Fed Creates $1 Trillion 'Out of Thin Air"

[TraneWreck]

No more than doing as the hospital administrator directs gives the lawyer a massive amount of experience with neurosurgery.

But the job of hospital administrator doesn't require you to be able to engage in neurosurgery. I looked up the requirements for applicants to the job and it says a BA or BS with a masters in medical administration as a nice, but not necessary qualification.

So yes, someone with a law degree who had been working in a hospital would be more than qualified to take that position.

A doctor or other medical professional.

We've done that experiment. Which is why most hospital administrators are MD's.

Here is the board of executives for Northwestern Memorial in Chicago:

http://www.nmh.org/nmh/aboutus/organizationleaders.htm

Not a single one of them have an MD. They all have bachelors and a masters.

Here's an article about the fellow the University of Chicago named as president of Weiss Memorial Hospital:

http://www.uchospitals.edu/news/1999/19990913-cucci-weiss.html

No MD here.

Now, admittedly, none of these folks have law degrees either, but this is simply information to reject your bizarre premise that you have to have experience with the subject matter in order to serve as an administrator.

I couldn't find a single administrator with the ability to perform neorosurgery.


Edit: This is interesting, the governing board of directors for the Cook County hospital system has 11 members, 2 with MDs and 1 with a JD.

http://www.cookcountygov.com/taxonomy/HealthHospitals/CCHHS_BoardMgt.pdf

 

[boloboffin]

Actually, I think he's got it right and your logical construct is mistaken. Inflation is caused by too much money chasing too few goods, not having to pay interest.

But isn't part of our problem that we have a tremendous inventory overhang from when the housing market collapsed?

And is there another way to create new money, other than "out of thin air"? I don't want to sound like a Paultard here, but the financial system really is bubble all the way down. It's the ability of the financial system to maintain momentum that keeps the whole thing afloat, and right now nothing's moving.

/gross oversimplification

 

[TraneWreck]

Run the money.

What does that entail, according to you?

 

[Piggy]

In my mind these things are intrinsically impossible to evaluate given the fragility of the world economy. We are still not sure how deep the current recession/depression will be, whether inflation or deflation will be the problem 2 or 3 or 10 years down the road, whether unemployment will peak at 9% or 15%. The default rates on the underlying mortgages thus becomes impossible to predict with any degree of accuracy, making the securities impossible to value except as highly risky junk.

Well, it's certainly true that we don't know the true valuation, because we can't. No argument there.

But regardless, we're at the point now where we're forced to peg them at some value or other.

By marketizing the valuation process, we get a "wisdom of crowds" effect -- similar to the remarkably accurate presidential prediction markets, for example -- which pools the collective smarts and is much more likely to end up correctly evaluating them than any top-down approach.

So given that it has to be done, I think it's the best way of going about it.

 

[drkitten]

What does that entail, according to you?

Evaluate the profitability and risk of proposed investments, in very broad terms.

You can see just how broad those terms are when you look at how the bankers themselves have divided up that pie. One of the participants in this board, for example, is (IIRC) a specialist in foreign currency transactions (trying to decide if the risk involved in trading British pounds for Mexican pesos is acceptable); she's neither qualified or experienced in evaluating commercial loans. A specialist in commercial loans wouldn't be qualified to examine bond transactions, and neither would be qualified to evaluate equities.

Even in as narrow a field as equities, people specialize; there are people out there who specialize in looking at utilities, at retail stocks, at "technology," at health care, and so forth.

A stock analyst who specializes in computer and technology stocks is generally not qualified to analyze utility stocks. Neither is typically capable of evaluating a residential mortgage.

But your suggestion is that a lawyer, who specializes "the law relevant to banks," can do all three?

I lack scope within the forum rules to fully characterize the utter wrongness of your suggestion.

 

[drkitten]

http://www.uchospitals.edu/news/1999/19990913-cucci-weiss.html[/url]

No MD here.

