Kevin Drum

Off Label

| Mon Feb. 2, 2009 12:49 PM EST

OFF LABEL....As the sun was setting on the final days of the Bush administration, they left us with one final gift: a new rule that made it easier for drug manufacturers to promote "off-label" prescription drug uses. The pharmaceutical industry loves this, of course, and they spend millions of dollars promoting their latest narrowly targeted wonder drugs to a wider audience while pretending they're doing no such thing. Blue Girl explains:

The problem is, the system has become corrupted and drug companies do their own "research," get it published, and then promote the off-label uses that their "research" showed was effective. A really common one is to prescribe antidepressants for pain management. I refused to take Cymbalta along with my anti-inflammatory and pain management meds because I can not see where changing my neurochemistry would have any effect on my degraded and damaged knees. He got pissy when I questioned the wisdom of the drug makers — and I got a new doctor. Within the first five minutes of meeting him, I told him to make sure to put on my chart in big letters that I refuse off-label uses, and in fact, given that my only health problems are annoyances more than illnesses, I prefer to stick with drugs that have been around long enough to have generics available. When he found out I did some of the peer review on Rezulin, Vioxx and Baycol, he realized exactly where I was coming from.

In BG's case, using Cymbalta would have been an annoyance, not a life threatener. But that's not always the case, and the drug companies themselves certainly aren't the ones who should be making that call. "A legislative fix may be in order," says Chuck Grassley. More here.

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Amex Redux

| Mon Feb. 2, 2009 12:30 PM EST

AMEX REDUX....On Saturday I vented about American Express's habit of examining which shops you buy stuff at and then reducing your credit limit if they don't like what they see. Megan McArdle thinks I'm being unrealistic:

This is what credit management looks like: you try to shut off access to the poor. Poor people have less financial cushion than wealthier people, and they are therefore much more likely to default on their debt.

....You can't have it both ways. Either you want credit card companies and mortgage originators to do everything they can to keep credit risks out of their system — which means identifying people whose shopping patterns indicate financial trouble — or you want them to extend too much credit. The sad fact is that becoming a more responsible lender is largely synonymous with discriminating against the poor.

Saturday's post was a vent, motivated more by the fact that I hate credit card companies than anything else, so let me take a moment to explain my real issue with what Amex is doing. Here's the problem: I'm a privacy dinosaur who doesn't like the idea of corporate America having access to my shopping history. What I buy, and where I buy it, are my business and no one else's unless they have probable cause and a subpoena to make me cough it up.

Now, obviously I'm on the wrong side of history here, but I continue to think that Fortune 500 marketing departments having routine access to my shopping habits is a far more corrosive practice than most people acknowledge. In the case of supermarkets and their loyalty card tracking programs, though, at least I have a choice. It's not much of a choice for most people, since the only way to opt out is to increase your grocery bill considerably, but you can still do it. In the case of your credit card company, you can't. They occupy an extremely privileged place in the financial system that automatically gives them access to your shopping history.

Normally, when financial intermediaries have access to sensitive information like this, regulations on what they can and can't do with it are pretty strict. They should be here too. I don't have any real problem, for example, with generic transaction shaping being used for fraud detection. That's not punitive in any way and doesn't rely on knowledge of specific purchases. Credit limit decreases are another story, especially since they can trigger a surprisingly vast waterfall of dire consequences for people (thanks to some of the other indefensible practices of the credit card industry). So in the same way that auto insurance companies in California aren't allowed to use redlining to set rates even though it probably "works," I don't think credit card companies should be allowed to mine your private shopping history to decide whether or not to cut you off from your credit supply. They're taking unfair advantage of their inherent access to private information, and whether they like it or not, they shouldn't be allowed to use this information themselves any more than they should be allowed to sell it to telemarketers or direct sales companies.

I'll add two more things to this. First, shed no tears for the card issuers. They have plenty of other ways of tracking your creditworthiness. Taking this one away won't hurt them much. Second, it's pretty obvious that Amex understands they went too far, since (or so they say) they ended this program when people started asking questions about on Good Morning America and the New York Times. But I'd feel a lot better if, instead of relying on their PR horse sense, we had some federal regulation to make sure this program — and lot of other credit card practices much worse than this — were dead and buried for good.

Chutzpah Watch

| Sun Feb. 1, 2009 2:35 PM EST

CHUTZPAH WATCH....Everyone in America is justly outraged at the $18 billion in bonuses handed out to gazillionaire bankers last year. Not to mention $35,000 commodes and $50 million corporate jets. But if you want to see some real chutzpah in action, cast your eyes across the Atlantic to our friends at Lloyds Bank. In September, Lloyds acquired troubled banking giant HBOS, and a month later became troubled itself, accepting a £20 billion bailout from the government in return for a 44% equity stake.

