“Bankers Are Balking at a Proposed Rule on Capital” Gretchen Morgenson – The New York Times

See on Scoop.itDidYouCheckFirst

“Over the next two months, the regulators proposing this rule will no doubt encounter a lobbying buzz saw. Mr. Hoenig (vice chairman of the F.D.I.C.) said he and his colleagues were bracing for that. Bankers, after all, prefer things just the way they are. They can load up on leverage to take risks and reap the rewards. But when losses abound? Well, they’re the taxpayers’ problem.” – Gretchen Morgenson, assistant business and financial editor and a columnist at the New York Times.

Greg Russak‘s insight:

Letting banks regulate themselves with what is called ‘risk-weighting’ didn’t work out so well in the past.

“This so-called risk-weighting approach was an abject failure. For example, the assumptions characterized the sovereign debt of Greece as risk-free, requiring that banks set aside no capital against those holdings for possible losses. The risk-weight system also determined, incorrectly, that highly rated mortgage securities fell low on the risk scale.”

Why shouldn’t banks be regulated up to their eye-balls? How can we think bankers can be trusted now?

Either they are horrible at analyzing risk and need lots and lots of oversight or, more likely, they know that in an under-regulated environment they can privatize any gains and socialize all their losses back to us through future federal bailouts.

See http://www.nytimes.com/2013/07/14/business/bankers-are-balking-at-a-proposed-rule-on-capital.html?ref=gretchenmorgenson&_r=0

GOP and Tea Party Budget Cuts Make No Sense Mathematically or Logically

To any and all self-proclaimed supporters of Ryan or the Tea Party:

Where would you start on a 2012 White House proposed budget that is projected to take in $2.6 trillion and spend $3.7 trillion? (http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/budget.pdf)

Numbers with the word trillion after them can be hard to comprehend. I got a quizzical look recently from a family member when I used million-million. So here’s what I do.

$3.7trillion = $3,700,000,000,000 = $3700 billion

Drop all the extraneous zeros and start out talking about $3700.00. Thirty seven hundred dollars is a number anyone can understand. That turns tens and hundreds of millions into pennies and dimes, respectively.

Even a number as large as one billion becomes easier to grasp out of 3700 billion when you realize that it’s one “dollar” out of 3700. That one (billion) dollar(s) becomes a paltry and practically meaningless – in a relative sense – 0.027% of the total.

With that in mind, I would be curious to know where the following would end up on anyone’s list for cuts greater than might already be built into the 2012 budget.

Planned Parenthood (Title X)
“Unlike the House Republicans’ Continuing Resolution for the rest of Fiscal Year 2011, which Congress is debating this week, the president’s budget proposes a $10 million increase to the Title X program, calling for this critical program to be funded at $327 million.”
(Source: http://www.plannedparenthood.org/about-us/newsroom/press-releases/statement-planned-parenthood-president-cecile-richards-president-obamas-2012-budget-36197.htm)

327 million = 0.327 billion. That’s 33 cents out of 3700 dollars. It’s 0.00891% of the total budgeted expense of our federal government.

“CPB requests a $495 million advance appropriation for FY 2014, an increase of $50 million over the last enacted advance appropriation ($445 million in FY 2012).”
(Source: http://www.cpb.org/appropriation/)

445 million for FY 2012 is 0.445 billion. That’s 45 cents out of 3700 dollars, or 0.01216%.

Head Start
“Continues strong support for high-quality early childhood programs with more than $8 billion for Head Start and Early Head Start to serve approximately 968,000 children and families”
(Source: http://www.whitehouse.gov/omb/factsheet_department_health/)

8 (billion) is 0.216% of 3700 (billion)

The Environmental Protection Agency’s (EPA) mission is to protect human health and the environment. The President’s 2012 Budget includes $9 billion to continue to deliver on this mission, a decrease of $1.3 billion.
(Source: http://www.whitehouse.gov/omb/factsheet_department_epa/)

A $1.3 billion decrease on $10.3 billion is a 12.6% REDUCTION in spending for the EPA.

$9 (billion) is 0.24% of 3700 (billion).

The President’s 2012 Budget for the Department of Defense (DOD) reflects that commitment, proposing $553 billion – an increase of $22 billion above the 2010 appropriation.
(Source: http://www.whitehouse.gov/omb/factsheet_department_defense/)

A $22 billion increase to $553B is a 4% INCREASE in spending on defense.

$553 (billion) is 14.94% of $3700 (billion)

So, do we start with more cuts to tiny programs that may have already had their budgets cut, or do we cut those where there’s a planned increase and that account for significant percentages of the total? I say the latter.

Mathematically and logically, do we start with expenses that represent 33 cents, 45 cents, 8 dollars, 9 dollars, or 553 dollars out of 3700? Doesn’t make sense to me to cut pennies when hundreds of dollars are possible.

Do we cut more from programs that represent 0.00891%, 0.01216%, 0.216%, 0.24%, or 15% of the total projected expense? I say the one that is 15% ought to be cut first.

Tax Revenues
Depending on what numbers one wants to accept and acknowledging that it seems impossible to do this with any certainty by people way more smarter than I, one thing seems clear even to me. The Bush era tax cuts and their extension is costing the government anywhere from 1.6 to 2.5trillion in uncollected tax revenues – mostly from the rich – and has not done one friggin’ thing to improve the economy as far as I can tell.
(Source: http://www.taxfoundation.org/news/show/26314.html)

IMHO, it’s crazy and dangerous to pretend the budget can be balanced and the debt reduced only by cutting expenses. Tax revenues also have to be increased.

My plan would be simple because I’m simply not fully informed or smarter than anyone else. It’s just where I – a common man like any tea bagger…except without the pointy hat and Ben Franklin get-up – would start.

