Saving Social Security

I recently received a petition for my signature to save social security from an expected Republican attack. To save it we must understand what it was meant to be and what it now is and what problems it faces.

Initially the Social Security program was meant to be a savings financed retirement fund to which employers would be required to contribute half of what was deducted from worker paycheck and put in the Social Security Trust Fund (a fully funded life insurance program). This is (or was supposed to be) like our personal IRAs but with the employer contribution (though many employers offer retirement programs for their employees to which they also contribute in addition to Social Security contributions). But from the beginning, current worker/employer contributions to the Trust Fund were used to finance current retiree benefits rather than being saved for the contributor’s future retirement, i.e., it was pay-as-you-go.

Three factors undermined this pay-as-you-go model. First, benefits were indexed to wages rather than inflation and as real wages have raise over time so have benefits. Second, the average life expectance of retirees has increased dramatically. When the Social Security scheme was launched in 1935, life expectancy in the US was a bit under 60 years (the average retiree received SS benefits for only a year or two). It is now 77.3, down a bit from 78.8 in 1919. Third, population growth has slowed and the number of workers taxes for this growing number of retirees has been and will continue to fall fast.  “Saving Social Security”

The simplest, and in my view most sensible, solution to this financing problem is to: a) increase the retirement age at which SS starts paying; b) increase the number of working age immigrates to help pay for the retired; and c) continue to encourage private pensions and IRAs. Unless you are French most of us continued working beyond normal retirement ages because we wanted to continue using our skills longer. We enjoyed what we did for more than just the money.

Adopting the above reforms would not reduce what a retiree SS beneficiary receives each month.  But it would reduce what she receives over her life time because would be retired for fewer years. Some people are calling this increase in the retirement age cutting Social Security.  What ever.

As I have argued elsewhere, I would replace Social Security with a Universal Basic Income.  “Our social safety net”

Trade once again

Everyone understands that without trade they would be dirt poor. If everyone had to be self-sufficient, they would be lucky to survive. It’s almost as obvious that the wider we can trade the more we can specialize in our comparative advantage raising the incomes of everyone. Where many stumble is at their national borders (though within national borders of large countries some regions restrict trade with other national regions to protect otherwise less efficient enterprises thus lowering incomes in general).

Why should trade be restricted across national borders? Three reasons stand out: two legitimate and one not. A potentially legitimate reason concerns national security. Requiring that products necessary for defense be domestically produced, even at greater cost, reduces the risk of supply chain disruptions. The risk is that this excuse is easily abused to the extent that such protection can turn illegitimate or corrupt.

A second legitimate reason also concerns resilience. The most efficient allocation of productive resources must take account of the risks of disruption to supply chains. We buy insurance for many assets and activities, thus incurring a certain cost, to protect our incomes from risks (large or small) of interruption and potentially larger losses. When buying goods or inputs from cheaper producers located far away, we are exposed to larger risks of supply interruptions. American manufacturers, for example, take these risks into account in deciding where to produce and purchase inputs to their products sold in the U.S.

A government bestowed financial favor on a firm or industry (trade protection, industrial policy) is always part of a quid pro quo. The firm delivers favors to the politicians who favor it.  Government protection of otherwise uncompetitive firms increases their viability and profits but at the expense of lower income for the rest of us. Countries that heavily indulge in such protection have suffered lower levels of income. “Trade protection and corruption”

Following World War II, and the establishment of what became the World Trade Organization, barriers to trade (domestic protectionism) were gradually reduced via bilateral and multilateral trade agreements. In the 62 years from 1959 to2021, real United States’ per capita personal income, when measured in constant 2012 dollars to adjust for inflation, increased 297.1%, from $13,971 in 1959 to $55,477 in 2021. This huge increase is the result of increased productivity per worker. But such productivity gains are only possible because of trade (within or across national borders).  “The case for trade”

Weaknesses in government programs to facilitate worker adjustments that are a necessary part of a dynamic, growing economy and other geopolitical factors are undermining the freest and most efficient trade (domestic and global) that our prosperity has depended on. “Geo Economic Fragmentation and the Future of Multilateralism”  “End globalization?”