So what happened next? Top execs immediately started making a case that they deserved a pay raise:

Advisers to the recently created Lloyds Banking Group are thought to have argued to shareholders that pay rises were warranted because the new bank was considerably larger as a result of the takeover of HBOS in a deal brokered by Gordon Brown last September at the height of the banking crisis.

One shareholder said: "It was not the best time to bring forward a plan where the potential rewards looked quite big."

In the face of shareholder reticence, Lloyds withdrew the plan and has not awarded pay rises for its directors.

But a fund manager said he still expected the bank to return with a new scheme, "but a little less generous".

Yes, you read that right. Troubled bank #1 buys troubled bank #2, thus creating an even more ginormous troubled bank that requires an even more ginormous taxpayer infusion, and the result is. . . .their top execs deserve more money! Chutzpah!

It's also a good case study of how corporate executives think these days, justifying their ever skyrocketing pay packages on the grounds that they're running bigger, more profitable companies than ever. But that's ridiculous. Running a big company requires different skills than running a small one, but economies of scale kick in pretty quickly. Running a $20 billion or a $50 billion corporation isn't really any harder than running a $10 billion company. And in most cases, the fact that corporate profits are up over the past three decades has everything to do with structural changes in the economy and just about nothing to do with brilliant executive management.

As for the financial industry, the long-term answer to their absurd pay packages is to figure out why the finance industry is so profitable. It shouldn't be. Especially now, it should be a cutthroat business with tiny margins, vanishing arbitrage opportunities, and competition ready to underbid you at every opportunity. So why — the past 12 months excepted — isn't it? Why hasn't increasing competition wrung the profits out of the industry? If we figure that out and fix it, gigantic Wall Street pay packages will become a thing of the past for good.

Quote of the Day - 02.01.09

| Sun Feb. 1, 2009 1:41 PM EST

QUOTE OF THE DAY....From Jonathan Chait:

It's kind of funny how, when it comes to domestic politics, many liberals employ assumptions about human nature that are wildly at odds with the assumptions they use about human nature when it comes to foreign policy. When you read the liberal blogs on domestic politics, concessions to the enemy are always counterproductive, will must be met with will, etc. When you read them on foreign policy, all those asumptions are flipped on their head. I'm not saying that these two sets of assumptions are completely impossible to reconcile, but it is pretty odd how easily they sit together.



| Sun Feb. 1, 2009 12:46 PM EST

FEDERER-NADAL...So I came down with some version of the creeping crud yesterday, which was a bummer. But there was a bright side: I kept waking up throughout the night, and whenever I did I turned on the TV and watched a few games of the Federer-Nadal match, inconveniently scheduled in the early California morning by our upside-down friends in Australia. The parts I saw were great tennis, and I don't blame Federer a bit for tearing up at the end. One of the stretches I was awake for was him blowing six consecutive break points at the end of the third set, any one of which would probably have won the match for him. Instead, he took home another loss. It was pretty excrutiating.

But I love this picture of the two of them after the match. When I first saw Nadal play a few years ago, he was a kid with stringy black hair, a sneer on his lips, always dressed in a muscle shirt, and hitting the absolute stuffing out of the ball. "This guy's a thug!" I thought, a tennis-playing Terminator — but of course nothing could be further from the truth. As I quickly learned, Nadal may very well be the nicest, sweetest, most generous tennis machine on the planet. He's almost too nice. It's hard to convince people that this is one of the great sport rivalries of all time when they spend more time hugging each other than trash talking.

But still a nice picture. And hopefully Roger will get his 14th before much longer.

Today's Two Minutes Hate

| Sat Jan. 31, 2009 12:35 PM EST

TODAY'S TWO MINUTES HATE....Here's the latest reason to hate credit card companies: Shop at Wal-Mart, obviously a sign of financial distress, and your credit limit gets lowered. Hallelujah!

This is from American Express, which has now decided to hunker down and simply lie about their habit of doing this. Compare and contrast the following news accounts. When Kevin Johnson returned from his honeymoon last year he got a letter from Amex saying, "Other customers who have used their card at establishments where you recently shopped have a poor repayment history with American Express." Here's what they told the Atlanta Journal Constitution about this in December:

"We're just doing this to manage risk," said Lisa A. Gonzalez, an American Express spokeswoman. She declined to say which retailers or mortgage companies are associated with consumers with higher default rates. She said it makes sense to examine these factors because "customers who have loans outstanding with certain lenders or customers who make transactions with certain merchants tend to have a higher proportion of credit issues or a higher probability of default."

And here's what they told the New York Times this week:

"The letters were wrong to imply we were looking at specific merchants," said Susan Korchak, a company spokeswoman....Now, the company says that there never was such a list. So what about the language in its letters to cardholders, which calls out particular "establishments" where cardholders had shopped, I asked. Well, apparently that was all just a big misunderstanding, despite the number of people who must have been in on drafting the notes in the first place.

