Slippery Bankers

Hey Barry

Man, I told you them bankers is weaselly. Them Golden Sox folks want millions in bonuses.

Like I say, people in hell want ice water, but it ain't gonna happen.

Clamp on em, listen to Barney Frank an good ol Timmy. Timmy, he's gonna be OK.

Anyways, I thinks the new law is this one: H. R. 851 - To establish executive compensation and corporate governance requirements for institutions receiving assistance under the Troubled Assets Relief Program.

If thas it, go ahead an push on it for us.

Thanks, Barry


your pal,

Drainin the Swamp

Hey Barry -

Once I read a coffee cup about real estate, makes sense for you bout now.

'Remember when you're up to your ass in alligators that your goal was to drain the swamp'

Keep on draining that swamp, Barry, we loves ya.

Russia - ya takes the steam outta the talk in Moscow. Keep it up with lotsa committee's, hard to stay pi--ed when you gotta go to a meetin in 2 hours

Muslims, Africa - ya tells it like it is, made things better. Thass the good ol' USA - no BS from here.

Sicko - I'm not real happy bout the insurance cuz it don't actually do nuthin good, so keep on the federal insurance program. We gotta get sumthin outa this, Barry.

Banks ! - Ya gotta keep drivin it, Barry; them bankers are slippery and ya can't let em get away again.

'conomy - ya right, it's gonna take some time, but Barry, them econs of yours ain't said doodly bout what's next. Whassup when the stimulus is done and we still don't got nobody buyin stuff?

'ghanistan - take to 'em Barry, take it to 'em.

Paki's - ya gotta stay on 'em bout the nukes and the talis. no choice but to make that place work right.

Worried bout you Barry - ya already got some grey showin an its only been 6 months. We needs ya, so take care of youself.

your pal

Look Ahead

Hey Barry -

Here's an idea about economics: think ahead.

Wow, that's what my videos are about.

Now Bill Dudley's gonna say the same thing.

http://www.washingtonpost.com/wp-dyn/content/article/2009/07/03/AR2009070302584.html

At least sumbody's watchin'.

Now, Barry, all's ya gotta do is set up a group to make that a systematic program and let me run it or at least work in it, an we're there. If'n ya don't let me help out, I'm just gonna do it myself.

Here's my video links - thanks for watchin.

http://www.youtube.com/watch?v=0IoQXhuvE-U [video, part 1]

http://www.youtube.com/watch?v=4yWF3WtUDoA [video, part 2]

http://www.mkeever.com/dodgingdisasters.html [scripts]

How about it Barry, let me help you out.

your pal,

Fixin the FED

Hey Barry,

Lotta folks wanna fix the bank mess by changin the FED. Don't know about that. Don't think you can fix the mess by just changin the FED.

Ya gotta shine light on the whole system, not just the darkest corner; otherwise ya just chase them roaches around the room.

Anyways, I give the bill [Federal Reserve Transparency Act of 2009 (Introduced in House) HR 1207 IH] a big thumbs down.

So, about my videos.

Wow.

Change the title to something bout Ron Paul and they take off like rockets.

So Barry, you gets even bigger numbers, so's I'm gonna change the titles to sumthin bout you.

Don't take it personal. And, don't worry, it'll be clean.

Still love ya,

Your pal,

Sneakin Fame

Hey Barry,

OK, so's my videos are getting nowhere fast.

I checked it out and Ron Paul videos get nine hunnert thousand views each, and he doesn't say anything at all. I mean, nothing.

Lemme in on that, so's I called mine an answer to Ron Paul and added some titles.

Catch a star - hell ya.

Here's the links - thanks for watchin.

http://www.youtube.com/watch?v=0IoQXhuvE-U [video, part 1]

http://www.youtube.com/watch?v=4yWF3WtUDoA [video, part 2]

http://www.mkeever.com/dodgingdisasters.html [scripts]

I'll let ya know if it works.

Your pal,

Laws and All

OK, Barry, you safe from me.

Here I am tryin to save the world an all - only nobody's watchin.

Hell ya gonna do?

Imagine iffn ya has real power and nobody's watchin.

Scary, thas what.

Mebbe I'll just go ahead and make some gripes about the new laws ya'll on about, instead of bein famous. Why not, why the hell not.

Here's one now that sounds real good, just lookin at the title.:

'Financial Transparency Restoration Act (Introduced in House), HR 2727 IH. To provide for the implementation of a system under which each financial institution will report on the financial condition of the institution to the public, and for other purposes.'

Seems this was there before until deep sixed by congress in 1994. Seems like it's shinin' some light on them bankers - Lord knows we needs that.

Here's another one that sounds good, from McCain fer Chrissakes:

'Department of Defense Financial Accountability Act of 2009 (Introduced in Senate) S 1287 IS - To provide for the audit of financial statements of the Department of Defense for fiscal year 2017 and fiscal years thereafter, and for other purposes.'

This'n here should go without sayin, crime that we gotta make a law. Keep track of the bombs and all, jeez - oughta be a no brainer.

Now here's one that just confuses me [now don' you go sayin 'well, doh']:

'Administrative Support and Oversight for Community Financial Institutions Act of 2009 (Introduced in House) HR 2676 IH, To amend chapter 3 of title 31, United States Code, to provide for an Assistant Secretary of the Treasury for Community Financial Institutions and an Office of Ombudsman for Community Financial Institutions, and for other purposes.'

Jes don' get that one at all.

Keep up the good work, we needs ya up there.

your pal,

You Tubing

Watch out Barry,

I'm comin after ya.

Made me couple videos, bad lighting, serious nerves, poor resolution and all that, but ya got competition Barry.

Ya gotta be famous to get traction, so here they go. Here's the links if ya promise not to laugh too loud:

Economics 2.0, Dodging Disasters, Part 1

http://www.youtube.com/watch?v=Z0m6TlmOISM

Economics 2.0, Dodging Disasters, Part 2

http://www.youtube.com/watch?v=7jsTVZemKSA

Here is a link to the video scripts:

http://www.mkeever.com/dodgingdisasters.html

Your pal,

Who's Gonna Make the Loans?

Hey Barry:

So your banker plan leaves them guys with lending, selling stocks and insurance.

OK, I hears you put in a strict regulation that they have to prove they won't go belly up.

But, here's the thing: Who's gonna make loans?

Met a laid off banker veep the other day. Wanna know how she pays the rent now?

She sells partnerships in commercial real estate loans. That's right, she makes the loans the bankers are too busy to make.

We need the loans and we want you to regulate them. But, how's that gonna happen if bankers are too busy with insurance and stocks to diddle with loans?

Am I gonna have to set up a deal with three doctors and a drug dealer to buy a five year old Honda? What the hell.

It's a real question Barry - take a look.

Your pal,

Banks on Fire

Hey Barry:

Good on ya for the bank plan. Here's the link: http://online.wsj.com/public/resources/documents/reform.pdf

Man, I thought it was never gonna get here.

Couple things, though.

First off, ya gonna want the guys who buy bank stocks watching them banks like hawks. But, Barry, ya got no disclosures in your plan.

Right now, them bankers are like vampires - they only show up in the dark. Ain't good enuf, Barry. Ya gotta shine the lights.

AND, ya gotta watch them bank lobbyists in DC - they'll gut your plans if you let 'em. So, keep on it Barry, or else we'll be here again in couple years.

