Category: regulation

Today’s Must Read

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Writing in Jacobin magazine, economist and blogger John Quiggen makes a cogent artument that, “Wall Street Isn’t Worth It.”

David Graeber’s denunciation of “bullshit jobs” resonated with many, producing a string of responses. Alex Tabarrok and Brad DeLong have suggested that the apparent inverse relationship between earnings and the social value of work done is simply an illustration of “diamond-water” paradox, that prices and wages are determined by marginal, rather than absolute values and that marginal values reflect scarcity as well as utility. Peter Frase refutes this claim in both empirical terms (noting for example the fact that the price of diamonds is set by the De Beers cartel rather than pure market forces) and as a resurrection of the discredited marginal productivity ethics of the 19th century.

I’d like to look at a specific question raised by the discussion of private returns and social value, namely: can Wall Street, in its present form, be justified? That is, does the share of income flowing to corporations and professional workers in the financial sector reflect their marginal contribution to the total value of social output, so that, if their work ceased to be done and their skills were allocated elsewhere, we would all be worse off?

I argue that society as a whole would be better off if the financial sector were smaller, and received much smaller returns. A political strategy based on cutting the financial sector down to size has more promise for the Left than any alternative approach now on offer, and is a necessary precondition for a broader attempt to make the distribution of wealth and power more equal.

Read the rest.

It’s a dense read, but I think that it makes the point quite well.

Go read.

So Not a Surprise

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Geithner defended Wall Street and prevented any real consequences for their actions, and now he gets his back end bribe for doing this:

Timothy F. Geithner will join the private equity firm Warburg Pincus as president, the firm announced on Saturday. It would be his first prominent position since leaving office as Treasury secretary this year.

The unusually low-key announcement — made with little fanfare on a Saturday morning — is Mr. Geithner’s first foray into the private sector in 25 years, after serving in the Treasury Department, the International Monetary Fund and the Federal Reserve Bank of New York.

As president of the New York Fed in 2008, Mr. Geithner helped lead the federal government’s response to the financial crisis, including the sale of Bear Stearns and the bailout of the American International Group.

………

Mr. Geithner follows in the path of past Treasury secretaries who, after leaving government, have accepted lucrative Wall Street posts. After leaving the Clinton administration, Robert E. Rubin joined Citigroup. And John W. Snow, a Treasury secretary in the George W. Bush administration, joined the private equity firm Cerberus.

Note that Geithner has never worked as an investment banker or stock broker, and he’s president of a private equity firm.

This is a payment for not rocking the boat, and f%$#ing the average American in the mortgage crisis.

And any future regulator knows that if they do right by the banksters, the banksters can throw them some multimillion dollar crumbs when they leave government service.

It’s Bank Failure Friday!!!

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 My bad, I missed last week, Bank of Jackson County was closed last week.

What’s more it was closed on a Wednesday.  I’ve looked, but there appears to no reason for this rather rare middle of the business week act.

And here they are, ordered, and numbered for the year so far.

  1. Bank of Jackson County, Graceville, FL

Full FDIC list

So, here is the graph pr0n with last years numbers for comparison (FDIC only):

Economists Finally Get a Clue

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I called for this at the start of the financial crisis, and finally many economists have begun to realize that there is such a thing as inflation is too low:

Inflation is widely reviled as a kind of tax on modern life, but as Federal Reserve policy makers prepare to meet this week, there is growing concern inside and outside the Fed that inflation is not rising fast enough.

 Some economists say more inflation is just what the American economy needs to escape from a half-decade of sluggish growth and high unemployment.

 The Fed has worked for decades to suppress inflation, but economists, including Janet Yellen, President Obama’s nominee to lead the Fed starting next year, have long argued that a little inflation is particularly valuable when the economy is weak. Rising prices help companies increase profits; rising wages help borrowers repay debts. Inflation also encourages people and businesses to borrow money and spend it more quickly.

 The school board in Anchorage, Alaska, for example, is counting on inflation to keep a lid on teachers’ wages. Retailers including Costco and Walmart are hoping for higher inflation to increase profits. The federal government expects inflation to ease the burden of its debts. Yet by one measure, inflation rose at an annual pace of 1.2 percent in August, just above the lowest pace on record.

