Tag Archives: CNBC

We’re Talking About Money, Honey

Felix Salmon:

Individuals are doing it, banks are doing it — faced with the horrific news and pictures from Japan, everybody wants to do something, and the obvious thing to do is to donate money to some relief fund or other.

Please don’t.

We went through this after the Haiti earthquake, and all of the arguments which applied there apply to Japan as well. Earmarking funds is a really good way of hobbling relief organizations and ensuring that they have to leave large piles of money unspent in one place while facing urgent needs in other places. And as Matthew Bishop and Michael Green said last year, we are all better at responding to human suffering caused by dramatic, telegenic emergencies than to the much greater loss of life from ongoing hunger, disease and conflict. That often results in a mess of uncoordinated NGOs parachuting in to emergency areas with lots of good intentions, where a strategic official sector response would be much more effective. Meanwhile, the smaller and less visible emergencies where NGOs can do the most good are left unfunded.

In the specific case of Japan, there’s all the more reason not to donate money. Japan is a wealthy country which is responding to the disaster, among other things, by printing hundreds of billions of dollars’ worth of new money. Money is not the bottleneck here: if money is needed, Japan can raise it. On top of that, it’s still extremely unclear how or where organizations like globalgiving intend on spending the money that they’re currently raising for Japan — so far we’re just told that the money “will help survivors and victims get necessary services,” which is basically code for “we have no idea what we’re going to do with the money, but we’ll probably think of something.”

Tyler Cowen:

For reasons which you can find outlined in my Discover Your Inner Economist, I am generally in sympathy with arguments like Felix’s, but not in this case.  I see a three special factors operating here:

1. The chance that your aid will be usefully deployed, and not lost to corruption, is much higher than average.

2. I believe this crisis will bring fundamental regime change to Japan (currently an underreported issue), rather than just altering the outcome of the next election.  America needs to signal its partnership with one of its most important allies.  You can help us do that.

3. Maybe you should give to a poorer country instead, but you probably won’t.  Odds are this will be an extra donation at the relevant margin.  Sorry to say, this disaster has no “close substitute.”

It may be out of date, but the starting point for any study of Japan is still Karel von Wolferen’s The Enigma of Japanese Power.   Definitely recommended.

Adam Ozimek at Modeled Behavior

John Carney at CNBC:

The fact that Charlie Sheen has decided donate a portion of the money from his live stage shows to help people affected by earthquake in Japan should be all you need to know that donating money to Japan is a bad idea.

Earthquakes, hurricanes, floods, tsunamis, volcanoes and even chemical or nuclear disasters can provoke a strong urge on the part of people to want to provide disaster relief in the form of charitable donations directed at those afflicted by the most recent disaster. This is almost always a mistake.

Almost all international disaster relief is ineffective. Part of the reason for this is that relief groups rarely know who is suffering most, or how aid can be most effectively directed.

Reihan Salam

Annie Lowrey at Slate:

Concern and generosity are entirely human—and entirely admirable!—responses to the disaster and tragedy in Japan. But if you really want to be helpful, as Felix Salmon and others have noted, there might be better ways to donate your money than just sending it to Japan. There are two basic rules for being useful: First, give to organizations with long track records of helping overseas. Second, leave it up to the experts to decide how to distribute the aid.

The first suggestion is simple: Avoid getting scammed by choosing an internationally known and vetted group. Big, long-standing organizations like Doctors without Borders and the International Committee of the Red Cross are good choices. If choosing a smaller or local group, try checking with aid groups, Guidestar, or the Better Business Bureau before submitting funds.

The second suggestion is more important. Right now, thousands of well-intentioned donors are sending money to Japan to help it rebuild. But some portion of the donated funds will be earmarked, restricted to a certain project or goal, and therefore might not do the Japanese much good in the end. Moreover, given Japan’s extraordinary wealth and development, there is a good chance that aid organizations will end up with leftover funds they will have no choice but to spend in country—though the citizens of other nations wracked by other disasters, natural or man-made, might need it more. Aid organizations can do more good when they decide how best to use the money they receive.

Taylor Marsh:

As for giving to Japan, don’t and here’s why, unless you want to give specifically to an organization like Doctors Without Borders.

Mahablog:

Felix Salmon wrote a column for Reuters warning people “don’t donate money to Japan.” His argument is that donations earmarked for a particular disaster often “leave large piles of money unspent in one place while facing urgent needs in other places.”

