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Archive for May, 2012

It seems that all we have heard of late is about the sharp partisan battles in Congress that have placed it in a gridlock and prevented it from working in a bipartisan fashion to “do the nation’s business.” Yes, the “do nothing Congress.”

But there are exceptions to this description.  Given the depth and severity of the financial collapse, it is good to see bipartisanship in addressing the issue of financial regulation, or more correctly, providing exemptions when there are mutually beneficial exchanges to be made.

As John Bresnahan reports, the prospects look good for a “one sentence bill worth $300 million to a bank owned by a politically connected family that has doled out hundreds of thousands of dollars in campaign donations.”

The bill would allow Emigrant Bank to avoid meeting the requirements for Tier 1 capital by allowing it to base capital requirements on what its assets were on March 31, 2010, before it broke the Dodd-Frank threshold of $15 billion. Of course, the argument is that the bank only broke the $15 billion mark for a brief period of time. By tweaking Dodd-Frank, Congress could allow the bank to free up funds, thereby allowing it to make additional loans, largely in New York.

Although the bill was sponsored by a Republican (Rep. Michael Grimm, R-NY), it has strong bipartisan support from members of the Financial Services Committee (success in the Senate remains uncertain). Why the support? Howard Milstein, owner of Emigrant Bank, was “a bundler for President Barack Obama’s 2008 campaign.”  Bresnahan provides some additional details on Milstein:

He is a force in New York state politics. Aside from his fundraising for Obama four years ago, Milstein has been a prominent financial backer of Gov. Andrew Cuomo. The Democrat tapped Milstein last year to head the New York State Thruway Authority despite complaints by watchdog groups that having a real estate mogul run the agency would be a conflict of interest.

Even Diana Cantor, wife of House Majority Leader Eric Cantor (R-Va.), worked for a Milstein-owned trust that catered to the needs of high-income customers.

The Milsteins, along with business associates and other family members, have donated hundreds of thousands of dollars to both GOP and Democratic lawmakers over the past decade. Along with Grimm, New York Democratic Reps. Carolyn Maloney, Carolyn McCarthy and Gregory Meeks — all co-sponsors of the bill — have received $11,500 in donations from the Milsteins this cycle.

According to a statement by Emigrant Bank, “H.R. 3128 is all about credit availability in underserved communities throughout New York City.” Perhaps. But one might also note that so many of the poor decisions leading up to the recent collapse (e.g., regarding relaxed underwriting standards, securitization, and the GSEs pumping liquidity into the low and moderate income segments of the market) were given the same justification, often by members of the House Financial Services Committee.

There is a powerful public choice argument regarding some of the factors that contributed to the financial collapse. In the election cycles leading up to the financial collapse, the securities and investment industry and real estate industry contributed tens of millions of dollars to the campaign chests of the Financial Services Committee and its Senate counterpart. Regardless of the party in control, the committee members prevented and/or gamed any attempts to impose regulatory reforms that might have had lessened the severity of the impending financial collapse. Certainly Congress responded in the aftermath of the collapse, albeit it ways that were far from sufficient.

But now that attention has turned elsewhere, normal practices appear to have resumed. The days of reform have run their course and Congress appears ready to return to its standard mud farming, imposing new regulations only to relax when a mutually advantageous deal can be struck.

At least we know that in 2012, gridlock has its limits and bipartisanship is still a possibility.

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The Cato Institute has a new project and accompanying website devoted to tracking police misconduct.  Isn’t it sad that the society that produced this has need for such a thing?  It is probably more accurate (even aside from the obvious sense) to say that we are a different people now.  Unfortunately, I think police misconduct is only going to get worse, especially with the militarization of state and local police forces that has been going on for some time and exacerbated by 9/11.

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Victor Davis Hanson has one of the most awful columns I’ve ever seen out on the wire today. The argument is that Greece is in trouble because of its bad culture, while places like Germany and Switzerland have good culture and therefore sound economic policies. Leaving aside the laziness of this kind of culture argument (what can’t it explain?), I was simply distracted by the gross errors of fact coming one after the other in quick succession.

Switzerland, by modern standards, should be poor. Like Bolivia, it is landlocked. Like Italy, it has no real gas or oil wealth. Like Afghanistan, its northern climate and mountainous terrain limit agricultural productivity to upland plains. And like Turkey, it is not a part of the European Union.

Wait, Italy is poor? Italy?

Unlike Americans, the Swiss are among the most homogeneous people in the world,

The country with four official languages? I’m sure they would be surprised to hear that they are “among the most homogeneous people in the world.”

and without much diversity, and they make it nearly impossible to immigrate to their country.

Apparently, the 22.9% of Switzerland’s population that is foreign-born, highest of any significant country in Europe, all got there illegally, and not through Switzerland’s generous guest-worker program. Huh.

OK, I can’t resist taking a dig at the culture-is-destiny claim too:

But government-driven efforts to change national behavior often ignore stubborn cultural differences that reflect centuries of complex history as well as ancient habits and adaptations to geography and climate. Greeks can no more easily give up siestas than the Swiss can mandate two-hour afternoon naps. If tax cheating is a national pastime in Palermo, by comparison it is difficult along the Rhine.

Yes, that’s the reason schoolchildren learn about the German Empire that dominated the ancient world. Cultures never change, and they are the ultimate determinant of prosperity; just look at your history. Wait, isn’t this guy a classicist?

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This is awesome. As we all know, the Obama Administration claims that it has the right to kill anyone it considers a terrorist, so long as it has some internal process for deciding whom to kill. Now someone has set up a petition on whitehouse.gov:

Considering that the government already has a “Do Not Call” list and a “No Fly” list, we hereby request that the White House create a “Do Not Kill” list in which American citizens can sign up to avoid being put on the president’s “kill list” and therefore avoid being executed without indictment, judge, jury, trial or due process of law.

