Tuesday, December 8, 2009
Monday, November 2, 2009
Wednesday, July 22, 2009
Wednesday, July 15, 2009
We here at The Directive really don't care how big GS or JPM or Wells or BoA or Citi are in isolation. What we care about, to paraphrase Col Jessup is this " banks live in a world that has tax payers and these banks need to be bailed out repeatly by the tax payers. Who's gonna do it? You? You, Mr. Dimon, you Mr. Blankfien? We have a greater responsibility than you can possibly fathom. You weep for Lehman and curse the taxpayers; you have that luxury. You have the luxury of not knowing what we know: that Lehman's death, while tragic, probably saved future pain and that the taxpayers existence, while grotesque and incomprehensible to you, keeps your ass afloat. You don't want the truth because deep down in places you don't talk about at the Hamptons you want the tax payers on that wall, you need the tax payers on that wall. We use words like honor, code, loyalty. We use then as the backbone of a life trying to keep the nation' financial shit together. You use them as a punchline. We have neither the time nor the inclination to explain ourselves to firms who rise and sleep under the blanket of steep yield curves and govt guaranteed deposits we provide and then questions the conditions under which we provide it. We would rather you just said "thank you," and went on your way. Otherwise, we suggest that you dump the FDIC guarantee on all those deposits and the ATM card from the Fed and stand on your own. Either way, we don't give a damn what you think you are entitled to.
Friday, July 10, 2009
"Of all tyrannies, a tyranny exercised for the good of its victims may be the most oppressive. It may be better to live under robber barons than under omnipotent moral busybodies. The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience. They may be more likely to go to Heaven yet at the same time likelier to make a Hell of earth. Their very kindness stings with intolerable insult. To be ‘cured’ against one’s will and cured of states which we may not regard as disease is to be put on a level of those who have not yet reached the age of reason or those who never will; to be classed with infants, imbeciles, and domestic animals."
- C.S. LewisWe here at The Directive can only add - A-Frigging-Men!
Monday, July 6, 2009
Friday, July 3, 2009
Thursday, July 2, 2009
The tone of political debates might actually change. Think about it. We here at The Directive have and we think highly of the idea.
Monday, June 29, 2009
I guess it is
coup d'é⋅tat–noun, plural coups d'é⋅tat
|a sudden and decisive action in politics, esp. one resulting in a change of government illegally or by force.|
1640–50; < class="luna-Img" src="http://cache.lexico.com/dictionary/graphics/luna/thinsp.png" alt="" border="0">
overthrow, rebellion, revolution, uprising.
Friday, June 26, 2009
The Albany-Trenton-Sacramento Disease
How three liberal states got into deep trouble with 'progressive' ideas.(courtesy of the WSJ)
President Obama has bet the economy on his program to grow the government and finance it with a more progressive tax system. It's hard to miss the irony that he's pitching this change in Washington even as the same governance model is imploding in three of the largest American states where it has been dominant for years -- California, New Jersey and New York.
A decade ago all three states were among America's most prosperous. California was the unrivaled technology center of the globe. New York was its financial capital. New Jersey is the third wealthiest state in the nation after Connecticut and Massachusetts. All three are now suffering from devastating budget deficits as the bills for years of tax-and-spend governance come due.
These states have been models of "progressive" policies that are supposed to create wealth: high tax rates on the rich, lots of government "investments," heavy unionization and a large government role in health care.
Here's a rundown on the results:
Government spending as economic stimulus. State-local spending per capita is $12,505 in New York (second highest after Alaska), $10,136 per person in California (fourth) and $9,574 in New Jersey (seventh).
Has all this public sector "investment" translated into jobs? Not quite. California had the nation's third highest jobless rate in May (11.5%). New Jersey and New York had below average unemployment rates in May compared to the national average of 9.4%, but one reason is that so many discouraged workers have left those states. From 1998-2007, which included two booms on Wall Street, New York and New Jersey ranked 36th and 31st in job creation. From 2000 to 2007, the New Jersey Business & Industry Association calculates that nine out of 10 new Garden State jobs were in the government.
