No The Fed Is Not Missing $9 Trillion

There is a meme going around (again) that, inter alia, "the Federal Reserve
 is missing $9 trillion."  (See the graphic below.) 

I agree with the overall intent of the meme but that claim that "the Federal Reserve is missing $9 trillion" is flat out wrong. [1]

The idea comes from the fact that awhile ago the Fed had $9 trillion listed as "off balance sheet."

Off-balance sheet does not mean "missing" or "hidden" or "we’re trying to trick you."

It is a standard accounting concept, it is how uncertain assets and liabilities are reported since, because of their uncertain, contingent  nature it is inappropriate (in fact, it could be misleading) to include them on a balance sheet.  

Off-balance sheet items are reported, just not on a balance sheet - nothing is missing, nothing is being hidden.

A balance sheet basically reports "This is how much I'm worth today."

I own a Mega millions ticket which is sitting on my desk from the day someone won over $300 million.  I haven't checked it yet.

That is a contingent asset - contingent on the right numbers being on it.

Should I record that $300 million plus on my balance sheet?  Tell the world I'm worth over $300 million?

Or should I report is as a wholly uncertain long shot.  As something else, not as a fixed asset or liability. Off my balance sheet.

So, no, the Fed is not missing $9 trillion and it is not trying to trick us.

And yes, there are real problems with the Fed.  Libertarian Alan Greenspan changed its fundamental nature as guardian of our banking system.

The Fed did a great job of protecting our banking system for decades, until Greenspan worked his libertarian magic.

We should not do away with the Fed - we should restore it - IOW, "Make the Fed Great Again!"  ;)

Judges Can And Should Make Law

Another miscarriage of justice has just occurred. I believe this wrong is rooted in attacks on our judicial system by the idea that "judges can't and shouldn't make law."

In March, 2016 an Oklahoma appeals court decided that state law doesn’t criminalize oral sex with a victim who is completely unconscious. The decision was based on statutory law.*

Courts are charged with delivering justice, the Oklahoma court didn't do so, apparently in the belief that "judges can't make law."  

Some folks (mainly conservative) insist judges can’t and shouldn’t “make law.” The reason?  I believe it is because for much of the 20th century, judges made a lot of law protecting individuals, especially consumers, a development quite upsetting to many conservatives.

But the fact is that throughout our history, judges have made law in order to do justice. ** (See, e.g., my blog entries linked below.)

The Oklahoma appeals court decision is an example of how this “judge’s can’t make law" idea has perverted justice in the US 

Per articles about the case, legal experts and victims’ advocates said they view the ruling as showing the gaps that exist between the nation’s patchwork of laws and evolving ideas about rape and consent.
. . . .

“And the appeals court ruling, on 24 March, affirmed that prosecutors could not apply the law to a victim who was incapacitated by alcohol.” ***

"Michelle Anderson, the dean of the CUNY School of Law who has written extensively about rape law, called the ruling “appropriate” but the law “archaic”.
“This is a call for the legislature to change the statute...."  Op cit.

That idea ignores the history of US law and of our legal system. This case is a clarion call for the courts to remember they are judges and have the power and responsibility to do justice - including "making law."

The idea that judges shouldn't make law and only legislatures can make law seems to be a relatively modern (mid to late 20th century) renewal of a political conservative idea which I believe arose because conservatives didn't like courts favoring people and justice as they often did throughout the 20th century, often merrily making law along the way. Lawyers, think MacPherson.  (Note that conservatives are perfectly fine with “activist judges making law favoring corporate adventurism.)

The fact is that throughout our history, judges have made law, often in order to simply do justice.

And this Oklahoma case and the reaction to it demonstrate why slavish adherence to legislative action doesn't do justice, it perverts justice.  

(It should remind of us the early period in English legal history when, if I recall correctly) the courts became mired in technicalities to the detriment of actual justice and the courts of equity arose to provide a degree of correction and an avenue to actual justice.)
One reason courts should make law is well-illustrated by Dean Anderson as quoted above: legislatures are often slow to act, and, not infrequently, important and necessary changes in our law can be blocked by even one powerful legislator.

The power to promote justice rests in the hands of those who make the laws. Insisting that such power rests only in the hands of legislatures doesn't promote justice, at times it frustrates it.


BTW: Two things to keep in mind with regard to judges "making law":

1: Legislatures can always over-rule "court made law" (with the exception of constitutional law.)

2:  Judges don't like to be over-ruled; they will hesitate long and hard before taking the chance of making law and then being over-ruled.