The Economist magazine has argued that: “One problem [with protectionism and industrial policies] is their extra economic costs. The Economist estimates that replicating the cumulative investments of firms in the global tech-hardware, green-energy and battery industries would cost $3.1trn-4.6trn (3.2-4.8% of global gdp). Reindustrialisation will raise prices, hurting the poor most. Duplicating green supply chains will make it costlier for America and the world to wean themselves off carbon. History suggests that vast amounts of public money could go to waste…. Yet rescuing the global order will require bolder American leadership that once again rejects the false promise of zero-sum thinking. ”  “The destructive new logic that threatens globalisation”

Misinformation and corruption are undermining the basis of our incredible prosperity just when we need to pull together to deal with global warming. We must resist and fight back to restore and preserve our efficient market economies.  They would not exist without trade.

Diversity Training

America was founded on the principle that every person deserves respect and equal treatment. While our constitution incorporated an unfortunate compromise by permitting slave ownership in the South, which was fixed after our civil war, many scars remain. Each generation needs to be taught our proper principles and we should do our best to reflect them in our dealings with our fellow citizens of all races and creeds.

As Tom Palmer put it some years ago: “The recognition of individuality, of the uniqueness of each individual, is commonplace in all cultures…. Each human person is unique…. What is less commonly grasped is that we all share something morally significant and that therefore all human beings have legitimate claims to rightful treatment by each other, that is, to respect for their human rights.”  “Freedom is the birthright of all humanity”

I assume that diversity training is an attempt to provide such understanding and to endeavor to remove the remaining scars of historical prejudices. That is certainly an important and laudable goal. But perhaps the new generation would benefit more from a forward-looking, positive approach rather than stressing atonement for an unchangeable past. Diversity is a fun and enriching phenomenon.

Let’s learn more about the cultural and historical backgrounds of our fellow citizens and how and why they or their ancestors came here. Let’s sample their food and music. Let’s rejoice in the diversity around us. Most cab drivers in the DC area are immigrants or immigrants once removed. I enjoy asking them where they or their parents are from. Most of them enjoy sharing such information. Every now and then one of them will reply with sarcasm that they are from Arlington or some such place. And I reply, “Yes, yes, but where did your ancestors come from? We all came from somewhere else” (overlooking our natives).

Diversity is more than a moral duty. It is a unique blessing of the American experience.

Fair Tax Act of 2023

While I will not hold my breath, I am thrilled to see the introduction of H.R.25 – FairTax Act of 2023 in the House of Representatives by Rep. Carter Earl L. “Buddy” (R-GA-1) on January 9.

“This bill imposes a national sales tax on the use or consumption in the United States of taxable property or services in lieu of the current income taxes, payroll taxes, and estate and gift taxes. The rate of the sales tax will be 23% in 2025, with adjustments to the rate in subsequent years. There are exemptions from the tax for used and intangible property; for property or services purchased for business, export, or investment purposes; and for state government functions.

Under the bill, family members who are lawful U.S. residents receive a monthly sales tax rebate (Family Consumption Allowance) based upon criteria related to family size and poverty guidelines.” “Fair Tax Act of 2023”

I have written a great deal about taxation, a necessary feature of government spending, and how to make it fair and economically neutral (minimal distortion of the allocation of resources in our economy). Income taxation—especially corporate income taxation—fail these tests. A universal consumption tax passes them. It is especially suitable for our globalized world where companies produce and sell in many countries. “Tax reform and the press”   “The corporate income tax”

But the issue of fairness is somewhat in the eyes of the beholder. I have also supported a Universal Basic Income (UBI), in place of our many safety net transfers including Social Security. “Our social safety net”  Not only does a UBI better fit American’s strong commitment to individual liberty and choice, but when combined with a flat consumption tax it produces a progressive impact on income that satisfies my notion of fairness. “Replacing social security with a universal basic income”

As I understand the new (actually a return to the old) and improved House rules, after consideration by the House Ways and Means Committee, the bill will be debated on the floor of the full House. This is a giant step in a very good direction.  