Commenters pointed out that many relief organizations accept donations with a disclaimer that surplus funds may be applied elsewhere. And other relief organizations don’t allow for earmarking of donations at all, but that doesn’t mean they can’t use a burst of cash during an extraordinary crisis.

Salmon also wrote, “we are all better at responding to human suffering caused by dramatic, telegenic emergencies than to the much greater loss of life from ongoing hunger, disease and conflict. That often results in a mess of uncoordinated NGOs parachuting in to emergency areas with lots of good intentions, where a strategic official sector response would be much more effective.”

That last probably is true. I also have no doubt that various evangelical groups already are planning their crusades to Japan to rescue the simple indigenous people for Christ in their time of need. (Update: Yep.)

So if you do want to donate money, I suggest giving to the excellent Tzu Chi, a Buddhist relief organization headquartered in Taiwan. Relief efforts in Japan are being coordinated through long-established Tzu Chi offices and volunteer groups in Japan, not by random do-gooders parachuting in from elsewhere. Tzu Chi does a lot of good work around the globe, so your money will be put to good use somewhere.

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On The Third Wednesday Of Christmas, My Wall Street Elite Gave To Me…

Louise Story in NYT:

On the third Wednesday of every month, the nine members of an elite Wall Street society gather in Midtown Manhattan.

The men share a common goal: to protect the interests of big banks in the vast market for derivatives, one of the most profitable — and controversial — fields in finance. They also share a common secret: The details of their meetings, even their identities, have been strictly confidential.

Drawn from giants like JPMorgan Chase, Goldman Sachs and Morgan Stanley, the bankers form a powerful committee that helps oversee trading in derivatives, instruments which, like insurance, are used to hedge risk.

In theory, this group exists to safeguard the integrity of the multitrillion-dollar market. In practice, it also defends the dominance of the big banks.

The banks in this group, which is affiliated with a new derivatives clearinghouse, have fought to block other banks from entering the market, and they are also trying to thwart efforts to make full information on prices and fees freely available.

Banks’ influence over this market, and over clearinghouses like the one this select group advises, has costly implications for businesses large and small, like Dan Singer’s home heating-oil company in Westchester County, north of New York City.

This fall, many of Mr. Singer’s customers purchased fixed-rate plans to lock in winter heating oil at around $3 a gallon. While that price was above the prevailing $2.80 a gallon then, the contracts will protect homeowners if bitterly cold weather pushes the price higher.

But Mr. Singer wonders if his company, Robison Oil, should be getting a better deal. He uses derivatives like swaps and options to create his fixed plans. But he has no idea how much lower his prices — and his customers’ prices — could be, he says, because banks don’t disclose fees associated with the derivatives.

“At the end of the day, I don’t know if I got a fair price, or what they’re charging me,” Mr. Singer said.

Derivatives shift risk from one party to another, and they offer many benefits, like enabling Mr. Singer to sell his fixed plans without having to bear all the risk that oil prices could suddenly rise. Derivatives are also big business on Wall Street. Banks collect many billions of dollars annually in undisclosed fees associated with these instruments — an amount that almost certainly would be lower if there were more competition and transparent prices.

Just how much derivatives trading costs ordinary Americans is uncertain. The size and reach of this market has grown rapidly over the past two decades. Pension funds today use derivatives to hedge investments. States and cities use them to try to hold down borrowing costs. Airlines use them to secure steady fuel prices. Food companies use them to lock in prices of commodities like wheat or beef.

Emily Lambert at Forbes:

Forget baseball, football, or any other sport. For the past two decades, the most interesting rivalry involving these cities has been in derivatives. It’s been the most important rivalry, too. Sports match-ups affect civic pride, but the derivatives battle affects the structure and stability of the financial system.

The rival teams are like the blue bloods versus the scrappy underdogs. The Wall Street club includes the country’s biggest dealers and needs little introduction. The Wall Streeters represent banks, institutions and exclusivity. They play the game of unregulated (or differently regulated, they argue) derivatives, to the tune of $600 trillion.

The Chicago team, based on and around La Salle Street, include the small traders and street fighters. They also have a club, and it too was private and pretty exclusive for years. It’s now the publicly-traded CME Group. But their club included its fair share of taxi drivers, policemen, train conductors, and other everyday folks. This team trades regulated derivatives, better known as futures and options. That market is huge but nowhere near as big as the unregulated (or differently regulated!) side.