My earlier discussions on "judicial activism:"
● http://rjw-progressive.blogspot.com/2009/07/discusing-role-of-judges-judging.html
● http://rjw-progressive.blogspot.com/2009/05/karl-rove-and-mystery-of-obvious.html
● http://rjw-progressive.blogspot.com/2009/05/judging-empthy-and-law-part-ii.html
● http://rjw-progressive.blogspot.com/2009/05/judging-empathy-and-law-part-i.html
● http://rjw-progressive.blogspot.com/2009/04/if-you-are-going-to-pursue-truth-you.html
● http://rjw-progressive.blogspot.com/2009/04/judicial-activism-2-of-3.html
● http://rjw-progressive.blogspot.com/2009/04/judicial-activism-3-of-3.html
● http://rjw-progressive.blogspot.com/2009/05/judicial-activism-4-of-3.html


= = = =
* http://www.ocdw.com/main/wp-content/uploads/2016/03/State-v.-RZM.pdf

**Legal scholars: if you don't think judges have made law throughout our history, aside from the actual history of our common law legal system, please consider why our library of legal authorities include an extensive collection of the ALI's Restatements of the Law - seeking to explain and rationalize much of the law courts have made in the US throughout our history.

And try to explain why the "codification movement" didn't take place until well after our Constitution was adopted.  See, e.g., http://digitalcommons.law.yale.edu/cgi/viewcontent.cgi?article=2359&context=fss_papers

The codification movement and the Fields Code are also discussed in Grant Gilmore's "Ages of American Law."

And finally, if courts can't make law, there would be no reason for ethical Rule 3.1: "Meritorious Claims & Contentions
"Advocate
"Rule 3.1 Meritorious Claims And Contentions
"A lawyer shall not bring or defend a proceeding, or assert or controvert an issue therein, unless there is a basis in law and fact for doing so that is not frivolous, which includes a good faith argument for an extension, modification or reversal of existing law..... 

- - -
*** http://www.theguardian.com/society/2016/apr/27/oral-sex-rape-ruling-tulsa-oklahoma-alcohol-consent?utm_source=esp&utm_medium=Email&utm_campaign=GU+Today+main+NEW+H+6x9+callout&utm_term=169331&subid=1178739&CMP=EMCNEWEML6619I2

Regarding Fractional Reserve Banking

I read a page linked today from Facebook which asserted the proposition that banks create "money ... from something called the Fractional Reserve Banking system.... This scam creates money out of thin air."

“Ahhh,” I said, “the old ‘fractional reserve banking’ misunderstanding.” MISunderstanding. (To avoid, ah, misunderstanding.)
 
Here’s what “fractional reserve banking” really is:

Banking law (the Federal Reserve Act in the US) requires that for each $100 dollars of deposits banks have received from customers, they have to keep 10% on deposit with the reserve bank (those deposits are called, you guessed it, "reserves" they are a form of safety net.) That requirement has the natural consequence or, better yet, corollary that they can only lend out up to 90% of the deposits they have accepted.

One way this reserve requirement is sometimes characterized is by saying “banks can loan up to 9 times the amount they have on reserve.”  Which is true, but incomplete.  And describing it in that incomplete way is what leads to the misunderstanding on the subject.

The folks all worked up about "fractional reserve banking" see the 10% reserves and they see the "9 times that" in loans  they can make -- but they don't see or understand is that a bank cannot loan out any money which hasn't already been loaned to them - that the 10% is 10% of deposits of real money people have  made with them, as is the remaining 90%.  They haven't "created" one penny.

But they think the bank has somehow created money out of thin air: as in the FB post’s proclamation "This scam creates money out of thin air."

They simply aren't “creating money out of thin air." .  This idea is simply wrong.

I've been trying to think of an analogy.  How about this? In US football, the last 20 yards before the goal line is called "the red zone."  That is "20% of the field.  The rest of the field is "4 times that," right?  Claiming "fractional reserve banking" means the banks "create money out of thin" air is like arguing that the football teams have created that other 80% of the field ("4 times the red zone!") out of thin air.  (Not a perfect analogy, but maybe it'll help conceptualize the issue.)

How do I know this about reserve banking?  I practiced regulatory compliance for a couple of the country's largest banks during the last century.  I had to know and, sometimes, work with the reserve requirement of the Federal Reserve Act, as amended over the years.

Does that mean I'm somehow in the tank for banks?  Because I worked for them?

Nope, but it does mean I know a lot more about some of the shitty stuff banks do than most people know.

Our banking system needs major reform, but we simply can't do it effectively if we believe nonsense like this "fractional reserve banking" lets banks "create money" idea.

.

Religious Beliefs And Piercing Corporate Veils

Some religious folks claim they have a right to intermix their personal religious views with their corporations' commercial activities.

But there is a long standing legal principle that when the owners of a corporation intermix their finances with those of the corporation, the owners lose their limited liability* for the corporation's obligations and debts.

This principle is called "piercing the corporate veil."

It seems to me that the same principle should apply when thew owners of a corporation intermix their personal beliefs with the business of the corporation - deny them the limited liability of stock ownership.

