Off the Shelf: In ‘Treasury’s War,’ Missiles for a Financial Battlefield

Mr. Zarate, now a senior adviser at the Center for Strategic and International Studies, makes a persuasive case that a series of financial weapons developed after 9/11, and used mostly by the Treasury Department, have given the United States opportunities to weaken terrorists and rogue states as never before. He develops that argument by tracing Treasury’s aggressive actions against various American foes over the last decade, whether Al Qaeda, North Korea, Iran, Libya or Saddam Hussein’s Iraq.

For those of us who start feeling drowsy at the very mention of the words “Treasury Department,” this book is an eye-opener. Under Mr. Zarate, and his successors, Treasury quietly built new capabilities that owe less to junk bonds than to James Bond.

“Treasury’s War” chronicles an array of the department’s enforcement efforts, from corralling informal Middle Eastern money-transfer networks useful to Al Qaeda to tracking Saddam’s missing millions. But the heart of the book is the emergence and evolution of Section 311 of the Patriot Act, which allows the Treasury Department to designate any bank in the world as a “primary money-laundering concern” and prevent it from doing business with any American bank.

In today’s financial world, where every bank wants to do business with every other bank, and where New York and the United States dollar remain of paramount importance, “hitting” a bank with a Section 311 order has the effect of transforming it into an overnight pariah. Mr. Zarate cites example after example in which 311’s have all but destroyed rogue banks that had been important conduits for money flows involving, for example, Al Qaeda or Iran.

The genius of Section 311 is that Treasury doesn’t do anything other than apply a financial “scarlet letter.” The actual damage is done by the bank’s peers, which typically refuse to do business with it out of fear that they, too, will be cut off from the financial system. Just the threat of a 311, Mr. Zarate writes, has caused nations as powerful as Russia, and as recalcitrant as Myanmar, to change their money-laundering laws, forcing their banks to conform to international standards. A handful of well-placed 311’s, he says, has put much newfound pressure on governments including North Korea and Iran.

“Geopolitics is now a game best played with financial and commercial weapons,” Mr. Zarate writes. “The new geoeconomic game may be more efficient and subtle than past geopolitical competitions, but it is no less ruthless and destructive.”

The centerpiece of the book, and probably the best example of Section 311’s uses and limitations, is the story of Treasury’s assault, beginning in 2005, on North Korea, which American officials said was involved in activities like counterfeiting and drug trafficking. Mr. Zarate describes how the United States hit one of the banks it linked to North Korea, Banco Delta Asia in Macau, with a 311.

Practically overnight, banks throughout the region, even in China, began turning away or throwing out North Korean government business. By this one simple act, Mr. Zarate writes, “the United States set powerful shock waves into motion across the banking world, isolating Pyongyang from the international financial system to an unprecedented degree.” He adds: “The North Koreans didn’t know what hit them.”

As the depth of its plight sank in, North Korea appeared to panic. First, it fired off a missile into the Pacific, a move that had the additional benefit of freaking out the State Department, which demanded to know what Treasury was up to. Then, Mr. Zarate writes, a North Korean representative contacted the United States, seeking relief from the 311. At the State Department’s insistence, negotiations began in Beijing, and appeared to end when a Chinese bank volunteered to handle a measly $25 million of North Korean money the authorities in Macau had frozen.

Mr. Zarate writes that “the amount of money wasn’t the issue” and that the North Koreans “wanted the frozen assets returned so as to remove the scarlet letter from their reputation.”

Then, he says, something amazing happened. Despite its government’s support of North Korea, the Chinese central bank refused to approve this solution, indicating that it, too, wanted nothing to do with a bank hit by a 311. “Perhaps the most important lesson was that the Chinese could in fact be moved to follow the U.S. Treasury’s lead and act against their own stated foreign policy and political interests,” he writes. “The predominance of American market dominance had leapfrogged traditional notions of financial sanctions.”

Eventually, however, Treasury’s pressure on Pyongyang had to be lifted at the insistence of the State Department, which was far more worried about North Korea’s missiles than its bank accounts. Mr. Zarate deplores the move. “The North Koreans had expertly turned the tables” on the United States, he says. “We were outmaneuvered at the height of international pressure and gave up our leverage.”

Fascinating stuff, I grant you, but not quite a fascinating book. Alas, some decent scene-setting aside, the author often writes like a government bureaucrat. In places, the book reads like a white paper. It also lavishes much praise on just about every official he has dealt with — his bosses and peers are described as “brilliant,” “hard-charging” and “legendary.”

