Felix Salmon

Ben Stein Watch, lawsuit edition

Felix Salmon
Jan 12, 2012 17:02 UTC

Many thanks to Yoree Koh (and @Dutch_Book) for bringing Ben Stein’s lawsuit against Kyocera to my attention. You can download the whole thing here, but it’s worth spelling out some of the more hilarious parts.

The whole suit is ludicrous, of course: Stein is claiming breach of a nonexistent contract. (The closest thing the suit comes to saying that there was any contract at all is the part when it says that Stein’s agent ,Marcia Hurwitz, “considered the deal done”. Which, obviously, she was wrong about.

The basic story is simple. Kyocera wanted to hire Stein to do some TV commercials, but the company is very environmentally conscious, and it decided not to use him after learning of his anti-science views on global warming.

Stein somehow manages to turn this into a question of religious freedom, claiming that Kyocera’s refusal to let him pitch their products constitutes “wrongful discharge in violation of fundamental public policy”:

Ben Stein said he was by no means certain that global warming was man-made, a position held by many scientists and political conservatives. He also told Hurwitz to inform defendants that as a matter of religious belief, he believed that God, and not man, controlled the weather…

A host of federal laws protects Americans from being discriminated against on the basis of religious belief. Neither employees nor independent contractors already hired may be dismissed on the basis of their religious views.

Ben Stein’s questioning of whether man makes the weather or God makes the weather is a matter of his religious belief. For him to be fired because of his religious belief is a clear case of discrimination against him for religious belief in violation of state and federal law.

A word to the wise, Ben: you weren’t fired for your religious beliefs. Indeed, in a world where it’s hard to get a large group of rabbis to agree on the day of the week, the Jewish religion’s views on the subject of global warming are very clear. Consider this letter, for instance, signed by more than 600 rabbis:

We have established Interfaith Climate and Energy campaigns in 21 states that are educating congregations on the link between energy conservation and renewable energy sources that benefit climate change reduction…

We have longstanding distress about other health and environmental effects of energy policy, including global climate change…

The same energy policies that will help achieve peace for humankind by reducing our dependence on oil will create greater harmony within creation by protecting the environment.

Here’s much more detail on the question of Jewish attitudes to global warming, summed up by saying that

we must take responsibility for maintaining and preserving G-d’s Creation not only for the here and now, but also for the benefit of posterity. This is something that must be taken very seriously, and we are required to follow the guidance of the experts in taking practical measures of conservation and preservation to save the world from irresponsible and destructive consumption.

Needless to say, the idea that the weather is controlled by God, and that therefore it is unaffected by human behavior, appears nowhere in any Jewish teachings I can find. And Stein is quite explicit about being a Jew, having decided to play that card in his execrable documentary about Darwinism.

Stein’s also upset that Kyocera took issue with “statements widely attributed to him that appear on the web”. He replies, in the complaint, that this “means anonymous, unsupported gossip about a famous person”. Which it almost certainly doesn’t. I’m something of an expert on statements widely attributed to Ben Stein: none of that gossip is anonymous, and nearly all of it is very carefully supported. With, for example, video, of Stein himself saying, very clearly, that a big speech by Barack Obama’s was “scarily authoritarian” and “something the Führer would have done”.

But my favorite bit of the complaint is where he complains that the ad which did end up running, featuring Peter Morici, is “an explicit misappropriation of Ben Stein’s likeness and persona, which is an explicit violation of Ben Stein’s rights of privacy and of publicity, barred by California law”.

In other words, this ad, while it might look to all the world as though it features a real economist who’s much more qualified on such matters than Ben Stein, is in fact an illegal violation of Ben Stein’s privacy, which uses the likeness of Ben Stein. Maybe Stein thinks that Morici should wear a long blonde wig, or something, to make him look less Stein-esque?

The irony here is that this man — someone who’s so worried about his privacy that he appears on TV every opportunity he gets — has to give the address of his four-bedroom, 3,821 square-foot Beverly Hills mansion on the final page of his legal complaint. Maybe the main effect of this suit is that he’ll get added, now, to one of those Los Angeles bus tours of the residences of the rich and clueless.


