Rohit's Realm

Contemplations on Corporate Crime

2009-10-17T11:26:46-07:00

For anyone who has been with me (and the wretched conglomeration of loneliness and despair known as the Realm) long, the knowledge that I am irrationally obsessed with criminality and lawlessness should not come as a surprise. Indeed, I have on two previous occasions forayed into the emerging field of lawlessness and economics (L&E for short), first in 2004 by considering the possibility of a career in selling smack, and then in 2008, by pondering the viability of an otherwise upstanding young gentleman¹ as myself pursuing a life of computer crime. Today, I expand on these seminal works through a groundbreaking analysis of yet another excellent opportunity for those with lots of good ol' American ingenuity, few morals, and an uncompromising work ethic, namely financial crime.

Such crimes, of course, come in many varieties, and in this Article I will consider only three sorts that I believe to be the most lucrative (i.e., possessing the highest net-present value)—Ponzi schemes, insider trading, and conspiracies to restrain interstate commerce² (specifically, price fixing). At the outset, however, I must note the benefits of the entire genre over the other sorts of criminality I have previously considered. Not much need be said about the first sort—the high transactions costs involved with being a low-level dealer in a substance such as smack, as well as the severe penalties if caught and the high possibility of experiencing grievous bodily injury or death, make this a decidedly low-value venture for all but the most desperate.

The question of whether to pursue computer or traditional financial crimes is not as easily answered. Both have the benefits of relatively low detection rates and only marginal increases in risk of dying or being seriously injured. Ultimately, however, financial crimes edges out computer crime, I think, when considered from behind the proverbial Rawlsian veil of ignorance.

Financial crimes, as a general matter, are not theoretically difficult to contemplate. While the execution might be both difficult and clever, the basic idea should be understood by just about anyone: the difference between a two-bit con man and a grand Ponzi-schemer is measured in degrees of brazenness and sophistication, not skill or difficulty. To the contrary, computer crimes are all about knowledge and skill. Breaking through multiple layers of hardware and software security is no joke, and inevitably requires an advanced understanding of computer science and mathematics. And herein lies the problem: no matter how much money one manages to make wearing his or her black hat, the social isolation and sexual frustration concomitant to such advanced knowledge in computer science will almost never be worth it. (Seriously. Take it from someone who knows.)

Having dispensed with the predicate discussion of which sort of criminality generally is the most value-added, I now turn to the specifics, namely, which sort of financial crime is the best to pursue. The first—Ponzi schemes—are easily dispatched as not worthwhile. Although certainly the easiest of the three to commence, execute, and administer, this form of criminality also carries with it several problems, the most important of which is that it is played out! Ripping off your own people while living large is so 2008! Bernie may well have ruined it for all of us. I mean, in this day and age, I am more likely to invest with a Nigerian prince than a fellow Indian touting 12 percent returns and an advanced trading strategy.³ Indeed, if 15 percent returns are mentioned, I might just shoot the guy and save everyone the trouble later (so beware browns!).

The calculus between the other two—insider trading and antitrust violations—is not so simple. Both seem to be en vogue these days if the Wall Street Journal is to be believed—just today there were articles on both (subscription required). Style, therefore, is not a consideration as it was with Ponzi schemes. Both, anecdotally at least, also seem to generate big returns for those who engage in them, and absent rigorous empirical study, it is hard to know which is more lucrative. We are thus left to consider only intangible qualities.

Two years ago, I might have been inclined to say that the former is way more awesome. I mean, what's not to like about Wall Street, right? Gordon Gekko was a pretty sweet dude, and as any good young capitalist seeking to accumulate power and wealth relative to and at the expense of those around her could attest to, greed is definitely good. Plus, most insider-trading rings also seem to have all kinds of cool spy shit going on, which, of course, is of tremendous value to me, the thirteen-year-old trapped in the body of a sixteen-year-old.