Now, admittedly, none of these folks have law degrees either, but this is simply information to reject your bizarre premise that you have to have experience with the subject matter in order to serve as an administrator.

Edward Cucci, 54, of Lincolnshire, Illinois, has more than 25 years of experience in hospital administration. He earned his undergraduate degree from North Park College in 1968, completed a master's degree in teaching from Northeastern Illinois University in 1971 while working at Augustana Hospital in Chicago and Evanston Hospital in Evanston, Illinois, then earned a master's degree in healthcare and hospital administration from the University of Minnesota in 1974.

Nope, no subject matter expertise here. No one with a masters degree in health care could possibly be a medical professional. Why, any paralegal could accomplish as much.

Fire all the doctors! Let the lawyers take over, since lawyers are demonstrably omniscient!

 

[TraneWreck]

Edward Cucci, 54, of Lincolnshire, Illinois, has more than 25 years of experience in hospital administration. He earned his undergraduate degree from North Park College in 1968, completed a master's degree in teaching from Northeastern Illinois University in 1971 while working at Augustana Hospital in Chicago and Evanston Hospital in Evanston, Illinois, then earned a master's degree in healthcare and hospital administration from the University of Minnesota in 1974.

Nope, no subject matter expertise here. No one with a masters degree in health care could possibly be a medical professional. Why, any paralegal could accomplish as much.

Fire all the doctors! Let the lawyers take over, since lawyers are demonstrably omniscient!

But he's not a doctor. That's the point. You claimed they all had MDs, you were wrong.

And yes, I would expect the very head of a renoun hospital to have a great deal of experience in administration. But administration, you will notice, is a profession that has nothing to do with being a doctor.

 

[Piggy]

Would y'all consider splitting this debate off into a new thread?

Just a thought.

 

[drkitten]

But he's not a doctor. That's the point. You claimed they all had MDs, you were wrong.

No, I claimed they were all MDs or healthcare professionals.

Which he most definitely is.

And yes, I would expect the very head of a renoun hospital to have a great deal of experience in administration.

But I will go further. I expect him to have a great deal of experience in medical administration. I wouldn't expect a legal administrator to have that experience.

But administration, you will notice, is a profession that has nothing to do with being a doctor.

I don't notice that at all. He's not a generic administrator -- he's a health care administrator, which has a great deal to do with being a doctor.

 

[TraneWreck]

Evaluate the profitability and risk of proposed investments, in very broad terms.

You can see just how broad those terms are when you look at how the bankers themselves have divided up that pie. One of the participants in this board, for example, is (IIRC) a specialist in foreign currency transactions (trying to decide if the risk involved in trading British pounds for Mexican pesos is acceptable); she's neither qualified or experienced in evaluating commercial loans. A specialist in commercial loans wouldn't be qualified to examine bond transactions, and neither would be qualified to evaluate equities.

Even in as narrow a field as equities, people specialize; there are people out there who specialize in looking at utilities, at retail stocks, at "technology," at health care, and so forth.

A stock analyst who specializes in computer and technology stocks is generally not qualified to analyze utility stocks. Neither is typically capable of evaluating a residential mortgage.

But your suggestion is that a lawyer, who specializes "the law relevant to banks," can do all three?

I lack scope within the forum rules to fully characterize the utter wrongness of your suggestion.

Well this is an even stranger argument. You have basically pointed out that no one is qualified to direct a bank because someone involved in tech stocks is not capable of dealing with mortgages. This is also a massive misunderstanding of what a bank executive's actual duties are.

But just like a hospital administrator doesn't need to know how to perform open heart surgery, directing the bank and administrating its internal functions is not the same as giving stock advice.

The administrators and boards of directors take advice from the people with experience in specific subject matters. Why does knowledge of a particular type of stock give you any ability to run to functions of a bank? In fact, the highest functions of a business (mergers and acquisition, details concerning the corporate structure, obligations to shareholders...etc) will be much more familiar to someone with corporate law experience than people "running money."