Peter Morici is, in those commercials, clearly supposed to look like the late Paul Samuelson. To judge the resemblance for yourself, his photo is easy enough to find on the web, for instance at this URL:

http://austrianeconomists.typepad.com/we blog/2009/12/paul-samuelson.html

Generations learned economics from the many editions of Samuelson’s textbook, so a visage like that must still have seemed natural for the role. Maybe Stein was originally in the running because with just a little make-up work he could be made to look like Samuelson too.

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Confessions of a Vertrue call-center operator

Felix Salmon
Jun 9, 2011 22:20 UTC

I had a fascinating conversation this afternoon with someone I’ll call Casey, who spent most of the past two years working for Adaptive Marketing, a/k/a Vertrue, a/k/a Ben Stein’s sleazy paymasters, as a Customer Care Assistant. Casey’s job was, essentially, to spend 40 hours a week, at $9 an hour, being abused by people who found out that they were being charged $29.95 a month on their credit card for a service they’d never heard of and had no idea they’d ever signed up for.

Needless to say, this is not a great job. But Adaptive Marketing didn’t make it any better: they ran the call center in a highly authoritarian and draconian fashion, monitoring every call and disciplining anybody who cancelled a contract without the requisite authority to do so. “It’s a fearful and autocratic environment,” said Casey. “Every day I would go to work thinking it would be my last day.”

Casey did reveal to me the magic words you need to say to a call center operator if you want a refund of the charges made to your credit card. Once you’re through to a call-center operator, canceling your account is easy — they’ll do that no questions asked, and won’t even try to keep or upsell you. But getting a refund is harder.

Here’s how it works: if you see a charge on your credit card and you want your money back, the trick is to threaten legal action. If you say that you’re going to sue, or that you’re going to your local attorney general, or anything along those lines, then presto your refund is on its way. Look at the transcript of a typical conversation which took place between Delci Lev and a call center supervisor named Teresa:

Supervisor: Your account is cancelled and you will no longer be charged.

Ms Lev: And credited.

Supervisor: The terms and conditions to which you agreed stated that you are not entitled to receive…

Ms Lev: No I didn’t sign anything…

Supervisor: …any refunds at the point of cancellation.

Ms Lev: Okay. Here we go, Attorney General, Department of Consumer Affairs. You got it Teresa. What’s your number?

Supervisor: As a confirmation of this call?

Ms Lev: No what is your…

Supervisor: My name is Teresa. My ID number is 153051. You will receive your two credits within two business days and you will no longer be charged.

Teresa steadfastly refused to budge on the refund (this passage comes on page three of the transcript) until the magic words were uttered — “Attorney General”. The minute that happened, bingo, “You will receive your two credits within two business days.” (Incidentally, Teresa subsequently quit the company, fed up with how horrible her job was.)

Threatening legal escalation isn’t the only way to get a refund — you can also say that you’re bankrupt, in other dire financial straits, or that there’s been a death in the family. But it’s the easiest.

The problems arise when you want a refund of more than six months’ worth of charges — at that point you’re likely to be told that you need to write a letter to Adaptive Marketing’s administrative offices in Omaha. And those calls come in quite frequently: Casey told me that Vertrue made a point of targeting elderly people in general, and seniors in assisted-living facilities in particular, because they tend to get confused or forget what they’ve signed up for. Often the calls would come in only after they died, from people going through their accounts, discovering thousands of dollars in monthly charges going back five years or longer.

In any event, there’s always two hurdles to clear: you need to threaten legal action and you need to ask for a refund. One or the other, on its own, will never suffice. And if you want a refund for multiple months, you need to ask for that, too: give Vertrue half a chance, and they’ll refund only the most recent charge. Casey was frank: “Most people we got were very dumb.” Vertrue makes money by ripping off people who aren’t particularly smart, and don’t have the imagination to ask for multiple refunds rather than one. And Casey’s job was to get them off the line before they realized that they were still out hundreds of dollars, even after one month’s refund — or no refund at all, just a cancellation.

