Dear Mr. Mitt Romney, I'm good, thanks for asking

Dear Mr. Romney,

I'm writing to you to let you know that I feel better off now than I did four years ago.

You've been asking people to let you know if they feel like they are doing better now than they were four years ago before Barack Obama was elected president.  Well, thanks for asking, I appreciate your concern.

Yes, I feel better now, after three and one-half years of the Obama presidency, than I did four years ago, after almost two terms of the George W. Bush presidency.

Since you have asked, let me tell you why that is so.

First reason -- the family financial situation.  The plain fact of the matter is this:  it's pretty darn good right now.  Well, yes, in mid-2008 the family finances looked pretty darn good, too, but I have a solid memory and I can use it to recollect that at this time four years ago it looked like our investments were starting to topple over, along with the country's whole financial system, and maybe our personal financial security would go along for the ride.  And, just a few months later--but still before the November election--the wheels started coming off of everything.  It was a frightening time.  It makes me think of this:  Do you remember slot cars?  And do you remember what things would look like when the wheels of one of those racing cars would come off or come out of the track as it was whirling madly around the set-up?  Pieces would go flying in all directions.  Well, four years or so ago the financial system sort of looked like that.  It doesn't look that way now.   It looks a whole lot better.  No wheels coming off, no pieces flying in all directions.

Don't get me wrong here -- the nation's commercial financial system still needs work and healing.  But it's better than it was four years ago, and I expect that it will improve some more under a second Obama Administration.  Why do I expect that (you might ask)?  Simple:  because of positive, helpful and constructive actions that President Obama has sponsored and supported.  Things like the Dodd-Frank Act, the Volker Rule, the Consumer Financial Protection Bureau, and an energetic Securities and Exchange Commission.

The SEC is expected to keep an eye on the financial markets so as to encourage them to be open, honest and above-board.  (Maybe you already know all this.)  That's got to be one very tough job.  Did you know, for example, the U.S. Government Accountability office has found that under former Chairman Christopher Cox--a Bush appointee who served from 2005 to 2009--"management at the SEC actively discouraged enforcement attorneys from bringing cases" according to an article in the April 23 issue of Bloomberg Businessweek?  By contrast, according to the article, the SEC under Chairman Mary Shapiro, appointed by President Obama in 2009, has vigorously pursued financial shenanigans and won huge settlements in high-profile cases such as Galleon Group, Goldman Sachs, J.P. Morgan Securities and others.

Stick with me for another minute here on this SEC thing.  We had several years where the SEC, which was supposed to be keeping an eye on a big part of our country's financial system, was in a state of suspended animation.  And then the wheels started coming off from that very same financial system, and pieces were flying every-which-way.  In the aftermath of the destruction, a re-animated SEC managed to find a whole bunch of bad-boy actions from those previous years.  Seems to me like this makes a good case for an energetic SEC and other financial regulatory bodies.

That said, the upcoming implementation of regulations from Dodd-Frank and Volker that will bring the financial alphabet soup of CDOs, CMOs and other derivatives into the light of day gives me an increased measure of confidence that we can avoid a repeat of the financial crisis of 2007 - 2009.

So, yes, I feel better financially than I did four years ago.  Thanks for asking.

Second reason -- healthcare reform.  Yes, believe it or not, even though we--speaking personally here--were already committed to the concept of--and expenditures for--health insurance, we like it better now than it was four years ago.  There's an element of altruism in this feeling because the healthcare reform championed by President Obama and Congressional Democrats makes health insurance available to people who could not previously afford it, and that's a very positive and healthy thing, both for those people as individuals and for the American population as a whole.  But I'll be selfish about it, too:  as things stand now with the healthcare reform law, if we unexpectedly find that we have to switch health insurance plans while experiencing a preexisting medical condition, we know that we will not be discriminated against by the new insurance company.  Prior to "Obamacare," as you and some others so cleverly call it, that would not have been true; there would have been a real threat of unacceptability, either financial or otherwise, caused by making a change to a different insurance company.

So, yes, I feel better because of the increased confidence that we can have in our choices of healthcare insurance than I did four years ago.  Again, thanks for asking.

