LIBOR and Self-Regulation

While the head has been cut off of the snake at Barclays PLC, with the CEO, Bob Diamond, the COO and the Chairman of the Board all resigning, the proverbially shit still has a far way to go before it hits the fan. Although the collusion between banks to set the rates, the implicit wink and nod from the Bank of England to get Barclays to lower their rate and, especially, the callous collusion between traders in various banks to rig the market so they could make more money are all shocking, how LIBOR (the London inter-bank offered rate) was set in the first place provided the biggest offense. As described in last week's The Economist:

For LIBOR, a borrowing rate is set daily by a panel of banks for ten currencies and for 15 maturities. The most important of these, three-month dollar LIBOR, is supposed to indicate what a bank would pay to borrow dollars for three months from other banks at 11am on the day it is set. The dollar rate is fixed each day by taking estimates from a panel, currently comprising 18 banks, of what they think they would have to pay to borrow if they needed money. The top four and bottom four estimates are then discarded, and LIBOR is the average of those left. The submissions of all the participants are published, along with each day’s LIBOR fix.

Emphasis added. This is patently Linsane as is it that anyone is surprised by this. The banks involved are only required to give an estimate, based on nothing else than what they think/feel is right, and people are surprised that this system did not work like gangbusters? The article goes on to point out that banks/traders were actually incentivized to rig the numbers as millions of dollars stood to be made based on where the LIBOR was at. I mean, I know hindsight is 20/20, but how did no one think about this beforehand? We are supposed to ignore the obvious conflict of interest and hope that those good chaps in the white shoe financial firms will work in everyone's best interest? This scandal again illustrates the ridiculous amounts of problems with self-regulation in banking. As much as folks like Jamie Dimon state that regulation will handcuff, prevent growth and curb stomp the entrepreneurial spirit because firms will not invest, why would anyone believe that self-regulation is remotely possible in an industry where tinkering with a few numbers or changing a few assumptions in a few projections can mean the difference in hundreds of millions, if not billions, of dollars?

Self-regulation is clearly not the answer, but government regulation has to be, if not effective, then at least competent. The Wall Street Journal pointed out last week that Tim Geithner was at least somewhat aware of these problems in 2008 and wrote to Mervyn King, the Bank of England Governor, suggesting possible changes that could improve the LIBOR. The simplest change, however, seems obvious: to affix the LIBOR to what it actually costs banks to lend and borrow. In most cases this process would become straightforward and could easily be backed up by hard data. The Economist concurs and goes another step:

Two big changes are needed. The first is to base the rate on actual lending data where possible. Some markets are thinly traded, though, and so some hypothetical or expected rates may need to be used to create a complete set of benchmarks. So a second big change is needed. Because banks have an incentive to influence LIBOR, a new system needs to explicitly promote truth-telling and reduce the possibilities for co-ordination of quotes.

The Economists recommendation, as delivered by Rosa Abrantes-Metz of NYU Stern, is to increase the number of banks on the LIBOR panel drastically so that the average is harder to game. That's all find and dandy, but we are long passed the era of the gentleman banker. In the 1970s and, especially the 1980s, with the rise of more aggressive money making schemes through hostile takes overs, LBOs and the development of overly complicated derivative trading strategies, gentlemen banks were replaced with ravenous financial wolves on the hunt for pure profit. Promoting truth-telling seems foolishly naivete. Hopefully, after one of these scandals, people will start to see and accept that.

IMAGE: The Telegraph Online

Time to be Sane Adults on Taxing and Spending

The Congressional Budget Office (CBO), a non-partisan organization that basically does audits and analyses for Congress, recently released a report that stated, in essence, that hard choices on taxing and spending need to be made sooner rather than later to prevent a contraction that could harm the very very very slowly rebounding economy. As reported by USA Today, at the end of this year the "Bush tax cuts" are set to expire after they were extended when the original sunset clause kicked in and $1.2 trillion in spending cuts, agreed to in last summer's debt ceiling negotiations, will be triggered. In our current economic climate, as seen in Europe, such austerity measures could have a significant impact on the country's precarious recovery. The CBO's prescription, which many economists (and this non-economist) agree with is:

Or, if policymakers wanted to minimize the short-run costs of narrowing the deficit very quickly while also minimizing the longer-run costs of allowing large deficits to persist, they could enact a combination of policies: changes in taxes and spending that would widen the deficit in 2013 relative to what would occur under current law but that would reduce deficits later in the decade relative to what would occur if current policies were extended for a prolonged period.

