9/29/09
This morning’s (i.e., Tuesday, 9/29’s) Wall Street Journal reports on page A4 that stockbroker and “financial planner” Frank Bluestein, whose business was apparently domiciled in Pontiac, Michigan, has been accused by the SEC of persuading more than 800 investors, many of them elderly, to invest in a Ponzi scheme. Mr. Bluestein’s “brokerage” was known as “Fast Frank, Inc.”
If these allegations are true, Mr. Bluestein’s conduct was despicable and reprehensible, especially when one considers that many of his clients would not by any definition be considered “financially sophisticated” (unlike Bernie Madoff’s “victims”) and that, in order to increase the size of his “clients” investments, “financial planner” Mr. Bluestein urged them to refinance their mortgages, insuring their actual or figurative bankruptcy. This case is further illustration of a point I repeatedly make to my students, friends, and anyone who will listen: Anyone can call himself or herself a “financial planner.” While there are many good financial consultants, planners, etc., out there, assume anyone who brandishes the title of “financial consultant,” “financial planner,” etc., is a thief, a mountebank, and a knave until you accumulate substantial evidence to the contrary.
In furtherance of the above, I ask the “victims” of Mr. Bluestein’s alleged felonious finagling one question:
You deal with a broker called “Fast Frank” and you are surprised when he absconds with your money?
Oh, yes, the future looks bright indeed.
Tuesday, September 29, 2009
“TAX THE RICH; FEED THE POOR…’TIL THERE ARE NO RICH NO MORE”
9/29/09
Much was made earlier this week of a poll that purported to show that 51% of Americans think that the “very rich” ought to be taxed at the rate of 50%.
First, a clarification of terminology. These polls are often inane, as is much discussion of “the rich,” a concept that seemingly confuses most people. Being “rich” refers to wealth; it is a balance sheet concept. One who has a high net worth is rich. If we are talking about taxing the “rich,” we ought to be talking about wealth taxes or personal property taxes, not income taxes. Income taxes hit people with high incomes (an income statement concept), who are not necessarily rich; i.e., they have not accumulated much wealth either because they have not been earning high incomes for a long time and/or they have, rather than accumulate wealth, elected to squander their incomes on the typical fluff and baubles that preoccupies so many high income, and faux high income, Americans. Note that, as my Dad used to say, people with money didn’t get that way by spending it. However, since most people are incapable of making the distinction between the “rich” and those with high incomes, and because of the wording of the polls, we have to assume that the pollsters and respondents are using the term “rich” to mean “high income earners.” Perhaps this level of financial illiteracy is fortunate; if people knew the difference between “rich” and “high income,” they would be pushing for wealth taxes, which would be the ultimate economic, financial, and political lunacy.
Taxing people at a 50% marginal rate is both misguided and unconscionable. It is misguided because it is horrible fiscal policy; at rates of 50% and higher, many high income people, and probably the most productive, would decide that it makes more sense to turn off the alarm clock and go back to sleep rather than get out of bed and face the world. A 50% rate is unconscionable because there is no justification for the government to seize 50% of anyone’s income; in the 19th century, the serfs in Russia rebelled at tax rates much lower than 50%. The government is not entitled to 50% of anyone’s income, especially when that rate was set, under our “democratic” system, by people other than those earning income taxed at 50%. One, of course, could argue by logical extension that no tax on income is justifiable, and that might be a worthy, but ultimately pointless, argument that we can save for another day. But half one’s income seized through the coercive force of government? Even the most ardent populist has to have misgivings, even if secret misgivings, about such an idea.
That having been said, can one blame the average person for feeling that such an onerous rate of taxation is justified in the wake of the behavior of our high income earners? Has there ever been time when high earners made such an extravagant effort at audaciously, and gauchely, displaying their “wealth” (or, in reality, access to liability creation, as I have said ad nauseam in the past)? The McMansions, the summer homes, the trips, the cars, the electronics, the clothes, the food, the restaurant meals in which the size of the portions and the price of the entrees seems to be inversely related, the hookers, the gambling, the expensive booze that differs only in labeling from the cheap hooch that did the job just as effectively on the residents of the skid rows that used to occupy the space now filled with the manses of the nouveau in debt, the cocaine, and all the tiresome detritus of the modern “rich” seem to be designed simply to tell other people: “I have money and you don’t. Chump.” Or, perhaps even more true, “I have more money than you! Don’t I? Don’t I? Please tell me I do or I will just fall apart. Wah! Wah! Wah!”
Yes, we are all familiar with the gilded age, but were even the exemplars of that era as audacious as these simpering wunderkinds? Certainly, the denizens of that age were eager to display their wealth, but there were fewer of them, they tended to display their wealth only to their approximate peers (out of a display of common sense completely foreign to today’s aspiring Gatsbys), and, unlike today’s “rich,” the Vanderbilts, the Rockefellers, the Carnegies, etc., actually contributed something to our economic development; they made their money laying the foundation of our prosperity rather than ripping out that foundation to squander the proceeds on their ephemeral pleasures.
