am I the only one angry about the news?

[JohnRoberts]

Executives at Fannie and Freddie get $12M in bonuses while asking congress for help covering another $6 to 7B loss. I wonder how much bonus they would expect if they were just breaking even? 

One observation, and I too am guilty, they say there are no atheists in foxholes, and I suspect we are all Keynesians when staring into the abyss of global financial collapse.  The only solution for too big to fail, is to not tolerate organizations that are too big to fail in good times. While we have to get from here to there, I guess the death by a thousand cuts of excessive regulation, limited to only these large organizations will accomplish their shrinking by the friction and inefficiency of carrying government regulators on their back...  I don't think the congress is smart enough to do this intentionally, but if that is the net result, it isn't the worst thing that could come from regulation, as long as they don't hamper free markets and competition for the smaller companies. 

Back to F&F they are currently the dominant originator of housing debt, and self interested real estate pukes are lobbying to increase the size of the mortgages F&F and will cover...  Bzzzt we do not need to expand F&F who are in conservatorship because they already failed... We need to figure out how to back out of that business and return it to private industry.

The government takeover of the student loan industry a few years back will surely not end well for tax payers. But perhaps useful if they are trying to get young people beholding to the government teat. If anything easy student loans just allowed colleges to raise prices while not delivering any more value.

Again one has to ask, not unlike the people who borrowed money for homes they could not afford, borrowing money to attend 4 years of basket weaving, and advanced basket weaving classes, then protesting because they can't find a good paying job weaving baskets, suggests another failure of personal judgement and responsibility for bad decisions.  Perhaps they should have studied engineering?

JR

Note: the sovereign debt crisis is not a too big to fail business problem, but too big to bail math problem exceeding a known fraction of GDP with debt that becomes unsustainable. At least Europe is serving as a cautionary tale for those of us here in the US paying attention (and voting).

 

[radiance]

I guess I'm with you...

but...

they say there are no atheists in foxholes, and I suspect we are all Keynesians when staring into the abyss of global financial collapse. 

no atheists in foxholes?  Keynesians? I lost you here....these are local expressions or so? Or better yet, this proves I'm undereducated...but not in debt ;-)

 

[living sounds]

As I understand it the student loan thing mainly eliminated the middle man (the banks). Of course, the whole idea of all-for-profit higher education is an absurdity in itself, and the current US system has resulted in one of the lowest social mobility scores in the developed world. US universities are able to pay high salaries and attract the best lecturers from around the world - but that's where a large portion of the students are coming from as well now, many returning home again afterwards. The long-term effects are already showing (businesses in the US have a hard time finding qualified workers), and its not going to get better with the current system. Scholarships for the few very gifted won't help to make average students better, or rather don't encourage prospective students repelled by the high bills and resulting tens of thousands of dollars in debt that would await them to take up studying. And those who can afford to study tend to choose arts over sciences and engineering, and will then face a job market where their skills are in low demand.
Also, long before all that the school system needs fixing, which in term suffers massively from the blatant inequality...


"There are no atheists in foxholes' isn't an argument against atheism, it's an argument against foxholes."
James Morrow  8)

 

[JohnRoberts]

I guess I'm with you...

but...

they say there are no atheists in foxholes, and I suspect we are all Keynesians when staring into the abyss of global financial collapse. 

no atheists in foxholes?  Keynesians? I lost you here....these are local expressions or so? Or better yet, this proves I'm undereducated...but not in debt ;-)

I see a parallel, while soldiers in foxholes may suddenly get religious when facing their mortality, conservative thinkers who do not favor bailouts, will suppress their better instincts when faced with the reality of global contagion and massive failures. I supported the bailouts at the time, as a lesser evil compared to worldwide collapse of the banking system.