 “Weighed against the political, social and economic risks of continued slow growth after a once-in-a-century financial crisis, a sustained burst of moderate inflation is not something to worry about,” Kenneth S. Rogoff, a Harvard economist, wrote recently. “It should be embraced.”

Low inflation favors the rentiers over the producers.

Of course, the economists, are talking about maybe moving the targeting from 2% to 3%, and I think that we should target 6%, but I’m an engineer, not an economist, dammit!*

*I LOVE IT when I get to go all Doctor McCoy!!!

Today’s Must Read

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Felix Salmon has a nice survey on how the proposed new process for sovereign debt restructuring that the IMF is considering represents a major shift:

………The paper raised quite a few eyebrows, since it marked the first time in a decade that the IMF has talked in public about changing the international financial architecture around debt restructuring. Its last attempt to tackle the subject, known as the Sovereign Debt Restructuring Mechanism, or SDRM, died ignominiously, bereft of any US support.

………

Lipton, in his speech, said that he was worried that “official resources, including from the Fund, would be used to pay out other creditors”. He also said that “in cases where the need for debt reduction may be unclear at the outset, in our view the key is to keep creditors on board while the debtor’s adjustment program is given a chance to work”.

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This idea is very close to the “standstill” that was originally proposed as part of the SDRM; another name for it is “default”. And as veteran sovereign debt advisor Rafael Molina patiently explained later on in the panel, sovereign debt managers will, as a rule, do anything to avoid defaulting on their debt. As a result, tensions are naturally very high whenever this idea is brought up, despite the upbeat spin that the IMF puts on it in its paper:

The primary objective of creditor bail-in would be designed to ensure that creditors would not exit during the period while the Fund is providing financial assistance. This would also give more time for the Fund to determine whether the problem is one of liquidity or solvency. Accordingly, the measures would typically involve a rescheduling of debt, rather than the type of debt stock reduction that is normally required in circumstances where the debt is judged to be unsustainable. Providing the member with a more comfortable debt profile would also have the additional benefit of enhancing market confidence in the feasibility of the member’s adjustment efforts, thereby reducing the risk that the debt will, in fact, become unsustainable.

Translating into English, the IMF here is essentially saying this: “Sometimes we don’t know whether a country’s debt is too high. We need time to work that out. But if we’re lending, during that period, then while we’re deciding whether or not the country’s debt is sustainable, we’re going to force it to default on its private debt.”

Read the rest.

Whiskey Tango Foxtrot?!?!? The IMF is calling for Taxing the Rich?!?!?!

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I’m not joking. The IMF actually suggesting that countries need to tax the rich in order to reduce deficits and improve economies:

Tax the rich and better target the multinationals: The IMF has set off shockwaves this week in Washington by suggesting countries fight budget deficits by raising taxes.

 Tucked inside a report on public debt, the new tack was mostly eclipsed by worries about the US budget crisis, but did not escape the notice of experts and nongovernmental organizations (NGOs).

 “We had to read it twice to be sure we had really understood it,” said Nicolas Mombrial, the head of Oxfam in Washington. “It’s rare that IMF proposals are so surprising.”

 Guardian of financial orthodoxy, the International Monetary Fund, which is holding its annual meetings with the World Bank this week in the US capital, typically calls for nations in difficulty to slash public spending to reduce their deficits.

 But in its Fiscal Monitor report, subtitled “Taxing Times”, the Fund advanced the idea of taxing the highest-income people and their assets to reinforce the legitimacy of spending cuts and fight against growing income inequalities.

 “Scope seems to exist in many advanced economies to raise more revenue from the top of the income distribution,” the IMF wrote, noting “steep cuts” in top rates since the early 1980s.

 According to IMF estimates, taxing the rich even at the same rates during the 1980s would reap fiscal revenues equal to 0.25 percent of economic output in the developed countries.

 “The gain could in some cases, such as that of the United States, be more significant,” around 1.5 percent of gross domestic product, said the IMF report, which also singled out deficient taxation of multinational companies.

I did not expect that the IMF would suggest this before pigs ……… Well, you know.

I guess they have been following the purchase levels of pitchforks and torches, and have become concerned.

Now if only they start supporting a Tobin Tax on financial transactions.

