Student Loans Should Be Dischargeable Some Day

A recent case out of the 7th Circuit illustrates the practical impossibility of discharging federal student loan debt.  The statute says that this debt can be wiped out in bankruptcy in cases of “undue hardship” but the court gloss on that legal standard is far more severe.

In this case, a 56 year old who ran up $260,000 of debt to earn an MBA and JD at marginal schools who then failed the bar exam twice, and is now unemployed, with a criminal record and lives with his elderly mother, sought to discharge his student loans. the Court acknowledges that “(1) [he] cannot maintain, based on current income and expenses, a “minimal” standard of living for himself and his dependents if forced to repay [his] loans[.]”

This wasn’t enough.  To discharge the loans, it must also be true that: “(2) additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period; and (3) [he] made good faith efforts to repay the loans.”

To satisfy the second prog who must demonstrate “the certainty of hopelessness.”

The second prong of the Brunner test contemplates whether “additional circumstances exist indicating that [the inability to pay] is likely to persist for a significant portion of the repayment period … .” Roberson, 999 F.2d at 1135. We have noted that “the dischargeability of student loans should be based upon the certainty of hopelessness, not simply a present inability to fulfill financial commitment.” Id. at 1136 (citing In re Briscoe, 16 B.R. 128, 131 (Bankr. S.D.N.Y. 1981)). While in Krieger we noted that the “certainty of hopelessness” standard “sounds more restrictive than the statutory ‘undue hardship’ [standard]” we also noted that “a judge asked to apply a multi-factor standard interpreting an open-ended statute necessarily has latitude; the more vague the standard, the harder it is to find error in its application.” 713 F.3d at 885. 

In this case, the debtor had two expert witnesses lined up to show “the certainty of hopelessness”, but was barred from using them at trial because he below his expert witness disclosure deadline.  The lender didn’t show or even attempt to show how it was prejudiced by this late disclosure.

To satisfy the third prong, which can bar discharge of student loans even when the debtor cannot maintain a minimal standard of living and faces “the certainty of hopelessness” that the loan will ever be repaid, it is not sufficient to show that the debtor “made good faith efforts to repay the loans” by paying as much as he could on another loan incurred for his law school education at the same institution.

Instead, because he hadn’t made many payments on this particular arbitrarily designated part of his student loan, he was barred as a matter of law from establishing that he made a good faith effort to repay the loans.

This judicial gloss on the undue hardship standard set forth by the statute goes far beyond the express statutory requirements for discharge of a student loan and makes it all put impossible to secure a discharge.

The law is the law.  But, Congress has the power to change it, and it does.  The economic reality is that higher education can impart substantial economic value to the student who can’t part with that benefit and return it, even if the students wants to do so.

But, it is also the case that dubious institutions of higher education, including law schools, that grant degrees to people with no realistic chance of passing the bar exam, have conferred almost no value to the student at immense cost to that student, and the student isn’t necessary in a great position to evaluate that risk which mediocre schools do not disclose or disclose only in a misleading manner.

By all means, people who get degrees and use those degrees to secure gainful livelihoods should pay for their loans.  But, someday, somehow, someone whose only mistake was to try to get a degree in a career that they later proved unable to pursue, ought to a get a break at some point.  Congress intended that when it created the undue hardship exception, but with now binding case law, that exception has essentially disappeared.

There is simply no way that failure to pay a debt that you are unable to maintain a minimal standard of living if you pay should count against you in a discharged proceeding.  Nor should a standard so daunting as “certainty of hopelessness” ever enter the legal lexicon.  A more appropriate standard would be that by a preponderance of the evidence it is unlikely that you will be able to pay a significant part of the loan in the foreseeable future, with the burden on the lender to show otherwise.

Quite frankly, neither of those prongs are really necessary.  The first prong, standing alone, adequate captures the statutory meaning of “undue hardship” and the other two should be abandoned by Congressional action.  The bar on the discharge of student loan debt should also expire at some point, perhaps 15 years if one earns a degree and any necessary professional credential to utilize it, and 5 years if one fails to earn the degree or is unable with reasonable diligence to attain the necessary professional credential to utilize it.

We would never punish a bad investment in physical or economic capital so harshly.  Education, which is the primary investment of most members of the middle class, shouldn’t receive this kind of harsh treatment either.

from Wash Park Prophet
via Denver News

Commentary on the August 2015 Edition Of The Colorado Lawyer

The 2015 Legislative Session

This month is the annual review of the 2015 legislative session of the Colorado General Assembly, most of whose laws took effect July 1, 2015, and the remainder of which take effect this month.  It notes that 682 bills were introduced, 364 were signed into law, 3 became law without the Governor’s signature (a symbolic step with no legal effect which on rare occasions is due to inadvertence), and 3 were vetoed.  Two of the bills vetoed limited use of red light cameras.  The other HB 1390 pertained to Consumer Credit Finance Charges and would have authorized higher interest rates for regulated low dollar consumer loans.

