Friday, November 21, 2014

Wall Street Banks in Commodities Businesses: An Inherently Unethical Conflict of Interest

Writing to the bank’s board of directors, an executive at Goldman Sachs wrote that the bank’s commodities division would achieve higher value “if the business was able to grow physical activities, unconstrained by regulation and integrated with the financial activities.”[1] According to Sen. Carl Levin, Goldman’s goal here is “to profit in its financial activities using the information it gains in the physical commodities business.”[2] The integration could be achieved in part by using the bank’s access to nonpublic information from the banking or trading operations to manipulate the price of a commodity by artificially restricting or adding to supplies through ownership at the production or storage stages. This structure contains a conflict of interest. Because resisting the temptation to exploit the conflict would put the Goldman bankers at odds with the bank’s financial interest, I contend that reliance by the public on intra-bank firewalls (i.e., policies) separating the commodity businesses from the bank’s trading operations is too weak to protect the public, including buyers of the commodity.

The full essay is at "Wall Street Banks in Commodities"




1. Sen. Carl Levin, “Opening Statement,” Wall Street Bank Involvement in Physical Commodities Hearing, Permanent Subcommittee on Investigations, U.S. Senate, November 20, 2014 (accessed November 21, 2014)
2. Ibid.
3. Ibid.

Wednesday, November 19, 2014

Missing Out in Reducing the Carbon Footprint: Human Reason Lapsing on Opportunities

Wind farms and solar panels—these alternatives to coal and natural gas could play a larger role in reducing the human impact on climate change were it not for missed opportunities. That any would be passed by when the species itself may hang in the balance points to a certain recklessness in the reasoning process akin to ill-afforded complacency.

In 2012, 13 gigawatts worth of wind-powered electricity generation capacity was installed in the United States, enough to meet the needs of roughly three million homes. This represents 40 percent of all the capacity added to the nation's power grid that year. Seven gigawatts had been added in 2011, and a bit more than five in 2010. In 2013, with Congress allowing the federal tax credit to lapse, only one gigawatt of wind power capacity was installed. Bioenergy, geothermal, and offshore wind were lagging too. Worldwide, investment in renewable energy sources was slowing as well, down to $211 billion in 2013, 22 percent less than the amount in 2011.[1]  Meanwhile, carbon emissions were at a record level globally in 2013 and the world’s oceans were already easing back in the additional amount of carbon that they could absorb. It would seem that the homo sapiens species has a self-destructive bent hard-wired in the brain.

At the very least, we are walking past opportunities as we head toward a global climate possibly outside of the realm of human habitation. According to the U.S. Energy Information Administration in 2014, the levelized cost of onshore wind energy for plants going into operation in 2019 could be as little as $71 per megawatt-hour (in 2012 dollars) without subsidies. Similarly, projections for the levelized cost of photovoltaic solar-cell energy were down 40 percent.[2]  Adding solar and wind plants to gas-powered generators and utilizing advanced load-management technologies could leverage the cost-savings, as the cost projections of energy from coal and natural gas were not showing similar drops.

Looking further out on the horizon, technology could perhaps be developed that would extract carbon from the oceans and the atmosphere. This unknown could end up making much of the difference in whether humanity keeps the global temperature increase within the 2C degree limit for sustainability.

In conclusion, the test may be whether we as a species use reason to resist the ever-present urge of instant-gratification. We know that a tax credit can be efficacious, and we see the cost projections coming down, yet on the other hand we find it hard to resist the convenience of driving more as gas prices drop, and we drive right by opportunities to reduce our collective imprint on the climate while we still can. It is as if we were a very overweight person at an unlimited buffet. In spite of having a goal of losing weight, we just can’t help ourselves while we are at the buffet because the food is there and we figure we can always eat less tomorrow. At the buffet, we figure in a warped sort of way that as long as we are there, it won’t be all that much worse if we go back for another dessert. It is just this sort of flawed reasoning that I suspect lies behind the arrows going in the wrong way in our handling of the climate crisis.



[1] Eduardo Porter, “A Carbon Tax Could Bolster Green Energy,” The New York Times, November 19, 2014.
[2] Ibid.

Monday, November 17, 2014

Homelessness in the U.S.: A Reflection of American Values

According to a report by the National Center on Family Homelessness in 2014, nearly 2.5 million American children were homeless at some point in 2013.[1] The U.S. Department of Education had reported that 1.3 million homeless children were going to school. California, which accounted for one-eighth of the U.S. population at the time, had one-fifth of the 2.5 million, which comes out to nearly 527,000. The relatively high cost of living and shortage of low-income housing, along with a largely stagnant minimum wage, are the more visible factors behind the gap.

The full essay is at "Homelessness in the U.S."





1. David Crary and Lisa Leff, “Number of Homeless Children in America Surges to All-Time High: Report,” The Associated Press, November 17, 2014.