Category: Legislation

They Can’t Do Any Worse Than the Banks

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Noted bond blogger Accrued Interest has penned an analysis where he says that, “Having the Govt. Mandate Pay Packages is a Stomach Churning Concept.”

While I agree that the idea of the government determining pay rates in a private industry is worrisome, there are a couple of important things to note:

  • It ain’t a private industry, it’s owned by the government. With the amount of money that the taxpayer has shoveled into the banking system, both through direct payments, Federal Reserve facilities, and the bailout of AIG, these institutions are as free market as the Tennessee Valley Authority.
  • How could the government do any worse than the banks?

Yes, there is that first sphincter tightening moment when you read the lede, but then you realize that the alternative is handing those chimpanzees in the banking industry an M-2 .50 caliber machine gun and a couple of belts of ammunition.

BTW, I would note that having a government office mandade pay is not my preferred solution.

My preferred solution would be through the tax code, because the government collects taxes pretty well, just ask Al Capone, along with some changes in shareholder rights laws:

  • Higher marginal tax rate, which makes the mega payouts less valuable
    • I’d like this additional money to go to an insurance fund to cover future bubbles, but if someone believes that this would happen, they have the political acumen of Little Orphan Annie.
  • Eliminate the deductiblity of wages above those of the President, plus an equal bonus
    • This also has the effect of taxing overpaying for prima donna athletes, which is a plus in my book
  • It is currently illegal for shareholders to hold binding votes on executive remuneration. Make it legal for shareholders to do so if they choose. I’d use the above Presidential wage line as a limit, since having shareholders voting on the salary of Willie the mail boy is nuts.
    • Note that I am not requiring requiring a binding shareholder vote, just allowing it.
  • I would also add a Tobin Tax on financial transactions on the order of ¼% on all financial transactions, which would serve to damp down some of the more destructive speculation and the massive front-running masquerading as “high frequency trading”.
    • I’d like to see this go to the above mentioned insurance fund, but the Little Orphan Annie comment still applies.

Note that, except for eliminating a specific prohibition on shareholder’s rights, these are all tax changes, and their administration, though not the politics of their being enacted, are simple and straightforward.

Thank You Rod Blagojevich

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Really, I’m serious about this, because Roland Burris knows that he will not get another term, and he knows that his value as a Washington lobbyist is nil, he does not have to kowtow to the insurance lobby, so he has announced that he will not vote for a healthcare bill without a public option.

In creating the lamest of lame ducks, Burris won’t be able to work in DC at all once he is out of office, Blago has created a man who can do the right thing, because he has nothing to lose.

House Passes the Student Aid and Fiscal Responsibility Act (SAFRA)

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It passed on a 253-171 vote.

The bill ends the subsidies that the federal government provides to for profit institutions to make student loans, and has that same federal government make the loans.

As Gail Collins notes:

It would simplify the federally guaranteed loan system, save an estimated $87 billion over 10 years and use that money to increase aid to low-income students, improve community colleges and raise standards for early childhood education.

Let us stop here and recall how the current loan system works:

  1. Federal government provides private banks with capital.
  2. Federal government pays private banks a subsidy to lend that capital to students.
  3. Federal government guarantees said loans so the banks don’t have any risk.

And now, the proposed reform:

  1. The federal government makes the loans.

Wow. You really do wonder why nobody came up with this idea before.

If you need to know what is wrong with the Republicans, you need go no further than the idea that the Federal government should use taxpayer money to prop up big executive paychecks.

H/t Steve Benen.

The Baucus Bill is too Lame for Ezra Klein

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If you haven’t followed Ezra Klein, he got hired as a blogger by the Washington Post, and since then, he’s done his level best to show that he’s one of the Beltway Kule Kidz, repeatedly posting about how it’s only those DFH’s* who care about the public option.†

Well, after all this time, Mr. Klein finally looks at the product of his best bud Max Baucus, and even he sees that it is completely inadequate:

  • The coops are divided up state by state.
  • They cannot cooperate for, or write policies for, large companies.
  • They have to bargain with providers individually, so they cannot set payment standards.

What’s more, for all of his show of bipartisanship, he has failed to secure the support of a single Republican.

Can we run a primary against him, please?

*Dirty F%$#ing Hippies
†FWIW, they aren’t DFH’s, I am. I don’t just want a public option, or single payer, I want a National Health Service (NHS), because I think that the system is too broken to allow for any potential point of entry for the health insurers.

Why Is The Fed Freaking Out About Disclosure?

