Responses to Dire Warnings of Imminent Danger

Mar 12th, 2009 | By | Category: Economics, Science and Society

1. In the best way we can, in the face of no viable alternatives beyond doom.

From NOAA:

NOAA’s National Weather Service has issued a report that analyzes forecasting performance and public response during the second deadliest tornado outbreak in U.S. history. The report, Service Assessment of the Super Tuesday Tornado Outbreak of February 5-6, 2008, also addresses a key area of concern: why some people take cover while others ride out severe weather.
In reviewing the public response, the team found that two-thirds of the victims were in mobile homes, and 60 percent did not have access to safe shelter (i.e., a basement or storm cellar). The majority of the survivors interviewed for the assessment sought shelter in the best location available to them, but most of them also did not have access to a safe shelter. Some indicated they thought the threat was minimal because February is not within traditional tornado season. Several of those interviewed said they spent time seeking confirmation and went to a safe location only after they saw a tornado. Many people minimized the threat of personal risk through “optimism bias,” the belief that such bad things only happen to other people.

2. Willed ignorance in the face of growing danger, in service of greed.

From the Boston Globe:

The federal agency that insures bank deposits, which is asking for emergency powers to borrow up to $500 billion to take over failed banks, is facing a potential major shortfall in part because it collected no insurance premiums from most banks from 1996 to 2006.

The Federal Deposit Insurance Corporation, which insures deposits up to $250,000, tried for years to get congressional authority to collect the premiums in case of a looming crisis. But Congress believed that the fund was so well-capitalized – and that bank failures were so infrequent – that there was no need to collect the premiums for a decade, according to banking officials and analysts.

Now with 25 banks having failed last year, 17 so far this year, and many more expected in the coming months, the FDIC has proposed large new premiums for banks at the very time when many can least afford to pay. The agency collected $3 billion in the fees last year and has proposed collecting up to $27 billion this year, prompting an outcry from some banks that say it will force them to raise consumer fees and curtail lending.

3. Manipulate and lie, to temporarily cover your ass.

From NakedCapitalism:

Readers may recall that during Lehman’s demise, a pitched battle was underway between some short sellers, epitomized by David Einhorn of Greenlight Capital. Einhorn raised questions about Lehman’s financial statements, specifically, inconsistencies and rosy looking valuations. The struggle became weirdly per[s]onalized, as Lehman sought to burnish the image of charmismatic CFO Erin Callen, as contrasted with the presumed to be evil company wrecking Einhorn. Of course, if the real performance (as opposed to what the reports said) was as bad as Einhorn’s line of inquiry suggested, it was management that had done the company-wrecking, but that level of detail is often lost on CNBC.

And one of the regular features of the Lehman versus its detractors affair was leaks to the media, leaks of a sort that even if the firm had done it in a way that it had plausible deniability, were clearly intended to reach outside parties, particularly the media.

Now let us turn to Citi. Recall what transpired, per the Wall Street Journal:

Citigroup Inc. was profitable in the first two months of 2009 and is having its best quarter in a year and a half, Chief Executive Vikram Pandit said in an internal memo aimed at boosting employee and investor confidence in his struggling bank.

Yves here. This is simply stunning. The Journal says up front a supposed internal memo was in fact intended to reassure investors.
Dunno about you, but this looks to me like a bald faced attempt to manipulate the stock price, and it certainly worked.