= = = = * A bit of history: before corporations were "invented," one could do business as a sole proprietorship or as a partnership. Under either, as an owner one was personally liable for all of the obligations of the business. (That rule still holds true today.) As the industrial age developed, people were reluctant to take such huge risks necessitated by industrialization. I might be willing to take the business risk of losing the amount I have invested, but I don't want the risks of, say an industrial accident or of the purchase price for a 747 should I own one share in an airline. So the idea of limited liability of owners of a corporation was developed and became part of the laws which govern us. Each shareholder's liability is limited to the "par value" of the shares owned. And the liability is for the obligation for that par value to have been paid into the corporation when the shares were issued. So when I buy a share of a corporation from someone else, as the general rule, I have and can have no financial obligations arising from the corporation's activities. That limited liability is lost when the corporate veil is pierced.

The No Fly List And Firearm Purchases

Many folks (including all of the liberals I know) think it is absurd to allow folks on the federal No-Fly lists (supposedly of suspected terrorists) to purchase firearms.

As a liberal, I have some concerns with the idea they should be barred from exercising any constitutional rights.

My concern starts with the "no fly list" itself. How has it been created? What sorts of checks and balances are there regarding people who get listed? Are there any due process protections? Say, a right to know the evidence on which the listing is based? (Those charged with crimes have the right to "be confronted with the witnesses against him;" should those on the no-fly list have lesser rights?)

Let's look at the use of the no-fly list when it comes to other constitutionally protected rights*

Let's say 'you' somehow end up on the no fly list. Should your right to free speech be negated? Your rights against unreasonable searches and seizures? Your right to peaceably assemble with others? Your right "to petition the Government for a redress of grievances."

= = = =
* Note, I personally don't think the constitution confers an individual right to own arms, but the Supreme Court has declared otherwise.
And I recognize a certain absurdity with not allowing some folks to fly because they are potentially dangerous but letting them buy whatever firearms they want.

As 'they' say, "hard cases make bad law."

Perhaps this is an example?

Starbucks War On Christmas. Real Or Fantasy?

Regarding the Perceived Starbucks War On Christmas.

Some of my fellow Christians are upset about the 2015 Starbucks “Christmas” cup - a plain red cup with just their logo.  Apparently they feel this choice is an attack on Christianity.

I am mystified by the idea that this choice (1) is seen as an attack on Christianity and (2) that Christians could possible be afraid of this perceived attack, this perceived shadow of death.

Come on folks, you’re embarrassing the rest of us.  Scripture repeatedly tells us: “Be not afraid, I am the Lord.”

As a refresher, let's run through the 23rd Psalm again:

23 The Lord is my shepherd; I shall not want.

2 He maketh me to lie down in green pastures: he leadeth me beside the still waters.

3 He restoreth my soul: he leadeth me in the paths of righteousness for his name's sake.

4 Yea, though I walk through the valley of the shadow of death, I will fear no evil: for thou art with me; thy rod and thy staff they comfort me.

5 Thou preparest a table before me in the presence of mine enemies: thou anointest my head with oil; my cup runneth over.

6 Surely goodness and mercy shall follow me all the days of my life: and I will dwell in the house of the Lord for ever.

King James Version (KJV)

Seasons greetings to all.

Regarding the Perceived Starbucks War On Christmas.

Some of my fellow Christians are upset about the 2015 Starbucks “Christmas” cup - a plain red cup with just their logo.  Apparently they feel this choice is an attack on Christianity.

I am mystified by the idea that this choice (1) is seen as an attack on Christianity and (2) that Christians could possible be afraid of this perceived attack, this perceived shadow of death.

Come on folks, you’re embarrassing the rest of us.  Scripture repeatedly tells us: “Be not afraid, I am the Lord.”

As a refresher, let's run through the 23rd Psalm again:

23 The Lord is my shepherd; I shall not want.

2 He maketh me to lie down in green pastures: he leadeth me beside the still waters.

3 He restoreth my soul: he leadeth me in the paths of righteousness for his name's sake.

4 Yea, though I walk through the valley of the shadow of death, I will fear no evil: for thou art with me; thy rod and thy staff they comfort me.

5 Thou preparest a table before me in the presence of mine enemies: thou anointest my head with oil; my cup runneth over.

6 Surely goodness and mercy shall follow me all the days of my life: and I will dwell in the house of the Lord for ever.

King James Version (KJV)

Seasons greetings to all.

Texas Teacher Self-defense Bill

I was prepared to go all liberal-postal, and figured if I read the actual Texas bill, I'd get some really good stuff.

But I found that the Texas bill just clarifies that existing Texas "self-defense" law also applies to teachers on the job - a clarification that doesn't really seem to be needed, although one would have to look to how the courts have actually applied the existing law

(If you read it, note that each section of the bill laying out the availability of the self-defense rule cross-references existing Texas law as applicable to teachers.)

http://www.capitol.state.tx.us/tlodocs/84R/billtext/pdf/HB00868I.pdf#navpanes=0

OTOH - to the extent that Texas law already allows use of deadly force to defend property strikes me as pretty strange values.