Some People are Terrified by Women’s Sexuality

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Case in point, the developers of a drug called, (I am not joking here) Lybrido, which is intended to increase sexual desire and response in women.

I don’t have a problem with this, though the idea that insufficient desire might be pathologized as hypoactive sexual-desire disorder (HSDD) is a bit troubling.

That being said, this following quote is even more troubling:

But of course swallowing a tablet can take us only so far. Chemically enhancing a woman’s desire might play out in all kinds of ways within a relationship. Some couples might feel closer, others might feel desolate because, despite more sex, their bond isn’t stronger. Wives might yearn for the old seductive efforts of their husbands, even if those gestures stopped working long ago. Women might feel yet more pressure to perform: Why not get that prescription? their partners might ask; why not take that pill? And men, if they are willing to confront the truth, might not be so happy about the reminder, as their partners reach for the pill bottle, that their women need chemical assistance to want them. All the agonies that have existed since the dawn of monogamy will still pertain, many of them coming down to the craving to feel special.

Beyond what might happen in millions of bedrooms, it’s even more difficult to foresee what societal transformations might be stirred. Just as with the birth-control pill, a foreboding not only about sex itself but also about female empowerment may be expressed in a dread of women’s sexual anarchy. Over the last decade, as companies chased after an effective chemical, there was fretting within the drug industry: what if, in trials, a medicine proved too effective? More than one adviser to the industry told me that companies worried about the prospect that their study results would be too strong, that the F.D.A. would reject an application out of concern that a chemical would lead to female excesses, crazed binges of infidelity, societal splintering.

“You want your effects to be good but not too good,” Andrew Goldstein, who is conducting the study in Washington, told me. “There was a lot of discussion about it by the experts in the room,” he said, recalling his involvement with the development of Flibanserin, “the need to show that you’re not turning women into nymphomaniacs.” He was still a bit stunned by the entrenched mores that lay within what he’d heard. “There’s a bias against — a fear of creating the sexually aggressive woman.”

Yes, giving 70 years erections to unleash upon the rest of society is a great profit center, but if women start wanting sex, it can create “societal splintering”.

So, men suddenly want to copulate with anything with a hole in it: Good.

Women wanting to have sex: Scary.

Someone needs to get their heads out of their ass.

What a Surprise, the New York Bank of the Federal Reserve is Completely Captured by the Vampire Squid*

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Case in point, we have a bank examiner fired by the NY Fed because she refused to ignore the law to help Goldman Sachs:

In the spring of 2012, a senior examiner with the Federal Reserve Bank of New York determined that Goldman Sachs had a problem.

Under a Fed mandate, the investment banking behemoth was expected to have a company-wide policy to address conflicts of interest in how its phalanxes of dealmakers handled clients. Although Goldman had a patchwork of policies, the examiner concluded that they fell short of the Fed’s requirements.

That finding by the examiner, Carmen Segarra, potentially had serious implications for Goldman, which was already under fire for advising clients on both sides of several multibillion-dollar deals and allegedly putting the bank’s own interests above those of its customers. It could have led to closer scrutiny of Goldman by regulators or changes to its business practices.

Before she could formalize her findings, Segarra said, the senior New York Fed official who oversees Goldman pressured her to change them. When she refused, Segarra said she was called to a meeting where her bosses told her they no longer trusted her judgment. Her phone was confiscated, and security officers marched her out of the Fed’s fortress-like building in lower Manhattan, just 7 months after being hired.

“They wanted me to falsify my findings,” Segarra said in a recent interview, “and when I wouldn’t, they fired me.”

Today, Segarra filed a wrongful termination lawsuit against the New York Fed in federal court in Manhattan seeking reinstatement and damages. The case provides a detailed look at a key aspect of the post-2008 financial reforms: The work of Fed bank examiners sent to scrutinize the nation’s “Too Big to Fail” institutions.

Segarra does not allege that Goldman was involved in the Fed’s decision to fire her, and I’m inclined to agree.

The nature of regulatory capture is that the regulators do the bidding of those that they regulate without being asked.

The question is how we fix this.

*Alas, I cannot claim credit for the bon mot describing Goldman Sachs as a, “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” This was coined by the great Matt Taibbi, in his article on the massive criminal conspiracy investment firm, The Great American Bubble Machine.