Those quibbles aside, “Treasury’s War” does a fine job of shedding light on a new and significant aspect of international relations that many of us may not be aware of, and that is likely to gain in importance in the years to come. The risk, Mr. Zarate concludes, is that other nations are now learning Treasury’s new tricks, and may eventually find ways to use them against us.

Shortcuts: Taking an Invention From Idea to the Store Shelf

None of us have ever gotten past the talking phase. But a lot of other people have.

Last year, the United States Patent and Trademark Office reported that 1.5 million patent applications were pending, compared with around 269,000 in 1992.

And the office issued around 270,000 patents in 2012, about 160,000 more than two decades before.

It’s very easy to believe that a multimillion-dollar invention is just a twist of a screwdriver away. Listen to the seductive radio and television ads that promise to help your invention fly off the shelves. Watch reality television shows like “Shark Tank,” where contestants vie to get businesses to invest in their idea.

While they all portray making millions off your invention as easy, it’s not, said Mark Reyland, executive director of the United Inventors Association of America, a nonprofit education organization. “It’s a business of failure.” That doesn’t mean you won’t be the next Thomas Edison, who was granted around a thousand United States patents. But just bring a little caution and a lot of skepticism to the table.

First, do some preliminary research. Google allows you to research patents at google.com/patents. You can also look at the United States Patent and Trademark Office site to see if your crazy idea has already been patented.

If it looks as if you have a unique product, file a provisional patent application with the patent office. That costs $65 to $260, depending on how many pages your patent needs, and is far simpler to do on your own than filing a formal patent claim.

A provisional patent application is good for one year and essentially protects you from someone else claiming your invention. So you have time to develop and see if there’s a market for it before going through the more onerous full patenting process.

That’s what Micaéla Birmingham of Brooklyn did when she came up with the idea of a sun shade for her baby’s stroller, fashioned out of a dish towel in her kitchen.

“That’s the great thing about a provisional patent,” said Ms. Birmingham, an urban planner. “It gives you a chance to get it off the ground.”

Filing a patent, including the necessary research, can easily run $4,000 to $10,000 — or more, said Michael Neustel, a patent lawyer in Fargo, N.D.

Do you need a lawyer? While you can make your way through the complicated and time-consuming process yourself, the patent office strongly suggests using one.

“This is not an area where people should do it themselves,” said Jonathan Putnam, a New York patent lawyer. “You need to understand prior patents and prior inventions. You need to explain how you’ve advanced the product. You need a dedicated adviser who has only your interest at heart.”

Patent agents are another option — they don’t have a law degree, but, like a patent lawyer, must pass an exam administered by the United State Patent and Trademark Office.

Ms. Birmingham said she used a friend who was a patent lawyer, spent about $5,000 on legal and filing fees and just recently received the patent for CityShade — two years after filing. The average wait between filing and receiving a patent is 29 months, according to the patent office.

While the patent was pending, she got her Web site, citymum.com, up and running and has sold 2,500 covers at $68 each ($78 for organic cotton).

The high cost of such lawyers is one reason companies advertise free or inexpensive invention help. But those services might just end up costing you more than you planned.

Nancy Tedeschi found that out. She came up with the idea of a snap-on screw to repair eyeglasses when the earpieces come off.

She filed a provisional patent application by herself and started manufacturing SnapIt Screw. But then she discovered that “the invention was the easy part,” she said. “Marketing and getting it out is horrible.”

Off the Shelf: In ‘Buy Side,’ a Wall Street Trader’s Crash Landing

But I suspect that things might have turned out almost as badly as they did for Turney Duff, a callow, young hedge fund trader who writes of his own noteworthy flameout in a bracing new Wall Street memoir called “The Buy Side” (Crown, 320 pages).

Mr. Duff’s tale calls to mind books like “Bright Lights, Big City,” by Jay McInerney, and especially “Liar’s Poker,” by Michael Lewis — stories of wide-eyed newcomers confronted by the temptations of moneyed New York. As literature, it doesn’t rise to the same class. As spectacle, it easily trumps both.

Mr. Duff makes millions, pays brand-name rappers to perform at his birthday party and marries a glamorous singer. But instead of riding into the sunset, he ends up retreating to sumptuous hotel suites where he inhales piles of cocaine, swills Scotch and watches pornographic movies. By himself.

Along the way, by his own admission, Mr. Duff becomes a caricature of the arrogant young Wall Streeter that so much of America loves to hate. If “The Buy Side” is remembered for any single line, it will be the remark that Mr. Duff says he uttered one evening upon confronting a lengthy queue outside a downtown Manhattan nightclub. Barging past the bouncers, he announces: “I don’t stand in lines. I snort them.” He and his trading pals think the joke so hilarious that they later emblazon it on souvenir T-shirts.

