Archive for category Congress

Political Disaster — Members of Congress Expected to Spend 5 Hours a Day Begging for Money | Alternet

Posted by Michael B. Calyn in Congress, Government on January 10, 2013


Political Disaster — Members of Congress Expected to Spend 5 Hours a Day Begging for Money

Why politics is so dysfunctional, in a nutshell.

January 9, 2013  

Members of Congress don’t know anything about “the issues” and they spend all their time fundraising, according to both a new Huffington Post story and “an easy inference to make after observing Congress for almost any length of time.”

The HuffPo’s Ryan Grim and Sabrina Siddiqui obtained a PowerPoint presentation given to incoming Democratic freshmen legislators by the Democratic Congressional Campaign Committee, and the DCCC’s recommended schedule for House members includes four hours spent on the phone begging rich people for money and one hour spent begging rich person for money in person. This is the daily schedule.

As Kevin Drum notes, this leaves no time for studying or homework. Members rarely know much about anything, policy-wise. An unnamed member confirmed to HuffPo that these guys basically are exactly as ill-informed as you feared:

One member of Congress said that the fundraising takes up so much time that members don’t even have time to become experts on bills they sponsor. “One thing that’s always been striking to me is even the members playing a leading role on specific issues actually could not talk about the issues,” said the member, who didn’t want to be quoted by name. “They didn’t have enough knowledge on their own issues to talk about them at length. I’m probably guilty of that.” He recalled one meeting early in his career, where he brought several members together to try to hash out a compromise, just as he had done earlier as a state legislator.

“Staff members were all twitching at the discussion, because their principals were saying things that were just flat-wrong or uninformed or wondering aloud about what the industry practices really were,” he recalled. “The staff members of course had a pretty good idea. … The members were sitting around the table having a remarkably uninformed and unproductive discussion.”

This, as much as anything else, is why our Congress is both dysfunctional — legislators have no clue what they’re voting for or against most of the time — and so attentive to the priorities of the very wealthy.

Newt Gingrich completely dismantled the internal institutions that used to provide Congress with objective information and research, both because that information frequently contradicted conservative dogma and because he knew that doing so would force Congress to rely on outside (ideological) organizations for information, which would strengthen the corporate-funded policy shops and think tanks that powered the conservative movement. Now nearly everything Congress “knows” about policy comes directly from self-interested, industry-funded groups. Simultaneously, as Lorelei Kelly recently wrote, congressional staff began shrinking, which means expertise was, once again, outsourced — now, increasingly, lobbyists perform the educational function that well-versed staffers used to.

So: the constituents members of Congress have the most direct contact with, and the ones they see themselves as reliant upon to remain in office, are the ones who have the ability to write massive checks. And the people the members talk to to understand the issues are either think tank ideologues or paid representatives of industry or both.

The result is Congress as it’s been since the second Clinton term: Hundreds of dim bulbs, a couple of brilliant-but-evil guys, and a handful of dedicated and intelligent people who frequently do weird and inexplicable things like “voting for the horrible 2005 bankruptcy bill.”

The annoying thing is that the solutions to these problems are incredible simple: public financing of elections and huge increases in congressional staff budgets. But you might notice that both of those solutions involve spending more money on the government, making them non-starters in our age of bipartisan agreement that government spending is unseemly.

The alternative to constant fundraising by the members is for outside groups to take care of it for them, which is a model conservatives already sort of practice. In their “Behind the Caucus” column on Rep. Tom Cotton, an Arkansas freshman who will vote against raising the debt ceiling because he explicitly wants the United States to default, Politico’s Mike Allen and Jim VandeHei explain that Cotton won his primary because the ultra-conservative Club for Growth simply sent Cotton “a FedEx envelope full of checks that he didn’t ask for.” And that certainly saves some time. Allen and VandeHeil also note that Cotton, and his peers, explain why we are probably about to induce a recession for no reason:

Many in the media — us included — often underestimate just how conservative and how impervious to criticism and leadership browbeating these members are when appraising the chances for change in the next two years.