Proving, Once Again, that Barack Obama can be Trusted to Do the Right Thing, If He Has No Alternative

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He is going to nominate Janet Yellen to the next Chairman of the Federal Reserve:

President Barack Obama will nominate Janet Yellen as chairman of the Federal Reserve, which would put the world’s most powerful central bank in the hands of a key architect of its unprecedented stimulus program and the first female leader in its 100-year history.

Obama will announce the nomination at 3 p.m. today in Washington, a White House official said in an e-mailed statement. Yellen, 67, would succeed Ben S. Bernanke, whose term expires on Jan. 31.

Obama turned to Yellen, vice chairman of the Fed since 2010, after the other leading candidate, former Treasury secretary and White House economic adviser Lawrence Summers, withdrew from consideration amid mounting opposition from Democrats on the Senate Banking Committee.

“She’s an excellent choice, and I believe she’ll be confirmed by a wide margin,” Charles Schumer of New York, the Senate’s No. 3 Democrat, said in a statement. Senate Banking Committee Chairman Tim Johnson, a South Dakota Democrat, pledged to work “to move her nomination forward in a timely manner,” saying her depth of experience is unmatched.

U.S. index futures climbed, signaling stocks may rebound from the biggest loss since August, and Treasuries rose after the announcement. Standard & Poor’s 500 Index futures added 0.3 percent as of 11:03 a.m. in London, after the U.S. benchmark gauge lost more than 2 percent over the past two days. Five-year Treasury yields fell two basis points.

He REALLY wanted Larry Summers, so I don’t expect to see much expenditure of political capital if the Republicans decide to hold up the process.

That being said, I think that the major difference between her and either Bernanke or Summers will be on the regulatory end of things, not the monetary policy end of things.

There is only so far that you can push a string.

It’s Bank Failure Friday!!!

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I missed stuff over the past month, my bad.

And here they are, ordered, and numbered for the year so far.

  1. The Community’s Bank, Bridgeport, CT (on September 13)
  2. First National Bank also operating as The National Bank of El Paso, Edinburg, TX (on September 13)

Full FDIC list

And here are the credit union closings:

  1. Craftsman Credit Union, Detroit, MI (on September 6)

Full NCUA list

So, here is the graph pr0n with last years numbers for comparison (FDIC only):

Things that Make You Shout out in Glee

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Larry Summers is not going to be Chairman of the Federal Reserve:

Lawrence H. Summers, one of President Obama’s closest economic confidants and a former Treasury secretary, has withdrawn his name from consideration for the position of chairman of the Federal Reserve amid rising opposition from Mr. Obama’s own Democratic allies on Capitol Hill.

In a statement released by the White House on Sunday afternoon, Mr. Obama said he had accepted the decision by his friend even as he praised him for helping to rescue the country from economic disaster early in the president’s term.

“Larry was a critical member of my team as we faced down the worst economic crisis since the Great Depression, and it was in no small part because of his expertise, wisdom and leadership that we wrestled the economy back to growth and made the kind of progress we are seeing today,” Mr. Obama said in the statement.

He added: “I will always be grateful to Larry for his tireless work and service on behalf of his country, and I look forward to continuing to seek his guidance and counsel in the future.”

Mr. Summers appeared to have been the White House’s favored candidate to succeed Ben S. Bernanke as chairman of the Fed, though Mr. Obama had repeatedly said he had not yet made a decision between Mr. Summers, Janet L. Yellen, who is a vice chairwoman of the Fed, or someone else.

But Mr. Summers’s reputation for being brusque, his comments about women’s natural aptitude in mathematics and science, and his decisions on financial regulatory matters in the Clinton and Obama administrations had made him a controversial choice.

Three Senate Democrats on the Banking Committee had come out against Mr. Summers’s nomination, meaning that the White House might have had to barter for as many as three Republican votes for him even to pass out of committee.

It ain’t 3, it’s 4, Elizabeth Warren, Sherrod Brown, Jeff Merkley, and Jon Tester, who announced his opposition on Friday.

Summers withdrew his name because he cannot be confirmed.

Let’s be clear here:  the American People won.

Obama desperately wanted to nominate Summers, despite the crescendo of opposition.

