Monthly Archives: April 2009

Hungarian armor

hungtruckIf you ever get a trivia question on who makes Hungarian truck armor, Nucor CEO Dan DiMicco provided the answer at Friday’s earnings call:
“In the first quarter of 2009, our Decatur, Alabama sheet mill successfully entered the Armor plate market.
“Decatur shipped over 5000 tons of their Armor plate products in the first quarter for the use in the protective structure with the Hungary military vehicle. In addition to military applications our Decatur team sees additional armor plate opportunities in transportation and energy markets. Nucor Steel, Berkeley continues to innovate and introduce new flat roll products for automotive applications.”


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Stress-tested banks

The government confirmed the following 19 banks underwent stress tests. Regions and Wells Fargo are of particular interest in Decatur.

J.P. Morgan Chase & Co.
Bank of America Corp.
Wells Fargo & Co.
Goldman Sachs Group
Morgan Stanley
PNC Financial Services Group
US Bancorp
Bank of NY Mellon Corp.
SunTrust Banks Inc.
State Street Corp.
Capital One Financial Corp.
BB&T Corp.
Regions Financial Corp.
American Express Co.
Fifth Third Bancorp

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In today’s Decatur Daily

My column in Sunday’s Decatur Daily is a critique of the recently popular, but misnamed, “Tea Parties.”  If you have lots of time, check out the tangled ownership mess surrounding Decatur’s very own toxic waste site: People behind DU’s toxic problem have tangled web. Enjoy!

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A footnote to financial incentives

Ken Priest receives Role Model Award

Ken Priest receives Role Model Award

From an employment standpoint, David Proctor is removed from the capitalist system. Hard work does not earn him more money. Doing a lousy job will not get him fired. He has a job for life, whether he does it well or poorly.

From a strictly economic viewpoint, this has a predictable outcome. Proctor has no economic incentive to work, so he will not do so. Excellence provides no financial benefit, so he should not pursue it.

Proctor’s situation interests me because he should be an example of the bad things that will happen if two recently controversial issues are resolved without due deference to the market economy. Socialize medicine and we’ll lose most of our doctors, and those that remain won’t be any good. Place salary caps on corporate executives and our main economic drivers will struggle under poor management.

Proctor, though, turns capitalism on its head. He is a federal judge for the Northern District of Alabama. He has a lifetime appointment and a fixed salary. I have covered a few of his trials, most recently the trial of (former) State Rep. Sue Schmitz. Lawyers in his court typically have a huge economic incentive, but invariably he outworks them. He starts early and runs late. He keeps odd hours to avoid wasting the jury’s time. He generally has already researched the legal issue before a lawyer files the motion, and he understands the issue better than the advocate who is paid to succeed.

I do not know what motivates Proctor. Maybe he wants an appellate court appointment. Maybe he enjoys the respect of lawyers and jurors. Maybe he derives satisfaction from seeing justice accomplished. What I do know, however, is that his motivator is not financial.

At first Proctor jumped out as an anomaly, but further thought suggests he is something more than that. EMTs get poverty-level wages, but save lives. Calculate the hourly wage of many teachers (my wife included) and it would be well below minimum wage. Firemen, policemen, pastors. Don’t be too nasty in your comments, but I would even include journalists in the category.

My 13-year-old daughter just walked in the room, and I asked her for more examples. She said, “janitors.” I thought she had missed my point, but then she said: “Ken Priest.” He’s a janitor at Cedar Ridge Middle School, and an amazing guy. He is totally committed to the students and to the upkeep of the building. For him, it most certainly is not about money.

As I think about people I know, most are in the Janitor Priest-Judge Proctor category. Sure they care about money, but place them in a job and they will do it to the best of their ability. Their prime motivator is not money, but noneconomic forms of satisfaction. Those motivators may be selfish or they may be altruistic, but the point is they are not financial.

I’m not sure where the point leads me, but I know it makes me more suspicious of my oft-stated criticisms of salary caps and socialized medicine. Economic forces are powerful, but they share space with many motivators that go unmentioned in economics textbooks. Those unmentioned motivators may be the most powerful.

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Sue Schmitz’s legacy

I covered State Rep. Sue Schmitz’s fraud trial, and I was not sure I agreed with the jury’s decision to convict. The United States accused her of collecting around $40,000 a year for doing little work as public relations coordinator for the Community Intensive Training for Youth (CITY) program. While I questioned the verdict, I have no question that she killed the program for which she worked.

Two-year college Chancellor Bradley Byrne said Thursday he’s all but certain the program to help troubled youths stay out of prison will have to shut down in June.

More than 60 employees of the program were told their jobs would end May 1.

Testimony during the trial suggested the program was amazingly effective at helping youth, until Schmitz and politics intervened. Sue Schmitz may have worked harder for the program than prosecutors claimed, but by merging the program with politics, she sapped it of its strength.

What a legacy for a pro-education legislator.

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More signs of upturn

Tragedy trumps economic stats every time, and we’ve had plenty of it in North Alabama recently. In the midst of our grief, though, there are more signs that the nation is steering away from a depression.

Locally, we can celebrate Wells Fargo’s announcement today that it expects record net income this quarter. Wall Street loved it, and the holding company attributed much of the gain to its acquisition of Wachovia, which has branches in Decatur and Hartselle. Wells Fargo’s statement that lending activity has been brisk is especially promising, as it could foreshadow an uptick in consumer demand.

 The weekly unemployment report also presented good news today. In the week ending April 4, the advance figure for seasonally adjusted initial claims was 654,000, a decrease of 20,000 from the previous week’s revised figure of 674,000. The 4-week moving average was 657,250, a decrease of 750 from the previous week’s revised average of 658,000.

On the downside, 3M is offering buyouts after already laying off a remarkable percentage of its workforce. After a couple days of immersion in tragedy, however, I think I’ll focus on economic positives.

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Filed under Banks, Recession

Stimulus as enemy of free trade

chinaU.S. producers of Oil Country Tubular Goods, such as Decatur’s Independence Tube, joined with the United Steelworkers today in filing an antidumping and countervailing duty petition against China. The petitions allege that Chinese producers benefit from massive government subsidies.
This may be the beginning of Chapter 2 in the effort to escape the global recession. Governmental stimulus payments get to corporate coffers through various routes, but they all have the effect of subsidizing the targeted industries. Subsidization of a domestic industry gives it a competitive advantage over foreign competition.
The steel tube folks want countervailing duties to avoid the effect of China subsidies. How long before China complains of U.S. subsidies that benefit this industry and others?
The International Trade Commission should tread warily, or laudable efforts to avoid a depression could morph into the erasure of decades of progress toward free trade.

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