If Nicolas Sarkozy speaks candidly to Congress about problems in the U.S. financial system, and the leading U.S. financial publication doesn’t cover it, does anyone hear him?
The Financial Times did justice to the French president’s speech before a joint session of Congress on Wednesday—front-page play, big photo, and a story that included the noteworthy warning from a friend about excesses in our capital markets.
Speaking in French, the Financial Times tells us, Sarkozy pleaded with the U.S. to become … strongly engaged in the introduction of necessary [financial market] rules and safeguards… He said America’s friends should be the first to criticize “the vagaries and excesses of a financial capitalism that currently leaves too much room for financial speculation.”
He received several standing ovations.
In its print edition The Wall Street Journal ran twenty-six words in the “What’s News” strip on its front page on Thursday:
Sarkozy told Congress that the alliance and friendship between France and the U.S. is strong, as the French president sought to restore closer ties with Washington.
The Journal should have done more with that.
Meanwhile, we admire Lisa Girion’s page-one Los Angeles Times story today on how a California health insurer set goals and paid bonuses based on how many policyholders were dropped and how much money was saved.
Health Net Inc. avoided paying $35.5 million in medical expenses by rescinding about 1,600 policies between 2000 and 2006. During that period, it paid its senior analyst in charge of cancellations more than $20,000 in bonuses based in part on her meeting or exceeding annual targets for revoking policies, documents disclosed Thursday showed.
The story is based on riveting internal company documents that turned up in an arbitration brought by a fifty-one-year-old hairdresser whose coverage was canceled, or rescinded, in industry parlance, while she was undergoing chemotherapy for breast cancer. Among the documents (viewable via links on the L.A. Times website) were confidential employee reviews and performance evaluations, showing that the insurer tied employees’ compensation to their decisions on claims, which is a violation of state law.
The LAT reports that in 2002, for instance:
The company’s goal for Barbara Fowler, Health Net’s senior analyst in charge of rescission reviews, was 15 cancellations a month. She exceeded that, rescinding 275 policies that year—a monthly average of 22.9.
More recently, her goals were expressed in financial terms. Her supervisor described 2003 as a “banner year” for Fowler because the company avoided about “$6 million in unnecessary health care expenses” through her rescission of 301 policies — one more than her performance goal.
In 2005, her goal was to save Health Net at least $6.5 million. Through nearly 300 rescissions, Fowler ended up saving an estimated $7 million, prompting her supervisor to write: “Barbara’s successful execution of her job responsibilities have been vital to the profitability” of individual and family policies.
The article says the case has gotten the attention of regulators, who will begin to look more closely at other insurers. We have no doubt that the article will add urgency to any regulatory crackdown.
Also, on the tree-forest-sound question: If a reporter makes a business prognostication and no one listens, and three years later his prediction comes to pass, what is the larger meaning, grasshopper?
On Wednesday General Motors Corp. announced one of the largest quarterly losses ever by a public company. GM had been sitting on a pile of tax credits, waiting for a profitable year to use them. On Wednesday it announced that it was taking a massive, $38.96 billion write-down stemming from charges related to the write down of deferred tax assets. According to the story in The Wall Street Journal:
GM’s persistently weak financial performance prompted the company to take the big write-down for what are known as net deferred tax assets. They stem from past losses and can be used to offset taxes incurred on current or future profits for a certain period of years. In writing them down, the company is essentially saying it may be unable to use them because it isn’t clear that the company will return to black ink in the near term.