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D/B/A SIFIs

Tubman_20With some ferocity, I usually resist the impulse to delve into matters financial. But this Dr. K item on GE Capital seems both clear-cut and easy-to-understand:

Most economists, I think, believe that the rise of shadow banking had less to do with real advantages of such nonbank banks than it did with regulatory arbitrage — that is, institutions like GE Capital were all about exploiting the lack of adequate oversight. And the general view is that the 2008 crisis came about largely because regulatory evasion had reached the point where an old-fashioned wave of bank runs, albeit wearing somewhat different clothes, was once again possible.

So Dodd-Frank tries to fix the bad incentives by subjecting systemically important financial institutions — SIFIs — to greater oversight, higher capital and liquidity requirements, etc.. And sure enough, what GE is in effect saying is that if we have to compete on a level playing field, if we can’t play the moral hazard game, it’s not worth being in this business. That’s a clear demonstration that reform is having a real effect.

Bold is mine, because this is key, both to Dodd-Frank and what largely works for business in the U.S. today at the behemoth level. Orwellian language about fairness and tax burdens and putting America to work [again] is just that – all myth. The megacorps want every tactical advantage to operate as alpha predators, forcing all non-megacorp entities to use language like this to accurately describe their actions. It’s win-win, and very savvy of them. Terrible for everyone/thing else. But his little crack of light – an admission that they can’t play if those are the rules is telling, so let’s listen.

Image: will we put American heroine Harriet Tubman on the $20 bill?

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The Entitlements entitlement

social securityWho is entitled to endlessly concoct reasons to tear apart a perfectly functional social safety net? Republicans, apparently:

With a little-noticed proposal, Republicans took aim at Social Security on the very first day of the 114th Congress.

The incoming GOP majority approved late Tuesday a new rule that experts say could provoke an unprecedented crisis that conservatives could use as leverage in upcoming debates over entitlement reform.

The largely overlooked change puts a new restriction on the routine transfer of tax revenues between the traditional Social Security retirement trust fund and the Social Security disability program. The transfers, known as reallocation, had historically been routine; the liberal Center for Budget and Policy Priorities said Tuesday that they had been made 11 times. The CBPP added that the disability insurance program “isn’t broken,” but the program has been strained by demographic trends that the reallocations are intended to address.

On the one hand this is sneaky, and on the other it is completely duplicitous. That’s all the hands we have. The retirement fund and the disability fund can be made completely solvent with an easy and frequently used reallocation. The entire conceit of a “broke’ government – concerned citizens in rural towns across the country love to erect these billboards denoting how we are out of money – is simply a rationale constructed to support policy ends otherwise unsupportable. Alongside the fact that no republicans actually campaign on this and such a scheme as outlined in the article must come cloaked in euphemism and  only quietly discussed.

All the while, real opportunities to correct budget priorities are beyond discussion. Entitled to be wrapped in a flag, indeed.

But the real question is, why do we even want to take care of people?

Image:Following the passage of the Social Security Act of 1935, a visiting nurse visits a rural family. Franklin D. Roosevelt Presidential Library and Museum, courtesy http://www.archives.gov

 

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Sum Zero

Guardian_KXLdepotThis reads like a cartoon manual for an evil PR firm:

The company behind the Keystone XL project is engaged in a “perpetual campaign” that would involve putting “intelligent” pressure on opponents and mobilising public support for an entirely Canadian alternative, bypassing Barack Obama and pipeline opposition in the US.

Hours before a Senate vote to force US approval of the Keystone pipeline, the industry playbook to squash opposition to the alternative has been exposed in documents made available to the Guardian.

Strategy documents drafted by the public relations giant Edelman for TransCanada Corporation – which is behind both Keystone and the proposed alternative – offer a rare inside glimpse of the extensive public relations, lobbying, and online and on-the-ground efforts undertaken for pipeline projects. The plans call, among other things, for mobilising 35,000 supporters.

So, in the face of the Senate vote, TransCanada is mobilising [sic] support for an alternate route for the pipeline. They’re going to play offense, strike first, and ‘neutralize risk before it is leveled.’ I’m not even sure I want to know what that means. But this whole thing has been catapulted far beyond merely Green issues, environmental concerns or even energy independence rhetoric – those are just for window dressing at this point. Can corporations do what they want, damn the consequences, or not? That the is principle on which this rests. Even political support in the U.S. for the pipelines seems to rest not on its benefits but on one party’s ability to jam something unwanted down the country’s throat most important aquifer.

And this is nice, from further down in the article:

They advise: “Add layers of difficulty for our opponents, distracting them from their mission and causing them to redirect their resources,” and warn: “We cannot allow our opponents to have a free pass. They will use every piece of information they can find to attack TransCanada and this project.”