A few bills of note:
* Repeat DUI and DWAI offenses can give rise to a fourth degree felony, even if there is no accident or injury.  Previously, a DUI or DWAI offense was always a misdemeanor even if the offender had a myriad of prior offenses.
* The privilege to engage in marriage by proxy, rather than in person, was limited to members of the military, or civilian government employees or contractors, working in support of the military outside the state of Colorado.  Previously, any adult could use the provision.  The limitation from prompted by concerns about abuse and exploitation and potential sex trafficking.
* Crowdfunding for for profit ventures with an expectation of return is barred by state and federal securities laws.  Colorado passed an exemption to state securities laws allowing for crowdfunding from Colorado investors to Colorado businesses subject to state securities regulation requirements.
* Exemptions from creditors in bankruptcy and the court supervised debt collection process (including homestead dollar amounts) were increased in dollar amount for the first time since 2007.
* Procedures to prevent multiple voter registrations for one person were established (over bar association opposition).
* Mandatory reporting of abuse for adults with a disability was imposed.
* Protections were enacted for people who videotape police conduct.
* A bill clarifying Colorado “wind law” was passed.
* A number of bills only a lawyer could love related to trust administration, access to safe deposits after the owner’s death, real estate title when a deed vests title in an entity other than a corporation before it is formed, who owns the attorney-client privilege of prior entities in entity mergers, background checks for related party foster care placements, juvenile delinquency alternative sentencing, electronic foreclosure sale procedures, title insurance regulation, and interstate child support rules were passed.  The statutory authority was granted to redirect the disposition of unclaimed property in attorney trust accounts from the State of Colorado to legal services for the poor.
The bar held up a number of Uniform Laws offered for consideration on various technical grounds, which did not pass as a result (the Uniform Voidable Transactions Act, the Uniform Fiduciary Access to Digital Assets Act, the Uniform Substitute Decision Making Documents Act).

Unwinding Mediated Settlements

What happens when a deal is reached in mediation and then the client doesn’t want to sign the final documents?  Does it matter that new evidence or fraudulent statements made in mediation were later discovered?  An article reviews the relevant law and concludes by stating: “There are no easy solutions.”

Conservator-Created Wills

Thomas Rodriguez and Brooke W. Brestel spell out the law and best practice of a Colorado law adopted in 2001 that allows a conservator to draft a will for a protected person.  C.R.S. 15-14-411.  I litigated one of the first such cases (it was resolved by a court approved settlement).

Together, they lay out the best practices in getting such a Will approved, and the circumstances under which a context at death is allowed (most obviously, under In re Estate of Romero, 126 P.3d 228 (Colo. App. 2005), a person subject to a conservatorship could execute a later valid will of his or her own).  It illustrates how someone who a close relationship to a protected person (such as a live in girlfriend) with relevant information about the protected person’s wishes, can be excluded from the process and may have a difficult time revisited the issue at death even if that person is not formally barred from doing so if he or she did not receive notice of the original probate proceedings (which even a lawyer cannot confirm the existence of, let alone review documents in, without entering an appearance or contacting a court clerk where one is believed to be pending on the pretense of wanting to do so).

The initial impetus for enacting C.R.S. 15-14-411 was to fix technical defects in estate plans focused on tax planning that had become obsolete or ill-advised due to changes in the tax law or changes in the protected person’s circumstances.  The use of C.R.S. 15-14-411 to change the status quo regarding the ultimately beneficial owners of an estate, such as the case illustrated in the article, has always been much more deeply problematic.  It is rare that one can be certain that it is a good thing to do so, it creates a new dreadfully expensive elective probate process in an conservatorship estate that is often at grave risk of seeing its funds depleted to litigate court proceedings, and as often as not, the status quo provides a reasonable approximation of justice.  I would favor amending C.R.S. 15-14-411 to disallow Conservator Drafted Wills except to reform an existing estate plan to reflect the same general donative intent in a manner that reflects new tax laws or changes in the protected person’s circumstances.  Sometimes the dignity of a protected person is best honored by not trying to second guess the estate plan in place had the protected person died, rather than merely been incapacitated by a disability affecting that person’s capacity.

