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| Earth Day 2010 Courtesy of geekstir.com |
Write people's accomplishments in stone and their faults in sand.
Benjamin Franklin
Dems Love GOP Opposing
Health Care "Reform" and Financial "Reform"?
I've been with the same insurer for 30 years; among other things, they offer banking services to members. Tonight for the first time I recall, the organization's CEO send out an email to members, communicating his concerns over a public policy issue: the financial reform package. He argues that even though they do not engage in risky investment practices, the effect of expected financial reform would be to restrict how the insurer handles its portfolio, limits its financial offerings, and decreases its margins (which, beyond reserves, are returned to members).
The basic framework of the debate is as follows: one of the basic abuses leading to the 1929 stock market crash was some use of bank deposits (unknown to the depositors) to cover security transactions. The federal government, in an effort to control against bank runs, instituted government insurance over depositor funds in Glass-Steagall; there was a wall between commercial banking and other banks (i.e., brokerages and investment banks) to avoid the moral hazard of commercial banking taking advantage of guaranteed customer deposits to engage in more speculative transactions. As a consequence, various rules and regulations inhibited innovation and margins in the commercial sector, and American banks were too fragmented to compete effectively against more unitary European and other foreign banks. In 1999, Glass-Steagall was repealed to make American banks more competitive. Progressives are arguing that the more deregulated American banking industry, particularly with unregulated markets for innovative products like derivatives, constitutes a new Wild West with new banking supermarkets, all "too big to fail".
I've made it clear where I stand on this: business success does rest on some variation of risk-taking behavior; micromanagement of the banking industry is expensive and counterproductive in terms of innovation, global market share and lower consumer cost. It's certainly not clear to me that the economic tsunami was a consequence of unitary banking, in the US or elsewhere in the developed world; in fact, there were some shotgun integrated banking marriages in the ongoing economic tsunami. There were some artificial rules set up, e.g., the Volcker rule, which focuses on spinning off proprietary trading. As Greenspan and others have noted, it is often difficult to discern between making a market and proprietary trading. Regulators have not been vigilant during these crises, and you will almost certainly have issues of regulator competence and performance in dealing with ill-structured judgments.
What should be in a final financial reform package? I'm reminded of Justice Potter Stewart's famous description of hard-core pornography: "I know it when I see it." When I look at the various incarnations of the Obama financial reform package--the Volcker rule, the $50B moral hazard proposal for "too big to fail", it's clear to me that this isn't it. What the financial reform package will do is raise costs and add another unresponsive layer of government bureaucracy, lower innovation and our global competitiveness--and only postpone the next day of financial reckoning.
Moreover, the Democrats think that the GOP opposition to the Democratic Party Healthcare Bill and so-called financial reform will backfire against them in this fall's election. I don't think so; opposition against the healthcare bill and Obama's approval ratings are still stuck at very low levels, and the latest poll on financial reform shows an even split (39%-39%).
Arizona Immigration Bill: Thumbs Down
I disagree with the new Arizona immigration law, expected to be signed shortly by Arizona governor Jan Brewer. I consider border security to be a federal, not state issue. The proposed law compels the law officer to make an assessment of immigration status, even of witnesses to a crime, based on a standard of reasonable suspicion, and the law officer can be sued if he or she fails to exercise due diligence in following up reasonable suspicion. The problem is that this impedes the law officer's flexibility in fighting crime and securing the cooperation of witnesses among undocumented visitors. The police already work with ICE. More disturbingly, "reasonable suspicion" is ill-defined and could be abused as a blank check to engage in ethnic profiling of Latino citizens, which is morally unacceptable, and no doubt a defense attorney might try to use immigration status to undermine the people's case. It's one thing to document the identity of a suspect; it's another thing to treat a police officer as little more than an extension of ICE. We must fight local crime on its own merits, and if witnesses refuse to cooperate based on extraneous factors like legal status, it is counterproductive. The state and local government should not be forced to duplicate or subsidize the rightful responsibilities of the Border Patrol.
Political Cartoon
Bob Gorrell shows us what "liberty" we have under a progressive Big Government, whom keeps a tight grip over your wallet. Maybe he'll give you a bigger allowance from your paycheck if you plead, "Please, sir, may I have some more?"
Musical Interlude: "Lost" Songs
Bread, "Lost Without Your Love"
Air Supply, "Lost in Love"
The Righteous Brothers, "You've Lost That Loving Feeling"
Sting, "If I Ever Lose My Faith in You"
REM, "Losing My Religion"