Hopefully our elected officials can act like adults long enough to make something happen for the good of the country. And, not to get too melodramatic, the world considering how interconnected the global economy now is. Let's just say, with this being an election year and all, I'm not exactly holding my breath.


Image: By Carolyn Kaster, AP by way of USA Today.

Dimon's in the Rough

See what I did there in the title? With the mixed metaphors and play on words and such? SO clever. Anywwaaayyy, JP Morgan Chase, the formerly venerable white shoe investment banking institution, reported a $2 billion trading loss yesterday afternoon. Not so surprisingly, Jamie Dimon managed to continue to sound like a giant doucher while attempting to show some sort of facsimile of contrition. While admitting to immense risk management failures, he managed to contend that oversight of the banking industry was still a ridiculous idea. Here are two actual quotes (well a quote and a paraphrase) from the same call to analysts:

"There were many errors, sloppiness and bad judgment," Dimon said. "These were grievous mistakes, they were self-inflicted."

 followed by...

Dimon said yesterday that the timing of the trading blunders "plays right into the hands of a bunch of pundits out there" who want a strict proprietary trading ban, the Volker Rule, named for former Federal Reserve Chairman Paul Volcker.

I mean... wow. Only a wanna-be pugnacious solipsist like Jamie Dimon could somehow claim that his firm's catastrophic failure in self-oversight somehow indicates that the Volcker Rule is a bad idea. Listen, I'm no class warrior. While sympathetic to a couple of Occupy Wall Streets complaints (when they enumerated them), I'm not marching for the 99%. But people like Dimon and some of his cohorts need to get their shit together and realize that while such rules will definitely be bad for their bottom line, it'll probably be good for the health of the world economy as a whole. While this is really for another, longer, post I've been thinking about for awhile... many commentators seem reluctant to assert is that the Volcker Rule, formerly known as the Glass-Steagall Act of 1933, worked pretty well for 6 decades. Enacted in the turmoil of the Great Depression, Glass-Steagall, among other things, separate commercial banking from investment banking. Lo and behold, there were no serious shocks to the banking system anywhere approaching the same scale of the Great Depression. Our current Great Recession then occurs after it was essentially repealed in 1999 (Good call Billy) and the Volcker Rule hopes to re-institute a weaker version. Now, clearly one cannot directly correlate the repeal of Glass-Steagall and the Great Recession, but why not bring back a rule that worked so well for over half a century? I've not really heard any compelling reasons, that hold any water, from folks like JD... who's firm bears little resemblance to the old JP Morgan & Co. that once ruled Wall Street (read this fantastic book for more. Seriously, Ron Chernow is the MAN).

To make a long story not any longer than the above, I hope Jamie stops spewing BS until the time he can put forth a reasonable argument for why the provisions of the Dodd Frank Act, including the Volcker Rule, would be bad for anyone aside from him, his cohorts, and their respective bottom lines.

Time To Take Your Licks, POTUS

A lot of time is spent on this blog snarkily sniping at the GOP; rightfully in MHO, as they continue to come across as an entirely unserious political party ("It is from the Bible that man has learned cruelty, rapine, and murder; for the belief of a cruel God makes a cruel man," says my progenitor). One should not take the disdain for one party as unabashed celebration of the other, however. President Obama, no matter where exactly you ascribe the blame, has failed to live up to the immense promise exhibited during his 2008 triumph. Perhaps part of that blame falls upon his supporters, myself included, who expected far too much of the man and thought far too little of the institutions in place. There is, however, one specific failure that is definitively attributable to the man and his administration and that is the failure to move ahead with pushing the proposals from the Simpson-Bowles Commission. This failure presaged numerous future problems that came up and, I believe, continues to hurt America today.