Hey, Mike and Jim, that’s what we’ve been saying for a while now. We’re screwed, because the people who spent thousands getting Cotton elected are the ones explaining the issues to him and his dumber peers.

 Political Disaster — Members of Congress Expected to Spend 5 Hours a Day Begging for Money | Alternet.

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Report: While American Families Lost a Ton of Wealth in the Crash, Members of Congress Did Just Fine | Alternet

Posted by Michael B. Calyn in Congress on October 10, 2012


 

Report: While American Families Lost a Ton of Wealth in the Crash, Members of Congress Did Just Fine

The Washington Post reveals how lawmakers personally benefit from legislation they pass.

October 9, 2012 

 

 

The Washington Post has a new multi-part investigation into the wealth of Congressmembers, including an in-depth look at how legislators personally benefit from laws that they pass. They dug into financial disclosure forms from all 535 members of the Senate and House of Representatives, looking at how many millionaires there are on Capitol Hill, who made money and who lost it during their time in office, and much, much more.

One of the key findings was that while Americans saw their median net worth fall a full 39 percent during the crisis years of 2007-2010, the median wealth of members of Congress rose 5 percent in that time, and the wealthiest third saw their riches increase by 14 percent.

Interestingly, the 253 millionaires in the current session of Congress, the Postnoted, is the smallest group in eight years—though “The numbers are likely to be underestimated because lawmakers are not required to list their homes among their assets.” That may be a result of an influx of Tea Party freshmen in 2010 – many of them “outsiders” who bested more established canidates.

Seventy-two of those members may have doubled their estimated wealth between 2004 and 2010, though the Post‘s estimates are inexact because members of Congress don’t have to report exact details. Eleven of them, including House Minority Leader Nancy Pelosi, may have added more than $10 million to their net worth. (The Post has statements by spokespeople for many of the members called out by name in the piece; Pelosi’s explained that, “San Francisco is one of the places where the market has skyrocketed in terms of price per square foot and has been fairly insulated in terms of the 2008 financial crisis.”)

But leadership positions aren’t a guarantee of stability. Steny Hoyer was the Dems’ majority leader in 2007, but the Post estimates his wealth declined some 90 percent between 2004 and 2010. And at least one member of Congress declared bankruptcy after the financial crisis. Ruben Hinojosa (D-Texas) had guaranteed a loan for his family’s business and wound up responsible for millions in debts—the largest of them to Wells Fargo, the bank that had gotten billions in taxpayer bailout dollars.

Some 73 members of Congress have helped push legislation that could benefit their family businesses or investments, the Post noted. And yet these apparent conflicts appear not to violate any of Congress’ ethics rules.

In some cases, the public interest in a bill is obvious—for example, in the GOP’s last round of attacks on public broadcasting, Rep. William L. Owens, a New York Democrat, was one of those who fought back, speaking on the House floor about his position and disclosing the fact that his wife is an executive at an upstate New York public TV station.

In other cases, members of Congress took advantage of laws after they passed them. Dennis Cardoza, a Democratic Representative from California, was instrumental in putting a provision into the farm bill that saved racehorse owners money in taxes on their horses. The next year, he purchased seven racehorses—and then, according to the Post, joined the Congressional Horse Caucus and started holding fundraisers at racetracks. (Cardoza resigned from Congress this summer, citing family issues, and joined up with a “law-and-lobbying” firm, according to the Fresno Bee, although he’s prohibited by ethics rules from actually lobbying for a year.)

Many of the members who personally benefited from legislation they passed have financial interests that are close to those of their district. Senator Jeff Sessions, the Alabama Republican, makes big bucks from timberland, and timber production is, the Post notes, one of his state’s largest industries. So his efforts to “revamp” and “reform” the tax laws (Republican-ese for tax cuts) pass ethics rules, which are pretty flexible. According to the Post, the rules “allow lawmakers to take actions that benefit themselves or their families except when they are the lone beneficiaries.” They also don’t have to identify potential conflicts at the time that they take actions that might “intersect or overlap” with their financial interests.