Today, however, I am more likely to go with antitrust violations as the best sort of financial crime to pursue. While the concept seems simple—agreeing to fix prices so you can rip off your customers is not that hard a concept to grasp—the execution requires a lot of skillful maneuvering. The steps, as I see them, for a successful price-fixing scheme are as follows: (1) obtain significant market power in an obscure product (lysine? really? that's not even my favorite amino acid); (2) arrange a meeting in a smoke-filled hotel room with other market players in said obscure product; (3) agree to fix prices; and (4) profit. With very low detection rates and a barrage of ways in which to obfuscate and dress up brazen criminality as mere economic reality, this pursuit simultaneously presents an opportunity to lead a life of crime and use your mind (which appeals to my intellectual side, as it were). Finally, antitrust invokes a nostalgic remembrance of a bygone era in a way insider trading simply cannot. Gordon Gekko may have been a sweet dude, but the robber barons of the Gilded Age were true rock stars—their decadence is unlikely to ever be matched, however hard modern-day wannabes may try.

So, what's the takeaway, then? Well, for the enterprising young entrepreneur, it seems antitrust is the way to go for a life of infamy and awesomeness. For those, like me, adrift in a turbulent sea of mediocrity and hopelessness, however, neither is probably the appropriate choice. I am far too awkward to successfully pull off an elaborate insider-trading scheme and far too inept to obtain market power in anything, no matter how obscure. So, in my hapless and lonely state, I am once again left to turn to the only place where I can find solace—computers. So, if when this law stuff does not work out, you know where I will be—smashing the stack for fun and profit. Remember, real men (again, I use the term loosely) exploit buffer overflows; cross-site scripting is for poseurs!

^ ¹ I use the term loosely, of course. I am neither very young nor in any way a gentleman.
^ ² Restraining intrastate commerce is for amateurs. Go big or go home!
^ ³ The whole discussion is moot regardless as I am essentially insolvent at the moment. Yay for graduate education!

Dark Clouds Brewing

2009-10-04T17:33:00-07:00

Exactly one year ago, I lamented the passing of my youth, lost forever down a (plastic) bottle of substandard alcohol. Not much has changed since then. And though today I am certainly a year older, and most likely, one dumber as well, the subject of my (much regretted) appearance on this planet is not one that is on my mind today. Instead, even as the continuing farce that is my existence barrels on towards ultimate obscurity and irrelevance, I did see a last this week that carries some significance—at least as much significance as is possible in a life so completely devoid of intrinsic meaning.

This past week was very likely my last first day of school ever. Absent a catastrophic failure (of the academic variety—the rest, I assure you dear readers, are certain to occur), I will finish up law school in approximately nine months, and once again be thrown into the dark abyss of reality from which I have been gleefully hiding the past two odd years. I know I should be feeling something—after all, much of my life for approaching three decades has been dedicated to education. But the emotions such an event should conjure in my mind—excitement, nostalgia, a hint of sadness—none of these is what I feel today. Instead, it is a unsettling combination of weariness, disbelief, boredom, and liminal anxiety that consumes me on this breezy autumn morning.

June 2010 seems simultaneously very close yet painfully far off. I have another year of law school left? Am I really ready for another nine months of that? I barely feel like I got any time off at all this summer (and truth be told, that is precisely correct). And yet, I only have one year of law school left? After that, it is again into the real world I go, in a vastly worse economic climate than my first go-around in 2005, and when the stakes are significantly higher. The prospect of grad school is no longer an escape hatch should I get unlucky, bored, or some terrible combination thereof. Been there, done that—and, in fact, have lots of debt to show for it.

And if all that was not enough, the countdown has begun on my time in Chicago. Regardless of what else happens, almost certainly come this time next year, I will be elsewhere. Where has my time here gone? It was just about two years ago that I moved here from San Francisco. All of it seems like a blur. Law, bars, restaurants, blizzards, pizza, more blizzards, more bars, more law—was that it? Was that my life in Chicago? Will I even be able to say I lived here once I leave, or will my only points of reference be loathsome Hyde Park and solitary stumbles home from shitastic bars at night?

Analogizing to a similar time in my life—2004–2005—perhaps I have precious little to fear. My senior year in college, after all, was quite memorable and, dare I say, even happy (insofar as I am capable of such emotions). And if the first week of this quarter is any indication, my last year of law school may shape up to be similarly so. But amidst all the rockin' and ragin' is a pervasive feeling of disinterestedness that has settled upon me like the dark rain cloud of melancholy that already follows me where ever I go.

