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 Our current Great Recession then occurs after it was essentially repealed in 1999 (Good call Billy) and the Volcker Rule hopes to re-institute a weaker version.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.

A Beautiful Legal Mind... Getting Clowned

Recently (somewhat), Jack Balkin, an esteemed Constitutional Law Professor at Yale, Dean Don Durkett look alike, and blogger at the eponymous Balkinization, wrote a post that suggested that the Occupy Wall Street movement co-opt the strategy of the Tea Partiers and make their point in light of the Constitution. Specifically, he feels that their struggle should couched in terms that reflect Article IV's "Guarantee Clause," which, essentially, guarantees a republican form of government. In his estimation, the OWS movement is arguing that our system of government is broken and no longer truly republican as corporate interests and the "1%" have taken over (i.e., we have an oligarchy, I guess).

Anywhooo, this brought a response from Tim Zick, a former professor of mine (not at William and Mary and who I did not particularly like) in the Concurring Opinions blog (I SWEAR this is the last dorky legal theory plug I'm plugging today). Prof. Zick argues that if OWS really wants to become a Constitutional movement, it has to look no farther than the Preamble. In his own words,

“We the People“ . . . in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution of the United States of America.” 

These fundamental principles seem to reflect what the protesters are most concerned about.  This is a nascent populist movement.  I’m sure if they were polled, the ”99 percent” would embrace the notion of a ”Republican form of government.”  But they would embrace that principle because it is supposed to produce ”a more perfect” union, justice, tranquility, general welfare, and the “blessings of liberty” across generations.

As much as it pains me to say this, Professor Zick seems to nail it dead to rights and totally clowns JB. What the hell is happening? My world is getting turned upside down. (Pardon the coming legal theory nerd out) Professor Balkin is getting clowned by Professor Zick? This follows his former co-blogger Marty Lederman leaving for the Office of Legal Counsel, after years of beating the Bush administration up for expansion of executive powers, and promptly okays the targeted assassination of a US citizen in a secret memo. The same OLC that is basically continuing the expansion of executive power started by Bush is now headed by former Yale Law Dean Harold "Hanju" Koh. Harold, bro, what happened to my dude who practically got into a physical altercation in regards to the expansion of executive power at a national security and the law forum? I seens it with my own eyes. We miss you...

Listen, I shed no tears over Anwar Al-Awlaki but I also cannot stand blatant hypocrisy. Jumping from criticizing, vituperatively, the Bush administration for writing secret memo for actions possibly outside the Constitution, and then turning around to do the exact same for the Obama administration? Duuudddeeessss...

(RANT OVER). On a happier note, hey there Jack Goldsmith. 'Sup buddy? How's Harvard treating you? That's coooolll. So, wanna be best friends now? Excellent! Say hello to ya motha for me.

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...)

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...