Although hardly news as it has been harped on brought up repeatedly by Andrew Sullivan and recently by the Republican National Committee in a helpful research briefing, it has yet to gain traction with the larger public. I know we are unofficially in election mode now, but it would be nice, as others have advocated, if the POTUS showed leadership by jumping back into the business of governing by reviving Simpson-Bowles. How effective would the picture he is painting of a do-nothing GOP Congress be if, a month and change after the RNC advocated the move, Simpson-Bowles proposals were shut down or hijacked with unnecessary additions. Or, even better, how excellent would it be if the proposals went through and Obama's spinmeisters got to work highlighting his leadership on the matter?

Regardless, promises were made about how this man was a post-partisan who was about what was good for the country rather than what was good for the campaign for re-election. Though there is no one on the other side who I would consider voting for (outside of Capt. Haughty-pants Huntsmann, who has no shot at being the nominee), it would be nice if President Obama was, well, presidential and completely solidified my faith in my vote. I don't want to be threatened into it again...

*** UPDATE ***
A persuasive, and conservative, argument of why it is imperative to trim our military spending. I could not agree more and can only hope that the cuts are very significant. Much like the belief that taxes should rise to around Clinton era levels, I think our military spending should fall, at the least, to pre-9/11 levels. In the balanced checkbook view of our economy, decreased spending AND increased revenue is the only way to bring down the US deficit.

From the Annals of Common Sense- Legalize It

 

 Looking at the facts objectively, the illegality of marijuana is a failed policy. The U.S. spends roughly $8 billion dollars (BILLION) on enforcing the prohibition of marijuana with 88% of arrests coming from simple possession (See this article for more information/statistics). Despite this, the regulations are having a negligible effect on the number of people who consume marijuana. Further, since there is a federal law outlawing marijuana that supersedes any state law allowing medical marijuana, and since the DEA continues to enforce it despite the White House's proclamation they would not interfere with state medical marijuana laws, many people with serious medical issues are not able to get the significant relief that marijuana provides them with. This includes increasing comfort and hunger of those receiving radiation treatment for cancer and military veterans who suffer from post-traumatic stress disorder (PTSD). 

Not to mention the fact that prohibition of marijuana seems to come from, originally, somewhat racist motives. For example:

 Around 1915, right at the height of its popularity, cannabis was in over 100 pharmaceutical preparations and seen as a medicine extraordinaire especially for difficult to treat neuralgia. It was in the early 20th century that America discovered jazz, and jazz seems to have been born with an affinity to the good herb. Louis Armstrong, besides being one of the best Jazz musicians of all time, was a cannabis ambassador and really was the very first cannabis activist. At that time cannabis was still legal. It was available in pharmacies, of course, but also could be ordered from catalogs as Hashish Candy and was commonly passed around amongst jazz musicians as cigarettes (“muggles“).[...]

According to Dale Gieringer [2] the very first anti marijuana law was passed in California in 1913. Dr. Gieringer reports that testimony that led up to the ban included this statement from a California pharmacy official: “Within the last year we in California have been getting a large influx of Hindoos and they have in turn started quite a demand for cannabis indica; they are a very undesirable lot and the habit is growing in California very fast…”
Anti-immigrant sentiment may have started the ball rolling, but it wasn’t long until marijuana was seen as a useful weapon to put the genie of African American civil rights back into its bottle.

The policy is even more nonsensical (see what I did there?) considering the United State's current economic dire straits, since the legalization of marijuana, even if only for medical purposes at a federal level, would allow for the more careful regulation and, more importantly, taxation of marijuana. According to the Cato Institute (re-link):

The potential of the industry as a whole is frequently overlooked. Marijuana is by most estimates a more valuable commodity than corn and wheat combined, with experts estimating its annual value to be between $10 and $120 billion. The employment potential of such a market is enormous. [...] If economic stagnation continues, however, employment and tax waste will become more and more relevant in driving public support for ending Prohibition. Unfortunately, that support may have to increase dramatically before any real ground is gained.

