Daily Digest 9/23 - Rethinking Robert Rubin, The Changing Geography Of Urban Poverty
Rethinking Robert Rubin (jdargis)
After he stepped away from Treasury in 1999, Rubin moved to Citigroup (C), and until 2009 he served as chairman of the executive committee and, briefly, chairman of the board of directors. On his watch, the federal government was forced to inject $45 billion of taxpayer money into the company and guarantee some $300 billion of illiquid assets. Taxpayers ended up with a 27 percent stake in Citigroup, which was sold in 2010 at a cumulative profit of $12 billion. Rubin gave up a portion of his contracted compensation—and was still paid around $126 million in cash and stock during a tenure in which his serenity has come to look a lot more like paralysis. “Nobody on this planet represents more vividly the scam of the banking industry,” says Nassim Nicholas Taleb, author of The Black Swan. “He made $120 million from Citibank, which was technically insolvent. And now we, the taxpayers, are paying for it.”
For businesses, debt interest payments are tax deductible; equity payments, like when a company pays out a dividend, are not. At the margin, this encourages entities to take on more debt than they otherwise would, as Steven M. Davidoff noted in a Deal Professor column earlier this year. More debt not only makes companies more vulnerable to bankruptcy but also makes investors more susceptible to panics, when they withdraw their capital en masse. More equity would make the world more stable.
The slowing of poverty’s upward trajectory signals a promising—if stubbornly slow—response to the recovery that began to take hold in the wake of the Great Recession, though the soft job market that has prevailed since the recession ended and the unevenness of that recovery can be seen in other troubling income trends. Between 2010 and 2011, 25 of the nation’s largest metro areas experienced a significant increase in income inequality (as measured by the Gini index), compared to 11 regions the year before. Increasing inequality affected a diverse array of regions, from metropolitan Atlanta, Chicago, and San Francisco to Kansas City, St. Louis, and Louisville. In each of these regions, inequality grew alongside rising poverty and falling incomes.
“The U.S. economy is clearly in a soft patch right now that could deteriorate into a stall,” said Scott Anderson, chief economist at Bank of the West in San Francisco. “Consumer spending is really driven by jobs and wealth effects and the consumer’s ability to borrow. All of those things are still suggesting moderate growth.”
ower, Pollution and the Internet (jdargis)
Most data centers, by design, consume vast amounts of energy in an incongruously wasteful manner, interviews and documents show. Online companies typically run their facilities at maximum capacity around the clock, whatever the demand. As a result, data centers can waste 90 percent or more of the electricity they pull off the grid, The Times found.
How the world’s oceans could be running out of fish (westcoastjan)
Large areas of seabed in the Mediterranean and North Sea now resemble a desert – the seas have been expunged of fish using increasingly efficient methods such as bottom trawling. And now, these heavily subsidised industrial fleets are cleaning up tropical oceans too. One-quarter of the EU catch is now made outside European waters, much of it in previously rich West African seas, where each trawler can scoop up hundreds of thousands of kilos of fish in a day. All West African fisheries are now over-exploited, coastal fisheries have declined 50% in the past 30 years, according to the UN Food and Agriculture Organisation.
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