Monday, August 17, 2009

Score One for the Good Guys

Prime capitalist institution, BB&T, has asserted itself as a healthy, thriving bank amidst a sea of faltering behemoths. Now, as the economy starts to show signs of life, the bank is breaking out of the gate and gobbling up its weaker competitors who made destructive lending decisions back in the day.

On Friday, BB&T acquired most of Colonial Bank Corp.'s deposits and assets through the FDIC's seizure of the bank. (Don't get me started on that whole process.) This will make BB&T the 8th largest bank in the US by deposits. That's good for us shareholders. (Incidentally, size of a company is most certainly not always a determinant of success, but with a company like BB&T, added market share means more opportunities to apply its winning strategy.)

Important to all friends of Objectivism, however, is the heightened profile of the bank. Take, for example, this WSJ article about the purchase, which mentions capitalist ubermensch John Allison, as well as Objectivism. Here's a slice:

Before Friday, BB&T had about $152 billion in assets, 29,000 employees and operations in more than 11 states. It will purchase an additional $22 billion in assets in the Colonial deal. Mr. Allison, an adherent of Objectivism as practiced by author Ayn Rand, shaped the bank's behavior around his philosophical outlook.

"BB&T Values," a 30-page guide to the company's 10 core principles, written by Mr. Allison, asks employees to practice "reason," justice," "productivity" and "independent thinking."

Employees are encouraged to adopt these principles at the nearby BB&T University training center.

The bank also has long opposed government intervention in the private sector, refusing to lend to any landowner who acquired property via eminent domain. BB&T did accept federal bailout money last year, but was among the first to pay it back. The day the company got approval to return the capital, executives, including Mr. King, cheered.

Other than the fact that the authors neglect to mention that BB&T was forced to take the money, this is very good coverage for the bank, Allison, and the philosophy. It implies that the bank's guiding philosophy put it in a position to be able to succeed in the current business environment.

Very positive stuff.

Friday, August 14, 2009

The West Bank Has A Stock Exchange?

This is a really heart-warming op-ed from the WSJ written by the Israeli ambassador to the United States. It's called "The West Bank Success Story," and in it, Ambassador Oren discusses the progress that the West Bank has made economically just in the last year. I want to include an extended excerpt here, because I think what he says is extremely important.

Since 2008, more than 2,000 new companies have been registered with the Palestinian Authority in the West Bank. Where heavy fighting once raged, there are now state-of-the-art shopping malls.

Much of this revival is due to Palestinian initiative and to the responsible fiscal policies of West Bank leaders—such as Prime Minister Salaam Fayyad—many of whom are American-educated. But few of these improvements could have happened without a vastly improved security environment.

More than 2,100 members of the Palestinian security forces, graduates of an innovative program led by U.S. Gen. Keith Dayton, are patrolling seven major West Bank cities. Another 500-man battalion will soon be deployed. Encouraged by the restoration of law and order, the local population is streaming to the new malls and movie theaters. Shipments of designer furniture are arriving from China and Indonesia, and car imports are up more than 40% since 2008.

Israel, too, has contributed to the West Bank's financial boom. Tony Blair recently stated that Israel had not been given sufficient credit for efforts such as removing dozens of checkpoints and road blocks, withdrawing Israeli troops from population centers, and facilitating transportation into both Israel and Jordan. Long prohibited by terrorist threats from entering the West Bank, Israeli Arabs are now allowed to shop in most Palestinian cities.

Considering the state the West Bank has existed in for half a century under the tyranny of religious rule, this is amazing news. For anyone familiar with the region, or who has even gone there and seen what the West Bank looked like (I was there at the end of 1999), the concept of shopping malls, movie theaters, foreign cars, and even a stock exchange is baffling.

I also find it to be an interesting example of how important the rule of law is. For years, the Palestinians have wavered somewhere between fascist centralized control and a sort of anarchic psychopathocracy. Introducing a consistent protection of individual rights, those of the Palestinians as well as the Israelis, is integral to forging an economic relationship between the two peoples. The possibilities for peace that arise from the scenario are enough to bring tears to one's eyes.

Oren also notes the contrast with Gaza, where the psychopaths continue to reign supreme, spending their money on rockets instead of shopping malls. Perhaps one day, if the West Bank pursues a pro-capitalist policy, enforcing property rights, the two regions on either side of Israel will become another study in opposites like East and West Germany or North and South Korea.

Friday, August 7, 2009

Honda, Who Knew?

I needed to look up something about Honda's Indiana plant for work, and this popped up in front of me when I opened the website:
The Human Being is born as a free and unique individual with the capacity to think, reason, and create--and the ability to dream. "Respect for the Individual" calls on Honda to nurture and promote these characteristics in our company by respecting individual differences and trusting each other as equal partners.
-Honda Philosophy
It's always nice to see reason and individualism promoted by a large corporation, even if inconsistently.

Wednesday, August 5, 2009

A Quick Thought About SEC Fines

In reading an article in the WSJ today about how the SEC has reworked its rules to allow confiscating executives' pay, even if the executives are not accused of any wrongdoing, something occurred to me. The SEC was founded in the 1930s to act as a protector of shareholders' rights. (Go ahead, laugh.) The idea was that businesses had become so large that their management was effectively kept hidden from the view of their owners. Theoretically speaking, there is nothing wrong with appointing a group of people to enforce laws against corporate fraud. Defrauding one's investors is a violation of their rights, and it is the government's job to defend against such injustice.

This, however, is not what the SEC did then or does now. The SEC concocts a bunch of hoops for managers to jump through, lest they be fined or thrown in jail, ranging from the grotesquely immoral to the just plain silly. The penalty for fraud is typically a corporate fine, paid to the SEC for some reason, and sometimes personal fines and/or jail time for executives depending on the crime. Similar punishments are doled out at the state level by rabid attorneys general like Elliot Spitzer.

What occurred to me is that the crimes are supposed to be violations of shareholders' rights, via mangerial fraud. And the punishment is a fine, which will be paid by who? That fine is coming right out of the shareholders' bottom line. So shareholders get screwed twice: once by the fraudulent management, and then again when the SEC fines them. This is, of course, assuming that any fraud existed in the first place, which may or may not be true.

This is just a little ammunition if you're ever in an argument and someone maintains that the SEC is necessary to protect innocent shareholders from unscrupulous executives.