Soak the rich. Mr. Obama plans to pay for his government investments through higher tax rates on the top 1% and 2% of taxpayers. Our troika of liberal states are champions at soaking the rich. The state-local income tax burden, according to the Tax Foundation, is the highest in the nation in New York, second highest in California and sixth in New Jersey. New York City boasts the highest business tax rate, 17.6%, according to a study by the American Legislative Exchange Council. Seven of the 10 highest property tax counties in America are located in New Jersey.
Instead of balanced budgets, these high taxes have produced record red ink. California's deficit for 2010 is projected at $33.9 billion, New Jersey's $7 billion and New York's $17.9 billion, despite multiple tax increases this decade. The Manhattan Institute finds that three-quarters of the loss in revenues this year in Albany is a result of reduced income tax payments by rich people even though the state keeps raising taxes on high earners.
California's debt burden has multiplied so fast that it now has the worst bond rating of any state, and Governor Arnold Schwarzenegger and state legislators are pleading with Washington to command the other 49 states to pay off its IOUs. The interest rates on Golden State bonds have nearly tripled in the last two years.
Powerful unions. Mr. Obama believes union power is a ticket to the middle class. The middle class is getting creamed in all three of these "progressive" states, where organized labor is king. The unionized share of the workforce is 20% in California, 19% in New Jersey and 27% in New York compared to 13% across the country. All three are non-right-to-work states, have super-minimum wage requirements and provide among the nation's most generous public-employee pensions.
Workers in these paradises are indeed uniting -- by leaving. New York ranks first, California second and New Jersey third in moving vans leaving the state. A study by the National Institute for Labor Relations Research found that over the past decade these and other high-union states (mostly in the Northeast) had one-third the job growth of states with low union penetration.
Government health care. New York, New Jersey and California are among the leading states in government spending on and intervention into the medical market. A 2008 study by the Pacific Research Institute ranked the states on the basis of government regulation of health care and found that New York is most regulated, while New Jersey ranks sixth and California seventh. "New York," the report declares, "suffers from government health programs that are out of control, a grossly overregulated private insurance market and almost completely uncompetitive provider markets."
Have government controls and Medicaid expansions ("the public option") lowered costs? Here is what the American Health Insurance Plans found. For family coverage annual premiums in 2006-07, the national median cost was roughly $5,300; in California it was $5,884, in New Jersey $10,398, and in New York $12,254. New York's coverage mandates cause families to pay more than twice what they do in other states for insurance.
As a result, California and New York have more than one-third of their residents uninsured or in Medicaid -- much higher than the national average of 25%. More government involvement in health care in California, New Jersey and New York has raised costs and often reduced private coverage. That's hardly a model for the nation.
* * *
So goes the real-life experience of progressive governance, with heavy tax burdens financing huge welfare states, and state capitals dominated by public-employee unions. Formerly rich states, they are now known for job losses, booming deficits and debt, wage stagnation, out-migration and laughing-stock legislatures. At least Americans have the ability to flee these ill-governed states for places that still welcome wealth creators. The debate in Washington now is whether to spread this antigrowth model across the entire country.
Thursday, June 25, 2009
Not for anyone being forced to wear it but if you want to wear one how is this not a freedom the French preserve??????????
liberty, eqality, fraternity - just don't wear the wrong duds
I thought that United States currency was legal tender for all debts. Some businesses or governmental agencies say that they will only accept checks, money orders or credit cards as payment, and others will only accept currency notes in denominations of $20 or smaller. Isn't this illegal?
The pertinent portion of law that applies to your question is the Coinage Act of 1965, specifically Section 31 U.S.C. 5103, entitled "Legal tender," which states: "United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues."
This statute means that all United States money as identified above are a valid and legal offer of payment for debts when tendered to a creditor. There is, however, no Federal statute mandating that a private business, a person or an organization must accept currency or coins as for payment for goods and/or services. Private businesses are free to develop their own policies on whether or not to accept cash unless there is a State law which says otherwise. For example, a bus line may prohibit payment of fares in pennies or dollar bills. In addition, movie theaters, convenience stores and gas stations may refuse to accept large denomination currency (usually notes above $20) as a matter of policy.