This doesn't mean such bailouts are OK and should just be allowed to occur again in the future (this leads to very bad behavior by these protected businesses from the lack of moral hazard). The only real solution that satisfies the prudent policy of no more bailouts in the future while avoiding larger systemic risk, is to reduce the size of these institutions so they are no longer "too big to fail" so at risk of actual money losing failure. The failure of MF Global is painful for Corzine and his investors, but it is the proper object lesson for other investors that if they use excessive leverage and make bad bets they can lose it all. (MF was betting that Euro Zone debt would not get written down and the market turned against him, which with that much leverage was the company killer. )

Perhaps it is a little too soon to start shrinking these "too big to fail" international banks to reduce them well below their former size, as the Euro zone banks are currently under the microscope for balance sheet valuation issues regarding sovereign debt holdings, and even the EURO common currency system is at risk due to the high borrowing costs of several weak member nations (because of their debt to GDP levels and future prospects). Since we've seen how interconnected the world financial systems are we should tread cautiously (but deliberately) around anything that makes them weaker.

I am not a fan of central control and government planning, but similar to anti-trust regulation, too-big to fail management should have ruled against several of the mergers in the banking industry that made already too-big institutions even bigger. Perhaps these can be systematically unwound (not easily I bet)?

The broader concept of atheists and foxholes is that sometimes situational circumstances can dominate decision making and cause us to deviate from best practices. For example an airplane dumping out it's excess fuel is surely a bad practice, unless you are about to make a dangerous landing, where it is a lesser evil than not dumping it.

Sorry if I was unclear... the Keynesian reference is to throwing money at every problem, and perhaps an oversimplification of his full body of work, that is often viewed through the lens of Hayek (an economist holding opposing views on major policy).

JR

 

[JohnRoberts]

As I understand it the student loan thing mainly eliminated the middle man (the banks).

Not eliminate but substitute government administrators, for actual business people.

I have long argued that government should stay out of the private economy, and lending for whatever purpose in not the government's job.  The lack of a profit motive should help the consumer, but history suggests that government has the opposite of a midas touch, where everything they touch turns to ........(insert your own joke here).  This seems to be following that trajectory.

Of course, the whole idea of all-for-profit higher education is an absurdity in itself, and the current US system has resulted in one of the lowest social mobility scores in the developed world. US universities are able to pay high salaries and attract the best lecturers from around the world - but that's where a large portion of the students are coming from as well now,

The US university system was doing pretty well, while somewhat dominated by progressive liberal opinion. The bastion of free speech and free exchange of ideas, seem limited to one side of most arguments.

Higher education  is not supposed to be a money machine, but too easy credit for student loans, has led to inflation in tuition and other fees. I don't have the actual numbers at the tip of my tongue but ratio of college administrators (non-productive bureaucracy) to actual teachers has deteriorated as easy money flowed.

Now the reality of too expensive, educations that didn't teach needed skills, leaves a new class of young unemployed.

many returning home again afterwards. The long-term effects are already showing (businesses in the US have a hard time finding qualified workers), and its not going to get better with the current system.

This is not a brand new trend but has been growing as employment opportunities improve for these students in their home countries.  Also with the expansion of the reach of the Internet, many professional workers can be based anywhere in the world and access foreign markets to make a living.

We also are tangled up with excessive illegal immigration and arguably not enough legal work visa for deserving candidates.

Our political class does not have the integrity to address the real issues, as both sides jockey for political favor over handling of illagals. Pretty ugly to watch. 

Scholarships for the few very gifted won't help to make average students better, or rather don't encourage prospective students repelled by the high bills and resulting tens of thousands of dollars in debt that would await them to take up studying. And those who can afford to study tend to choose arts over sciences and engineering, and will then face a job market where their skills are in low demand.

An interesting push back against education reform is now claiming that focus on under performers is diverting resources from top performers limiting them to mediocrity. As a mostly self taught college drop out I'm inclined to call BS on that. If the smart kids are bored, make them help teach the slow learners. That will keep them busy. 

Also, long before all that the school system needs fixing, which in term suffers massively from the blatant inequality...

we're all doomed... 

"There are no atheists in foxholes' isn't an argument against atheism, it's an argument against foxholes."
James Morrow  8)

I am opposed to war, but I am even more strongly opposed to rulers who suppress their own people and deny them self determination, property rights, rule of law, and FREEDOM.  Wars are never the first or easy option, but historically the option that has given a good result, and many members of today's free world community, would not be free today, without past international interventions and wars. So another lesser evil than leaving evil unfettered in the world to run amok. 

Of course I expect opinions to vary...