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Between the Bloomberg court case demanding FOIA Releases and Congressman Ron Paul’s increasingly popular legislative proposal to audit Federal Reserve programs, it is pretty clear that the Federal Reserve is in full panic mode.

Here are what I think are the likely motivations, in order of increasing plausibility:

Henry Blodget suggests that the Fed, and the banks are concerned that the release of this data will lead to a bank run, as it did with Reconstruction Finance Corporation (RFC) in early 1933.

They are not suggesting that any new problems will be revealed, but that the mere fact that banks have used Fed lending facilities will trigger a panic.

I find this unlikely, simply because there is deposit insurance now, and as such small depositors will no longer freak, as a result now, and the large players already know who is in bad shape, and everyone knows that everyone has availed themselves of these facilities.

It is clear that this is what the banks suggested in their filing on the Bloomberg case, that added transparency will lead to excessive rumors, which is, of course laughable. It is lack of transparency that fosters rumors, so find this argument unpersuasive.

Karl Denninger suggests a scenario, that I consider to be more likely, that the banks and the Federal Reserve have been lying through their teeth, and that the real state of affairs is truly awful, and upon discovery of a program of systemic lies and accounting tricks with the Federal Reserve at its core will cause institutions to implode, much as the discovery that Bear Stearns and Lehman Brothers were lying caused them to implode:

The problem The Fed has is that as the supposed “risk regulator” for the American Banking System it has absolutely refused to do its job of prudential regulation and still is. Instead of demanding that its member banks hold capital against all unsecured lending it has “blessed” models rather than markets. But at the same time it has declared “haircuts” against collateral that make clear that so-called “face value”, or “par”, is a farce.

The Fed is supporting institutionalized lying – that is, the intentional mis-marking of assets. If The Fed was an honest regulator and monitor of market risk it would insist that no bank carry an asset at a value materially higher than its “haircut” off par at the window. After all, the penalty rate for discount window use already discourages banks from coming there; the “haircuts” must (and I argue do) reflect what The Fed actually believes about the quality of these alleged “baskets” of asset classifications.

If The Fed believes that these asset classes have this sort of haircut from face value in the market how does it justify allowing any bank under its jurisdiction holding such “assets” at a higher value on their balance sheet?

(emphasis original))

Mr. Denninger calls this “Racketeering,” and an , “attempt to cover up outrageous and repeated failures to comply with US Securities laws,” I think that he is not far from the truth.

Another possibility that no one has mentioned, is that likelihood that in revealing this information, the Federal Reserve will be revealed to have lied to Congress, and possibly to the US Treasury, in some cases under oath, and that Bernanke does not want to be the target of a grand jury investigation.

Finally, Occam’s razor says that the most likely explanation is usually the simplest, and the fact is that transparency does not serve either the banks or the Federal Reserve.

For the banks, this money would be cast as more bailout, and there would be more pressure on restricting executive pay.

For the Fed, knowledge is power, and by becoming more transparent, the Fed will inevitably become less powerful, and any bureaucracy will fight this tooth and nail.

FWIW, my guess is that the last 3 likely all figure into this, that is the discovery of massive concealed losses, the worry about perjury charges, and simple bureaucratic imperative.

Cramdown Has Returned

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And it is about bloody time.

Barney Frank has announced plans to reintroduce a bill to give bankrputcy judges the ability to modify mortgages, it appears that the banks got cocky, and promptly forgot promises of voluntary mortgage mods, as the picture (from here) shows.

It appears that members of Congress are shocked that banks are not willing to do mortgage mods, when they:

  • Cost them money.
  • Require them to post the losses to their balance sheets immediately, as opposed to marking them to face value for the next few years.

Campaign contributions and lobbyists are a much better investment than helping people.

Liberals Draw Line in the Sand

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Barack Obama has called just about everyone in Washington, DC for a meeting at the White House, insurance companies, doctors, Republicans, Blue Dogs, etc., but he hasn’t called in the progressives.

While members of his staff are making it clear that they intend to Sistah Soulja the liberals, the Liberals, or more accurately the Progressive Caucus in the House, are hitting back:

In a letter delivered to the White House moments ago, the two leaders of the bloc of House progressives bluntly told President Obama that they will not support any health care plan without a public option in it — and demanded a meeting to inform him face to face.

The bullet points of the letter are that in order to have them support the plan, there must be a public option, built on Medicare providers and using Medicare rates.

Note that there three things that can happen:

  1. Obama can stick with, and pass, most likely under reconciliation in the Senate, a bill with a real public option.

    1. Which means that the progressive caucus wins, and the Democratic party wins, particularly in the long run, when people see that government works for them.

