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Interactive Finance & Energetic Textiles: M2M, Internet of Things Innovations Pioneering Information Frontiers (Part 2)

By Carl Ford February 19, 2014

Q&A session with Hugh Donahue, a public policy analyst and advisor to Marketcore, covered the implications of existing computing capabilities for machine to machine (M2M) and how intellectual property implementation expands to M2M and the Internet of Things. In Part 2, Donahue expands on smart grids, government regulations, pioneering into the IoT and a dynamic M2M market.

Carl Ford: One pet peeve I have is the lack of a buy-side in the smart meter / smart grid market.  I recognize that battery distribution would have to be better and significantly larger to serve a consumer market, however it strikes me that Marketcore could well enable a truly dynamic energy market.  Can you offer any thoughts on that?

Hugh Donahue: Great insight!

Conceptually, yes, absolutely.

Marketcore IP enables IT developers and engineers crafting operating systems and applications. Convergences, overlaps, synergies would have to align around the ways in which buy side activities over smart grids and through meters implicate wealth in bonds, contracts, insurance policies, lines of credit, loans or securities to evaluate feasibilities.

The domain competencies of IT engineers and developers in Independent System Operators (ISOs) and Regional Transmission Organizations (RTOs) are absolutely crucial here due to their indispensable grid roles. IT engineers and developers in those organizations are definitely the “go-to” grid guys, to generate applications yielding value, say, for instance, in terms of contracts.

Similarly, IT engineers and developers at utility retailers may see opportunities with metering data, say, for instance, hard numbers on billings and more granular information regarding incoming revenue and the ways in which that information could provide other arrows in retailer quivers in bond markets. That metering information may not affect buy-side in the ways we routinely think of buy-side, and I could imagine it as an ideal body of data for a transaction credit, which retailers could employ to offset the cost of future transactions and/or to access system-generated analytics informing appropriate risk matching.

Innovation and inertia regarding net metering and distributed generation set contexts for smart meters and grids. Incumbent utilities loathe surrendering discretion over distributed generation and net metering. This has been and yet remains the great rub on renewable energies quite aside from crystalline silicon efficiencies and negative externalities of wind. Both the Solar Energy Industries Association and the Solar Electric Power Association do lots of thought leadership on distributed generation and net metering as they concern solar power.

You may be onto something here, Carl, that’s wholly new. There may well be robust opportunities for IT developers and engineers to team up with cloud services to aggregate and organize individuals and institutions generating power on their own to sell more distributed generation back into grids. Candidly, lots and lots of people with solar panels would jump for joy for applications along these lines, I’d think. Any number of them tell me they feel all but suffocated by incumbent generation and transmission companies.  And, candidly, I would contemplate a jostling regulatory scrum. National Association of Regulatory Utility Commissioners meetings would be good starting points to get a quick sense of regulatory openings and barriers to entry. Those NARUC folks are terribly serious, and many are animated by public service in the public interest. And, the big utilities tend to hold lots of sway with state regulators, so anyone keen on turning a nickel promoting distributed generation and net metering better be gimlet-eyed about what he’s getting into. The solar power groups have state by state information, too. And, don’t forget the Federal Energy Regulatory Commission, a crucial leader.

CF: Hugh, you are describing very dynamic opportunities that in essence work at the speed of computing. What implications for oversight and government regulation do you see?

HD: Carl, what a great question. 

Big data can potentially emerge to define efficient and reform inefficient markets during the 21st century. Machine to machine connectivity and communications operationalize the different functionalities I explained earlier, and those are key reasons why Crossfire Media is so consequential. You have your finger on the pulse of the times and bring together institutions, firms and individuals with applied capabilities and skills to implement these transformative changes.

Marketcore IP supports architectures for transparency, liquidity and risk assessing. Through Marketcore’s IP, IT engineers and developers have a suite of tools to effect marketplace corrections. This transparency-generating, liquidity-providing, risk-assessing architecture might just restore confidence in equity and bond markets. The architecture goes a long, long way toward creating efficient markets and efficient market administration.

It’s all a very big deal about how the United States administers markets and promotes investment dating back to John Quincy Adams and Andrew Jackson.

The reality in 2014 is that big data now makes it possible to address shortcomings in inefficient market administration of inefficient markets that Americans have adopted with government, industry and finance dating from 1828.