JR

 

[QUEEF BAG]

'too big to fail' probably should be 'too big to live' in a lot of cases.

and there are things which could go in the 'too important to fail' basket.
some utilities for example.  well, i guess that's the root of most of the old monopolies.


for profit education...lots of bad examples to be found.  especially if is run by a
publicly traded corporation.

i suppose one thing positive about the government being in the student loan biz...
the students will probably receive a "kinder, gentler" collection pursuit after graduation.



corporations too often work the quarterly numbers at the expense of the long term.

executive pay should be tied to results.  not paper results, but REAL results.
maybe bonuses should be paid ten years after the fact.

 

[sodderboy]

Going back to F&F the government is horrible at managing loans, and the only accountability is on the tax payers.  None of the bum foliticians or fake executives had ANY accountability.  OWS should really be OJGS- Occupy Jamie Gorelick's Street.  She must own at least three houses paid for by tax payer lucre, so there are plenty of locations for protests.  Thang is that people like Scam Jones and Cass Shaftstein covet the jobs like Gorelick had.  More aspiring fake executives.

John, don't get mad at the news, they are the same DC steno pool they have always been.  It's the foliticians.  They really need to be given pink slips and the $$$ removed from DC.  That is the only solution.  The Great Society is exploding everywhere and should not be rebuilt or reinforced.

Mike

 

[JohnRoberts]

'too big to fail' probably should be 'too big to live' in a lot of cases.

To big to allow to live, but size in business generally brings advantage over smaller competitors, so big company's will generally grow larger and stronger.

A company like WalMart is a little conflicted. It tends to crowd out smaller merchants who can't compete with their scale, but it also gives consumers better pricing value that small merchants generally can't. 

I'm waiting for Walmart to take a serious run at healthcare... I don't care if the doctor I see is on the internet asking me questions from India or whatever.

and there are things which could go in the 'too important to fail' basket.
some utilities for example.

Utilities are allowed quasi-monopoly control over their markets in exchange for tight regulation and government oversight over pricing and profit.

well, i guess that's the root of most of the old monopolies.

The old fashioned reason for monopoly is the goal of all business to grow larger (more profitable) and gain more control over markets and competition. Federal anti-trust laws provide oversight and work to prevent modern monopolies. They broke up AT&T which is slowly reassembling.

There is an interesting argument going on right now between anti-trust regulators and Google over their dominance of internet paid click advertising. The twist in this case is that Google's nominal product sold to consumers, search is given away free... 

for profit education...lots of bad examples to be found.  especially if is run by a
publicly traded corporation.

Higher education was never free, but the for profit and non-profit distinction is a little fuzzy. The administrators do not work for free.

There have always been examples of fraud and abuse when the government gets involved in providing funding. I recall when I got out of the army, there was a GI Bill for education assistance, and multiple nonsense truck driving schools or whatever to capture some of that easy government money.

Higher education should be exactly like a business... If you listen to the complaints from the recent protestors on wall street, or some of them, They are complaining about paying to attend 4 years of college and not being able to get a job. Perhaps there should be a money back guarantee, where if you can't find a job, the product (education) was faulty.  Some technical trade schools literally do exactly that... Maybe it's time for the Ivy covered halls to step up. 

i suppose one thing positive about the government being in the student loan biz...
the students will probably receive a "kinder, gentler" collection pursuit after graduation.

Opinions vary...  Some are suspicious the government is just trying to expand and ensnare more of the population into an entitlements culture.

FWIW congress is in the process of overturning rules that currently make it more difficult for students to discharge student loan debts with personal bankruptcy. 

corporations too often work the quarterly numbers at the expense of the long term.

Public companies providing education for profit are often tempted by the government money tree, but chasing this too hard in the short term can kill the business, and that segment is a little bubblicious.

executive pay should be tied to results.  not paper results, but REAL results.
maybe bonuses should be paid ten years after the fact.

While there is a generally a free market for executive pay, some bonus practices based on short term results seem logically like they would encourage risky short term behavior...  Surely huge bonuses paid to traders for huge profits on home mortgages and derivatives should probably be open to claw back. 