Further, this display of wealth not only incites the typical person, who gets the feeling, in most cases rightfully so in modern American, that s/he is getting screwed by the “rich,” but tends to raise doubts about capitalism, but not in the way one mighty think. In a truly free market, capitalistic society, one gets rich by working hard and being smart. But if one is to judge today’s high income earner by the way he handles his wealth, we can only conclude that he is an idiot. Who needs any of this figurative excreta on which he not only squanders his income but also drives himself into debt? Why, for example, does a guy like Jim Press, former muckety-muck at Toyota (and the first American to serve on Toyota’s board) at which he made a seven figure income for years, and then a poohbah at Cerberus and Chrysler, at which he would have made an eight or nine figure income had his judgment regarding his own industry not been so poor, find himself in actual or figurative bankruptcy? Because he couldn’t get by on a seven figure income due to his senseless squandering of his income. Why do people feel consumed to buy the junk they buy? How smart can they be? And if they work so hard, how can they possibly have time to play with the toys they buy? The way the typical “rich” person, or at least the “rich” person who is most desperate to show everyone he is “rich,” handles himself leads a sane and sober person to wonder whether it is smarts and hard work, or merely luck, that makes one rich. It seems to all the world that the Millionaire Next Door years ago moved to a McMansion, bought a fleet of Ferraris, and is now broke. Too bad for those waling children. But truly bad for those sane and sober rich, those who have accumulated wealth the old fashioned way: hard work, intelligence, dedication, focus, and a willingness to adapt and, yes, to serve their customer base and community. These people, the true heroes of our economy, will be painted with the same brush, and be subjected to the same punitive levels of taxation, as those who made their money though lucky breaks, even luckier trades, the utter foolishness of the American people, or even more nefarious means.
So a tax rate of 50% on anyone is moronic; however, those who have behaved like utter fools in the wake of their newfound (or, in some cases, longstanding) riches have brought such vitriol disguised as policy upon themselves. In fact, one wonders why the percentage of positive responses was not far higher than 51%.
Much was made earlier this week of a poll that purported to show that 51% of Americans think that the “very rich” ought to be taxed at the rate of 50%.
First, a clarification of terminology. These polls are often inane, as is much discussion of “the rich,” a concept that seemingly confuses most people. Being “rich” refers to wealth; it is a balance sheet concept. One who has a high net worth is rich. If we are talking about taxing the “rich,” we ought to be talking about wealth taxes or personal property taxes, not income taxes. Income taxes hit people with high incomes (an income statement concept), who are not necessarily rich; i.e., they have not accumulated much wealth either because they have not been earning high incomes for a long time and/or they have, rather than accumulate wealth, elected to squander their incomes on the typical fluff and baubles that preoccupies so many high income, and faux high income, Americans. Note that, as my Dad used to say, people with money didn’t get that way by spending it. However, since most people are incapable of making the distinction between the “rich” and those with high incomes, and because of the wording of the polls, we have to assume that the pollsters and respondents are using the term “rich” to mean “high income earners.” Perhaps this level of financial illiteracy is fortunate; if people knew the difference between “rich” and “high income,” they would be pushing for wealth taxes, which would be the ultimate economic, financial, and political lunacy.
Taxing people at a 50% marginal rate is both misguided and unconscionable. It is misguided because it is horrible fiscal policy; at rates of 50% and higher, many high income people, and probably the most productive, would decide that it makes more sense to turn off the alarm clock and go back to sleep rather than get out of bed and face the world. A 50% rate is unconscionable because there is no justification for the government to seize 50% of anyone’s income; in the 19th century, the serfs in Russia rebelled at tax rates much lower than 50%. The government is not entitled to 50% of anyone’s income, especially when that rate was set, under our “democratic” system, by people other than those earning income taxed at 50%. One, of course, could argue by logical extension that no tax on income is justifiable, and that might be a worthy, but ultimately pointless, argument that we can save for another day. But half one’s income seized through the coercive force of government? Even the most ardent populist has to have misgivings, even if secret misgivings, about such an idea.
That having been said, can one blame the average person for feeling that such an onerous rate of taxation is justified in the wake of the behavior of our high income earners? Has there ever been time when high earners made such an extravagant effort at audaciously, and gauchely, displaying their “wealth” (or, in reality, access to liability creation, as I have said ad nauseam in the past)? The McMansions, the summer homes, the trips, the cars, the electronics, the clothes, the food, the restaurant meals in which the size of the portions and the price of the entrees seems to be inversely related, the hookers, the gambling, the expensive booze that differs only in labeling from the cheap hooch that did the job just as effectively on the residents of the skid rows that used to occupy the space now filled with the manses of the nouveau in debt, the cocaine, and all the tiresome detritus of the modern “rich” seem to be designed simply to tell other people: “I have money and you don’t. Chump.” Or, perhaps even more true, “I have more money than you! Don’t I? Don’t I? Please tell me I do or I will just fall apart. Wah! Wah! Wah!”
Yes, we are all familiar with the gilded age, but were even the exemplars of that era as audacious as these simpering wunderkinds? Certainly, the denizens of that age were eager to display their wealth, but there were fewer of them, they tended to display their wealth only to their approximate peers (out of a display of common sense completely foreign to today’s aspiring Gatsbys), and, unlike today’s “rich,” the Vanderbilts, the Rockefellers, the Carnegies, etc., actually contributed something to our economic development; they made their money laying the foundation of our prosperity rather than ripping out that foundation to squander the proceeds on their ephemeral pleasures.