Class no longer engages me the way it did in years past, and journal is quickly becoming the proverbial albatross around my neck. With each new trip to Hyde Park, a little bit of me dies, both literally and metaphorically. I am struggling to find the motivation to read, write, study, or engage in really any productive activity whatsoever. Even small tasks require extraordinary amounts of self-coaxing to accomplish. Perhaps this is simply a phase from which I will emerge soon. But perhaps not. As reality looms ahead on the horizon and the sun sets on my time in Chicago, I certainly hope it is the former. Then again, I would probably do well to remember a famous quote on days like these.

Twelve Hours of Hate

2009-09-26T11:38:58-07:00

For those who have had the extreme misfortune of having made my acquaintance, the subject of my consummate hatred for everything and everyone, myself most of all, should not be news. Nevertheless, even while we may understand that generally, I am a curmudgeon, the extent and obscurity of my hatred had never been studied in detail—that is, until this summer.

On a road trip back from New York to Chicago in August, my friend decided as we were leaving Manhattan to note whenever I said I hate something. Over the next twelve hours and a number of topics of conversation, he managed to create a list of thirty-one items—a window into my hatred, if you will.

The result was surprising, even to me. Damn, I'm a hater! For those who are interested, I have reproduced the list below in its entirety (the original will be framed).

Rohit hates:

Poor people.
Dumb people.
Women who like losers.
Chicago (city of).
Los Angeles.
People who are dirty because they are trying to be cool.
Hipsters.
Failed human beings.
Democrats who advocate for the continued existence of GSEs.
Senators Grassley, Schumer, and Burris.
Representatives Frank, Boehner, Waxman, Pelosi, Cantor, and Rangel.
All of Congress.
Microsoft software.
VDT₀.
KB Toys.¹
Big 10 Greeks.
The vibe of AC.
Paying tolls.
University of Chicago undergrads. All of them.
FOBs.
Judgment-proof drivers.
Federalism.
Douchey vanity plates.
Stanford.
Family law scholars.
Ohio.
Indiana.
Midwesterners.
Corn subsidies.
Fat people.
Life. Human life. His life.

Now, all I need to do is add a Rohit loves section and I have a perfect profile for an online dating site. So here goes.

Rohit loves:

Cal football.

I don't know if I like my chances on the Internet. I think I better stick to failing in bars.

^ ¹What? I don't really hate KB Toys, I don't think. But if it is on the list, it must be true.

The Fall from (Geek) Grace

2009-09-18T16:42:33-07:00

While stories of devastating, relentless failure with women—and in life more broadly—are so commonplace to my miserable existence (and this blog) as to be passé, one should never doubt my unfaltering capacity to achieve new lows with each passing year. This week brought just such a low, and in an unlikely arena—technology—demonstrating clearly that my material worthlessness is not limited to social interactions, but instead permeates the very fabric of my being.

Before exploring this unhappy episode in an otherwise melancholy existence, however, some background is in order. As those who have persisted with me over the years likely know, I am not much for watching television, and since moving to Chicago two years ago, I have not even owned a TV, content to avoid the petty indulgences of the loathsome unwashed masses. But late last year, a creeping suspicion began to overwhelm me: what if I had passed the so-called point of attenuation such that my disconnect with popular culture rendered me unable to maintain my steadfast elitism? It was at that point that I decided perhaps reentering popular culture in some small way might be necessary.

Such a venture, though, is easier said than done. Highly leveraged and destitute as a result of a (poorly informed fantastic) decision to attend law school, purchase of a television set was not a possibility until after the summer (when I actually had capital in-flow for the first time in a year). And since I wholeheartedly subscribe to the quaint philosophy often known as go big or go home, not any TV would do.

Last week, I found a deal on a Toshiba 40'' HDTV (LCD, 1080p, 60 Hz for the nerds out there) and jumped on it. I was expecting it to arrive sometime at the end of this week, but was pleasantly surprised to discover it waiting for me on Tuesday. Excited by the arrival of this new (and great) toy, I quickly unwrapped it and set it up (on a filing cabinet, in a fine showing of continued dysfunction).