The existing Texas law is what should have people alarmed, IMO.

Also- some observations regarding 'Stand Your Ground' laws: see, http://rjw-progressive.blogspot.com/2014/02/stand-your-ground-laws.html.

Stand Your Ground Laws

I ran across this post in a Facebook conversation:

"Self defense is a God given right."

I agree, but the way we implement that right is critical - literally a matter of life or death.

Today's "stand your ground laws" seem to reflect a value that a person's pride is more important than a human life.

Through centuries of Anglo-American experience and development, we came to a collective, societal  decision that two criteria are needed to prevent self-defense principles from becoming a killing field, a license for murder.

The first was requiring retreat before using lethal force - I believe based on the idea that human life is more important than pride.

The second was the development of use of an objective standard in deriding whether the 'defender' acted reasonably - whether the defender was truly acting in self-defense.  With the objective standard we ask - "would the 'reasonable person' in the shoes of the defendant have felt his life was in danger?"

These "stand your ground" laws mostly use a subjective standard - "did this defendant feel his life was in danger?"

The trouble with the subjective standard is that, in the real world, it is no standard at all - all we have is whatever the defendant decides to say.  In operation, that is no standard at all.

Yes, an objective standard is, in the real world, somewhat hazy and difficult to establish - but it is still better than a meaningless subjective standard at all, which factor is neglected by these "stand your ground" laws. 

Again, today's "stand your ground laws" seem to reflect a value that a person's pride is more important than a human life.

And I think that is huge step back into lawlessness within our society.

= = = =
Note: These thoughts are based mainly on what I remember from my one crim law course in 1978.  There are details I'm sure I have forgotten, and nuances I've passed over.

I believe, however, that these two issues are at, should be at, the center of the discussion. 

Post Offices As Banks

Senator Elizabeth Warren* has proposed empowering post offices to do consumer banking and lending (as is done, I believe, in several other industrialized countries.)

How would that help people?  Let's look at how consumers are treated by today's established banks.

Here's some history.  Up until the 70s, at the larger commercial banks, consumer banking was considered a necessary nuisance, a backwater in the banking world.  Consumer bankers were generally not held in high regard because the profits from consumer banking were low.

Then came the soaring interest rates of the 70s which resulted, in large part, from the OPEC oil price increases.

Interest rates soared on loans to all banking customers, corporate as well as consumer.  Rates soared so high that the states had to repeal the previous "usury rate" limitations which had kept interest rates low.

As oil prices came down and as our economy adjusted to the new realities, wholesale and corporate interest rates dropped to levels near those from before the interest rate run-up.

But banks found that the consumer market didn't pressure them to lower consumer interest rates nearly as much as the corporate markets did - consumer interest rates stayed relatively high - well above the rates which had just a few years earlier been considered criminal usury.  (I did legal work for a large US bank, so far as I am aware, there was no collusion among the banks on these rates.)

Because of the increases spreads between the rates banks borrowed at and the rate they charged consumers, profits from consumer lending soared and consumer bankers became the heros of the commercial banking world.

Incidentally, those rapacious rates were the reason banks were able to survive the huge losses they incurred from the LDC debt crisis - the loans to the lesser developed countries which had to be largely written off.  For example, the large bank I represented in the restructurings sold off $7 billion in LDC loans for about $2 billion - a loss of roughly one  sixth of its total assets.

That $5 billion dollar loss (for a bank of about $30 billion in assets) did not sink the bank only because of the massive profits they had begum making on consumer loans.

Are you upset that we the people had to bail out the banks in 2008?  Bet you didn't know that we the consumers unknowingly bailed them out in the 1980s.

Banks still make huge profits on consumer banking.  Credit unions offer one alternative, consider the value for consumers if our postal service could be expanded to provide another low cost alternative to the current banking system.

= = = =
I very much support Senator Warren (as well as Bernie Sanders, Sherrod Brown and Al Franken.)

I disagree, however, with the impression Senator Warren is creating about the so-called "$83 Billion Bank Subsidies."  Those "subsidies" are the lower costs of borrowing banks have because of the core central bank function of "lender of last resort" of the Federal Reserve - which not only provides stability to the banking system, but which keeps interest rates lower for all elements of the economy.

See my last post at http://rjw-progressive.blogspot.com/2013/12/the-so-called-83b-bank-subsidy.html

The So-called $83B Bank Subsidy

Our modern banking system has many huge problems - mostly the fact it seems to be run and allowed to be so run by socioaths.

BUT: A clarification on that "$83 billion subsidy" proclamation.  It is not what it seems.

The government does not give that money to banks - the so-called "subsidy" arises from a standard central banking function: "lender of last resort."

