April 19


Mexico: Open for more business

I recently had the opportunity to visit with officials from Mexico’s new administration for some extremely insightful talks on border trade and security. I walked away impressed. Our neighbors to the south are open for business. But not just that, they are open for suggestions!

Since the election of Mexico’s new president, I have continued to work with the transitional teams and our meetings have been met with openness and professionalism from day one.

The tone of these meetings was no different; frank and direct with a clear spirit of cooperation, not combativeness. This is an administration that fully understands that, as Asia’s position as a desirable manufacturing location begins to slip due to rising labor and transportation costs, Mexico is primed to seize an opportunity for real job growth and help elevate the economies of its NAFTA partners, Canada and the United States.


The suburbs v. the aquifer

Artwork by San Antonio's own Gary Sweeney. Courtesy of the artist.Portland, Oregon, has become famous for its dense, walkable urban environment, and is often treated as a model for smart growth among mid-size American cities. One key to Portland’s successful development model is a regulation that aimed not to improve the urban core but to protect the farmland just beyond it. The city’s Urban Growth Boundary was enacted in 1976 as part of a state law to defend farmers against the encroachment of suburban growth (Randy Bear touched on this last June in a column on Portland).

I thought about this as I read the news that San Antonio had purchased 461 acres just outside highway 1604, northwest of the city, which will be incorporated into Government Canyon State Natural Area. This deal, and many others like it, was funded by a dedicated sales tax which since 2000 has provided about $225 million to purchase and preserve land over the Edwards Aquifer. Just as Portland strengthened its urban core by protecting farmers, could the City of San Antonio do so by protecting its only significant supply of water?

If it was up to the people of San Antonio, there’s a good chance it could.


It's kind of like hazing: busting the rating agency

Yo, everybody! 5-0! 5-0! The cops are here!

The U.S. Justice Department filed a lawsuit this week against Standard & Poor’s, for its role in overrating mortgage bonds, CDOs, and other securities in the years 2004 to 2007, securities that later proved to be weapons of mass financial destruction – the initial catalysts of the Great Credit Crunch.

When I read the story this morning, I suffered an involuntary eye-roll, the type I discourage in my daughters. If a fraud was committed in those years, the ratings agencies, frankly, are not the prime suspects here.

If the Wall Street mortgage bond market in the years 2002-08 was the greatest financial frat party of all time, the rating agencies were the freshman pledges. We needed them for continuity, and because they provided a reason to host a party. But look, nobody really respected them. They did what Wall Street told them to do.1

But then the party went horribly awry, and somehow the upperclassmen frat brothers are way too smart to still be at the scene.

Now, with the frat-house furniture stolen, the neighbor’s cat shaved and duct-taped, the Dean’s house toilet-papered, and the entire kitchen and basement burned black, the police have shown up and seized all the stupid pledges they found passed out in the back garden.

Yes, the pledges were at the party. And yes, they kind of knew it could all go wrong somehow2, but they weren’t really in on it. They didn’t have the upside that the Wall Street firms had. They were just trying to appeal to the big frat brothers, who might someday invite them to be part of the inner circle3.

So, I rolled my eyes this morning because the cops can definitely bust Standard & Poor’s, but it begs the question “Why?”


The USA of IOU

Every once in a while I read a finance article that sticks in my head and never goes away. An article about the historical intersection of debt and the United States from the New Yorker from four years ago by Jill Lepore is just one of these.1

Lepore’s article explains that in many ways the United States was founded of the debtors, by the debtors, for the debtors.

We know from English literature that the United States represented a fresh start for insolvents from the lower and upper classes, which makes sense when we learn that both Dickens’ father went to debtors’ prison and Trollope’s father fled England to avoid it.


Too many guns, not enough eyes

Rethinking southbound inspections on the southern border

President Obama’s second term is officially underway, but one of his top priorities for his second term was made apparent well before he took the oath of office. Because of a confluence of tragic events, the president made clear that guns and gun ownership would be in the spotlight.

This is a not a column about gun control. Other commentators have already said plenty about that subject and it’s a topic that will continue to use up plenty of ink. But I do want to touch on the connection between guns in America and our proximity to Mexico and cartel violence in that country. Illegal firearms trafficking requires a lot of U.S. inspection resources devoted to preventing the illegal export of guns and ammo, but like all government resources, they’re finite.

In March 2009, Customs and Border Protection stood up its Outbound Programs Division in the Office of Field Operations. As then Commissioner Alan Bersin said in testimony provided before the Senate Caucus on International Narcotics Control in March 2011, the division “is focused on stemming the flow of firearms, currency, stolen vehicles, and fugitives out of the United States.”

This is no small job. In fiscal year 2010, CBP seized more than 1,900 southbound weapons. According to the Bureau of Alcohol Tobacco and Firearms, from January 1, 2010, to October 5, 2010, a total of 5,329 weapons seized in Mexico were traced using ATF’s firearms tracing system, known as eTrace. During the same period, the Mexican Defense Ministry reported approximately 16,000 weapons recovered throughout Mexico.


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