1. Raise income and capital gains taxes on richest 2% and on corporate profits immediately to Clinton era levels. Even higher would be ok, too. I’m using that era in our history if for no other reason than it was a time when there was economic expansion and a budget surplus.

2. Change the tax code immediately to a more progressive schedule that captures more tax the more income that individuals make (and presumably, then, encouraging the true heroes of capitalism – and I mean it sincerely – the small business owner to make a decent living while having a tax incentive to invest “excess” income back into their business)

3. Close every corporate tax loop hole there is, starting with the ones that benefit oil, coal, gas, and financial services industries. They are doing just fine without them, thank you very much.

4. Not only *not* increase the DoD budget, but find ways to cut it by….I don’t know….10% seems reasonable. More is better. Stopping the pissing away of lives and money in the Middle East would help, too.

Just my 2 cents. It’s about all I have left…..

The Case for Funding The Corporation for Public Broadcasting

The following is in response to two questions recently raised by a friend who opposes funding public broadcasting. His questions were:
1. Is it really the role of government to support such enterprises?
2. Do you really believe that NPR is unbiased?

Here was my response.

First, I guess I have to take just a little bit of an issue with how you frame your first question. I believe that “citizens” should support public broadcasting. I wouldn’t call it government support.

I also would never call The Corporation for Public Broadcasting an “enterprise.” For me, that connotes visions of shareholders wanting to know how this quarter’s performance will translate into dividends and an increase in the value of their equity. I don’t envision the CPB board as having dividend payments and share price on their agenda.

I do think that a civil society ought to appreciate and place enough value on what public broadcasting brings to that society to have about 2 of our tax dollars per year per every man, woman, and child in America spent on funding the Corporation for Public Broadcasting. That’s just over one-half penny per day per citizen. The DoD’s nearly $600 billion budget, on the other hand, costs each of us $2,000 per year, or $5.48 per day. 1000 times different.

IMHO, CPB has proven their worth over the years and many times over. They brought us all the classic programming everyone likes to talk about like Sesame Street, Mr. Roger’s Neighborhood, Nova and much, much more. More recent works include http://www.pbs.org/wgbh/americanexperience/films/reagan/.

It is precisely the non-commercial, non-profit, public service characteristics that they offer that I think are most precious and most important to a civil and well-informed society.

Supporters of public broadcasting can attest to the frequent pleas for donations to make up the difference between what they get from our paltry tax dollars and what it takes to actually employ some 21,000 people (http://www.cpb.org/funding/) who bring us news and programming that simply would not be commercially viable nor nearly as valuable if it had the taint of advertising dollars influencing it. Would we really want our kids watching Big Bird shill for Taco Bell? I admit that I cringe whenever I see Exxon/Mobil thanked for their contribution to programming, and I wonder exactly how much influence they may be exercising over the content. There has been concern expressed about that, but I won’t go into it here.

I also think it’s important to put their funding into perspective. CPB is asking for $604million for FY2014 after having been, “faced with flat CPB funding for the better part of the past decade.” (http://tinyurl.com/4avg34k).

600million sounds like a big number, and it is, until you look at the budget as a whole.

The Department of Defense’s budget for 2011 is $548.9 billion (http://tinyurl.com/4f22njv), almost 1000 times greater than CPBs. I won’t deny nor debate here the value and the need for a military and the jobs tied to our industrial military complex. I just question whether we need a military that’s this big, if it’s the right type for the 21st century, and where the logic is in wanting to balance the budget by entirely eliminating the CPB while increasing defense spending?

If we’re worried about paying for CPB, I would prefer that we reduce the DoD budget by the equivalent 0.1%. One-tenth of one percent of the DoD budget funds CPB.

It gets even more difficult for me to understand the attraction for eliminating CPB’s funding when it’s compared to a $3.6 trillion dollar budget. CPB’s $0.0006 trillion funding request just doesn’t look at all meaningful. It certainly makes no sense to an accounting neophyte like me to be one of the first budget items to eliminate.

As for the question of bias, yes, of course there’s bias. We human beings, by our very nature, are biased about pretty much everything. There’s no getting around that.

To my experience, the “bias” of people who support public broadcasting seems to be toward a sincere desire for a greater depth of coverage and information that is backed by substantiated and referenced facts than can be found or even reasonably produced, for that matter, in a 22-minute local news broadcast or in the madness of the never-ending race for ratings in a 24×7 cable news world gone mad. There’s simply not much chance of big ratings and advertising money in a news story that takes 6 or 7 minutes in a country which seems to suffer from mass-attention deficit disorder and a fixation on all things Khardasian.

So, yes, I proudly profess my “bias” in support of the balance that public broadcasting brings to commercial news. Even more importantly, CPB’s work appears to be the last vestige of balance to what masquerades as news these days. I really think, now more than ever, that we need news and programming that isn’t filtered or directed out of a concern for advertising dollars, corporate profit, and unabashed political agendas.

Not all of the CPB’s efforts and funds are directed to news, of course. As I started out typing this I was listening online to WDUQ‘s broadcast of a program called Studio 360. They were discussing a book entitled “Spark” about human creativity. It included a discussion of the art, photography, and reflections of the tragedy that was 9/11. Not sure where else I would have heard this. Glad that I did. I then listened to commercial-free jazz before starting the PBS American Experience Reagan documentary. I figure I’ve already gotten much more than this year’s 2 dollars worth of news and entertainment in just one morning.

Where I think we need to try to reduce or eliminate our biases is when we talk about what to do about our federal budget.

Looking at this purely from the financial perspective and through a lens of limited knowledge and understanding of the dark art of accounting, I think we need to start cutting in places that are much bigger than CPB’s funding. It is, after all, only 0.0167% of the total budget.