Restoring Regular Order to Congress

In my “Hopes for the New Year” blog last week I listed among my hopes: “Restore Congressional Leadership. Enforce the War Powers Act. Restore regular order and cross aisle cooperation to address real problems. “Our dysfunctional Congress”

The promises made by Kevin McCarthy to gain the required majority support for his Speakership of the House, largely deliver my wish. They weaken the power of the overly powerful Speaker and increased the power of your and my Congressman or Congresswoman. Each appropriation will be properly and separately considered (first by the relevant committee) rather than the all in one rush package no one has time to read in the final minutes before the government must shut down. The issues and proposed remedies were presented a few days ago by Bruce Fein “Deliverance from the Republican House”

OK guys, please get on with addressing the issues and needs of the country that depend on law. The term “guys” here is a standard reference to both men and women. It reminds me of the many meetings we had in 2000 in Istanbul with the new head of the new Turkish Banking Supervision body created to manage Turkey’s exchange rate and banking crises. We (our IMF team) met with him and his team daily and often well into the night and he often referred to us as “girls” or in his better moods “ladies.”

Russian culture

Article 2 of the Constitution of the Russian Federation states: “Man, his rights and freedoms are the supreme value. The recognition, observance and protection of the rights and freedoms of man and citizen shall be the obligation of the State.”

Chapter two goes on to spell out these rights, which are those observed in most democratic country in the world. “Article 17 1. In the Russian Federation recognition and guarantees shall be provided for the rights and freedoms of man and citizen according to the universally recognized principles and norms of international law and according to the present Constitution.” These include free speech, privacy, “the right to the inviolability of private life, personal and family secrets,” etc. It seemed a bit odd, then, when the deputy from the party “New People”, the well-known Russian actor of theater and cinema, Dmitry Pevtsov, recently stated that Article 2 should be replaced a declaration of the supreme Russian values as faith, family and the fatherland.

These are very different values than in Russia’s existing constitution and those found more widely around the world. That brought to my mind an email conversation I had with a young Russian living in London almost fifteen years ago but it sounds like it was just yesterday. It was rather shocking to me then, but it is important and educational to hear how others think about their own culture and think about ours. Here it is: “Dialog with Denis-a young Russian living in Europe”

Hopes for the New Year

We each have our own beliefs, customs, and preferred lifestyles. But we live together in communities and nations with others who have their own beliefs, customs, and preferred lifestyles. Generally, each of us doing our own things does not interfere with others doing theirs. But sometimes it does, raising issues of the rules governing those interaction. Our personal freedom and peaceful coexistence with others depend on how wisely we define those rules. Finding and observing an optimal balance of personal freedoms with community restraints and obligations enhances the wellbeing of everyone. The U.S. has a bigger space for personal freedom than most countries and has flourished because of it.

Generally, my freedom of behavior stops where my fist meets your face. What I do with my fist otherwise should not be your concern. But some people (or countries) seem to go out of their way to find behavior by others to object to.  We had no national interest or need to attack Iraq, Syria, Kuwait, Libya, Liberia, Somalia, or Kosovo, to name a few of the countries we attacked in the last twenty years. Two men suing a baker for refusing to bake their wedding cake when another baker across the street would be happy to do it are looking for fights rather than harmony. With the same reasoning: should a website designer be required to design a website for the Ku-Klux-Klan when she disagrees with their message and activities?

Nor is it credible, nor a contribution to the rule based international order meant to keep the peace among nations with divergent political systems, to ignore the rules you expect other nations to follow. “The rule of law-China and the U.S.” The U.S. attack on Iraq violated international law as much as does Russia’s attack on Ukraine. Rather than press China to abide by international trade rules, the U.S. is ignoring them itself.  “WTO ruling-Trump tariffs violate rules” Our bullyish hypocrisy is more than embarrassing. It undermines our international standing and influence and is contrary to our national interest.