The Best that Can Be Expected………

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I guess it was inevitable that former TARP Inspector General Neil Barofsky would have to find work.

Considering his background, taking a position in a large white shoe law firm tied in with finance was very likely and Jenner & Block appears to be much less evil than many of their competitors:

Neil Barofsky, the former prosecutor who brought transparency and accountability to the federal government’s 2008 bank bailout program as its first special inspector general, has joined Jenner & Block, a law firm based in Chicago, as a partner.

Mr. Barofsky, who was appointed by George W. Bush to oversee the $700 billion Troubled Asset Relief Program in late 2008, was a Washington outsider whose periodic reports on the program questioned Treasury officials’ claims of its effectiveness. He and his office drew criticism at times from those officials, as a result.

Mr. Barofsky left his post in 2011 to teach at New York University’s law school. He also wrote “Bailout,” a scathing account of his time in Washington that highlighted the problem of regulators who he said were for the most part captured by the institutions they were supposed to police.

In an interview, Mr. Barofsky said that joining Jenner & Block was a natural next step because the firm specialized in helping government agencies and major corporations with in-depth investigations of problematic practices. Such investigations, he said, are similar to the work he did at TARP. In addition, unlike many other large law firms, Jenner & Block represents clients bringing suits against large financial institutions.

“I can bring my experience investigating large financial institutions and complex financial transactions to a place that doesn’t just do defense work in this area,” Mr. Barofsky said. “This is an opportunity in private practice to help improve governance and have a truth-seeking role.”

Well, we’ll see how this goes, and he has done a real service in reporting on the corruption of the TARP as IG, and in his book about the experience, Bailout, which has probably earned him the undying enmity of Timothy Geithner, Eric Holder, and Barack Obama, and he deserves a lot of credit and a not inconsiderable payday, for that.

The Only Two Things You Need to Know About Larry Summers as Fed Chair

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Item 1: He’s controversial because he is such a horrifically bad choice:

The Washington Post’s Neil Irwin looked this morning at what he sees as the many reasons the upcoming nomination of a new Federal Reserve chair became a circus, unlike past low-controversy nominations.

………

But among Neil’s four factors, only one really matters at the margin: The White House appears poised to make a demonstrably bad choice for Fed Chair.

If Larry Summers withdrew himself from consideration, or the White House announced that it isn’t going to pick him, the circus tents would pack up and we could all go home. The Fed Chair race would become uncontroversial and boring again, Business Insider’s existence notwithstanding.

People oppose Summers for all sorts of reasons, but here are my two.

One is that while we don’t know exactly where he (or Janet Yellen) would lead on monetary policy, I suspect Summers shares the White House’s unhealthy lean toward tight money. It’s particularly hard to figure out what Summers would do since he’s not actually a monetary policy scholar.

The other is that I fear Summers would squander the comity and collaboration that make the Federal Reserve Board work, since he’s had a tendency to do that at other institutions he’s been tapped to lead.

Item 2: Wall Street, which has spent millions cultivating him, appears to be terrified at the prospect of Summers as Fed Chair:

The spreading expectation that President Obama will name Lawrence H. Summers to lead the Federal Reserve Board appears to be working against the central bank’s efforts to stimulate the economy.

The jitters even have some analysts betting that a Summers nomination could lead to slower economic growth, less job creation and higher interest rates than if the president named Janet L. Yellen, the Fed’s vice chairwoman.

Businesses raising money and people buying homes and cars all have faced higher interest rates in recent months as the Fed’s campaign to suppress borrowing costs has faltered. The rise in rates reflects optimism that the economy is gaining strength, and an expectation that the Fed will begin to pull back later this year. But a wide range of financial analysts also see evidence of a Summers effect.

Many investors expected that Ms. Yellen would be nominated to replace Ben S. Bernanke as head of the central bank, a choice that would have sent a clear message of continuity. Instead, investors are now trying to anticipate how Mr. Summers might change the Fed.

The unease is the product of a little information and a lot of speculation. Mr. Summers, a Harvard University economist who served for two years as Mr. Obama’s primary economic adviser, has said little about monetary policy in recent years. Investors are left parsing a handful of comments in which he has expressed some doubts on the benefits and concern about the consequences of the Fed’s policies.

