Tags: The Economist

Law Schools Now Paying Their Graduates’ Salaries to Look Better in School Rankings

I knew that the legal market was in bad shape last summer when I came across the story that top law firm Weil, Gotshal & Manges announced its first mass layoffs in 82 years, but I had no idea it was this bad.

As most of you will be aware, U.S. News & World Report publishes a widely anticipated ranking of undergraduate as well as graduate schools. I recall how closely my peers scrutinized these rankings back when I was a high school senior and, apparently, a similar obsession continues to this day.

In fact, law schools are so consumed with performing well in these rankings that they are going to outrageous lengths to make it look like their students are performing better financially after graduation than they actually are. One of the most ridiculous ways they achieve this is by paying the salaries of their graduates upon graduation. This way, students can take on employment at non-pofits and government agencies, positions they would never otherwise consider in light of their mountains of student debt. In return, their alma maters can pretend their graduates got real jobs. It is the academic equivalent of GM automobile channel stuffing.

This isn’t just a minor trend of one-offs being exaggerated by the media either. For example, George Washington University paid the starting salaries of 22% of its graduates in 2012, while the University of Virginia paid for 15%.

These programs even have a name that reminds me of a financial derivative packed full of worthless securities. These programs are being called “bridge to practice” schemes and according to The Economist “in a recent survey by the National Association for Law Placement (NALP), 45 of the 94 schools that responded now run such programs.”

Now more from The Economist:

EACH YEAR when U.S. News, an American publisher, releases its league table of law schools, potential students seize on it and the universities decry it for oversimplifying a personal and unquantifiable decision. But the schools can ill afford to ignore it, since not just applicants but donors and even credit-rating agencies pay close attention to the scores.

Among the ranking’s most important components is the share of graduates who find jobs. The 2014 table, announced on March 11th, shows that the University of Virginia (UVA) and George Washington University (GW) do especially well on this. Although UVA’s law students are only in ninth place for their scores in standard admission tests, 97.5% of the class of 2012 had a job on graduating—the best mark in the country. At GW the discrepancy was even more striking: its 85% graduate-employment rate ranked ninth, whereas its admission-test scores were 21st.

However, the two schools’ performance is not as stellar as it seems. A close look at the online employment database of the American Bar Association reveals that GW and UVA are among the leaders in a striking trend: law schools paying the salaries of their alumni when they go to work in legal firms, non-profits or the government. GW paid the starting salaries of a whopping 22% of its 2012 graduates; at 15%, UVA was not far behind.

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Introducing “Freeports” the Latest Way for Oligarchs to Store Their Assets

The following article from The Economist is extremely telling about the macro world we live in on several different levels. First, it shows that the super wealthy are desperately concerned about not only the debasement of their national fiat currencies, but are also seriously concerned about appropriation of assets. Second, it exposes an interesting point related to Bitcoin. While the Senate held hearings on BTC last week, and focused on money laundering and tax avoidance, here you have these Freeports springing up all over the world, which seem to be extremely friendly to such activities. More than anything else, it shows that if people have a need and desire to hide assets, they will find a way to do it.

More from The Economist:

PASSENGERS at Findel airport in Luxembourg may have noticed a cluster of cranes a few hundred yards from the runway. The structure being erected looks fairly unremarkable (though it will eventually be topped with striking hexagonal skylights). Along its side is a line of loading bays, suggesting it could be intended as a spillover site for the brimming cargo terminal nearby. This new addition to one of Europe’s busiest air-freight hubs will not hold any old goods, however. It will soon be home to billions of dollars’ worth of fine art and other treasures, much of which will have been whisked straight from collectors’ private jets along a dedicated road linking the runway to the warehouse. 

The world’s rich are increasingly investing in expensive stuff, and “freeports” such as Luxembourg’s are becoming their repositories of choice. Their attractions are similar to those offered by offshore financial centres: security and confidentiality, not much scrutiny, the ability for owners to hide behind nominees, and an array of tax advantages. This special treatment is possible because goods in freeports are technically in transit, even if in reality the ports are used more and more as permanent homes for accumulated wealth. If anyone knows how to game the rules, it is the super-rich and their advisers.

Because of the confidentiality, the value of goods stashed in freeports is unknowable. It is thought to be in the hundreds of billions of dollars, and rising. Though much of what lies within is perfectly legitimate, the protection offered from prying eyes ensures that they appeal to kleptocrats and tax-dodgers as well as plutocrats. Freeports have been among the beneficiaries as undeclared money has fled offshore bank accounts as a result of tax-evasion crackdowns in America and Europe.

Several factors have fuelled this buying binge. One is growing distrust of financial assets. Collectibles have outperformed stocks over the past decade, with some, like rare coins, doing a lot better, according toThe Economist’s valuables index. Another factor is the steady growth of the world’s ultra-wealthy population. According to Wealth-X, a provider of data on the very rich, and UBS, a financial-services firm, a record 199,235 individuals have assets of $30m or more, a 6% increase over 2012.

Oligarch asset consolidation. Thank you Ben Bernanke!

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The United States: 5% of the World’s Population, 25% of its Prisoners

This article is from May, but wow what a crazy statistic.  I guess there was just no room for Corzine…From The Economist:

Excessive incarceration is an American problem. The country has about 5% of the world’s population but almost 25% of its prisoners, with the world’s largest number of inmates and highest per capita rate of incarceration. California eagerly participated in this trend of locking up ever more people. During Mr Brown’s previous stint as governor in the 1970s the state switched to more inflexible sentencing. It then spent another two decades adding “tough-on-crime” laws that kept extending sentences even for minor crimes.

The resulting prison-building boom, and rapacious bargaining by the prison-guards union, meant that state penitentiaries became the fastest-growing major cost in the state budget. California’s 33 prisons and associated camps therefore bear no small responsibility for the state’s recurring budget crises, and the resultant crunch on school and university funding.

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