A middle-class kid from Maine, Mr. Duff began his career in 1994, in the early years of the hedge fund era, when he arrived in New York as a fresh-faced journalism graduate from Ohio University. Unable to land a job in writing or anything else, he reaches out to an uncle on Wall Street, who arranges interviews with several of the big firms. Mr. Duff aces the one at Morgan Stanley by recapping the previous evening’s episode of “Melrose Place,” the interviewer’s favorite television show. Hey, so much for that diploma.

One of the book’s strengths is Mr. Duff’s self-awareness. He realizes what he became. At Morgan, where he spent five years as a desk assistant, he knew little about Wall Street and learned even less about investing, acknowledging that he was too lazy to read research. Where he thrived was after the closing bell, when he proved adept at staging office parties and leading his peers — and a few higher-ups — through the assorted watering holes he frequented.

His light-bulb moment comes one evening when he successfully introduces a group of pretty girls to a senior trader. “I realize I’m in my element,” he writes. “I feel in total control and at ease. Only in looking back can I see how seminal this moment is. I would never be able to stand out at my job. There I’m out-experienced, out-connected and out-degreed. But here, with a glass in hand, I have as good a chance as any to move and shake.”

Mr. Duff puts his social skills to good use when, unable to secure an actual trading job at Morgan, he moves to an up-and-coming hedge fund, the Galleon Group — the same Galleon Group that was eviscerated in Wall Street’s continuing insider-trading scandals.

As a “buy side” trader executing transactions for senior portfolio managers, he is a conduit to the “sell side” traders at the big Wall Street firms who actually carry out his trades. Mr. Duff’s decisions on how and where to allocate his trades make him of crucial importance to the sell-side traders, who earn commissions on them.

It is Mr. Duff’s portrait of how sell-side traders ardently romance their buy-side counterparts that is probably the book’s most memorable contribution to Wall Street literature. He takes everything they offer: booze, dinners, Super Bowl tickets, private jets to Las Vegas weekends, parties in South Beach, lots of cocaine and, while at Galleon, scads of tips that move stocks. One of his mentors, a trader named David Slaine, ended up cooperating with the government’s Galleon investigation, but the scandal proves peripheral to the book.

WHAT stays with you is the portrait of a young man who seemingly never met a temptation he could deny.

For a time, Mr. Duff rides high, earning million-dollar bonus checks, renting a TriBeCa triplex with drop-dead Hudson River views and eventually adding a wife, a Long Island manse and a beloved daughter. But the drugs soon take hold, and his long downward spiral grows uglier at every turn. After two stays in rehabilitation facilities, he loses the trading job he took after leaving Galleon, then his marriage and the real estate. The financial crisis does the rest, and today, Mr. Duff says, he tries to make a living writing from a tiny apartment in Long Island City, Queens.

Mr. Duff proves a fine wordsmith; his prose is smooth, lean and rhythmic. Where the book misfires — badly — is when he tries to plumb the existential side of things, or to employ literary artifice. There is one cringe-worthy chapter about his girlfriend (who would become his wife), where he begins every few paragraphs with a letter, “I,” then “I L,” and so on, which of course ends up spelling out “I LOVE YOU.” It made me want to throw the book across the room.

Almost as bad is his “Bud Fox” moment, the obligatory episode in these lost-in-Manhattan memoirs when the protagonist must replicate that memorable scene from Wall Street when Charlie Sheen, having sacrificed himself to Gordon Gekko and the gods of capitalism, stares out at the Manhattan skyline and asks, plaintively, “Who am I?”

Mr. Duff’s moment comes the morning after his 34th birthday party, when he wakes on the roof deck of his triplex, fires up a marijuana cigarette and realizes how hollow all his newfound wealth and party-hardy friends make him feel. “Why,” he wonders, “do I feel so empty?” My bet was all that cocaine; whatever the reason, I didn’t much care. I just wanted to smack the guy.

That said, this is an entertaining and cautionary tale, well worth your time. I can imagine parents out there who might give it to children pondering Wall Street careers. Of course, should it excite rather than frighten your budding Bud Fox, you might consider urging an alternative career path.

Off the Shelf: ‘Big, Hot, Cheap and Right,’ a New Look at Texas - Review

This is nothing new, as most any Texan will tell you. But Ms. Grieder, a onetime correspondent for The Economist who now works at Texas Monthly, and a Texan herself, has written a smart little book that counters much of this silliness, and explains why the Texas economy is thriving. It’s called “Big, Hot, Cheap and Right: What America Can Learn from the Strange Genius of Texas” (PublicAffairs, $26.99). The sad truth, alas, is that it’s probably a lot easier to understand the successes of Texas than it would be to duplicate them.