Not that it will really accomplish anything. But humiliating the turncoat in the Oval Office would nevertheless warm the cockles of my jaded heart.

HT: Glenn Greenwald

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Sustainable misery

Here are some of the latest economic ideas coming out of Europe:

  • Take longer coffee breaks.
  • Don’t upgrade your software or buy a new computer.
  • Forget about that graduate degree.
  • Bring your child to work.  All day.  Every day.
  • Spend a lot of time on the internet.  With a dial-up modem, of course.
  • Don’t maintain the machinery at your plant.  That might keep it from breaking down.
  • Cut your R&D budget.
  • Forget that; eliminate your R&D budget.

These weren’t exactly the proposals advocated by Tim Jackson in a Times editorial today, but they might as well have been.  Jackson is a “professor of sustainable development” and advocates that we should pursue “less productivity” (seriously!) in the economy.  Here is the take-away.

Perhaps in the long run it’s an easier and a more compelling solution: to loosen our grip on the relentless pursuit of productivity. By easing up on the gas pedal of efficiency and creating jobs in what are traditionally seen as “low productivity” sectors, we have within our grasp the means to maintain or increase employment, even when the economy stagnates.

Just when I thought that Europeans (and the rest of us) couldn’t get any worse economic advice than Paul Krugman’s ranting about the evils of austerity, along comes Prof. Jackson with this sage advice: just do things less well.

Sustainable development is one of those very dangerous buzz words that came out of the last century.  Dangerous because it cloaks old-fashioned anti-capitalist gibberish in jargon that has an appealing sound.  Who could be against sustainability or development, after all?  But it is unusual to see the regressive aims of this movement couched in such stark terms.  And, in case your wondering, the sustainability is questionable, and the development is non-existent.

Jackson thinks we should transform our economy into one that cares more about the “caring professions,” jobs where time and human interaction are key: medicine, education, social work.  But only if it is one with less focus on efficiency.  We don’t want educational tools that allow more learning with fewer dollars, or medical innovations that reduce suffering and disease.  What Jackson wants is more time–more human time.  “Even to speak of reducing the time involved,” says Jackson, “is to misunderstand its value.”

In an economy that focuses on efficiency, there is more time for human interactions.  Indeed, that is the very definition of increasing labor productivity is reducing the time required to perform a particular task.  So, if we want doctors to have more face time with patients or teachers to have more one-on-one time with struggling students, we need more productivity, not less.  That doesn’t mean productivity gains will be channeled into the activities Jackson values, of course.  But the unstated essence of what he is saying, and what those people who would increase command and control in the economy always always say, is that “people should value what I care about instead of what they care about.”

Jackson sees a less productive labor force as a means of increasing employment.  In this view, since there is a certain amount of work to be done, if workers are less productive, it takes more time to do that fixed amount of work.  Voila! Unemployment solved.  But what he doesn’t mention is who pays for all of these new unproductive workers.  Ahhhhh, there’s the rub.  You see, in the background of Jackson’s sustainable lifestyles is a powerful mechanism that  diverts, through force, productive resources that are focused on profit to paying for an ever-increasing number of workers whose aim is not economic value, but “caring.”

So, when we peel back the rosy language of caring and sustainability and people “devoted to work with devotion, patience and attention” we get something not new at all, namely a massive welfare state continually draining the capacity of the economy to produce goods and services, while workers work less, do less, for shorter time with greater compensation.

Jackson is the author of a book called Prosperity without Growth: Economics for a Finite Planet.  I would say what is really “finite” is Jackson’s mind and the future of the economy if more and more people buy into his vision of sustainability.

Hollande for President, anyone?

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On this Memorial Day, a salute to all those Americans who have lost their lives fighting in foreign wars.

A special salute to Major Brian Mescall, a graduate of the Citadel, who was killed in action in Afghanistan.  And one to Captain Ray Conard, killed in his B-24 during WWII (he was a member of the 734th Bomber Squadron, 453rd Bomber Group in Britain).  This may be the story (though I haven’t been able to verify it) of what happened to Captain Conard:

MISSION # 182 – BIELEFELD, GERMANY – 26 NOV. – SUN.

41 aircraft flew on to bomb a railway viaduct just outside Bielefeld. Using a visual correction through a cloud break on a PFF run, 101 tons fell on the target with fair results.

For the third time in the month, tragedy stalked the 734th Squadron. Capt. Conard, leading mission 182, crashed a few miles from the base. Apparently unable to get his plane to climb, Capt. Conard jettisoned his bomb load. Never over a few hundred feet above ground, the ship lost altitude steadily and headed for two homes about forty or fifty feet apart. Unable to climb over them or fly between them, [Capt Conard stood the big ship on its right wing and cartwheeled between them.]*  Capt. Conard’s action is believed by Major McFadden and Col. Thomas, who investigated the crash, to have been deliberate in order to avoid striking the homes and injuring or killing the occupants. His courageous action cost him his life along with the lives of his crew, but the occupants of the homes were in no way harmed, This, despite the fact that an engine damaged a corner of one of the homes as it was dislodged from the plane. Capt. Conard has been recommended for the DSC, posthumously.  

*added in some versions of the story found on the web

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Senator Tom Coburn (R-Oklahoma) on CBS News:

S&P’s downgrade on us was right. Matter of fact, we’re going to get another downgrade. I can tell you right now… If you look what’s getting ready to happen to us, in another five years, we’re going to have $22 trillion worth of debt. We’re going to have 120% of our total GDP in debt. If you look at historic interest rates, we’re going to be paying $800 billion a year in interest. Where are we going to get that money?

HT: Fox.

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