“People don’t know what Larry might do,” said Mohamed El-Erian, chief executive of Pimco, the giant bond fund manager. “There’s a lack of a lot of information on Larry’s views. We don’t have enough information to make an assessment, just some second- and thirdhand accounts.”

Wall Street owns Larry Summers, but they don’t want him to be Fed Chair.

The only thing to argue for him is cronyism and corruption.  Seriously.

If Obama nominates him, I am calling both of my Senators bring up his role in Andrei Schleifer’s corruption in the market reforms in Russia.

This is a Breath of Fresh Air………

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The SEC just settled with a hedge fund that misused funds and manipulated markets, and in addition to a fine, and a 5 year ban for the principal, they got an explicit admission of wrongdoing:

Wall Street’s regulator sent a message on Monday that it was now taking a more aggressive stance on securities settlements as it extracted its first admission of wrongdoing under a new policy.

The regulator, the Securities and Exchange Commission, said that the hedge fund manager Philip A. Falcone had agreed to admit wrongdoing and to be banned from the securities industry for at least five years to settle market manipulation accusations. As part of the settlement, he and his fund, Harbinger Capital Partners, must also pay more than $18 million.

The deal comes a month after the commission had in a rare move overruled its own enforcement staff to reject a settlement struck with Mr. Falcone and Harbinger.

That original agreement had called for a two-year ban from raising new capital and no admission of wrongdoing. It also did not include an injunction against committing fraud in the future — language common to nearly every single securities settlement.

The original settlement terms had irritated the S.E.C.’s new chairwoman, Mary Jo White, people briefed on the matter said, and frustrated many others within the agency who saw that deal as too lax.

The new, tougher terms reflect a wider policy change that Ms. White outlined this year, aiming to shift the burden of admission of guilt onto the defendant, overturning a longstanding policy of allowing defendants to “neither admit nor deny” wrongdoing.

If this is a start of a trend, then this is a big deal.

I hope that this is not just political atmospherics.

FCC Takes a Half Step in the Right Direction

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If you follow telecommunications developments, you are no doubt aware, that, following Superstorm Sandy, Verizon decided not to fix the conventional wire lines and instead used something called fixed wireless (Voice Link™).

Basically, it means unreliable 911, credit card machines don’t work properly, DSL is not available, and it’s reliability is suspect.

Verizon applied for permission from the FCC to shaft its customers by making its removal of copper a permanent things.

Well, today, the FCC voted to move Verizon’s application off the fast track:

For those following the summer sitcom That Darned Voice Link, it looks like the FCC has now decided to order new episodes for the fall season.

Short version: the Federal Communications Commission (FCC) Wireline Competition Bureau issued a public notice taking Verizon’s Section 214(a) request to discontinue copper-based TDM service on Fire Island, NY and Mantaloking, NJ off the “fast track” streamlined process on the grounds that it needed more information before it could properly consider the request. Had the FCC not acted before August 27, the request would have been automatically granted.

The Bureau made it clear that this was not in any way a determination on the merits of the request. But in light of several substantive filings raising questions about whether substituting Voice Link for copper would (in the words of the statute) “reduce, or impair service to a community” (including requests from both the NY Public Service Corporation (PSC) and the NJ Board of Public Utilities (BPU) to hold off until they complete their state level inquiries), the Bureau wanted more information to properly consider the request.Consistent with this, the Bureau also sent Verizon a request for additional data that covers the areas you would hope the FCC would want to know about before deciding whether substituting Voice Link for copper lines “impairs” service to the local community.

The Bureau made it clear that this was not in any way a determination on the merits of the request. But in light of several substantive filings raising questions about whether substituting Voice Link for copper would (in the words of the statute) “reduce, or impair service to a community” (including requests from both the NY Public Service Corporation (PSC) and the NJ Board of Public Utilities (BPU) to hold off until they complete their state level inquiries), the Bureau wanted more information to properly consider the request.Consistent with this, the Bureau also sent Verizon a request for additional data that covers the areas you would hope the FCC would want to know about before deciding whether substituting Voice Link for copper lines “impairs” service to the local community.

So, it’s not a formal decision, but the fact that they rejected a fast track does not bode well for Verizon.