These rivals have butted heads since the 1970s, when the Chicago club expanded beyond the world of agriculture and into financial products, New York’s domain. Chicagoans have had a chip on their shoulder for over a century, and traders often portray this head-butting as epic, their struggle to bring much-needed transparency to New York’s murky markets.

The teams fought it out at the Chicago Board of Trade, long the dominant exchange in Chicago, in the boardroom and in the clearinghouse. On one side, you had smaller firms owned by Chicago guys. On the other side, you had representatives from New York firms like Goldman Sachs and Morgan Stanley. A few years ago, the New York firms won the clearinghouse. That became, to a large extent, the reason that the two Chicago futures exchanges merged in 2007. The rallying cry was to save Chicago from New York.

The current derivatives duel is the latest fight, and it could have been Chicago’s moment of triumph. The Chicago crowd made a jab for transparency when CME Group teamed up with Kenneth Griffin at neighboring Citadel Group to create an exchange that would make the derivatives trade less murky. Congress, in its attempt to bring order, took a page from Chicago’s playbook and instructed the bankers to use clearinghouses, a staple in futures.

But as Story recounts, the banks didn’t like the exchange idea. “So the banks responded in the fall of 2008 by pairing with ICE, one of the Chicago Mercantile Exchange’s rivals, which was setting up its own clearinghouse.” CME Group, she later writes, dropped the effort with Griffin to create an exchange and instead has allowed its clearinghouse’s risk committee be “mainly populated by bankers.”

Chicago has represented something special over the years, a counterpoint to Wall Street. Its futures market wasn’t perfect, but it worked. When Wall Street’s derivatives market broke down in 2008, Chicago rightly held its regulated market, its way of doing things, up as a potential model. It may be too simplistic to say that one model is right and the other wrong, but the challenge itself is vital. Especially in a complex business like this one, you need different ideas and sparring to keep the game honest.

Now Chicago’s exchange is a public company. Duffy and Donohue are tasked with maximizing shareholder value. The banks are directly or indirectly responsible for the vast majority of derivatives trading, and CME Group has to involve them in decisions. But it doesn’t have to sell out to them. In Story’s story, CME Group looks less like a counterpoint to Wall Street than like the Midwestern arm of it. I hate to think that the rivalry is dead. There are plenty of people in Chicago who seem to hate New York with a passion I associate more with religion or the Bears (ouch, by the way). I hope that in this fight, which could prove decisive, those people recover their voice.

Kenneth Anderson:

Although I have a few reservations about the tone of the article being just slightly conspiratorial, Louise Story’s front page NYT story today on the evolution of derivatives clearinghouses is highly informative and very well done.  The graphics showing how the bilateral trades would turn into centralized clearing are quite good and would be useful with a class.  On balance,  I think the overall shift to centralized clearing is a good move.  But I also have a bad, bad feeling about this in the context of Dodd-Frank and future expectations.  As I have said in past posts, in a future of financial regulation in which the central question of systemic risk and moral hazard has not been addressed, the result of what is otherwise a sensible move (yes, yes I’m skipping over all the concerns about end-users and Main Street, etc.) could turn out to create not so much a central clearing house but instead … a central address for depositing unwanted risk.

After all, why should any of these leading market participants believe at this point that the government would allow the central clearinghouse to burn down in a crisis?  And if they don’t believe that, then what is their incentive to set terms that will adequately address the risk as a matter of private ordering of fees, margin, whatever form of insurance the central risk-clearer needs? Having a central clearing counterparty is a great idea — if it and the actors that run and control it have the private incentives to make sure it is not a mechanism for accumulating and compounding risks.

Presumably the answer is that government regulators will set those requirements and solve the problem.  But the general theory of financial regulation used to be that systems would be monitored for risk-taking, after private parties (with well-structured incentives forcing them to internalize the risks) had already made the first round of risk-decisions.  Regulators would be kicking the tires for safety and soundness, as a second line of regulatory defense, not the first.  I am an admirer overall of Gensler’s efforts, but he cannot be Batman to Financial Gotham.  The peculiarity is that a structure that ought, in principle, to reduce risk might wind up leveraging it.  The clearing house might turn out to be the one address market participants need to send their unwanted risks.

