The madness of March - Time to pay college athletes

Once again, the Ides of March have brought us the Madness of the NCAA men's college basketball tournament. It's fitting that "Selection Sunday" fell on March 15 because the Big Dance has become a kind of Shakespearean tragedy about hypocrisy and the death of amateur athletics.

In this story, the role of Othello or Hamlet is played by Jim Calhoun, head coach of the top-seeded UConn Huskies, but it could just as well be Pete Carroll of USC if this was January and we were talking about a BCS championship. Coach Calhoun, the highest-paid state employee, was recently asked if his salary could be justified in light of Connecticut's budget deficit. Part of his response was, "My best advice to you … shut up."

Coach Carroll handles the issue much better, saying he just tries to "do (his) part" while making over $4 million per year. Whether it's Calhoun or Carroll, basketball or football, Connecticut or California, public or private university, the moral of the story is the same: it's wrong for a multibillion-dollar industry to be based on the labor of people required to work for free — and not giving college athletes their share is indefensible.

There is no way to tell how much money is being made off the tournament, but the official numbers are mind-blowingly big. It's almost impossible to measure the benefit to the local economies in cities from Philadelphia to Portland and from Greensboro to Glendale, but it's predicted that because of the Final Four, the long-suffering city of Detroit (which should host this event every year) will see a $50 million impact in three days.

CBS alone is paying $6 billion over the next 11 years, making it tough to imagine how much the network must be making off these players if it's willing to pony up over a half-a-billion dollars for three weekends of games. An estimated $4 billion will be wagered on the tournament — more than half of it illegally — with nearly every workplace in America running its own pool and many newspapers publishing a handy gambler's guide. Despite the recession, there is plenty to go around.

The schools and athletic conferences also get in on the action. Half the TV money goes to the schools based on how many scholarships they give out and how many sports they play, and the other half goes to conferences based on their teams' performance in the six previous tournaments.

So there is a very real incentive for schools to maintain large and active athletic departments while being part of "power" athletic conferences. UConn, for example, plays in the Big East — a conference that made almost $15 million from the 2007 tournament while eight other conferences made a little more than $1 million each — and Huskie men's basketball makes the university about $12 million per year. I'd be surprised if UCLA hoops is bringing in much less than that, and USC's athletic department revenue has doubled to over $76 million during Carroll's eight years.

At tournament time, especially the last three games, it's amazing to see how many professionals are earning a living off amateur basketball. Oddly, as the venues get bigger, the number of available tickets gets smaller — until the Final Four when the entire lower section of the largest arenas in America are typically reserved for media and the press, the luxury boxes are all taken by corporate sponsors and their invited guests, and whatever seats are left go to the bigger conferences and the booster clubs of the bigger programs. Of course, the scarcity drives up ticket prices.

Meanwhile, in a situation that is nothing short of tragically ironic, the people actually creating the product (the players on the court) get almost nothing. The NCAA deems a student athlete eligible to play as long as he doesn't get paid. While he works for free, the NCAA, the athletic conferences, and the schools all earn money by marketing his athletic skills.

In exchange, the school teaches him some other marketable skills he might be able to use to earn money once he graduates. But his most marketable skills wouldn't be the ones he learned in four years of classroom study, they'd be the ones he developed during a lifetime on the court. And because there are very few jobs playing professional basketball available, the best time for him to market his athletic skills is while he's in college learning those other skills he'll need for the rest of his life.

The time has come for a Social Security system for student athletes — calculated on a per-student basis depending on how much revenue that athlete's sport contributes to the athletic department and paid once the student leaves school — with bonuses for graduating and for graduating on-time. It would provide an incentive to go to or stay in college, dull the influence of agents and their hollow promises of NBA millions, and be a nice cushion in case the job market's a little tight for a 6-foot-9, 230 pound sociology major with a smooth jump shot.

Where power resides - AIG and the global economy

Henry Kissinger said power is the ultimate aphrodisiac. He would know. After all, he dated Candice Bergen and Marlo Thomas and the only thing sexy about him was his job title.

America is a capitalist country governed by a representative democracy and right now, American capitalism and American democracy are in a tug-of-war over where power will be centered — with nothing less than the global economy hanging in the balance. On one side is capitalism, profit motive, and the power of money. On the other side is what my eight grade social studies teacher called "demos kratos," community, and the power of the people. The arena for this battle is today's House capital markets subcommittee hearing where Edward Liddy, the CEO of AIG, is testifying about $450 million in annual bonuses his company is paying out after having been saved from bankruptcy by the American taxpayer.

Liddy is in a no-win situation. He wasn't in charge when the decision to pay these bonuses was made. He's just the guy who was named to take over once we bought control of AIG under our previous president. His job is to give honest answers to tough questions that our elected representatives have to ask now that the U.S. government has basically taken AIG's title as the largest insurance company in the world with an investment of $180 billion in bailout money.

