Bob Latta and His Wealth

Each year, congressmen have to disclose their various financial assets and other financial information. They don't have to give exact figures, just a range for each asset worth more than $1,000.

Including Representative Latta of Ohio’s 5th District.

We cannot tell for sure, but assuming the law of averages is at work, Latta’s wealth over just the 4 years he has served in Congress has increased from about $1,386,000* (the mid point of the range as shown in the chart) to about $2,258,000 (also the midpoint) an increase of about $872,000, equaling an increase of about 63%.

But, keep in mind: per his disclosure statements, about half of that wealth is in CDs and other bank accounts. These days, bank accounts don’t earn much interest and thus barely grow. So it is likely that the bulk of that $871,000 growth has come from the stocks and bonds side of his portfolio. If that’s the case, that part of his wealth grew by about 125% in value. His stock investments likely more than doubled!

During these same four years, the median income

for families in Wood County dropped from $47,874 to $45,395, a drop of about 5%. (I couldn’t find figures for median wealth of families in Wood County, or figures for the Ohio 5th district, so these Wood Co

unty income figures have to serve as just a rough form of comparison. I suspect that the average wealth has also dropped in that during those 4 years, the Dow Jones Industrial Average (The standard measure for the stock markets as a whole) dropped from 13,264 to 11,577, about 12%, with an even higher drop before Obama took office and the market began to recover.)

Bottom line, Representative Latta’s wealth seems to have soared 63% plus or minus while he has been in Congress. The rest of us in his 5th district have seen income and wealth decline by 5%.

BTW: in a recent video he posted, (http://www.youtube.com/watch?v=3HAaAQQQFkA ) he talks of the differences between a public servant and a politician:

“A politician sees how they [sic] can take from the people they represent for their own benefit, while a public servant sees how much they [sic] can give of themselves back to the people they [sic] represent.”

(Few people actually follow the rules of grammar when they speak, I don’t intend to criticize his typical errors of case in that oral statement.)

Based on his finances, would you say he’s a public servant? Or just another politician?

(But let’s keep this in mind. It is theoretically possible that each of Latta’s wealth investments was at the high end of the range when he started and are now all at the low end - thus it is possible that he has actually lost wealth over these four years.

If so, only he can tell us that law of averages have passed him over.)

= = = =
* We simply don't know enough to guess where his opening $1.3 million in wealth when he started in Congress came from. According to his on-line biographies, most of his career has been spent as a, ah, public servant.

Prayer In Schools Prayer By Schools

The US Supreme Court has ruled against prayers lead by or promoted by schools and other agencies of the government.

It has not forbidden prayers in schools by individuals.

Needless Fed Freakout

A lot of folks from Tea Partiers to liberals are getting worked up about what they think the audit of the Federal Reserve disclosed -

What folks think happened and the reality can be very different, however. (I'm not going to argue that the US banks and the Fed are princes all around, but the reality of some of the stuff people are worked up about was a lot different than what they think was going on.)

Bottom line here is that the Daily Kos and many others are freaking out about stuff that was good for the US economy and very low risk.

I haven't looked at every aspect of what the audit found - but I have looked at two programs which folks are needlessly freaking out about.

(You might want to pour a fresh cuppa - some of this stuff is semi-difficult.)

I. The Commercial Paper Funding Facility

Bottom line: The Fed's Commercial Paper Funding Facility funneled money to "Main Street USA" to promote our economy.

As an example, the Daily Kos noted (http://www.dailykos.com/story/2011/12/05/1042543/-The-Fed-Bailouts:-Money-for-Nothing) that

"Pages 135 & 196 – Sixty percent of the $738 billion “Commercial Paper Funding Facility” went to the subsidiaries of foreign banks. 36% of the $71 billion Term Asset-Backed Securities Loan Facility also went to subsidiaries of foreign banks."

One can hear the author muttering "Outrageous! Another $738 billion given away to the banks, and most of them subsidiaries of — wait for evil – 'foreign banks!'" Oh the xenophobia!

Let's start with a very simple idea - let's stop and ask what a "Commercial Paper Funding Facility" (a "CPFF") is and what it does.

First, what the heck is "commercial paper?"

Commercial paper is simply short term promissory notes that corporations use to fund their day to day activities - inventory purchases, payrolls, operations, etc. (Much of this is low risk self-liquidating - borrow to buy inventory today and pay it off in, say, 6 months after the inventory is resold.)

The maturities of commercial paper run from 1 day to 270 days. And because the commercial paper is unsecured (no underlying mortgage or security interest in some sort of property) the commercial paper markets are pretty much limited to the highest rated companies.