Don't give an inch - ya gotta be in front drivin on this one. Ya can't just sit in the back seat.

We're countin on ya.

Your pal,

The private health industry's time is up

Hey Barry:

Even the Christian Science Monitor supports single payer!

Holy Climolis!

Here's the link: http://www.csmonitor.com/2009/0616/p09s01-coop.html

Bout time we do it the right way.

Whattya say, Barry?

Your pal,

Stuck With Insurance

Hey Barry:

Guy says we spend here 50% more than world averages on health care and don't get squat for it.

Where does the 50% go?

Insurance.

Guess we're stuck with 'em.

Sucks.

But at least we get a government option, right Barry?

Your pal

Talk To The Terrorists - It Works

Hey Barry:

So here's an expert who says that we should talk to the terrorists.

What an idea. You were right all along.

His name is John Arquilla and he works for the Navy.

Read it here:

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/06/02/EDH517TKBD.DTL

Your pal

Please, Don't Kill Me - Health Insurance

Hey Barry:

So exactly how does insurance make us better, Barry?

It's a big question because nobody likes insurance companies 'cept some of the crooked ones in Congress.

I goes to the doc and I waits while they checks my card - if I'm lucky enuf to have one - then I fill out a bunch of forms that don't do anything cept cover the insurance's ass, then tell the doc my problem and he says he'll let me know if the insurance will cover it or whether I should go to the ER.

Total time in office one hour, total time with doc, 180 seconds.

If its the ER, we're talkin four to eight hour wait for 180 seconds with the doc.

What the hell is that? It ain't workin, Barry. It just ain't workin.

But, you already know that, right?

Everybody in the country wants single payer, Barry, cept you and the insurance. Even most of the docs want it.

I gotta think ya really want it Barry.

So, are you afraid or are you just waitin?

Ya gotta do this one Barry, ya gotta do this one. Single payer. This is why you're there.

Your pal

Better Society: $25

Wow.

A new San Francisco program improves families' lives for $25 a pop.

Read it to believe it: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/05/21/MN0J17O5RJ.DTL&hw=newsom&sn=006&sc=515

Guns and Credit Cards

Hey Barry,

What the hell is wrong with them gun guys in DC anyways?

We both know that some folks is gonna die in the parks this summer. Why do ya go to parks anyway? Ya go to get drunk and stoned - ain't nothing else to do. That's the point, ain't it?

So now some of those effin idiots will have a loaded 45 or AK in the tent. Wonnerful.

Might as well stay home with the gang bangers shootin up the town every night. No point in drivin all day to get shot at - do that at home.

Here's a proposition: give me one of the folks who pushed this law and I'll put him in a car in the hood at night with all the guns he wants. See if he's there in the morning.

Anyways, I can dream.

Good deal on the credit cards, even it it costs a life or two. It's worth it. The life's on the banks, anyways.

Your pal

After Them Banks

Hey Barry:

Good on ya. Some moves on the banks, I read and I like.

Bernanke ups the ante on control - that's good.

Geithner goes after derivatives - that's good even tho Congress has to step up.

But, but...we want a better system Barry.

Think about it - bankers just cannot run investments, Barry. Even you said it: repeating the same action and expecting different results is INSANE.

So, Barry, let's get off the nut express and separate loans from gamblers. Don't know about you, but I don't want my little cash stash managed by gamblers and junkies. A little help here Barry.

Your pal.

Too Big To Fail - ??

So Barry, I hears lot of gum flappin on the idea that some of them banks are just too big to let go. Well, if some of them banks are too big, then some of the car makers are too big, too. And if they are too big, then what about my cousin's rib joint? Why he's got 100 chairs in that sucker. Course, it's in Detroit, so mebbe he's a goner. No saving cousin Phil, huh Barry?

So riddle me this Barry - just exactly what are the rules about too big to fail, anyway? Where can I read them?

Is it who I know? Or, my skin color? Or, who I pray to??

And, anyway, why not just let them fail, Barry? Sell off the good parts and deep six the bad and there ya go. Been done before.

But, Barry, here's the question: What about the ol' US of A? Are we too big to fail, Barry? What about us?

See, what I'm lookin at is the idea that us workers don't have enuf money to buy shit. We were borrowing, but the payback to them good ol banks runs 30% a year. Screw that.

But, Barry, even I know that if guys like me don't buy stuff, we all done. And, well Barry, I'm damned if I'm goin into hock at 30% any more.

And, Barry, our national credit card to pay for the stimulus, well it's there, ain't it? And it will take a lot of growth to get out of it. Now, growth - it sure as hell ain't comin from me.

So Barry, there's the question: Where in the hell is all this growth comin from?

The only answer I hears is that ya gotta raise all our wages so's we can buy stuff without borrowing at no 30%

Cause, if we don't do that, even the good ol' US of A ain't too big to fail.

Your pal,

Riverboat Gamblin

Hey Barry:

Who woulda thunk it? Effin amazin.

100 gold plated economists and we get riverboat gamblin.

Trillion here, trillion there, OK. But, we gotta pay for that.

The only ways I sees us payin is old fashion growth. Ya gotta grow us Barry.

You'se lockin us in to a treadmill. The only way it works is if we just keep on growin.

And, ya know what Barry, that's just how the bankers screwed us up. They made their beds so that if things ever stopped goin up, they were screwed. Then we were screwed.

Them econs of yours better start putting in night hours cuz we got no room for mistakes here Barry.

And, God knows it's real easy to make mistakes.

We're with ya, but ya gotta watch it like a hawk.

Your pal,

100 days

Hey Barry:

Happy Anniversary. Ya doin good so far -keep it up.

Here's my list of good things for the USA you done so far:

Take on the banks, keep it up

Take on the military contractors - God knows them guys need some comeuppance

Start on health care - can't be done soon enough, keep on the pressure.

Good appointments of people who care about regular folks - labor, vets and all

Keep taxes on the fat cats, that's good. And, I think you want the inheritance tax back, keep on that one too

Let the world know that Bush is gone and the Americans are back - mebbe I can take the Canadian flag off my back pack

No more torture - probably should put the guys who were in charge in jail, but at least our boys will be less at risk now

Out of Iraq - but Barry ya gotta do something about Pakistan's nukes

Good start, Barry, good start.

thank you

your pal.

Nancy Calls Out Wall Street

Nancy Pelosi calls out Wall Street for a Pecora style hearing to set new rules of the game.

Link: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/04/16/MNAB1733BH.DTL&hw=pelosi&sn=004&sc=401

Go girl!

Painting Roaches

OK Barry

You tired of me about banks, I got it. Just one more cuz it's a holiday.

One of my honeydo jobs is to clear out an old paint shed in the back.

Old, ugly and shaky [the shack Barry, the shack]. Plus it has lots of roaches, termites and rats.

DCON does the rats, but the roaches?

You ever cleaned out roaches Barry? Fun job. First ya gotta find the water source cuz them roaches will eat each other all day long and forever so long as there's water around. One time before this, well them roaches would sun themselves in the moonlight on a bright night, they'd rustle when you walk, scurryin away from your feet.

So I found the water source - leaky pipe under the sink - and it was covered with a big ball of white yuck, no roaches in the day, just the white yuck. Took the sink and the yuck and set that sucker in the bright sunlight and it dried up quick. Ya know what, them roaches just walked away after that. Not so much as a by your leave. Sorry for the neighbors, but what ya gonna do?