Further, this display of wealth not only incites the typical person, who gets the feeling, in most cases rightfully so in modern American, that s/he is getting screwed by the “rich,” but tends to raise doubts about capitalism, but not in the way one mighty think. In a truly free market, capitalistic society, one gets rich by working hard and being smart. But if one is to judge today’s high income earner by the way he handles his wealth, we can only conclude that he is an idiot. Who needs any of this figurative excreta on which he not only squanders his income but also drives himself into debt? Why, for example, does a guy like Jim Press, former muckety-muck at Toyota (and the first American to serve on Toyota’s board) at which he made a seven figure income for years, and then a poohbah at Cerberus and Chrysler, at which he would have made an eight or nine figure income had his judgment regarding his own industry not been so poor, find himself in actual or figurative bankruptcy? Because he couldn’t get by on a seven figure income due to his senseless squandering of his income. Why do people feel consumed to buy the junk they buy? How smart can they be? And if they work so hard, how can they possibly have time to play with the toys they buy? The way the typical “rich” person, or at least the “rich” person who is most desperate to show everyone he is “rich,” handles himself leads a sane and sober person to wonder whether it is smarts and hard work, or merely luck, that makes one rich. It seems to all the world that the Millionaire Next Door years ago moved to a McMansion, bought a fleet of Ferraris, and is now broke. Too bad for those waling children. But truly bad for those sane and sober rich, those who have accumulated wealth the old fashioned way: hard work, intelligence, dedication, focus, and a willingness to adapt and, yes, to serve their customer base and community. These people, the true heroes of our economy, will be painted with the same brush, and be subjected to the same punitive levels of taxation, as those who made their money though lucky breaks, even luckier trades, the utter foolishness of the American people, or even more nefarious means.
So a tax rate of 50% on anyone is moronic; however, those who have behaved like utter fools in the wake of their newfound (or, in some cases, longstanding) riches have brought such vitriol disguised as policy upon themselves. In fact, one wonders why the percentage of positive responses was not far higher than 51%.
Wednesday, September 23, 2009
“(INSURANCE)? WE DON’T NEED NO STINKIN’ (INSURANCE)”
9/23/09
Republicans have attacked the health care proposal of Senator Max Baucus (D, Montana) (See my already seminal 9/17/09 post GIMME A STEAK...AND GIVE THAT MAN THE BILL.) because the bill plan requires nearly all Americans to buy health insurance. Senator Charles Grassley (R., Iowa) says “Individuals should maintain their freedom to choose health care coverage, or not.” Senator Jon Kyl intoned “This bill is a stunning assault on liberty.” There are plenty of reasons not to like the Baucus proposal, but its insurance mandate, at least currently, is not one of them.
Regular readers know that there are few more ardent champions of personal freedom and liberty than yours truly. However, I also believe that along with individual rights come individual responsibilities. As it stands now, the choice not to buy health insurance is a choice to have others pay for your health care. As I said in that 9/17 piece, few, if any, people are denied health care, or at least emergency treatment, in this country. One simply goes to an emergency room and gets his or her life saved, leg set, appendix removed, etc. The care the uninsured receive may or may not be the best care possible, but it will be expensive care in any case. If the person receiving the treatment does not have insurance and cannot pay for such treatment, the hospital or other health care provider will simply spread the cost of that care among its other patients who have health insurance or who can otherwise pay for their treatment and, under the current scheme of things, the treatment of those who elected to have others pay for their care. The argument for mandating health insurance goes that if we make people buy car insurance so that other motorists with whom they come in contact (literally) don’t get stuck with bills arising from the negligence of the uninsured, it makes sense to make people buy health insurance so responsible people don’t have to pick up the tab for irresponsible people. It’s not a perfect argument; driving is a privilege, not a right. But it does have a certain logical appeal.
Still, those of us who still respect individual freedom are offended by the notion of forcing people to do anything, other than avoid inflicting bodily, financial, or other harm on others (a prohibition, by the way, that just might cover requiring carriage of health coverage). So maybe there is a way around requiring purchase of health insurance. We could make absolutely sure that the uninsured pay for whatever health care they receive by allowing providers to place liens on, or simply seize, the bank accounts, homes, and other assets of those who elect not to carry insurance. We could make such liens senior to any other debt incurred by these deadbeats, thus making lenders reluctant to lend to the uninsured. We could garnish wages, forever, if necessary, for those who have no assets or assets insufficient to cover their hospital bills. In other words, we would make failure to carry health insurance a choice, but a choice that could lead to utter destitution of those who make that choice. The result, of course, would be that electing not to purchase health insurance would not be a choice any remotely reasonable person would make, and no mandates would be necessary to get everyone to buy insurance.
There are lots of people who simply cannot afford insurance. They will get subsidies to buy insurance and, as I predicted, the size of those subsidies has been increased from those proposed in the original Baucus plan. There are more people who can afford insurance but choose to spend money on other “essentials,” like luxury cars, flat screen televisions, and homes and vacations they have no business owning or taking. Unfortunately, they, too, will get subsidies; that’s the way the world works. But no one will have an excuse not to buy insurance if doing so would result in utter financial ruin and if the “I just can’t afford it” argument is nullified by taxpayer subsidies.
Of course, one could argue, with a not inconsiderable degree of logic, that if we force people into buying insurance either by a mandate or by making it financially ruinous not to do so, we are merely forcing people to do business with those nice folks in the health insurance industry. Without a public option, the argument might continue, we are effectively forcing people to become so much cannon fodder for the health insurers. The notion is frightening to many of us and would probably lead to even greater regulation of insurers than the Baucus plan envisions, a public option, or both. But once we’ve forced people into buying insurance, given them subsidies to do so, forced health insurers to take on all comers, and provided a public option, how far are we from a completely socialized, one payer system? As I said in the aforementioned 9/17/09 post, GIMME A STEAK...AND GIVE THAT MAN THE BILL, “Health care reform is something that is very difficult to do incrementally.”
