When US SEC Charges Pastor with Defrauding Retirees (Pastor said he was more trustworthy than bankers..)

Fascinating story.

US Securities Exchange Commission has recently charged a Pastor for defrauding customers. He using his religious stature pushed people into giving their savings towards his own venture.

Remembering noted botanist GH Krumbiegel, creator of Bangalore’s Lalbagh

A nice tribute. We neither know about such people nor remember them.

“There is a saying about him- German by birth, married an English woman, but his heart always belonged to India.” Alyia Phelps Gardner is talking about her great-grandfather Gustav Hermann Krumbiegel (1865-1956), a German botanist and town planner who was one of the chief architects of the Lalbagh Botanical Garden.

Krumbiegel is credited for having brought over 50% of the nearly 9,000 trees from 800 genera in Lalbagh. His work was also instrumental in the city getting the “Green City” tag. Krumbiegel was responsible for planting seasonally-flowering trees on the city’s avenues so that they would be covered in bloom throughout the year.

…

Were Gustav Krumbiegel alive today, Gardner says, he would have been “very sad” at the sight of the beautiful city losing its green cover which he had painstakingly worked on creating.

“I feel sad about all the trees, some over 100 years old, being hacked and poisoned. I worry about the pollution and the garbage in the Garden City and I feel he is telling me to stand up.”

A part of several local city groups on Facebook, Gardner has been actively advocating the need to plant trees with the help of local citizens. She is also working on a campaign to restore the dilapidated Krumbiegel Hall.

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Why Russia gave up Alaska, America’s gateway to the Arctic

Fascinating account by Prof. William L. Iggiagruk Hensley of University of Alaska Anchorage.

One hundred and fifty years ago, on March 30, 1867, U.S. Secretary of State William H. Seward and Russian envoy Baron Edouard de Stoeckl signed the Treaty of Cession. With a stroke of a pen, Tsar Alexander II had ceded Alaska, his country’s last remaining foothold in North America, to the United States for US$7.2 million.

That sum, amounting to just $113 million in today’s dollars, brought to an end Russia’s 125-year odyssey in Alaska and its expansion across the treacherous Bering Sea, which at one point extended the Russian Empire as far south as Fort Ross, California, 90 miles from San Francisco Bay.

Today Alaska is one of the richest U.S. states thanks to its abundance of natural resources, such as petroleum, gold and fish, as well as its vast expanse of pristine wilderness and strategic location as a window on Russia and gateway to the Arctic.

So what prompted Russia to withdraw from its American beachhead? And how did it come to possess it in the first place?

As a descendant of Inupiaq Eskimos, I have been living and studying this history all my life. In a way, there are two histories of how Alaska came to be American – and two perspectives. One concerns how the Russians took “possession” of Alaska and eventually ceded it to the U.S. The other is from the perspective of my people, who have lived in Alaska for thousands of years, and for whom the anniversary of the cession brings mixed emotions, including immense loss but also optimism.

Read the piece for more details..

There were 54 Princely State banks in 1950s! (The thinking to merge these banks started in 1951..)

As the 5 remaining State Associate banks are going to merge with parent SBI, the blog has been interested in knowing more about these banks. The blog has put up some posts as well: one, two, three.

However, this amazing chapter drawn from Second Volume of RBI History (1951-67) pretty much sums up how these banks became part of SBI. The thinking on this process started almost as early as 1951 (more on this later in the post).

Moreover, it is fascinating to know that RBI counted 54 such State banks in 1952:

Finance apart from finance is also an art…

Matt Levine of Bloomberg View points to a recent plan by a hedge fund manager to work around GM stock. All kinds of jargons/fancywords are used to package the idea:

When Marginal Revolution Blog visits Lasalgaon Onion Market

One very important module in all economics training should be visiting and understanding local markets. It is appalling how as economics students we don’t know how markets/shops work in our neighbourhood and markets in our city of training. It is as if markets only exist in textbooks. They are just all around us but we hardly care. It might be just a great idea if we students understood these markets and look to make them better.