As I reported last December, some of the richest members of Congress represent districts where their constituents are seriously struggling. Darrell Issa, the richest member of Congress, represents a California district where 14 percent of the population live below the poverty line. Issa took some hits during the financial crisis, but rebounded—somewhat amazingly:

Issa appeared to lose about $90 million in 2008, but his portfolio regained an estimated $197 million within two years of the financial meltdown. The rises were fueled by his commercial real estate ventures in San Diego and successful investments in mutual funds, bonds and other securities.

Eric Lichtblau, writing in the New York Times last summer, noted, “In Mr. Issa’s case, it is sometimes difficult to separate the business of Congress from the business of Darrell Issa.”

The real problem is that, while most Americans struggle, members of the body that purports to represent them remain largely separated from the problems of the general population. While millions of Americans face foreclosure, search for work, or labor in low-wage, zero-benefit jobs, a member of Congress’s $174,000-a-year salary (plus excellent benefits) is out of reach enough; let alone a financial portfolio capable of dropping $90 million and then regaining more than twice that. It’s easy for Sessions and others to argue that their personal interests dovetail with those of their state, but what happens when we’re increasingly represented by a political class financially insulated from the consequences of so many of their actions—and able to make laws that make sure that stays the case? 

 Report: While American Families Lost a Ton of Wealth in the Crash, Members of Congress Did Just Fine | Alternet.

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Cagle Post » Beyond Broken: Congress is Morally Bankrupt

Posted by Michael B. Calyn in Congress on October 5, 2012


 

TINA DUPUY

Beyond Broken: Congress is Morally Bankrupt

 

I don’t really make predictions. But my prediction is in 10 years, we will all snidely refer to anything inept, broken, petty and lazy as being like the 112th Congress.

Coaches will yell it at their athletes when they’re falling behind, “Do you want people to call you the 112th?! Do you? Then get up and get back in the game!” A nasty burn in a breakup: “You’re too 112th to live with, Darrel.” This Congress should not have its jersey retired—but quarantined—nothing we ever like, respect or care about should ever be called 112th.

Bill Day / PoliticalCartoons.com

Out of 112 Congresses this batch of Brooks Brothers barnacles has managed to break the institution. Their public approval rating is hovering around the margin of error—and that’s only because some of the people pollsters called think the president is Martin Sheen.

Because of the abuse of the filibuster, the Senate can no longer function. The filibuster is a storied device to pause a vote with a Senator’s yammering. Now it’s used as a veto threat. It’s as if the “hold” button was rigged to just hang up the call (and then block the number). Anything less than one party having 60 lock-step voting members means a stalemate. Without a super majority “nothing” is now the only thing possible in this deliberative body. The same amount of votes it takes the Senate to amend the Constitution is now what it takes to rename a post office.

Speaking of which, that’s basically all the 112th House has done for two years: re-name post offices. Naming things that already have a name. That’s what they’ve been doing on our dime. Out of the paltry (and pathetic) 124 laws that have originated in the House, 27 of them have named post offices. Two have issued commemorative coins. That means of the two years this House has met they’ve only originated 95 bills that have become laws.

How do they compare? Well the average number of laws originating in the House in a normal (not mind-numbingly obstinate) Congress is around 300. The 111th House, under Democratic majority, made 254. The 109th House, with a Republican majority made 316 laws. Going back to the 1970s, the 93rd Congress had 337 laws originate in their chamber.

What has the House been doing? “Nothing” would be something to aspire to. They’ve been introducing symbolic, go-nowhere bills that will never be brought up in the dysfunctional Senate and therefore never make it to the President’s desk. Their bills have mainly been to outlaw abortion and overturn the Affordable Care Act. That’s right: Not only have they been ineffective at MAKING their own laws—they’ve been ineffective at unmaking other laws.