With that background, what are my most important wishes/hopes for 2023?

–Stop pushing us into WWIII. Remove the neocons from our government. “Ukraine war-how does it end?”

–End the Russian war on Ukraine. Yes we can (push Ukraine and Russia to the negotiating table) “End the war in Ukraine”

–Fix our immigration laws/policies. https://wcoats.blog/2022/09/23/a-land-of-immigrants/

–Join the Trans Pacific Partnership (now called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership)   “Tony Judt on trade”

–End our Industrial policies. “Industrial policy sounds good but is unsound”

–End our trade protectionism  “Trade protection and corruption”

–Compete with China fairly  “Competing with China”

–Return to our principles re-Israel/Palestine “Dear Congressman Kevin McCarthy”

–Restore Congressional Leadership. Enforce the War Powers Act. Restore regular order and cross aisle cooperation to address real problems. “Our dysfunctional Congress”

–Restore fiscal sanity—balance the Federal budget via spending cuts (especially so-called defense). https://wcoats.blog/2011/04/23/thinking-about-the-public-debt/

–Restore the domestic rule of law (even on Trump): “A reflex U turn from the January 6 Committee”

–Restore the Republican Party to the principals I have always supported—get rid of Trump. “More on Trump acquittal”

–Protect our free speech but restore civility to public debate. “Sacred tension-uncanceling ourselves – Jonathan Rauch”

The above would be a good start in restoring America to the principles and scope of government that made us the Land of the Free – Home of the Brave.

Happy New Year

Who Decides?

Who decides what we eat, drink, and how to go about being merry? Societies range from those that rely heavily on government determination to those that leave most choices to individuals. At one end of the spectrum, the government determines what it is healthy or safe for us to consume and do and at the other end each person freely makes their own decisions about most aspects of their life.  Neither of these extremes is absolute, of course. At the freedom end we are not free to violate the freedom of others (steal their property, assault their bodies, etc.).  At the cradle-to-the-grave -government-protection end we safely eat, drink, and enjoy the activities the government allows us to.

America flourished economically and culturally because we were largely free to make our own decisions. Government largely enforced property rights and public safety and provided information on which we could make better informed private choices. We innovated and took calculated risks with the deployment of our ideas and flourished.

In recent decades the government has increasingly restricted our choices to what it determined was good or safe.  The superiority of our private choices depends on how well informed and responsible we are. While we and the government may both think we are motivated to act in our personal best interest, the incentive to get it right is stronger for the individual actor.  And incentives always matter.

Take but one example—the “War on Drugs.”  Despite this war, 11,712 people died from drug overdoses in 2000 rising in two decades to 83,558 in 2020 (from 6,190 to 64,183 for opioids). “Drug overdose deaths-fentanyl-Greenville NC” I believe, with many others, that ending the drug war (legalizing the purchase and consumption of them) and instead educating the public about their effects (honest, fact-based information) would reduce such deaths.

The growing, selling and consuming of Cannabis is now legal in 21 states. When I gave into the social pressure in college to take a drag as a joint was passed around, I learned that it makes me less social. Wine was my better option. Not only do I enjoy wine, but I appreciate its socializing properties.  So, it has probably been 50 years since I have smoked marijuana. Its not clear whether its legalization along with better information and education on its pros and cons will increase or decrease or leave unchanged its consumption. The destructive prohibition of alcohol and the organized crime syndicates that grew up to circumvent it and its subsequent repeal did not eliminate the damage that alcoholism visited on some people.  However, Americans have generally benefited from the reliance on education and persuasion rather than government coercion.  Rather than crime syndicates to distribute illegal booze, we have AA and health facilities to help those who have not been able to resist overusing it.

