Big Government

The Revenge of John McCain.

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John McCain Was elected to Congress in 1982 and elected to the Senate in 1986 taking the seat previously held by Barry Goldwater. In 1989, he was involved in the “Keating Five Scandal.

The five senators—Alan Cranston (Democrat of California), Dennis DeConcini (Democrat of Arizona), John Glenn (Democrat of Ohio), John McCain (Republican of Arizona), and Donald W. Riegle, Jr. (Democrat of Michigan)—were accused of improperly intervening in 1987 on behalf of Charles H. Keating, Jr., Chairman of the Lincoln Savings and Loan Association, which was the target of a regulatory investigation by the Federal Home Loan Bank Board (FHLBB). The FHLBB subsequently backed off taking action against Lincoln.

The late 1980s were the era of the Savings and Loan scandals.

The Federal Home Loan Bank Act of 1932 created the S&L system to promote homeownership for the working class. The S&Ls paid lower-than-average interest rates on deposits. In return, they offered lower-than-average mortgage rates. S&Ls couldn’t lend money for commercial real estate, business expansion, or education. They didn’t even provide checking accounts.

In 1934, Congress created the FSLIC to insure the S&L deposits. It provided the same protection that the Federal Deposit Insurance Corporation does for commercial banks. By 1980, the FSLIC insured 4,000 S&Ls with total assets of $604 billion. State-sponsored insurance programs insured 590 S&Ls with assets of $12.2 billion.

Inflation in the late 1970s and early 1980s led to pressure on Savings and Loan institutions that had been lending money at 6% to home buyers but savers were demanding higher interest rates to compensate for inflation. The S&Ls were caught in the “Borrow high and Lend low” vise that led to their demise.

My review of Nicole Gelinas’ book on the 2008 economic crisis includes some discussion of the 1986 problems.

The story of the 2008 collapse begins in 1984 with the rescue of the Continental Illinois Bank. Here began the “too big to fail” story. Two things happened here that led to the crisis. One was the decision to bail out all depositors, including those whose deposits exceeded the FDIC maximum. Secondly, the FDIC guaranteed the bond holders, as well. Thus began the problem of moral hazard. Another feature of this story was the role of Penn Square Bank, which had gone under two years earlier in the wake of the oil price collapse, which devastated many of its poorly collateralized loans in the oil industry. Both banks had been caught seeking higher returns through risky investments. Penn Square, however, had been allowed to collapse. Continental was rescued and that began a trend that the author lays out in detail through most of the rest of the book.

The 1986 crisis and the 1989 scandal affected McCain deeply. He was a freshman Senator and was probably included in the group for two reasons. First he was the only Republican and Second, Keating, a Phoenix developer, was a constituent. McCain was humiliated and his ego was as big as all outdoors.

His reaction to his humiliation was once of the worst pieces of legislation in the 20th century, The McCain-Feingold Act.

In 1995, Senators John McCain (R-AZ) and Russ Feingold (D-WI) jointly published an op-ed calling for campaign finance reform, and began working on their own bill. In 1998, the Senate voted on the bill, but the bill failed to meet the 60 vote threshold to defeat a filibuster. All 45 Senate Democrats and 6 Senate Republicans voted to invoke cloture, but the remaining 49 Republicans voted against invoking cloture. This effectively killed the bill for the remainder of the 105th Congress.

McCain, still in his “Maverick mode and still running on ego, persisted.

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A Critique of Electronic Health Records Systems

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…with extension to other kinds of application software.

At the New Yorker, of all place:  Why Doctors Hate Their Computers.

See also this 2012 article in the Atlantic.

[Jonathan adds: See also this 2009 Chicago Boyz post and discussion.]

Coupling

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(No, this post is not about sex…sorry. Nor is it about electrical engineering, though it might at first give that impression.)

The often-interesting General Electric blog has an article about drones, linked to a cloud-based AI platform, which are used to inspect power lines and detect incipient problems–for example, vegetation which is threatening to encroach on the lines and short them out, or a transformer with a tendency to overheat.  The article mentions a 2003 event in which an encounter between an overgrown tree branch and a sagging power line resulted in a wide-area blackout that affected 50 million people.

The inspection drone sounds like a very useful and productivity-improving tool: obviously, inspecting thousands of miles of power lines is nontrivial job. But the deeper issue, IMO, is the fact that one problem in one place can propagate over such a wide area and affect such a vast number of people.  Power system designers and the people who operate these systems are certainly aware of the need to minimize fault propagation:  circuit breakers and fuses, network analysis tools,  and the technologies of protective relaying were developed, by GE among others, precisely for reasons of fault localization.  But experience shows that large-scale fault propagation still sometimes does take place.

This problem is not limited to electrical systems.  The mention of the tree-branch-caused 2003 blackout reminded me of a passage from the historian Hendrik Willem Van Loon:

Unfortunately in the year 1914 the whole world was one large international workshop. A strike in the Argentine was apt to cause suffering in Berlin. A raise in the price of certain raw materials in London might spell disaster to tens of thousands of long-suffering Chinese coolies who had never even heard of the existence of the big city on the Thames. The invention of some obscure Privat-Dozent in a third-rate German university would often force dozens of Chilean banks to close their doors, while bad management on the part of an old commercial house in Gothenburg might deprive hundreds of little boys and girls in Australia of a chance to go to college.

