Monday, March 31, 2008

A New Role for the Fed?

Today Secretary Paulson announced a new plan for the Fed to take more responsibility for regulating investment banks as well as some aspects of various exchanges. I haven't read the whole plan yet but it seems interesting. At the risk of agreeing with Obama who said (according to the WSJ) that the plan was inadequate and that he hadn't read it yet, my early take is that something doesn't sound right.

Leaving a true analysis of the pros and cons of Fed regulation to the professionals, here are some interesting points to think about.

First, currently the FED is assigned with two tasks: Full Employment and Controlled Inflation. One should note that other Central Banks are may be concerned with just one of these policies; The ECB primary goal is inflation control. One might ask if the Fed is doing a good job with one of these tasks (inflation) at the current time in their effort to stem job losses and boost inflation. How will the FED manage when they also are responsible for maintaining exchange stability or investment bank stability?

Second, the FED is not a branch of the government. It is somewhat independent and does not report directly to the executive branch. Various regulating agencies which Secretary Paulson recommends consolidating under the FED do. It appears that this may be a nice way of removing responsibility for banking industry regulation from the purview of the Executive Branch to a quasi-private organization. Do we really want that?

Saturday, March 29, 2008

Discover Card and an Old Marketing Trick

Ever been to a hotel and have your reservation messed up? The clerk comes out and quickly corrects the problem, maybe even upgrading your room in the process? What do you think about the service? What do you think about the hotel? My guess is you will be happy; they made a mistake and they fixed it giving you a better room to boot, what nice people.

What if you went to the same hotel and they hadn't made a mistake? What if 100 people went to the same hotel, fifty of them get the rooms they expected while fifty of them are "upgraded" after an honest mistake is made. Turns out the people who suffered through the mistake will tend to rate the hotel better than the people who had no problems. They suffered through a minor inconvenience, got a room and saw the hotel manager go out of their way for them.

Well, it can be a scam. If people really do rate their experiences better after a mistake is made and fixed. Why shouldn't the hotel make mistakes on purpose? You get the room you were always going to get, the upgrade is a scam, and the mistake was just for show.

It appears Discover card is doing this trick. On March 12th I received a notice from Discover Card. I have a card but haven't used it in about five years. In fact, I had just shredded it a few days before I got the letter. The letter informed me that they made a mistake. It turns out I made a purchase in January where I was qualified for a 1.5% APR but I was not given that rate, instead I was charged a much higher rate.

Thats great news! It turns out Discover Card is pro-actively going through my account to look for errors in their billing. However, I haven't made any purchases. When I do make purchases I always pay at the end of the month so the APR doesn't matter anyway. Thank you Discover Card for finding your error, except it appears that you have created a new error. You are discovering transactions which didn't happen! Were your computers broken in January, or are they broken now? Or are you lying to me?

Discover Card apologizes in the last paragraph for any inconvenience that might have been caused. I feel better; I must try to love my Discover Card; I must remember to use it next time. Alas, I already shredded it.

Why The Name?

When I was in High School I took a Calculus class with a good friend of mine (All names are neglected here to protect the guilty). The class was easy, but I had a hard time with the teacher. She was horrible, she was more concerned with what instrument you wrote with rather than what you knew about the subject. One of those math teachers who didn't know to much about math and so graded you on what she knew, which was nothing. Needless to say, I got a C in the class.

I was a C student. Not really dumb, but I didn't apply myself. I have learned from my mistakes and corrected that. Now, back to the real story.

At one point in the class we were required to write a paper on Calculus. Interestingly this was the second ten page paper I had been required to write on the history of Calculus, the first coming in 8th grade. I wrote on Leibnitz: ten pages of mediocre writing. I got a C; I deserved it. I should note however that I went to the library, and actually put some effort into this paper.

My friend however, put extra effort into the paper. He decided to moc the teacher as he suspected she didn't really read the papers at all. His paper was entitled Diahretic Expostulations on Calculus. Think of it as Bullshit on Calculus. My friend was one of the few people with a computer at the time, he switched his font to Greek charters and typed like a monkey to fill the first page with Greek letters. The borders were 1.5 inches and the font was something like 15p. with 2.5 spacing. The entire ten pages could be condensed to about half a page of single spaced type with a normal font. The paper read "Calculus is cool, especially when written with pencil." He got an A+.

I hope my blog meets with as much success as his paper.

Friday, March 28, 2008

A Grand Entry

Here I am, ready to blog. Well, not ready yet. I plan to start a bit later. I have a lot to say but I need some time to compose something thoughtful. See you later.