Now with the new job I got two choices: clean it up right in the light and all, or paint it over. If I paint it over, the wife won't notice til she sees a roach. Maybe by then I can distract her with a trip to her mother's.

Just a thought Barry. We still got your back. Do the right thing.

your pal.

Bank Fraud; Today!!

Hey Barry:

No time to write, but I can still read.

Check out Bill Moyers on bank fraud at the top:

http://www.pbs.org/moyers/journal/04032009/watch.html

Money quote;

'BILL MOYERS: Yeah. Are you saying that Timothy Geithner, the Secretary of the Treasury, and others in the administration, with the banks, are engaged in a cover up to keep us from knowing what went wrong?

WILLIAM K. BLACK: Absolutely.........'

Ya gotta rein in these guys Barry, no excuses.

Your pal

Positively Depressing

Hey Barry:

You lookin' good from down here. Keep workin' those bankers. Hard to believe them guys.

Been quiet from me 'cause the depression just hit and I gotta get a job.

Be back at ya soons I'm workin.

Your pal

Outside the Banker's Sandbox

OK Barry, we get that you are trying real hard on a whole lotta things. And, we are hearing your guys about the bank mess. Geithner, Summer, Volcker and all. And I gotta tell ya, on this one, it's a real downer, Barry.

Here's what it sounds like: 'Bankers created the mess and we have to give them money to fix the problem. Of course, we can't go outside the box because we are a nation of laws.'

Don't wanna hear that Barry.

I want to hear that you know what the country needs to get things moving and that you will do that, whatever it is. It may involve new laws, new regulations, who knows what all. Ya gotta focus on the end result and not on the process, Barry. All your guys are process people and that ain't gonna work. I read somewhere that the biggest failure in managing companies is to repeat the process when the results are bad. When the results are bad, ya gotta change the process, Barry. Sound familiar?

Maybe you need special emergency powers to suspend normal laws for a little while. This sure as hell is not normal times Barry. What did FDR do?

If I am there the AIG guys are sitting in my office all day every day until we get a solution. I don't take a letter about how hard it is to change an agreement with crooks.

Maybe we need a banking czar to shake up the nest.

The very least you need is someone to think outside the box, Barry. You don't have that now and we are hurting because of it.

I am available to think outside the box, Barry. And, I'm cheap. Don't need no stinking half million dollars to sit around and make ideas, Barry. Call me any time.

Keep thinking like a father and a husband - don't think like a politician.

We're with you Barry - just don't get snowed.

Your pal.

Bank Regulation Basics

Hey Barry, good to see you on the trail. Keep movin'.

So I sees you got the big ol' dude Volcker to weigh in on the bank mess. At least he's bigger than Timmy.

But, really, 'Financial capitalism has to change,' or somethin' like that is what he says. Like I hear on my street: "No shit, Sherlock."

Anyways I took a look at the system and Holy Crap! it's really been gamed to within an inch.

It's not rocket science to figure out how to fix it. We have done it before and I did it again here: www.mkeever.com/bank_regulation_usa.doc

No, the hard part's when you make the changes. You will hear screamin', boy howdy, them bankers is gonna scream.

But, Barry, we gotta make them changes. There really is no choice.

Your girls' future is on the line here Barry, don't go chicken on us.

We got your back.

Geithner Bombs

Barry, I really love ya. We need you a lot, so keep hangin' in there. Ya doin' all the right stuff.

But Barry, this Geithner guy is not ready for prime time. He is just too small. And, ya need some big guys there Barry, not some limited hack. Seems like a nice enough guy and competent in a limited way, but this here's the future of our country we're talkin' and you need some weight there. Ya need Wilt Chamberlin for cryin' out loud, not some pine warmer.

So, anyways the markets gave the plan a thumbs down and I'm gonna tell ya why.

You guys left out too much, that's why. And here's what you left out.

1. Nationalizing the banks. Ya need to give these bank idiots a timeline to get the lending going. If they don't make it, ya take 'em over, fire the managers and make loans.

I don't mean that you ask them politely for data, I mean that they make loans or get out.

Our national security is on the line here Barry, ya need to get everybody on board.

2. Banks and Investments. Bankers are just no good at making investments. We don't need any more proof, Barry. The Great Depression, the Glass-Steigal act, the Resolution Trust - for cryin' out loud. As sure as God made little green apples, that is something we know.

So, ya gotta create a firewall between bankers and investments. Maybe a new law. Maybe repealing the 1980's deregulation.

Ya gotta do something here and Geithner's not the guy.

3. Unregulated Securities and Banks. Barry, there's a whole bunch of poisonous crap out there and no rules against making more.

Those horse shit mortgage derivative bonds - where's the rule against making more? Nowhere, that's where.

Why the hell not, Barry? Why the hell not?

Unregulated banks - there's a whole bunch of them left over. That can't be Barry, ya gotta get a handle on all the banks. We just can't afford for you to mess this up.

The bankers and the Wall Street guys know they screwed up. And, they expect you to fix it with hard things, not namby-pamby things.

Ya gotta get tough, Barry, we got your back.

Soup Kitchens and Banks

So Barry, been helluva couple weeks. Hang in there, you're doin' good.

Anyway, couple weeks ago I double dog dared you to mention some things that get my goat. And you did - you talked about jobs, unions, bad food and pay-to-play. If I had any input into that, I thank you.

Now then, things are gettin' worse quick. Listen Barry: we need soup kitchens now. You saw the Denny's free breakfast deal, right? I mean two hour lines for a free breakfast, for Pete'e sake. Ya, we need jobs, but we need to eat too and there ain't no jobs. Ya gotta do something, people are starving out here.

Here's another thing. The only thing you say about banks is that the CEO can't make more than $500K. Gimme a break willya. Holy crap. $500K. Listen here, I'll run a bank for $25K. Here's my qualifications: I know absolutely nothing about running a bank but I am a bookkeeper. Guaranteed to be a better deal than the current crooks and losers.

I'm so pissed about the banks that I'm running a seminar for some local congress people about how to regulate banks. Trying to get FDIC, FED, SEC and all those guys in a room with the field reps.

Subject is this: what went wrong and how do we fix it.

Stay tuned. I'll let you know what happens.

So, Barry, take it easy and be nice to those great girls of yours.

I'm off.

What's Wrong With the Proposed Stimulus Package

The President Elect, with respect hereafter 'Barry', called for those who are critical of the proposed stimulus package to offer alternatives. In fact, he says that '...if members of Congress have [a] good idea[s]...that is good for the economy, then I'm going to accept it,' Andrew Taylor AP.

OK, here goes:

'Hey, Barry. How ya' doin'. Kinda stressful right now, I feel ya'.

Me, I'm doin' fine, thanks.

So, Barry, look here, ya know I'm not in Congress, but I got some ideas on me here and I'm goin' to lay them on ya'.

And, Barry, I know you won't take these out of my mouth into your new plan, but I think they're kinda cool, so I'm gonna double-dog dare ya to even mention any two of them. Just so's I know you're listening to real folks.

Ya, Barry, it's a double-dog dare.

First off, here's the hole in your plan. Basically it is trying to fix a roach problem in the kitchen by pissing down a rat hole in the yard. Won't hurt, but won't fix the problem anyway.

See, when I go to the grocery and the gas station I learn some things. Here's what I learn. People are really hurting and sending money to rich folks ain't gonna help me buy gas. You feel me?