Meanwhile, Vertrue’s freescore.com site — the one shilled by Ben Stein — is still up and running and still breaking the law, a full year after the law went into effect. Why it isn’t being prosecuted for this I have no idea. But Vertrue’s business is clearly on the decline, as it gets attacked by class-action suits and state attorneys general from around the country. When Casey joined there were 150 people in the call center; today, that’s down to about a dozen, and employees are being sent home for lack of anything to do. Those half-hour wait times, it seems, are a thing of the past — as is Vertrue’s business model.

Vertrue is owned by a group of private equity investors led by One Equity Partners, the private equity arm of JP Morgan. I hope they managed to dividend out of it much less money than the $800 million they bought it for. Because at this point it’s undoubtedly worth only a tiny fraction of that sum — if it’s worth anything at all. They don’t even have Ben Stein on the freescore.com homepage any more.


My wife recently discovered that she was a victim of Vertrue’s scams. Over several years they were deducting between $18- $35 each month, amounts and names changing on credit card statements, one such was MVQ Shopessentials. After reaching their call center in Neb. they agreed to refund a minute fraction of the total amount stollen of $1360.
I continued to pursuit and seeing that I was getting nowhere with Vertrue Inc. and realizing they were under law suit by AG’s of numerous states, BBB rating of “F” and virtually an $800 million company of sewer rats, I decided to give up! NO not really. I then approached Barclays Bank (issuer of the credit card) and after many letters and phone calls and emails, they reimbursed us half the stollen amount. But I was not going to be happy with just half that was stollen.
So more calls to Barclay’s Security Dept., letters to their CEO, agreement to meat with NBC News regarding the situation, Barclays then refunded the full $1360 that Vertrue stole from my wife.

I am absolutely amazed that this company (with several subsidiaries, apparently just as fraudulent) with all its lawsuits and bankrupts, it is still able to steal from unsuspecting consumers. Wow what a country. If you can steal enough to hire enough lawyers, you can go on for years and years. Company started in the 80′s by Gary A. Johnson founder and CEO. Harvard MBA. Evidently he skipped the classes on business ethics.

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Ben Stein Watch, penny-stock edition

Felix Salmon
May 23, 2011 13:23 UTC

In 2004, Ben Stein wrote a thin book called How to Ruin Your Financial Life, a collection of short sarcastic chapters giving extremely bad advice. Chapter 32 is entitled “Invest in Penny Stocks”, and it aims directly at the purveyors of “advice” about the same:

If you buy GE at $25 and it goes down by $.50, you’ve lost 2 percent, but if you buy XYZ at $.50 and it goes down by $.50, you’ve lost 100 percent.

This will never happen to you, though, because you’re only buying really top-quality penny stocks, the GEs and GMs of the penny stocks — only they haven’t been discovered yet.

Plus, you’re only buying after you’ve gotten really hot tips, and when you know for sure that you’re going to watch that stock zoom into the stratosphere.

Let’s put aside for the time being Stein’s decision to cite GM as being the kind of wonderful stock which goes up and up in value, because now Stein has endorsed Accredited Members Inc., “a leading publisher of micro cap investment research”:

Stein firmly believes micro caps have a place in every investor’s portfolio and that the kind of in-depth research AMI brings to its readers can mean the difference between success and failure in investing in the micro cap space. “AMI does the kind of research that can result in triumph and avoid tragedy in the micro cap world. An informed investor is the best kind of investor,” said Stein, “and in the micro cap and nano cap world, AMI is an important path to being informed.”

Later this year, Stein is publishing “What Would Ben Stein Do: Applying the Wisdom of a Modern-Day Prophet to Tackle the Challenges of Work and Life“. Yes, he really does refer to himself as a “modern-day prophet”, probably on the strength of his farsighted views on things like the GM share price. It’s going to be fascinating to see what the book says about selling out all your stated beliefs if someone comes along with a big enough check. Or what to do if you follow a modern-day prophet who gives wildly contradictory advice to his acolytes.


This post may scare some investors off, but if you are doing any day trading. Penny stocks are a must in this economy.