It was only then that horror struck: how was I going to plug in the (sadly, non-HD) satellite receiver into the wall? Did I even have coaxial cable? Of course, I thought to myself. How could I not have coax cable? I have a whole closet full of random electronic shit lying around for times like this. I frantically went through it, finding two floppy drives; several aerodynamic, rounded IDE cables; speaker wire; A/V cables; USB cables; DVI connectors; S-video cables; and even a cable for a TI graphing calculator (what?). But, to my great dismay, no coaxial cable was to be found.

I felt a sudden feeling of intense shame pass over me. Instinctively, I hung my head down and could feel my cheeks burning from embarrassment. What kind of geek was I? No coax cable in the house? How could I continue to live? I had brought disgrace upon my household and family.

Fighting the overwhelming urge to scribble a note about worthlessness and leap off my balcony, I rushed to Ace Hardware and picked up a dozen feet of coax cable. (In retrospect, I should have bought at least 100' so such a terrible event would never again come to pass.) As luck would have it, however, it still did not work: the receiver I had was from a previous tenant, and I would have to get a new one for my own account.

But that is hardly the point. Satellite receivers may come and go (as they did in this case), but the shame of September 15, 2009, will live on for ever. Is it any coincidence that it was exactly one year after Lehman fell (subscription required)? I think not.

On Football and Friendships

2009-09-13T20:30:37-07:00

I realized last night as I left the Cal alumni bar in Chicago, having just watched my beloved Golden Bears rack up fifty-something points for the second week in a row, that I probably care more about Cal football than almost anything else in my (necessarily futile) life—including people. The sheer silliness of the previous statement ought not be dismissed lightly. But neither should the grain of truth that rests beneath it. And as I made my way back home on that warm autumn night, if there was anything I was certain about, it was that surely there was some truth to that sentiment. The realization, moreover, made me profoundly uncomfortable, though I am still at a loss as to explain precisely why.

One reason might be the baseness of the comparison. Cal football, of course, is not a person—institution might be the best descriptor—and to equate the importance of that institution to my personal relationships (such as they are) does seem a bit unseemly, and especially so when it is most of those personal relationships that are under consideration. But the more I think about it, the more convinced I become that the thought that crossed my mind last night cannot be regarded merely as fleeting (or drunken) lunacy.

Since my freshman year some eight years ago (God, has it really been that long?), Cal football has played an integral role in my life each autumn. Through the tortuous defeats in 2001, to the slow rise to respectability in 2002, to the epic triple-overtime victory over (much-loathed) U$C, to the final Big Game at Memorial Stadium as a student in 2004, football was an integral part of my college experience. Even as a (so-called) adult in San Francisco, I held season tickets and spent most Saturdays in and around Berkeley. And in Chicago, the weekly trek to the alumni bar in good weather and bad has become as much a part of my routine as arbitrary, irrational hatred of (miserable) Hyde Park. Through the ups and downs of the past eight years, across time zones, schools, cities, and careers, the institution has been an unwavering constant.

The same can hardly be said about nary a single person in my life (except, perhaps, members of my family, but that is quite different). And, of course, it cannot be any other way. Almost every single one of my close friends from all my walks of life—high school, college, work, grad school, and law—are serious individuals (although some more serious than others!), each on his or her own trajectory that necessarily differs from mine.

That is not to say that I do not have close friends from the past, of course—I do, and I am continually impressed by how we can still get together after months or years going by and still have things be normal. But loose contact and occasional Facebook stalking is hardly an adequate substitute for regular in-person contact. At best, one can hope for an update upon meeting that compensates for time spent apart. And that is with close friends.

Others, not as close, are nothing but temporal relationships defined by discrete eras in one's life. The expiry of that era (say, graduation or moving away) also brings the expiry of the friendship—at least for purposes of this discussion. In short, while people have come, gone, and periodically reappeared, Cal football has always been present. And no matter where I go and what I am doing, it will be around me in a way that no person besides perhaps a spouse could be. And unlike a spouse, Cal football does not have to bear the revolting burden of my disagreeable presence.

