Category Archives: political economy

Failure Proofing

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The FDIC, in the wake of its own failure regarding the Silicon Valley Bank and Signature Bank collapses (primarily caused by those banks’ managers’ failures, but the FDIC had its role, too, along with the Federal Reserve’s regulators), now wants to excuse failure by making those who failed whole again—and do it at the expense of the rest of us.

Those who failed, in this context, are those with uninsured deposits—deposits larger than the presently insured $250,000—at banks. The FDIC actually is proposing an assessment on larger, successful banks which would be used to…repay…those uninsured depositors who would otherwise be left holding the bag in a bank failure. Even an FDIC bureaucrat knows that such an assessment wouldn’t be paid by any of those larger, successful banks, but by those banks’ customers in the form of higher fees, higher loan interest rates, and lower deposit interest rates.

Ostensibly, the assessment is backward-looking and is only a one time good deal for those bag holders of SVB and SB.

The proposed special assessment would recoup the $15.8 billion paid out from the FDIC’s Deposit Insurance Fund to protect depositors in SVB and Signature who had deposits in excess of the $250,000 insurance threshold. It would do so by imposing a fee of 0.125%—or 125 basis points—on insured deposits at banks with $5 billion in assets or more, which would remain in effect for eight quarterly assessment periods starting in the first quarter of 2024.

If this goes through, though, you can bet your own deposits, large or small, that the assessment will be made permanent and available to all future depositors. The FDIC never should have bailed out those two banks’ uninsured depositors in the first place; now it wants to cover up its mistake by spreading it around.

This is the path to destruction. If there is no failure, there can be no improvement, no progress, only poverty—and not only economic.

Not At All

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California’s Proposition 12, which sets animal-welfare standards for meat sold within the state, has been upheld by the Supreme Court. It’s a ruling that should have been expected, and appellants’ claim that the California law violates the Commerce Clause notwithstanding, the ruling is proper. What a State requires of products sold entirely within it is not interstate commerce—which is the province, and the only aspect that is the province, of the clause.

All Prop 12’s law does is place requirements on the meat sold within the State; it imposes no requirements on how other States comport themselves, including how they raise their food animals. Nothing in the law forces other States to incur the costs of complying with it.

It is true enough that

Californians account for about 13% of the country’s pork consumption but raise hardly any pigs. That means that the costs of complying with Proposition 12 fall mostly in states like Iowa, which raises a third of the country’s pigs.

The Prop 12 law often is viewed as an attempt by California to dictate regulate what other States do regarding their own production requirements. The decision to accede to California’s “regulatory” efforts, though, is a purely business one and not at all a legal one. In fact, the ruling also makes it easier, from a legal standpoint, for states like Iowa to not sell their pork products in or into California at all.

And that’s what I recommend. There are a lot of markets other than California, including export markets, that would easily absorb those 13%. It’s long past time producers in the other 49 States, and our several territories, start ignoring California and its foolishnesses.

And They Accused Trump of Being Soft on Russia

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Progressive-Democrat President Joe Biden’s Janet Yellen-run Treasury department has—once again—extended a waiver to a rule barring import of Russian oil and gas that was instituted ‘way back in March 2022. Even at the time of the rule’s institution, Treasury created a waiver to allow financial institutions to continue processing dollar-currencied payments for Russian energy in other countries.

The waiver was supposed to expire by that June, but Yellen extended it to early December. She said, through a Treasury spokeswoman,

This license [extension] will provide for an orderly transition to help our broad coalition of partners reduce their dependence on Russian energy as we work to restrict the Kremlin’s revenue sources[.]

After that she extended the waiver again, until the middle of this month.

Now Yellen is extending the waiver yet again, to November, and this time she’s not even pretending she has a reason:

Treasury didn’t respond to a request for comment Friday [5 May 23].

Biden and his cronies in Party and his supporters on the Left all zealously decried former President Donald Trump’s playing to Russian President Vladimir Putin’s ego with all of Trump’s pretty words about Putin.

Here is Biden and his Treasury person actively propping Putin’s energy economy by not closing off payments for Russian energy. Any orderly transition has long since been effected, or should have been; there no longer is any reason for extending the thing beyond Biden’s concrete softness on Russia.

Debt Limit Extensions

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James Freeman quoted Capital Alpha Partners‘ James Lucier’s prediction concerning reaching the current debt limit and Congress’ response to it:

We think that Congress will pass a temporary extension of the debt limit deadline for 30, 60, or 90 days.

The House already has passed a temporary debt limit extension—of ~365 days.

The sad fact is that all debt limit extensions, of however many years, are merely temporary, and that will continue to be the case until Congress quits spending more money than the Federal government takes in. The most efficient way of achieving that end is to cut spending—not merely reduce its rate of growth.

That efficiency will take We the People getting off our duffs and electing Representatives and Senators—and Presidents—who have the courage to do the cutting.

A Better Solution

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Senator Joe Manchin (D, WV) is reintroducing his energy project permitting reform bill in the Senate. He also re-cited the need for reform in his remarks introducing the bill.

In the United States, it often takes between five and ten years—sometimes longer—to get critical energy infrastructure projects approved, putting us years behind allies like Canada, Australia, and more recently the EU, who each have policies designed to complete permitting in three years or less[.]

Even though fixing this would help allegedly green energy projects, also, Manchin’s cronies in the Progressive-Democratic Party syndicate have been happy to sacrifice that in favor of letting those interminable delays kill so many domestic cheap hydrocarbon-based energy projects. It’ll be an up-the-cliff battle to get anything like this passed in the Party-dominated Senate.

Among the useful things in Manchin’s bill, though, is this:

The Building American Energy Security Act would establish maximum timelines for permitting reviews including a two-year process for major projects and a one-year process for smaller projects. It would provide legal avenues for project developers to take against the federal government if a permitting review is delayed beyond set timelines and would mandate a single inter-agency environmental review.

That’s good as far as it goes, but here’s a better enforcement mechanism, IMNSHO: the permits should be will-issue, and if no decision is reached by those deadlines, the project should be deemed fully permitted, with no further review and no appeal of the permit. Rejections must be public, specific, and detailed, and they can be appealed directly to Federal courts: the Energy and Interior Departments, EPA, any other government entity can appear only as defendants in an appeal; no appeal of a permit grant should be allowed.

A further criterion and an additional deadline: if any of the rejection criteria are not met, the project should be deemed fully permitted, with no further appeal. The rejecting authority should have gotten it right the first time.

If the initial court does not reach a final decision within six months, the project must be deemed fully permitted. Appeals must be finally resolved within three months of the appeal filing (which itself must occur, fully developed, within one week of the lower court’s ruling, or the opportunity to appeal must be forfeit), or the project must be deemed fully permitted. And: only one appeal of a permit grant must be allowed at each court level; naysayers cannot be allowed to drag things out with serial appeals.

Those last put a premium on the Federal courts moving cases apace, but it puts a bigger premium on the lawyers to prepare and move their cases without delays—and eliminates the deliberate stalls represented by cynical serial appeals.