They’ve voted 33 times to overturn ObamaCare. As if the president was going to sign that piece of legislation. Ever.

Jobs, jobs, jobs? More like: Blah, blah, blah.

I asked a congressional staffer the other day if working in the lowest rated Congress in the history of counting was like being on the set of “Gigli.”

His answer? “Pretty much.”

Part of this is our fault. To paraphrase P.J. O’Rourke, we voted in a bunch of people who think government is ineffective so they have to prove themselves right once on government dole.

But really, I’ll just quote congressional candidate Wayne Powell running against House Majority Leader Eric Cantor: In a debate last week the retired Army Colonel said, “You don’t like government. You should just resign and then I’ll take over.”

Indeed. But instead on October 5, 2012, Congress will take (yet another) break. They will not resume their idle busy work until November 13. They’re taking five weeks off so they can campaign to keep their jobs they don’t really do.

Like I said: morally bankrupt.

 Cagle Post » Beyond Broken: Congress is Morally Bankrupt.

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Congress hits bottom: Only 10 percent approve – POLITICO.com

Posted by Michael B. Calyn in Congress on August 14, 2012


 

 

Congress hits bottom: Only 10 percent approve

 

By SEUNG MIN KIM 

8/14/12

That thud you just heard was the sound of Congress hitting an all-time low approval rating – again.

Gallup said Thursday that a mere 10 percent of Americans think members of Congress are doing a good job – the same approval rating from February of this year, which was the lowest in Gallup’s history.

And their disdain for Capitol Hill is one thing that Democrats, Republicans and independent voters can agree on. Low approval marks for Congress were consistent among party affiliation – with Democrats giving a 9 percent rating, Republicans 10 percent and independents 11 percent.

“It is difficult to pinpoint precise causes for these extraordinarily negative views, although the continuing poor economy is certainly a major factor,” pollster Frank Newport wrote in the analysis. “The fact that control of Congress is now divided, with a Republican majority in the House and a Democratic majority in the Senate, may provide an opportunity for Americans of all political persuasions to dislike some aspect of Congress.”

The 112th Congress has consistently registered low approval ratings, according to Gallup. The highest mark came in May 2011, when 24 percent of Americans gave a thumbs-up to Congress.

Other surveys during this Congress have shown even worse numbers. A New York Times/CBS News poll conducted in October found that Congress earned a 9 percent public approval rating.

Tuesday’s poll surveyed 1,012 adults and has a margin of error of plus or minus 4 percentage points.

 

 Congress hits bottom: Only 10 percent approve – POLITICO.com.

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House GOP waiting on Postal Service drop-dead date to move on reform bill – The Hill’s On The Money

Posted by Michael B. Calyn in Congress, Politics on August 6, 2012


 

The Hill Newspaper

House GOP waiting on Postal Service drop-dead date to move on reform bill

By Bernie Becker - 08/05/12 03:00 PM ET

  

The House has left Washington without passing a fix to the Postal Service, and Republicans now say they are not likely to bring the issue to the floor until after November’s elections.

House Republicans acknowledge that postal reform could be a tough vote for some of their members, with the issue not breaking down as cleanly along ideological lines as subjects such as the Bush-era tax rates the House voted on just before leaving for recess.

But sponsors of the House GOP postal bill suggest another factor at play as well: Lawmakers don’t know exactly when the Postal Service might hit a doomsday date when they wouldn’t be able to deliver the mail.

With mail volume declining, the Postal Service is currently losing $25 million a day, and recently defaulted on a $5.5 billion payment, earmarked for future retiree benefits, to the U.S. Treasury. The agency has another payment of roughly the same size due at the end of next month, which it also says it won’t be able to pay.

But postal officials have added that, at least in the short-term, that default won’t affect their ability to deliver the mail and pay their employees. 

And with Congress having a habit of waiting to act until a deadline looms, that could give the House even less incentive to bring the bill to the floor before their members face voters in November. 

Speaker John Boehner (R-Ohio) suggested, in his last news conference before Congress broke for August, that the House had delayed dealing with postal reform because USPS was able to keep its head above water. 

