Would Wall Street have underwritten the Apollo program?

In today's FT, John Kay points out the value of building complex systems with modular parts, so that if one part fails, it doesn't necessarily risk the whole system. In
FT.com / Columnists / John Kay - Too big to fail? Wall Street, we have a problem, Kay reminds us about how the modular nature of the Apollo spacecraft enabled Apollo 13 astronauts to use their lunar module as a "lifeboat" for the long trip back to earth after an explosion nearly killed the crew on the way to the moon.

What's missing from Kay's recollection is the great lesson from Apollo 13 that we must make those modular systems capable of replacing each other.

The great scene in the Apollo 13 movie with Tom Hanks is when engineers explain to flight controller Gene Krantz that they can't simply substitute the air filters from the command module for the exhausted ones on the LM.

This is because the contractor for the command module made them square and contractor for the LM made the air filters in the LM circular in shape.

Reminds me of the different shapes of the plugs for cell phone charger jacks. If that's how our financial system continues to be built, we may need to hold our breath a while longer.

S&P Retains First Amendment Guru Floyd Abrams

The New York Times reported in a business cover profile that Floyd Abrams, veteran First Amendment lawyer who has had a role in many major, groundbreaking First Amendment legal precedents, is representing Standard & Poor’s against lawsuits claiming damages resulting from incorrect ratings. S&P’s legal opinion, as always, is that ratings are like editorial opinions and therefore protected speech.

The article is both personality profile and legal strategy brief. It’s rather surprising that a lawyer would lay out so much of his legal strategy in the Times business section, but it may be a way of warning plaintiffs that there is not going to be an easy path to settlement discussions here.

Read the article at this single-page link.

McGraw-Hill ‘exploring strategic options’ for BusinessWeek magazine, more layoffs at Standard & Poor’s

McGraw-Hill has apparently put BusinessWeek magazine on the block, announcing this week that it is exploring strategic alternatives for the flagship business magazine.

MHP also announced layoffs of about 85 people in financial services. Is anyone reading this out there one of those 85? Would anyone give us a recap of who’s been kicked to the curb from the financial services side?

Email steve@ratingagency.com to provide info. We protect anonymous sources if we can vet them.

CalPERS sues credit rating agencies over losses

One of the largest state pension funds, CalPERS, has apparently sued the rating agencies over their handling of ratings that led CalPERS to more than $1 billion in investment losses.

S&P and Fitch said the lawsuit was “baseless.” Moody’s didn’t comment in the Seattle Times story.

Marketplace, the American Public Media radio show, has this report from Bob Moon.