Archive for the ‘Ethics’ Category

Washington, D.C., hit near-record high temperatures on Wednesday. But that didn’t discourage more than a hundred dedicated activists from making the two-mile walk from Dupont Circle to the headquarters of Crossroads GPS, one of those outside groups spending millions of dollars to sway the elections. These brave souls were marching to demand that Crossroads co-founder and GOP strategist Karl Rove be held accountable for selling out our democracy to the highest bidder.

As we journeyed together through the streets of our nation’s capital, I heard people talking about lots of different issues—from jobs and retirement to health care and elections. Ultimately, however, most of their grievances boiled down to a single word: fairness. These folks were out in the scorching heat because they believe that American democracy is about every citizen having a voice in government. Not about how many dollars a person (real or corporate) can spend on TV and radio ads.

At our destination, all one had to do was look around to see what real democracy looks like. It’s not the small group of people who were upstairs in an air conditioned room, figuring out how to manipulate voters into favoring the candidates that corporations want in office.  Democracy is those who cared about their country enough to brave the heat for a chance to shout in the streets that people, not corporations, should have the power in our system.

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To JPMorgan shareholders who have witnessed a $25 billion drop in market value since the “London Whale” gambled away $2-plus billion: Look on the bright side. Think of this as a public service investment in sound financial policy education. As Congress continues with hearings on JPMorgan and CEO Jamie Dimon himself takes the stand tomorrow, many reforms now enjoy an urgent new argument. This expensive episode means we should act now on a number of reforms.

Implement a strong Volcker Rule
Banks shouldn’t gamble with a taxpayer backstop. This is why a strong Volcker Rule is needed. JPMorgan’s gambling partners allowed the bank to risk so much because they knew the U.S. taxpayer would make good on extraordinary losses. Within the details of the rule, JPMorgan’s ability to continue such betting in the future boils down to the interpretation of two words in the Wall Street reform law statute: “aggregate position.” The Senate authors explain that this means the bank can hedge a specific position, such as a single bond, which the bank purchased at various times, at various prices.  JPMorgan believes this means an entire portfolio, such as its ownership of 130 separate bonds. The Volcker Rule must be tightened, implemented and enforced.

Break up big banks
Failure of a bank JPMorgan’s size could cripple the economy. At some point, banks become too large to manage. Detail-focused CEO Jamie Dimon failed to catch what he subsequently called a “badly conceived” gamble.  Federal Reserve Bank presidents in Dallas and St Louis have called for a break-up.  Sen. Sherrod Brown (D-Ohio) introduced legislation recently to reduce bank size. The bill could even garner bipartisan support, as Sen. Richard Shelby (R-Ala.) voted for the same legislation two years ago, along with 32 other senators. In the House, Reps. Brad Miller (D-N.C.) and Keith Ellison (D-Minn.) introduced a parallel bill.

Increase bank capital
Even industry apologists who oppose reducing bank size and limiting risky activities agree that bank capital—what shareholders invest and lose when loans or gambles go bad—must be high. Fortunately, JPMorgan exceeded minimum capital standards, though many think mandatory levels should be doubled. Sen. Pat Toomey (R-Pa.) supports higher bank capital, a view he voiced at the both the May 22 and June 6 congressional hearings on the JPMorgan fiasco.

Reform banker compensation
The now-terminated chief investment officer earned 94 percent of her pay from “incentive compensation.” No wonder she swung for the fences, as Gary Gensler put it at the May 22 hearing. Gensler chairs the Commodity Futures Trading Commission, the primary financial gambling regulator. The Wall Street reform law specifically bars pay that promotes “inappropriate” risk-taking, but regulators are now more than a year late finalizing it.

Stop derivative deregulation
Wall Street shills, as Rep. John Tierney (D-Mass) labels some of his fellow members in the House, are moving nine bills. Of varying danger, one of them leaves offshore derivatives trading, such as JPMorgan’s London trades, free of basic regulation. Rep. Frank Lucas (R-Okla.), chairman of a key committee, cancelled a vote on two problem bills.