And furthermore, one essential aspect of evaluating "the profitability and risk of proposed investments, in very broad terms" is knowledge of the legal landscape. Regulations and restrictions are at least as important as the ability to "guage the market," which it's clear no one currently in charge of the banks can do anyway.

 

[drkitten]

Well this is an even stranger argument. You have basically pointed out that no one is qualified to direct a bank because someone involved in tech stocks is not capable of dealing with mortgages. This is also a massive misunderstanding of what a bank executive's actual duties are.

And here's your fundamental problem.

You can't distinguish between "administration" and doing the actual work of the organization.

Here's your original quote (post #99, highlights mine)

I can't tell you how happy it would make me to nationalize those failing institutions, fire all the goofballs that caused this mess, and put smart, ethical people in their positions for 1/100 of the salary.

You're firing "all the goofballs" who caused the mess, including the specialists involved in assessing risks of CDAs and whatnot.

And replacing them with unqualified lawyers.

And you think that's okay, because since lawyers are qualified to sit on the board of directors, and therefore they're qualified to run the money.

The administrators and boards of directors take advice from the people with experience in specific subject matters.

Whom you've just fired and replaced with legal expertise.

 

[TraneWreck]

No, I claimed they were all MDs or healthcare professionals.

Which he most definitely is.

But I will go further. I expect him to have a great deal of experience in medical administration. I wouldn't expect a legal administrator to have that experience.

First of all, a legal administrator is a sort of business expert that deals with massive law firms. It's not necessary to be a lawyer to work that job.

But the major point is that you become a "health care professional" by getting a bachelor's degree and going to work in the medical profession. Thus someone with a law degree who went to work in the medical profession would be more qualified than someone with just a bachelor's.

Once again, the act of administration is separate from the subject matter being administrated.

I don't notice that at all. He's not a generic administrator -- he's a health care administrator, which has a great deal to do with being a doctor.

There is no skill unique to being a doctor that is remotely applicable to being an administrator. You don't need knowledge of anatomy, the ability to perform surgery, or familiarity with X-ray and MRI machines.

You may need knowledge of how business relates to the uniqueness of the medical profession. This would include concepts like malpractice liability, the odd laws surrounding perscription drugs, enhanced duties concerning medical ethics, and insurance issues.

But once again, the interesting point is that a lawyer working for a hospital will be more intimately familiar with each of those issues than anyone else.

So why aren't lawyers administrators? It appears that there's no reason for a lawyer to take a pay cut:

According to this chart (I can't verify it's accuracy):

http://www.payscale.com/research/US/Job=Hospital_Administrator/Salary/by_Degree

Hospital administrators make about $75k on average. The average lawyer working for a hospital makes about $84k (http://www.payscale.com/research/US/Job=Attorney_/_Lawyer/Salary)

So there's no real benefit for someone with a law degree to move into that position. This is different than saying they couldn't do that job.

And finally, you can keep looking through boards of directors for hospitals throughout the country, but there are plenty of JDs on those boards. And again, to be clear, I'm not arguing that lawyers make the best administrators as a rule, or are even qualified for those positions at a higher rate, I'm saying that a lawyer with the right experience will have expertise that would make them useful in those positions.

 

[TraneWreck]

You're firing "all the goofballs" who caused the mess, including the specialists involved in assessing risks of CDAs and whatnot.

And replacing them with unqualified lawyers.

And you think that's okay, because since lawyers are qualified to sit on the board of directors, and therefore they're qualified to run the money.


Whom you've just fired and replaced with legal expertise.

Haha, nice try.

First of all, if the goofballs in question include subject matter experts, then obviously they will have to be replaced by someone with the requisite skills. I will agree that the pool of available candidates will not likely include lawyers (though there are plenty of people on wall street who used to be lawyers).