  2. The bill gets killed in the house when 40+ Democrats vote against it.

    1. Which means that the progressives win, because they show that they have the power to stop things, and the electoral repercussions hit the Blue Dogs from close districts, not the Progressive, and Barack Obama. It means that they have to be negotiated with in the future, and the Powers That Be of the Democratic Party’s efforts cannot be exclusively dedicated to providing anilingus to the Blue Dogs.

  3. They fold like a bunch of wet broccoli, and vote for a milquetoast bill that allows Barack Obama to claim that he has done something to reform our healthcare system in 2012

    1. This is a lose for the progressives, and they go back to being people that everyone in Washington, DC can ignore with impunity.

The only way that these guys lose is if they blink…..Then again, never underestimate the capability of Democrats to snatch defeat from the jaws of victory.

Needless to say, the argument that is apparently being fronted by Rahm and His Evil Minions™:

Should Obama jettison the public option, progressives will come under tremendous pressure to back the plan anyway. White House advisers will likely insist that liberals mustn’t deny the president a historic victory and enable a defeat that could cripple the first African-American presidency.

Is one of the most repellent things that I’ve read…well this week….It’s a bull market for repellent these days.

I would also add that the only person crippling Barack Obama, whether its on marriage equality, DADT, banking reform, healthcare, torture, accountability, etc. is Barack Hussein Obama.

Letter from Congressional liberals below:

Dear President Obama:

Thank you for continuing to work with Members of Congress to draft a health reform bill that will provide the real health care reform this country needs.

We look forward to meeting with you regarding retaining a robust public option in any final health reform bill and request that that meeting take place as soon as possible.

Public opinion polls continue to show that a majority of Americans want the choice of a robust public plan and we stand in solidarity with them. We continue to support the robust public option that was reported out of the Committees on Ways and Means and Education and Labor and will not vote for a weakened bill on the House Floor or returning from a Conference with the Senate.

Any bill that does not provide, at a minimum, a public option built on the Medicare provider system and with reimbursement based on Medicare rates-not negotiated rates-is unacceptable. A plan with negotiated rates would ensure higher costs for the public plan, and would do nothing to achieve the goal ofproviding choice and competition to keep rates down. The public plan with set rates saves $75 billion, which could be lost if rates are negotiated with providers. Further, this public option must be available immediately and must not be contingent upon any trigger.

Mr. President, the need for reform is urgent. Every day, 14,000 Americans lose their health care coverage. We must have health care reform that will effectively bring down costs and significantly expand access. A health reform bill without a robust public option will not achieve the health reform this country so desperately needs. We cannot vote for anything less.

We look forward to meeting with you to discuss the importance of your support for a robust public plan, which we encourage you to reiterate in your address to the Joint Session of Congress on Wednesday.

Lynn Woolsey
Raul Grijalva

While I Would Not Trust Ron Paul with My Lunch Box,

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When Barney Frank says that he supports an audit of the Federal Reserve, and that the bill will pass the House in October, and I believe that his assesment is an honest one.

That being said, I think that the Senate is more receptive to Bernanke’s protestations as to the need for opacity independence, and have been more thoroughly bribed by Wall Street are more concerned about market repercussions, while Obama’s economic advisors are Wall Street stooges and influence peddlers very supportive of the current regime at the Fed, which makes his signing a bill dubious.

As to Representative Paul, it’s a case of a stopped clock being right twice a day.

Who Got Pictures of Max Baucus Sodomizing an Underage Goat?

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Because Max Baucus (DINO-MT) has now explicitly stated that he supports a public option:

U.S. Senator Max Baucus has finally broken his silence regarding his personal position on including a public option in health care reform legislation. Last Monday night (8/17), in an unprecedented conference call to Montana Democratic central committee chairs, the powerful leader of the Senate Finance Committee told his strongest supporters that he supported a public option.

While discussing the obstacles to getting a public option through the Senate, he assured his forty listeners, “I want a public option too!”

….

Seriously, I’m beginning to think that some of the Blue Dog types (technically, Blue Dogs are only a caucus in the House of Representatives) are starting to get some very serious push-back, and it scares them.

Michelle Bachmann is Pro Abortion Rights?????

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She was on Hannity’s show, and she was talking about Obama’s healthcare reform plan, and she said the following at about 5:35 in her interview:

“That’s why people need to continue to go to the town halls, continue to melt the phone lines of their liberal members of Congress,” said Bachmann, “and let them know, under no certain circumstances will I give the government control over my body and my health care decisions.”