Bank officers should not oversee themselves
CEO Jamie Dimon sits on the New York Federal Reserve Bank, which supervises his bank. U.S. Sens. Barbara Boxer (D-Calif.) and Bernie Sanders (I-Vt.) introduced a bill May 22 that prevents active bankers from serving on the federal supervisory agencies. Massachusetts senatorial candidate Elizabeth Warren and former New York governor Eliot Spitzer think Dimon should step down from the New York Fed.

Good financial laws, unfortunately, require a disaster, such as the failed JPMorgan bet, or the 2008 crash, which has been an enormous cost to Main Street. That’s because of massive spending by Wall Street, which collectively spends $1.5 million a day lobbying. Let’s hope that the unintended investment by JPMorgan in reform advocacy secures substantial reform.

Co-authored by Anthony So, professor of the practice of public policy and global health, director, program on global health and technology access at Duke University

The World Health Organization’s Director-General recently warned of the growing challenge of antibiotic resistance in the starkest terms: “A post-antibiotic era means, in effect, an end to modern medicine as we know it. Things as common as strep throat or a child’s scratched knee could once again kill.” In the case of tuberculosis, many infections are already resistant to first-line therapy, and second-line therapy costs between 50 and 200 times more. For methicillin-resistant Staphylococcus aureus (MRSA), an antibiotic-resistant infection that claims more lives than AIDS in the U.S. each year, the costs of these infections to hospitals may reach as high as $4 billion annually.

Responding to this challenge, existing antibiotics must be conserved and novel antibiotics developed. To preserve the effectiveness of antibiotics for human use, Europe banned feeding antibiotics to livestock for growth promotion in 2006. In Denmark, where such use of antibiotics had been phased out more than a decade ago, drug-resistant pathogens in livestock are down while industry output is up. Yet a bill to restrict such use here — The Preservation of Antibiotics for Medical Treatment Act — languishes in the U.S. Congress.

Instead, the Generating Antibiotic Incentives Now, or GAIN, Act has piggybacked into the FDA bill reauthorizing user fees for drug approval. GAIN would provide five more years of monopoly protections for new antibiotics. Already receiving three to seven years of exclusivity, some antibiotics may receive up to 10 years of protection after market approval. This measure defies both the economics and biology of antibiotic resistance.

Resistance to an antibiotic increases as the drug is used more frequently, so the use of new antibiotics must be reserved for resistant infections. However, monopoly protections conflict with the need for preservation by encouraging companies to sell as much of the new drug as possible. Further, this incentive does little to defray the upfront costs of R&D but risks imposing a heavy cost on consumers, both here and abroad. Rationing antibiotics by monopoly pricing will not ensure appropriate use by doctors or patients. Lengthening the monopoly period will not lead to firms forfeiting today’s profit for preserving tomorrow’s antibiotic effectiveness. In fact, the same drug companies do not even reserve classes of antibiotics important for treating human disease from non-therapeutic use in growth promotion in animals. And there is no profit from drugs kept in reserve.

Multiple drugs used in combination are the mainstay of treatment for diseases like tuberculosis. Yet extended exclusivity may thwart the innovation and access to such combination therapy. Consider the lessons from Abbott’s hold over ritonavir, a drug that boosts the effectiveness of other HIV drugs used in combination. In 2003, Abbott hiked the price of ritonavir by 400 percent — except when used for its own combination product, Kaletra — placing other combination treatments relying on this booster drug at a market disadvantage. So does this incentive approach lead to GAIN — or just greed?

Worse yet, the bill fails to address the serious scientific bottlenecks in the pipeline. The customary approaches to identify novel drug candidates have produced dismal results. The experience of a leading drug company suggests that it would take 80 times the number of screens of potential drug compounds to yield one antibiotic launch compared to one drug launch in other therapeutic areas. Throwing just any incentives at antibiotic R&D is not going to work. The solution to the faltering antibiotic pipeline is not an extra dose of data exclusivity.