But I was, of course, refering to the executives behind this mess. To the extent that I implied otherwise, I apologize. The Boards of Directors and executive positions could be filled by transactional lawyers with years of experience in finance, corporate law, and other banking-related functions.

And maybe most importantly, I identified lawyers as one potential group that could fill the vacancy left by the removal of the boards of directors we're currently bailing out. There are plenty of others, but you seem to have a problem with lawyers, which is cool, but it doesn't allow you to suspend reason.

 

[TraneWreck]

And here's your fundamental problem.

You can't distinguish between "administration" and doing the actual work of the organization.

I don't believe I am. I'm merely pointing out that you don't need to be able to remove a kidney to be a hospital administrator.

 

[mhaze]

....but you seem to have a problem with lawyers, which is cool, but it doesn't allow you to suspend reason.

Given that the animal house called Congress rather exclusively is laswyers, why would a reasonable person want in multiplicity the stench of such a pig farm?

 

[TraneWreck]

Given that the animal house called Congress rather exclusively is laswyers, why would a reasonable person want in multiplicity the stench of such a pig farm?

For the honey-baked ham?

 

[gdnp]

Well, it's certainly true that we don't know the true valuation, because we can't. No argument there.

But regardless, we're at the point now where we're forced to peg them at some value or other.

By marketizing the valuation process, we get a "wisdom of crowds" effect -- similar to the remarkably accurate presidential prediction markets, for example -- which pools the collective smarts and is much more likely to end up correctly evaluating them than any top-down approach.

So given that it has to be done, I think it's the best way of going about it.

I agree. I'm afraid, however, that until the economy stabilizes the crowds will have little wisdom.

 

[mhaze]

I agree. I'm afraid, however, that until the economy stabilizes the crowds will have little wisdom.

(Not disagreeing with your or Piggy's comment but trying to clarify).

There are only three prices: What the seller wants, what the buyer wants, and what a transaction actually occurs for.

What you are seeing is a myopic and market irrational, egotistical focus on the first of these.

 

[gdnp]

If the seller wants a million and the buyer will only pay $500,000, then no transaction occurs. The market collapses.

People focus, for example, on the fall in housing prices. What they ignore if the even more dramatic fall in housing sales. What the buyer is willing to pay and what the seller wants to part with his property no longer match, and thus no deal happens.

The same is largely true with the credit markets. The banks don't want to lend money at the interest rates that the shaky borrowers will pay, and the borrowers don't want to borrow money at the rates at which the banks are willing to lend. Thus you end up with a frozen market where little money gets lent.

 

[mhaze]

If the seller wants a million and the buyer will only pay $500,000, then no transaction occurs. The market collapses.

People focus, for example, on the fall in housing prices. What they ignore if the even more dramatic fall in housing sales. What the buyer is willing to pay and what the seller wants to part with his property no longer match, and thus no deal happens.

The same is largely true with the credit markets. The banks don't want to lend money at the interest rates that the shaky borrowers will pay, and the borrowers don't want to borrow money at the rates at which the banks are willing to lend. Thus you end up with a frozen market where little money gets lent.

This is why bankrupcy and foreclosure mechanisms are good, they allow for corrections when needed. Say that a company will not part with A B C for offered prices, but cannot maintain with existing cash flow. It files bankrupcy, and the court commences operating the company for the benefit of the creditors. A B C are sold. There is discretion not to, such as if the creditors vote to wait until they are priced adequately.

It doesn't matter what the company owning A B C thinks or wants.

You've brought up several examples, of course. But there is and can be no such thing as "a market collapsing" without government holding, supporting, restricting or otherwise monkeying with the market mechanism.

Incidentally, the most common example of this is when a consumer owes more than the value of an asset, so he cannot sell it and feels he must continue making the payment (due to not being able to stomach the loss on liquidation). But this is only putting off the inevitable often with worse effects. EG "Let's hold on to A B C and wait for the market to recover".

HA.