Just one more thing that has always bothered me…We often hear the ridiculous argument that for young, healthy people, the decision not to buy insurance is a rational one. Does being young and healthy somehow make one immune for accidents, car wrecks, skiing accidents, motorcycle accidents, etc.?
Republicans have attacked the health care proposal of Senator Max Baucus (D, Montana) (See my already seminal 9/17/09 post GIMME A STEAK...AND GIVE THAT MAN THE BILL.) because the bill plan requires nearly all Americans to buy health insurance. Senator Charles Grassley (R., Iowa) says “Individuals should maintain their freedom to choose health care coverage, or not.” Senator Jon Kyl intoned “This bill is a stunning assault on liberty.” There are plenty of reasons not to like the Baucus proposal, but its insurance mandate, at least currently, is not one of them.
Regular readers know that there are few more ardent champions of personal freedom and liberty than yours truly. However, I also believe that along with individual rights come individual responsibilities. As it stands now, the choice not to buy health insurance is a choice to have others pay for your health care. As I said in that 9/17 piece, few, if any, people are denied health care, or at least emergency treatment, in this country. One simply goes to an emergency room and gets his or her life saved, leg set, appendix removed, etc. The care the uninsured receive may or may not be the best care possible, but it will be expensive care in any case. If the person receiving the treatment does not have insurance and cannot pay for such treatment, the hospital or other health care provider will simply spread the cost of that care among its other patients who have health insurance or who can otherwise pay for their treatment and, under the current scheme of things, the treatment of those who elected to have others pay for their care. The argument for mandating health insurance goes that if we make people buy car insurance so that other motorists with whom they come in contact (literally) don’t get stuck with bills arising from the negligence of the uninsured, it makes sense to make people buy health insurance so responsible people don’t have to pick up the tab for irresponsible people. It’s not a perfect argument; driving is a privilege, not a right. But it does have a certain logical appeal.
Still, those of us who still respect individual freedom are offended by the notion of forcing people to do anything, other than avoid inflicting bodily, financial, or other harm on others (a prohibition, by the way, that just might cover requiring carriage of health coverage). So maybe there is a way around requiring purchase of health insurance. We could make absolutely sure that the uninsured pay for whatever health care they receive by allowing providers to place liens on, or simply seize, the bank accounts, homes, and other assets of those who elect not to carry insurance. We could make such liens senior to any other debt incurred by these deadbeats, thus making lenders reluctant to lend to the uninsured. We could garnish wages, forever, if necessary, for those who have no assets or assets insufficient to cover their hospital bills. In other words, we would make failure to carry health insurance a choice, but a choice that could lead to utter destitution of those who make that choice. The result, of course, would be that electing not to purchase health insurance would not be a choice any remotely reasonable person would make, and no mandates would be necessary to get everyone to buy insurance.
There are lots of people who simply cannot afford insurance. They will get subsidies to buy insurance and, as I predicted, the size of those subsidies has been increased from those proposed in the original Baucus plan. There are more people who can afford insurance but choose to spend money on other “essentials,” like luxury cars, flat screen televisions, and homes and vacations they have no business owning or taking. Unfortunately, they, too, will get subsidies; that’s the way the world works. But no one will have an excuse not to buy insurance if doing so would result in utter financial ruin and if the “I just can’t afford it” argument is nullified by taxpayer subsidies.
Of course, one could argue, with a not inconsiderable degree of logic, that if we force people into buying insurance either by a mandate or by making it financially ruinous not to do so, we are merely forcing people to do business with those nice folks in the health insurance industry. Without a public option, the argument might continue, we are effectively forcing people to become so much cannon fodder for the health insurers. The notion is frightening to many of us and would probably lead to even greater regulation of insurers than the Baucus plan envisions, a public option, or both. But once we’ve forced people into buying insurance, given them subsidies to do so, forced health insurers to take on all comers, and provided a public option, how far are we from a completely socialized, one payer system? As I said in the aforementioned 9/17/09 post, GIMME A STEAK...AND GIVE THAT MAN THE BILL, “Health care reform is something that is very difficult to do incrementally.”
Just one more thing that has always bothered me…We often hear the ridiculous argument that for young, healthy people, the decision not to buy insurance is a rational one. Does being young and healthy somehow make one immune for accidents, car wrecks, skiing accidents, motorcycle accidents, etc.?
Tuesday, September 22, 2009
“I GO TO RIO…”
9/22/09
Way back in February of this year, Pat Ryan, chairman of both insurance giant AON and the Chicago 2016 Committee, stated that “there is no insurance product for cost overruns of construction.” Since then, after the heat was turned up on the city and Mayor Daley for so cavalierly putting the citizens on the line for the financial consequences of the Mayor’s 21st century edition of bread (for favored contractors; this is Chicago, after all) and circuses (for those with the spondulicks, and the desire, to buy overpriced tickets for events in which we normally show not even the slightest interest), Mr. Ryan has miraculously found such insurance, or, more properly, according to the Chicago Tribune, Mr. Ryan believes he can arrange such insurance. However, there is a catch; the insurance, in which I guess we just gotta believe, will only cover cost overruns attributable to circumstances beyond the Chicago Olympic team’s control, like inflation. Such insurance will not cover cost overruns due to changes in construction plans, a common, perhaps the most common, source of cost overruns. Such insurance, if indeed it is any more than a figment of Mr. Ryan’s, and the Mayor’s, team’s febrile imagination, would not cover shortfalls due to, according to the Civic Federation of Chicago, unsold tickets or donation shortfalls. The Tribune also points out that such insurance won’t cover such quaint Chicago customs as bribes, bid-rigging, and political cronyism. So it looks very much like this “insurance,” which Mr. Daley assures us will protect the taxpayers from his impetuousness, would cover everything but those things that are most likely to occur. Selling such insurance sounds like a great deal.
