Category Archives: regulation

Good Medicine for Bad Bankers

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That’s the title of an Alan Blinder op-ed in The Wall Street Journal. It’s subtitled One way to keep bankers from behaving badly is to hit them in their pocketbooks with penalties that affect bonuses.

Blinder cited remarks by New York Federal Reserve Bank President William Dudley:

Mr Dudley highlighted the “ongoing occurrences of serious professional misbehavior, ethical lapses and compliance failures” at giant financial institutions. And he warned the audience, which included a number of the world’s leading bankers, that unless the epidemic of bad behavior stops, “the inevitable conclusion will be reached that your firms are too big and complex to manage,” in which case “your firms need to be dramatically downsized and simplified.”

You bet. However, Blinder wants more government interference, even after government’s proven failure to manage economies of any sort. He wants a points system for bank(er)s’ misbehavior, with a sufficient accumulation of points leading to an offending bank’s loss of its banking license. And he wants government to dictate where in a bank its losses should be allocated. Because businessmen and their accountants can’t be trusted with this judgment. But government can be.

No, the best way to achieve “hitting them in their pocketbooks” is to have the bankers’ jobs at risk through free market sanctions on their banks’ continued viability—let those banks fail and enter bankruptcy. And the best way to achieve that would be to eliminate the too-big-too-fail sewage of Dodd-Frank.

Sorry I’m late with this today.  Ate up with dumb and with lazy.

Perjury?

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This is the oath that witnesses before the House Committee on Oversight and Government Reform requires of its witnesses, when those witnesses are sworn (and if one witness is required to be sworn, they all must be) (scroll to Rule 9, para (g)). It’s not the same oath for all committees, but it’s typical.

Do you solemnly swear or affirm that the testimony that you are about to give is the truth, the whole truth, and nothing but the truth, so help you God?

I mention this because it turns out

Then-Deputy Commissioner Steven Miller wrote in an email in June 2012, about a month before a House Ways and Means subcommittee hearing….

“I am beginning to wonder whether I should do [the hearing] and affirmatively use it to put a stake in politics and c4 [regarding IRS targeting of conservative organizations applying for 501(c)(4) status].”

Miller also was never directly asked about the targeting. That removes the legal aspect of perjury: Miller would seem not to have perjured himself.

But morally? Yew betcha.

Crony Capitalism

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Montreal-based CGI Group Inc, the company that received a $74 million contract to develop and maintain the Hawaii Health Connector web portal, will be awarded another year-long state maintenance contract despite the ongoing problems with the site.

The money comes from a $204 million federal contract the state received in 2012 to set up the Obamacare network in the islands.

This is the same crowd that had so much fun with the ObamaMart failure in 2013.

Hmm….

A(nother) Thought on Climate…Change

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Watts Up With That has a summary article and graph on this; the basic article is on the other side of a link in the summary. It’s typically academic in its language, but it’s well worth a layman’s time in slogging through. Here’s the graph (which is a construction of Watts’; it’s not in the linked-to article):TreeRingSummary

Northern Europe summer (June, July, August) temperature reconstruction. Data shown in °C with respect to the 1961-1990 mean. Adapted from Esper et al. (2014).

The black lines are individual data points, and the grey shading smoothes the data. The green line represents the center of the grey shading, and the red line approximates a regression line showing the long-term rate of cooling over these 2,000 years. All the representations show the same thing: it was warmer in northern Europe 2,000 years ago, during the time of the Roman Empire, than it is today.

The take away for me, though, is what’s represented by the black lines and the grey shading. Compare those to the alleged warming trend of the last 100 years—and its stagnation over the last 20 years (fully a fifth of those 100 years).

Now show that that recent “trend” is distinguishable from the noise level apparent in the data and their first smoothing, the grey shade.

Technology, Oil, and Government

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Falling oil prices are a good thing. Except when they’re not. Or….

The irony in the falling prices is that the success of US producers using hydraulic fracturing and horizontal drilling technologies is partly responsible, along with slowing demand by struggling Asian and European markets. Now that success could come back to bite the so-called fracking industry and other drillers in America.

[Wyoming Governor Matt, R] Mead acknowledged that in the short term, lower gas prices will benefit businesses and residents in his sparsely populated state, where distances between towns are often calculated in hours instead of minutes.

But, he pointed out, “If we see low prices continue for some time, we’ll see rigs start to lay down. And it’s not just the direct revenue. It’s the hotels, restaurants and all that goes with that.”

Not to mention jobs.

This is normal in a free market economy, though. New technologies, or old technologies like fracking whose time has come, are always disruptive. Recall the stereotypical, but no less accurate for that, impact on horse-drawn buggy and whip manufacturers with the advent of the horseless carriage and then the assembly line for making those automobiles cheap.

So it is with fracking. Not only does it make hard-to-get oil and natural gas (much) easier and (much) cheaper to get, it drastically increases the supply of these commodities, each of which individually drastically lowers the price of these, and together they synergistically do.

But when supply overshoots demand, and the price obtainable for oil and gas cannot cover even the lowered cost of extraction, many of the suppliers, extractors, stop producing, stop extracting. This has negative effects on both fracking jobs and the ancillary jobs Mead mentioned.

However, in a free market, supply and demand quickly match each other, and prices—and jobs—stabilize. With the technological advances associated with this commodity, too, as with any technological advance, the new pricing equilibrium will be lower than the prior equilibrium. It’s uncertain whether oil and gas pricing in particular will stabilize at their current levels, continue a little lower, or go a little higher. But it’s virtually certain we’re done with $100 oil for the foreseeable future, which is to the good of utilities, manufacturers, consumers, and anyone and anything that uses energy.

And those jobs? They’ll recover with the stability and predictability of the new normal in oil and gas extraction. The widespread use of fracking and related technologies also will lead to a net increase in employment when all is said and done, just like in those early automobile days.

The kicker here is identified by Kathleen Sgamma, Western Energy Alliance Vice President of Government and Public Affairs [emphasis added]:

There is a point at which the lower commodity price combined with the increased regulatory cost will put new wells out of business—they just won’t be drilled[.]

And [emphasis added]

whether a well is on private, state, or federal land, “because the regulatory environment is such that it makes it more expensive to develop on those federal or tribal lands.”

Government’s intrusive regulation wasn’t a factor in Henry Ford’s disruption.