This brings us full circle to my original complaint about F&F executives reportedly expecting $12M bonuses for losing only $6B this quarter. Since 2008 when the government seized F&F taxpayers have kicked in $180B (so far). arghhh

JR

PS: I know it's the politicians...  Jack Abramoff (notorious ex-obbyist) is out of jail and talking up a storm. He may have an interesting perspective to share from his past practices wheeling and dealing with congress.  He is pimping a book he wrote about the game. I wonder is that will wake anybody up? proabaly not...

 

[living sounds]

To big to allow to live, but size in business generally brings advantage over smaller competitors, so big company's will generally grow larger and stronger.

But we're talking about banks here! The only business with no real R&D and no relevant intellectual property whatsoever. Any "innovation" can be copied within half a day by all the competition, and competition in this sector just results in brain drain away from the real economy. Their sole role should be to provide liquidity to the rest of the market, instead they're spinning their own games...

Higher education was never free...[].

Maybe not in the US, but in other countries free higher education did/does exist. Over here you can get money from the government to pay your bills while you're a student if you meet certain criteria, and you'll have to pay back only half of it (at little or no interest). A lot of people get a higher qualification who otherwise wouldn't have been able to afford it, and it affects overall productivity in a positive way. There may be a certain amount of abuse of this system, but at the end of the day its still advantagous to do it this way.

 

[JohnRoberts]

To big to allow to live, but size in business generally brings advantage over smaller competitors, so big company's will generally grow larger and stronger.

But we're talking about banks here! The only business with no real R&D and no relevant intellectual property whatsoever. Any "innovation" can be copied within half a day by all the competition, and competition in this sector just results in brain drain away from the real economy. Their sole role should be to provide liquidity to the rest of the market, instead they're spinning their own games...

There is a fair argument for turning banks into government run utilities, but I don't know if i trust the government with even more access to private assets.

The banks themselves believe they are businesses with novel products, ranging from various services like debit cards and sundry different types of accounts.

While if not too big, too important to be run by the government, while the private sector has stumbled too.

Higher education was never free...[].

Maybe not in the US, but in other countries free higher education did/does exist. Over here you can get money from the government to pay your bills while you're a student if you meet certain criteria, and you'll have to pay back only half of it (at little or no interest). A lot of people get a higher qualification who otherwise wouldn't have been able to afford it, and it affects overall productivity in a positive way. There may be a certain amount of abuse of this system, but at the end of the day its still advantagous to do it this way.

Free...?  Apparently that free education is not very thorough, if you believe the money actually comes from the government. While the government certainly takes credit and expects fealty for giving it to you, only after they first take it from other productive citizens.

Perhaps in ancient greece you could wander into one of socrates lectures for free, but i bet even back then there was some system to manage who could attend with a quid pro guo somewhere involved.. 


JR

PS: I am not opposed to some government subsidies for education, but it is all paid for by taxpayers like me. Noting is free, but speech hopefully, and choice, and stuff like that.

 

[living sounds]

Free...?  Apparently that free education is not very thorough, if you believe the money actually comes from the government. While the government certainly takes credit and expects fealty for giving it to you, only after they first take it from other productive citizens.

Perhaps in ancient greece you could wander into one of socrates lectures for free, but i bet even back then there was some system to manage who could attend with a quid pro guo somewhere involved.. 


JR

PS: I am not opposed to some government subsidies for education, but it is all paid for by taxpayers like me. Noting is free, but speech hopefully, and choice, and stuff like that.

Well, philosphically (or physically) speaking nothing is free. And yes, the money comes from a productive society, and one of the reasons productivity is high is that quality education is availible to everyone. You might even think of it as providing liquidity to the market in the form of human resources. ;-)

 

[JohnRoberts]

Well, philosphically (or physically) speaking nothing is free. And yes, the money comes from a productive society, and one of the reasons productivity is high is that quality education is availible to everyone. You might even think of it as providing liquidity to the market in the form of human resources. ;-)

Liquidity would be like a more effective market to make it easier to exchange peoples time/effort for money. Educating people is IMO more like giving a mechanic a tool box, so he can fix cars and gain employment. While education feels like a form of wealth, and it does make us all better equipped to deal with the future, you can't eat it. However it does make individuals worth more to employers and help us earn our bread.

Education just like any investment, the capital must be employed prudently. You can't make money in the market just by throwing money at it, and you don't get good education results, without measuring and managing the process.

