Thursday, December 23, 2010

Red Herring- Too Big To Fail

Some have argued that a failure of the 2010 Congress was its  failure to break up the big six "too-big-to-fail" banks.

The issue isn't "too big to fail."  That is a red herring in the analysis of our banking system problems..

The issue is the repeal of Glass-Steagall and the "rescue" of the commercial banks of the 1990's by allowing them to merge with investment banks.

In the 30s, we broke them up into 2 industries (1) low risk, low return commercial banks, to handle "the people's money/savings" - money we need and can't put at risk;  and (2) high risk high reward investment firms to handle investment money - money folks and companies are willing to put at risk and can afford to loose.

From the 70s through the 1990s, the incursion of other, unregulated industries into the profitable lines of the commercial banks made them relatively unprofitable, return-on-investment-wise.

Traditionally, central banks (like the Federal Reserve) have promoted commercial bank system efficiency and confidence by standing as the "lender of last resort."  Not "too big to fail" but "too important to fail."  (That role  had never been invoked through at least the 1980's, but the possibility served to promote the commercial banking system.)

When commercial banks became relatively unprofitable in the 90's, their "rescue" by allowing them to merge with high risk banks, while extending the role of "lender of last resort" to the investments banks was madly short-sighted.

Don't be distracted by the idea of "too big to fail." 

Recognize that we need (1) profitable but safe commercial banks (which also provide the incredibly important global payments systems and import/export finacing) and (2) separate high risk high reward investment banks for those who have some money they can afford to put at risk.

Friday, December 17, 2010

The Forest and The Trees

Listening to a political discussion  carried on NPR this morning, I noticed the analysis of various subjects - the trees - seemed to lose sight of some overall concepts - the forest.

The conservative panelist justified the rejection of the James Zadroga 9/11 Health and Compensation Act of 2010 on the grounds that "we need to pay for it" and the bill didn't do so.

Moments later, he defended tax cuts because, well, just because, so far as I could tell. 

If one steps back to view the fiscal and moral forest, the current GOP position seems to be that we have to "pay our way" in meeting our moral obligations to help those in need, and at the same time they argue that we have to cut back on our ability to do so.

Is the supposed need to "pay our way" the real justification for the Republican Party's rejection of the bill?

"Pay our way."  How many people borrow to buy a house?  A car?  Pay college tuition?  Buy that big screen TV.

That is all "good" economics (borrow our way)  because it serves business - aka mammon.

Should we borrow to help those in need?  The answer of too many these days is not only "No" but "Hell no!"

One current GOP idea is that the nation should manage its finances the same way a family does.

How many families in modern America don't borrow for both important and frivolous reasons?

Not to suggest that helping the poor is a frivolous undertaking.  Christ certainly didn't think so.  And He didn't put conditions on who he helped.

In addition, note that the goals and financial obligations of a family unit are very different that of a government.

How many families would adopt the "mission statement" of the US Constitution as their family credo:

"To form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity."

Is the supposed need to "pay our way" the real justification for the Republican Party's rejection of the bill?

Perhaps Stephen Colbert indirectly provided the answer when he said:

"If this is going to be a Christian nation that doesn't help the poor, either we have got to pretend that Jesus was just as selfish as we are, or we have got to acknowledge that He commanded us to love the poor and serve the needy without condition."

Wednesday, December 15, 2010

FoxNews Bears False Witness

On Monday, 12/13, FoxNews presented an editorial excoriating "the Senate" for failing to bring the 'James Zadroga 911 Health and Compensation Act' to the floor for a vote.

The Fox editorialist announced that "Shame .Embarrassment. Outrage. Anger. All are proper reactions to the conduct of our Senators who will now find one excuse after another to explain away the fact that they have turned their back on American heroes"

Fox didn't mention that the bill didn't make it to the floor because of a Republican filibuster.  It didn't identify the Republicans as those deserving  the "shame, embarrassment and outrage"

To criticize the GOP would violate Fox's apparent "the GOP is always right" position. 

On the other hand, by attacking the Senate as a whole.  Fox fulfilled the long standing right wing anarchistic view that "government is the problem," as pronounced by President Reagan in his first inaugural address 

By suppressing the fact of who was responsible, FoxNews was spreading false reports, also known as bearing false witness, which is condemned by the 10 commandments.  Perhaps Fox should have those commandments displayed in its news rooms.

Monday, December 6, 2010

Bi-partisanship Dance Step and Metaphors

Dear President Obama:

Re: Bi-partisanship

It takes two to tango - but when one partner is only looking to tangle, it ain't a dance anymore!

Or, another metaphor:  the republicans have switched the road signs around and taken down the barrier where the bi-partisan bridge has been washed out.

Or another: Don't forget, Wiley Coyote never caught on, but he was just a cartoon character.