That is a rather large spectrum that the Cato Institute is offering but, going conservative with their estimate, even if the value was only $40 billion, you would probably be looking at, roughly, a $15 billion swing to the government. This accounts for the taxes that could be established on the newly found industry as well as a little under $8 billion that would no longer have to be spent on the prohibition of marijuana (if simple possession was also decriminalized). If the government goes for full legalization (since many feel that marijuana is safer than either alcohol or cigarettes), even more could be raised with excise taxes being added on the purchase of marijuana.

Change is gonna come and the  U.S. government (C'MON Obama, we know you inhaled...) should embrace it sooner rather than later. The vast majority of Americans support medical marijuana and roughly 50% support full legalization. Why not give the people what they want and help refill the coffers/decrease unemployment? Tis a no-brainer, no? Getting ahead of public opinion policy wise (barely at that) seems much better, albeit somewhat less safe, than obstinately staying the course and allowing federalism to take its course as public opinion continues to change. Plus, everyone knows the founding fathers were all about the herb... that's just science.

How to Fail At Legislating by Really, Really Trying

This post may very well get pretty long and quite possibly convoluted, so I request your patience/forgiveness in advance. A probably (definitely) better written piece that takes on similar themes can be found here (it's Rolling Stone, but not Matt Taibbi. So back off). Feel free to jump to the last paragraph of this post for the punch line.

In a surprise to no one, the (Not so) Super Committee on Debt Reduction failed miserably at their mandate and did not even get a proposal together that they could vote on. There are a variety of reasons for this failure but (as some may have guessed) I place the blame squarely at the feet of GOP orthodoxy (religious term usage intended) on taxes. Simply put, Republicans on the Debt Reduction Committee refused to budge on additional revenue to work in tandem with the spending cuts the Dems were offering. Specifically, the GOP was requesting that the Bush tax cuts lasted beyond 2012. Obama has pushed for the continuance of the Bush tax cuts for the middle class before, but the Republicans required that ALL of the tax cuts, including for the wealthiest in this county, are extended as well. Despite the fact that the country can no longer afford them. And despite repeatedly and vociferously preaching debt reduction. The basic argument, as far as there is one, is that taxes upon the wealthy impede growth and the economic growth is really the only way we can pay down our national debt. Classic Trickle-down economics (aka Reaganomics).

There are NUMEROUS problems with this theory, but I'll try to contain myself as much as possible. First and foremost, if this is the case then WHERE THE EFF IS THE MOTHER EFF'N GROWTH YOU GODDAMN MORONS? (Looks like my Caps Lock got stuck. Whoops.). This is not some hot new theory that Paul Ryan, Mitch Daniels and Chris Christie hatched at a slumber party being all GOP young guns and such. As the name suggests, the Bush tax cuts have been around since the presidency of, wait for it... you ready?... I don't know if you are, but here it is... George Walker Bush. Yet the growth hasn't come.  Now, I guess, the plan is to maintain the status quo and hope beyond hope that the spirit of the Gipper makes it all better? These tax cuts have taken billions from our revenue stream and, along with two unfunded wars, helped mightily in bringing the US into the situation we are now in. Despite GOP mythologizing, even President Reagan raised taxes when it was necessary to keep the US economy on an even keel. You do not stand on orthodoxy when the country is reeling; you find solutions that work (such as spending cuts + increased revenues = balance; yes, that would be Personal Finance 101- Your Checkbook).