“The postal legislation, there’s a lot of conversation about it,” Boehner said Thursday. “But, you know, these missed payments are not going to affect the ability of the post office to do its job.”

At the same time, senators, who passed a broad postal overhaul more than three months ago, and members of the mailing industry have urged the House to get moving on its bill, so the two chambers can hammer out a compromise agreement. 

But even if the House did find more motivation on postal reform, the chamber is only scheduled to be in session eight days in September, and has other pressing issues like the farm bill and drought relief on its plate as well. 

And while Republicans may want a clearer picture about when a USPS doomsday might occur, other Capitol Hill observers and members of the mailing industry say that could be more difficult than it sounds. 

The Postal Service, they say, has to walk a fine line of sounding the alarm about their fiscal challenges and the need for congressional assistance – all without scaring away potential customers. 

With that in mind, Rep. Dennis Ross (R-Fla.), a key sponsor of the House GOP postal bill, told The Hill last week that he did not think the chamber would take up the measure until the post-election session. 

“I don’t like that,” said Ross, who is sponsoring postal legislation with House Oversight Committee Chairman Darrell Issa (R-Calif.). “For the sanctity of the institution, we need to act on this thing.”

But Ross also said that the Postal Service was not helping encourage a House vote by failing to give members a clearer picture of when the agency could pass a point of no return.

The Postal Service’s inspector general, for instance, said in a July memo that it agreed with USPS projections that said the agency could face a shortfall in October and at other points in the 2013 fiscal year. USPS owes more than $1 billion to the Labor Department in October for workers’ compensation, a payment it expects to make. 

But David Williams, the inspector general, went on to say that a host of reasons – from changes in the cost of fuel to the global financial outlook – could significantly alter those projections. 

In May 2011, Postmaster General Patrick Donahoe said that the service could face insolvency in October of that year. A month or so later, the agency had pushed that back to July 2012. 

“We know for a fact that they’re running out of money,” Ross said. “But they won’t give us a definite date that this is a drop-dead date when our postmaster says ‘I can’t afford to sign another paycheck’ or ‘I can’t put another truck on the road.’”

For their part, postal officials say they are being upfront about their cash challenges and that an expected boost from election and holiday-related mail should be able to get them through October. 

Dave Partenheimer, a spokesman for the agency, also hinted at USPS’s delicate balance in both being open about their financial problems and not driving away the mailing industry.

“We remain concerned about how these ongoing liquidity issues unnecessarily undermine confidence in the viability of the Postal Service among our customers, which could cause businesses to explore other delivery and communication options, resulting in additional financial pressure on the Postal Service,” Partenheimer told The Hill in a statement.

Art Sackler, co-coordinator of the Coalition for a 21st Century Postal Service, said that he had also noticed that USPS had tried to soften its message to potential customers, and that there are a lot of variables at play when trying to predict the agency’s financial picture.

“It’s hard to see how their message could be any different,” said Sackler, whose group represents private-sector companies that use USPS. “I think they’re being pretty open about their numbers.”

Sackler added that he was concerned that, by pushing postal reform back in to a lame-duck session, the issue could get lost in the shuffle, with Congress expected to concentrate on broad fiscal issues. 

Ross has said that he and Issa have the votes to pass their postal bill. But that vote would force GOP lawmakers in rural areas, where USPS can play a more central role in constituents’ lives, to go on the record on a plan that would pave the way for the consolidation of postal operations. 

The bill that passed the Senate in April and the current House proposal have deep differences that would need to be reconciled, on issues like the healthcare prepayments that USPS is defaulting on and how to best downsize the agency’s workforce. 

Rep. Gerry Connolly (D-Va.), a House Oversight member, declared that the GOP shouldn’t blame the lack of a drop-dead date from the Postal Service for the House not voting on the issue, even as he said USPS should be more open about its fiscal situation.