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Ben Stein Watch, DSK edition

Felix Salmon
May 17, 2011 18:35 UTC

Without further ado, the top ten lines from Ben Stein’s article on Dominique Strauss-Kahn:

  1. If he is such a womanizer and violent guy with women, why didn’t he ever get charged until now?
  2. This is a case about the hatred of the have-nots for the haves, and that’s what it’s all about.
  3. So far, he’s innocent, and he’s being treated shamefully. If he’s found guilty, there will be plenty of time to criticize him.
  4. Can anyone tell me any economists who have been convicted of violent sex crimes?
  5. Maybe Mr. Strauss-Kahn is guilty but if so, he is one of a kind, and criminals are not usually one of a kind.
  6. He is one of the most recognizable people on the planet. Did he really have to be put in Riker’s Island?
  7. A man pays $3,000 a night for a hotel room? He’s got to be guilty of something. Bring out the guillotine.
  8. Was Riker’s Island really the place to put him on the allegations of one human being? Hadn’t he earned slightly better treatment than that?
  9. Can anyone tell me of any heads of nonprofit international economic entities who have ever been charged and convicted of violent sexual crimes?
  10. People accuse other people of crimes all of the time. What do we know about the complainant besides that she is a hotel maid?

I’m amazed how many of even the people criticizing Stein have overlooked these two Neanderthal statements:

“The prosecutors say that Mr. Strauss-Kahn “forced” the complainant to have oral and other sex with him. How? Did he have a gun? Did he have a knife?”

“if he was so intimidating, why did she immediately feel un-intimidated enough to alert the authorities as to her story?”

Has this prominent journalist read ANYTHING about rape in the last few decades?

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Ben Stein’s fiscal policy

Felix Salmon
Sep 20, 2010 15:28 UTC

Here’s Ben Stein in August 2008, when we were at the depths of the longest recession in postwar history:

The unhappy fact is that it’s necessary to raise my taxes and the taxes of all upper-income Americans…

If we don’t raise taxes, if we keep doing what we’re doing, the immense deficits and debt will not go away — and will probably grow.

The question is simply this: Do we want to step up to the plate like responsible people — I hate to say this, but the last responsible people who actually did this were named Bill and Bob (Clinton and Rubin) — and shoulder our responsibilities? Or do we just kick the can down the road a bit and leave the mess for our children and their children?

And if we do raise taxes, should people who are barely getting by pay them or should people who are getting by very nicely pay them?

I don’t like taxing rich people or anyone I like. But our government — run by the people we elected — needs the revenue. Do we pay it or do we make our children pay it? Dwight D. Eisenhower — and Bill Clinton — knew the answer: You behave responsibly and balance the budget except in rare circumstances.

And here’s Ben Stein in September 2010, 15 months after the recession ended:

In the midst of a severe recession, I am to have my taxes raised dramatically.

I am not quite sure what my sin is…

What I don’t get is this: There is no known economic theory under which raising my taxes in the midst of a severe recession will help the economy recover. It isn’t part of any well known monetarist or Keynesian theory. So if it does no good to raise our taxes, I assume we are being punished.

But for what? I don’t own slaves.

Good point, Ben. Let’s just raise taxes on slaveowners. That’ll do the trick.


When Ben Stein (and aren’t his initials a happy coincidence?) pays taxes, he feels he is being punished, even though he is only paying his share toward keeping his country going. When he shops for groceries and goes through the checkout line, does he feel he is being punished for needing to eat? Why doesn’t he demand free food? Why shouldn’t everything we need–or desire–be free? Jeez, Ben Stein is nothing but a dirty little commie, isn’t he? On top of being a lackwit.

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Unemployment chart of the day

Felix Salmon
Jul 20, 2010 19:03 UTC

Chart of the day comes from Derek Thompson:

median longterm unemployment.png

The dynamics here are terrible, of course, because there are five unemployed people for every job opening. In that kind of context the only way that this chart is going to start reverting to the mean is if millions of Americans simply give up looking for work at all, and therefore stop counting as unemployed for the purposes of these statistics. The ranks of the demoralized are growing fast — but, clearly, not enough to stop the median period of unemployment rising inexorably past the 6-month mark.