Challenging and sensitive examples concern racial, sexual and religious discrimination.  The Civil Rights Law of 1964 attempted to address racial discrimination but in some ways overreached. The case of same sex marriage and the cake baker come to mind. We are still struggling to find the best balance between potentially conflicting individual rights.  I fail to see how the refusal of a baker to cook for the marriage of two men (which violates his religious beliefs), interferes with their right and ability to marry —an arrangement society has always seen as beneficial and important (and thus not to be denied to homosexuals).

The case of affirmative action also provides a challenging example of addressing a problem with social attitudes vs coercion. The Supreme Court decided in 1978 that the prohibition against racial discrimination could be violated for a temporary period in the interest of greater racial diversity and balance.  Harvard University chose to discriminate against Asian students, who would have been overrepresented if admitted on the basis of academic merit only, in order to admit a larger number of African Americans.  Asian students have challenged Harvard’s policy and the Supreme Court is expected to rule next year in “STUDENTS FOR FAIR ADMISSIONS, INC., Petitioner, v. PRESIDENT & FELLOWS OF HARVARD COLLEGE, Respondent” on the question “Should this Court overrule Grutter v. Bollinger, 539 U.S. 306 (2003), and hold that institutions of higher education cannot use race as a factor in admissions?”

I believe that a public discussion of the benefits of diversity to schools and other institutions as well its contribution toward overcoming earlier and existing negative discrimination against African Americans is the more promising and flexible approach to this issue than government coercion. I find it interesting that many federal court judges take race into account in hiring their clerks.  “Appeals court judges consider race of their clerks”  This is also an interesting perspective: “How liberals lost their way on affirmative action”

The times are changing

In 1978 China began to free up and open its economy to move its economic policies toward ours. Although the Communist Party of China remained in complete control of the political domain, the growth in China’s economy was dramatic. “According to the World Bank, more than 850 million Chinese people have been lifted out of extreme poverty; China’s poverty rate fell from 88 percent in 1981 to 0.7 percent in 2015, as measured by the percentage of people living on the equivalent of US$1.90 or less per day in 2011 purchasing price parity terms.” “Poverty in China”

As I wrote 11 years ago: “Chinese people strike me as more like us than most any other people (including Europeans) I have met. And who do I mean by “us?” I don’t mean just Anglo Saxons like myself. I mean the hard working, innovative, entrepreneur types who are creating most of the wealth in this country like Google founders, Larry Page (American born Jew) and Sergey Brin (Russian born Jew), or Steve Jobs, who was born in San Francisco to a Syrian father and German-American mother, as well as many Anglo Saxons like myself.” ‘My G20 trip to China”

Sadly, Xi Jinping has been reversing this free market trend with very damaging results to economic growth and personal privacy and freedom in China.  

Sadder still, the United States has reversed direction since 9/11 as well, though more slowly. Not only has our government increasingly intruded into our privacy (it didn’t end with Edward Snowden’s revelations:  “Civil rights-Brennan-domestic terror-white supremacy”), but it has flooded the economy with excessive regulations, increasing trade restrictions and even the launch of industrial policies and subsidies that violate WTO rules. “US chip war to hit allies as hard as it does China”   “Competing with China” Our championing of the rule of law is growing increasingly hollow. Asset forfeiture provides but one example: Coats on the abuse of civil forfeiture”  and George Will on civil forfeiture nightmare”

How can this be? Why do we seem to want to be more like China? Many of today’s voters had not been born when the Berlin Wall fell in 1989. We must make the case for free markets and limited government again and again, but in a way that is understood by, and appeals to the concerns and sensitivities of, generations X and Z and our future children.   “Global protests-democracy-autocracy”

Econ 101:  Student Loan Forgiveness

“The Biden administration recently announced it will forgive roughly $500 billion in student debt…. Borrowers whose income was under $125,000 ($250,000 if married) in either 2020 or 2021 are eligible.” “Does Biden’s student debt forgiveness achieve his stated goals” Biden would forgive this government guaranteed debt by executive order. Congress has not passed a law authorizing it. In my opinion, it should be and presumably will be overturned by the Supreme Court as an overreach of executive authority. 