What are Federal Reserve notes and how are they different from United States notes?
Federal Reserve notes are legal tender currency notes. The twelve Federal Reserve Banks issue them into circulation pursuant to the Federal Reserve Act of 1913. A commercial bank belonging to the Federal Reserve System can obtain Federal Reserve notes from the Federal Reserve Bank in its district whenever it wishes. It must pay for them in full, dollar for dollar, by drawing down its account with its district Federal Reserve Bank.
Federal Reserve Banks obtain the notes from our Bureau of Engraving and Printing (BEP). It pays the BEP for the cost of producing the notes, which then become liabilities of the Federal Reserve Banks, and obligations of the United States Government.
Congress has specified that a Federal Reserve Bank must hold collateral equal in value to the Federal Reserve notes that the Bank receives. This collateral is chiefly gold certificates and United States securities. This provides backing for the note issue. The idea was that if the Congress dissolved the Federal Reserve System, the United States would take over the notes (liabilities). This would meet the requirements of Section 411, but the government would also take over the assets, which would be of equal value. Federal Reserve notes represent a first lien on all the assets of the Federal Reserve Banks, and on the collateral specifically held against them.
Federal Reserve notes are not redeemable in gold, silver or any other commodity, and receive no backing by anything This has been the case since 1933. The notes have no value for themselves, but for what they will buy. In another sense, because they are legal tender, Federal Reserve notes are "backed" by all the goods and services in the economy.
IS CALIFORNIA'S CURRENCY BACKED BY TREASURIES??????????????
Thursday, June 18, 2009
Friday, June 5, 2009
Thursday, May 28, 2009
Wednesday, May 27, 2009
Trial Balloon courtesy of the Washington Post.
Monday, May 18, 2009
Friday, March 27, 2009
Thursday, March 26, 2009
Fed Weighs Change as Banks Take Heat: Costly Waffles, Valentine Woes
By KELLY EVANS (Wall Street Journal)
In recent years, overdraft fees made billions of dollars for banks, but only worsened the hangover for a debt-addicted nation. Now, amid an overhaul of financial institutions and their services, consumers are seizing their moment to cry foul.
The Fed is debating whether reign in pesky overdraft banking fees. WSJ's Kelsey Hubbard speaks to WSJ reporter Kelly Evans about whether consumers will really benefit.
The Federal Reserve ends a public comment period this month to determine whether banks' current handling of overdraft fees needs to be changed. In the process, its Web site has become a sounding board for Americans' frustration with all things banking, from billion-dollar bailouts to the average $27 fine for overdrawing on an account.
For example, Brian Shriver in Atlanta, Ga., writes: "Such fees are obscene and immoral. The lesson I learned is that I can't trust my bank to avoid the temptation to rip me off royally."
Overdraft fees usually work like this: A customer makes a purchase -- in Mr. Shriver's case, say, $12.21 at Waffle House -- but doesn't realize his account doesn't have enough for the transaction. Rather than decline his card or alert him, the bank allows the transaction to proceed, so Mr. Shriver isn't aware that his account is negative -- or that he has incurred a $35 overdraft fee -- until he checks his balance online.
"It's deeply unfair," said Mr. Shriver, 43 years old, when reached by telephone. He wrote to the Fed in exasperation after a series of small purchases he made last month racked up $525 in overdraft fees. "I'm mad at my bank but I'm also mad at the system," he said. "There needs to be more oversight so these fees aren't so extortionary."(Blogger note - or we can state that you bounced 15 checks)
Most banks and credit unions automatically sign customers up for what they call overdraft "protection," that allows -- rather than blocks -- purchases and ATM withdrawals that overdraw their bank accounts. For this service, the institutions charge customers fees ranging from $10 to $38 per overdraft, according to a study released last November by the Federal Deposit Insurance Corp.
Some 86% of banks the FDIC surveyed had overdraft programs in place in 2006, and three-quarters automatically enrolled customers in such programs. The survey also found overdraft fees were most common among young adults, ages 18 to 25, and low-income accounts. A separate analysis from Mike Moebs, who runs Lake Bluff, Ill.-based Moebs Services, a research and consulting firm, shows banks and credit unions earned $36.7 billion in consumer overdraft revenue last year, about three-quarters of their total service charge income.