What might be copied, Ms. Grieder indicates, is the so-called Texas model — that is, a weak state government with few taxes and fewer regulations and services. It would be far harder to replicate the state’s civic DNA, which features traits that can be traced to its decade, beginning in 1836, as a stand-alone nation (independent, suspicious of Washington), the late-1800s cowboy era (self-reliant, fraternal) and the 20th-century introduction of oil and entrepreneurialism (pro-business, skeptical of government). Those values, Ms. Grieder says, created a populace ideal for economic growth: “pragmatic, fiscally conservative, socially moderate and slightly disengaged.”

This is a refreshing book on many levels. Outside writers have been regularly caricaturing the state since the novelist Edna Ferber introduced America to postwar Texas with “Giant” in 1952. The canon ranges from “The Super-Americans,” by John Bainbridge (1961), to “As Texas Goes ... : How the Lone Star State Hijacked the American Agenda,” by Gail Collins, a New York Times columnist (2012). Ms. Grieder’s is the rare book that takes stock of the Texas model without ridiculing many of its traditions and politicians.

I tend to look askance at an analysis that attributes a company’s or a state’s success to events two centuries ago, but Ms. Grieder’s history lessons are persuasive. Texas’s laissez-faire mix of weak government, low taxes and scant regulations is deeply rooted in its 1876 Constitution, which was an attempt to vehemently dismantle an oppressive post-Civil War government of radical reconstructionists. Texas business interests flourished after turn-of-the-century legislators passed an early antitrust law, which kept much of its oil and natural resources squarely under local control.

Historically, Ms. Grieder writes: “Texas wasn’t a straightforward pro-business state. It was (and is) pro-Texas business.”

More recently, the state’s economic boom has been a mix of luck and good planning. Strict lending laws allowed Texas to dodge the worst of the housing collapse, while the 1994 North American Free Trade Agreement was a boon to the state’s export sector.

But “the secret ingredient,” Ms. Grieder writes, has been the industrial policy of Gov. Rick Perry, offering a generous broth of subsidies and incentives that Texas has used to attract hundreds of businesses that have richly diversified its traditional energy-based economy. This has had the added benefit of insulating Texas from the ups and downs of oil prices.

“The Texas model isn’t an accident, in other words, even if the state Constitution does call for a very stark version of it,” Ms. Grieder says. “Texas has a long tradition of looking outside the government for support — and often finding it. That predates the Texas revolution and was reinforced by the rise of the cattle kingdom and the oil booms.”

Systems and laws aside, Ms. Grieder emphasizes, the crucial component in the Texas boom has been its people, who tend — forget stereotypes — to be tolerant, optimistic and results-oriented. It’s no accident that Houston, a city sometimes caricatured as a haven for obnoxious right-wingers, in 2009 became the country’s largest city to elect an openly gay mayor. The state has benefited from waves of immigration, beginning after the Civil War and persisting to this day.

As outsiders, successful immigrants tend to be hard-working and self-sufficient, and the state’s pro-business culture has made their jobs easier at every turn. Non-Texans tend to look at glib right-wing Texas politicians like Governor Perry — and many others — and assume that the Texas electorate must be similar.

In fact, Ms. Grieder demonstrates, Texas voters are notoriously ambivalent about politics, in large part because the state Constitution gives politicians so little power. As a result, even the worst Texas leaders tend to do little damage.

“Texans are, ultimately, a pragmatic people,” she writes. “Politicians and their excesses can be justified by the economy alone. And that’s one area where no one’s been disappointed. So maybe it doesn’t matter if the state’s leaders breathe fire, pray for rain, turn up at Tea Party rallies and spend all day suing the federal government. How crazy is that, really? Texas is a pretty good place to live; that’s why several million people have moved here since the beginning of this century.”

This is a good book, and Ms. Grieder’s clear, vivid writing makes it downable in a single afternoon. I have only one bone to pick. Ms. Grieder has graciously mentioned a book of mine in her footnotes. Unfortunately, she misspells my last name. And my first. But one can overlook minor errors. This is a promising debut from a promising young author.

Off the Shelf: Bretton Woods Monetary Agreement, Examined in a New Book

Representatives of some 44 nations gathered in July 1944 at Bretton Woods, a resort spot in New Hampshire, to hammer out a world monetary system, replacing the gold standard that had failed so woefully. But only two nations mattered: Britain and the United States.