This probably overstates the interconnectedness of the global economy as it existed in 1914, but would fit our present-day global economy very well.  (The author was talking about the origins of WWI, which he blamed largely on economic interconnectedness…not correct, IMO, but the war was largely caused, or at least reached the scale that it did, because of another type of interconnectedness…in the shape of alliances.)

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The Trump Russia Collusion story explained.

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The election of Donald Trump as president in 2016 was a catastrophic event for a segment of the US government. It had been assumed by the entire “Ruling Class” that Hillary Clinton would, at last, be elected president. Books have been written about her reaction to the loss. One was titled, “Shattered” and recounted her reaction. A pretty good analysis in this Amazon book review.

To be fair to the authors, they lay the blame for her loss squarely on her. They sort of feel bad about it but their close access makes it obvious to them and they are objective enough to report it. The other main person held responsible is campaign manager Robby Mooks, who is so enamored with ‘analytics’ that he can’t see the forest for the trees. The canary in the coal mine is Bill Clinton, who senses that his wife and her campaign are not connecting with the white working class, but is ignored by the team who consider him washed-up and out of date.

What happened after she lost ? The Russia Collusion story was concocted.

Here is an analysis of How it began and why.

It turned out, however, that the dossier was a Clinton-campaign opposition-research project, the main allegations of which were based on third-hand hearsay from anonymous Russian sources. Worse, though the allegations could not be verified, the Obama Justice Department and the FBI used them to obtain surveillance warrants against Page, in violation of their own guidelines against presenting unverified information to the FISA court. Worse still, the Obama Justice Department withheld from the FISA court the facts that the Clinton campaign was behind the dossier and that Steele had been booted from the investigation for lying to the FBI.

Now, more analysis is coming from Sharyl Attkisson.

Taken together in context, the evidence points to two important findings. First, U.S. government insiders, colluding with numerous foreign citizens and governments, conspired to interfere in the 2016 election. Second, after the election, these figures conspired to undermine, oust, and perhaps even frame Trump and some of his associates.

The methods used, according to factual accounts and witnesses, include collusion with reporters and politicians, leaks to the press, and paid political-opposition research. Officials in the intelligence community were involved in the effort, which included the use of the Foreign Intelligence Surveillance Court (FISC), domestic and foreign informants or spies, and electronic surveillance.

Both articles are worth reading in full. The fact that other diversions are appearing, like the hoax bomb story, suggests that the Democrats know the Mueller “investigation” is going to be ended soon with a dud.

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Sputnik Anniversary Rerun – Book Review: Rockets and People

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Today being the 61st  anniversary of the Sputnik launch, here’s a rerun of a post about a very interesting book.

Rockets and People, by Boris E Chertok

Boris Chertok’s career in the Russian aerospace industry spanned many decades, encompassing both space exploration and military missile programs. His four-volume memoir is an unusual documentpartly, it reads like a high school annual or inside company history edited by someone who wants to be sure no one feels left out and that all the events and tragedies and inside jokes are appropriately recorded. Partly, it is a technological history of rocket development, and partly, it is a study in the practicalities of managing large programs in environments of technical uncertainty and extreme time pressure. Readers should include those interested in: management theory and practice, Russian/Soviet history, life under totalitarianism, the Cold War period, and missile/space technology. Because of the great length of these memoirs, those who read the whole thing will probably be those who are interested in  all  (or at least most) of the above subject areas. I found the series quite readable; overly-detailed in many places, but always interesting. In his review American astronaut Thomas Stafford said “The Russians are great storytellers, and many of the tales about their space program are riveting. But Boris Chertok is one of the greatest storytellers of them all.”  In this series, Chertok really does suck you into his world.

Chertok was born in Lodz, Poland, in 1912: his mother had been forced to flee Russia because of her revolutionary (Menshevik) sympathies. The family returned to Russia on the outbreak of the First World War, and some of Chertok’s earliest memories were of the streets filled with red-flag-waving demonstrators in 1917. He grew up on the Moscow River, in what was then a quasi-rural area, and had a pretty good childhood“we, of course, played “Reds and Whites,” rather than “Cowboys and Indians””swimming and rowing in the river and developing an early interest in radio and aviationboth an airfield and a wireless station were located nearby. He also enjoyed reading“The Adventures of Tom Sawyer and Huckleberry Finn met with the greatest success, while Harriet Beecher Stowe’s Uncle Tom’s Cabin gave rise to aggressive moods’Heyafter the revolution in Europe, we’ll deal with the American slaveholders!” His cousin introduced him to science fiction, and he was especially fond of  Aelita  (book and silent film), featuring the eponymous Martian beauty.