IF a regulated bank is in trouble and having trouble attracting sufficient deposits to remain in operation, and IF the central bank decides it is a temporary situation and the bank can be restored to profitability, THEN the central bank (in the US, the Federal Reserve) will lend money to that bank to restore it.

Now, most people don't know that banks are constantly lending money to each other, large amounts of money - to help maintain reserve deposits and as a central part of the money payment systems among banks, etc.

Those loans are made between banks at the "Fed Funds rate," a rate set among the banks (NOT by the Federal Reserve.)  And the Fed Funds Rate is the rate on which all other rates are based - commercial loans, consumer loans, credit card rates, etc.

Like all loan rates, the rates reflect the perceived risk that the borrower will default.  

Because of the lender of last resort policy, the perceived risks of inter-bank lending are lower, and that keeps the Fed Funds rate low, which in turn is reflected in all other loan rates.

That "$83 billion subsidy" is the calculated savings from lower interest rates which arise from the "lender of last resort" policy.

So (1) it is not money going from the Fed to the banks, and (2) it keeps interest rates throughout our economy lower - and in that sense is a subsidy for all of us. 

FB Group "Kick Butt Liberals" Kicks My Butt

I was kicked off of a "liberal Facebook page today because I objected to a "joke" which I believe promoted rape culture and considered offensive

Here is the exchange (I have deleted posts which addressed the other political content of the thread.)

QUOTE

David Allen
******GOOD MORNING FELLOW BUTT-KICKERS******

Today is Wednesday. It’s Hump Day. So feel free to hump the co-worker of your choice.

Okay, I know. It’s an old joke. But I think it’s still a good one. 

. . . . [Text on another issue deleted ] 

From the admin team at Kick Butt Liberals. HAVE A GREAT DAY!!

David Allen 
Kathy Harbaugh 
Maxine Levy
Bill Pelland
= = = =
[Note the attempt at a polite tone]
Bob Walker @David Allen >>Okay, I know. It’s an old joke. But I think it’s still a good one.

Ahhhh, I'm not so sure. It has a suggestion that non-consensual sex is OK - aka "rape culture.

I hope you'll reconsider your take on this one. (Not too long ago, I would have agreed with you, but hanging with feminists, including my daughters, has been a great education.)

2 hours ago · Like
= = = = = =

David Allen Sigh...it's a joke. If I ever get so bloody PC that I can't take a joke, then wrap me in my shroud. I'm dead.

I have no intention of offending anyone, but the only way to be certain not to offend ANYONE is to not talk at all.
about an hour ago via mobile · Like · 1
= = = = = =

Bob Walker @David Allen >>Sigh...it's a joke.

If it is a joke, it sure as hell isn't funny. And this isn't a matter of "PC" - this is a matter of promoting or objecting to rape culture

If you happen to work in either of the offices my daughters work in, I'll encourage them to castrate you. On a Wednesday only, of course.

Only joking..... Right?
about an hour ago · Like
= = = = = =

David Allen Bob,. I am currently on a cell phone, & I cannot p.m.. So I am going to tell you exactly like it is here now. nowhere in there joke was there even a hint that sex was going to be non consensual. You are whining over something that doesn't exist.

if you have a problem with the way I, or any other admin posts, then you may feel free to leave.
about an hour ago via mobile · Edited · Like · 2
. . . .
Bob Walker @David Allen >>nowhere in there joke was there even a hint that sex was going to be non consensual.

What about "So feel free to hump the co-worker of your choice." In case you missed it: "YOUR choice."

40 minutes ago · Edited · Like
= = = =

Bill Pelland Bob Walker It is time to let it go. It is obvious you do not care for the joke. On KBL we allow (even encourage) humor. Not all our members think all jokes are humorous - so be it. There was much in David Allen's post of value politically speaking and that is what this page is about. I strongly suggest you concentrate on that portion of David's post!
35 minutes ago · Like · 2
= = = =
Bob Walker >>It is obvious you do not care for the joke. 

Promoting the rape culture of today isn't a joke

.
>>& I cannot p.m..

I believe this discussion should be held in the light of day for all to see.

.
>>if you have a problem with the way I, or any other admin posts, then you may feel free to leave.

I happen to like this group. But I think your "joke" was, at best, in poor taste. If you have a problem with my disagreeing with you, feel free to ban me.

But if you do so, consider just how liberal you really are.

.
And perhaps you might consider consulting with the other moderators.

If they all agree with you that "it's just a joke," please let me know because I will want to leave..
21 minutes ago · Like
= = = =

Bob Walker I'm curious as to what the other administrators think: Maxine Levy, Kathy Harbaugh, Bill Pelland. 