So it was interesting to read this post on MR blog by Alex Tabarrok who visited Lasalgaon’s onion market. It was also nice to read that he was invited by an avid blog reader!

Life lessons from a Bacardi: remember your roots and be frugal

Nice interview of Facundo L. Bacardi, the great grandson of founder of Bacardi.

Facundo L. Bacardi had little interest in joining the family business, which happens to be the largest privately held spirits company in the world, with a portfolio of more than 200 brands, including Bombay Sapphire, Grey Goose and Dewars.

The great-great grandson of Bacardi company founder Don Facundo Bacardţ Massū had other plans.

“When I was young, I wanted to be a lawyer,” he said. “When I got to my teens, I started thinking, Boy, I’d really love to be a baseball player.”

As Bacardi got older, his family legacy began calling him. Now 50, he has been chairman of the board of Bermuda-based Bacardi Limited since 2005 and a director since 1993. He spoke with Reuters to share some of the life lessons he has learned from his family — and the family business — over the years.

He says the most important lesson is to be frugal and rooted:

How Bengaluru [Bangalore] stops terror attacks with traffic jams..

An old article now. Came over the weekend. In case those who missed it:

Let’s face it – Bengaluru’s traffic is legendary! From inspiring thousands of people to live minimalist lives with whatever stuff they manage to fit into their car, to creating the first humans who live for hours every day on pure exhaust fumes, Bengaluru’s traffic has some unique firsts to claim in India. (In Asia, and the world though, China’s got us beat. When will the Tiger overtake the Dragon?!)

But before you write off the city as an irretrievable traffic mess, you should also see the silver lining to the sooty, pollution covered picture. According to a report by Nikhil Gangadhar in the Deccan Herald, Bengaluru may be the first city in the world that stopped at least one terrorist attack using just bad traffic. 

That’s right, you heard correctly…a terrorist attack may have been averted with just a traffic jam. Nikhil reports that a man named Habib Mia, arrested in Tripura and brought to Bengaluru last week, told police that terrorists who attacked IISc on December 28, 2005, also planned to attack other seminar events in parallel to tarnish India’s reputation.

However, an attacker who was travelling to the Indian Institute of Management on Bannerghatta Road apparently got caught in a traffic jam, and the seminar he was supposed to attack ended before he could get there.

What’s more, the terrorists also reportedly dropped a plan to attack an event at PES Institute of Technology because there was no easy escape route available. We have no further information on why this was the case.

What can one say really? It even attracted attention of MR Blog.

Is the new 1 Pound coin safest in the world? (though looks quite similar to India’s 10 Rupee coin)

UK’s Royal Mint has introduced a new one pound coin. The Mint proudly says it is the safest coin in the world.

It has 12 sides and made of two metals (bimetallic). The outer ring is gold coloured and inner ring is silver coloured. This bimetallism feature is quite similar to our very Rs 10 coin as well. Just that we have gold in the inner and silver in the outer ring.

When did Bombay takeover Calcutta as the prime financial centre of India? Some evidence..

For the current generation of scholars on finance and economics, this question would sound absurd. Competition between Calcutta and Bombay over financial centre? Really?

But Calcutta not just competed but even was much larger financial centre than Bombay. The older textbooks mention both Calcutta and Bombay as financial centres with Calcutta as First centre and Bombay as second financial centre. This is natural as Calcutta was the political and commercial capital of British. The first Presidency bank started in Calcutta in 1806 followed by Bombay nearly 34 years later in 1840 (the one in Madras was found in 1843). Bank of Bengal was much larger than Bank of Bombay for most part of Presidency bank history.

But Calcutta went through a lot of political turmoil in the 20th century which affected the city and its financial ranking. Bombay eventually took over the space of commerce and finance with Delhi taking the role of political centre. The question is when did Bombay eventually take over the financial space?