Marijuana Regulation

There is a nice introduction to the legal ethics issues involved in representing someone in Colorado’s state legalized, but illegal under federal law, marijuana regulation regime (in which I practice regularly).  In this area, as in the areas of limited representation (e.g. ghostwriting) and firm v. individual attorney representation of clients, the situation is made more complex by the secondary but independent professional regulation authority by the federal courts in addition to state regulation of attorneys.  The federal courts do not contain in their ethical rules an express exemption for marijuana practice found in state court ethical rules.

All of this is a reminder that many people could be exposed to federal prosecution for their de facto legalized conduct if there is a change in the political winds before the federal status of marijuana is reformed, for example, with a new President, despite widespread liberalization of medical marijuana and regulated legalization of recreational marijuana in the District of Columbia and several states in addition to Colorado.  President Obama’s approach has allowed the groundswell of state and local support to play out in the laboratory of the states, but that could all be swept away in a single executive order – although people acting in reliance on official federal policy to respect marijuana laws might be spared the gotcha effect of a retroactive change in policy under certain legal doctrines.

Outrageous Conduct

What constitutes “outrageous conduct” in connection with the intentional infliction of emotional distress tort and some similar and related claims is for a jury or the judge in a bench trial to decide, subject to general boundaries imposed by judges.  Part I of a two part article summarizes 21 cases interpreting those standards decided since the last such review of Colorado case law in a 1999 article. In this highly fact specific area of tort law, one relies on general principles to at one’s peril.

It is an area where many claims are brought, but few ultimately prevail, and often a means by which emotional distress and punitive damage claims can be presented when they would not have been available under other causes of action such as negligence, breach of contract, and breach of the duty of good faith and fair dealing in connection with a contract (other than an insurance contract which receives special treatment).

How To Draft A Bad Contract

A breezy article sets forth 25 bad contract drafting issues, although it is often a bit cocksure, failing to distinguish between stylistic issues that don’t make much difference, and serious drafting oversights.  As is the fashion, it favors contracts that are written in “plain English” and abandon traditional formalities of presentation (e.g. favoring omitting “Whereas” from recitals of fact in the preface to a contract, and “Witnesseth” from signature blocks), and strongly favors brevity without much thought to why the alternative might not be so bad.

Some are obvious, but clearly important such as not including “inconsistent provisions” in your contract (which is easier to do than you might think when using form contracts).  I have my own contract writing checklist which includes some of their issues, while raising others that they do not (e.g. I favor establishing agreement in advance concerning the reasonableness of likely remedies).

Style is nice, but substance matters more, usually even if it makes a contract longer and harder to read.  Also, there is a failure to appreciate that one of the reasons contracts are drafted by lawyers is because the parties want something that seems legalizistic and has weight that rivals its importance.

Contracts that truly involve only two parties can often be to the point.  But, contracts that involve multiple parties (some of whom may not be signatories, such as regulatory agencies and taxing authorities, and third party successors to the drafters) often need to be long and rather complex to be complete in U.S. law where few good default terms are provided by law.

Family Court Judges On Litigating Family Law Cases

It is always good to hear how judges expect lawyers to behave so that lawyers can act appropriately to help their clients.  Domestic relations cases, with relatively loose procedures that don’t perfectly fit the traditional adversarial civil action rights enforcement model and often have pro se parties, is a particularly helpful place to have this guidance.

Some of the problems are fundamental, like entrusting a single judge without co-decision makers with almost completely unbound discretion in parenting matters subject only to the mantra of “the best interests of the child” which has a little meaning but only a little.  Wide discretion in other decision making areas (like which property and what debt should be divided how, and what child support and maintenance awards to make) have much more guidance, but still leave a great many ways that any one case can be correctly resolved.  It is little wonder then, that a large share of all domestic relations litigants perceive judicial bias directed at them in these cases.

Alas, while hearing a judge’s perspectives on these cases is always desirable, none of the comments from judges address the hard and non-obvious issues that these cases present, foremost among them, the fact that unlike other civil litigation, a divorce is never really completely over; it is a moving target that continues to deal with new circumstances even during the course of the litigation.  Striking a balance between finality and urgent emergent circumstances in these cases is not easy.