So: a month ago monitoring your transactions with "certain merchants" was a legitimate way of managing risk. This month the story is that they were never doing it in the first place. You betcha.

Bastards. I really hate these guys and their entire sleazy industry. More here. Kevin Johnson's website is here.

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*Picking Up

| Sat Jan. 31, 2009 12:49 AM EST

PICKING UP....David Cay Johnston is unhappy with the Obama press operation. It took a week for anyone at the White House press office to pick up the phone when he called, and when someone finally did things didn't get much better:

After a full week of such calls, a human being answers. But Ben LaBolt immediately bristles when asked to spell his name, refuses to give his job title, and says he is going "off the record" until I stop him to explain that the reporter grants that privilege, not the other way around — a basic journalistic standard that LaBolt seems unaware of. He soon hangs up without even hearing what I called to ask about.

A return call is answered by Priya Singh, who spells her name when asked, but does not know (or will not say) what her job title is and several times describes requests for information about how the Obama administration press office is operating as a "complaint" which she would pass on. She says she is not authorized to comment, though she at one point tells me she is a spokesperson.

....My questions to LaBolt and Singh prompted a return phone call the next day from Nick Shapiro, who spelled his name, but had to be prodded several times to give his job title: assistant press secretary.

During our brief conversation, Shapiro, like LaBolt (whose name Shapiro did not recognize), started one sentence with "off the record." Told that the journalist grants the privilege, and that none would be granted here, Shapiro expressed surprise. His surprise was double-barreled, at both the idea that the reporter issues any privilege and that any reporter would decline to talk "off the record."

"Off the record" has become a cancer. It's now practically a default presumption, rather than a rare exception granted for specific and justifiable reasons. Unfortunately, no one is willing to do anything about it. A few years ago the big newspapers all instituted policies that banned blind quotes unless there was a good case for them, but as near as I can tell the only result was to force their reporters to concoct ever more inventive ways of saying "because he wouldn't talk otherwise." Beyond that, life went on as usual.

Reporters are as much to blame for this as politicos, and Johnston concedes that some of what happened here may just be birthing pains. Everyone is new, policies haven't been set, equipment isn't all working, etc. etc. Let's hope so. Obama didn't have much of a reputation for openness with the press during his campaign, though, so it's worth holding his feet to the fire over this. Let's not have another Bush administration, please.

Michael Steele

| Fri Jan. 30, 2009 7:40 PM EST

MICHAEL STEELE....I see that the candidate I was rooting for to head up the GOP has won:

It's official. The new face of the National Republican Party is Michael Steele, a 50-year-old African American, the first in the history of Abraham Lincoln's party.

Ah, but he's not just 50 years old. Steele was born on October 19, 1958, the exact same day as me. That's why I was rooting for him.

But it's not all sunshine on the Michael Steele front. Because of our shared birthday I once pinged him to be my friend on Facebook. He never responded. Very sad. I guess he didn't want to reach out.

Friday Cat Blogging - 30 January 2009

| Fri Jan. 30, 2009 3:04 PM EST

FRIDAY CATBLOGGING....Last week I promised guest catblogging, and guest catblogging we shall have! This week's episode comes via my sister, who's doing some long-term catsitting for a friend and now has two new companions. That's Azrael on the left, examining that perennial cat favorite, a cardboard box, and Jasper on the right. Azrael is a cute little lap cat who (apparently) demands attention at all times and all places. Jasper is more the economy size, and my sister complains that he keeps her up at night by sleeping next to her and purring loudly. This sounds absurd to me, since purring is a well known tranquillizer, but there you have it. Welcome to catblogging, A&J. The usual suspects will return next week.

So How's That Working Out For You Guys?

| Fri Jan. 30, 2009 2:45 PM EST

SO HOW'S THAT WORKING OUT FOR YOU GUYS?....Lockstep opposition to all things Obama isn't working out too well for the GOP according to recent polling done by Democratic pollster Stan Greenberg. CQ's Balance of Power reports:

A survey of 1,200 voters in 40 traditionally Republican congressional districts now held by Democrats [] shows Obama's post-election honeymoon reaching a rapturous stage, with 44 percent of voters strongly supporting his policies. [Another 26% "somewhat support" his policies. –ed]

A full 64 percent favor his economic plan, compared to 27 percent against. And precisely that same proportion favors the stimulus in 13 states that are expected to have competitive Senate races in 2010: Kentucky, Florida, Missouri, North Carolina, New Hampshire, Pennsylvania, Louisiana, Colorado, Ohio, Kansas, North Dakota, Wisconsin and Illinois.

If DC Republicans continue to lash their fate to the SS Talk Radio, I think they can expect to see more and more of this.