Third reason -- President Obama's actions with the rest of the world.  It's a big world, and nobody can bat 1.000 when dealing with the endless number of situations that can be conjured up by the leaders and wanna-be leaders of almost 200 other nations, but the man has caused, or been an important part of, a lot of very big changes.  To begin with:  Osama bin Laden is a part of history now, and no longer a threat to us.  If President Bush could use a whole aircraft carrier to take credit for dragging the country into the quagmire that resulted from the invasion of Iraq in 2003, then I am entitled to use this letter to you to give President Obama credit for his leadership in removing Bin Laden from the most-wanted list.  (Since you asked.)

Speaking of Iraq, here's another major foreign policy achievement by the Obama Administration:  accomplishing a solid and secure military exit from that country.  That was done before the end of last year, and it feels incredibly good to have that mess behind us.  Same thing goes for the war in Afghanistan:  we're still there, and we need to get out, but at least now we have a clear path to the exit on that one, too.

And then there was that pesky Colonel Gaddafi in Libya.  His people whacked him last year.  They were helped out with some NATO air cover.  For the United States and Europe and NATO, Libya was a much different situation as compared to Iraq and Afghanistan, with the need for different decisions and actions; it was cleverly done and I believe that there will be tremendous long-term benefits for the people of Libya, the United States, Europe and a lot of other countries, too.

And so, yes, I feel better than I did four years ago because of the ways that our country has been represented to the world by President Obama, Secretary of State Clinton and the rest of the Administration.  They are good at diplomacy, and that's a Really Big Thing.  America's future depends on cooperation and collaboration with the other nations, more so than at any other time since the end of World War II.  President Obama has done a superb job in creating a foundation for the professional diplomacy that is needed for successful cooperation and collaboration.

Nobody's perfect, and President Obama is no exception to that observation.  There are some things that he has done, or not done, that do not meet with my agreement, or that I wish could have been done differently or better.

But that's not what you asked me.  You asked me if I'm better off than I was four years ago.

Yes, I am.

Come to think of it, these things make it better for you, too.

This has been fun.  Maybe we can do it again?

Thanks for asking.

Sincerely,

Garry Herron
LeftWingCapitalist   

Government Waste or a Wise Investment of Taxpayer Dollars?

(This article is written and researched by Guy Heston, and I am pleased to include it here.)

One of the oft-repeated refrains from my friends on the right is we could get our federal budget balanced if we could just get rid of all this ridiculous, wasteful government spending.  

The late Sen. William Proxmire (D-Wis.) famously handed out Golden Fleece Awards between 1975and 1987 to highlight examples of silly government spending (yes, Democrats are concerned about government waste, too).  He noted in 1975 that the Navy used 64 aircraft to fly 1334 officers to the Tailhook Convention at the Las Vegas Hilton Hotel.  And by 1987 he was still on the military’s case, giving a Golden Fleece to the Army for ringing up a $159,000 bill to plant trees at Fort Belvoir, VA, that died within a year.  “The Army succeeded in treeing the taxpayer this time and should turn over a new leaf,” he said.  After a 12 year hiatus the awards were revived by Taxpayers for Common Sense and are still handed out.

But hold on.  What government spending is silly and what spending is common sense and a sound investment?

Would you say a $250,000 federally funded study on the sex life of the screwworm is a waste?  It turns out said study has helped save the cattle industry billions of dollars by controlling a parasite that attacks cattle.

How about a study of dog urine?  Sounds kind of silly, doesn’t it?  Only the study resulted in a better understanding of human kidney function and improvements for diabetes patients.

And what about that study called “Acoustic Trauma in the Guinea Pig?”  That seems to have waste written all over it, unless of course it resulted in better treatment of early hearing loss in infants, which it did.

The above examples, as noted by reporter Suzy Khimm in The Washington Post (Apr. 26, 2012), were provided by Rep. Jim Cooper (D-Tenn.), who has had just about enough of all this fleece talk.  He has announced the first annual Golden Goose Awards to honor the best of effective federally funded research.  Lest you think this is just another lefty wanting to up the federal deficit, he’s a Blue Dog Democrat and was joined in the announcement of the awards by Rep. Charlie Dent (R-Penn.) and Rep. Robert Dold (R-Ill.)  A rare example of Washington bi-partisanship.