One big opportunity is deploying operating systems and applications empowered by Marketcore IP to supersede regulatory costs associated with contemporary market administration and to stimulate efficient markets.  

For instance, enforcement no longer deters, many thoughtful observers contend. Nowadays, enforcement is little more than a regulatory cost with negligible betterment to and for the public interest. The big banks, great pharma companies and massive healthcare systems settle, pay their fines, go on with business and investors pretty much sign-off, powerless to change management.

Look at Steven Cohen, head of SAC Capital, who’s pretty much an enforcement poster boy just now compared with Jamie Dimon at JP Morgan Chase. Cohen had $15B in his hedge fund in January, 2013. He now controls $3B according to news reports and is in agreements with the U.S. Attorney to no longer manage other people’s money.

By contrast, Jamie Dimon, head of JP Morgan Chase, received a 74-percent raise after JP Morgan Chase settled somewhere between $10 to $14.6B fines, depending how one counts and how much JP Morgan parks with regulators, in connection with securities and residential mortgage back securities wrongdoing, on a 16-percet profit loss and 33-percent share price appreciation.

It’s easy to see why. Dimon struck a phenomenal deal with DOJ protecting the bank from judicial scrutiny in its settlement deal. Notice Better Markets litigation against the Department of Justice alleging that “the DOJ violated the Constitution and laws of the United States by using a mere contractual agreement to resolve claims of historic importance without subjecting the Agreement to independent judicial review.”

DOJ is tantamount to a Palatine Court, “A ruler with royal privileges and judicial authority reigning within the territory,” abusing its discretion by toadying to the wealthy bank, Better Markets contends.

"The agreement fails to identify or explain:  

THE LOSSES: How much did JP Morgan Chase’s clients, customers, counterparties, investors, and others lose as a result of its fraudulent conduct?  $100 billion?  $200 billion?  More?

THE PROFITS: How much revenue, profits, and other benefits did JP Morgan Chase receive as a result of its fraudulent conduct, and was it all disgorged?  $10 billion?  $20 billion?  More?

THE BONUSES: Who received what amount of bonuses for the illegal conduct?

THE INVESTIGATION: What was the scope and thoroughness of the investigation that provided the basis for the agreement?

THE FRAUD: What are the material facts of the illegal conduct by JP Morgan Chase and the specific violations of law that were committed?

THE CULPRITS: What exactly did the individual executives, officers, managers, and employees involved in the illegal conduct actually do to carry out the fraud, and do any of them still work for the bank?

THE CORRECTIVE ACTION: Why did the contract fail to impose on JP Morgan Chase any obligation to change any of its business or compliance practices, which are standard conduct remedies that regulators routinely require? And how can the sanctions effectively punish and deter JP Morgan Chase, given its wealth and its extensive history of lawless conduct?

THE LACK OF ADMISSIONS: Why are there no admissions of fact or law by JP Morgan Chase, and what, if any, are the concrete legal implications of their so-called 'acknowledgment'?

By entering the agreement without seeking any judicial review and approval, the DOJ violated the Constitution and laws of the United States.  

The Executive Branch, acting through the DOJ, violated the separation of powers doctrine by unilaterally striking a bargain with JP Morgan Chase to resolve unprecedented matters of historic importance, without seeking any judicial review and approval of the agreement.

The DOJ violated the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) by failing to commence a civil action in federal court so that the court could, among other things, assess the civil penalty. The DOJ acted arbitrarily and capriciously by, among other things, entering the agreement without seeking judicial review and approval."

All of this may be salutary in the long run; e.g., DOJ may be vindicated or vilified in courts of law and public opinion striking the deal, Dimon may enter the pantheon of bankers celebrated or derided for exercising market power comparable to J.P. Morgan’s in the 1907, but it is expensive, time consuming and hard to foresee tangible benefits inuring to investors.

Shameless as DOJ decision making may be to many, who like Better Markets, are demanding stronger enforcement, it’s nonetheless important to  note regulators’ bind. If regulators were to actually police wrongdoings, the offending institutions could tip into bankruptcies. Investors and shareholders could and likely would litigate allegedly corrupt management, the shenanigans would be exposed through due process in courts of law and out goes the giant firm along with the soiled senior executives, the baby along with the bathwater.