The name of the political party in power is far less important than the regime’s financial and banking connections..

This is a stunning piece by Murray Rothbard written in 1984.   It points how the revolving door between Wall street and US government is so old and deep.

Amma canteen variants catching up in other States: Just bad populism?

Karnataka just announced in its recent budget that it will launch Namma Canteens styled like TN’s Amma canteens. This led to criticism that it is not just populism but also hinders well run private darshinis in the State.

In a piece, Nikita Doval of Mint shows the  idea has caught up with other States too. Of course menus differ based on local consumption:

The late J. Jayalalithaa’s government in Tamil Nadu had launched Amma Unavagam (Mother’s canteen) with much fanfare in 2013.

Meant to provide wholesome food at heavily subsidized rates, the canteens which are run by the government but staffed by women from self-help groups have been a runaway success. Meals are priced at Re1, Rs3 and Rs5 and the menu includes idli, pongal, pre-mixed rice and chapatis which are served with complimentary dal. Such has been the success of these canteens that states like Rajasthan, Madhya Pradesh, Odisha, Andhra Pradesh have also started their own versions of subsidized food canteens. Now Karnataka too has announced the launch of Namma Canteens in the state.

The nomenclature varies from state to state; so in Rajasthan it is the Annapurna Rasoi Yojana where breakfast is served for Rs5 and lunch for Rs8. In Madhya Pradesh, it is christened the Deendayal Canteen; in Andhra Pradesh, the NTR Anna Canteens and in Delhi, the Aam Aadmi canteens were launched in January where the state aims to provide a wholesome nutritious meal for Rs10.

Just plain populism?

Whatever the names, the end objective is the same, to meet the nutrition requirements of the poor at a minimal rate in clean, hygienic surroundings.

It would be easy to dismiss the scheme as populist, especially given that Jayalalithaa’s party’s success in the 2016 elections was attributed to all the schemes which had been started in the years before, ranging from giving free laptops, mixer-grinders and of course the canteens, but a bigger purpose is also being met.

According to the National Family and Health Survey conducted in 2015, Indians still continue to struggle with BMI (body mass index) and anaemia. In states like Andhra Pradesh, 14.8% of men and 17.6% of women were found to be underweight. In Madhya Pradesh the numbers were 28.4% and 28.3%.

“In India, nutrition is a big issue, low BMI is a concern even for adults. In such a scenario, a balanced wholesome meal is part of the state’s responsibility but it has to be done well to succeed,” says Dipa Sinha, a right to food campaigner and assistant professor at Ambedkar University, Delhi. She cites the example of Brazil’s popular restaurant and community kitchens that serves nutritious food at affordable costs.

It is, however, not a simple matter of launching a subsidized food scheme. There are several other factors that need to be taken into account like the kind of food being served, the condition under which it is served and the overall hygiene of the place. One of the other advantages of the Amma Canteen is the employment it provides to a large number of women. “At a time when we are looking with worry at the declining number of women in the workforce in India, schemes like this are a great way to bring more women into the work-force,” says Sinha.

Similar arguments are made for mid day meal schemes as well. Populism can be tolerable as long as implementation is fine. Populism plus poor implementation is a double whammy which is usually the case with most such schemes..

Role of immigrants in US innovation history

I would be surprised if there was no role. How immigrants are attacked despite they bringing benefits to the local economies.

Profs. Ufuk Akcigit, John Grigsby and Tom Nicholas have a piece:

The impact of immigration on US economic development has become a controversial issue in recent policy debates. This column, arising from a study linking Federal Census data with patent records, examines the historical role of immigrant inventors in the process of US technological innovation. Immigrant inventors appear to have been of central importance to American innovation during the 19th and 20th centuries, both through their own inventive activity and through their influence on domestic inventors.