They say they are taking nominations for the award and I’ve got one for them.  The Dept. of Energy (you know, the one Texas Gov. Rick Perry wants to do away with once he remembers its name) recently completed a successful test of extracting natural gas from ice crystals deepunder the permafrost in Alaska.  It’s a big deal because the U.S. Geological Survey believes there is 590 trillion cubic feet of this natural gas, enough to supply the U.S. for years to come and greatly lessen our dependence on foreign oil.  The Dept. of Energy is asking Congress for another $5 million to continue the research and it sounds like a good, common sense investment to me.

Of course we want to ferret out wasteful spending and unnecessary programs.  But we need not look far to find all sorts of examples of government funded research that enriches and lengthens our lives, helps us better understand the management of our planet and results in billions of dollars of profit for the private sector.

Visit the Fed - see lots of money, learn some good stuff

Yesterday I saw Martha Washington's face on a dollar bill.  It was a genuine one dollar bill, not a fake, and not a picture of the currency; it was the real thing.

Also, saw a 10 cent bill and a 25 cent bill, as well as a money vault with a footprint the size of an American football field, but with a ceiling that is much higher than is the height of the field's goal posts.  And I saw first-hand why we are able to go about our daily lives without worrying after the safety of our money deposits that are on account with all those street-side commercial banks that we use constantly.

All of this--and more--is contained in the Los Angeles Branch of the Federal Reserve Bank of San Francisco.  I was fortunate to be able to attend a tour of this Fed location, and to learn about it from one of the great employees who work there.  You can do this, too.

We've talked about the Fed in this space before:  The Fed:  Why was it created? and What is the Fed and who owns it? provide some background on this institution and its functioning.

Tour the Fed

It's better to see it in person.  Take my word for that.  When you have the chance, get together with some friends, co-workers or a school group--typically from 10 to 30 people--and contact a local Fed branch about a free group tour.  Here in Federal Reserve District 12 they do tours at their locations in San Francisco, Los Angeles, Salt Lake City, Seattle and Phoenix.  Similar tours are probably available in the other Districts.  I think that the Federal Reserve is eager to do some educational outreach in conjunction with its centennial in 2013.

Check on the web site that corresponds to the Fed District for your geography; a good place to start is the Federal Reserve's educational web site.  Out here in the West, tour information is available by clicking here for this part of the San Francisco Fed's web site.

My group of 22 toured the Los Angeles Federal Reserve bank branch.  It is a quietly-busy place that is, as you can probably imagine, highly secure.  The location is freeway-close, as we say here in Southern California, but not obvious or ostentatious in its appearance. The people who work there are real nice and very informative.  They are also very careful.

My guess is that there has never been a robbery there -- if you go, don't bother asking any very specific questions of this nature, because they won't give you any specific answers in return.  I tried asking a couple of specific questions, and after some polite but firm "no comment" responses I decided not to press my luck any further by asking about anything that might touch on security issues.

A missing machine gun and shinplasts

Nonetheless, it was notable that at one point in the tour our guide showed us the main police location in the building, at which time she commented on the security preparations by saying "note the machine guns in their brackets on the wall. . .oh, one is missing, I guess it must be in use."

There was no reason to ask about the nature of its use.

All kidding aside, there is lots of important and valuable work that goes on in these Fed locations.  There's a small gallery to augment the educational experience; that's where they display samples of rare and antique American currency, including the Martha Washington dollar bill and the 10 cent and 25 cent bills.  These very small denomination bills were used during the Civil War when minting metal coins was not possible because the only active mint at the time was located in Richmond, the capital of the Confederacy; in any case, the metals were needed for other war-time uses.  These same small bills--they are physically very small, in addition to being of small denomination--became known as "shinplasts" when it was discovered that they could also be used to sometimes cover a soldier's small wounds.