I got a cousin at the Community College and here's how he puts it: 'The problem was created as a result of the current system and it will not go away until the system is fixed.

Throwing money at the problem does not fix the system. We need it, but it is not enough'

OK, Barry, here's my laundry list of how to fix the system from the bottom where I live.

Jobs - it's great you want to make jobs, but what if all the jobs go to China? Here's the thing, the fat cats make money from jobs in China. So, fix that. Make it so the fat cats make money from jobs in the USA.

Look, right now we have no rules on jobs in international trade, except we think low wages are better than high wages. So, duh, all the jobs go to low wage countries. Go into a Wal-Mart and find something made in the USA. Good luck with that.

We need to do something, but if we do the Chinese will squeal like a stuck pig. I give a rat's ass if they do, but I know you gotta dress it up. Try this: we can buy as much from China as they buy from us, including T-bills. I even wrote a theory around it, you can see it here: Balanced Trade: Toward the Future of Economics, link: http://www.mkeever.com/essay.html

Even my ten year old niece knows you can only buy as much as you make, so we should know that too.

Banks - we thought we learned in the 1930's for cryin' out loud that you can't trust banks with investments. I want my money in a bank to be safe and not gambled away on some cockamamie horse shit. Their job is to lend money; if they don't do that, take away their license.

And, Barry, I have not heard a single word from you about banks. Ya gotta fix that. And, ya gotta do it right and ya gotta do it quick.

Wages - Any fool can see that the rich are getting way too rich and the poor are goin' down the drain. Why are all the screwy investments around anyway? Simple, there is too much money in the hands of rich people and not enough wages paid to working stiffs like me.

Put another way, the balance between capital and wages is out of whack. That's another thing ya gotta fix. And, Barry, alls I hear from you is 'help the middle class' That's all good, but what about me?

Investments - Speaking of investments, what's up with the SEC sayin' they don't understand an investment? That's just unbelievable. Fix it - no please, just fix it.

Unions - Any fool knows that laws protecting unions have been sold out to fat cats. My cousin got fired just because she mentioned that she wanted an election.

The laws are clear - unions are good for working people. So, Barry, ya gotta enforce them or we might as well move to China or India where our jobs are.

Poisons - We all know that a lot of what we eat, drink and use is poisonous. Our stuff is literally killing us. So, Barry ya gotta fix that. Here's a good place to throw money: hire a bunch of lawyers and scientists to test our stuff and put the SOB's in jail who are killing us. It's not rocket science.

Pay-to-Play - Barry, it's funny that you asked for ideas from Congress when we all know that Congress is corrupt at its core. How in the hell do you expect new ideas from that bunch?? They are all part of the system that makes money from the way things are now. Ya gotta change that and you won't change it if you listen to the people who created the problem in the first place.

OK Barry, I gotta go walk the dog - three point five pound chihuahua and a real kick in the ass.

So, it's a double-dog-dare just to mention the real stuff. 'Cause if you don't fix the real stuff you can't fix the economy. And, if you wanna chew on it, just give me a call.'

Copyright January 2009, Mike P.McKeever, email: mckeever@earthlink.net. Contact author for permission to reproduce in whole or part in printed form, permission hereby granted to reproduce in whole or part in any electronic forum.

Corruption and Regulation

Originally posted October 2008:

Perhaps it was Karl Marx who predicted that the capitalist and communist economic systems would converge someday.

That day seems to be coming closer and closer with recent events trending toward increasing market and administrative regulation in the USA as a capitalist beacon and Russia as the former home of socialism.

In Russia President Medvedev is fighting corruption since he thinks that it hinders economic growth. In the USA, unregulated free market actions have created a financial panic that has created demands for stricter regulation from Democrats, Republicans, CEO's, the SEC and the general public.

Russian Sergey Vadimovich Stepashin, chairman of the Russian Federation Comptroller's Office, has proposed a comprehensive corruption elimination campaign, according to an interview article in the Rossiyskaya Gazeta, September 24, 2008 by Tatyana Panina.

He singled out Russian Law No N94-FZ "On Distribution of Orders for the Delivery of Goods, the Performance of Work, and the Rendering of Services for State and Municipal Needs" as providing opportunities for corrupt behavior.

In the United States, Christopher Cox the Chairman of the Securities and Exchange Commission [SEC] has blamed a lack of regulation for the current financial crisis. ['S.E.C. Concedes Oversight Flaws Fueled Collapse', By STEPHEN LABATON, New York Times Published: September 26, 2008]

The question naturally arises: What is regulation? It's an important topic that needs a lot of discussion.

I'll try to provide an overview from a layman's, i.e., not a lawyer, point of view. Perhaps a Western economic student's perspective will be useful - even though it may contain a few legal blunders.

REGULATION OF BANKS AND FINANCIAL FIRMS

In 21st Century economies, banks and financial institutions control part of the country's money supply. Thus, regulating them correctly is a national security matter - poorly or crookedly managed banks can harm the country.

Any firm which manages a part of the country's money supply should be examined regularly by the Central Bank or other appropriate institution to be sure it is being run soundly and honestly.

If the bank examiners conclude that the bank or firm has problems, the examiners should insist that the problems be corrected. Failure to correct the problems will lead to the bank being closed and its assets sold to another bank.

This is a case where separation of powers and extensive processes to ensure fairness to accused individuals can be compromised in the interests of the country.

MARKET REGULATION OF UTILITIES AND MONOPOLIES

In a market economy where most goods and services are provided by private, for-profit enterprises, sometimes firms are granted a monopoly by the state in providing a specific product or service. The economic justification for the monopoly is that the economies of scale compared to the size of the market dictate that a monopoly can be more efficient. In other words, the amount of investment to get the lowest cost is so high that a company will make the investment only if it can get a sufficient volume of business. This usually happens in utilities like electricity, garbage collection, sewer and water systems and so forth.

The economic problem is that any monopoly has an incentive to raise the price too high in order to make high profits. This then defeats the purpose of granting the monopoly in the first place.

Before some deregulations in the USA, many state governments created Public Utility Commissions [PUC's] which regulated utility monopolies. The basic idea is that before the firm can change any price or service level, it has to justify that change to its PUC. Failure to secure approval meant that the firm would be fined the total amount of the inappropriate price or service level. This took away the firm's economic incentive to cheat - what's the point in cheating if you will lose any gain to a fine?

The PUC's based their decisions on allowing a return on investment [ROI] sufficient to attract capital for expansion and no more. If a company needs to pay 10% on bonds or loans to get the money for the expansion, then the PUC allowed a price to be set which made a 10% ROI likely.

In exchange the firm received a safe and steady market but was prevented from risky and possibly more profitable ventures. Investors received a certain income with little growth possibilities. The system worked fine until deregulation.

Most PUC members were elected by voters under their enabling legislation.

REGULATING INDIVIDUAL BEHAVIOR WITH CRIMINAL LAWS

Making regulation effective in preventing bad behavior by individuals requires that the rules are clear, specific and indisputable. After all, a person prosecuted under such a law stands to lose considerable wealth and/or freedom if convicted. He can be expected to mount a vigorous defense.

First Principle - Prevent Bad Behavior

Effective regulation tries to prevent specific behaviors, whether by individuals acting alone or for a company, bureau or government or behaviors by such organizations as a matter of organization policy.

Second Principle - Describe Bad Behavior

This creates a need for a detailed description of each behavior to be prevented. After all, how can a person or organization be accused of behaving badly if the behavior is not listed as prohibited behavior?