I was pleasantly surprised to see at least our math scores improved in the last round of standardized tests. The verbal scores are still on a slow track, suggesting kids today are not reading much outside the classroom... 

I guess we need more wizard and vampire novels to capture their interest, perhaps a few new comic books to get them reading instead of watching videos on youtube.

JR

PS Are kids using Kindles yet for texctbooks? that could save a few bucks.... And be easier to carry, not that kids don't need more exercise.

 

[JohnRoberts]

And the bad news keeps coming...  Now that our central planners have decided to block the pipeline from canada until after the elections next year, canada is already shopping the oil to the far east.

The only logic that I can imagine that makes some kind of bizarre sense, is if the government can push up the price of our oil, all their bets picking winners in the marginal alternate energy industry will look better...  This is no reason to block US jobs and cheaper energy for all of us...

I'm reminded of the french monarchy before the revolution saying "let them eat cake", our administration seems to be saying "let them drive Priuses or Volts"....

And don't get me started on the proposed christmas tree tax,,,  these suckers are incorrigible. Just what we need lets tax Christmas.

JR

 

[living sounds]

I've read a newspaper article about the environmental impact of tar sands exploration in Canada, it's extremely ugly. We should be able to engineer smarter ways, new bioengineering solutions are being developed right now.

 

[Meathands]

My question to JR (and others who may be silent) is whence the faith in deregulated markets? I agree that when the US govt. gets into things, it tends to get ugly and bloated (the DMV being the classic libertarian example). But humans are as a rule weak and selfish, so we need collective action (the government) to protect ourselves against the negative externalities of people pursuing their own profit. Otherwise we have absurd situations like people putting harmful chemicals like atrazine in our food and paying "scientists" to deceive consumers into thinking that's ok.

So, and I ask this question from a position of ignorance, why do libertarians, Tea Partiers, etc. think that markets left to their own devices will not poison, deceive, etc. the consumer until it becomes unprofitable to do so?

 

[living sounds]

So, and I ask this question from a position of ignorance, why do libertarians, Tea Partiers, etc. think that markets left to their own devices will not poison, deceive, etc. the consumer until it becomes unprofitable to do so?

Read Michael Shermer's latest book "The Believing Brain", it provides a pretty thorough rundown including the latest science about how humans form believes and reinforce them. Incidentally, he's a libertarian himself.

 

[JohnRoberts]

My question to JR (and others who may be silent) is whence the faith in deregulated markets? I agree that when the US govt. gets into things, it tends to get ugly and bloated (the DMV being the classic libertarian example). But humans are as a rule weak and selfish, so we need collective action (the government) to protect ourselves against the negative externalities of people pursuing their own profit. Otherwise we have absurd situations like people putting harmful chemicals like atrazine in our food and paying "scientists" to deceive consumers into thinking that's ok.

So, and I ask this question from a position of ignorance, why do libertarians, Tea Partiers, etc. think that markets left to their own devices will not poison, deceive, etc. the consumer until it becomes unprofitable to do so?

As I have said many times there is a place for regulation to prevent the excesses of unfettered capitalism, and even the most rigorous regulation is not smart enough to perceive a bubble while it is occurring, or prevent the next Madhoff. I find many libertarian arguments attractive but they often seem almost childishly innocent (no offense to any libertarians out there reading this)..That said even libertarians concede a need for some regulation. The government just needs to stick to their statutory responsibility (like protecting our borders and illegal immigration), and stop trying to take over every single aspect of the private economy (like student loans for one recent example), or taxes on Christmas trees.  arghhh  The pipeline decision is being made by the state dept. because it involves a foreign country.

I will ask in return, what makes you think a government made up of men, will posses the wisdom to make all these decisions for us? If you look closely at those elected to represent us, they seem less like a superior brain trust, and more like hogs at the public trough.

This basic question of how to govern has been well inspected over the millennia, and I would advise reading the federalist papers for a glimpse into the rational behind the US constitution and our form of government. it was designed to protect our personal freedoms from the self interest of our elected leaders, who are merely men, like you and me (actually not exactly like you and me). 

Despite a very good plan, the congress and lobbyists have distorted our rational governance with runaway spending and crony capitalism rewarding special interests to the detriment of the greater whole. We need to reign in the excessive spending and actions that are far from governing in (all of) our best interest. 