Recruiting allies to deliver the pro-pipeline message is critical, Edelman says in the documents. “Third-party voices must also be identified, recruited and heard to build an echo chamber of aligned voices.”

Most certainly! Echo chambers are just darling this time of year.

Image: A depot used to store pipes for Transcanada Corp’s planned Keystone XL oil pipeline is seen in Gascoyne, North Dakota, last week. Photograph: Andrew Cullen/Reuters, via theguardian.com

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Money and How You Spend It

There was a weird point about ‘political capital’ George W. Bush kept making after he won the 2004 election: he had it (via beating Kerry) and he was going to spend it. A non-sensical notion outright, talking about political capital this way always seemed like one of those things he didn’t understand – to which we can now add painting – whose utilization in this case was not only inappropriate but ultimately futile. Recall that he was going to used his to privatize Social Security. Amazing.

For some reason this comes to mind with the news that the half-billion dollars spent in anti-Obamacare advertising has actually led to increased enrollments in the program.

Divestment is almost political capital in reverse; you have little or no political momentum whatsoever, and so you resort to your next best, perfectly legitimate weapon in a capitalist system  becomes making a moral distinctions about how you spend your money. It might be one of the only uses of morality relevant in a capitalist system, but we’ll leave that to Adorno. The Unitarian Universalist Association, however, have decided to exercise their full rights:

An overwhelming number of the 2,000 delegates present at the meeting voted to approve the resolution. But some did raise concerns about the influence the divestment movement actually has on companies. “Some people said that disinvestment is ineffective because it doesn’t actually affect companies,” Tim Brennan, Chief Treasurer and Chief Financial Officer, told us. “But it’s not about affecting the companies as much as it is about making a strong moral statement.

This a very political use of capital. Identifying Carbon Tracker 200 companies is an aggressive attempt to inform and speed the divestment movement. Just like physicians and insurance companies were within their rights to spend in the service of protecting the status quo, so to are groups seeking to upend the fossil fuel economy. Will it work? Can the moral case be made? Past attempts can be instructive.

 

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So that’s where they come from

Paul Krugman reviews “Capital in the Twenty-First Century” by French economist Thomas Piketty, and discovers the origins of “Confiscatory Taxation on Excess Incomes: An American Invention.” What do you know?

one point Piketty makes is that the modern notion that redistribution and “penalizing success” is un- and anti-American is completely at odds with our country’s actual history. One subsection in Piketty’s book is titled “Confiscatory Taxation of Excess Incomes: An American Invention”; he shows that America actually pioneered very high taxes on the rich:

When we look at the history of progressive taxation in the twentieth century, it is striking to see how far out in front Britain and the United States were, especially the latter, which invented the confiscatory tax on “excessive” incomes and fortunes.

Why was this the case? Piketty points to the American egalitarian ideal, which went along with fear of creating a hereditary aristocracy. High taxes, especially on estates, were motivated in part by “fear of coming to resemble Old Europe.” Among those who called for high estate taxation on social and political grounds was the great economist Irving Fisher.

Just to reemphasize the point: during the Progressive Era, it was commonplace and widely accepted to support high taxes on the rich specifically in order to keep the rich from getting richer — a position that few people in politics today would dare espouse.

There are many reasons our precursors would have been against these trends that support the creation of an American aristocracy. Egalitarian ideal? Isn’t that socialism? Creating wealth is fine and plenty noble, but safeguarding it is not what life is about – much to the dismay of some of us. To our further dismay, the whole notion of what was and what was not imagined by the founders of this country or by later generations who helped shape it continues to be a poorly understood system of rakes on the path. Please do watch out.

Image: Andrew Carnegie, who made a lot of money but also had ideas about the role of surplus wealth that many might find surprising.

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Taken to dumping

This is amazing. Amazingly simple.

Duke Energy has been dumping toxic liquid into a public waterway in North Carolina for sometime, attention to which has prompted state officials to cite Duke for violations. But then, a funny thing happens to the story:

Internal emails released Thursday by environmental lawyers confirm what activists have long charged: the North Carolina authorities tasked with regulating Duke Energy — the company responsible for the Dan River coal ash disaster — have been colluding with the corporation behind closed doors to undermine concerned environmental groups.

“These documents reveal a very cozy relationship between the N.C. Department of Environment and Natural Resources and Duke and a deferential approach from DENR to Duke,” said Nick Torrey, Associate Attorney at the Southern Environmental Law Center, in an interview with Common Dreams.

In January 2013, the SELC announced plans to sue Duke Energy on behalf of environmental organizations over dangerous coal ash ponds near Asheville, North Carolina. This was soon followed by similar action regarding the Riverbend coal ash dump north of Mount Holly. “For a long time, they’ve known their coal ash ponds are leaking and polluting groundwater,” said Torrey.