It is critical to describe the prohibited acts specifically so that there is little room for judgment. Such phrases as 'corruption' or 'bribery' are too vague to use in a law. Perhaps a phrase is useful such as: 'An individual employee granting an exemption to a legal requirement for an applicant in exchange for a payment of money or goods to the individual granting the exemption.'

In practice, this means that no behavior can be prohibited until that behavior is described and listed as prohibited. So, if taking a bribe for a favor is described and prohibited in a law passed on January 1, 2009, I cannot be prosecuted for taking a bribe on December 31, 2008. Of course, I can be prosecuted on January 3, 2009 for granting the favor that day, assuming that granting a favor has been described as prohibited behavior.

Third Principle - Describe Specific Punishments for Bad Behavior

The instrument which describes behavior as bad will also specify what is the punishment for the behavior. This may be a range of possible punishments, but the range of possible penalties should be specified. Failure to do so creates another problem where corruption can enter: negotiating or bribing away the punishments.

Fourth Principle - Separation of Powers

This is a Western approach; but, it seems to have merit in difficult areas like corruption.
Entities which participate in the identification and punishment of corrupt behavior should be different entities. For example, suppose a criminal law exists which states that a national government bureau employee who takes money or property and provides an exemption for an applicant to the bureau is guilty of a crime and will be fined a sum of money and be fired from the bureau.

Ideally, the national government's prosecutor prepares a case against the employee with all the relevant facts. The prosecutor's office then presents the case to a national government judge who listens to the prosecution and the defense, then makes a determination of innocence or guilt and assigns the punishment.

If the prosecutor's office also has the power to determine the guilt or innocence, the process is more likely to be viewed as corrupt and is also more susceptible to corruption since only one person has to be bribe.

Fifth Principle - Laws Conform to the Jurisdiction

The above example concerns a national or federal law, prosecutor and judge. If the case concerned a city law, then the prosecution would proceed under a city law with a city prosecutor and judge.

City judges cannot prosecute federal crimes and federal judges cannot decide offenses against city laws.

Sixth Principle - Separate Powers Chosen Separately

While one part of the prosecution process can be chosen by one part of the government, the other part should be chosen differently. For example, federal prosecutors can be appointed by the federal government directly, but federal judges should be either elected in a national election or appointed by the government subject to confirmation by the legislature.

Seventh Principle - Consumer/Worker Lawsuits

As an additional check on institutional abuses, consumers and workers are allowed to sue for damages. If this power is weakened, then regulations before the fact of abuse become even more important.

US National Security

Back in March of 2007, I wrote a list of nine areas that are critical to the future national security of the United States.

Now is the time to revisit the list, shown in order with the biggest threat listed first.

1. Political corruption - the government of the USA is corrupt. The legislative system requires that candidates raise money from rich interests to be elected; then the elected legislators grant favors to their campaign contributors.

The national security suffers when only money interests receive favorable laws.

2. Military/Industrial Complex - Contractors receive money from providing products and services to the armed forces. With that money they influence policy to encourage wars.

Our national security is damaged by public wars for private gain. Our military is corrupted when wars are started or encouraged by companies who profit from a war.

3. Energy - Oil interests damage the national security by promoting our dependence on oil.

We simply must reduce our oil dependence - there is no alternative.

A bill was proposed in 2007 in the House of Representatives to fund searches for oil alternatives. This is a good idea.

Here's another: let's treat oil like a public utility. After all, everyone needs it, just like water and electricity. So let's create a national oil commission that will plan for energy alternatives and regulate the price of oil so that oil companies can earn a reasonable rate of return but not any excessive profits.

Failure to deal with our energy problem will damage our future security.

4. Labor and Consumer Unions - Corruption favors business interests over workers and consumers. It is time to restore a more equal balance between labor and business and consumers.

Continued weakening of labor and consumer power will damage the working family, the backbone of America.

A case can be made that all the laws which favor capital creation should be weakened and all the laws which promote higher wages and more jobs should be made stronger. Our national security depends on a strong economy and the economy depends on consumers having enough income to buy products.

5. Income and wealth Disparity - we are becoming a two tier country; the middle class is becoming weaker.

Our idea has been that Americans are mostly middle class. Losing the middle class will damage our long term security.

6. Elections - The foundation of the American idea is that voters can change the government if it is unresponsive. But, if the voting process is manipulated for partisan purposes or private gain, our security is damaged.

7. Judicial Independence - Judges must be above politics to protect our values.

8. [Was 9] Financial Regulation [was Usury]

Unregulated banks have caused the current mess. We cannot tolerate cowboy capitalism.

9. [was 8] Trade Deficits - trade deficits reflect an economic imbalance that will eventually damage the American way of life.

A word about climate change - it is a global problem, not just a US problem, so is not listed here.

Obama's Economic Thinking

So far the thinking of the new economic team is seriously disappointing.

They are reported to have reached out to divergent economists who [wait for it..........] all agree that the stimulus is needed.

So, mainstream economists call other mainstream economists to solve a problem created by mainstream economics. That is just dumb.

The reason we are in this mess is that mainstream economic thinking is wrong. Even Bush understands the mainstream: 'Free people, free markets, free trade.' This is the same thinking that gave us the Great Depression.

It's also the thinking that gave us Enron, the mortgage meltdown and a severe recession tetering on depression.

Throwing money at the problem - - the Obama solution - without examining the framework is a prescription for disaster.

Even in mainstream, textbook economics, monetary policy - throwing money at the problem - does not work unless people want to borrow.

Nobody wants to borrow now and even the few who do want to borrow can't.

Here's the problem: everyone is convinced that the economy will become worse, not better.

Here's the solution: convince people that the economy will get better.

Here's how to do that: point by point, list each situation in the economic framework that has contributed to the problem, Then list each action to be taken and how it will correct that one particular situation.

For example:

Problem: bonds based on sub-prime loans have tanked and frightened bond buyers.

Solution: no bonds based on mortgages will be offered for sale without a rigorous examination of the mortgages which underlie the bond, with the examination's results published in the bond prospectus and verified by an outside regulator. This is not rocket science, it's very similar to the disclosure the SEC used to require for any security.

Problem: rising unemployment.

Solution: reconfigure national labor laws so that the creation of jobs is favored over the creation of capital. There is a real concern that there is already too much capital in the world and not enough jobs.

For details, see the discussion of the jobs theory of economic growth here: http://www.mkeever.com/apply.html

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Don't any of these people read economic history??

Mark-To-Market

One of the problems today is that banks are reluctant to lend to other banks, seemingly so because they are unsure of the borrowing bank's financial status.

One of the reasons for that caution is that the borrowing bank's balance sheet may be too weak to support the new loan. If so, one of the probable causes is the required write down of assets to their current estimated values from the acquisition value.

The Accounting Principles Board is responsible for this requirement which was installed after the Enron debacle.

Before then, a corporation simply amortized its losses over some period of years, maybe five years.

That way, the company could borrow again - provided it had adequate cash flow - and continue to survive.

In this emergency, both the new administration and the APB should consider an adjustment with protections to the mark to market requirement. A change here would help the credit markets flow again.

Presidential Speech on the Economy - Proposed

Introduction: Econ 1A

The opinions and speeches from the Office of President are keys to the people's state of mind about the economy. Economic activity is based on people's expectations about the future. If most people think the economy is doing well, then they will invest, buy properties and take on debt. But if most people think the economy is doing poorly, they will save their money for a rainy day and avoid borrowing money to protect their family.