Court Rules

Changes to several important court rules (which differed from the versions initially proposed) were formally adopted May 28, 2015, effective for cases filed on or after July 1, 2015, but the formal announcement didn’t make it into the Colorado Lawyer until the August, 2015 issue.  The delay is understandable, but unfortunate, given that many lawyers rely on this publication to keep track of rule changes, which proceeds at a steady dribble because of the administrative process by which they are made by the Colorado Supreme Court.

from Wash Park Prophet
via Denver News

Automobile Safety v. Airline Safety

It is common place to compare the way automobile manufacturers and airplane manufacturers treat accidents.  Automobile manufacturers often blame the drivers or argue that “shit happens” and don’t systemically analyze every accident to prevent it from happening again.  Airplane manufacturers assume that every accident is due to a defect in the product, and rigorously investigate and analyze each accident so it can never happen again.

The analogy if sometimes applied to how hospitals handle bad outcomes, in an effort to cajole the medical establishment to start acting like airplane manufacturers, so that they can establish good systems to prevent mistakes, and in that context, the analogy is fair.

But, the analogy is not really fair to automobile manufacturers.  Why?

1.  Commercial airline accidents are overwhelmingly single vehicle accidents due to the air traffic control system.  Automobile accidents are overwhelmingly collisions with other vehicles or at least caused by avoidance maneuvers conducted to avoid collisions with other vehicles, and it really isn’t viable to institute the equivalent of an air traffic control system for automobiles.

The airline industry’s experience may argue strongly for the institution of the equivalent of an air traffic control system for ships in harbors.  But, it is inherently easier to engineer solutions to problems caused by single vehicle accidents than to problems caused by collisions or near collisions which are a problem with the entire traffic management system, and not so much with the vehicle itself.  Likewise, when a commercial airline crashes in the absence of a collision, the likelihood that a defective airplane was at issue is great.

Notably, while most airplane accidents are carefully investigated and result in soul searching by the manufacturers looking for a solution, this did not happen in the same way rebels in Ukraine shot down a Malaysian airliner with a ground to air missile.

2. Good systems are only half of the reason that commercial airline accidents are so rare.  The other is that commercial airlines are flown by professional pilots who are on the job, rather than by amateurs.  The fair analogy in terms of safety to a commercial airliner is not the accident rate of private automobiles, but the accident rate of buses, which is much, much lower than the accident rate of private automobiles.

If one wants to control for this factor one should compare the accident rates for general aviation aircraft not flown by professional charter pilots against the accident rate for motor vehicles not driven by professional drivers who are on the job.  Accident rates for general aviation aircraft not flown by professional charter pilots turn out to be much higher and are actually quite similar to the accident rates for private motor vehicles driven by amateurs.

Operator error accounts for a much larger share of general aviation accidents than it does of commercial airline accidents, and also accounts for a much larger share of accidents by ordinary amateur automobile operators than it does of accidents by professional bus drivers.

For example, a very substantial share of all motor vehicle accidents involve drunk drivers.  But, very few bus accidents involve drunk bus drivers.  Similarly, many motor vehicle accidents are caused by inexperienced and reckless teenage drivers acting carelessly or recklessly, while very few bus accidents are caused by bus drivers acting in this fashion.

3. It is also notable the general aviation aircraft and commercial airlines tend to fly out of different airports and in different airspace.  Commercial airlines tend to cruise at higher altitudes and operate out of major commercial airports, while general aviation aircraft tend to cruise at lower altitudes and operate out of smaller local airports.  Thus, commercial airliners are largely insulated from interactions with less safely piloted general aviation aircraft, while motor vehicles overwhelmingly share the same roads, without regard to who is operating them.

4. It is notable that a very share share of all on the job fatalities involve motor vehicle accidents, crimes and suicides.  Each of these, unlike most other job fatalities, has as a substantial cause, actions of people who are not within the control of the employer and frequently conduct at locations that are not within the control of the employer.  Solving these causes of on the job fatalities requires societal level solutions and not employer level solutions, unlike most other potential causes of on the job fatalities and injuries.

Now, this isn’t to say that the analogy of hospitals to airlines is unfair.  Hospitals, like commercial airliners, are operated by on the job professionals.  Bad outcomes in hospitals, like single plane accidents by commercial airliners, operate in environments that are controlled by a single party with the power to change the systems that cause them.

But, automobile accidents, unlike accidents involving commercial airliners, do not predominantly involve single vehicle accidents in vehicles operated by expert on the job operators, so the analogy in that case of automobile manufacturers to airline manufacturers is really unfair.  Automobile manufacturers are reasonable good (although not as good as airlines) at investigating and resolving single vehicle accidents in vehicles where there is good cause to believe that a reckless operator was not the problem, which is really the only fair apples to apples comparison in this case.

from Wash Park Prophet
via Denver News

Windows 10

For better or for worse, have a ditched the odious, loathsome, evil Microsoft Windows 8 for Microsoft Windows 10, and rejected all of the big brother settings.  I am now waiting for the other shoe to drop when I go into the office this morning and find out, if my impulsive act was ill advised, that my machine is no longer compatible with the firm network or some critical piece of software.