We need to get back to the basics — the 3Rs — sharing resources, risks and rewards. Greater public support for new models of R&D collaboration would help share resources and risks with the private sector. Bolstering such efforts, like those at NIH’s National Center for Advancing Translational Sciences, might help lower the barriers to bringing forward new antibiotics to clinical trials. One method of sharing rewards — offering prizes — could enable companies to recuperate their R&D investments without relying just on revenues from the quantity of antibiotics sold.

In these austere economic times, where might such monies come? Leading all sectors in defrauding the federal government under the False Claims Act, the pharmaceutical industry has paid $23 billion in settlements and fines to federal and state governments over the past two decades, some portion of which might have been directed to a foundation that would support innovation and access to such life-saving medicines.

The failure to find suitable incentives reflects a poverty of policy imagination. The greatest cost, though, may be the complacency that comes with believing that Congress addressed antibiotic resistance with this measure. Even with the GAIN Act’s passage, this public health challenge will still remain: Tomorrow’s infections will not be cured with this expensive placebo.

For more by Robert Weissman, click here.

For more by Anthony So, click here.

For more health news, click here.

"Robert Weissman, Public Citizen president"Well, the Big Business guys are transparent about one thing: They can’t stand the idea of the public holding them to account for their attempts to buy elections and influence policy, or even that they be prevented from corrupting the government contracting process through campaign spending.

The latest: They are so terrified even of having their political spending disclosed that they are pushing in Congress legislation that would prohibit the government from requiring contractors to disclose their campaign-related spending.

Senator Susan Collins, R-Maine, is carrying their water, with the Orwellian “Keeping Politics Out of Federal Contracting Act,” a bill that recently passed the Committee on Homeland Security & Governmental Affairs and may well become law unless citizens move quickly to help stop this abomination.

The Collins initiative is in response to an excellent initiative floated by the Obama administration, but which the White House failed to implement. The simple idea was to require government contractors to disclose their campaign-related spending, including the kind of secret corporate campaign expenditures enabled by the Citizens United decision.

Contractor disclosure is important for two key reasons. First, virtually every major corporation enters into contracts with the government, so if contractors are required to disclose their campaign spending, that would cover most giant businesses. Second, the corrupting pall of campaign-related contributions is worst in the area of government contracting, since this is where the direct payoffs to corporations from political spending are highest. Disclosure will help mitigate the campaign-contractor corruption nexus.

Last year, it leaked that the Obama administration was considering an executive order requiring contractor disclosure.

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You might think that the declining price of gasoline means that we don’t have to pay attention to all that talk about oil speculation driving up the price of oil. Right?


Even though the price of gas has fallen, you’re still lining the pockets of Wall Street every time you gas up. As Memorial Day approaches and summer driving season kicks off, remember that speculators will clean up even as the price of oil drops.

It’s a rigged game, with rules that make you give your hard-earned money to financiers no matter what. It’s like the bully on the playground who established the ground rules for a coin toss game as “heads I win, tails you lose.” Under those rules, the bully always wins.

In this case, the bully is Wall Street. With oil markets, loose rules allow speculators – not end users – to dominate the volume of trading, increasing price volatility and making more money the more the price changes – whether that price is going up or down.

Goldman Sachs has admitted that speculation adds as much as $23.39 per barrel to the price of crude. That translates to 56 cents per gallon. (See here if you want confirmation.)

So, we pay more. They get richer. And it has little to do with actual supply and demand.

Illegal manipulation

You would think that since speculators can legally game the system, they wouldn’t need to resort to fraud or illegal manipulation. But last year, federal regulators charged five oil speculators with manipulating the price of oil in the early months of 2008 and making a $50 million profit from the scheme.

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