Seth_Klarman_Views_(24_pgs) June 2013

I’ve been meaning to read this for a while – I can’t remember where I came across this or who I owe credit to for originally posting this but thank you.  This is probably the best piece I’ve read all summer, maybe all year.

For this blog post I originally started jotting down excerpts from this speech that resonated with me.  I quickly realized that I was writing down everything – literally re-transcribing the entire speech.  I would have copied and pasted the whole thing for you, dear reader, but this appears to be a scanned copy of a printed document.

Anyway, give it a read – don’t be daunted by the 24 pages, it’s actually a very quick read and it is well worth your time.


If you can’t laugh at the subversion of our basic liberties what can you laugh at?  The recent leak of the NSA’s secret PRISM program has elicited quite a response – especially the poor presentation value of their “pitch” slides.  Seriously, if you’re asking for $20M a year of taxpayer money at least jazz up your powerpoint a bit.


In every stage of these Oppressions We have Petitioned for Redress in the most humble terms: Our repeated Petitions have been answered only by repeated injury. A Prince whose character is thus marked by every act which may define a Tyrant, is unfit to be the ruler of a free people.

Declaration of Independence In Congress, July 4, 1776

I think the news breaking about the NSA’s PRISM program is pretty scary.  This type of abuse is truly the biggest threat to the country and the liberties we hold dear that I can think of.  It seems like everyone kind of expected this type of surveillance was taking place but now that we’ve been confronted with some hard evidence it becomes harder to just write it off.  This is truly an Orwellian nightmare come true.

Obama – what part of “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized” do you not understand?

I was thinking about this yesterday and I was trying to come up with an analogous 1776 version of this story.  It would basically involve the British having a central processing center for all written communications and papers (kind of like the postal service but you can’t avoid it).  But instead of just receiving and distributing the mail it made a copy of every document that passed through and kept that document on file forever – for the king or his agents to review at their pleasure.  Images of red coats sitting in a row reading and transcribing letters with their feather pens should be coming to mind.  Wouldn’t that have been outrageous?  Do you think the founding fathers would have listed that as one of their grievances in the Declaration of Independence?  I digress…

There is a great op-ed piece in the Guardian by Daniel Ellsberg that is worth a read – below is an excerpt.  It’s also worth nothing that Ellsberg thinks this is the most important leak in American history; even more important than the Pentagon Papers that were leaked 40 years ago.  (side note: at least the UK’s free press is looking out for our rights and liberties – thanks, we owe you one)

“But what is not legitimate is to use a secrecy system to hide programs that are blatantly unconstitutional in their breadth and potential abuse. Neither the president nor Congress as a whole may by themselves revoke the fourth amendment – and that’s why what Snowden has revealed so far was secret from the American people.

In 1975, Senator Frank Church spoke of the National Security Agency in these terms:

“I know the capacity that is there to make tyranny total in America, and we must see to it that this agency and all agencies that possess this technology operate within the law and under proper supervision, so that we never cross over that abyss. That is the abyss from which there is no return.”

The dangerous prospect of which he warned was that America’s intelligence gathering capability – which is today beyond any comparison with what existed in his pre-digital era – “at any time could be turned around on the American people and no American would have any privacy left.”

That has now happened. That is what Snowden has exposed, with official, secret documents. The NSAFBI and CIA have, with the new digital technology, surveillance powers over our own citizens that the Stasi – the secret police in the former “democratic republic” of East Germany – could scarcely have dreamed of. Snowden reveals that the so-called intelligence community has become the United Stasi of America.”

Scary stuff indeed.  Hang on… someone’s at the door.

Simon Sinek: How great leaders inspire action

I’ve been periodically watching this video for a few years and I’ve been meaning to blog about it for quite a while.  This 20 minute talk is well worth your time – the concept is simple but resonates incredibly well.

The punchline: why you do something is more important than what you do or how you do it.  That’s not to say the “how” or “what” aren’t important but it’s the “why” that ranks supreme.  People don’t buy what you do, they buy why you do it.

There are leaders and there are those who lead.  Leaders are people with power and authority, we follow them because we have to.  Those who lead inspire us, we follow them because we want to.

The Golden Circle


Senators Sherrod Brown (D, Ohio) and David Vitter (R, Louisiana) have a good op-ed in the NYT from yesterday: Make Wall Street Choose: Go Small or Go Home

Yesterday they introduced legislation that aims to end too big to fail and level the playing field for banks, big and small, by requiring sufficient capital reserves.  What a revolutionary notion…

I really hope this is genuinely good legislation that isn’t overly complex or loaded with loop holes.  Even if it is good legislation it’ll be tough to overcome Wall Street’s influence over congress.  I’m hopeful but not holding my breath.

Some excerpts:

Today, the nation’s four largest banks — JPMorgan Chase, Bank of America, Citigroup and Wells Fargo — are nearly $2 trillion larger than they were before the crisis, with a greater market share than ever. And the federal help continues — not as direct bailouts, but in the form of an implicit government guarantee. The market knows that the government won’t allow these institutions to fail.

It’s the ultimate insurance policy — one with no coverage limits or premiums.

These institutions can then borrow and lend money at a lower rate than regional banks, Main Street savings and loan institutions, and credit unions.


Unfortunately, existing capital rules are insufficient to prevent another crisis and are either too complex to administer or too easy to manipulate.


Our bill aims to end the corporate welfare enjoyed by Wall Street banks, by setting reasonable capital standards that would vary depending on the size and complexity of the institution.


Our proposal also curtails the expansion of the government safety net for Wall Street by limiting taxpayer support to traditional banking operations. Under our legislation, financial institutions would be prohibited from transferring nonbank liabilities — like derivatives, repurchase agreements and securities lending — into federally supported banks that benefit from deposit insurance. This would ensure that the government safety net protects only the commercial bank, not the risky investment-banking arms of the megabanks. If the megabanks want to remain large and complex, that’s their choice — but Americans should not have to subsidize their risk-taking. If they fail, their executives and investors — not taxpayers — should pay the price.

Great NYT piece about all the lessons learned after our financial crisis.  You could have had a blank article after that headline and the point would have come across but instead Jesse Eisinger has a great article about JPM, it’s major trading loss last year, and how it not only deceived shareholders but was not even bothered by regulators.

We have not learned our lesson and it is surely sewing the seeds of the next great financial crisis.  Check it out.

NYT: Lesson Learned After Financial Crisis: Nothing Much Has Changed

A few of the money shots:

What we now know about the incident is that, as the cliché has it, the cover-up was worse than the crime. The losses out of the London office weren’t enough to take down the bank. But as they were building, JPMorgan traders fiddled with risk measures and valuations. The bank’s risk managers defended the traders and pooh-poohed the flashing red signals. The bank gave incorrect information to its regulator. Top executives then made misleading statements to shareholders and the public. All the while, the regulator served its typical role of house pet.


So let’s take a moment to celebrate a handful of American heroes, Mr. Levin and the staff members at the Senate Permanent Subcommittee on Investigations. Because of them, this corruption has come to light. Friday’s hearing served to emphasize how lonely Mr. Levin’s efforts are. Senator John McCain, Republican of Arizona and the new ranking minority member on the committee, did a yeoman’s job of asking a few questions. Senator Ron Johnson, Republican of Wisconsin, made a few incoherent statements using the au courant phrase “too big to fail,” then scuttled out of the hearing. None of the other senators, Democrats and Republicans alike, bothered to show up.