Kevin Drum:

Banks can talk all they want about capital requirements and governance structures, but if they’re unwilling even to admit publicly who runs their clearinghouses, it’s pretty obvious their primary interest is focused on keeping the derivatives club very, very small and very, very private. In other words: no aggressive competition needed here, thankyouverymuch. Big commissions and big bonuses will remain the order of the day.

Unless, of course, regulators take a tough line and force banks to genuinely open up derivatives trading. What do you think are the odds?

Anthony McCarthy

Barry Ritholtz at The Big Picture:

I keep coming back to this simple fact: If you understand what caused the crisis, the first step in preventing another is working backwards and undoing each of the causes. Front and center is the Commodity Futures Modernization Act that allowed the rampant shadow banking system to develop. It still needs to be overturned . . .

Philip Davis at Seeking Alpha:

The secrecy surrounding derivatives trading is a key factor enabling banks to make such large profits and the banks guard that secrecy very closely. In theory, the Dodd-Frank bill will eliminate much of the abuse that is going on in the derivatives market. But already, the newly-elected House and Senate Republicans are looking to turn back to clock. This is apropos because, as Barry Ritholtz points out: It was the dreaded Commodity Futures Modernization Act that allowed the rampant shadow banking system to develop.

John Carney at CNBC:

Half of Story’s piece seems built around the complaints by financial companies—such as Bank of New York Mellon and State Street—that want to become clearing dealers for derivatives. The other half is built around customers who feel the fees they pay to existing dealers are too high—thanks to the anti-competitive cabalization of the derivatives market.

The irony of all this, of course, is that the cabalization of the derivatives market was one of the goals of regulators, who demanded that market participants set up centralized derivatives clearing houses in an effort to contain counter-party risk. Central to the successful operation of any such clearing house, however, is the exclusion of would-be dealers who seem too risky.

One of the ways a centralized clearing house reduces counter-party risk—that is, the risk of someone on the other side of your trade not doing your deal—is by being the strongest and biggest counter-party that is on the other side of every trade. The idea is that even if a single seller fails—and doesn’t deliver on the sale—the derivatives clearing house has access to enough capital and liquidity that the trade itself can still be completed. You don’t have to worry, in other words, who is on the other side of your trade—it’s always the clearing house.

Importantly, however, a clearing house has to guard against the possibility of its members failing. Without proper capitalization and collateralization requirements, the clearing house could find itself unable to complete trades in a time of financial distress. It would go from being a risk-reducer to a risk-multiplyer, with all the risk concentrated in one place.

The odds of getting a clearing house that is properly capitalized are rather low on the face of it. Competition between clearing houses will result in a downward pressure on fees, collateral requirements, and dealer capitalization requirements. In short, the clearing house will be captured by its customers in a manner that undermines its financial soundness.

To make matters even worse, the natural market counter-balance to this pressure toward riskiness on the part of the clearing house is undermined by the perception—indeed, the reality—that any important clearing house is too big to fail. In a free market, the customers of a clearing house would balance out the demand for lower collateralization/capitalization/fees with a wariness about the increased risk associated with this lowering. But in reality, customers don’t worry about a major clearing house failing because the US government will intervene to bail it out.

This is, ordinarily, an argument made by proponents of government regulation. The tendency toward riskiness plus moral hazard means the clearing house cannot be self-policing. To balance out this situation, the government steps in an imposes collateralization and capitalization requirements on the clearing house. There’s even a sort of fairness argument here—the higher costs associated with the regulations are paying for the implicit guarantee.

If we could be confident in the competence of regulators, the story might end there. Unfortunately, regulators have a poor track record of regulating risk. On the one hand, they often simply lack the tools to effectively predict risk—which means they are simply guessing about the types and levels of capital and collateral that should be required. On the other hand, they are subject to political pressures that influence their view of risk. So what starts out as an educated guess winds up as a politicized guess.

If that’s too theoretical, here’s an example drawn from history. In the 1980s, global regulators were meeting to discuss bank capital requirements. One of the issues at hand was what risk weighting different assets should get. All of the countries agreed that their own highly rated sovereign debt should get zero percent risk weighting—which essentially meant that banks didn’t have to set any capital against losses. Ask the banks with Irish and Greek debt how that is working out.