Another eventuality (certainty, really) that insurance will not cover (and that may fall under the Tribune’s “political cronyism” category) is what I will call “back scratching” insurance or “we’ll make it up to you” insurance. Contractors and/or contributors will be coaxed into “contributing” to the Olympic effort, either through direct contributions or through eating cost overruns, by, when outright bullying doesn’t work, assurance that whatever is lost on the Olympics will be made up through the awarding of contracts for other city business. That way, the Olympics don’t show a loss because costs are kept low and/or hefty contributions miraculously appear. The taxpayers, the Mayor will be happy to report, will not have to come up with any dough to cover losses for the Olympics. However, taxpayers will be on the hook for the sub-rosa “make whole” deals reached with favored city contractors. And there will be no insurance for that. And, given the way things are done in this city, few people will notice.
Oh, well. Perhaps the Mayor can sell off the traffic lights. Or the naming rights to Chicago streets. Or the parks. Or the lake front (Oh, wait, the lakefront will be cluttered with Olympics detritus…okay the river front.) Or the schools. Or the police stations. Or….
Way back in February of this year, Pat Ryan, chairman of both insurance giant AON and the Chicago 2016 Committee, stated that “there is no insurance product for cost overruns of construction.” Since then, after the heat was turned up on the city and Mayor Daley for so cavalierly putting the citizens on the line for the financial consequences of the Mayor’s 21st century edition of bread (for favored contractors; this is Chicago, after all) and circuses (for those with the spondulicks, and the desire, to buy overpriced tickets for events in which we normally show not even the slightest interest), Mr. Ryan has miraculously found such insurance, or, more properly, according to the Chicago Tribune, Mr. Ryan believes he can arrange such insurance. However, there is a catch; the insurance, in which I guess we just gotta believe, will only cover cost overruns attributable to circumstances beyond the Chicago Olympic team’s control, like inflation. Such insurance will not cover cost overruns due to changes in construction plans, a common, perhaps the most common, source of cost overruns. Such insurance, if indeed it is any more than a figment of Mr. Ryan’s, and the Mayor’s, team’s febrile imagination, would not cover shortfalls due to, according to the Civic Federation of Chicago, unsold tickets or donation shortfalls. The Tribune also points out that such insurance won’t cover such quaint Chicago customs as bribes, bid-rigging, and political cronyism. So it looks very much like this “insurance,” which Mr. Daley assures us will protect the taxpayers from his impetuousness, would cover everything but those things that are most likely to occur. Selling such insurance sounds like a great deal.
Another eventuality (certainty, really) that insurance will not cover (and that may fall under the Tribune’s “political cronyism” category) is what I will call “back scratching” insurance or “we’ll make it up to you” insurance. Contractors and/or contributors will be coaxed into “contributing” to the Olympic effort, either through direct contributions or through eating cost overruns, by, when outright bullying doesn’t work, assurance that whatever is lost on the Olympics will be made up through the awarding of contracts for other city business. That way, the Olympics don’t show a loss because costs are kept low and/or hefty contributions miraculously appear. The taxpayers, the Mayor will be happy to report, will not have to come up with any dough to cover losses for the Olympics. However, taxpayers will be on the hook for the sub-rosa “make whole” deals reached with favored city contractors. And there will be no insurance for that. And, given the way things are done in this city, few people will notice.
Oh, well. Perhaps the Mayor can sell off the traffic lights. Or the naming rights to Chicago streets. Or the parks. Or the lake front (Oh, wait, the lakefront will be cluttered with Olympics detritus…okay the river front.) Or the schools. Or the police stations. Or….
Saturday, September 19, 2009
OF THE GOVERNMENT, BY THE GOVERNMENT, AND FOR THE GOVERNMENT
9/19/09
Today’s (i.e., Saturday, 9/19’s) Chicago Sun-Times reports that Cook County Board President Todd Stroger has expressed irritation at the leak of news that the Cook County State’s Attorney’s Office has issued a subpoena for financial records from Mr. Stroger’s office. Mr. Stroger does not blame Commissioner John Daley, who is chairman of both the County Board finance committee and audit committee, who revealed the existence of the subpoena to fellow commissioners in a memo he sent last week. Mr. Stroger says that Mr. Daley was merely doing his job as audit committee chairman. Instead, Mr. Stroger blames unknown commissioners for putting politics ahead of “what’s good for the government.” (Emphasis mine) Mr. Stroger said, in his usual articulate fashion, that “Committee members probably should have some confidentiality and not immediately call the press. But they are what they are.”