You go girl!

Meanwhile, Back in Bizarro world

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Guess who is going to hold a fundraiser for the first Virginia Congressman who takes the pledge not to vote for a health plan without a public option?

Terry McAuliffe….Yes, that Terry McAuliffe, a man who has been repeatedly excoriated by lefty bloggers like me as a corporate stooge, and little more than bagman for political contributions from wealthy people and special interests.

In fact, I did a happy dance when he lost the primary race for VA governor for this reason.

But he is sponsoring this initiative:

Terry McAuliffe thinks it is time to “insist” on the public option. We couldn’t agree more. Terry’s agreed to host a fundraiser with Virginia and national bloggers who are insisting on a public option for the first Virginia Congressman who will take our pledge! This will be an awesome event to highlight and honor any Virginia Congressman who shows leadership on this issue. If you would like to be a part of the host committee for this event, shoot me an email at notlarrysabato@hotmail.com. Lowell and I are already on board, and I’m sure there will be many others!

Good for Terry McAuliffe….I cannot believe that I just said that.

I would also be remiss in mentioning that Act Blue has a page to donate to Congressmen who take the pledge not to support any bill that lacks a real public option, and it’s already raised nearly $300K.

I’ve added the link to my Act Blue page too.

Have I Mentioned that I Love Barney Frank*

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Here he is taking on some teabaggers, though I would suggest that people who think that Act Pink does any good listen to his comments toward the end, when he says that, “Disruption never helps your cause. It makes you look like you are afraid to have rational discussions. You just drive people away.”

*In a 110% purely heterosexual kind of way, of course, as the General would say.

It’s a Half Step

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Barack Obama is now proposing a tax on “risky” financial transactions.

The problem here is two fold:

  • Many of the risky financial transactions were there to skirt regulations, and this just creates another incentive for people to do this again.
  • Many of the problems with our markets come from people who attempt to generate minuscule profits across thousands, or millions, of trades, Goldman Sachs front-running the entire US stock market comes to mind.

The solution to fixing this is to make rapid-fire low margin speculation unprofitable, and the way to do this is to to tax all financial transactions at something like ¼-½%.

For the investor, this is an infinitesimal cost of doing business, but it puts the rampant speculator out of business.

It eliminates regulatory arbitrage, and could go a long way toward paying for health care reform.

Largest Arbitration Firm in Nation Shut Down

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Three cheers to Minnesota Attorney General Lori Swanson (pictured) who just put the criminally corrupt National Arbitration Forum (NAF) out of business.

As of the end of this week, they will no longer be accepting any cases on consumer disputes under a consent decree.

The NAF, the favorite venue for credit card and cell phone company kangaroo courts, argues that they did not have the resources to defend themselves in this case, but the reality is that they do not have the facts to defend themselves in this case:

….In one case, NAF ordered a woman to pay the credit card company MBNA almost $8000 because she had the same name as another woman who owed MBNA money. Conversely, when a Harvard Law Professor named Elizabeth Bartholet, who used to work part-time as an NAF arbitrator, handed down a single decision against a credit card company she was immediately stripped of her caseload by NAF at the request of the credit card industry.

….

Unfortunately, NAF was vulnerable to this kind of attack because the evidence against it was so overwhelming–not every forced arbitration company has a Harvard Law professor prepared to testify about how they were strongarmed into shafting consumers–so it remains to be seen whether another, equally offensive company will emerge to fill the void (a bill, currently pending in Congress, would end the practice of forced arbitration in consumer and employment contracts altogether). Even so, the near-total demise of NAF is one of the most important pro-consumer developments in decades; for the first time in years, credit card companies may actually have to follow the law.

When a member of the Harvard Law faculty gets kicked for ruling for the consumer once, it will be hard impossible to get a jury not to throw your sorry asses in jail.

Pam Martens of Counter Punch properly calls the mandatory arbitration system Judicial Apartheid, and she also notes that the NAF was quite literally owned by the bill collection agencies like Mann Bracken, Wolpoff & Abramson, and Eskanos & Adler, and testimony that, “Management meetings in which personnel were instructed to call arbitrators and tell them, prior to the release of the decision to the parties to the arbitration, to change decisions they had issued that found against the Famous Parties [credit card companies].”

There is a bill in Congress to put an end to this, but I am not inclined to believe that it will see the light of day, and in any case, the people behind this need to go to jail, not just be put out of business.

Previous posts are here.