The same global regulators argued about what risk weighting to give mortgages. The Federal Reserve thought mortgages should get a 100 percent risk weighting—the same assigned for highly-rated corporate debt, and requiring an 8 percent reserve against losses. The West Germans, however, wanted to gin-up interest in their residential real estate market and pushed for a 50% risk weighting. This risk weighting more or less held through the later capitalization reforms, resulting in banks over-investing in mortgage-backed securities. How’d that work out?

So we’re left with a problem from hell. Market participants cannot be trusted to govern a clearing house. The clearing house itself cannot be trusted to be self-governing. And the regulators cannot be trusted to govern properly either.

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Your Daily FinReg Centerfold

Brian Beutler at Talking Points Memo:

With the Wall Street reform legislation agreed to by House and Senate negotiators now in serious doubt in the Senate, what happens if the final bill can’t muster the votes? At his weekly press availability this morning, House Majority Leader Steny Hoyer hinted that they may have to make some changes.

“We’re trying to work with the Senate to ensure that we both take up a version that does in fact have 60 votes,” Hoyer said.

But the conference report, passed late last week, can not be amended on the House or Senate floors. It’s an up-or-down, yes-or-no proposition. If they need a new ‘version’ that has 60 votes to overcome a filibuster, they’d have to reconvene the conference committee, strip the language that offends Sen. Scott Brown (R-MA) and Sen. Susan Collins (R-ME) and try again.

Kevin Drum:

In the wake of a historic economic collapse caused largely by a financial industry allowed to run rampant, Sen. Russ Feingold (D–Wisc.) has decided to vote in favor of doing nothing at all to address this:

As I have indicated for some time now, my test for the financial regulatory reform bill is whether it will prevent another crisis. The conference committee’s proposal fails that test and for that reason I will not vote to advance it. During debate on the bill, I supported several efforts to break up ‘too big to fail’ Wall Street banks and restore the proven safeguards established after the Great Depression separating Main Street banks from big Wall Street firms, among other issues. Unfortunately, these crucial reforms were rejected. While there are some positive provisions in the final measure, the lack of strong reforms is clear confirmation that Wall Street lobbyists and their allies in Washington continue to wield significant influence on the process.

Can I vent for a minute? I know Feingold is proud of his inconoclastic reputation. I know this bill doesn’t do as much as he (or I) would like. I know the financial industry, as he says, continues to have way too much clout on Capitol Hill.

But seriously: WTF? This is the final report of a conference committee. There’s no more negotiation. It’s an up-or-down vote and there isn’t going to be a second chance at this. You either vote for this bill, which has plenty of good provisions even if doesn’t break up all the big banks, or else you vote for the status quo. That’s it. That’s the choice. It’s not a game. It’s not a time for Feingold to worry about his reputation for independence. It’s a time to make a decision between actively supporting something good and actively supporting something bad. And Feingold has decided to actively support something bad.

Scott Brown, the junior Senator from Mass:

Dear Chairman Dodd and Chairman Frank,

I am writing you to express my strong opposition to the $19 billion bank tax that was included in the financial reform bill during the conference committee. This tax was not in the Senate version of the bill, which I supported. If the final version of this bill contains these higher taxes, I will not support it.

It is especially troubling that this provision was inserted in the conference report in the dead of night without hearings or economic analysis.  While some will try to argue this isn’t a tax, this new provision takes real money away from the economy, making it unavailable for lending on Main Street, and gives it to Washington. That sounds like a tax to me.

I have always strongly opposed a bank tax because, as the non-partisan CBO has said, costs would be passed onto the millions of American consumers and small businesses who rely on major U.S. financial institutions for their checking, ATM, loans or other services.  This tax will be paid by consumers who will have to pay higher fees and the small businesses that won’t get the funding they need to invest and create jobs.

Imposing this new tax is the wrong option. Our economy is still struggling. It is wrong to impose higher taxes and ignore the impact it will have on our economy without considering other ways we might offset the costs of the measure.  I am asking that the conference committee find a way to offset the cost of the bill by cutting unnecessary federal spending. There are hundreds of billions in unspent federal funds sitting around, some authorized years ago for long-dead initiatives. Congress needs to start to looking there first, and I stand ready to help.

Sincerely,

Senator Scott P. Brown

John Carney at CNBC:

Democrats on Tuesday planned to strip out a controversial tax from their landmark financial reform bill in order to win the swing votes needed to pass it through Congress.