Most innovators come from Germany:

Figure 1 shows the share of inventors who were born abroad in each state. During the late nineteenth and early twentieth centuries, economic activity was largely concentrated in parts of the Northeast and the Midwest (Glaeser 2011). Immigrant inventors were heavily concentrated in these places too, perhaps in response to the greater opportunities and rewards available to individuals with inventive capabilities. Indeed, prior work has shown that the movement of inventors across countries is affected by key economic variables that affect financial returns, such as tax policy (Akcigit et al. 2016). Meanwhile, immigrant inventors were far less represented in southern states, where opportunities, or societal openness to disruptive ideas, may have been more limited (e.g. Acemoglu et al. 2014).

Based on an analysis of US patent technology classes, Figure 2 shows the areas in which immigrant inventors were prevalent. Medical inventions (e.g. surgical sutures) accounted for the largest share of immigrants, but this category produced just 1% of all US patents. However, immigrants were also active in chemicals and electricity – two sectors that had a particularly large effect on US economic growth, accounting for 13.9% and 12.6% of all US patents, respectively. Noticeably, immigrants accounted for at least 16% of patents in every area. This evidence suggests that their impact on inventive activity was widespread.   

Figure 2 also shows that the majority of immigrant inventors originated from European countries, with Germans playing a particularly prominent role. This is consistent with the findings of Moser et al. (2014) who show that German-Jewish émigrés who fled the Nazi regime boosted innovation in the US chemicals industry by around 30%. Today the closest analogue to these high-impact individuals would be inventors of Indian and Chinese ethnic origin who make substantial contributions to the development of innovation clusters in areas like Silicon Valley (Hunt and Gauthier-Loiselle 2010, Kerr and Lincoln 2010).

This does not mean immigrants alone help. Just that allow skilled people to more freely

In summary, our study – which is based on a large new data set matching millions of inventors from patent records to individuals in Federal Censuses – provides suggestive evidence that immigrant inventors were of central importance to American innovation during the 19th and 20th centuries. Although the migration of high-skilled inventors to the US involved some costs, immigrant inventors contributed heavily to new idea creation, through both their own work and collaboration with domestic inventors. Our evidence aligns with the view that growth in an economy is determined by its ablest innovators, regardless of national origin. The movement of high-skilled individuals across national borders therefore appears to have aided the development of the United States as an innovation hub.

 

In today’s finance, there is return free risk, but no risk free return…

Prof JR Varma just nails it in this post. He quotes from John Cochrane’s blog whose notion of risk is way too simplistic even despite recent crises.

He says economists continue to believe in risk free return whereas more accurately it is return free risk:

The Journey of Humankind: How Money Made Us Modern (National Geographic edition)

It is interesting when likes of National Geographic Channel discuss matters of money. They have a program as well on power of money for the human civilisation.

Civilization existed before money, but probably wouldn’t have gotten very far without it. Ancient humans’ invention of money was a revolutionary milestone. It helped to drive the development of civilization, by making it easier not just to buy and sell goods, but to pay workers in an increasing number of specialized trades—craftsmen, artists, merchants, and soldiers, to name a few. It also helped connect the world, by enabling traders to roam across continents and oceans to buy and sell goods, and investors to amass wealth…

Over the centuries, money continued to evolve in form and function. The ancient world’s stones and shells gave way to coins, and eventually to paper currency and checks drawn upon bank accounts. Those physical tokens, in turn, gradually are being superseded by electronic ones, ranging from credit card transactions to new forms of digital currency designed for transferring and amassing wealth on the Internet.

Nice pictures in the story as well…

Fight over AIADMK two leaves symbol: How History repeats itself..

The Election Commission had to freeze AIADMK’s two leaves symbol as the two factions staked claims over it.

However, this is nothing new. The same fight over the symbol happened when MGR died as well:

With the Election Commission freezing the ‘two leaves’ symbol of the All India Anna Dravida Munnetra Kazhagam (AIADMK), the focus has now shifted to how the warring factions will come to terms with the changed circumstances, particularly in the context of the byelection to the R.K. Nagar constituency. However, the present tussle in the AIADMK over the party symbol has brought back memories of the piquant situation the party faced in 1988 over the same issue.