But, so far, so good.

Anyway, after Windows 8, how much worse can it get?

from Wash Park Prophet
via Denver News

The Technologies, Economics And Regulations That Make Netflix A Cultural Innovator

A thoughtful piece by Todd VanDerWerff at Vox argues that:

Netflix is accidentally inventing a new art form – not quite TV and not quite film.

I agree.

First, to be clear, the piece and I are talking about the Netflix streaming service, which has morphed far beyond the mail order DVD rental system with an socially interesting prioritized waiting system that it was at first.

It turns out that movie streaming also wasn’t that revolutionary.  This was just like renting a movie at a local video store with less waiting and a monthly membership fee which some video rental operations had already started to offer.

What really made Netflix streaming culturally innovative at first was binge watching whole seasons of television shows at once.

You’ve done it, I’ve done it, our kids have done it.  It was possible in theory before by renting DVDs of a whole season of television shows, but that was expensive and wasn’t something that video rental store customers were used to doing or imagined themselves doing.  On Netflix, binge watching a season cost no more than watching an episode every week at an appointed time the way we used to do it with broadcast television.

Binge watching TV shows on Netflix (or once you gained the habit on Netflix, elsewhere, where the show wasn’t available on Netflix) significantly changed the experience of watching television shows.

It upset the status hierarchy of video based media, of which the movies had previously been the uncontested top dog, offering two hours of uninterrupted polished pieces instead of half hour or one hour TV episodes made with lower budgets, with a week in between episodes, interrupted at least every fifteen minutes by about 12 minutes or more per hour of commercials.  A movie had dozens of show times a week at various area theaters and could also be obtained at the video rental store on demand.  TV episodes were only available at an appointed half hour or hour each week (except for daily soap operas with really poor production values), unless you recorded them with a difficult to program and low quality video recorder.  And, for roughly half to two-thirds of the year, any given TV show was airing reruns.  Diligent TV watchers spent most of the year in a new episode desert.

Suddenly, with Netflix, television was commercial free, available on your schedule, with no reruns unless you want them, and you could watch an entire season over a few days or a couple of weeks, capturing fine details and story arcs put their by the screen writers who see the show as a package, which got lost with all of the interruptions, delays, and occasional out of order or missed episodes of ordinary TV watching.  Higher quality content from made for cable television programming that had funding other than commercials and didn’t have to meet suitable for children censorship standards on networks like Showtime and HBO appeared just shortly before Netflix hit.

As a result, movies now became one off short stories or mini-series when there were sequels, while TV shows with eight hours or more of content per season, became the novels of the video world, something that developing world soap operas (telenovelas in Spanish, but present in similar forms in Japan, Korea, Nigeria and elsewhere) had aspired to, but never quite attained.  And, when you binge watch, the ability to spread eight or more hours of fictional world indulgence over the times you have to enjoy it, with pauses when you feel like it, put the feel of reading a novel into TV episodes as well.

This makes sense.  A movie script typically runs 80 to 120 pages or so, some of which is scene description and blocking rather than dialog.  Most adapted movies take a novel that runs 250 to 750 or so pages and condense it into the much shorter movie format, inevitably leaving the view with an abridged version of the original.  Notably, some of the best movies, e.g. Blade Runner and many of the Disney movies like The Little Mermaid, adapt short stories or fables or myths or short children’s books, so that they don’t have to abridge the story.

Binge watching, however, merely opened the door to innovation.  The experiments that Netflix has been able to open the door to with its original programming have really changed the medium.  Netflix has been able to innovate radically in generating content, because its business model and its technology don’t have the same constraints and incentives as traditional broadcast television.

Seasons can now have wildly varying length.  A new concept can be presented in a four episode trial.  A few Netflix original shows (for example, Orange in the New Black, Sense8, and Ascension) have episodes that are longer than an hour.

Like independent films, Netflix original programming can appeal to niche or culturally elite audiences, rather than trying to maximize the number of eyes on the screen watching the same show at any given time which pushes programmers to make lowest common denominator compromises. Since Netflix can stream hundreds of different shows to its overall audience at once, Netflix doesn’t have to deny viewers their most popular content to cater to niche views the way that any broadcast medium does.  This allows Netflix to have a total prime time audience far greater than any broadcast network limiting to airing one show at a time, even if the number of viewers of any particular program on any given day is much lower than the number of views of any particular program on a given day in a broadcast television format.