With crucial Republican moderates threatening to withdraw their support, Democrats were weighing alternative ways to fund the most sweeping rewrite of the Wall Street rulebook since the 1930s.

Though a supposedly final version of the bill had been hammered out last week, Democrats in charge of the process called a fresh negotiating session, which got under way shortly after 5 p.m. EDT Tuesday.

Democratic lawmakers and aides said they planned to remove a $17.9 billion tax on large financial institutions. Instead, they would cover most of the bill’s costs by shutting down a $700 billion bank-bailout program.

“I haven’t talked to everybody, but I gather from a number of people they like this option,” said Democratic Senator Christopher Dodd, one of the lawmakers in charge of the bill.

The bill had been expected to pass both chambers of Congress this week in time for President  Obama to sign it into law by July 4. But supporters have been forced to scramble for votes in the Senate, putting that goal in jeopardy.

Analysts said while that timetable may slip, the bill was still likely to become law.

“We believe that this legislation will pass, timing and the bank tax remain the final question marks,” wrote FBR Capital Markets analyst Edward Mills in a research note.

Jay Newton-Small at Time:

Senate Banking Committee Chairman Chris Dodd stood an hour ago in the Senator’s Retiring Room off of the Senate floor in an intense conversation with Massachusetts Senator Scott Brown – one of surely many they will have today. Dodd is trying to get Brown, one of four Republicans who voted for the Senate version of financial regulatory reform, to pledge his support for final passage. House and Senate negotiators last week worked out a deal to combine the two measures only to find that Brown couldn’t support $18+ billion in new bank fees. To complicate matters, Democrats are now down a vote due to the untimely death of Senator Robert Byrd, a West Virginia Democrat.

Dodd, a Connecticut Democrat, and House Financial Service Chairman Barney Frank are planning on taking the unusual step of reopening the conference committee this afternoon. Lucky for them it wasn’t formally closed or reopening it would’ve taken votes from both chambers of Congress. They have been negotiating with the four Republicans – Brown, Maine Senators Olympia Snowe Susan Collins and Iowa’s Chuck Grassley — on new offsets for the $18+ billion. Dodd says that 90% of the $18+ billion would now be paid for by the immediate end of TARP, the unpopular bank bailout fund due to expire October 3. The additional offset would come from raising fees the banks pay to the Federal Deposit Insurance Corporation, exempting all small banks under $10 billion capitalization (Dodd says he’s spoke to Sheila Bair on this and she’s fine with it). Some Republicans still have reservations that such a move, though, wouldn’t prompt the banks to pass the cost on to consumers. “Repealing TARP definitely appeals to me,” says Snowe, who met with Dodd in her office last night and again this morning.  “At this point other issues are not related to the TARP part, we’re still looking at how you replace those fees. So things are still in motion here, there are a lot of conservations developing.”

Brown, emerging from his meeting with Dodd, says he’s waiting to see the final product and hasn’t made any decisions yet. Brown sent Dodd and Frank a letter this morning announcing his opposition to the $18+ billion in fees, prompting today’s dramatics. Collins told reporters she was pleased with her meetings with Dodd but that she also had made no final decision. Grassley was nowhere to be found. “I gather there were a number of people who were uneasy with the earlier pay-for who like this alternative and so the present plan is to probably reconvene the conference this afternoon,” Dodd said, heading into a meeting in Senate Majority Leader Harry Reid’s offices. If all four Republicans sign on, Dems should have enough votes to pass the Senate as they race to finish the legislation by the end of the week.

Annie Lowrey at The Washington Independent:

Rather than charging the hedge funds and big banks considered most responsible for the financial crisis a reasonable fee for implementation, the conference committee will settle for ending a government stability program and spreading the pain around to all federally insured banks — including small community-focused banks — to satisfy the demands of one Republican. So it goes in Washington.

Felix Salmon:

It would be a fiasco of tragic proportions if the banks managed to remove these taxes from the final bill, essentially absolving themselves from cleaning up after their own mess. The arguments against the taxes are weak indeed: either you simply oppose all taxes on principle (which seems to be the Scott Brown stance, and which is fiscally disastrous), or else you’re forced into John Carney’s corner.