Several points are worthy of note:
--Why doesn’t Mr. Stroger blame Mr. Daley, who was the guy who actually revealed the subpoena to commissioners? We have to assume that Mr. Daley, one of Chicago’s more astute politicians, knows that few on the county Board can keep a secret. Is this hesitance to blame the Mayor’s brother really a consequence of Mr. Stroger’s assessment that Mr. Daley is only doing his job? When did someone’s doing one’s job ever stop Mr. Stroger from criticizing anyone in the past? Could Mr. Stroger’s hesitance to blame Mr. Daley be a reflection of who is really in charge of the County Board? Could Mr. Stroger’s obeisance add credence to those who argue that the Stroger family has been an arm of the Daley family, politically, for two generations?
--Why is John Daley head of both the audit and finance committee? I don’t profess to know a great deal about accounting, but I, many years ago, passed the CPA exam and know enough to teach, with some degree of effectiveness, survey accounting courses to MBA (and similar degree) students. It would seem that having the finance committee and the audit committee report to the same person would be an egregious violation of the most elementary auditing principles.
--Note Mr. Stroger’s words: “I just think some of ‘em (the unnamed leaking commissioners) can’t see the forest because of the trees and they don’t always look out for what’s good for the government.” I doubt if Mr. Stroger has the intellectual horsepower to realize the enormity of that statement. “What’s good for the government”? Since when is what’s good for the government the measure of performance for our public officials? How about what’s good for the citizenry? Apparently, that’s not as important to Mr. Stroger, and to a whole list of far more despicable people throughout history, as what’s good for the government. Was that a mere slip of the tongue on Mr. Stroger’s part, or was it a Freudian slip, revelatory of what this second generation career payroller really thinks is the essence of the function of a public official?
Today’s (i.e., Saturday, 9/19’s) Chicago Sun-Times reports that Cook County Board President Todd Stroger has expressed irritation at the leak of news that the Cook County State’s Attorney’s Office has issued a subpoena for financial records from Mr. Stroger’s office. Mr. Stroger does not blame Commissioner John Daley, who is chairman of both the County Board finance committee and audit committee, who revealed the existence of the subpoena to fellow commissioners in a memo he sent last week. Mr. Stroger says that Mr. Daley was merely doing his job as audit committee chairman. Instead, Mr. Stroger blames unknown commissioners for putting politics ahead of “what’s good for the government.” (Emphasis mine) Mr. Stroger said, in his usual articulate fashion, that “Committee members probably should have some confidentiality and not immediately call the press. But they are what they are.”
Several points are worthy of note:
--Why doesn’t Mr. Stroger blame Mr. Daley, who was the guy who actually revealed the subpoena to commissioners? We have to assume that Mr. Daley, one of Chicago’s more astute politicians, knows that few on the county Board can keep a secret. Is this hesitance to blame the Mayor’s brother really a consequence of Mr. Stroger’s assessment that Mr. Daley is only doing his job? When did someone’s doing one’s job ever stop Mr. Stroger from criticizing anyone in the past? Could Mr. Stroger’s hesitance to blame Mr. Daley be a reflection of who is really in charge of the County Board? Could Mr. Stroger’s obeisance add credence to those who argue that the Stroger family has been an arm of the Daley family, politically, for two generations?
--Why is John Daley head of both the audit and finance committee? I don’t profess to know a great deal about accounting, but I, many years ago, passed the CPA exam and know enough to teach, with some degree of effectiveness, survey accounting courses to MBA (and similar degree) students. It would seem that having the finance committee and the audit committee report to the same person would be an egregious violation of the most elementary auditing principles.
--Note Mr. Stroger’s words: “I just think some of ‘em (the unnamed leaking commissioners) can’t see the forest because of the trees and they don’t always look out for what’s good for the government.” I doubt if Mr. Stroger has the intellectual horsepower to realize the enormity of that statement. “What’s good for the government”? Since when is what’s good for the government the measure of performance for our public officials? How about what’s good for the citizenry? Apparently, that’s not as important to Mr. Stroger, and to a whole list of far more despicable people throughout history, as what’s good for the government. Was that a mere slip of the tongue on Mr. Stroger’s part, or was it a Freudian slip, revelatory of what this second generation career payroller really thinks is the essence of the function of a public official?
“SHE ASKS ME WHAT I MAKE…”
9/19/09
The Fed has come up with a plan to review, and maybe veto, the compensation plans of U.S. banks. The plan extends far beyond the pay packages of CEOs and COOs and extends far down the organizational (but not necessarily the compensation) ranks of bank personnel to include traders, lending officers, and other bank personnel. Further, the Fed’s oversight power would extend well beyond the mega-banks, the downfall of which would supposedly create so much havoc for our economy, to reach every Fed regulated bank in the country.
This proposal is being advanced partially in response to international pressure to impose even tougher scrutiny over bank pay, a subject bound to arise in the upcoming G-20 meeting in Pittsburgh, partially out of genuine concern about another financial “meltdown,” partially as part of an ongoing turf war with other government agencies over regulation of banks, and partially out of desire of the Fed, which, under Obsequious Ben Bernanke has become little more than an arm of the Bush/Obama administration, to extend government control even further into our nation’s financial sector.
As regular and longtime readers know, my stance on government regulation of pay in the private sector is that the whole notion is appalling, but once the banks and other financial institutions took the government’s money, they opened the door to such oversight. Until this proposal, such financial equivalent of a colonoscopy by the gentle hands of the federal government could have been avoided simply by refusing to take bailout money. Given the pusillanimous leadership of the financial sector, however, such testicularity was out of the question. So the whiners and the criers who run our nation’s financial sector took the money and, implicitly, accepted the scrutiny that came with it, and so were in no position to complain.