Additionally, and lastly (thankfully for you), the current talk of tax cuts to the wealthiest and corporations spurring hiring and ACTUAL growth through capital investment, R&D, new products, et al., is just a steamy load of horse manure. As today's NY Times points out, many companies, currently sitting on enormous amounts of cash, are not reinvesting that money in ways that would ACTUALLY help the economy grow. Rather, these companies are artificially approximating growth by instituting share buy backs,which push up the earnings per share. This is accounting legerdemain being used to simulate growth. The truly sad part is that investment in research and development would, eventually, help a company ACTUALLY grow. It just requires taking the long view. And in lies the rub. The short term artificial growth helps executives hit required earnings per share/growth numbers and, thus, get performance based performances attached to those numbers. Likewise, usually top executives making these decisions hold a large amount of stock in the company and can directly benefit from these buy backs. This is, clearly, a potential conflict of interest but courts give a wide amount of latitude in business judgment. Unless there is a clear breach of fiduciary duties, the games continue. All tax cuts would do is grow the pile of money that corporations are sitting on and help those running those companies get richer while paying lower tax rates. Sounds totes fair, right?

So, in other words, shit is eff'n crazy pants to the max. I can only hope that the POTUS sticks by his promises to veto any attempt to roll back the automatic spending cut trigger and a full extension of the Bush tax cuts. It may take some brass ones but, considering our current political environment (those federalists/anti-federalists were lil schoolboys comparatively), this may be the best outcome we could have hoped for.

From the Annals of Common Sense- The Sense Strikes Back...

An article in the New York Times detailed how, despite raucous clamoring from various corners for reduced corporate taxes, 280 of the biggest publicly traded firms paid about half of the official corporate tax rate. In full disclosure, the study is based on a report from the liberal leaning Citizens for Tax Justice but it is still clear that many corporations use any loophole they can find to limit their tax exposure. A money quote from the article:

American corporations are paying a smaller share of taxes than in previous decades. They paid a total of $191 billion in federal income taxes in 2010, the Internal Revenue Service said, representing about 1.3 percent of the nation’s gross domestic product. That is down from about 6 percent during the 1950s (although some of the decline is because a smaller percentage of businesses now file as corporations).

It seems, considering the facts from this article and the GOP reluctance to raise taxes, the easy solution would be to lower the corporate tax rate, say by 10% to a total of 25%, and close the loopholes. Thus, you would not have some corporations paying 10% (or 0%) and some corporations paying 35% (the actual rate) for an average 18.5% corporate tax rate. Instead, everyone pays a lower rate of 25%, which actually brings up revenue by 6.5%. And, as an added bonus, all corporations are treated fairly with none getting screwed for creative accounting. Seems fair, no? And would satisfy both political parties, no? Getting to the meat and potatoes of the matter...

But the Citizens for Tax Justice study found that two-thirds of  the American companies with significant profits overseas actually paid more in taxes to foreign governments than they did in the United States. Rather than lowering the corporate rate more, the study said, the federal government should end the subsidies and shelters that favor companies that game the system. 

“Closing the loopholes will have real benefits, including a fairer tax system, reduced federal budget deficits and more resources to improve our roads, bridges and school — things that are really important for economic development here in the United States," the report said.

Worrrdddd. Again, I do not understand why this is even an argument. You cut taxes (and give Grover Norquist a boner) while raising revenues. What's not to love? Yo, POTUS... I'm ready to head the Council of Economic Advisers. Or you can slap me into that supposed Super Committee. Whenever you're ready. Just for the record, I play ball (in terrible shape, but decent court vision... classic PG) and recently gave up cigarettes (and we can cheat together. I'll never tell. I'm like a lock box). We can do this sir. YES WE CAN!

(Image from rally requesting NoMas Paine for C.E.A. Or a random Google Images pic. None of us have any way of knowing...)

From the Annals of Common Sense...

Bi-partisan fiscal policy experts (two Democrats and two Republicans) testified in Congress in from of the so-called Super Committee on Tuesday and dropped the common sense hammer.

Bi-partisan agreement on a plan that raises $1 in additional revenue for every $3 in spending it cuts (for a total deficit reduction of 4 trillion dollars)... kinda just makes sense, no?

Hopefully the panel itself will come to its senses. This country was built on compromise and this is as good a  time as any to revisit that tradition.

Speaking of Nonsensical... 'Sup NBA Lockout

As a big NBA fan, I have been toying with the idea of a lockout post for a little while. Today, however, I came across a post in Grantland, Bill Simmons' new offshoot of ESPN, that tackled the issue better than I could.