Committee members should resist the temptation to waste time detailing their personal feelings and get to the nuts and bolts of these bonus payments. Because when they do, and when the American taxpayer learns the full story, there will be plenty of outrage to go around. As upset as people are at the idea that AIG would be paying bonuses at all, just wait until it becomes known exactly who is getting this $450 million and exactly where they are. These people are in AIG's Financial Products Unit. The FPU, run by former junk-bond peddler and Michael Milken associate Joseph Cassano, was the department that basically invented the credit default swap (an insurance policy on mortgage-backed securities) and the market for their derivatives. Under Cassano's direction, these people cooked up a scam to charge fees for using AIG's stellar credit rating to add value to investments (like MBS's) traded by its clients — but without setting aside nearly enough capital to off-set the risk.

When the housing market crashed and those securities went bad, AIG had to pay up and lost its credit rating in the process. Contractual obligations due to that change in credit rating then required billions more in payments and, because AIG didn't have and couldn't borrow the cash, we bailed them out. So it was this exact department that traded so much debt that the global market in CDS's has grown to an estimated $62 trillion, but they had no idea what they would do if it all went wrong. And these are the people being paid $220 million in bonuses for 2008, $165 million of which went out last Friday. Not to fan the flames of fury or anything, but of the 400 or so people in the FPU, about 375 work out of the London office. So we're talking about hundreds of millions of American taxpayer dollars being paid to people who don't even live in America.

From the capitalism side, they'll say the contracts to pay these bonuses were in place before the bail-out and they have to be honored because a contract is a contract. They'll say these people are essential for "unwinding" existing CDS's and derivatives so the department can be sold off at the maximum price. They'll also say we're talking about "retention bonuses" designed to keep these people from going somewhere else.

But a contract wasn't a contract when the United Auto Workers had to re-structure their agreements with Ford, GM, and Chrysler before any automaker bailout could happen. It also doesn't make much sense to think the people who didn't see (or didn't want to see) the problem coming are the only ones who can fix it. And I wouldn't worry too much about them leaving. Where are they going to go? Jobs are scarce in the economy these people helped create — especially in the financial sector — and there is no more "toxic asset" than a resume with "American International Group, Financial Products Unit" on it.

Joe Cassano did pretty well for himself during his eight-year tenure as he buried us all in $60 trillion in bad paper. He made $300 million and as recently as 2007 said he couldn't see AIG "losing one dollar in any (CDS) transactions." Clearly he hasn't learned a thing since his junk-bond adventures in the '80s and it seems Wall Street hasn't learned anything from the Great Depression in the '30s.

So the question of who should have the power in this new global economy is easy to answer. Power should rest in the hands of those who learn the lessons of history, not those who seem destined to repeat it.

Playing a high-stakes poker game - Barack vs. the bankers

As president of the second largest bank in the world (Chase National) when the stock market crashed in 1929, Albert Wiggin had the vice president of the New York Stock Exchange go to the floor of the exchange on "Black Thursday" and very publicly buy large blocks of shares in major American corporations for more than their market price. The move temporarily stabilized the market and Wiggin was called a hero. What nobody knew was when the Great Depression began that October, he had been short-selling Chase stock and made himself about $4 million in about four months. I don't begrudge anyone their right to earn a living, but on Main Street, anyone who makes money from the misery of others is a poverty pimp. On Wall Street, he's a role model. People like Albert Wiggin, who profited as the country slid into a depression represent Barack Obama's biggest problem in keeping us out of one.

I've been on the Obama train longer than any writer in America, and whenever anyone had doubts during the election season, I always told them the same thing. "All he's done so far is everything right. I have no reason to believe this will be the thing he gets wrong." And he hasn't let me down yet. He said he'll close Guantanamo, restored Habeas Corpus, gave equal pay to women, will end "don't ask, don't tell," provided health care for poor kids, laid out a plan to provide health care for everyone, put an end date on the Iraq occupation, passed an economic stimulus package with almost no Republican support, and ended the ban on federal funding for embryonic stem cell research. Not bad for two months' work. But he still hasn't solved the "banking crisis," and I know exactly why not. He's got to put the Albert Wiggins of today of out of business first.

The root of the problem is investment banks made trillions of dollars worth of bets on mortgage-backed securities that have lost or are losing value because of the high rate of default and/or foreclosure. The fact that those bets don't seem very safe right now means the commercial banks which own (or are owned by) these investment banks — as well as the companies that provide insurance against those bets not paying off — are also exposed. This gunky stew of risk is the sludge that is slowing our economic engine. When that engine backfired and the exhaust fumes cleared, we found out that there is so much money in MBS's that they had to be referred to by the perfectly Bushian oxymoron, "toxic assets."

Remember there are two different kinds of banks: commercial and investment. Many investment banks have taken on too much risk and are turning to the federal government for money on the premise that they are so important that we can't let them go under. For the last three decades, every administration has had to embrace that idea. From the savings and loan crisis in the late '80s and early '90s, to the hedge fund long term capital management in the late '90s, to Enron in the early part of this decade, to Citigroup and AIG now — and every president before Obama has caved in and bailed them out. Barack's playing a high-stakes poker game with the world's leading financial institutions with $350 billion in chips on the table with a marker for another $250 billion in his back pocket, and it looks like he's going to call Wall Street's bluff.