Many people who claim to champion social justice and more equal income distribution favor Biden’s proposal. I assume that they don’t really understand what they wish for. While I covered these issues seven years ago, perhaps some memories should be refreshed:  “Two approaches to American governance-the case of higher education financing”

The basic facts are that, aside from the idle rich who might attend college solely for cultural enrichment (which is nice if you can afford it), people attend college to acquire the knowledge and skills that enable them to earn higher incomes than otherwise. “According to new data from the Federal Reserve Bank of New York, the median annual wage for a full-time worker ages 22 to 27 with a high school diploma is $30,000. For a full-time worker with a bachelor’s degree, it’s $52,000…. The return on investment for a college degree is substantial — worth upwards of $800,000 or more in increased earnings over a lifetime.”   “Wage gap-college-high school grads”  For taxpayers to pay for this education would transfer income from the middle-income class to the higher-income class, not something that social justice champions can justify. Multiple private and government programs pay for low-income students to attend college.

As the amount of student borrowing has skyrocketed, so has the cost of college. “Over the past several decades, the cost of higher education has increased dramatically, more than doubling since 1985 at both public and private universities.” While some have attributed the incomes in the cost of college to the easy access to government guaranteed loans (especially if they don’t have to be repaid), evidence: “points instead to administrative growth as reactive to consumer demand and regulatory requirements….    Most colleges today operate their own systems of justice to comply with federal regulations like Title IX, and HR departments have grown apace with changes in federal regulations about hiring practices.” “A new theory of rising college costs”

“Administrative spending comprised just 26% of total educational spending by American colleges in 1980-1981, while instructional spending comprised 41%. Three decades later, the two categories were almost even: administrative spending made up 24% of schools’ total expenditures, while instructional spending made up 29%…. The factors that drive universities to hire more administrators can be boiled down to a few main explanations, often reflecting a shifting landscape in the higher education, including government regulations, competition between schools, and a modern population of students with increasing needs…. Perhaps most controversial is an increasing raft of federal and state regulations that universities must abide by: the Clery Act, which requires campuses to report their crime activity; new Title IX regulations that govern the handling of sexual assault; and Family Educational Rights and Privacy Act (FERPA) requirements for providing educational records….   A Vanderbilt study of 13 colleges and universities found that regulatory compliance comprises 3 to 11% of schools’ nonhospital operating expenses, taking up 4 to 15% of faculty and staff’s time….  And on a deeper level, colleges and universities are simply being asked to do more. Families expect their sons and daughters to have access to career assistance, readily available health services or counselors if they’re struggling with a mental illness.” “Bureaucrats and buildings-the case for why college is so expensive”

Those choosing to invest in college who are not helped by family and friends and have not worked and saved enough to cover the cost, generally have no credit record or collateral to offer banks or other outside lenders. This is what motivated the government guaranteed student loan program. For the future we should consider college financing arrangements in which the lender has “skin in the game.” To repeat from my blog seven years ago: Milton Friedman in 1955 and repeated in Capitalism and Freedom in 1962 made an interesting proposal for sharing the risk of investing in higher education between the borrowing student and the lender. “Enter income-share agreements ( ISAs ), which are essentially equity instruments for human capital. Investors finance a student’s college education in return for a percentage of their future income over a fixed period. ISAs are not loans and there is no outstanding balance. If students earn more than expected, they will pay more, but they also will pay less—or nothing—if their earnings do not materialize.”   “from the Wall Street Journal”

The Student Success Act proposed by Sen. Marco Rubio (R., Fla.) and Rep. Tom Petri (R., Wis.) almost a decade ago (but never adopted) would provide for the collection and publishing of information on the cost and average earnings of graduates of different colleges and fields, which would help students choose where and how to invest in their futures. We need to improve the information on which young people base their college and career choices and ensure that those who would benefit from college but can’t afford it at the time are not there by prevented from doing so. But otherwise, students choosing to benefit from college should pay for their investment.