All of which provides perfect context for the latest piece of claptrap to emanate from Ben Stein:

The people who have been laid off and cannot find work are generally people with poor work habits and poor personalities. I say “generally” because there are exceptions. But in general, as I survey the ranks of those who are unemployed, I see people who have overbearing and unpleasant personalities and/or who do not know how to do a day’s work. They are people who create either little utility or negative utility on the job.

How does Stein know this? Because, believe it or not, he’s been friends with these people for decades:

I get letters and e-mails from friends of decades standing asking for money every single day. Their common denominator is that they lacked prudence and lived in a dream world.

What kind of dream world would that be, Ben? One where they believed that they could time the market? Or maybe just one where they believed in the value of a decades-long friendship? Silly them.


From my econ 101 class 14 years ago:

Perhaps Keynes’ biggest insight was regarding ‘sticky’ wages. Employers and workers are both reluctant for any reduction in nominal wages. As a result unemployment can get stuck at a high level instead of a market-clearing level.

With some inflation, wages could reset at a full-employment level without nominal wages going down.

With inflation at zero or less, high unemployment is with us to stay.

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Ben Stein’s employer breaks the law

Felix Salmon
Apr 5, 2010 21:27 UTC

April 2 was meant to be a great day in the history of sleazy free-credit-report websites like Ben Stein’s employer Freescore. A new FTC rule came into effect (read all 22 pages of it here), forcing all such websites to have a huge notice across the top of every web page, saying that AnnualCreditReport.com is the ONLY authorized source for credit reports under federal law, and providing a prominent link to this page.

Yet here we are on April 5, and Freescore.com has no such disclaimer. Neither does CreditReport.com. And the biggest site of them all, FreeCreditReport.com, has no such notice either — but instead of simply ignoring the law, like its competitors, it’s trying to find a loophole. Instead of the notice, there’s a box saying this:

Why isn’t my Credit Report free?

Due to federally imposed restrictions it is no longer feasible for us to provide you with a free Experian Credit Report. So for now we’ll be charging you $1 for your Report. But instead of keeping your $1, we’ll donate 100% of the proceeds to Donorschoose.org, an online charity providing funds to classrooms in need.

Underneath that text is the DonorsChoose logo; it’s worth noting that the underlined text, which looks like a hyperlink, isn’t one, and that it’s impossible to click away from FreeCreditReport.com to DonorsChoose.org. I’d also be astonished if DonorsChoose approved of this despicable stunt.

The idea here is that if FreeCreditReport charges $1 and immediately donates that money to charity, then the report isn’t free any more, the name of the site notwithstanding, and therefore the site doesn’t need to carry the FTC-mandated notices. I do hope that the FTC doesn’t allow that kind of nose-thumbing.

But in any case it’s pretty clear that both Freescore.com and CreditReport.com are simply in outright violation of the new laws. I look forward very much to seeing them slapped with some huge fines.


How many consumers are even aware that this free disclosure law only covers the major Consumer Reporting Agencies (Experian, Equifax, and TransUnion) but not the dozens of smaller “nationwide specialty consumer reporting agencies” (as defined by FCRA Section 603(w))?

For example, the Medical Information Bureau Inc. (MIB) is a cooperative data exchange formed by the North American insurance industry more than 100 years ago. Today, the MIB operates the most extensive database of medical information on individuals who have previously applied for health, life, disability income, critical illness and long-term care insurance. The Federal Trade Commission warns that, “in addition to an individual’s credit history, data collected by Medical Information Bureau, Inc. may include medical conditions, driving records, family history, criminal activity, drug use, sexual orientation, and participation in hazardous sports, among other facts.”

https://www.annualmedicalreport.com/deni ed-insurance-because-of-a-medical-coding -error-in-her-mib-report-video/

Likewise, most consumers and even many insurance agents are unaware that insurers such as Humana, UnitedHealth Group , Aetna (AET), and Blue Cross plans, have ready access to applicants’ prescription histories. These online reports, available in seconds from a pair of little-known intermediary companies, typically include voluminous information going back five years on dosage, refills, and possible medical conditions. The reports also provide a numerical score predicting what a person may cost an insurer in the future.

