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Saturday, September 5, 2009

The decision by the AP to publish photo of dying Marine

The AP recently published a picture of a dying Marine in Afghanistan. Secretary of Defense Gates wrote a pleading letter to the AP asking that the picture not be published out of respect for the family. The AP staff reconvened and decided to stand by their decision to publish the photo. Should the family's wishes have been respected in this matter or should the public’s "right to know" outweigh the wishes of the family? What are your thoughts on this?

Here is a link to the photo:

**The AP warns Graphic Content.

Monday, June 1, 2009

Deregulation, Demise of Savings and Loans, The Beginning of the End

In 1970, President Richard Nixon appointed a commission known as The President's Commission on Financial Structure and Regulation also known as The Hunt Commission. The primary accomplishment of this commission was to abolish the power to establish interest rate ceilings on time and savings accounts.

At the time of the commission, interest rate ceilings were established by the federal government on savings accounts, wherein savings and loans were permitted to pay 1/4 of 1% (25 basis points) more to their depositors than that paid by other depository institutions, principally commercial banks. In exchange for this advantage of 25 basis points, savings and loans were required to lend 80% of their deposits on home mortgages. The abolition of the power to establish interest rate ceilings meant the demise of savings and loans in the United States. The commission attempted to allow sufficient time for smooth implementation. However, it erred in the timing and failed to allow for a recession which ensued. This caused the savings and loan debacle, at a cost of more then $200 billion dollars to the U.S. Treasury.

By 1980, all state usury laws were, for all intents and purposes, involuntarily repealed; deposit money floated freely in the market place; savings and loans, as such, disappeared; the Federal Savings and Loan Insurance Corporation ceased to exist, and all bank deposits were insured by the FDIC. Also, in 1987, President Reagan did not re-appoint Paul Volcker, a proponent of regulation in the financial markets, as chairman of the Federal Reserve System. On the contrary, he appointed Alan Greenspan, who was one of the chief proponents of deregulation. There were a number of laws enacted that set us on the road to complete deregulation including the Depository Institutions Deregulation and Monetary Control Act of 1980 and the Garn-St. Germain Depository Institutions Act of 1982.

In 1994, the congress saw fit to allow inter-state banking with the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. This was the beginning of the creation of super banks and the ultimate end, for the most part, of large community banks. In 1999, banks were allowed, not only, to cross state lines, but also, to cross state lines and buy other banks. Also, in 1999, Congress repealed what was left of the Glass-Steagall Act, which was enacted in 1933 to separate commercial banking from investment banking. The bankers had been lobbying for years, with the complicity of Alan Greenspan et. al., to have this law repealed. To add to the economic upheaval which was yet to come, both the Clinton administration and the Bush administration steadfastly refused to regulate derivatives. Some economists feel that this was the biggest cause of the present recession.

And, so, by the turn of the 21st century, the bankers had achieved almost total deregulation of the banking system. We know from sad experience that this was a serious mistake. We also know that "too big to fail" is intolerable. Last week, on CNBC, a guest made the statement that world powers must have super banks. There is little basis for this statement. Twenty years ago, Japan had very few banks, and many of those were classified as super banks. Japan has not been heard from as an economic world power for the last decade.

Tuesday, April 14, 2009

Toomey to challenge Specter

We are pleased to welcome Mark as our guest blogger. Mark is a sports radio talk show host and political enthusiast who engagingly blogs about sports and politics at Spolitics - Sports and Politics so be sure to drop by and take a look!

Being from Pennsylvania, this was the best news story of the day. Incumbent Republican Senator and RINO (Republican in Name Only) Arlen Specter has gotten a primary challenge from conservative Pat Toomey. Pat was the president of Club for Growth and also mounted a primary challenge for Specter in 2004, which he lost narrowly. Specter is thought to be very vulnerable because of his vote for the stimulus package, a package that only 3 other Republicans voted for. Specter knew a challenge was coming, and even prematurely ran an ad about Pat Toomey criticizing Toomey for being a Wall Street Trader. A hypothetical matchup between Toomey and Specter conducted by Quinnipiac University had Toomey leading Specter 41%-27% with 28% undecided. This could turn out to be a great race, and while I think Specter has a much better chance in the general election, he is basically a Democrat anyway so I hope Toomey can pull it out.

Big thanks to Mark for his informative article! To read more, click on the title link.

Friday, March 6, 2009

We're Looking for a Few Good Bloggers

We welcome guest bloggers! If you want to contribute to the conversation, please click our Send Us A Note icon in the right navigation bar (about midway down the page under Get in Touch) and let us know what you have in mind. Here are some great tips (opens in a new window) if you want to guest post. We'll be posting a blog entry from one of our guest bloggers soon. Thanks!

Saturday, February 28, 2009

Can financial institutions exist under unbridled capitalism?

Events on Wall Street and resulting hearings in Congress in the past several months have made manifest the fact that the financial institutions and others cannot exist under unbridled capitalism. Perhaps Citicorp is the best example. They are the recipients of billions of dollars in aid and judged to be too big to fail. Sandy Weill, former CEO, is said by Charlie Gasparino of CNBC to have treated this one-time great corporation like his own personal playpen. He was also instrumental in appointing Bob Rubin, former Secretary of the Treasury under President Clinton, to the position of Chairman of the Executive Committee of the Board of Directors of Citicorp. Rubin is quoted as saying, in effect, that he wasn't interested in becoming part of management but would like to serve in an advisory role to the Board of Directors and CEOs. In this position he is said to have okayed the leveraging of assets 39:1. If that had worked he would have been a hero. It didn't work and Rubin suffered no ill consequences.

What is evident now is that after the smoke clears, the congress should and will enact regulatory statutes. These should include, but not be limited to the following:

1. Limit the size of banks
2. Limit the exposure to risk
3. Reinstate Glass-Steagall (legislation which separates commercial and investment banking)
4. Limit the types of monetary instruments, e.g. derivatives, etc, which can be employed
5. The stockholders should have the power to vote on executive salaries should they exceed a certain multiple of the salaries of non-management employees

In the last 16 years, under Presidents Clinton and Bush, we have seen the largest transfer of wealth from the producers to the parasites.

It will be interesting to watch the swing of the pendulum as new bills are taken up in Congress to regulate and somehow rein in Wall Street.