However, this latest Fed proposal is not tied to federal bailout money, and the proposed control over compensation would not be justified by the old, and understandable, “he who pays the piper calls the tune” adage. Instead, the Bernanke Fed is justifying this massive expansion of government power by invoking its powers as the “safety and soundess” regulator for banks. The Fed argues that it merely wants to avoid situations in which bank personnel are compensated for engaging in excessively risky activities that might result in imperiling banks that would then have to be bailed out in a redux of the “capitalism on the way up and socialism on the way down” approach to the financial system of which the Bush administration was so fond. Thus, the Fed argues, this micromanagement of bank compensation levels is essential to keep our banking system safe and sound.
This explanation of its rationale for expanding the government’s already far too intrusive role in the financial system is clearly a rationalization rather than a genuine explanation. If the Bush/Obama administration, and its lackeys at the Fed, were so concerned about the safety and soundness of the banking system, it could advance that salubriousness by announcing that the next time those tough guy champions of free market capitalism on Wall Street come begging for a bailout, the approach the federal government will take will be executed through an expanded version of the RTC of the late ‘80s and early ‘90s. The new RTC would seize those banks that get into trouble, fire their boards and their executives, and break the banks up into good banks and bad banks, auctioning off the assets of the bad banks to real capitalists rather than the faux free marketeers who speak so admiringly of the virtues of the marketplace while remaining comfortably ensconced in their government coddled multi-layered leviathans. Further, the mechanisms necessary to quickly implement such a new RTC approach should be put in place now in order to show the banks that the government is serious and to obviate the explanation given for not employing such an approach when things got messy a few years ago; i.e., that we simply did not have time to deploy a new RTC and thus our only alternative was to ladle out seas of spondulicks to the very scoundrels and mountebanks who did so much to aid and abet our self-immersion into the soup of financial dystopia from which we are, according to the experts, currently emerging.
Faced with the prospect of losing their lifetime sinecures, the people who run these financial goliaths will suddenly become very assiduous about keeping their institutions safe…and the taxpayers protected. Of course, I am assuming here that the people who ostensibly run these institutions actually understand what their traders, investment bankers, sales people, and loan officers are doing. This is perhaps a far too brave assumption.
This solution, like most of those I propose, will never be implemented because the Bush/Obama administration, and most of Congress, essentially sees its role as coddling Wall Street rather than protecting the taxpayers. The idea of actually throwing their paymasters out of the very positions from which those paymasters can dispense such abundant largesse to their puppets in Washington would be the political and financial equivalent of matricide to a career Washington politician.
The Fed has come up with a plan to review, and maybe veto, the compensation plans of U.S. banks. The plan extends far beyond the pay packages of CEOs and COOs and extends far down the organizational (but not necessarily the compensation) ranks of bank personnel to include traders, lending officers, and other bank personnel. Further, the Fed’s oversight power would extend well beyond the mega-banks, the downfall of which would supposedly create so much havoc for our economy, to reach every Fed regulated bank in the country.
This proposal is being advanced partially in response to international pressure to impose even tougher scrutiny over bank pay, a subject bound to arise in the upcoming G-20 meeting in Pittsburgh, partially out of genuine concern about another financial “meltdown,” partially as part of an ongoing turf war with other government agencies over regulation of banks, and partially out of desire of the Fed, which, under Obsequious Ben Bernanke has become little more than an arm of the Bush/Obama administration, to extend government control even further into our nation’s financial sector.
As regular and longtime readers know, my stance on government regulation of pay in the private sector is that the whole notion is appalling, but once the banks and other financial institutions took the government’s money, they opened the door to such oversight. Until this proposal, such financial equivalent of a colonoscopy by the gentle hands of the federal government could have been avoided simply by refusing to take bailout money. Given the pusillanimous leadership of the financial sector, however, such testicularity was out of the question. So the whiners and the criers who run our nation’s financial sector took the money and, implicitly, accepted the scrutiny that came with it, and so were in no position to complain.
However, this latest Fed proposal is not tied to federal bailout money, and the proposed control over compensation would not be justified by the old, and understandable, “he who pays the piper calls the tune” adage. Instead, the Bernanke Fed is justifying this massive expansion of government power by invoking its powers as the “safety and soundess” regulator for banks. The Fed argues that it merely wants to avoid situations in which bank personnel are compensated for engaging in excessively risky activities that might result in imperiling banks that would then have to be bailed out in a redux of the “capitalism on the way up and socialism on the way down” approach to the financial system of which the Bush administration was so fond. Thus, the Fed argues, this micromanagement of bank compensation levels is essential to keep our banking system safe and sound.
This explanation of its rationale for expanding the government’s already far too intrusive role in the financial system is clearly a rationalization rather than a genuine explanation. If the Bush/Obama administration, and its lackeys at the Fed, were so concerned about the safety and soundness of the banking system, it could advance that salubriousness by announcing that the next time those tough guy champions of free market capitalism on Wall Street come begging for a bailout, the approach the federal government will take will be executed through an expanded version of the RTC of the late ‘80s and early ‘90s. The new RTC would seize those banks that get into trouble, fire their boards and their executives, and break the banks up into good banks and bad banks, auctioning off the assets of the bad banks to real capitalists rather than the faux free marketeers who speak so admiringly of the virtues of the marketplace while remaining comfortably ensconced in their government coddled multi-layered leviathans. Further, the mechanisms necessary to quickly implement such a new RTC approach should be put in place now in order to show the banks that the government is serious and to obviate the explanation given for not employing such an approach when things got messy a few years ago; i.e., that we simply did not have time to deploy a new RTC and thus our only alternative was to ladle out seas of spondulicks to the very scoundrels and mountebanks who did so much to aid and abet our self-immersion into the soup of financial dystopia from which we are, according to the experts, currently emerging.