Note: "On Oct 21,2013 (9 days ago) David Allen became the 4th admin at Kick Butt Liberals."
17 minutes ago · Like
= = = =

Bill Pelland Bob Walker- I am an admin and the only other one online. I sent you a personal message which is what you should have done in the first place. I am TELLING YOU NOW - Let it go!
15 minutes ago · Edited · Like · 3
= = = =

Maxine Levy Bob, as an administrator you want to know what I think. Let it go and really sometimes it is no one's business what I think. KBL is for the members.
9 minutes ago · Like · 1
= = = =

Bill Pelland Bob Walker One thing you have to realize is that while David Allen is a new admin he (Like I) are long time members of KBL. Kathy Harbaugh and Maxine Levy have entrusted us with this responsibility and we have their full backing and faith. When one of us speak, we speak for all.
about a minute ago · Like · 1
= = = =
Bob Walker QUOTE
Your [Personal Message] message will go to Maxine's Other folder because you aren't connected to her on Facebook. See More
END QUOTE
a few seconds ago · Like
= = = =
END QUOTE

And these PMS

QUOTE
Conversation started today
Bill Pelland
10:47am
Bill Pelland
I've asked you nicely to drop this - Please comply.  I am an admin for KBL.
= = = =

Bob Walker
11:03am
Bob Walker
"Kick Butt Liberals FB page pledges to the members in providing a forum which is comfortable for all members."
That joke made me, and I'm sure, other people uncomfortable. 
I'm sorry you can't accept that someone would disagree with you.
= = = =

Bill Pelland
11:05am
Bill Pelland
Your [sic] out of here!
= = = =

Bob Walker
11:06am
Bob Walker
LOL.
= = = =

Bill Pelland
11:10am
Bill Pelland
My initial PM:  I've asked you nicely to drop this - Please comply.  I am an admin for KBL.
Bob Walker
11:14am
= = = =

Bob Walker
>>My initial PM
So?  Do you think I will immediately look at the PM's I receive
I will likely post the exchanges on my wall for folks to see KBL's "sense of humor" and willingness to accept criticism.
= = =
END QUOTE

And this screen shot

Socialism in the US - The Real Radicals

There is a slogan floating around the internet announcing that "The time is now to stop calling the Democrats the "Democratic Party" and start calling them what they really are, the Socialist Party"

Let's think about that, and the assumption that socialism is inherently not American.  Let's start with a definition of "socialism."  Such as:

"Socialism is an economic system characterised [sic] by social ownership of the means of production and co-operative management of the economy....'Social ownership' may refer to cooperative enterprises, common ownership, state ownership...."  http://en.wikipedia.org/wiki/Socialism

Then I'd say something like, "Historically, we in America have understood that some things are best left to private enterprise, such as industry and many service businesses; and that some things are best left to socialist enterprise, like the post office and the military, as well as  municipal services such as police and fire safety, schools, trash collection, water distribution.  

"We've also traditionally believed services such as higher education can be served by both public and private non-profit institutions.

"And many services and activities have been traditionally allocated to the two systems acting cooperatively, such as road construction, which done by private enterprise on behalf and for the benefit of the public, and paid for and administered by public funds.

"Our hospital systems used to be the same, involving both public sector and the private sector.

"The idea that everything should be done, and that everything is best done, by private enterprise is a very modern and very radical idea advocated by powerful and yet extreme elements in our political system."

"True conservatives seek to retain the blended systems which have served our country so well over the centuries.  The radicals who insist on privatizing governmental services have a heavy burden of proof - and the evidence of the last 30-40 years does not support their radical ideas."

"When the only people who benefit from pure capitalism are the capitalists, then it is hard to argue that such an extreme form of economic organization is successful, from the point of view of "we, all of the people."

Rewarding Risk Takers

Conservatives argue that most of the wealth produced in our country should go to the investors - after all, they are the ones who have "taken the risk."

What about the workers.  No risk?

A worker risks his entire livelihood on whether the managers will screw up.  And whether the managers will decide to ship the jobs overseas or to some other state that cuts 'em a tax deal.  On whether the managers will decide they don't like his haircut or sexual orientation or type of car he drives and fire him.

A worker risks his livelihood on whether a venture capitalist will invade and and gut his pension and milk the company of its assets and toss it, shriveled and gutted into the gutters lining the "free market" abattoir. 

The idea that the capitalists deserve most of the wealth produced in our nation because they are the one's who "take risks" ignores the cold bright light of waking reality.

Some History of The Fed

"Get rid of the Fed" some guy on youtube screams.

Let's look at history. Modern commercial banking developed pretty much in tandem with the industrial revolution.

In the industrialized nations, under the "free markets" practices which were followed, there were rounds of systemic banking crashes roughly every 15 years. (Krugman argues every 5, but it depends on what you consider as included as a systemic crash.)

The Fed was formed in the early 1900s, primarily as a clearing bank - helping banks in one area of the country clear checks deposited with them which are drawn on banks in other areas.