Money shot of sensibility comes from the following quote:

Labor deals, LeBron, the Zombie-Sonics, these things show us that in the subsidized world of sports, we have supported owners rather than supporting sports. Although the subsidization seems completely unnecessary, if we are going to subsidize, we need to subsidize the sport, not the owners. And like all good subsidies, if we give the money, we get to attach strings, meaning we get to set rules so that there are no work stoppages, and so that the sport is fair to the fans, since we ultimately spend the money that makes the owners and players rich (the contempt they show for fans is another subject).  (Emphasis added).

I feel like this point is not emphasized, either in the previous NFL collective bargaining agreement fiasco or now with the NBA, nearly enough. There is tons of coverage of whether the owners or the players are greedy/getting screwed/et al. and coverage about how the fans are getting the short end of the stick because the are not games, but not nearly enough on the fact that these sports are, in nearly all cases, subsidized by the tax payer. The fans should have part ownership of the direction of these leagues because, as the author of the letter notes, "[...] like all good subsidies, if we give the money, we get to attach the strings [...]." 

Well, 'cept on Wall Street. Because Wall Street needs to be internally regulated. Imagine what could happen if they had regulations...

David Frum Flips the Script on the Euro Crisis

As noted first by Sully, David Frum has an interesting take on the benefits Germany derived from the Euro and how it had a deleterious effect on the rest of the Euro-zone. Essentially, the currency manipulation inherent in the Euro made it so that Germany became the Euro-zone's lender and many countries (Ireland, Greece, Portugal, Spain... sound familiar?) racked up an enormous amount of debt because interest rates were so low. On the other hand, because Germany had changed to the Euro and no longer had the Deutsche Mark, there was no currency appreciation in Germany that would have negatively affected their trade surplus, retention of corporations and unemployment. Basically. Germany was able to continue to grow on fundamentals while the rest of Europe built castles in the air supported by massive amounts of loans from Germany.

Not to take away from the foolish behavior of the other countries (the Irish built like a they were dru... nevermind, Greece's public sector and taxation was/is a bloody mess, etc.), but I think it's an interesting take on how Germany should cop to their complicity and stop playing the victim.

(Image from the Economist)

Surprise, Surprise... The Joint Deficit Reduction Committee Ain't That Super

The (self-proclaimed) non-partisan Center on Budget and Policy Priorities (it's level of partisanship has been debated), released a study the other day on the proposals presented by the democratic and republican members of the Joint Select Committee on Deficit Reduction that was put together in the crisis averting, debt ceiling raising deal this past August. Not all that surprisingly, the republicans on the committee still stick to the formula that it is all about spending cuts, with no additional revenue. Y'know, the Jack and the Beanstalk economic plan... plant the magic beans, wait for growth and then get your golden eggs (and much like Jack and the Beanstalk, it's a goddamn fairy tale). They also go rogue on the baseline for their estimates bu assuming that the Bush tax cuts continue (y'know those tax cuts that have been around for almost a decade but have yet to lead to one iota of economic growth) while every other estimate supposes that they expire. This is in clear contrast to Senator Max Baucus' plan, which proposes some revenue increases but that also requires significant spending cuts; including deep cuts to Medicare and Medicaid. Of course, that plan was quickly rejected by the republican members of the "Super Committee."

If the POTUS cannot take advantage of republican intransigence and differentiate between the fairy tales offered by the GOP with the compromise offered by the democrats, I don't know what to say. I guess that would prove, once and for all, that BOTH parties are completely incompetent.

EDITORS NOTE: I use y'know faarrrr too much. Don't worry, I'm working on it. Just so y'know.

And He Pulls Another Brooks!

Ahh, David Brooks... you never cease to amuse me. He went ahead and pulled a Brooks in an opinion piece yesterday by, as he is wont to do, making some very salient and important points but washing it all away with his larger and wrongheaded take-away. CLASSIC Brooks!