The team's fortune over the years, moreover, has become my fortune, their victories, my jubilation, and their defeats, my anguish. I am not sure I could say that about too many people beyond my family, girlfriends, and closest friends. The difference, I think, is best expressed as the one between empathy and sympathy. For instance, I have discussed elsewhere almost crying over a particularly tough defeat a couple years back; rare would be the relationship and the circumstance when I would feel the same way over something that occurred to an individual I knew.

So, all in all, the notion that I may place more importance on an institution—worse still, a sports institution—than the people in my life cannot be dismissed outright. And maybe it can even be justified.

But it's still pretty fucking ridiculous. If after reading this site, there was still someone out there who did not fully believe that there was something overwhelming wrong with me, this entry should lay all such equivocations to rest. But, then again, why would I care what you think of me? I probably don't like you all that much anyway—at least not as much as I like Cal football.

Seven Years and Counting

2009-08-17T22:47:05-07:00

Bath, July 2009

Despite my dereliction in updating this past year, I hope the recent flurry of activity convinces you, dear readers, that I have indeed resurrected this site from the ashes of unmet expectations. Two posts in as many days, however, is unusual, even by what used to be normal standards; I have two reasons for breaking these prevailing norms.

First, in addition to returning to the web, I have also posted pictures from my time in the UK this summer (working in London). Albums from Edinburgh and Bath are now online.

Second, today marks the seventh anniversary of this blog (though not the Realm, which is almost a year older). My first post appeared on this site on August 18, 2002. Please do not judge me too harshly.

In any case, I am off to Japan tomorrow (or later today, I suppose) for a little more than a week. Expect at least a couple updates from there, as I will be carrying a computer and will need to be online (for asinine reasons, as it were) rather regularly.

The “Rentership” Society

2009-08-16T10:10:19-07:00

The (often overlooked) Weekend Journal has an essay this week that to me seems absolutely indispensable for anyone who cares about how we move out of the financial shit storm in which we are currently ensconced. It briefly documents the centuries old American obsession with home ownership, and all the US government has done since the Depression, both covertly and overtly, to make the dream of ownership a reality for tens of millions. Of course, we all know where all that assistance led us decades later: the debacle that is GSEs like the infamous Fannie and Freddie, now on taxpayer-funded life support and operating in a zombie-like state.

Finally, it seems, serious people are willing to engage the fundamental fallacy that created these worst-of-all-worlds hybrid monstrosities: home ownership as the end-goal for all people, no matter how little they make or much they can afford. This is a welcome change in my book. I may be sounding like a broken record of unsympathetic callousness at this point, but economic realities are rarely warm and fuzzy either. With our catastrophic flirtation with financial meltdown perhaps—hopefully—drawing to a close (LIBOR is down to 0.5 percent!), we are now seeing calls for the so-called rentership society.

How exactly that is accomplished, however, is a different question. No doubt some who are either too dimwitted or too corrupt to learn any lessons (maybe both) will fight the whole concept tooth and nail, calling for the government to once again prop up those of both the lying and languishing ilk. But those sorts of people can no longer be taken seriously. And news that the Administration is altering its focus to renting rather than ownership as far as federal subsidies are concerned is only a part of the story.

If we want to get serious about de-emphasizing home ownership, screwing around with HUD subsidies is a sideshow. Likely the biggest federal incentive for home ownership is the mortgage interest tax deduction. Take that away, and all of a sudden the owning versus renting decision changes entirely. Easy enough, right?

Of course not. The problem is that a lot of people who do (miraculously still) own their homes benefit greatly from this handout. They are, moreover, mostly of the older and wealthier sort, and thus, as far as politics go, much more significant than the young, poor, or some awful combination thereof. The chances, therefore, of the blowhard jerk-offs in Congress actually altering the tax code to strip out the mortgage interest deduction is about as likely as Fannie and Freddie actually reporting a quarterly profit ever again.

Which is really too bad. There is nothing more disappointing then a recognition of what is wrong and how to fix it followed by complete inaction. Well, actually, that's not true. Corn subsidies are worse.