Indeed, Netflix original content has the most comparative advantage, relative to broadcast or cable TV and the movies, by not just stealing market share from those traditional mediums, but by actually serving niche demands that were entirely unmet by the old media due to their technological, economic and regulatory constraints.  Netflix can serve everyone who like the old TV and movie content, but can also offer content to additional viewers who don’t like anything that was on offer in the old formats very much.

Netflix also could have chosen to enter the market at the high end, catering to high end customers with a high monthly price, but instead, has made itself more transformative culturally by following a business model that is about maximizing its membership base at a price many times cheaper than a cable TV subscription, despite the fact that it offers a product that is qualitatively different and bettter than broadcast TV which cable TV merely replicates with better reception, more channels (most of which are awful), and fewer censorship restrictions on cable TV only content.

Netflix didn’t invent streaming video, which had been available via streaming video on premium TV channels for ages.  But, cable TV operators priced this service based upon the going to the movies alternative, without seeing, as Netflix did, how transformative it could be to offer steaming at an easily affordable flat price instead.  The inherent nature of intellectual property content, which doesn’t cost meaningfully more to make more copies of in the digital age than it does to make one copy, was a natural fit to this model.

But, the rest of the industry clung to the old physical property economic models even though they had never really made sense and were ultimately superseded in the case of broadcast television and radio when innovators of those media came to the same realization that maximizing spending by making content wildly available at a minimal cost, rather than maximizing spending per unit provided, was the name of the game.  The ability of Netflix to limit access to its otherwise unlimited content with passwords, however, gave it the capacity to shift from the commercial and donation based model of broadcast television, radio, Google, Hulu and more, to a subscription based model.  And, by making legitimate unlimited access so cheap, Netflix has dramatically undercut piracy which is no longer worth the hassle when the public can access intellectual property content at a reasonable price, legitimately, so these economics have made it unnecessary to make heavy use of punitive enforcement tools like anti-piracy lawsuits aimed at ordinary content views in order to support their own business model.

There is also no incentive for Netflix which isn’t paid by the episode, to engage in the recent odious trend in movie sequel making to break the last book in a movie adaptation into two parts, purely to force movie goers who are already hooked on the series, to buy one more movie ticket over the course of the series.  Or, worse in the case of an adapted literary series like Lord of the Rings that turns the shortest book of the entire four book saga, the prequel The Hobbit, which is the only one of the four books which could have been done justice in one ordinary length movie, into three very long movies that are long in setting and cinematography, and thin and far off canon in their story.

And, since Netflix originals aren’t financed by commercials, producers don’t have to worry about alienating customers of an unrelated product.  Advertisers don’t like controversial programming, and tying a brand, say Chick-fil-a, to a controversy unrelated to the product itself, say gay rights (in the case of Chick-fil-a, spawning a nationwide boycott which still damps its sales to liberals even though the company has largely backed down from its political stances), is bad for business.  Netflix originals don’t even have an incentive to avoid criticizing the commercialism that makes broadcast television possible, in general.

Knowing from the start that the audience will be binge watching the episodes in order, without much interruption, writers don’t have to spend as much of each episode rehashing the premise of the show and recapping what happened in relevant previous episodes.  They know that even if they really stump a modest percentage of their audience, that those viewer can go back and watch the referenced episode over again.

And, both cable TV, for example, in series like Game of Thrones and True Blood, and Netflix originals in shows like Hemlock Grove and Sense8, have not only pushed boundaries beyond what would be allowed by censors on broadcast television.  They have pushed on beyond the boundaries of what would be permitted by movie censors to achieve an “R” (children allowed only with an adult) rating, to the “NC-17” rating originally envisioned as a category reserved for pornography.  Thus, for what is really the first time in the history of the dramatic medium, it is now possible to easily access highly explicit and violent content that still tells a legitimate dramatic story, rather than serving as mere window dressing for pure pornography.  A handful of serious works like Lady Chatterley’s Lover, Lolita, and the Bible have crossed that line before, but performances of them in dramatic works have generally held back the violence and carnality that are described and/or implied in them.

Not everyone thinks that opening the door to more explicit and violent programming (which realistically, any tween or teenager can access more easily than the vast majority of adults can control it) is a good thing.  And, binge watching keeps us glued to our screens when we could be out living actual lives.  But, on the whole, Netflix have been a revolutionary technological and economic innovation that is one of the important factors that makes the quality of life in 2015 better than it was in 1997, when Netflix was founded.

from Wash Park Prophet
via Denver News

An Unnecessary Police Homicide In Boulder, Colorado

[P]olice were called to an apartment at 1841 19th Street in Boulder at around 10:30 p.m. on a report of a man thought to be under the influence of LSD who was attacking others with a knife. Upon their arrival, officers found an injured party who was taken to the hospital and is expected to recover. . . . 