“We could’ve fashioned, just like the Senate did, a very reasonable, bipartisan bill,” Connolly said.

 

House GOP waiting on Postal Service drop-dead date to move on reform bill – The Hill’s On The Money.

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Do-Nothing Congress Olympics Part IV

Posted by Michael B. Calyn in Congress, Humor/Parody on August 4, 2012


RJ Matson - Roll Call - Do-Nothing Congress Olympics Part IV - English - Do-Nothing Congress Olympics Part III, Congress, 2012 Elections, Democrats, Republicans

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Congress on vacation

Posted by Michael B. Calyn in Congress, Humor/Parody on August 4, 2012


Dave Granlund - Politicalcartoons.com - Congress on vacation - English - Congress, do-nothing, do nothing, vacation, closed, summer recess, work, un done, unfinished work, gridlock, partisan, senate, house, congressmen, congressional

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A Challenge on Middle-Class Tax Cuts – NYTimes.com

Posted by Michael B. Calyn in Congress, GOP, Government, Legislation, Opinion, Perspective on July 11, 2012


The Need to Agree to Agree

Published: July 9, 2012 

 

 

Taxes are supposed to be complicated and contentious. Yet, speaking from the White House on Monday, it took President Obama less than 15 minutes to make a strong and sensible case for letting the high-end Bush-era tax cuts expire at the end of 2012. Citing well-documented facts, he pointed out that tax cuts at the top have failed to promote economic growth and have blown a hole in the federal budget.

Under his plan, Americans who make more than $250,000 a year — the top 2 percent of taxpayers — would see their tax rates go back up next year to the levels from the Clinton years, while those making less than $250,000 — the remaining 98 percent — would have their tax cuts extended through 2013.

In calling for cooperation from Congress, Mr. Obama said that the point is to “agree to do what we agree on”: extend the middle-class tax cuts. As a matter of fairness and responsible policy making, he said, the majority of Americans, and the broader economy, should not be held hostage again to another debate over the merits of tax cuts for the wealthy.

Unfortunately, it is not a message Congressional Republicans want to hear, committed as they are to preserving tax cuts for the rich at all costs. It is not even what some Democratic leaders want to hear, including Nancy Pelosi, the House minority leader and Senator Charles Schumer of New York, both of whom voiced support on Monday for Mr. Obama’s approach but have advocated in the past for extending the tax cuts for households that earn up to $1 million a year, a level that would please wealthy campaign donors.

But it’s a message that needs to be sent, loud and clear, over and over. There will never be consensus for solving the nation’s budget problems without first ending the lavish tax breaks at the top. In the near term, letting the high-end tax cuts expire would raise much-needed revenue without harming the recovery because tax increases on high-income Americans do not cut into consumer spending nearly as much as middle-class taxes. The revenue that could be raised — about $850 billion over 10 years — would be a significant step toward reducing the deficit and financing programs to spur the economy.

Mr. Obama laid out the broad issues. Now he needs to drive these points home.

THE TAX INCREASES WOULD BE MANAGEABLE Reverting to Clinton-era tax rates for those making more than $250,000 annually would mean increases in the top rates to 36 percent and 39.6 percent from 33 percent and 35 percent currently. It would also mean raising the tax rate on investment income, which is highly concentrated among the wealthy, to 20 percent from 15 percent. No one is being bankrupted or punished. They are being asked to pay more after an extended period of super-low rates. The 15 percent rate on capital gains investment income, for example, is the lowest such rate since the Great Depression.

MILLION-DOLLAR EARNERS DON’T NEED A BREAK Extending the tax cuts to those earning $1 million a year would cost the government $366 billion in lost revenue over 10 years, compared with extending the tax cuts only to those making less than $250,000 a year. That amount would have to be made up by cutting federal spending in critical areas like Medicare, Medicaid, education and food safety.