The difference between Bitcoin and FTX

Bitcoin is a digital currency (cryptocurrency) that can be paid to another bitcoin user willing to accept it via a blockchain account.  It is backed by nothing and promises nothing. Its US dollar value has fallen from $65,496 on November 14, 2021, to $15,630 on November 21, 2022.

“FTX Exchange was a leading centralized cryptocurrency exchange specializing in derivatives and leveraged products. Founded in 2018, FTX offered a range of trading products, including derivatives, options, volatility products, and leveraged tokens. It also provided spot markets in more than 300 cryptocurrency trading pairs such as BTC/USDT, ETH/USDT, XRP/USDT, and its native token FTT/USDT.12 In early November 2022, the exchange and the companies in its orbit began a steep fall from grace….  According to its bankruptcy filing, FTX, which was once valued at $32 billion and has $8 billion of liabilities it can’t pay, may have as many as 1 million creditors…. On November 16, a class-action lawsuit was filed in a Florida federal court, alleging that Sam Bankman-Fried created a fraudulent cryptocurrency scheme designed to take advantage of unsophisticated investors from across the country. ” “FTX exchange”

The difference between Bitcoin and FTX is that Bitcoin is a digital coin/token that some believe might achieve wide adoption as money and thus a stable demand that could stabilize its price. In my opinion, this is HIGHLY unlikely. I explained this potential eight years ago: “Cryptocurrencies the bitcoin phenomena”   “The future of bitcoin exchanges”  But most people buying Bitcoin are gambling that they can sell it for a higher price than they paid for it (first cousins to slot machine addicts).

On the other hand, FTX and its related products and services promised real things and to play by known rules (contracts). On November 11, FTX and its affiliated firms were put into bankruptcy. Billions of dollars where missing? Founder Sam Bankman-Fried (SBF) claims that he was just careless. It appears more likely that he was a lying fraudster. “An attorney also said the firm had been run as a ‘personal fiefdom’ of Bankman-Fried with $300 million spent on real estate such as homes and vacation properties for senior staff.” “Crypto lender genesis says no plans to file bankruptcy imminently”  Presumably to promote himself as a good guy and to win influential friends, SBF also contributed millions to charities and politicians. 

Most crypto product and service providers want regulations that will give potential investors and customers more confidence in their products but that will not stifle the potential creativity of a dynamic industry.  Hopefully congress will get on with it — carefully. “Crypto bill criticized”

“Sam Bankman-Fried, the founder of the FTX exchange and Alameda Research, a cryptocurrency trading platform, seemed to confuse his bank and his companies. According to John Ray, the new CEO in charge of the restructuring of his empire which went bankrupt on November 11, Bankman-Fried received a personal loan of $1 billion from Alameda. He is not alone: ​​the firm, which is a kind of cryptocurrency hedge fund, has also lent $543 million in personal loan to Nishad Singh, an associate of Bankman-Friend, and $55 million to Ryan Salame, the co-CEO of FTX Digital Markets, one of FTX’s affiliates.  

“’Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,’ Ray wrote. ‘From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.’”  “Bankman-Fried received 1bn in personal loan from his company”

“Bankman-Fried’s net worth peaked at $26 billion.[11] In October 2022, he had an estimated net worth of $10.5 billion.[12] However, on November 8, 2022, amid FTX’s solvency crisis, his net worth was estimated to have dropped 94% in a day to $991.5 million, according to the Bloomberg Billionaires Index, the largest one-day drop in the index’s history.[13][10] By November 11, 2022, the Bloomberg Billionaires Index considered Bankman-Fried to have no material wealth.[14]”  “Sam Bankman-Fried”

I assume that jail is next, perhaps in the cell previously used by Bernie Madoff.

If you subscribe to The Economist you can read fascinating details here: “The failure of ftx and Sam Bankman-Fried will leave deep scars”