Better than keeping your money in a mattress

The vault, of course, is the most significant part of the whole place.  It's full of cash money.  Lots and lots of greenbacks.  That's where commercial banks store their "excess reserves."  By law and regulation, every American commercial bank must keep a set amount of "reserves" on hand so that they always have the ability to redeem depositors' funds.

(You didn't actually think that the money that you deposited in your bank is really still in that bank, did you?)

With the total deposit amounts being as big as they are these days, there's just no way that a commercial bank branch can keep its required reserves physically on site, so they settle for just enough to maintain their normal daily operations.  The remainder is called "excess" or "excess reserves."  The excess reserves end up in the Fed's vaults, like the one that I saw yesterday in the Los Angeles Fed.

The place is impressive, and a big part of why its there is to maintain confidence in the soundness of the nation's banking system.  From what I saw, the Fed does a good job for us.

Go see it for yourself; let me know if it looks any different to you.

Comments on JPMorgan's billions and the GDP

JPMorgan (and big banks in general)

Should a bank that is too big to fail be allowed to fail?

Ten years ago we wouldn't be having this conversation.  We should have been having it then, but we weren't.  My recollection is that such a question entered the popular consciousness only during the dark days of the financial crisis of 2008.

That question is actually a shorthand for a longer and more complete question; in its greater form, the question is this:  Should a bank that is too big to fail without its failure having catastrophic consequences for the overall economy be allowed to fail?

That's a good question, but I think there's a better one.

Nothing is too big to fail.  Even the biggest and strongest of the giant Sequoia trees in California's Sierra Nevada mountains will eventually be struck by lightning or some other calamity and come toppling down.
                    


These big trees have been around for centuries.  As they become really old and really big, their vulnerabilities pile up.  Eventually, something brings them down.  Others in the immediate vicinity become collateral damage and get knocked down, too, but it doesn't become a catastrophic event for the entire forest.

The comment

Confused in the Great Midwest has commented on my May 14 posting on JPMorgan's recent multi-billion dollar mistake in derivatives trading by raising the "too big to fail" question.  CITGM's comment is worth reading in full, but here's the closing point:  "Perhaps we need to challenge the notion of 'too big to fail.'  . . .  It's not yet a crime to make a bad bet. But let's also let them bear the full consequences of their decisions. The next time a mega-bank becomes insolvent as a result of poor decision-making, let's let them fail."

Those are reasonable points, and there's no denying the seductive simplicity in letting nature take its course; in making it so that people--or organizations--bear the consequences of their decisions; in recognizing the wages of sin; and then letting life continue.

Now that you've mentioned it. . .

Unfortunately, JPMorgan, and all the other big banks--all of which can fail--are big enough that any such failures would probably topple the country into a financial depression.  Collateral damage is not a pretty sight.  The failure of a big bank would create a big, ugly mess.  Lehman Brothers and Bear Stearns were not anywhere near as large as the big banks of today are, but they fell over in 2008 and we are still feeling the effects of that financial crushing.

So, yes, let's challenge the notion of "too big to fail."  I agree.

This is the question that ought to be asked:  Do we need banks that are as big as these guys have become? 

If so, then let's recognize the fact that we are allowing ourselves to be placed into a national financial environment that we have never been in before--at least, not in almost a century--and then ask this follow-on question:  What national coping mechanism is needed to enable us to exist in a secure, prosperous and democratic way when the great majority of financial power is concentrated in fewer people and organizations than at any time since the 1920s, or perhaps not since the days of the so-called Robber Barons of the late 19th and early 20th centuries?

On the flip-side, if we don't really need banks to be so big, then how do we make them smaller so that if one of them makes a bad bet and it fails, then life goes on, at least for everybody else?

The amount of financial concentration in this country is not generally appreciated.  Two days ago on May 15, Argus Market Watch reported:  "Despite the fact that there are still more than 8,000 chartered banks in the
U.S., a staggering 80% of all bank assets are held by a relative small handful of banks with greater than $10 billion of assets. Thirty years ago, that percentage was closer to 20%."  (The emphasis is mine.)