Carney is worried that we don’t know exactly where the tax will be applied — but that’s a feature, not a bug. Setting up the tax in great deal ex ante is essentially just asking banks to spend millions of dollars on tax consultants who can help them skirt the new levies. And as the risks in the system evolve and change, so to should the way that they’re taxed. It’s right and proper that the newly created Council for Financial Stability will be charged with taxing systemic risk, rather than having a bunch of politicians try to do so at the beginning and then watch as the banks and other financial institutions nimbly sidestep the new taxes.

An increase in the FDIC premium would be a gift on a platter to banks like Goldman Sachs and Morgan Stanley which don’t have insured deposits — not to mention non-bank players like Citadel which are systemically very important. I’m unclear on what exactly this Republican “procedural hurdle” is — I thought that after reconciliation, you just needed a simple majority to pass a bill. But I’m getting very annoyed about it.

UPDATE: Russell Berman at The Hill

UPDATE #2: Eric Zimmermann at The Hill

Noam Scheiber at TNR

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Okay, Now We Have The “D*#%weed” Heard Around The Sphere

John Carney at Clusterstock:

On some CNBC show we don’t know much about because it airs when decent people are eating dinner with their families and the rest of us are having a drink with friends, Dennis Kneale decided he’d had enough of bloggers comparing him to Beaker from the Muppets and fat ladies in thongs on the beach. It was time to strike back.

The video is below, so you can watch the train-wreck yourself. He personally names DealBreaker and Zerohedge as the blogs that have been unfair to him.

Gawker:

The CNBC Reports host clearly wanted to push back at the “cowardly” critics, and a CNBC segment about his feud gave him the chance to call his online enemies “dickweeds” and slam one in a live interview (see heavily-edited excerpt above). In the end, though, it’s the bloggers who win: Whatever his ratings, Kneale’s on-air pushback against a lone, anonymous blogger is sure to be a traffic boon to the targets of his ire — and a revelation to viewers who might never have heard them.

Nicholas Graham in HuffPo

Seeking Alpha:

First, Dennis is clearly not interested in an honest debate about the economy, otherwise why would he make so many patently false emotional statements about every blogger living in his or her mother’s basement. Surely Dennis has heard that newspapers and television are losing their audiences to the web because there are some incredible bloggers who are willing to do and say what the mainstream media will not. (I shouldn’t make too many assumptions about what Dennis knows because high profile media professionals tend to live in a radically provincial bubble.)

Also, why would Dennis waste valuable network time engaging alleged basement trolls who he claims are nothing more than name-callers? I am not understanding Dennis’s logic (i.e., bloggers are inconsequential name callers, but I [Dennis] am willing to both engage and converse with them on a major media outlet).

In Dennis’s rant, he notes how he has invited several popular bloggers onto his show to “debate” his point of view. Again, I wonder if Dennis realizes his audience is older than 12 and knows no true debate can occur on a heavily edited and controlled media set. If Dennis is truly interested in a real debate, he will submit to a third-party location with a mutually agreed upon moderator. The debate will have a list of questions both parties must answer, and a time limit in which to answer. As a matter of fact, I, Damien Hoffman, would be happy to mediate such a real debate that can be podcasted to the known universe. Further, Dennis will stop whining about how his identity (and ego) is plastered on the overwhelmingly muted flat screens of every financial professional’s office. Instead, he can focus on the exchange of objective ideas absque the abuse of the bully pulpit advantages and spin.

And one of Kneale’s targets, Zero Hedge‘s Tyler Durden, posts:

Zero Hedge received an invite from Dennis’ producer Dave at 1:34 pm to appear on the show. Of course, our frequent readers realize this is a non-starter for anyone at Zero Hedge due to the nature of our operation. We countered by offering a telephonic interview at an indeterminate point in the future (and desirous of at least a 24 hour advance notice: again, frequent readers will attest that I tend to post constantly, for about 18 hours a day), and even offered Dennis a forum on Zero Hedge to directly address our readers, whom he, we assume affectionately, had some florid words for. Nowhere did we give the impression we would have a call today, and offered up a date in two weeks for an extended call, which would take place upon my return from a reconnaissance trip to Europe (ironically to check up on some of GECC’s major investments in the region: stay tuned for my observations). Our overture was denied, yet somehow Dennis decided to make a point of misrepresenting the communication that took place. We provide a transcript of the email exchange earlier for our readers’ convenience.

John Cole

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