In the early 1930s, following the crash of 29, the Fed was given expanded powers to regulate banks. Their central mission was to support "the safety and soundness of the banking system." (When I worked on the legal aspects of banking projects involving new products or variations of old products - one key part of every submission to the Fed in support of the products was an analysis of how the new product and how we would handle it conformed to safety and soundness principles..)

Through this role of the Fed, American commercial banking was stabilized, and the periodic and regular rounds of crashes were eliminated. We had a stable banking system from the 30s to 2008. (BTW: in case your thinking about the S&L crisis: The S&L crisis didn't involve fed regulated banks - S&Ls were not and are not commercial banks - and the S&L crisis arose from congress giving S&Ls vastly expanded powers with no increase in regulatory oversight.)

In the mid 80s, Reagan appointed libertarian Alan Greenspan to head the Fed. Greenspan was and remains a libertarian who is opposed to government regulatory power. (He was a personal friend of and was mentored by Ayn Rand.)

Greenspan did not see his job as using a regulatory structure to assure bank system safety and soundness. He believed the banks would self-regulate, acting wisely to protect their own interests. (He did admit after 2008 that his belief was a mistake.) He reduced regulations and regulatory compliance. He actually saw his job as supporting the banks in whatever they wanted to do - not to pursue safety and soundness goals.

For up to 80 years the Fed provided us with the most stable banking system I have ever read about or experienced.

The "Libertarianized Fed" is the disaster - get rid of the libertarian influences and let the fed get back to promoting safety and soundness - and get away from supporting them whatever they do.

Getting rid of the Fed is essentially what Greenspan did - with disastrous consequences.

The Fed Audit Doesn't Say

The audit of the Fed is out, and there are some people screaming -becasue they don't understand the basics of banking.

I wrote this on FB in response to one who claimed "not one dollar of the 16 trillion was repaid.

?>>money not repaid

That is one thing he got completely wrong. I think, but don't know, because he doesn't actually give sufficient details, that he read the "outstanding balance" figures of 0 as meaning the debt were forgiven, or somehow not repaid.

The report is clear, though, that money's lent were repaid. Do a word search in the report [http://www.scribd.com/doc/60553686/GAO-Fed-Investigation] for "repaid" and see the many specifications that monies were repaid. The youtube guy is just whacko on this point. (and it isn't the only thing he is whacko about.

And yeah, the interest rate charged thew banks sucks - as I said, there are many serious problems with the fed - largely, IMO, the result of Greenspan's running it.

But the guy who did the video is still an idiot

He mentions Table 8: as I suspected, the guy doesn't understand the concept of revolving credits. The lead-in to table 8 explains it, to a certain degree: 

"Table 8 aggregates total dollar transaction amounts by adding the total dollar amount of all loans butdoes not adjust these amounts to reflect differences across programs inthe term over which loans were outstanding. For example, an overnightPDCF loan of $10 billion that was renewed daily at the same level for 30business days would result in an aggregate amount borrowed of $300billion although the institution, in effect, borrowed only $10 billion over 30 days." See page 130

Under a revolving credit, a loan is made in a certain amount, repaid, remade, repaid, remade, etc.

If you have extended a $10 revolving line of credit to me, and I have drawn it down, repaid it the next day, drawn it down again, repaid it, 10 times - have I borrowed $10? (the maximum amount of the risk at any one time) or have I borrowed $100?

What if I borrowed that $10 for the full 10 days, instead of cleaning it up daily? You wouldn't say I've borrowed $100 dollars, right?

Requiring the periodic cleanup (in my example, and in the audit reports explanation, daily) is actually more restrictive and safer from the lender's point of view than letting run for a longer term.

Paul 'Pheidippides' Ryan

The man we can all believe in....

9 Trillion Lost By the Fed (Bogus)

Once again, the 2010 video clip of the Federal Reserve Auditor General is making the rounds over on the right and among the easily alarmed - the clip which supposedly says there is $9 trillion missing” from the Federal Reserve.  (See, e.g., http://www.youtube.com/watch?v=GYNVNhB-m0o -  I picked this one because the uploader amuses us with is paranoia about her lapel pin, inter alia.)


At one point in the clip,  Rep. Alan Grayson asks about the “$9 trillion in Off-balance sheet transactions” - see, e.g., at 3min 45sec.)


A lot of people freak when they hear that exchange and seem to think Grayson is referring to “missing money” or sneaky accounting tricks.  (A few seconds later, he does ask about some supposedly missing money, but he is no longer referring to the off-balance sheet accounts. That the Inspector General bobbles the question adds to the impression some people have that there is something sneaky going on.  Nope, just a missed opportunity.*) 


"Off-balance sheet" accounts are transactions which simply do not fit on a balance sheet. The term does not mean "missing money" or “losses.”  And it does not mean those accounts aren't being tracked and reported.**


An example of an “off-balance sheet" transaction: 


Suppose that today, Dollars are trading 1:1 against Doubloons.  I think Dollars are going to go up against Doubloons in the next month, you think they are going to go down.   We place our bets by agreeing that in one month, I'll deliver 1,000 Doubloons to you and you'll deliver 1,000 Dollars to me.  (Most foreign exchange contracts are simply to deal with potential exchange rate shifts when one is dealing internationally and aren't simply bets.)


