Friday, July 20, 2012

On Dodd-Frank, Prominent Republican Appears Unaware Her Own Party Is Actively Blocking It

When the headline news on various financial pages is Sheila Bair attacking the Dodd-Frank Wall Street Reform Act and asking why nothing is fixed, one must wonder why a prominent Republican would be unaware of her own party's massive efforts to obstruct, delay, defund, defang, and generally stifle every bit of Dodd-Frank.

Why isn't it fixed, Mrs. Bair? Could the true answer be that your party has made a concerted effort to stand in the way of the fix? Could the true answer be that Dodd-Frank, while it's imperfect, might have had much more positive impact if it had been properly funded and supported by the Republican House?

Mrs. Bair, haven't you noticed all those Republican efforts to hobble Dodd-Frank? Mrs. Bair, are you completely unaware of what your party is doing? Or is this yet another instance of Republicans feigning ignorance of the real reasons being their own actions in order to attack the other party for what they themselves caused? Is this yet another instance of engineering failure in order to have something to blame on someone else?

Monday, July 16, 2012

LIBOR Ought to Nail Deregulation's Coffin Shut

If our world were ruled by rational, informed decisions, the LIBOR scandal would serve as the final nail that would forever end the plague of deregulation fervor and the pestilence of laissez-faire myopia. It won't be. Most true believers will never give up that push towards more and more laissez-faire, no matter how clearly it's shown to destabilize our systems of commerce. Wave ream after ream of documented business and finance train-wrecks under their under their noses and it they'll be unconvinced. They'll still rant and rave that we need less govt just as they've been doing for decades.

"In the early 1990s, the Fed suspended its surveillance of primary dealers, another example of Alan Greenspan's laissez-faire approach to regulation. Since then, there has been "failure after failure" among their ranks, Kotok notes, citing Lehman Brothers, Bear Stearns, Merrill Lynch, MF Global, Countrywide, and now Barclays."
- Aaron Task in "Why the LIBOR Scandal Matters: ‘Destruction of Confidence to the Nth Degree’"

Even now in the wake of LIBOR, candidate Romney's "Day One, Job One" summary lists elimination of regulations as one of the five executive orders he wants to carry out on day one of a Romney term.

Our markets have proven time and again that we need a mix of market choices with government oversight. The ideal balance may vary from market to market, but in any significant market -- one on which much of the economy depends -- we need stabilizers to improve predictability of returns on investment. And we need oversight in order to not only protect the consumer but to protect the honest businessman from dishonest competitors. In an arena of sensible regulation, the honest businessman can proudly say "my company holds to good business practices and I proudly work with government regulators to confirm that to the public." And he can rest more soundly at night knowing that his competitors won't undercut his otherwise stable business with shady, risky moves that a long-term outlook would abhor. Or at least that they'll have significant risk of being caught and called out if they do. And that businessman's potential investors can better expect a reliable, predictable return year after year rather than a sudden flop into insolvency from cutting corners. Business thrives under sensible regulation that keeps it lined up with good business practices.

Yet this is a truth that runs contrary to laissez-faire dogma. And we can not expect them to give up their notions. The best we can hope for is that maybe these scandals might help to show enough of the public that deregulationists hold to a debunked economic faith and that their doctrines should be no less a subject of mockery than Branch Davidians or Flat Earthers.

When Low Is Mistaken For High (Tea and Taxes)

"Still, at the very moment anti-tax protesters were emerging as the most powerful force in American politics, handing Republicans landslide control of the U.S. House, the data show that people were sending the smallest portion of their income to the federal government since 1979."

- Lori Montgomery in "In 2009, Americans paid lowest federal tax rates in 30 years"