SMALL BUSINESSES ARE SPARED Republicans argue that letting the high-end tax cuts expire will hit small businesses and impede hiring. That is nonsense, and based on an overly broad definition of “small business,” which counts any taxpayer who reports business income as a business owner, including lawyers and accountants working in partnerships, corporate executives who sit on other firms’ boards and shareholders in “S-corporations,” business organizations that can employ thousands of workers. Using a more reasonable definition of small business — for instance, having income and deductions of less than $10 million — a recent Treasury analysis found that only 2.5 percent of small-business owners would face higher taxes from the expiration of the Bush tax cuts. Of those who would be affected, most are unlikely to reduce hiring or investment because of ample deductions for business expenses.

The strength of Mr. Obama’s argument is unlikely to sway Republicans. But he’s right on fairness and the facts, and will, we hope, prevail in this debate.

 A Challenge on Middle-Class Tax Cuts – NYTimes.com.

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McConnell Can’t Answer How GOP Will Insure Americans After Repealing ObamaCare: ‘That Is Not The Issue’ | ThinkProgress

Posted by Michael B. Calyn in Congress, GOP, Politics on July 3, 2012


McConnell Can’t Answer How GOP Will Insure Americans After Repealing ObamaCare: ‘That Is Not The Issue’

By Ben Armbruster on Jul 1, 2012 at 10:15 am

Sen. Mitch McConnell (R-KY)

 

Since the Supreme Court last week upheld the Affordable Care Act, Republicans have been scrambling for a response. Without much to say now that the law has been ruled constitutional, the GOP has fallen back on its pledge to repeal ObamaCare. However, the new health care law provides 30 million Americans with access to health insurance. So how do Republicans plan to replace this key feature if they repeal?

Fox News’s Chris Wallace asked Senate Minority Leader Mitch McConnell (R-KY) this important question on Fox News Sunday today and the senior senator from Kentucky had no answer. After McConnell meandered through the typical GOP talking points that they plan to allow the sale of health insurance across state lines and that they will institute medical malpractice reform, he finally settled on an answer: Insuring Americans “is not the issue”:

WALLACE: One of the keys to ObamaCare is that it will extend insurance access to 30 million people who are now uninsured. In your replacement, how would you provide universal coverage?

MCCONNELL: Well first let me say the first single thing we can do for the American system is get rid of ObamaCare. … The single biggest direction we can take in terms of improving health care is to get rid of this monstrosity. [...]

WALLACE: But you’re talking about repealing and replace, how would you provide universal coverage?

MCCONNELL: I’ll get to it in a minute. [...]

WALLACE: I just want to ask, what specifically are you going to do to provide universal coverage to the 30 million people who are uninsured?

MCCONNELL: That is not the issue. The question is, how can you go step by step to improve the American health care system. … We’re not going to turn the American health care system into a Western European system.

Watch the clip:

 

 

If Republicans are successful in repealing ObamaCare, they’ll also have to answer how they’ll provide coverage for those with pre-existing conditions, lower-income Americans, and even the millions of young Americans who can now stay on their parents’ health care plans until age 26.

 McConnell Can’t Answer How GOP Will Insure Americans After Repealing ObamaCare: ‘That Is Not The Issue’ | ThinkProgress.

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Making Banks Boring – Credit Slips

Posted by Michael B. Calyn in Banking, Congress, Federal Bank, Finance, Government, Legislation on June 29, 2012


Making Banks Boring

posted by Adam Levitin

Bloomberg has an editorial arguing that making banks boring won’t prevent a crisis; only increasing bank capital will do so.  

To the extent that its big point is that banks will suffer during an economic downturn and the only protection against that is more capital (or insurance, including from the government), it’s hard to disagree.  But what this editorial misses is that 2008 wasn’t just some periodic economic downturn that occured for reasons beyond our comprehension or control, like El Niño and La Niña weather patterns.  Instead, the 2008 financial crisis was made by the banks themselves. The 2008 financial crisis was the inevitable result of the financial services’ industry’s behavior in the 2000s.  And that‘s why we have to make banking boring. Boring banks might be hurt by economic crises, but they don’t make them. We cannot prevent every economic downturn, but there’s no reason we should suffer the preventable ones.  

