Wall Street Journal announces recession

Ahead of the Tape – WSJ.com:

The National Bureau of Economic Research probably won’t say this for months. But why wait? The U.S. economy fell into recession sometime in January.
The NBER — a nonprofit organization of mostly academic economists — puts official dates on when recessions begin and end. It looks at a wide range of data, including income growth, industrial production and gross domestic product. Few pieces of data are more important than the Labor Department’s monthly payroll employment report, which shows the job market started contracting around the beginning of the year.
The NBER calls the labor market the “broadest monthly indicator” for the economy. The last recession — which the NBER says began in March 2001 — commenced just as a succession of payroll employment declines were setting in. The same goes for the recession that began in July 1990.
Payrolls contracted by 22,000 in January and 63,000 in February. Economists surveyed by Dow Jones Newswires expect the Labor Department to report today payrolls contracted 60,000 in March.

You heard it here … second.

Back to … (not the future)

File this under “big black eye” — Census Back to Pen and Paper – washingtonpost.com:

The government is dropping plans to use handheld computers to count millions of people, citing problems with a contract that was intended to make the 2010 Census the nation’s first high-tech head count.
The Census Bureau had planned for its workers to use wireless handheld devices to collect information from people who don’t mail in forms, replacing the clipboards, pens and paper that they used in the past. The agency hired Harris Corp. of Melbourne, Fla., under a $600 million contract, to build 500,000 handheld computers and create a system to manage the data, as well as other services.
But problems with the devices and a long list of changes that census officials asked for — at one point reaching 417 new or clarified technical requirements — vastly increased costs and made officials question whether the plan was manageable.

Having served as the Senate staffer on one of the oversight committees for the 1990 Census, I know what a massive undertaking this is. So the folks at Census have my sympathy — but only those who now have to deal with the mess. That the contract was allowed to get to this point is a black eye on the Bureau and needs to be looked into.
This one is right up there with the recent Heathrow fiasco (and no, I was not caught up in the resulting airline delays during my recent travels – but did have to scramble for a hotel room when the hotel I had booked had to accommodate large groups who were delayed) — see BA sees Heathrow chaos clearing | Business | Reuters.
Just a reminder that Murphy’s Law is alive and well in the I-Cubed Economy.

Patent wars – con’t

Follow up on USPTO’s attempt to change the continuations rules — Law Blog – WSJ.com : Patent Lawyers Do the Boogie as Court Shoots Down PTO Rules:

The PTO was seeking to streamline the application process and unclog a backlog of patent applications by reducing the number of claims and continuations allowed in a patent application. (Claims help define a patent, while continuations are used to amend patent claims and contest rejected patent claims.) Critics of the rules, according to reports, felt that the limitations on patent claims would mean that more complex patents would lose substance.
Yesterday [Tuesday], in a nod to administrative law, district judge James Cacheris voided the rules because, he wrote, the PTO doesn’t have the power to make the changes. Why? He ruled the changes were substantive, not procedural.

No word as to whether PTO will appeal. See the full Law Blog posting for links to further discussions.

SEC grapples with “fair value”

According to CFO Magazine, “The Securities and Exchange Commission has sent 30 letters to CFOs, offering guidance for use of the new fair-value accounting standard that took effect January 1.” The SEC also posted a Sample Letter on the SEC web site.
The key disclosure requirement involves a discussion in the MD&A section of the financial report with an explicit discussion of the methodology used to price the assets. In other words, SEC is using the old math teacher approach of “show your work.” Don’t just give me a number – tell me how you got there.
This could have a positive impact in helping increase acceptance of intangible-backed lending and securitization. One of the key concerns over using intangible as collateral is valuation. An SEC approved disclosure system for the valuation of currently hard-to-price assets will set a good precedent for all “exotic” asset classes. And forcing companies to discuss their valuation methodologies will foster a greater scrutiny and evaluation. That should lead to greater standardization of the methodologies and a more transparent (and less risky) way of deal with these assets. With greater understanding should come greater acceptance of the use of intangibles as an asset class.

Rearranging the boxes

Treasury Secretary Hank Paulson has set himself upon a Herculean task. He wants to replace the hodgepodge of financial regulators that has grown up over the past century with a Prudential Financial Regulatory Agency (“PFRA”) and a Conduct of Business Regulatory Agency (“CBRA”) (see Blueprint for a Modernized Financial Regulatory Structure).
I have no specific comment on the details of the proposal – I’m sure there are nuances upon nuances layered over reams of technical details. I would like to raise more of a mega-question, however, concerning the premise of the proposal. It is the same question I raised about the creation of the Department of Homeland Security as the key element in our anti-terrorism efforts.
In an age of increased emphasis on collaboration, flattened organizations and multi-organization cooperation, is creating a new bureaucratic structure the right answer? As we find the importance of interconnections and multiple points of view, does it make sense to create a Department of Everything Department?
Again, there may well be great merit in the Secretary’s proposal – I’m not in the position to judge the details of whether certain regulatory functions are best handled by the Federal Reserve or by some new agency. I am simply asking a different question. Are there other forms of organizational reform that would give us a better outcome than the standard industrial-era solution of an overarching consolidated bureaucracy?
Maybe it is time to look for “out-of-the box” solutions (to use that old cliché). After all, Hercules accomplished one of his tasks (cleaning the Aegean stables) with an innovative response.
Let me suggest, therefore, that everyone pay more attention to one of the key short-term recommendation (rather than the “Long-Term Optimal Regulatory Structure” recommendation). That short term recommendation is strengthening the President’s Working Group on Financial Markets (PWG). The PWG may be exactly the type of information age regulatory structure needed for the I-Cubed Economy. The proposal calls for expanding the role of the PWG and adding certain other agencies to the group.
Since PWG was set up by Executive Order, these changes can be made by Executive Order. I would urge the Administration to move ahead with this as soon as possible. This could be the starting point for a more innovative regulatory structure.