Up until the current President I had not in 50 years of listening heard a sitting President say that the economy was in bad shape, regardless of the reality. That's because the office confers authority on the occupant about the future of the economy.

'If the President says that the economy is doing well, by golly family, we'll go ahead and buy that new house because things will work out. But, if the President says that the economy is in trouble, well gee whillickers, we'd better hunker down and save our cash for hard times ahead.'

The President-Elect's main job, IMHO, from now until the end of his terms in 2016 is to constantly repeat that the economy is doing great and the future is bright. Exactly like he did during the campaign with the mantra of change. The change we want now is economic growth with fairness. And, it is happening before our eyes.

The Speech - Thanksgiving Day

Good evening my fellow Americans, I am taking this time tonight to address you all about the state of the American economy at this joyous Holiday time when we have gathered our family and friends if we can and we are missing them terribly if we cannot be with them. Michele and I offer our prayers for the safe return of all our men and women in harm's way tonight. May God be with you.

I know that you all are concerned about how we are doing here at home and how other countries are doing as well. Well, let me tell you this, I won't lie to you, there are some troubled places in our land tonight and my economic team and I are working tirelessly to craft sensible solutions to those problems - solutions that will harness the incredible energy of the American people to the task of putting all those who want to work back to work quickly. It's our number one priority.

Let's be clear about one thing: the American economy is the strongest economy in the world. It is the strongest in the world because of you folks out there listening to me tonight and your fellow Americans who will read about this tomorrow. The fundamentals of the economy are sound and people are ready and willing to work hard to make our economy grow.

Here are just a few of the things that are right about our economy today:

Just about 95% of you who want to work are working. In my book, when you get something 95% right, you are doing pretty well. We are working hard here to get that closer to 100% and to make sure that the wages you earn can provide you and your family a comfortable living. We have a lot of ideas about how to do that and you'll be hearing about them soon.

The housing market has been difficult for a lot of folks. It is rebounding now and some of you are buying homes and other properties because of the incredible bargains. Banks are lending to home buyers on favorable terms. Interest rates on 30 year loans are close to historic lows.

The government has a responsibility to help out some of the folks who have home loans they can't afford any longer and we are working on the question. We'll have an announcement about our plans soon.

The Christmas shopping and holiday gift giving season starts tomorrow and I hope you all will celebrate this season in the traditions of your family. I see this season as a beginning of hope for our country. Please share that hope with us in the next few weeks by spending time with your family and friends if you can.

The stock market has some incredible bargains now and most of the advice I read about buying stocks is to hold them for long term gains. If your situation permits, it's a good time to think about adding to your portfolio. Our economy is going to grow. You heard that from an insider.

Gas prices have come down a lot in recent days. That's helping with your daily budgets and I'm happy about that. We didn't do it, but I'm still happy about it.

I am here to say that our future is bright in this country. We have a chance to change the direction of our country for the better. We are working very hard to create a bright future. Here are some of the ideas we are working on. I am not going to promise you that each idea here will become reality, but a few of them will.

We are finalizing our plan to bring health care to all Americans.

Some of our banks have seen ownership changes, but no depositor has lost a dollar due to the fine work of the FDIC. All your deposits in single accounts under $250,000 are safe.

Our financial sector has some issues we need to fix. We are working hard here to craft new rules and regulations that will prevent abuses in the future. Some of the banks which have received federal funds are still not lending to credit worthy borrowers at realistic rates; we will be contacting them soon.

We are focusing on the market as an engine of growth. The government has taken some positions in some companies to help us over this tight period. As soon as the situation eases up, we will turn those positions back to the markets. The steps the government has taken are the right steps and you will see the results on Main Street very soon.

It's time to create the future for our kids and grandchildren. What kind of future do we want for them? Here's an idea about energy and the future - just to let you see the kind of fun this job can really be.

We need to reduce our reliance on personal cars as the main method of getting to work. I will propose a giant program of building fixed rail metro systems in large urban areas. This will revitalize our cities, save energy, provide hundreds of thousands of jobs and give us all better lives. I will pay for it by placing a ten cent per gallon import tax on foreign oil so that the revenues will be placed into a fund for urban rail projects. At current prices, that's a five percent fee for a better future.

We are also going to ask the Big Three US automakers to create energy efficient cars so that they will survive into tomorrow.

Let me say in conclusion that we understand exactly where we are. There are a lot of good things about our country now and it is appropriate to celebrate those. There are also some problem areas. We are identifying the problems and creating solutions to fix them.

You are already working to get America moving again. I will be with you in January. Yes we can!

Chinese Chips: They Ain't French Fries

Are the Chinese stealing US tech secrets with implanted chips in all computers??

read here: http://cryptome.info/manchu-chip.htm

Food for thought......

New Day Dawning

A lot of water under the bridge in the last thirty days.

First, because this blog focuses on issues critical to the national security of the US, it is appropriate to say that national security has been greatly enhanced by the victory of the Obama and the Democrats in the recent election.

Second, the world turns and there is no time to relax before dealing with issues. Problems like Iraq, Iran, health insurance, energy policy and the economy demand immediate attention.

Third, two pressing issues cannot be delayed until January and demand the President-Elect's immediate attention.

THE ECONOMY

Incomprehensibly, Obama gathered some 25 or so famous economic and business leaders and produced nothing of interest to economic actors. How is that possible?

The economy and the markets are in turmoil and panic. Obama is required to make a statement immediately. Let me repeat: Obama is REQUIRED to make a statement immediately. Failing to do so may possibly turn a recession into a depression. The fear is almost a living thing.

Here is what the statement should say:

'My fellow Americans, we all know that our economy is a little weak right now.

I am not yet the President and will not be until January, but I know that markets need some reassurance that my future adminisration will act responsibly.

I have looked carefully at the situation and I will develop some solutions very soon that will ease the crisis. They are not ready yet but they will be soon.

In the meantime I can tell you that the underlying structure of the economy is sound and there are a lot of things going right as we speak. For example, the real estate market is adjusting to new prices and people are buying houses and borrowing money from banks. Of course, there are many homeowners in some difficulty, but we are working on a solution to that problem.

The FDIC is performing just as it should and all the depositors insured by the FDIC have not lost a penny. Some banks have been acquired by other banks and, while their CEO's and shareholders have lost some equity, their depositors have remained whole.

The auto industry is asking for some help right now and it employs a lot of workers. There is precedent for helping that industry, but it is too soon for me make a specific recommendation.

My administration will fix the things that need fixing and make the good things stronger. As a country we are committed to a market structure as our engine of economic growth. We may tinker a little with the rules and regulations that govern the market, but in the next few months we expect the markets to return to normal."

[BTW - I am available to write economic speeches for a very reasonable fee.]

RUSSIA AND THE COLD WAR

The Cold War was a horrible thing and it is over. Sadly, there are some Americans who seem to have an interest in re-creating it.

We have enough security problems without mindlessly creating new problems in Europe.

Russia under Putin and Medvedev are engaged in a long term process to build a democratic society. You can easily see the details by reading Medvedev's recent state of the union speech at: http://www.kremlin.ru/eng/speeches/2008/11/05/2144_type70029type82917type127286_208836.shtml

It is a speech remarkable for its focus on securing a good future for Russians.