Several factors contribute to banks' success with such fees, namely the ubiquity of debit cards and the fact that fewer Americans pull out -- let alone balance -- checkbooks anymore, favoring the cards and online banking. The number of debit-card transactions in the U.S. surpassed credit cards for the first time in 2004, according to data from the Nilson Report, and debit usage has grown nearly 50% since then to about 33 billion transactions last year, versus 24.6 billion for credit cards.
Last year, Jennimaria Palomaki, a scholarship student at the University of Georgia who works part-time to support herself, unwittingly racked up nearly $200 in overdraft fees on a series of small purchases she made without realizing her balance was negative. "I live paycheck to paycheck and I always check my balance online," she said, "but sometimes you don't realize a charge has gone through and every one of these little purchases is overdrawing your account." Paying off those charges meant she couldn't afford to buy her boyfriend a gift for Valentine's Day. (Blogger note - The HORROR)
"I understand the banks have to protect their own interest. I get that," she said. "But it feels like I'm being stolen from when I get this huge fee for a small purchase."
People like Mr. Shriver and Ms. Palomaki say this isn't fair. They want the option either to opt out of the service altogether or to be told when they're about to make a purchase that will overdraw their accounts and incur a fee. "There's no alert system," Ms. Palomaki said. "That's the biggest problem." (Blogger note - yes, it is called addition and subtraction). She and others also object that when several purchases happen simultaneously, banks process the largest ones first, so that each subsequent smaller charge incurs a fee.
The Fed is considering a number of different approaches, ranging from no change in current practices to requiring banks to give notification on every purchase that would result in an overdraft, but many institutions say the latter isn't realistic. "People think when they're making a purchase it's like a direct line into their account but it's not; it's a third-party processor making the transaction," said Judy Rigwood, compliance director at the TLC Federal Credit Union in Oregon, with five branches and about $90 million in assets. "We don't have the technology to do that."
She and others say the only real option is to allow customers to opt entirely in or entirely out of overdraft service. Those who opt out would see their cards declined on those purchases exceeding the amount available in their checking accounts. "Frankly we offer overdraft service as a way to help our members," Ms. Rigwood said. "Some people rely on it almost like they would a payday loan. It allows them to make vital purchases."
The Fed's 60-day comment period will end March 30, but it will likely take several weeks or months for officials to comb through the 80-plus pages of outcry posted so far on their Web site, under "Regulation E," and issue a ruling.
Mr. Moebs said he wouldn't be surprised to see the Fed require banks and credit unions to break down transactions into four broad types -- ATM withdrawals, automated payments, debit-card purchases, and check purchases -- and allow customers to pick which types they'd like to carry overdraft protection, starting perhaps on Jan. 1, 2010.
"I think that's great, but who's going to pay for it?" he said, estimating the cost of banks' updating their programming and technology to comply in the $25 million to $40 million range. "Since the Fed is saving everyone these days, are they willing to cough up?"
He and others in the industry say it isn't clear how much ramped-up regulation would benefit consumers, especially if it prompts banks to cover the cost of new regulation and make up for the lost fee income by restricting debit-card usage or imposing fees elsewhere, such as on free checking accounts.
"Somewhere or another these costs have to be covered," said William Cooper, chief executive of Wayzata, Minn.-based TCF Bank, an $18 billion company with some 450 branches and 1.8 million checking accounts. He said it could mean the end of free checking, which his bank pioneered over 20 years ago. "Instead of that monthly charge we get debit-card fees, ATM fees and so on that make up the difference. If you take those away it's pretty clear what will happen; we'll have to go back to $10 a month," for checking accounts, he said. "Then everyone will end up paying for it."
Friday, March 20, 2009
Commentary by Caroline Baum
March 19 (Bloomberg) -- Somewhere John Galt is smiling.
The hero of Ayn Rand’s “Atlas Shrugged” is smiling because he’s seen it all before: the government’s intervention in the private sector; the constraints placed on business in the name of the people; the desperation on the part of government bureaucrats when they realize their leverage is limited; and -- this part is still fiction -- the decision on the part of business leaders to walk away from the enterprises they built.