A Crisis of Faith

2009-08-12T18:24:31-07:00

True happiness, as I have discussed on this site ad nauseum over the years, is probably a concept that will elude me for the remainder of my futile existence. So much I have accepted. It would be curious, then, if in the midst of this eternal philosophical disquiet, I found a meaningful substitute for happiness in something so vacuous as to be embarrassing. And yet, that is exactly the place I find myself in today.

No, dear readers, I'm not talking about personal relationships assets (perish the thought!). It is, I am afraid, something far more plebeian than that: material possessions.

That statement raises a potential internal inconsistency that I must attend to immediately. On the one hand, I have rejected blind materialism as akin to self-delusion. On the other hand, I have embraced pursuit of success (loosely defined as money, cash, hoes) as an acceptable life purpose, as it were. I suppose on their face, those two assertions are irreconcilable but for the following premise: a life pursuit does not necessarily translate into intellectual contentment. Thus, I have no quibbles with someone who dedicates her life to pursuing capitalistic success (life is meaningless—getting rich is no better or worse of a goal than any other), so long as she retains sight of the effervescent glow of necessary futility that envelops all who live (though some more than others). The problems only occur when one attempts to conflate the two: pursuit of success can never be pursuit of contentment.

Imagine my disappointment, then, when I found myself doing precisely that, giddy as a school boy with a new toy, when I replaced my old 'berry with a fancy new one. So shiny! So fast! So cool! Could it be that money was, for once, buying happiness?

Consumed by self-loathing and contemplating ending it all, I decided some more analysis was necessary and suicide not appropriate (just yet). (Plus, jumping off my balcony would probably result in a traffic disaster and violate the cardinal rule of killing oneself: don't ruin other people's commute, asshole!)

After lots of deliberating, I am convinced my initial feelings of joy will soon give way to a more cautious perspective—say, when some malfunction makes me very angry with my new toy. And once the honeymoon period is over, I can again return to my dour equilibrium state, fully aware of the futility of life.

This disappointing episode, however, does raise a large issue, namely that this site has been exuding an ambiance of neutrality (if not downright happiness) recently. Of course, such platitudes only serve to lubricate the slippery slope down to the cesspool of foolish consumerism. I realize now that I have become complacent in the fight against false happiness. No more. Melancholy, here we come. I'm back, dear readers.

Did Law School Kill the Realm?

2009-06-28T10:47:12-07:00

It is hard to know what has suffered more in the (school) year just past, my personal life or this blog. Needless to say, however, both have suffered dramatically. And while my personal life was never much to write home about—and therefore its faltering nothing to lament—the same cannot be said of the (formerly) illustrious Realm. Once a glimmering bastion of douchebaggery and misanthropy, all that remains today is a fetid cesspool of occasional despair and compulsory self-loathing. It is, in short, a shadow of its former self.

What villainous scoundrel vanquished this most worthless of Internet havens that so poignantly failed to display the utter pointlessness of human existence? Certainly law school would be a worthy contender for this dishonor. Between soul-crushing journal work and lunatic decisions to take four to five substantive courses per quarter, the past year rarely left me with time to pontificate on the meaninglessness of existence. There just was not enough time to appreciate my own material worthlessness. But, I submit to you dear readers, a most dreadful proposition—one that is far worse than the aforementioned. It is with a heavy heart that I must admit that, at least in part, I have failed to write this past year not only for a mere lack of time but also for a loss of inspiration.

With the amount of reading, writing, and (faux) arithmetic (also known as economics) that the past year demanded, also came a decided creative dullness that I could not wake from, no matter how hard I tried. Certainly the crushing work load did not help, but even while working (more than) full time in San Francisco (and traveling frequently), I still managed to keep a steady posting rate. And that's not even mentioning college, where I damn near killed myself trying to squeeze in everything in four years.

Is it just the law? Does the precision and repetition of it all just drive people into a left-brain funk from which they cannot emerge? I find it all rather sad, to be honest. Some of the best writers I know are my classmates in law school. And while no one is going to shed a tear if I stop writing (I suspect a few will rejoice, while most do not even care to notice), certainly it would be a downright tragic if others more talented than I were to be driven into the same somnolence that has consumed me solely because they chose law as a career.