Bait and Switch on Healthcare ……… Again

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This time, it is the out of pocket limits for group plans that has been delayed:

In another setback for President Obama’s health care initiative, the administration has delayed until 2015 a significant consumer protection in the law that limits how much people may have to spend on their own health care.

The limit on out-of-pocket costs, including deductibles and co-payments, was not supposed to exceed $6,350 for an individual and $12,700 for a family. But under a little-noticed ruling, federal officials have granted a one-year grace period to some insurers, allowing them to set higher limits, or no limit at all on some costs, in 2014.

The grace period has been outlined on the Labor Department’s Web site since February, but was obscured in a maze of legal and bureaucratic language that went largely unnoticed. When asked in recent days about the language — which appeared as an answer to one of 137 “frequently asked questions about Affordable Care Act implementation” — department officials confirmed the policy.

The discovery is likely to fuel continuing Republican efforts this fall to discredit the president’s health care law.

Under the policy, many group health plans will be able to maintain separate out-of-pocket limits for benefits in 2014. As a result, a consumer may be required to pay $6,350 for doctors’ services and hospital care, and an additional $6,350 for prescription drugs under a plan administered by a pharmacy benefit manager.

Some consumers may have to pay even more, as some group health plans will not be required to impose any limit on a patient’s out-of-pocket costs for drugs next year. If a drug plan does not currently have a limit on out-of-pocket costs, it will not have to impose one for 2014, federal officials said Monday.

The health law, signed more than three years ago by Mr. Obama, clearly established a single overall limit on out-of-pocket costs for each individual or family. But federal officials said that many insurers and employers needed more time to comply because they used separate companies to help administer major medical coverage and drug benefits, with separate limits on out-of-pocket costs.

Gee, they had only 4 years to get this working, and they “can’t get their computers to work”.

Am I the only one who is beginning to suspect that maybe the real intent of Obamacare is to eliminate employer sponsored health plans?

This is exactly the sort of thing that Obama’s economic brain trust ***cough*** Cass Sunstein ***cough*** would like.

There are a lot of academic economists out there who hate employer sponsored health insurance.

Healthcare Quote of the Day

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In this New York Times article, they discuss the consequences of the increasingly frenetic pace of mergers among hospitals.

One line of the story is particularly important:

“The rhetoric is all about efficiency,” said Karen Ignagni, the chief executive of America’s Health Insurance Plans, a trade group that represents insurers. “The reality is all about higher prices.”

Notwithstanding any “efficiencies”, the price hikes come from the fact larger chains have more pricing power when negotiating with insurance companies and the government.

It serves to illustrate a point: We do not have a healthcare cost problem in the United States, we have a healthcare price problem in the United States.

This is a classic case of a market failure.

OOPS!

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Not only am I day late for bank failure Friday, but I also missed last weeks bank closure completely.

My bad.

As the graph below shows, nothing has been happening lately, and I stopped looking.

And here they are, ordered, and numbered for the year so far.

  1. First Community Bank of Southwest Florida (also operating as Community Bank of Cape Coral), Fort Meyers, FL  <==From August 1
  2. Bank of Wausau, Wausau, Wisconsin

Full FDIC list

So, here is the graph pr0n with last years numbers for comparison (FDIC only):

The FCC Gets one Right, Big

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The FCC has issued a temporary rule forbidding the extortionist phone rates charged to prisoners and their families:

Today was an extremely emotional meeting at the Federal Communications Commission (FCC). After ten years of fighting, the FCC resolved the Petition filed by Martha Wright and concluded that the rates charged for prisoners to make and receive phone calls are “unjust and unreasonable” and therefore violate Section 201 of the Communications Act. The FCC imposed interim rates and issued a further Notice of Proposed Rulemaking to ensure that rates going forward are based on actual cost to provide service, not jacked up outrageously because prisoners and their families have no choice. Importantly, the FCC ruled that the “commissions” (aka kickbacks) paid to jails for the right to exploit the helpless and profit from the misery of their families are not a “cost” that can be recovered. (FCC press release here.)

This is a repulsive practice.

Not only was it creating a literally captive customer base for these obscene rates, it also had the effect of increasing recidivism, and impoverishing the families of prisoners.