In this edition of FactCheck Extras, we look at the history of derivatives, President Obama's use of a teleprompter, and an old piece of bunk that won't go away.
The liberal group Americans United for Change has released an ad that blames Wall Street for high unemployment.
The ad says that "a few years ago, Wall Street created something called derivatives" that were used to build "a house of cards that finally came tumbling down" and "cost 7 million Americans their jobs."
According to data from the Bureau of Labor Statistics, there are about 7 million fewer employed Americans, if you begin counting the downturn in late fall 2008. Whether derivatives (explained by Investopedia here), or Wall Street futures trading in general, can be held directly responsible for the loss of all of those jobs is, at best, a matter of opinion. But it is absolutely false that "a few years ago, Wall Street created" derivatives. Derivatives actually have a history that stretches back much, much further.
In his book "Building the Global Market: A 4,000 Year History of Derivatives," financial analyst Edward J. Swan quotes Senate Report 93-1131 as saying that "the system of agricultural futures trading developed in the United States in the 1850-1900 period in response to the rapidly increasing economic need centralised pricing and larger-scale risk bearing in agricultural marketing."
And Don Chance, a professor of finance at Louisiana State University, has argued that the true birth of derivatives can actually be traced back to biblical times. As he wrote in his "Essays on Derivatives":
Chance: To start we need to go back to the Bible. In Genesis Chapter 29, believed to be about the year 1700 B.C., Jacob purchased an option costing him seven years of labor that granted him the right to marry Laban's daughter Rachel. His prospective father-in-law, however, reneged, perhaps making this not only the first derivative but the first default on a derivative. Laban required Jacob to marry his older daughter Leah. Jacob married Leah, but because he preferred Rachel, he purchased another option, requiring seven more years of labor, and finally married Rachel, bigamy being allowed in those days. Jacob ended up with two wives, twelve sons, who became the patriarchs of the twelve tribes of Israel, and a lot of domestic friction, which is not surprising. Some argue that Jacob really had forward contracts, which obligated him to the marriages but that does not matter. Jacob did derivatives, one way or the other. Around 580 B.C., Thales the Milesian purchased options on olive presses and made a fortune off of a bumper crop in olives. So derivatives were around before the time of Christ.
While giving a speech at the Conservative Political Action Conference on Friday, Minnesota Governor Tim Pawlenty said that "President Obama was in a grade school classroom speaking to elementary school children and he was using a teleprompter." But that's not true.
As we explained back in January, Obama did use a teleprompter in a grade school classroom — but it was to talk with reporters, not children. It's possible Pawlenty had received a chain e-mail that falsely claimed Obama had used the teleprompter to talk to kids. Earlier in the day when the president met with the school children, he sat next to Secretary of Education Arne Duncan and didn't have a teleprompter, as this image from the White House blog makes clear:
You can see the image of Obama speaking to reporters from behind a teleprompter, along with our full report here. And to see a broader report on the use of misleading pictures in chain e-mails, watch our "Just the Facts" vidcast here.
Nancy and the Jets, Again
Pawlenty wasn't the only politician tripping up over items we've already debunked. The Coloradoan recently caught Republican congressional candidate Diggs Brown in a falsehood, when he said: “Nancy Pelosi flies a jet, 757, that costs you $480,000 a month for her to fly from Washington to her home. The reason it’s a 757 is she didn’t want to stop to refuel her aircraft.”
But that's a bit of old bunk that we first proved wrong in December 2008. And we've debunked it a few more times since. The Coloradoan referred to our report. One more time for anyone who missed it: Pelosi travels in a 12-seat Air Force plane as her predecessor, Speaker Denny Hastert did. She once used a C-32, a luxury aircraft that seats about 45, when no other planes were available.