[The Boulder Daily Camera] reports that officers encountered [Sam] Forgy [a 22-year-old who was majoring in applied mathematics at CU Boulder] as they were climbing the stairwell to his apartment, on the second floor of the complex. He was nude and holding a hammer. The cops maintain that they repeatedly ordered Forgy to drop the hammer. 

Police feared Forgy was going to jump onto them with the hammer, the Daily Camera notes — so one officer tried to Tase him. When the Taser failed to fell Forgy, a second cop fired his gun, killing him. The number of shots hasn’t been specified to date; witnesses estimate that there were between three and five. Moreover, one person who heard the exchange said the shooting of the gun and the Taser were close to simultaneous.

Via Westword.

I understand that sometimes people point guns at or shoot police, or rush at them with knives, and that responding with a firearm may be their only choice.

It is very hard to conclude that a naked guy on drugs holding a hammer precariously standing alone on a fifteen foot high stairway balcony railing poses the same kind of threat.

Are the Boulder police incapable of backing off and trying to defuse the situation?

Do they not realize that a hammer is rarely a deadly weapon when wielded by a naked college student on drugs who can barely maintain his balance on a balcony railing?

Are they so unsure of their own physical prowess that they think that two of them, after all the training that they have received, fully clothed and armed with batons and mace are no match for a naked college student on drugs with a hammer?

The officer who fired this shot does not belong on a police force, anywhere.  His actions were at a minimum cowardly and proof of his incompetence.  Worse, they tend to show a deeply flawed culture in the force, that shoots first, and considers other options only after the suspect is dead. Arguably, this is really a case of simple unpremeditated, perhaps heat of passion, murder.

There is simply no version of the facts available to us in which this shooting was justified as self-defense or to carry out an arrest.

The Boulder Police Department should promptly fire the officer who killed Sam Forgy and then an independent individual should review the case to see if criminal charges should be brought.

from Wash Park Prophet
via Denver News

Corporate And Municipal Bond Ratings By The Numbers

American Corporate and Municipal Bond Ratings

On April 11, 2014, there were only three companies with AAA credit ratings in the U.S. according to S&P. Those companies were Johnson & Johnson, Exxon-Mobil, and Microsoft.

The number of companies with the top-credit rating has been dwindling for years. Back in 1980, there were more than 60 U.S. companies rated AAA by S&P. That fell to six in 2008. Since then,” General Electric, Pfizer and ADP were downgraded.

I wouldn’t be surprised if there were four or five AAA rated companies today, but I don’t have the exact figure.

Just 800 companies (less than 5%) have investment grade bonds out of 23,000 U.S. companies with revenues over $35 million whose credit was reviewed by bond rating agencies. But, only about 1,800 companies with non-investment grade bonds, however, have actually issued publicly traded bonds. So, about 30% of publicly traded bonds are investment grade, and only about 0.1%-0.2% of publicly traded bonds are AAA rated. Companies with sales of less than $35 million per year are not eligible for an investment grade bond rating.

An investment grade bond rating, in practice, roughly corresponds to classification of a “large capitalization” stock, although in principle, bond ratings are not directly dependent upon market capitalization.

The rating system at Standard and Poors and at Fitch ranks investment grade bonds as follows (Moody’s equivalent rating):

AAA (Aaa)
AA+ (Aa1)
AA (Aa2)
AA- (Aa3)
A+ (A1)
A (A2)
A- (A3)
BBB+ (Baa1)
BBB (Baa2)
BBB- (Baa3)

Moody’s rating are somewhat more strict than comparable ratings by Standard and Poors (S&P) as illustrated by historic default rates for bonds of a given rating.

Historical default rates vary greatly, but in the S&P system through 2007, averaged about 0.6% for AAA, 1.5% for AA, 2.9% for A, 10.3% for BBB, 29.9% for BB, 53.7% for B, and 69.2% for any kind of C rating.  This is measured over the life of the long term bond and is not an annual default rate.

Historical default rates on municipal bonds are much lower than default rates on corporate bonds with the same rating until 2010 when Moody’s and Fitch abolished the separate system (S&P abolished the separate system in 2001).  More recent municipal bond issues are rated on the same scale as corporate bonds.  For example, in the old system, S&P BB rated municipal bonds have about the same default rate on average as S&P AA rated corporate bonds.  Investment grade municipal bonds as rated by any major bond rating agencies under the old system have default rates lower than AAA rated corporate bonds.