That's an earth-shaking change in the financial landscape, and the Dodd-Frank Act is the first, and only, major piece of national law-making that has been accomplished to try to update America's legal environment to address the tectonic shifts in its banking and business financial environment.

I don't know if we need mega-banks like JPMorgan, Bank of America, Citi and Wells Fargo.  But as a nation we have encouraged them to exist and to get bigger--the repeal of the Glass-Steagall Act set the foundations for today's banking system, and the banking consolidations of the last several years have built higher and higher on that foundation.  Now we have to address the consequences by either accepting the status quo and learning how to live with it--which is what the Dodd-Frank Act does--or by changing things and breaking up the big banks.

GDP and growth

Anonymous asked this question about the April 27 posting on GDP:  "Do you really need to have a GDP that is growing or could you have a flat GDP and still have a healthy economy?"

Good question, if somewhat unexpected because we focus so much of our attention on growth.

GDP should grow at least as fast as the country's population growth.  That way, the average prosperity--when measured as GDP per capita--will at least stay on an even keel.  If GDP grows at a slower rate than does the population, then there is less prosperity per person.  I would call the first scenario "healthy" and the second scenario "unhealthy."  Since the population of the United States is growing, and will continue to grow for the foreseeable future, then GDP needs to grow by at least the same rate in order for us to have a healthy economy.

JPMorgan's billions

These big bank folks don't have much fondness for government regulation of their business, but they sure make a good case for it.  Likewise, they are making a good case for voting Democratic in the November elections.

All of this is because of last week's news about the big bank JPMorgan Chase losing at least $2 billion in doing some bad trading in financial instruments called derivatives.  That's a whole lot of money.  Maybe it's not life-threatening for a bank as big as JPMorgan, but it was only about four or five years ago that similar things were said about the big financial companies Bear Stearns and Lehman Brothers, and we all know how things turned out for them, and consequently for the whole world's financial system, our nation's economy and several million American jobs:  pretty darned badly.

Simple math at JPMorgan = simple politics

Here's more perspective:  JPMorgan's CEO, a fellow named Jamie Diamon, has been quoted as grousing about the Dodd-Frank financial legislation because it will cost JPMorgan so much money to implement the new guidelines and to prepare for the regulatory oversight.  How much does he think it will cost?  Well, maybe something like $400 million to $500 million.  And yet they can drop four or five times that much in a single trade, and accept it as an affordable cost of doing business.

The math seems pretty simple to me:  if the nation's biggest bank can afford the cost of a single bad trade, then it can afford the cost of prudent oversight that is only a fraction of the cost of that bad trade.  That's true for all the other big banks, too.

The politics of this also seem pretty simple to me:  President Obama and the Democrats, in general, are the horses to ride in the November elections because they are the ones who are committed to implementing and using the financial oversight of the Dodd-Frank legislation.  The Republican challengers in this election are mistaken when they call for the repeal of Dodd-Frank and say that things are better when the big banks are allowed to oversee their operations without government involvement.  That's like saying the fox will be a great guardian in the hen-house.

Don't like Dodd-Frank?  Try remembering Bear-Lehman

Today's Republican Party is guilty of indulging in the same logic that helped Bear Stearns and Lehman Brothers to end up the way that they did.  And they took the rest us us along for a very bumpy ride.  We don't want another ride like that one.

Here's the eagle

Officially named the Dodd–Frank Wall Street Reform and Consumer Protection Act and accompanied by the mighty fine-looking Great Seal of the United States this hefty piece of legislation introduces itself with this goal statement:

"An Act to promote the financial stability of the United States by improving accountability and transparency in the financial system, to end "too big to fail", to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes."

My guess is that somewhere in the Act's 848 pages there are things to be found that are imperfect and will need some modifications to deliver on the goal.  That's not unusual.  This is complicated stuff.  Mostly, though, it's got us going in the right direction to fix some very big problems.

Big banks, big deals, big money. . .big problems

Does anybody really understand everything that the big banks do these days?  Does anybody fully understand financial derivatives, collateralized debt obligations, mortgage-backed securities, and things whose names are beyond the everyday knowledge of at least 99% of the population but which are worth millions or billions of dollars as the banks trade them daily?  I don't.  But some people do.