The Russian government thinks that its national security interests have been slighted and ignored by NATO and the USA for some time. The missile defense bases in Poland and the Czech Republic are major irritants to Russia.

Obama spoke with Medvedev on the telephone recently and opened a dialog. It is critical that this dialog be encouraged and expanded. There is no reason, IMHO, that Russia cannot partner with the US on many issues.

Today is the Future of Economics

Today is the Future of Economics

When even Alan Greenspan, the epitome of Ayn Rand's Objectivist philosophy, says that unregulated markets created the current financial problem, it's safe to say that unregulated, winner-take-all, cowboy capitalism is dead as a serious policy recommendation.

Its results are harmful to most of the population. It is entirely predictable that income maldistribution and criminal behavior will follow the introduction of cowboy capital.

But, what is the alternative?

Right now, serious politicians are crafting laws and regulations to restrain some of the poor behavior of free markets. Sadly, they are doing so in an intellectually handicapped framework. As a result their actions may be less than effective.

This is an attempt to create a framework for policy.

GOAL

The overriding goals and first priorities of any new policies and regulations should be to protect consumers from harm, to create jobs for the population and to correct income and wealth maldistributions so that a tolerable level of well being is provided throughout the society.

Part of securing this goal is to recognize that providing the means to create additional capital to the already wealthy in the hopes that they will use that capital to create more jobs is a foolish hope.

The world already has too much capital - there are more goods being produced than consumers have the ability to buy. It is time to reduce the amount of capital and to increase the wages of workers.

MARKETS

Markets wherein entrepreneurs use capital to create businesses and jobs are necessary in any modern economy. Without markets, a society is likely reduced to barter and subsistence farming.

But, markets are inherently flawed and require supervision to ensure the common good. The philosophy that equates the freedom to create wealth with the betterment of the entire society is a myth. We have seen the results of believing that myth again and again.

Managing markets for the common good allows for reasonable profits and entrepreneurial incentives.

But, that market supervision prohibits and punishes criminal behavior, monopolies and maldistribution of income and wealth.

FINANCIAL MARKETS

Commercial banks and investment brokers of every kind created the current situation because of ineffective market supervision.

What should effective supervision look like?

Any effective market control should allow for the global interdependency of financial markets.

Currency exchange markets operate virtually in cyberspace and around the clock pretty much unsupervised.

Capital routinely seeks safety and returns globally without concerns about borders except as borders affect risk.

FINANCIAL TRADE ORGANIZATION [FTO]

Create the FTO. Give it the task to write international standards for bank management, bank lending and investment disclosure and control.

Seek membership of all developed economies in the FTO and allow any developing country to join.

Central banks of FTO members reinstall or create separations between commercial banking activities and investing activities. Commercial banks are constrained from selling investment assets, definition to follow.

Central banks take responsibility to manage commercial banks with regard to lending standards, management competence and balance sheet ratios. The central bank has the power to institute changes in bank management where required in its judgment.

Central banks and deposit insurance agencies guarantee all deposits in commercial banks regulated by the CB and guarantee all loans to member banks. To prevent the moral hazard problem, bank principals' deposits are exempt from the deposit guarantee and they are forbidden to borrow from their bank.

FTO members create an SEC type disclosure process for ALL investment properties. This will eliminate derivatives.

The goal of the FTO is universal membership and compliance. A compromise which attracts more members should be taken. Capital will seek the greatest reward, smallest risk location. If the regulation system is not consistent in every country, then capital will find the weak link.

INTERNATIONAL TRADE

Free [unregulated] trade brings the good and the bad of unregulated markets wherever it is tried: economic growth, criminal behavior and poor income distribution.

The philosophy behind it rests on the idea of a general world equilibrium where every consumer in every country is well off.

This is a pipe dream. It will never happen. Policies which support that idea create the evils of unregulated markets.

Each country must manage its trade to take advantage of the benefits and avoid the problems trade brings.

Trade should be encouraged. It should be managed so that there is neither a deficit nor a surplus from trade, i. e., the current account balances in each country are even every year. A country should not buy more from other countries than it sells to them, as measured in currency. See my article on balanced trade at www.mkeever.com

Consumers should be protected from dangerous imports. Hypothetically only, if China were to allow melamine in dairy products - which it does not - then any country which prohibits melamine in dairy products has the right to ban the import of diary products from China without penalty.

If the WTO requires a country to allow Chinese dairy imports, then the WTO should be scrapped.
***************************

The above is only a start toward a rational economic policy framework.

Mike McKeever
McKeever Institute of Economic Policy Analysis
www.mkeever.com
October 28, 2008
Permission to reproduce in whole or part with attribution is hereby granted.

Too Dumb - 9, McCain asks Contribution from Russian UN Delegation

See the story:

http://en.rian.ru/russia/20081020/117842524.html

Too Dumb - 8, Gazprom in Alaska

'As Palin assails Russia, Gazprom meets with Alaskan officials'

see the story: http://www.iht.com/articles/2008/10/14/business/gazprom.php

Corruption and Regulation

CORRUPTION AND REGULATION - A LAYMAN'S PERSPECTIVE

Perhaps it was Karl Marx who predicted that the capitalist and communist economic systems would converge someday.

That day seems to be coming closer and closer with recent events trending toward increasing market and administrative regulation in the USA as a capitalist beacon and Russia as the former home of socialism.

In Russia President Medvedev is fighting corruption since he thinks that it hinders economic growth. In the USA, unregulated free market actions have created a financial panic that has created demands for stricter regulation from Democrats, Republicans, CEO's, the SEC and the general public.

Russian Sergey Vadimovich Stepashin, chairman of the Russian Federation Comptroller's Office, has proposed a comprehensive corruption elimination campaign, according to an interview article in the Rossiyskaya Gazeta, September 24, 2008 by Tatyana Panina.

He singled out Russian Law No N94-FZ "On Distribution of Orders for the Delivery of Goods, the Performance of Work, and the Rendering of Services for State and Municipal Needs" as providing opportunities for corrupt behavior.

In the United States, Christopher Cox the Chairman of the Securities and Exchange Commission [SEC] has blamed a lack of regulation for the current financial crisis. ['S.E.C. Concedes Oversight Flaws Fueled Collapse', By STEPHEN LABATON, New York Times Published: September 26, 2008]

The question naturally arises: What is regulation? It's an important topic that needs a lot of discussion.

I'll try to provide an overview from a layman's, i.e., not a lawyer, point of view. Perhaps a Western economic student's perspective will be useful - even though it may contain a few legal blunders.

REGULATION OF BANKS AND FINANCIAL FIRMS

In 21st Century economies, banks and financial institutions control part of the country's money supply. Thus, regulating them correctly is a national security matter - poorly or crookedly managed banks can harm the country.

Any firm which manages a part of the country's money supply should be examined regularly by the Central Bank or other appropriate institution to be sure it is being run soundly and honestly.

If the bank examiners conclude that the bank or firm has problems, the examiners should insist that the problems be corrected. Failure to correct the problems will lead to the bank being closed and its assets sold to another bank.

This is a case where separation of powers and extensive processes to ensure fairness to accused individuals can be compromised in the interests of the country.