Since second year ended, I have tried to rediscover the muse, but it has been to no avail. In New York the past few weeks, work kept me more busy than law school had in the spring. In London this past week, law school occupied my time even when work did not. The only reason I am writing this right now is because I have a five hour train ride from Edinburgh back to London (and wireless!). I would like to say that this is the post that marks my return, but I would be lying if I said so with any degree of certainty. Where this site goes from here is a mystery, even to me.

Maybe it is only appropriate: maybe the Realm will live, surely it will (eventually) die—at this point, I honestly could not tell you when the death knell shall sound. In that way, the situation is no different than my life (or yours, for that matter). Maybe I (you) will live, surely I (you) will die, and in the end it won't have mattered at all. It is always good to have some perspective.

Congress Hates Me (and the Poor)

2009-05-19T08:21:59-07:00

Damn. It has been a long time since I last posted. This has been a rough nine months (more on this later) for this blog, but as the school year winds down, I thought I would ease back into writing, with the goal of resuming my normal productivity levels soon. While the meaninglessness of life is certainly a topic to which I will return, I thought that today I would focus on something a little less cerebral: credit-card legislation making its way through Congress this month.

Defenders of this legislation have couched their rhetoric in fiery imagery of abuse and exploitation, invoking again the equivalent of mustachioed subprime mortgage banker of yesteryear (by that, I mean 2007, when the apocalypse was not visible on the horizon). Greedy corporate executives working at evil banks, it seems, have been tricking honest, hard-workin' 'Merican folks into taking out credit they could not afford and then charging them unfair fees and penalties. And since we generally believe that abuse and exploitation are a Bad Thing™, why shouldn't our saviors in Congress step in and impose blanket restrictions on the evil credit card companies?

Plainly speaking, because it will screw me over. True, there is abuse and exploitation in credit cards, and certainly, no one can credibly deny that those with less education or less capital bear the brunt of that exploitation and abuse. And to the extent we can, we should stop the trickery and deceit that (apparently) runs rampant.

Stopping trickery and deceit, however, is a far cry from capping interest rates (as many have proposed). Higher interest rates for riskier borrowers is not an abusive lending practice; it is a fundamental tenet of capital markets. If there is less chance that you will recover the money you lend, you charge a higher interest rate to compensate for that risk.

So, when credit card companies are restricted from charging the interest rate that would compensate for a particular borrower's risk profile, they are left with only two options: (1) not lend at all to that borrower; or (2) charge less risky borrowers (like me) more to compensate for the risk they cannot offload due to the cap on interest rates. In practice, credit card companies will probably do both, as the Times (bastion of conservatism that it is) noted yesterday.

Neither of those results, in my mind, is desirable, but the latter is leaps and bounds more offensive than the former. The problem with the first option, of course, is that the riskiest borrowers tend to be the poorest, so when credit card companies start denying credit (because they are unwilling to take on a risk without adequate compensation), the poorest will be disproportionately affected. No one is going to offer risky borrowers a rate the market will not bear absent a subsidy. And, that is exactly what the second option is—a subsidy from the middle class, who have a low risk of defaulting on their debt, to the poor, who have a high risk.

Ultimately, the inescapable truth, terrible though it may be, is this: really risky borrowers should not be getting credit at all. The only way they can is (1) if they are charged higher interest rates, or (2) if someone less risky subsidizes that risk. When you take away first option via legislation, only the second option is left. And if we are limiting options, we should be certain that the ones left are superior to the ones limited. Responsible people subsidizing irresponsible people does not sound like the better option here. Isn't that what the subprime mess was about fundamentally? People buying stuff that they could not afford and others subsidizing them.

This is my true frustration with economic populism. Demagogues always win points for it with the (much loathed) unwashed masses, but in the end, it is those unwashed masses along with the middle class that get reamed while the rich escape unscathed (in this case, for example, the rich will be unaffected because they have enough assets such that they do not need credit). Something to think about the next time some asshole gets in front of the cameras and starts babbling on about corporate greed and the like.