Faced with the prospect of losing their lifetime sinecures, the people who run these financial goliaths will suddenly become very assiduous about keeping their institutions safe…and the taxpayers protected. Of course, I am assuming here that the people who ostensibly run these institutions actually understand what their traders, investment bankers, sales people, and loan officers are doing. This is perhaps a far too brave assumption.
This solution, like most of those I propose, will never be implemented because the Bush/Obama administration, and most of Congress, essentially sees its role as coddling Wall Street rather than protecting the taxpayers. The idea of actually throwing their paymasters out of the very positions from which those paymasters can dispense such abundant largesse to their puppets in Washington would be the political and financial equivalent of matricide to a career Washington politician.
Thursday, September 17, 2009
EVERYBODY IN THE POOL
9/17/09
For a guy who doesn’t have an overall opinion on health care (health insurance, really) reform, I sure seem to be writing a lot about it lately!
One of the schemes being advanced as part of health insurance reform is a nationwide, government sponsored buying co-op, which would bring buyers and sellers together in order to facilitate the purchase of health insurance at an affordable price. Federal subsidies would be provided to those who meet certain income tests, thus rendering any unsubsidized insurance unaffordable for them. As a big fan of free markets and competition, this idea makes a lot of sense to me, though one wonders how well it would work under circumstances (e.g., preexisting conditions) and in an area (health insurance) in which the normal magic of the marketplace often falls flat.
One of the provisions of creation of such a co-op is that illegal immigrants would not be granted access to it, even if they wanted to participate with their own money, i.e., buy insurance without a federal subsidy. President Obama, as pusillanimous as any other politician in Washington, has been adamant about not letting undocumented immigrants access to such a pool. How much sense does this make? None. Such denial has been floated as part of a health care overhaul by the Obama administration because the President, and just about every other politician, does not want to be accused of “coddling illegals.” The “no health care for illegals under any circumstances” argument eliminates a substantial part of the motivation for overall health care reform.
I understand the argument that “illegal” has a very specific meaning, that those here illegally shouldn’t be here and thus, the argument goes, ought to be deported rather than given access to benefits designed for those here legally. But I also understand reality; we have millions upon millions of illegal immigrants in this country, and they aren’t going anywhere any time soon both because apprehending and deporting all of them would be impossible (and in some cases inhumane) and because it would be well nigh impossible, at least in the short to intermediate run, for our economy to function without undocumented workers. All these immigrants, like anyone else, have health care needs. If we don’t allow them to buy health insurance, unsubsidized health insurance, we will continue to provide emergency (and not always in the strictest sense of the word) care for free.
Let me reemphasize the word “unsubsidized.” I am not in favor of providing free or subsidized health care for illegal immigrants, especially when so many of our citizens have no health insurance. But that is precisely why I am in favor of letting illegal immigrants have access to a system that enables them to buy coverage with their own money. Do we want to allow them such access, or do we want to continue doing what we do now, i.e., provide illegal immigrants with free health care?
For a guy who doesn’t have an overall opinion on health care (health insurance, really) reform, I sure seem to be writing a lot about it lately!
One of the schemes being advanced as part of health insurance reform is a nationwide, government sponsored buying co-op, which would bring buyers and sellers together in order to facilitate the purchase of health insurance at an affordable price. Federal subsidies would be provided to those who meet certain income tests, thus rendering any unsubsidized insurance unaffordable for them. As a big fan of free markets and competition, this idea makes a lot of sense to me, though one wonders how well it would work under circumstances (e.g., preexisting conditions) and in an area (health insurance) in which the normal magic of the marketplace often falls flat.
One of the provisions of creation of such a co-op is that illegal immigrants would not be granted access to it, even if they wanted to participate with their own money, i.e., buy insurance without a federal subsidy. President Obama, as pusillanimous as any other politician in Washington, has been adamant about not letting undocumented immigrants access to such a pool. How much sense does this make? None. Such denial has been floated as part of a health care overhaul by the Obama administration because the President, and just about every other politician, does not want to be accused of “coddling illegals.” The “no health care for illegals under any circumstances” argument eliminates a substantial part of the motivation for overall health care reform.
I understand the argument that “illegal” has a very specific meaning, that those here illegally shouldn’t be here and thus, the argument goes, ought to be deported rather than given access to benefits designed for those here legally. But I also understand reality; we have millions upon millions of illegal immigrants in this country, and they aren’t going anywhere any time soon both because apprehending and deporting all of them would be impossible (and in some cases inhumane) and because it would be well nigh impossible, at least in the short to intermediate run, for our economy to function without undocumented workers. All these immigrants, like anyone else, have health care needs. If we don’t allow them to buy health insurance, unsubsidized health insurance, we will continue to provide emergency (and not always in the strictest sense of the word) care for free.
Let me reemphasize the word “unsubsidized.” I am not in favor of providing free or subsidized health care for illegal immigrants, especially when so many of our citizens have no health insurance. But that is precisely why I am in favor of letting illegal immigrants have access to a system that enables them to buy coverage with their own money. Do we want to allow them such access, or do we want to continue doing what we do now, i.e., provide illegal immigrants with free health care?
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