https://www.annualmedicalreport.com/pres cription-analytics-corporate-databases-t rack-whats-in-your-medicine-cabinet/

An investigation last year by the Federal Trade Commission found that the two companies supplying these pharmacy profiles—Ingenix Inc. and Milliman Inc.—violated federal law for years by keeping the system hidden from consumers. But the FTC has merely required disclosure if prescription information causes denial of coverage or some other adverse action; the agency imposed no penalties. Disturbingly, the new laws do not require the Medical Information Bureau Inc., Ingenix Inc., or Millliman Inc. to offer consumers a safe, online source to request their medical report files; they only have “1-800″ numbers.

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Iowa cracks down on Ben Stein’s sleazy paymasters

Felix Salmon
Mar 24, 2010 17:08 UTC

Ben Stein has a bit of free time on his hands these days, now that his odorous association with FreeScore.com and its sleazy owners Vertrue means that he’s no longer writing a column for the NYT. So he might be interested in reading the blistering 62-page ruling that Judge Robert Hutchison has just handed down in Iowa, which goes into great detail about how Vertrue has violated all manner of laws in that state with its unfair and deceptive practices.

Here’s the bit about Ben Stein’s arm of the company:

Vertrue maintains its own website FreeScore.com, where the consumers can purchase a service involving credit scores. However, Vertrue bundles another distinct product, Privacy Plus, with the purchase of the initial service, for an additional monthly fee of $1.00. Thus, to purchase the initial service, a consumer must purchase Privacy Plus, although this fact is obscured as much as possible. In such instances, although the record is unclear as to whether a consumer receives one welcome e-mail for both services or two separate e-mails for the two distinct services, there is no ambiguity that to cancel both services, a member must call two separate 800 numbers, even though the consumer had no choice but to purchase both services together. Most consumers will likely be unaware of the purchase of the second service (much like the post-transaction solicitations discussed above), and that when the consumer calls an 800 number to cancel the primary service, he or she will continue to be billed for the (unknown) add-on service. Moreover, even for the wary consumer that understands that two services are being purchased with only one click of the mouse, such a consumer may not understand that calling one number to cancel does not cancel both services, despite the “one-click” nature of the initial purchase.

And the rest of Vertrue is even worse: Hutchison goes into great detail about how it preys on the elderly, almost never provides any benefits to the users of its products, and goes to great lengths to create bogus “surveys” and the like, the results of which are always discarded unread, to make people think that they’re being rewarded for doing something. He writes:

Unlike Vertrue‘s memberships, most consumer goods are tangible. Thus, for example, if a membership arrangement involves the periodic review of books or CDs on a negative option basis, the receipt of the items themselves serves as unequivocal notice to the consumer of the fact of membership and its attendant obligations.

By contrast, a membership that provides “access” to benefits may be all but invisible and may have little concrete presence in a consumer‘s life, especially in instances where the consumer is not even aware of purchasing the “access” in the first instance. Here Vertrue fosters invisibility by utilizing a marketing structure that obscures effective notice to the consumer of the membership enrollment and places numerous burdens on the consumer: the burden to cancel in order to avoid the onset of charges; the burden to differentiate a membership notice from the junk mail or spam that it resembles; and the burden to detect an ambiguous charge on one‘s account statement and act on it. Vertrue‘s own records show that 84% of the more than 860,000 Iowa memberships involved no discernible use whatsoever of any membership benefits by the consumers who were subject to membership charges. Thus, the Defendants‘ overall marketing scheme has netted more than $35 million in membership charges from Iowans, and has provided remarkably little in return. Indeed, Vertrue‘s own benefit usage data for memberships that began after 1989 and were active as of May of 2009 shows that 91.5% of memberships involved no benefit usage whatsoever.