Just as there are two factions now, the AIADMK was then divided into two groups, one led by Janaki Ramachandran, widow of the AIADMK founder M.G. Ramachandran, and another by Jayalalithaa, then, the party’s propaganda secretary.

At that time, the battle went on for nine months and it was a month before the Assembly elections in January 1989 that the Election Commission (EC) decided to freeze the symbol. While the Janaki faction was given the symbol of ‘a pair of pigeons’, Jayalalithaa’s group got the ‘cock’ symbol.

The fight erupted weeks after the dissolution of the Tamil Nadu Assembly in January 1988 and police sealing the AIADMK headquarters building on Lloyds Road in Royapettah. In mid-March, the Jayalalithaa faction had formally staked its claim for the name and symbol of the party.

This time too, two new symbols have been given:

The split in the AIADMK became official on Thursday when the two factions chose new names and picked poll symbols+ from the election commission’s ‘free basket’ ahead of the RK Nagar byelection.

The V K Sasikala faction, now called AIADMK (Amma), settled for ‘hat’ as its symbol for the RK Nagar bypoll; the OPS group that christened itself AIADMK (Puratchi Thalaivi Amma) chose the ‘electric pole’, with its forked arms, appeared to have an uncanny resemblance to ‘two leaves’, the popular symbol of the parent party. The settlement came hours before the deadline for filing nominations.

Sasikala faction candidate T T V Dinakaran wore a hat – and a smile – when he went to file his nomination papers, but OPS and his candidate E Madhusudanan had a hearty laugh as the ‘electric pole’ appeared to have an uncanny resemblance to ‘two leaves,’ the popular symbol of the parent party.

Fascinating..

 

25 Years Later, Is It Still the Hayek Century?

Hayek died 25 years ago on 23 March 1992.

David Boaz of Cato Institue pays a tribute:

Hayek lived long enough to see the rise and fall of fascism, national socialism, and Soviet communism. In the years since Hayek’s death economic freedom around the world has been increasing, and liberal values such as human rights, the rule of law, equal freedom under law, and free access to information have spread to new areas. But today liberalism is under challenge from such disparate yet symbiotic ideologies as resurgent leftism, right-wing authoritarian populism, and radical political Islamism. I am optimistic because I think that once people get a taste of freedom and prosperity, they want to keep it. The challenge for Hayekian liberals is to help people understand that freedom and prosperity depend on liberal values, the values explored and defended in his many books and articles.

There is more here…

Unique ‘Twitter satyagraha’ against HDFC Bank completes 50 days: Why did the bank choose the wrong nudge?

A very interesting article. It talks about yet another person protesting on another Indian bank’s practices.

Instead of the usual protests, he wrote series of Tweets everyday for the last 50 days asking the bank to say sorry:

Bengaluru-based communications professional Karthik Srinivasan has started a unique protest to express his displeasure with what he calls an unethical programme by HDFC Bank. A popular handle on Twitter and known blogger, Srinivasan has just completed 50 days of his so-called ‘Twitter satyagraha’ against the bank’s opt-out programme for preferred customers.

The core problem is that default choice was made as opt-out:

RBI Governor: Please Stop Banks Fleecing Customers and Depositors!

First there is this article by Dr Yerram Raju : Is SBI heading for bankruptcy?

Customers of State Bank of India (SBI), especially in south India, are forced to ask whether SBI is headed for bankruptcy as they find 99% of the automatic teller machines (ATMs) shut down and all branches declining withdrawals from the depositors’ savings account beyond a limit. Bank branches are refusing to honour cheques drawn on them, either their own or on third party, in spite of sufficient balance in the account. To top it, the bank’s branches refuse to give written objection for returning the cheque across the counter. 