Typically banks will buy commercial paper from one company (a method of lending to those companies) and resell it at a slight spread to another company which has some excess short term cash to invest at the moment.

The CPFF was simply the Fed providing funds to the banks so they could, in turn lend short term to (by buying commercial paper of) the best corporations so they could operate day to day.

That is money that went to Main Street to keep the economy running.

And the fact that some of it went to "subsidiaries of foreign banks?" Let's stop and ask, "which subsidiaries? The Beijing branch of Deutsche Bank, maybe?

Nope. The CPFFs to such subsidiaries went to the US subsidiaries of the foreign banks - the subsidiaries they set up in the US to do business with US companies. So the Pittsburgh subsidiary of, say the Dutch Bank ABN AMRO does business with US companies (mainly in the industrial midwest, I'm thinking.)

So that $738 billion of CPFF money to "subsidiaries of foreign banks" helped promote the US economy right here on Main Street USA.

Looks like a winner to me....

(The real question to me is what was the spread the banks were charging? Were they getting those CPFF funds at, say, 1% and charging the corporations floating the paper 10%?

That would be objectionable. It would take a lot more research that the Daily Kos indulged itself in to discover that.)

II. Currency Swaps (Buckle up...)

Bottom Line, the risks were much less than the face amounts and they supported the US dollar around the world.

Daily Kos tells us about the outrageous amount of currency swaps:

"Page 205 – Separate and apart from these “broad-based emergency program” loans were another $10,057,000,000,000 in “currency swaps.” In the “currency swaps,” the Fed handed dollars to foreign central banks, no strings attached, to fund bailouts in other countries. The Fed’s only “collateral” was a corresponding amount of foreign currency, which never left the Fed’s books (even to be deposited to earn interest), plus a promise to repay. But the Fed agreed to give back the foreign currency at the original exchange rate, even if the foreign currency appreciated in value during the period of the swap. These currency swaps and the “broad-based emergency program” loans, together, totaled more than $26 trillion. That’s almost $100,000 for every man, woman, and child in America. That’s an amount equal to more than seven years of federal spending -- on the military, Social Security, Medicare, Medicaid, interest on the debt, and everything else. And around twice American’s total GNP."

$10 Trillion! OMG!

Note first: the quotation marks the Daily Kos used around the word "collateral," as if holding one currency as collateral against an obligation in another currency is less than real or valuable.

Heck, when it comes to collateral, you can't ask for anything more liquid or better than actual currency.

So Daily Kos writer is up in arms about something that was a positive in those deals.

And second, what they don't tell you (and I am guessing they just didn't know) is that in currency swaps, the notional value is far more than the real value at risk. The amount at risk is a combination of (1) the opportunity value of the interest accrued, and (2) the amount that one currency might move against another.

Example: Let's say I have US $100 (100 US dollars) and you have 7764.7003 yen (JPY)

You deposit your 7764.7 JPY with me as collateral, and I give you $100 to be repaid in 1 year at 5% interest. In one year, you'll owe me US$105 and I'll owe you JPY7764.7 in return of the collateral you put up.

If the exchange rate doesn't change, all I have at risk is the amount of the interest I'm charging you, US$5. (Which is 5% of the notional value of the deal.) And my loss there is the US$5 I could have earned lending it to someone else.)

But exchange rates always fluctuate, of course.

Suppose the value of the yen appreciates against the dollar. My risk is actually lower, and if the yen appreciates more than 5%, I have no risk!

Say you go out of business and can't repay that US$100 or the US$5 interest. If Yen has gone up against the dollar, I might be ahead of the game, holding collateral which is now worth more than the US$105.

If the yen goes down against the dollar, I might lose (1) the US$5 plus (2) the amount of the exchange lose.

Over the last one year, the value of the yen against the dollar has ranged from JPY 86.67 per dollar to JPY 76.0 per dollar - so the amount at risk over that would be about 1/10th of the notional value.

And because the Fed was dealing with a number of different currencies, and the interactions among the currencies are such that when one goes up others are likely to go down; and because the swaps involved a large number of counterparties, the true amount at risk was well less that even that 10% of the notional values.

In the 80's, commercial banks planned on about 5% losses on commercial loans and built that expectation into their pricing- anything less than that indicated the lenders weren't being aggressive enough. If we assume that in these interest swaps, the Fed would face the same 5% risk of loss, the true amount at risk would have been 0.5% of the notional face amount of those swaps - without any consideration that many of any which might failed would have been fully or largely collateralized.

So, instead of "That’s almost $100,000 for every man, woman, and child in America," it would be more accurate to say "That’s not even$5,000 of collateralized risk for every man, woman, and child in America which helped promote the value of the US around the world."