Apparently, though, a few employees at one of the most accomplished and savvy banks in the world thought they knew more than they did, and so the end result of their recklessness is billions in red ink.

Perhaps there was nothing illegal about what went on at JPMorgan.  Maybe this is some kind of mole-hill that looks like a mountain right now, and the view might change in a few weeks.  There's no way of knowing what will turn up as the facts are brought to light.  As I am writing this, we are still in the dark on most of the facts of this case.

But for now, at least, it evokes bad memories of other really, really smart people having way too much fun playing with lots and lots of other people's money a few years ago.

Here's the evidence, so here's my vote

Government regulation and regulators are far from perfect, but I think it's time that we learn from the mistakes of our recent past, and accept the fact that the big banks will not regulate and oversee themselves.  They have no systemic motivation to do it, and even if they did have the motivation, they still don't know how to do it.  Instead, when let loose to play without enough adult supervision, they revert to their former bad habits.  The evidence for that just keeps on piling up.

It's the same evidence that says that President Obama and the Democrats in Congress are on the right track with their overhaul of financial regulation.

They have my vote to stay on the same track.

Obesity, healthcare, its costs and some solutions

"Obesity" is a polite, clinical and objective way of saying that people weigh too much.  It's a fact that Americans weigh too much.  Those who are very much overweight are obese.  Some of the causes of this are unavoidable, but most are not.

Excessive weight and obesity are expensive.  They cause lifestyle costs for the individual, they can lead to harmful and potentially deadly consequences for the overweight person, and the costs of health insurance and health care for everybody are higher because of obesity.

How many are obese?  Take a look at this:
                                         

Almost a third of our population falls into this high-risk, high-cost category, and the numbers are growing.

How does this problem begin?  Well, apparently a lot of it begins in childhood.

This is an obvious problem that begs to be fixed, but there's apparently not enough effort being put into it to make the solutions effective.  Maybe these ideas will help:

• Nip it in the bud -- there are a lot of overweight children these days, and most of them are overweight because of poor decisions on their part and because of ineffective and lax parental guidance and oversight, and sometimes downright overindulgence; it's time that all social institutions that touch on kids--schools, houses of worship, clubs--provide meaningful education to their young charges on the dangers of weight gain.
• Financial motivation for parents -- the people who are responsible for the problem will have to be charged for it; I don't know how to do this, but it seems reasonable to think that the health insurance companies, with appropriate governmental oversight, should be able to figure this one out, since they want to position themselves as the free-market nexus of all things that are financial for healthcare.
• Remove temptation -- since children spend lots of time in and around schools, let's make sure that whatever food they can get in those venues will not contribute to the problem; let the bureaucrats replace regular milk with non-fat milk, and have them remove fatty sweets and other foods when they are found in the cafeterias and the vending machines and replace them with healthier alternatives; and there are probably lots of other similar things that could be done.

I've actually heard and seen people who are parents of young children complain about "bureaucratic meddling" when somebody in nutritional authority in the school district replaces a too-fat food available in the school with a lower-fat alternative.  Get real, people!  That's just bitching and moaning, and it's harmful to the health of the children.

It seems to me that everybody--whether it's adults who are parents of young children, the children themselves, or adults as adults--need to have what I will call a "healthy food mindset."  This means simply accepting nutritional and scientific facts, such as:  fatty foods are bad; exercise is good; excessive caloric intake is bad; portion-size awareness is good; over-indulgence is bad; moderation is good.  I know that fully-loaded ice cream tastes real good -- I love it, too!  But it's meant just for those very infrequent, special times; it's not meant to be consumed as a daily food group all by itself!

These are just a few ideas, focusing on how obesity starts with the young ones.  The overall problem of an overweight population needs to be addressed at all ages and with all segments of the population.  These corrective ideas can be extended to be effective beyond childhood, but it always seems to be a good idea to begin things at the beginning.

Many thanks to my friend who suggested writing about this.  He deserves credit, but he cherishes his privacy.