So how is boring banking a solution? It matters for two reasons, one widely understood, and the second entirely overlooked.  

First, boring banking does a reasonably good job of aligning risks and rewards for the parties actually making loans, and this helps control against asset price bubble. Boring banking, in its simplest, most stripped down form means that banks make loans and hold them on their balance sheets. (There are problems that can stem from this, namely from the asset-liability duration mismatch, but that’s another issue, and the other banking crises cited by Bloomberg didn’t pose systemic threats like 2008.) 

The primary reason that the banks ran into trouble in 2008 was not because they were making bad loans that they held on portfolio. Instead, they made bad loans because they knew those loans would be securitized. The problem was that the banks then went and bought into those very same securitizations, which they then used as collateral for their short-term borrowings (such as repo), making them intensely exposed to the performance of their MBS. 

The overprovision of underpriced credit enabled borrowers to bid up asset prices, which then meant that subsequent loans looked better than they were in terms of LTV.  Once lax securitization practices ignited the bubble, it affected not only securitized loans, but also balance sheet loans. And then it was pretty much inevitable that someone would get spooked as evidence of poor loan performance speed in and a run and then a market-freezing panic would result that would hit all uninsured short-term credit as no one could be sure which institutions were impaired and which were money good.  The fact that the banks were heavily leveraged didn’t help things, and Bloomberg is right that more capital would have softened the blow. But better to avoid the problems in the first place than to hope that capital will be sufficient.  

The second reason for making banking boring is one that is continually overlooked in the New Glass-Steagal debate, namely the political benefit of separating commercial from investment banking, which helps ensure against deregulation. Commercial and investment banks can both get into trouble when they’re not regulated. Indeed, the stories of the S&L crisis and of 2008 are fundamentally stories about deregulation.  Glass-Steagal made commercial banking boring by divorcing it from securities. Glass-Steagal also split the financial services industry politically and enabled the different parts of the industry to be played against each other. Commercial banks, investment banks, and insurance companies fought each other for turf for decades. This mattered in terms of regulation because regulation is a political game.

Because of Glass-Steagal, the financial services industry did not present a monolith in terms of lobbying, and a Congressman could afford to take a stand against one part of the industry because there would be campaign contributions forthcoming from the other parts of the industry. This is how William O. Douglas got the Trust Indenture Act of 1939 passed–he made concessions to the commercial banks in order to get their support for legislation that kept the investment banks out of the indenture trustee business. In the agencies, each part of the industry had its pet group of regulators who would push back against other regulators when they thought that there was an encroachment on their turf, which is the basic nature of deregulation—allowing greater activities than previously allowed. And it even mattered in the courts, as the insurance and investment banking industries financed major litigation challenges to commercial bank deregulation. The result of a politically fragmented financial services industry was to hold deregulation at bay for quite a while. This started to unwind in the 1980s and by the Gramm-Leach-Bliley Act, it was over. It didn’t take long before we all reaped the fruits of deregulation.

If you want to see more modern examples of the benefits of divided industries, see the FDA’s recent decision on the naming of high fructose corn syrup. It’s going to keep going by that name, rather than by “corn sugar” because in part from intense lobbying pushback from another part of the sweetener industry–the cane and beet sugar manufacturers. Sarbanes-Oxley passed in part because of a split between the Business Roundtable and the US Chamber of Commerce. And in the financial institutions space, the Durbin Interchange Amendment passed because it posed banks against another heavy duty group, retailers. 

In short, yes, we need more capital and/or insurance as a cushion for banks during downturns. But we also need to make sure that the banks are not fueling the behavior that leads to economic crashes and downturns. That means in part ensuring that there is adequate regulation of the financial sector, and that requires breaking the political power of the banks. Glass-Steagal accomplishes a political breakup of the banks; neither the Volcker Rule nor capital requirements do. That’s why we need to make banking boring. 

 Making Banks Boring – Credit Slips.

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