That’s all I could think about when I read that American International Group Inc., recipient of $173 billion in taxpayer funds, was paying out $165 million in bonuses to employees of its financial-products group, the poster boy for risk and greed.
The Obama administration, Congress and the public are outraged taxpayer dollars are going to enrich the folks who got us into this mess. So am I.
Members of Congress want to blame Edward Liddy, the former chief executive officer of Allstate Corp., who was recruited by former Treasury Secretary Hank Paulson in September to steer AIG away from the shoals.
Liddy is paid $1 a year for his efforts. “My only stake is my reputation,” Liddy said in a March 16 open letter to Treasury Secretary Timothy Geithner.
His only crime, as far as I can tell, is inheriting compensation contracts providing for retention bonuses for certain AIG derivative traders, some of whom have left the company, and listening to lawyers on his options.
Why should Liddy endure the public’s wrath for the sake of his reputation, which lawmakers will destroy in a heartbeat to save their own hides? Youwalkaway.com isn’t an option just for homeowners who owe more on their mortgage than their house is worth.
In Rand’s magnum opus, the “men of the mind,” as she calls the nation’s producers, quit. Literally. They walk away from the mines, factories and businesses they built as the government tries to deprive them of their wealth through increased regulation and taxation. (Whether financial engineering constitutes production is an issue for another column.)
Rand’s men in Washington believe they’re entitled to the output of these minds and the material rewards, enacting an Equalization of Opportunity bill, which is really about equality of outcomes; a Railroad Unification Act, to prop up weak carriers and destroy competition; and ultimately, as the economy collapses, “Directive 10-289,” which makes it a crime to stop working.
The “looters,” as Rand calls them, fail to understand that the men of the mind may vote with their feet, refusing to work for the benefit of others.
I’m not alone in noting the parallels in the government’s evolving response to the financial crisis. For a year I’ve been waiting for Paulson or Geithner to announce “the John Galt Plan to save the economy,” which is right out of Rand’s novel.
It wasn’t until the AIG bonus brouhaha broke last weekend and I watched government officials flailing to contain the fallout that I realized the government is losing its leverage. Or maybe it never had any leverage to begin with.
Let me explain. The government has been propping up teetering financial institutions, including AIG, Citigroup and Bank of America, creating the illusion that the banks need the government.
The government doesn’t care about these institutions. It cares about the stability of the financial system: the totality, not the parts.
Congress can refuse to allocate more money to institutions in which it already owns a share (80 percent in the case of AIG). It can levy a tax on the AIG bonus payments or withhold them from the next $30 billion cash infusion, although who would notice? And it can install new management.
Why hasn’t the government put in its own people already? Maybe no one wants the job.
The government needs Liddy and Citigroup’s Vikram Pandit and Bank of America’s Ken Lewis to continue working to restore their firms to prosperity in the same way the looters in Rand’s novel need Hank Reardon and Francisco d’Anconia and Dagny Taggart, respectively, to run their steel mills, copper mines and railroad.
From their perches as chairmen of the House Financial Services Committee and Senate Banking Committee, respectively, Democrats Barney Frank and Chris Dodd fulminate about the lack of regulation and about inflated CEO compensation. For Dodd, it’s a good opportunity to deflect attention from his sweetheart mortgages from former Countrywide CEO Angelo Mozilo and his questionable real estate deal in Ireland.
All that’s left for life to imitate art completely is for these CEOs to quit. Let Barney Frank and Chris Dodd run AIG. Let’s see how they fare.
Fact Versus Fiction
The government needs these companies to survive -- and buy back the government’s ownership stake -- more than they need the government. Most of these CEOs are already wealthy. They don’t need a job working for the government, which is what running a bank amounts to today.
What’s in it for them? One dollar of compensation? Their reputations? The house on the lake looks more appealing by the day.
Is anyone surprised sales of “Atlas Shrugged” have spiked in recent months as reality comes to resemble Rand’s fiction?
(Caroline Baum, author of “Just What I Said,” is a Bloomberg News columnist. The opinions expressed are her own.)