That looks like a winner to me also.

To My Sunny Day Dem Friends

You keep telling me I shouldn't criticize President Obama; he's the master chess player -- wooing the independents and moderate Republicans by demonstrating what a fair and bi-partisan guy he is.

"And besides, Bob, he has your vote, where else are you going to go? Why should he do anything progressive"

Well guess what, my Pollyanna-politico friends. It isn't working.

Per the latest Gallup poll, Obama’s approval rating has dropped across the board, most — 10 percentage points, from 40% to 30% — among pure independents.

And nearly as much — eight points — among moderate/liberal Republicans, from 29% to 21%. [Gallup poll]

They don't say why - apparently they don't ask that question.

Maybe its because the economy hasn't completely turned around quickly enough for impatient Americans?

But maybe it's because, more and more, he is seen as an ineffectual leader, always willing to compromise and to compromise far to the right of what most people want, never willing to actually fight for anything.

(I guess you need a comfortable pair of shoes to fight for stuff and he seems to have lost his in the move to the White House.)

Whatever it is, he isn't accomplishing the goal you say he is reaching for.

So, should he keep on pursuing an unsuccessful strategy?

Or become the leader we elected him to be?

OWS Costs In Perspective

The relative sizes of some current economic facts:

It has been said that the Occupy Wall Street demonstrations have cost cities $13 million dollars. That's a lot of money. (Of course, one can ask whether the massive police reactions to OWS were necessary and thus whether that 13 million was necessary, but, OK, let's accept the $13 million figure.)

Let's picture that $13 million as filling the standard size bed of my Ford F150 pickup.

The direct losses from Wall Street's unregulated speculation in the toxic sub-prime CDOs were about $9 billion.

Based on my F150 scale, that $9 billion would fill about 6 ½ standard highway sized tractor-trailers (with a 53' trailer.)

And corporations in the US have about $2 trillion in savings, which is money not spent on jobs and production and business activities.

Based on my F150 scale, that $2 trillion would fill about 1,450 standard highway sized tractor-trailers .

Bumper to bumper, that's about 20 miles of 18 wheelers hauling that $2 trillion dollars out of our nation's economic activity.

Free Markets and Consequences

The term "free markets" means markets and commercial activities with few or no restrictions.

What human activity doesn't end in tragedy when human impulses are left unrestrained? (Whether you view it in terms of "original sin," human nature, or karma, unrestrained human impulses can be catastrophic.)

The US and world financial markets became ever "freer" under the policies and practices of (i) libertarian Alan Greenspan of the Federal Reserve and (ii) the GOP controlled US government during Bush II's first administration. (Not to mention the whole Reagan Revolution thing.)

Who thinks the crash of 2008 was just something that happened without cause?

Let's face it: Derivatives (and their rating scheme) operated in almost a pure "free market."

Derivatives were the direct cause of the crash of 2008.

Real Voter Fraud

Should it take 3 Democratic voters in Ohio to equal 1 Republican voter?

The Ohio GOP has decided it should and that it's fair.

That it's fair to negate the votes of 25% of Ohio Voters. (Calculations below.)

Republican leaders love to shout about "voter fraud." Yes, a vote cast by an ineligible person is a type of voter fraud. (After an intensive 5 year investigation, the Bush II administration found about 120 cases nationwide worth prosecuting. And one would assume half would vote for one party and half for the other – unless you assume that all single-vote fraudsters would vote for just one party....)

But also: denying an effective vote to an eligible person is another type of voter fraud.

Gerrymandering - the drawing of districts to favor one party over another is being taken to extremes by the GOP in Ohio.

Ohio is a swing state, sometimes going Democratic, sometime Republican. It is, in essence, split 50% Republican, 50% Democrat.

So it's 16 Congressional house memebers shoud be roughly split 50%/50%, right?

The GOP dominated legislature has redrawn district maps for the 16 Ohio Congressional districts in such a way as to almost ensure there will be a 12 Republican to 4 Democrat split in our House delegation.

In 2008, 5,607,879 people voted for president in Ohio. So let's say there are 2,803,939 Republican voters and the same number of Democrat voters. (Yes, this is an over-simplification, but we're talking averages here.)

There are 350,492 people per district. Through the extreme redistricting of the GOP, Democrats in 4 districts (the 8 expected by the averages minus the 4 lost through the extreme gerrymandering) are being denied representation.

That's 1,401,968 voters being denied an effective vote - 1.4 million cases of overt voter fraud. Brought to us by the Ohio GOP's extreme redistricting.