Under the federal Clean Water Act, citizens can sue a polluter to enforce environmental law. Yet, before they do so, they must give 60 days’ notice to the polluter to ostensibly give that polluter the opportunity clean up its act, explained Torrey. However, a state agency can file its own lawsuit, and if it does so on the exact same claims raised in the 60 day notice letter, then those groups cannot file own suit in federal court.

“Each time we sent 60 day notice letters, on approximately the 59th day, the DENR would file its own enforcement action,” said Torrey, explaining this effectively blocked the environmental suits.

So, if you are Duke Energy (or any number of other highly-profitable corporate entities) you can do as you wish with the land, sea and air, and when anyone notices you then can arrange with friendly state agencies, optimally peopled with your own people, to be hit with trivial fines and non-binding directives to “study” the potential effects of your pollution, ‘penalties’ that will effectively pre-empt other, perhaps more significant, law suits from environmental groups. Now that is authentic frontier gibberish corruption.

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Security

As much as I want to and probably should just post poems all the time, some serious OMG as Nomoremister points us to a post about the less humane reasons why high levels of inequality are so damn bad:

What is happening in America today is both unprecedented in our history, and virtually unique among Western democratic nations. The share of our labor force devoted to guard labor has risen fivefold since 1890 — a year when, in case you were wondering, the homicide rate was much higher than today.

Is this the curse of affluence? Or of ethnic diversity? We don’t think so. The guard-labor share of employment in the United States is four times what it is in Sweden, where living standards rival America’s. And Britain, with its diverse population, uses substantially less guard labor than the United States.

In America, growing inequality has been accompanied by a boom in gated communities and armies of doormen controlling access to upscale apartment buildings. We did not count the doormen, or those producing the gates, locks and security equipment. One could quibble about the numbers; we have elsewhere adopted a broader definition, including prisoners, work supervisors with disciplinary functions, and others.

Sure I’d rather dwell on why growing inequality is unjust and unhealthy for a democracy. But this is the Third World coming to a United Staes near you. Gruesome.

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50th anniversary of the War on Poverty

30_Days_of_Gratitude-_Day_15_(4104711435)Krugman offers some background on  whether the War on Poverty was/is a failure. Spoiler alert: no, it wasn’t:

The narrative in the 1970s was that the war on poverty had failed because of social disintegration: government attempts to help the poor were outpaced by the collapse of the family, rising crime, and so on. And on the right, and to some extent in the center, it was often argued that government aid was if anything promoting this social disintegration. Poverty was therefore a problem of values and social cohesion, not money.

Again, broken record-ish, Republicans will not commit to helping people by giving them money because of moral hazard arguments they do not apply on any other level. Inequality continues to be the source of many evils; meanwhile, so many people cannot see through the haze of their own advantages to see fit to extend them to anyone that doesn’t already have them.

Better rich people, please.

Image: 30 Days of Gratitude – Day 15, via Wikimedia Commons.

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Two centrist, nonpartisan organizations walk into a pension

Matt Taibbi in Rolling Stone brings some light to the sad, frustrating, infuriating story of how public pensions have been invited to a dinner where they are the main course:

There’s an arcane but highly disturbing twist to the practice of not paying required contributions into pension funds: The states that engage in this activity may also be committing securities fraud. Why? Because if a city or state hasn’t been making its required contributions, and this hasn’t been made plain to the ratings agencies, then that same city or state is actually concealing what in effect are massive secret loans and is actually far more broke than it is representing to investors when it goes out into the world and borrows money by issuing bonds.

Read the whole thing. Green has made (some of) us very mean.

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Disconnect on Energy

Back from the sunny Med. Where to begin? There is all kinds of stuff, but K at BJ had a really good post on local municipal utilities, even in conservative areas, breaking away from the nationalized ALEC propaganda about alternative energy, doing their own thing, saving money and generally moving ahead smartly:

Just 10 weeks after breaking ground, construction of Bryan Municipal Utilities’ solar generation project has been completed, and power is being supplied to Bryan’s electrical grid.
BMU broke ground for the $7.42 million solar array in early December 2011. By mid-January 2012, all 23,530 solar modules were in place, and by the first week of February, the solar plant was fully operational.
“The solar arrays are producing just as expected, and we have seen them perform up to the maximum capacity of 1.8 megawatts on sunny days,” said Steve Casebere, director of utilities.
As of February 13, the solar field has produced 100 MWh, which means it has also produced 100 solar renewable energy credits. BMU sold 2,500 solar RECs produced in 2012 to American Electric Power and Duke Energy for $606,500.
In addition to the power and energy credits, what the solar plant does not produce is valuable. With the energy produced to date, the solar field has saved 76 tons of carbon dioxide and 3.6 tons of methane gas emissions.

Meanwhile, as she says, conservative and libertarian lobbyists dig in against these and other success stories.