Wall St Journal on the BP oil spill

The Thursday Wall St Journal had a very good article about what went wrong. Looks like it really is BP's fault. The well was behind schedule and over budget. To save time and money the BP manager cut short the mud circulation procedure ("bottoms up" in oil field lingo). Best practice is to pump all the mud up from the bottom and inspect it for natural gas. If gas is detected in the mud, the well has a leak. BP only ran the bottoms up procedure for an hour, where as 12 to 24 hours is needed. Then BP skipped a leak test after cementing in the drill pipe, even though the cementing contractor Halliburton warned of trouble. The BP manager, an inexperienced man, had to overcome objections to his shortcuts by the other contractors on the rig.
The underground gas pressure is high, because of the 13000 feet of rock sitting on top of the oil/gas deposit. When BP pumped the drilling mud out of the well, the gas forced its way up the drillpipe onto the drilling platform and caught fire. To add insult to injury, the last ditch safety device, the blowout preventer failed to close off the well. So, we have two errors of judgment on BP's part, combined with a faulty blowout preventer and the result is horrendous.

Wall St Banks cook the books

According to a front page story in the Wall St Journal, the big banks reduce their short term borrowing at the end of each quarter to make the end of quarter balance sheet look better. Bank of America, Deutsche Bank and Citigroup are named. They call it "window dressing".
Why do we care? Simple, a bank's ratio of debt to capital in a good measure of the bank's soundness. Too much debt, too little capital, and any small setback, like a loan default can break the bank. Bank runs out of money and has to fold. Investors in the bank loose all their money and FDIC pays off the depositors.
According to the Journal article, the banks are engaging in deceptive practices to could suck in unwary investors.
We REALLY REALLY need to clean up the accounting business in this country so that published financial documents mean something. In this case, the rules ought to be changed to require the banks to publish their average debt, averaged over the entire quarter, not just their debt on one special day out of the quarter.

Russians make first test flight of their new Air Force 1

The Russians need a presidential aircraft to keep up with the Americans. They just test flew a Tupolev twin engine TU-214 destined for the Russian Air Force One role. Looks like an ordinary narrow body airliner, with winglets like a Boeing 737. No where near as cool and impressive as the Boeing 747 four engine jumbo jet flown by the Americans. But at least it is Russian built, the Russians would loose a lot of status points if they used a foreign built aircraft.
Of course Aeroflot is converting their entire fleet to western built airliners. Aeroflot brags that all their international flights use Boeing aircraft.
Western aircraft enjoy a safety record of 0.73 crashes per million flights. East bloc aircraft show 7.something crashes per million flights. You are ten times more likely to crash flying east bloc aircraft. I wish the Russians all possible luck with their new home built executive aircraft.

NASA man rates the Russian Soyuz capsule

Ever cautious NASA requires any space craft carrying live astronauts to be "man rated", by which they mean the maker has filled out pounds and pounds of NASA paperwork for every single piece that goes into the spacecraft. One of the reasons Shuttles cost so much and flew so little was the burden of doing the man rating paperwork on every single part.
NASA claimed that man rating was so important that they could not use the highly reliable Delta and Atlas rocket boosters used by United Launch Alliance to launch communications satellites. They claimed that Delta and Atlas were not man rated and hence far too dangerous to boost astronauts to the International Space Station (ISS). This was the justification for starting a new development of Ares booster rockets.
In the long interval between the end of Shuttle flights and the first Ares flight, NASA planned buy tickets to the ISS from the Russians. Naturally the Russians don't do NASA paperwork for man rating their Soyuz system. But NASA, based on the Russian record of successful launches (better than the Shuttle) decided to man rate Soyus, just to keep the paper trail in order.
If NASA really cared they could man rate Delta and Atlas just as easily.

Sunday Pundits

David Gregory's Meet the Press topic was "What can Washington do about the Gulf oil spill". Real answer. Nothing. The men and equipment to deal with the spill belong to the oil industry.
The New York Times man was very positive that Washington could do something, he didn't know what, but something. There goes a man of faith, faith in government. Too bad he is supposed to writing news stories.

Don't Mess with Texas

The Texas Board of Education has been updating the curriculum requirements for the state. This update has attracted quite a bit of negative press comment. Liberals accuse the Texans of being too conservative. And, due to the large size of the Texas school book market, they fear that Texas standards will become defacto national standards as text book publishers revise their books to meet the Texas standards.
I've read the Texas curriculum. It's posted on line here.
I don't see anything wrong here. The curriculum is spelled out in plain English, rather than ed major jargon. It is concrete, listing persons, places, events, and concepts to be taught. The selection of material seems perfectly reasonable to me. They want students to know American history, some fundamental economics, and recent important events such as the end of the cold war, and 9/11. It is NOT watered down. The curriculum goes far beyond anything taught in my high school, and I went to a pretty good school.
In My Humble Opinion (IMHO) the Texas curriculum is perfectly reasonable and centrist. The critics are drawn from far out in left field.

Regulation? or Welfare for Banks?

Up til now "derivatives", side bets placed between banks and investors, have been on a one to one basis. The two parties to the "derivative" reach a deal between themselves and that's that. Should one party to the deal go bankrupt (can you say AIG?) the other party doesn't get paid. Realization of this fact since 2008 has reduced the number of derivative deals.
The regulatory bill coming thru Congress includes a guarantee for derivatives. The bill requires derivatives to be traded on exchanges, similar to a stock exchange. The seller and the buyer do a deal with the exchange. BUT, the exchange will guarantee the deals against default. If you buy a derivative and the seller goes bust, the exchange will pay you off.
Just what we need, guarantees on gambling. The derivatives are essentially bets that stocks will rise or fall, or that a company or country (Greece for instance) will default on it's bonds. Banks are channeling lots of money into the game 'cause a winning bet pays off big. Money spent gambling on derivatives is money that should have gone into economic development. Derivatives do not finance new factories, new businesses, new construction, inventory, accounts receivable or sales. In short money that should have gone to creating new jobs is frittered away gambling.
We should not encourage the gamblers by offering a guarantee of payoff.