I look forward to Vertrue being slapped with a massive fine in Iowa, and to the authorities in 49 other states following suit. Sadly I doubt Ben Stein can be held personally liable for any of this, but he’s certainly morally culpable. And next time he cashes a check from Vertrue, he should think about the story of Charles Pope:

Charles Pope, a 63-year-old military veteran from Marshalltown, testified at trial regarding his experience with a check mailer. Mr. Pope‘s experience appears to be representative, and well illustrates the objectionable features of Vertrue‘s method of marketing in the direct mail channel.

Mr. Pope received a mailing in the form of a “snap-pack,” a check-sized envelope that is to be opened by tearing off a perforated stub at the end. The outside of the snap- pack bore the name and the logo of the consumer‘s credit card issuer (“Union Plus” in Mr. Pope‘s case), and also bore the words “CHECK ENCLOSED” above Pope‘s name and address. The envelope contained a $10 check made out to Mr. Pope. The envelope also contained a check-sized slip of paper, which explained in small print that by cashing or depositing the check the consumer would be enrolling in a trial membership, which would lead to charges on the consumer‘s bank (or credit) account unless the consumer affirmatively canceled…

Vertrue‘s billing records showed that Mr. Pope‘s Union Plus credit card was charged $12.95 a month beginning in October of 2004, and the monthly charges continued through September of 2008, by which time the charge had risen to $14.95. Mr. Pope testified that he was not aware that he was a member of any Vertrue program until he was contacted by the Attorney General‘s office in about September of 2008, at which time he canceled the membership. He recalled receiving the check in the mail, but had assumed that he was being reimbursed for overpaying his credit card account. Mr. Pope testified that he never intentionally enrolled, and never made any use of whatever benefits the membership involved. Mr. Pope testified that he had seen the charges on his statement, but mistakenly believed that they related to insurance. By the time he canceled after four years, Mr. Pope had unwittingly paid $695.60 in membership fees. Upon cancellation, he was refunded only one payment of $14.95.

I wonder whether Stein feels like paying Mr Pope the other $680.65 out of his own pocket.


Not apologizing for Ben, whom I happen to like as a person if not as “an economist”… If however you find literally “loathsome” having, in his time, glossed over the (to me, evident) troubles of Wall Street, one could name several apparently paid contributors even unto this very news service whom you must then consider evil incarnate for no less energetically clutching to the self-same shaky premise, louder and for longer.

Just saying, when it comes to economic misguidedness, Ben Stein has no monopoly. Not by a long shot.

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Goldman-bashing at Bloomberg and Fortune

Felix Salmon
Jan 29, 2010 10:30 UTC

It’s Goldman-bashing time again (when isn’t it), with Michael Lewis returning to the same source of comedic gold that he’s mined in the past. His new column should be here, but isn’t; Alphaville has excerpts.

I have no problem with this kind of thing; I only wish it were a bit funnier. I’m all in favor of opinion columnists bashing Goldman every so often; I certainly do it often enough myself. On the other hand, they shouldn’t be allowed to get away with outright falsehood and extravagant stupidity. So why is Ben Stein writing for Fortune, and why are they letting him exude this kind of crap about Goldman Sachs?

Obviously, Goldman can put any disclaimer it wishes in the boilerplate of the offering documents. But as underwriters, it has a duty to deal fairly and honestly with its buyers, and to deal as a fiduciary, putting clients’ interests first if the buyer is a client of the firm. It holds itself out to the world that way, too. It holds itself as “adding value” when its works for a pension fund or any buyer by selling him securities. Read the annual report.

That is, it, Goldman, has a legal duty to not take advantage of the people to whom it acts as a fiduciary.

Does Stein think that if he uses the word “fiduciary” often enough, he’ll be able to change what it means? A broker-dealer, by its very nature, is an intermediary, a middleman. If you trade with Goldman, it’s either acting as a broker — finding someone else in the market who wants to buy what you’re selling, or sell what you’re buying — or else it’s acting as a dealer, and taking the opposite side of the trade itself. In neither case can it be a fiduciary.