If I'm right, and dollars go up, in a month I can perform by buying those 1,000 Doubloons with less than the $1,000 I'm going to receive from you. Say the exchange rate has shifted so that I can buy those 1,000 Doubloons for $950 I've made $50, you've lost $50. 


But how should that transaction be recorded on our balance sheets as of Day 1?  


A balance sheet is a financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point in time.


So what is the value of that foreign exchange contract?


Is the value $1,000?  Nope. even if  you fail and go out of business before then, I won't lose a thing.


Is the value zero since today they have the same value?


Is it $50?  (Remember, until the settlement date, neither of us knows what the rate will be on the delivery date.)


It simply makes no sense to put that sort of transaction on a balance sheet.  That DOES NOT mean the transaction is not accounted for in our books and records - it just means it isn't in the balance sheet, it is being kept track of in other ways.  (Actually, such transactions are “on the balance sheet" in footnotes, but not included in the balance calculation because there is no exact figure which can be given.)


Furthermore, one of the features of an off-balance sheet transaction is that in the real world, the amount at risk (one way of measuring value) is nowhere near the face amount of the transaction. That adds to the rationale for keeping such transactions “Off-balance sheet” since including them would mislead people.  (Just as the fact that people are mislead when they think “Off-balance sheet” means “lost” or sneaky.




And that is why off-balance sheet accounts are typically such large numbers - the real risk is a minuscule fraction of the face amount.


= = = =
* Just before that exchange, the Inspector General explains that her only jurisdiction is over the Board of Governors of the Federal Reserve, not over the Federal Reserve Banks.  Despite that, Grayson persists in asking her about reviews of the Federal Reserve Banks.  I think she is still trying to figure out how to got him to understand that he is asking the wrong person when asked about the off-balance sheet accounts.


** FWIW, I learned this stuff when I was legal counsel to several areas  of a major bank which dealt with "off-balance sheet accounts" (including the foreign exchange trading desk).  I too originally though "off-balance sheet" meant or at least implied something tricky and I didn’t understand that it refers to transactions that are being accounted for in other ways.  It doesn't mean anything tricky.

Small Business and Regulations

The GOP loves to talk about “crushing regulatory burdens” on small businesses and they claim their policies will make it easier for entrepreneurs to start businesses and “create jobs.” 


"Crushing regulatory burden?"  "Crushing?"


I have never heard a conservative mention (and possibly many don’t even know) that many, if not most, business regulations exempt small businesses.  


And the GOP leaders ignore that many regulations protect small businesses from the giant businesses' practices. In fighting regulations, are they really on the side of small businesses?  When is the last time a small business contributed enough to them to get their attention?


It seems to me that if the GOP and right wingers really wanted to unleash the pent-up entrepreneurial power in America and help them create jobs, they would support a national health care system - think of how many people with great ideas are unable to start businesses because the need health insurance and the cost of it for a new business is prohibitive.

Or maybe they'd fight against the tax schemes that allow huge mega-retailers to invade our towns and push small businesses out - aka "crushing" small business people.


(Regarding regulations: I practiced law doing regulatory compliance from the 70s to the 90s and I later lobbied on behalf of small businesses for a particular trade.)

The Bank Bailouts of 2008

Someone asked on Facebook: >>Remember when we were told we "had to" bail out the banks for the sake of our economy?<<


Yes, we did have to bail them out from their then certain collapse.  Business depends on bank credit to do business. Everyday.  Business depends on the bank payment systems to do business.  Everyday.  Imports and exports of goods depend on trade finance systems to do business.  Everyday.


The commercial banking parts of today’s banks are the providers of those three functions.  Functions which are, day to day, critical for our economy


If the banks had failed, how long would you have lasted with just the cash in your pockets?  How long would you have survived if your grocery story didn't have any available credit to finance its inventory, and no payment systems to pay its suppliers?  How long would you have survived if your gas station's supplier couldn't pay for imports of oil products? 


We had to bail out the banks because our primary banking regulator, the Federal Reserve, was run by a libertarian for 2 decades leading up to the 2008 collapse, and libertarianism was what let the recently  combined commercial and investment banks run amuck and gamble away the rent money, and the seed money, and your and my deposits. 


Yes, the bailout sucked, and Wall Street got away with economic murder.  The triumph of the Chicago School of Economics is that Obama and Congress kissed Wall Street ass.  http://en.wikipedia.org/wiki/Chicago_school_of_economics


But it is mistaken to think each of us didn't have our literal survival at stake had the banks been allowed to fail.