JR

PS: If I was china I would not only buy the Canadian oil offered, but lock in multi year contracts, so when the pipeline is finished (after 2012 election) the chinese can flip the canadian oil back to us for a profit. Think of it as a stupidity tax while that is redundant.

PPS: Yes the public will is easily swayed, and simple democracy is just a glorified lynch mob. This has all been known and understood for hundreds of years. It still takes diligence and constant attention to keep the foxes out of the hen house. I am already dreading the $Bs that will be spent by both sides on partisan advertising to sway voters to their particular viewpoint, over the next year.

 

[Meathands]

I will ask in return, what makes you think a government made up of men, will posses the wisdom to make all these decisions for us? If you look closely at those elected to represent us, they seem less like a superior brain trust, and more like hogs at the public trough.

Well put. I agree with your diagnosis of our current govt. That's why I am not a socialist--it would make "trough" even bigger and easier to access. However, I don't run to a laissez-faire position (which I'm not accusing you of), because it seems to me when I look around the world that there is such a thing as better and worse governing. Right now we have worse, but we do have systems in place that should allow us to make it better or at least to protect ourselves from the worst. Unregulated capitalist markets do not have those systems.

While, we're getting pissed, did you see this BS about Spencer Bachus' insider trading?
http://www.slate.com/blogs/weigel/2011/11/14/spencer_bachus_rogue_trader.html

 

[JohnRoberts]

This is only one example of congress passing laws that don't apply to themselves...there is a list. 

Not only congress, but their staff, and even regulatory agencies have and trade on market moving insider information.

There are market information collecting firms based in DC that hunt up this inside info and resell it to hedge funds.

Regulators are just starting to clamp down on insider trading, and it will be interesting when the trail leads back to some of their political handlers and maybe even themselves.

There are too many "reasonable man" tests, that congress fails reasonably.

I am optimistic that the tea party movement really represents a shift in government accountability demanded by voters, and it will take a couple more election cycles to clean up the senate due to staggered elections (only 1/3 every 2 years).

The republicans are a little too happy because they were out of power when this started and not in the spotlight, but in many ways they are as culpable as the democrats, and the microscope will get around to inspecting them after we clean up the more dangerous offenders who still wield power.

I am not sure there is a better form of government anywhere else, but public oversight is part of our government system and we have gotten a little slothful.  Interesting how Alexis de Tocqueville warned hundreds of years ago that the death of democracy comes when politicians figure out they can bribe voters with their own money. The IQ test for us voters is will the majority of us figure this out and stop it in time. The white house and the senate doesn't seem to get it yet. As they keep trying to "help" us with increasing spending on top of already obscene and arguably unsustainable levels. We only need to glance across the Atlantic to see how this could turn out.

While it is easy to be critical of european governments for allowing themselves to get into the current debt situation, I applaud their orderly attempts to preserve the monetary union and find a path out of the insolvency of weaker member nations. This requires great courage in leaders when some nation's citizens clearly don't have much stomach for paying the piper for past spending (like how nobody wants to pay for dope they already smoked)  8). For the union to advance beyond a simple common currency, they need to survive this test before they can face others.

JR

 

[Meathands]

I am optimistic that the tea party movement really represents a shift in government accountability demanded by voters, and it will take a couple more election cycles to clean up the senate due to staggered elections (only 1/3 every 2 years).

I'm with the Tea Party in some respects, but which so-called "Tea Party" politicians give you cause for optimism? I haven't seen one who seems committed to any ideals, including those of the Tea Party.

The republicans are a little too happy because they were out of power when this started and not in the spotlight, but in many ways they are as culpable as the democrats, and the microscope will get around to inspecting them after we clean up the more dangerous offenders who still wield power.

They were in power when this all started, but are happy enough to propagate the myth that the meltdown somehow started on 1/21/2009. Many people believe, for example, that TARP happened under Obama. I'm curious as to why you identify the current administration, full of thieves and enablers as it is, as the more dangerous threat? When I look at the Tea Party-endorsed alternatives who have never shown or expressed any commitment to deal in reality with he problems of budget, endowments, lobbyists, etc., another four years of democratic rule looks like the lesser of two evils.