A fiduciary is someone who invests someone else’s money on their behalf; Goldman Sachs Asset Management is one such institution which does indeed have a fiduciary duty to its clients. But Goldman’s traders are by definition the opposite: far from having their interests aligned with the people they’re trading with, they actually take the opposite side of the trade. Besides, when Goldman underwrites an offering of new securities, its client is the issuer, not the buyer of the paper. If Goldman had a fiduciary duty to its client in such matters, it can’t also have a fiduciary obligation to the investors in the deal.

But Stein hasn’t reached the heights of its idiocy quite yet. He continues:

Obviously, it’s different if Goldman is trading with a hedge fund or a canny wealthy trader who is not a client, who takes all kinds of risks. But when underwriting and selling to clients, such as pension funds, Goldman has a legal and moral duty…

The problem, of course, is for Goldman to be able to discern, for any given counterparty, whether Ben Stein would consider them to be “not a client” or a client. The bank is providing exactly the same service to the “canny wealthy” types as it is to “clients such as pension funds” — but Stein seems to think that every trader should have a red phone and a blue phone, with one used for “clients” and the other one used for “not a client”s. How to tell them apart? Maybe the traders should phone Stein first, every time, just to be on the safe side.

What kind of magazine prints this stuff? What kind of editor allows a columnist to get away with something like this?

Simple fact: if the banks’ proprietary trading had been consistently profitable, they would not have needed to be bailed out by the taxpayers in 2008.

Does Stein really think that the losses suffered by the banks in 2008 were the result of prop trading? That somehow the hundreds of billions of dollars in writedowns on toxic loans were so small that a consistently profitable prop-trading operation could have more than made up for them and obviated the need for a bailout?

Of course not: Stein doesn’t think. But as a result, his columns are neither interesting nor provocative: they’re just stupid. And I can’t for the life of me work out why Fortune is publishing them.


I think you are missing Stein’s point, Felix. He is not referring to broker-dealer status when he uses the term ‘fiduciary’. He is referring to Goldman’s status as an investment bank. An IB has a higher standard, because it is an advisor and advocate for investment management.

It makes me chuckle every time I read all the finger wagging responses and editorials. Obviously, most of this readership never earned a living as an intermediary. If they did they would understand how this financial crisis and aftermath is not the result of collusion and willful ignorance on the part of “big bankers”. Maybe the wage earners among you all should try to imagine themselves in a world where they desired to earn as much profit as possible, had a seemingly endless supply of capital(Institutions, governments, and the super-rich) that demanded the highest return with the highest safety available (Mortgage securities)on one end and hundreds of millions demanding to buy, invest, build, and create with on the other end. Imagine, if you can beyond your own narrow wage-earner world, what you would do if you were in the middle of those two forces. Imagine the frenzy of competition, imagine the frenzy of capital seekers, imagine the frenzy of capital providers…now imagine that frenzy sustaining itself for half a decade.

If you can get that far in your thinking, you will begin to understand that the common folk are not being consumed by big evil cigar chomping bankers, but rather the common folk just like everyone else were willing participants in everything that led to this financial crisis. Everyone was happy when the going was good. People got to buy homes without having to save decades for a the usually necessary down payment, people had jobs in growing companies fueled by consumer credit, folks who wanted to start a business without having to beg thiwr friends and family for start up capital could now go to banks where they could get sba guaranteed loans. Everyone liked it and everyone demanded it.

The government engineered this whole mess. They gave the IBs and CB’s the cheap capital, they asked intermediaries to make full use of leverage, they provided loan guarantees or suggested guarantees, they created huge mega-million project financing guarantees and gov’t backed bonding. They lowered interest rates and bought Treasuries on borrowed money. They did all this over and over again to the tune of trillions of dollars. And everyone thought it was a great idea.

You all are pointing your finger at the wrong culprit. Point your finger at the Fed Govt. …because they are still doing the same crap….shelling out dough for high speed rail, buying a trillion dollar health care boondoggle while cutting taxes and shelling out tax credits…how’s that going to balance the budget?

Quit looking for someone to blame, because the blame is you…and its me…and its everyone who demands justice. There is no justice, we are all ingredients in the stew. We need to better manage the cook who’s stirring the pot- the Fed Gov. Quit sniveling and bring some real thought and ideas to the discussion!

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