MARKET REGULATION OF UTILITIES AND MONOPOLIES

In a market economy where most goods and services are provided by private, for-profit enterprises, sometimes firms are granted a monopoly by the state in providing a specific product or service. The economic justification for the monopoly is that the economies of scale compared to the size of the market dictate that a monopoly can be more efficient. In other words, the amount of investment to get the lowest cost is so high that a company will make the investment only if it can get a sufficient volume of business. This usually happens in utilities like electricity, garbage collection, sewer and water systems and so forth.

The economic problem is that any monopoly has an incentive to raise the price too high in order to make high profits. This then defeats the purpose of granting the monopoly in the first place.

Before some deregulations in the USA, many state governments created Public Utility Commissions [PUC's] which regulated utility monopolies. The basic idea is that before the firm can change any price or service level, it has to justify that change to its PUC. Failure to secure approval meant that the firm would be fined the total amount ot the inappropriate price or service level. This took away the firm's economic incentive to cheat - what's the point in cheating if you will lose any gain to a fine?

The PUC's based their decisions on allowing a return on investment [ROI] sufficient to attract capital for expansion and no more. If a company needs to pay 10% on bonds or loans to get the money for the expansion, then the PUC allowed a price to be set which made a 10% ROI likely.

In exchange the firm received a safe and steady market but was prevented from risky and possibly more profitable ventures. Investors received a certain income with little growth possibilities. The system worked fine until deregulation.

Most PUC members were elected by voters under their enabling legislation.

REGULATING INDIVIDUAL BEHAVIOR WITH CRIMINAL LAWS

Making regulation effective in preventing bad behavior by individuals requires that the rules are clear, specific and indisputable. After all, a person prosecuted under such a law stands to lose considerable wealth and/or freedom if convicted. He can be expected to mount a vigorous defense.

First Principle - Prevent Bad Behavior

Effective regulation tries to prevent specific behaviors, whether by individuals acting alone or for a company, bureau or government or behaviors by such organizations as a matter of organization policy.

Second Principle - Describe Bad Behavior

This creates a need for a detailed description of each behavior to be prevented. After all, how can a person or organization be accused of behaving badly if the behavior is not listed as prohibited behavior?

It is critical to describe the prohibited acts specifically so that there is little room for judgment. Such phrases as 'corruption' or 'bribery' are too vague to use in a law. Perhaps a phrase is useful such as: 'An individual employee granting an exemption to a legal requirement for an applicant in exchange for a payment of money or goods to the individual granting the exemption.'

In practice, this means that no behavior can be prohibited until that behavior is described and listed as prohibited. So, if taking a bribe for a favor is described and prohibited in a law passed on January 1, 2009, I cannot be prosecuted for taking a bribe on December 31, 2008. Of course, I can be prosecuted on January 3, 2009 for granting the favor that day, assuming that granting a favor has been described as prohibited behavior.

Third Principle - Describe Specific Punishments for Bad Behavior

The instrument which describes behavior as bad will also specify what is the punishment for the behavior. This may be a range of possible punishments, but the range of possible penalties should be specified. Failure to do so creates another problem where corruption can enter: negotiating or bribing away the punishments.

Fourth Principle - Separation of Powers

This is a Western approach; but, it seems to have merit in difficult areas like corruption.
Entities which participate in the identification and punishment of corrupt behavior should be different entities. For example, suppose a criminal law exists which states that a national government bureau employee who takes money or property and provides an exemption for an applicant to the bureau is guilty of a crime and will be fined a sum of money and be fired from the bureau.

Ideally, the national government's prosecutor prepares a case against the employee with all the relevant facts. The prosecutor's office then presents the case to a national government judge who listens to the prosecution and the defense, then makes a determination of innocence or guilt and assigns the punishment.

If the prosecutor's office also has the power to determine the guilt or innocence, the process is more likely to be viewed as corrupt and is also more susceptible to corruption since only one person has to be bribe.

Fifth Principle - Laws Conform to the Jurisdiction

The above example concerns a national or federal law, prosecutor and judge. If the case concerned a city law, then the prosecution would proceed under a city law with a city prosecutor and judge.

City judges cannot prosecute federal crimes and federal judges cannot decide offenses against city laws.

Sixth Principle - Separate Powers Chosen Separately

While one part of the prosecution process can be chosen by one part of the government, the other part should be chosen differently. For example, federal prosecutors can be appointed by the federal government directly, but federal judges should be either elected in a national election or appointed by the government subject to confirmation by the legislature.

I hope that we will see a lot of discussion about this important topic.

Capitalism is Dead

What happened?

The short answer is that the mortgage packagers lied to the buyers. The folks who created the bonds mixed good loans with bad loans and then lied about it.

It's a rookie mistake: NEVER lie to money.

Now the money - bond buyers - is frightened. They will likely stay frightened for some time.

They'll stay away longer if there is no bailout. They will come back eventually, but they will be very leery of new bonds.

The solution is to provide very detailed disclosure and expect mistrust. After all, when you lie to a nervous buyer, it takes a long time to rebuild trust.

It'll happen, so have patience.

Why did they lie to money?: because no one told them they could not. There was no regulation - no cop on the beat - , so they got away with it.

But what are the long term effects?

Basic long term effect is that free market capitalism with no oversight and ineffective regulation has once again proved to be a disaster.

It is predictable and avoidable. So, why do we have to re-learn that lesson again and again??

The Great Depression, the Dot.com bust, Enron, etc., etc.

We have to re-learn it simply because there is too much money to be made privately by acting greedily.

The money goes to buy loose regulations from Congress.

Congress took down the firewall between banks and investments we had built after the 1930's depression.

We took them down in the 1970's and promptly got the S&L meltdown and bailout and now the mortgage meltdown and eventual bailout.

Will we learn the lesson this time? Who knows? It's a crapshoot.

One thing is for sure.

Capitalism is dead.

The capitalism that insists on a laissez faire, laissez passer, i.e., zero regulation or government oversight, is dead because it does not produce good results for most people.

The United States founding fathers broke from England to secure both liberty and property. The current debacle has destroyed property for many of our citizens. This happened because businesses insisted on the liberty to pursue their selfish gains regardless of the cost to the country.

The world declared that communism and socialism were dead upon the demise of the Soviet Union. The declaration was made because the system failed to provide a good life for its subjects.

Free market capitalism is dead for the same reason - it has failed to provide a good life for most of its citizens. Many in the United States believe that our citizens have one of the highest standards of living in the world. This is not true by most objective measures.

Capitalism's apologists insist that letting entrepreneurs work for personal gain is good for the economy because they will build capital in the form of money for themselves and that they will use that capital to invest in new businesses. From the new businesses will come jobs and economic growth.

That idea is wrong. It is wrong because the individuals who accumulate the wealth have little or no necessary incentive to risk it on new businesses. They are just as likely to buy a yacht and an Italian villa as they are to invest in a new business.

There are people who make such investments, but allowing their ranks to grow in the hopes of creating more new businesses just does not work.

Today, the world had too much capital. Capital markets are worldwide and operate on a 24/7/365 basis thanks to the internet.

There is so much capital around that its owners have a hard time placing it in secure investments. At the same time, just about every sound business idea is able to receive funding. In addition, investors spend much of their time on financial or non-productive investments. Thus we have the derivatives that brought the financial system to the brink of collapse.

This is happening at the very time when more and more people around the world are sliding into poverty, despair and violence.


Copyright, 2008 by Mike P. McKeever, Santa Rosa, CA. This text can be posted in any electronic forum. For publication in printed form please request permission from the author: email: mpmckeever@earthlink.net.