He narrates from his own experience and perhaps overstretches it. But it will be good to read about more SBI customers. Are they facing similar troubles?

Whatever it may be, overall message is clear. Banks have lost their basic sense of serving the customer. We are back to earlier days when banks just didn;t care. Once again, Indian banks seem to have become way too arrogant and shunning the customers. Their pricing has become opaque and are just charging all kinds of things.

Second, there is detailed memorandum to RBI chief against these practices:

A group of bank customers, consumer activists, policy watchers, bankers, trade unions and non-governmental organisations (NGOs), has requested the Reserve Bank of India (RBI) to urgently change policies to ensure that banks treat bank customers fairly. 

In a Memorandum sent to RBI Governor Dr Urjit Patel, they said, “We are disturbed at the unfair treatment that bank customers suffer in the form of frequent, arbitrary and one-sided increase in banking charges, or the refusal of banks to automatically pass on contractual benefits such as lower interest to those with floating rate home loans, or the rampant mis-sellling of third-party products such as insurance.”

“The RBI as the banking regulator has been proactive in improving the customer service rendered by banks. However, the RBI has not taken banks to task on the many customer-unfriendly practices that are increasing with impunity. Over the years, the RBI has remained silent on several anti-depositor actions of banks. The Banking Ombudsman’s rulings also tend to side with banks, making no attempt to observe the pattern of complaints which would amply bring out rampant mis-selling of insurance and wealth management products. We have identified some specific areas and request RBI’s intervention to take corrective steps after engaging with customers,” the Memorandum says.

Hopefully banks wake up..

US adopts T+2 settlement cycle for Securities Transactions..(India moved to T+2 system 14 years ago)…

Clearing and Settlement system (referred as backoffice in corporate lingo)  is perhaps one of the most understated yet highly important activity in financial markets. When two parties trade, one gets securities and other cash. This settlement process takes time. Earlier these settlement systems ran in months than brought down to fortnight and now to a few days. All this has been possible due to technology.

So you trade on a day it is called as T. The time taken to settle is added to T. So T+5 means settlement shall happen on 5th working day after the trade.

US SEC announced that it shall move from T+3 to T+2 settlement:

The Securities and Exchange Commission today adopted an amendment to shorten by one business day the standard settlement cycle for most broker-dealer securities transactions.  Currently, the standard settlement cycle for these transactions is three business days, known as T+3.  The amended rule shortens the settlement cycle to two business days, T+2. 

The amended rule is designed to enhance efficiency, reduce risk, and ensure a coordinated and expeditious transition by market participants to a shortened standard settlement cycle. 

“As technology improves, new products emerge, and trading volumes grow, it is increasingly obvious that the outdated T+3 settlement cycle is no longer serving the best interests of the American people,” said SEC Acting Chairman Michael Piwowar.  “The SEC remains committed to ensuring that U.S. securities regulation is reflective of modern times, and in shortening the settlement cycle by one day we aim to increase efficiency and reduce risk for market participants.”

Broker-dealers will be required to comply with the amended rule beginning on Sept. 5, 2017.

What is interesting is India moved to a T+2 system in 2003!

Following Finance Minister’s announcement on March 13, 2001 that the rolling settlement would be extended to BSE-200 list would be traded only in the compulsory rolling settlement on all the exchanges from July 2, 2001. Further, SEBI mandated rolling settlement for the remaining securities from December 31, 2001. SEBI introduced T+5 rolling settlement in equity market from July 2001. Subsequently shortened the settlement cycle to T+3 from April 1, 2002. After having gained experience of T+3 rolling settlement, it was felt appropriate to further reduce the settlement cycle to T+2 thereby reducing the risk in the market and to protect the interest of investors. As a result, SEBI, as a step towards easy flow of funds and securities, introduced T+2 rolling settlement in Indian equity market from 1st April 2003.

We are unaware of the progress made in equity markets. Our infrastructure and systems have been ahead of most developed countries for a while..