In “The Battle of Bretton Woods” (Princeton University Press, $29.95), Benn Steil, a senior fellow and director of international economics at the Council on Foreign Relations, describes that effort from its roots and projects its effect on today’s conflicts among the dollar, the euro and the Chinese renminbi. Although America’s global dominance has long since melted away, no substitute is yet strong enough to shove the dollar aside, in part because of Bretton Woods.

Britain entered the conference exhausted and broke, crippled by the war. It desperately needed flexible exchange rates to rekindle its vital exports to pay for the imports it required to live. It clung to a privileged access to trading with its empire, one-fourth of the Earth’s land and people.

America was unscathed at home and far stronger in 1945 than in 1941. Owner of the bulk of the world’s gold bullion, a stunning 20,000 metric tons, the United States wanted to emerge from World War II with fixed conversion rates assured by a dollar tied to gold. And it went without saying that it was bent on becoming the globe’s financial capital.

Representing America at Bretton Woods was Harry Dexter White, an economics professor who had joined the Treasury as an adviser in 1934. By dint of intellect and hard work, he became grudgingly accepted as its ranking expert on international finance. He labored as the brains buttressing the Treasury Secretary, Henry Morgenthau, who described himself as “just a farmer,” albeit a close gentleman-farmer friend of Franklin D. Roosevelt. Morgenthau presided at Bretton Woods but White ran the show.

Dr. Steil presents evidence that White was also an informant for the Soviet Union, a starry-eyed admirer of what he saw as its remarkable economic success. For years, Dr. Steil says, White provided documents to the Soviets and favored their side in policy debates. In 1948, White fended off the House Un-American Activities Committee, denying that he was a Communist. A more adverse light was shed on his activities when wartime codes were broken years after his death. Dr. Steil is more convinced of the espionage claims surrounding White than some historians who see his actions as more innocent. There is no sign that his interest in the Soviets affected his work at Bretton Woods.

Taking Britain’s part at the 1944 conference was the celebrated John Maynard Keynes, who knew full well that war had reduced Britain to a hapless debtor, obliged to accept whatever the United States offered. The book confirms that Keynes was an intellectual giant with flawless intuition for finance, but it also exposes his caustic criticisms of lesser men and his tin ear for workaday diplomacy. The Americans considered him too bright for his britches and bottled him up at every opportunity.

White had prepared so well that the actual conference was well-orchestrated, everything the Americans wanted. “Now the advantage is ours here, and I personally think we should take it,” Morgenthau said to White, who fully agreed. As White said, “If the advantage was theirs, they would take it.”

The Americans wanted free trade and open markets; they feared postwar inflation. Bretton Woods helped by providing for stable but convertible currencies, tied within limits to the dollar and ultimately to gold. It also created the International Monetary Fund, a money pool from which nations with trade deficits could borrow to satisfy international accounts. And it set up what became the World Bank, initially focused on rebuilding Europe, and later on the developing world. Britain lost out on looser exchange rates, and its imperial trade preferences were doomed.

On item after item, Keynes found a stone wall. What Dr. Steil calls his “most tangible legacy” from Bretton Woods was pathetic. Norway moved to abolish the Bank for International Settlements for cooperating with the Nazis, a motion that Keynes vehemently opposed. The delegates eventually agreed that the bank would be “liquidated at the earliest possible moment.” The bank is still in business today.

Keynes ended up having to play an impossible hand. In 1945, he was left to sell Parliament on accepting arrangements that he had exhausted himself resisting. Four months later, he was dead. History later vindicated his advocacy of flexible exchange rates. The Bretton Woods system, not fully in effect till 1961, died only a decade later when President Richard M. Nixon ended the gold standard. The United States was running such large international deficits, paying out so many dollars, that not even Fort Knox had enough gold.

“The Battle of Bretton Woods” should become the gold standard on its topic. The details are addictive. But be warned: the book is dense. Every skirmish, every exchange — and the book gets into hundreds of thems — was presumably meaningful to the participants. But while some episodes mattered much, many did not. The author is no Robert Caro, who in his multivolume biography of Lyndon B. Johnson delves into minute details but also explains their larger significance.

Perhaps that is what is missing here — an unmistakable voice, a sense that this rich history is told by one mind. Mr. Caro is known for working on his own, with the assistance of his wife. In his acknowledgments, Dr. Steil thanks 10 research assistants and an advisory panel of 18 luminaries. The book sometimes reads like a succession of brilliant but loosely connected graduate seminar papers — an assemblage, a very fine one, but an assemblage nevertheless.