Good Point: Inequality between those with and without college degrees in middle America is just as important, if not much more important, than the inequality between the top 1% and the bottom 99% that you see on the coasts. Further, those without college degrees are more likely to live unhealthily, get divorced, have children out of wedlock and not encourage their own children to go to college. This is clearly overlooked in the income inequality debates and is important to recognize and reinforce.

Wrongheaded Take-Away: Just when you think he might be killing it with important and pertinent points, he goes all Brooks on yo ass with this gem:

But the fact is that Red Inequality is much more important. The zooming wealth of the top 1 percent is a problem, but it’s not nearly as big a problem as the tens of millions of Americans who have dropped out of high school or college. It’s not nearly as big a problem as the 40 percent of children who are born out of wedlock. It’s not nearly as big a problem as the nation’s stagnant human capital, its stagnant social mobility and the disorganized social fabric for the bottom 50 percent.

If your ultimate goal is to reduce inequality, then you should be furious at the doctors, bankers and C.E.O.’s. If your goal is to expand opportunity, then you have a much bigger and different agenda.

Good point David! 'Cept when, y'know, you make it an either/or decision. The point that is making so many people angry is that the GOP holds it to be self-evident that there should be no tax increases and that any attempts to balance the budget must come from cutting spending alone. Including, especially, exactly the type of spending that would help with things like those looking for a college education or those who might need some sort of social safety net behind them as they try to raise their kid as a single parent in the middle of the country. How about, instead of this false equivalence, we agree that we need some degree of SMART spending cuts while also increasing taxes on the most fortunate amongst us? Would that not both tackle the red and blue inequality? Some times things make way too much sense to ever be enacted...

On Occupy Wall Street and "Inside Job"; Or How I Learned to Stop Worrying and Love the Financial WMDs

There is a lot of discussion on all sides of the political debate about what is exactly going on in Zucotti Park with all the tree hugging hippy crap. They are either a potentially unruly, anti-Semitic mob fomenting class warfare or a group of unfocused kids with legitimate issues who need to publicize their demands and specific legislative goals. These guys and gals really cannot catch a break.

Though this is hardly groundbreaking and has been stated by others before, I think what they are protesting is quite clear and I think a main issue was presented quite clearly in the 2010 documentary "Inside Job". The film examined the causes and aftermath (or, rather, the continued consequences) of the Great Recession. Personally, I found it very interesting but thought that it went a little heavy in the demonization of Wall Street. Specifically, the attempts to link risky investing behavior with wide spread cocaine use and fun with high priced hookers after hours, on the banks' dime, were patently ridiculous IMHO (I know many i-bankers and cannot say I've see that once). What "Inside Job" nailed though, and what I think is the main issue for many, many OWS protesters, is the incestuous nature of Wall Street, the government and academia. In theory, Wall Street is supposed to be both a self-regulating body as well as regulated by government agencies with those in academia providing an additional, unbiased, check. In reality, all of these are interrelated with government officials moving back and forth between government and banking and professors at eminent educational institutions such as Harvard and Columbia making large sums of money writing papers financed by interested parties and serving on the boards of many banks and Fortune 500 companies. Everyone has a personal interest in the status quo leading to numerous conflicts of interest that are rarely addressed (don't even get me started on rating agencies... this post is running long enough).

Considering that the Great Recession is a product of a system rife with conflicts of interest that led to failures in both outside and self regulation, it is not surprising that a mass of people (those 99 percenters) would be generally angry that any and all attempts of renewed regulation are being shot down. Dodd-Frank is rife with holes and the GOP is constantly trying to defund agencies integral to reform. The banks scream about how regulation will cut into (record) profits and a return to Glass-Steagall is seen as beyond the pale despite the fact that it prevented such recessions for the better part of 60 years (more on this in the future most likely). It's enough to make anyones blood boil.

Long story short (well, not really), 1. watch "Inside Job" (as long as you take some of the rhetoric with a grain of salt) and 2. everyone should give the OWS protesters a break. They have some legitimate beefs and they are expressing their constitutionally protected right of (peaceful) free speech. Only hostage takers make demands ('Sup Mitch McConnell?).