On one side of the table, the commercial banks control lines of credit to businesses and individuals who need to borrow to make payroll or to finance major purchases like cars and appliances. They have these "toxic assets" (otherwise known as "liabilities") that they want the government to be stupid enough to buy at inflated prices. They'd like to make a deal sooner rather than later so the Dow/Jones can stabilize. Then they can stop worrying about whether or not mortgage payments are being made and get back to the business of earning profits.

On the other side is our president. He controls $600 billion in taxpayer money he can spend to keep the economy from drifting toward recession. He would like the banks to allow credit to flow to those businesses and individuals, but he's not stupid enough to pay for those "assets." He's in no rush to make a deal because the voters have given him two years to get things turned around, there are ways to make credit available without the big commercial banks, and he knows the foreclosure rate will eventually force the investment banks to take whatever is offered to get those "assets" off their books.

These people, our Albert Wiggin, took risks they shouldn't have taken believing that if it all went wrong, we'd bail them out because they're "too big to fail." Barack Obama is about to teach them that when you are entrusted with things like peoples' retirement and life savings, failure is not an option — no matter how "big" you think you are.

Anointment, not appointment - No democracy for Santa Monica

There is a great scene in the movie "Casino" where Robert DeNiro's character, Sam Rothstein, is appearing before the Nevada Gaming Commission which is considering his application for a license. At their table, he and his lawyer are surrounded by boxes, binders, and folders full of papers they intend to use to make their case. A few sentences into Rothstein's lawyer's opening argument, a senator cuts him off, speaks into the microphone, and says, "Pardon me, counselor. Before you continue, this commission is prepared to act on a motion denying the Rothstein application. Do I hear a motion seconded?" The motion is quickly seconded, of course, three fast "aye" votes are offered by the seven-person panel, and the senator declares, "The 'ayes' have it. This hearing is adjourned."

That's basically what happened last week when the Santa Monica City Council filled the seat left vacant by the passing of Herb Katz by appointment, and not via a special election. It wasn't quite as bad as Rothstein's plight, but it cannot be called "democratic" in any way, shape, or form. Truth be told, it wasn't an appointment as much as it was an anointment — with the role of God being played by Santa Monicans for Renters' Rights (which held four of the six seats on the council). When it was all over and SMRR filled the seat with one of its own, it became clear that anyone who wishes to serve our fair city on the council has to kiss that organization's proverbial ring. What SMRR probably doesn't realize yet is that it has called much more attention to itself than it wants, has exposed its disproportionate influence in city politics, and played itself in the process.

The irony of this situation is that SMRR was born out of the City Council's inability or unwillingness to respond to the needs of Santa Monica's tenants back in the '70s when real estate was booming, rents were climbing, and people were being forced to move out in order to make room for condo conversions. The legend goes that local neighborhood groups, tenants, and other political organizations got together to form this Voltron-esque (pre-1980 Reagan-esque?) coalition with the mission of passing rent control laws in this town. And they've done well. Eleven of our past 12 mayors and, until recently, every member of the Rent Control Board have come from the ranks of the group. From humble (borderline noble) beginnings 30 years ago, SMRR has morphed into the monster we know today. And now it must be stopped.

As we've seen through the filling of Herb Katz' seat, neither the supposedly open appointment process, the democratic electoral process, or the will of the people of Santa Monica are nearly as important to SMRR as making sure they control as many aspects of city government as possible. It was a move so blatantly ambitious that it would have made Machiavelli proud. But I hope they don't spend too much time patting themselves on the back because once a group gets to be so full of itself that it can't see the forest of its own mission statement for the trees of its conflicts of interest, the only way to change it is from within. That's exactly what I plan to do and what I advise my fellow Santa Monicans (especially the 20-and-30-somethings) to do: join SMRR, get active within the organization, and build a coalition of support for your potential candidacy. Since the road to city government runs through Santa Monicans for Renters' Rights, there is literally no other way to effect policy change on a local level.

Nobody votes for a candidate based on his or her support for SMRR's agenda in any local races with the possible exception of Rent Control Board commissioner. And even then, the election of Republican landlord/real estate investor (and good guy) Robert Kronovet could be seen as a direct protest of the group's inexplicable hammer-lock on the levers of power in this town. At least when you vote for someone in the GOP, you know you're getting a person who believes in smaller government, lower taxes, and the power of the individual to solve his or her own problems. With SMRR lately, you don't know what you're getting — and all I've seen is hypocrisy.

For an organization that claims to support "ensuring the continued prosperity of our local economy while protecting the community from excessive development and the traffic it generates," and that's "committed to protecting residential neighborhoods from intensification of nearby commercial development" to not take an official position on Proposition T — or worse, to work to defeat it — is indefensible. And for the organization to claim to be "committed to public participation in all aspects of community life, including its political life" while engaging in the public farce that was the "open" appointment process for Katz' seat is so dishonest that it insults our collective intelligence. You can bet it's an issue I will be bringing up at meetings, if my application for membership is approved.