Chinese Corporate Bond Ratings

In contrast, in China:

Around 97% of existing yuan-denominated bonds hold ratings of double-A to triple-A—the best a company can get.

That is from Fiona Law at the Wall Street Journal, cited by Christopher Balding, and ultimately Alex Frangos via Marginal Revolution.

Meanwhile, a Chinese government agency, the China Securities Finance Corp (CSF), central bank-backed refinancing institution, is now “among top 10 shareholders of many listed-firms” as Chinese regulators have stepped in to prop up a collapsing stock market. Effectively, this is turning what had until recently been a mostly theoretical communist basis of the Chinese economy into one in which state ownership of enterprise is again rapidly becoming the norm.

from Wash Park Prophet
via Denver News

Human Sacrifice In Nepal

A Nepalese man with an ill child went to a local holy man who told the man with the ailing child that a human sacrifice of a boy was necessary to save the ill child. A ten year old boy was lured away and then kidnapped for the purpose. The human sacrifice ritual was carried out.

Three days later the missing boy’s body was found. Local police say that five men have confessed to participation in the crime, and six more, including the holy man, have been arrested in connection with the crime. Life sentences are possible under Nepalese law.

CNN (at the link above) provides the following context for the killing:

The village, in the Nawalparasi district bordering India, is home to some of the country’s poorest and uneducated people — often known as “untouchables” in the traditional caste system. Both the victim and the accused in this recent killing are from this social class. 

Superstitions such as the sacrificial slaughter of animals such as water buffaloes, goats and chickens are common among the country’s mainly Hindu population. The ritual killing of animals during the Gadhimai festival — celebrated every five years — takes place in the belief it will bring prosperity. 

“(It’s) very unfortunate what happened,” said Hari Prasad Mainai, Nawalparasi’s chief district officer. “From the government level, we are going to launch (an) awareness program against these superstitions in the villages of Nawalparasi district.”

Nawalparasi, Nepal (map from Wikipedia)

 A few observations:

* We still live in “a demon haunted world”, to use Carl Sagan’s words.

* Most deaths related to religious belief involve either denial of health care because of a belief that religious cures will suffice, or the executions or lynchings of suspects maleficent witches or sorcerers in the name of Muslim, Christian or animist belief systems.  Ritual sacrifice claims in the last few centuries or so have almost always been false, or the work of isolated mentally ill serial killers.

* It is notable that this ritual sacrifice was carried out with an intent to heal, rather than an intent to harm others, and was not a produce of any manner of Satanism.

* The apparent ready confessions of the many people involved is notable, although there may be more to the story to explain how they were obtained.  Still, it is often the case that people acting in what they felt at the time was a righteous manner, be it at the direction of a holy man, or in furtherance of a cause such as terrorists, often do confess.

* This case is one of many that establish that Hinduism as practiced, is not all peace and love, and has its brutalities.

* The fact that the individuals involved on all sides in this incident were Dalits probably helps to explain the swift and sure law enforcement action to punish those involved.  There may even be an element to this prosecution that punishes a caste-less holy man for the hubris of pretending to do a Brahmin’s job.  It is not obvious that similar acts by more socio-economically established people who be handled the same way (although it might be that higher caste individuals would not have done it.)

* The story does not relate how the ill boy who was supposed to be cured by the sacrifice fared.  It could be that a willingness to confess was tied to his recovery (on the ground that the price was worth it), or his failure (on the ground that the justification for the act was undermined).

from Wash Park Prophet
via Denver News

Debt Priority Structure And The Systemic Risk Of A Financial Crisis

A technical analysis of how networks of debt obligations with different priorities can lead to systemic risk which can precipitate a financial crisis can be summed up with one simple conclusion:

a necessary condition for minimizing systemic risk is that at least 50% of debts in the entire market should exist as senior debts.

Previous attempts to reduce systemic risk in the banking sector, such as those imposed by the FDIC have focused on a similarly simple indicator – limits on the amount of leverage that an institution may have relative to its equity (typically banks must have equity reserves of at least 20% of their total assets).

This study says that just as there is a minimum level of equity investment that matters, there is also a minimum senior to junior debt ratio that matters.  Thus, a bank with 20% equity, 40% senior debt, and 40% junior debt, or another less risky mix of assets, faces minimal systemic risk, while the presence of banks with more risky portfolios than this benchmark significantly enhances the systemic risk that the banking system will collapse in a financial crisis.

from Wash Park Prophet
via Denver News