If regulators don’t enforce as forcefully as they can and should, the offending firm agrees to stop breaking the law and defrauding the public and the system can self-correct through monitoring, or so the logic runs.

Separately, this is why whistle-blowers are so important, because regulators have much more difficult challenges getting facts if whistle-blowers do not come forward.

The Department of Justice and Securities and Exchange Commission rely on non-prosecution agreements to enforce wrongdoing.

How oxymoronic is that?

Judge Jed Rakoff engages enforcement thoughtfully in a recent New York Review of Books.

DOJ deals with JP Morgan Chase and HSBC ride the non-prosecution chassis. They are virtually identical: Big, headline-generating news reporting seemingly stunning fines/settlements, small armies of surveyors dispatched to monitor current and yet hired big bank executives and staffers with the assurances of senior bank managers that current and to be hired executives and staffers will not behave as shamelessly as mentors and predecessors, the institutions write off the fine as a cost of business, shareholders either breathe sighs of relief the clouds of prosecution in federal courts are finally lifted or weep at their impotence to police the management of the corporations in which they have invested, or both. 

A non-prosecution agreement template is in place for Foreign Corrupt Practices Act litigation according to Hogan Lovells’ report.

So, when enforcement is tantamount to a non-deterrent crap shoot -- that is, one set of outcomes for a new money guy and another set of outcomes for storied bank -- investors are in really lousy positions, for the federal government is essentially conceding the reach of its enforcement powers  before dominant firms.

To be sure, a great show is made of enforcement.

It does matter.

It is a tool.

All true.

And, journalists do fine jobs. Among many others, Morgenson on finance and Walsh on pensions and municipals in the Times, Moyers and MacNeil Lehrer Productions Newshour on PBS, the Nightly Business Report, and Matt Taibbi, who refreshes muckraking for Rolling Stone, all create informed readers and citizens.

But, capable journalism can at best beam the spotlight of publicity.

Now, big data gives us a chance to try something new, which machine to machine communications and the Internet of Things make transformatively possible.

IT engineers and developers seeking further information can find it at www.marketcore.com.

CF: What about IT engineers and developers who are pioneering the Internet of Things?

HD: That’s where the energy applications are timely. Together with an immensely gifted textile scientist, I am developing energy absorption and energy generating yarns, fabrics and textiles.

Advanced Fabric Technologies, our energy absorption technology innovator, brings functionalities for high-performance yarns, textiles, fabrics and garments in sports, medicine, first responder and soldering, ballistic protection for energy, mining, security and national security, interior design, industrial textiles and specialty fabrics.

In each and every application, our energy absorption technology partner can enable real-time monitoring, protect workers and equipment during catastrophic events and the underlying gypsum in institutional structures from routine bumps and bangings inflicted by gurneys and other mobile equipment.  It can boost the translucency and increase the durability and strength of tensile membrane canopies and roofing systems, and provide superior abrasion resistance across all fabrics and textiles.

Just now, we’re addressing coated fabrics, ballistics, translucency in tensile membrane canopies and roofing systems and abrasion resistance in interior fabrics and wall coverings.

When an industrial partner integrates sensors and radio frequency capabilities, any of these capabilities becomes intelligent.

When an industrial partner adds either motion or ambient light energy generating technologies, the intelligent yarn, textile, fabric or garment can function as renewable materials or machines operating in an Internet of Things free from standard electrical inputs from the grid. 

We’re very pumped up about Advanced Fabric Technologies energy absorption innovations and see those technologies as original equipment manufacturer components for machine to machine connectivity and the Internet of Things.

One of our energy-generating partners employs motion-to-power sensors that can report any number of factors from a fabric with available sensor and radio frequency technologies.

Think about it.

Our energy absorption partner will certainly transform the coated fabrics industry as a horizontal technology applicable for defined markets like tarps, booms, and bouncers.

Its energy absorption technology could well emerge as a vertical technology, transforming whole industries particularly as renewable power from ambient light and motion energizes functionalities.

CF: Hugh, thank you for your insight and for being so forthcoming.

HD: You’re welcome, Carl. I really appreciate this opportunity. Hope to connect in Las Vegas for platform conference.

Be sure to check out Part 1 of this Q&A session.


Edited by Rachel Ramsey
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