alone Goldman Sachs.

The Foreign Office - what side is it on?

In her now dated but still hilarious book Members Only, recounting her adventures as a journo inside Westminster, Frances Edmonds relays the tale of a visitor asking for directions to the Foreign Office:

"Which side is the Foreign Office on?" he asks a passing police officer.
"Well," says the officer after some thought, "they're supposed to be on our side. But sometimes I wonder."

Sure enough, the account of Foreign Secretary William Hague losing his temper in discussion with senior Tory MPs confirms that this perception is still extant:

He [Hague] lost his rag when outspoken Tory Douglas Carswell told him he was 'under the thumb of pro-Arabist' diplomats in the Foreign Office.
'The Foreign Office displays a kind of bigotry towards Israel,' said Mr Carswell. 'The whole idea of self-determination in the Middle East is anathema to some Foreign Office people. It is anti-Israel just as it is pro-EU.'.

He wasn't the only one either:

Robert Halfon told Mr Hague: 'The Foreign Office has not done enough to stop the delegitimisation of Israel. We must speak up for its right to exist.'
Right-winger Priti Patel said: 'We must be more critical of the Palestinians for not giving up violence.' And Nick Boles, a close ally of David Cameron, claimed that the Foreign Office had not done enough to condemn the Palestinian National Authority for glorifying suicide bombers.

Hague himself strongly denied this:

Mr Hague was furious at Mr Carswell's personal onslaught. 'You are living in a fantasy world and talking total nonsense,' he told him. 'The Foreign Office is not pro- Palestinian. I have never heard such claptrap.'

One has to wonder, though, if there's no smoke without fire. There certainly seems to be recurring clouds of anti-Israel smoke from the FO - the Yes, Prime Minister episode A Victory for Democracy features the FO ignoring a Prime Ministerial request to abstain from a UN resolution condemning Israel. Seems like very little has changed in public perception.

Bill Quango MP for PM

A robust defence of capitalism. Read the whole thing.