Chertok remembers his school years fondlythere were field trips to study art history and architectural styles, plus a military program with firing of both rifles and machine gunsbut notes “We studied neither Russian nor world history….Instead we had two years of social science, during which we studied the history of Communist ideas…Our clever social sciences teacher conducted lessons so that, along with the history of the French Revolution and the Paris Commune, we became familiar with the history of the European peoples from Ancient Rome to World War I, and while studying the Decembrist movement and 1905 Revolution in detail we were forced to investigate the history of Russia.” Chertok purused his growing interest in electronics, developing a new radio-receiver circuit which earned him a journal publication and an inventor’s certificate. There was also time for skating and dating“In those strict, puritanical times it was considered inappropriate for a young man of fourteen or fifteen to walk arm in arm with a young woman. But while skating, you could put your arm around a girl’s waist, whirl around with her on the ice to the point of utter exhaustion, and then accompany her home without the least fear of reproach.”

Chertok wanted to attend university, but “entrance exams were not the only barrier to admission.” There was a quota system, based on social class, and  “according to the ‘social lineage’ chart, I was the son of a white collar worker and had virtually no hope of being accepted the first time around.” He applied anyhow, hoping that his journal publication and inventor’s certificate in electronics would get him in.” It didn’the was told, “Work about three years and come back. We’ll accept you as a worker, but not as the son of a white-collar worker.”

So Chertok took a job as electrician in a brick factory…not much fun, but he was soon able to transfer to an aircraft factory across the river. He made such a good impression that he was asked to take a Komsomol leadership position, which gave him an opportunity to learn a great deal about manufacturing. The plant environment was a combination of genuinely enlightened managementworker involvement in process improvement, financial decentralizationcolliding with rigid policies and political interference. There were problems with absenteeism caused by new workers straight off the farm; these led to a government edict: anyone late to work by 20 minutes or more was to be fired, and very likely prosecuted. There was a young worker named Igor who had real inventive talent; he proposed an improved linkage for engine and propeller control systems, which worked out well. But when Igor overslept (the morning after he got married), no exception could be made. He was fired, and “we lost a man who really had a divine spark.”  Zero tolerance!

Chertok himself wound up in trouble when he was denounced to the Party for having concealed the truth about his parentsthat his father was a bookkeeper in a private enterprise and his mother was a Menshevik. He was expelled from the Komsomol and demoted to a lower-level position.  Later in his career, he would also wind up in difficulties because of his Jewish heritage.

The memoir includes dozens of memorable characters, including:

*Lidiya Petrovna Kozlovskaya, a bandit queen turned factory supervisor who became Chertok’s superior after his first demotion.

*Yakov Alksnis, commander of the Red Air Forcea strong leader who foresaw the danger of a surprise attack wiping out the planes on the ground. He was not to survive the Stalin era.

*Olga Mitkevich, sent by the regime to become “Central Committee Party organizer” at the factory where Chertok was working…did not make a good first impression (“had the aura of a strict school matronthe terror of girls’ preparatory schools”)..but actually proved to be very helpful to getting work done and later became director of what was then the largest aircraft factory in Europe, which job she performed well. She apparently had too much integrity for the times, and her letters to Stalin on behalf of people unjustly accused resulted in her own arrest and execution.

*Frau Groettrup, wife of a German rocket scientist, one of the many the Russians took in custody after occupying their sector of Germany. Her demands on the victors were rather unbelievable, what’s more unbelievable is that the Russians actually yielded to most of them.

*Dmitry Ustinov, a rising star in the Soviet hierarchyaccording to Chertok an excellent and visionary executive who had much to do with Soviet successes in missiles and space. (Much later, he would become Defense Minister, in which role he was a strong proponent of the Soviet invasion of Afghanistan.)

*Valeriya Golubtsova, wife of the powerful Politburo member Georgiy Malenkov, who was Stalin’s immediate successor. Chertok knew her from schoolshe was an engineer who became an important government executiveand the connection turned out to be very useful. Chertok respected her professional skills, liked her very much, and devotes several pages to her.

*Yuri Gagarin, first man to fly in space, and Valentina Tereshkova, the first woman.

*Overshadowing all the other characters is Sergei Korolev, now considered to be the father of the Soviet space program although anonymous during his lifetime.  Korolev spent 6 years in labor camps, having been arrested when his early rocket experiments didn’t pan out; he was released in 1944.  A good leader, in Chertok’s view, though with a bad temper and given to making threats that he never actually carried out.  His imprisonment must have left deep scarswriting about a field trip to a submarine to observe the firing of a ballistic missile, Chertok says that the celebration dinner with the sub’s officers was the only time he ever saw Korolev really happy.

Chertok’s memoir encompasses the pre-WWII development of the Soviet aircraft industry…early experiments with a rocket-powered interceptor…the evacuation of factories from the Moscow area in the face of the German invasion…a post-war mission to Germany to acquire as much German rocket technology as possible…the development of a Soviet ballistic missile capability…Sputnik…reconnaissance and communications satellites…the Cuban missile crisis…and the race to the moon.

Some vignettes, themes, and excerpts I thought were particularly interesting:

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