Regulating Reputational Risk

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Progressive-Democrat ex-Presidents Barack Obama and Joe Biden used their banking regulators to “encourage” banks to do no businesses that might inflict “reputational risk” on the bank’s soundness and to end existing business relationships with such enities. Those reputation-damaging businesses—according to those administration men—centered on such Nasties as payday lenders, gun retailers, and crypto.

By focusing on reputation risk, supervisors attempt to understand and anticipate public opinion regarding issues and events and then to attempt to directly connect this public opinion regarding issues and events to an institution’s condition in ways that have proven nearly impossible to assess or quantify with accuracy[.]

Those are the words of the Federal Deposit Insurance Corporation and Comptroller of the Currency bosses as they work on a rule that would bar regulators from “reputational risk” evaluations. If regulators can’t quantify what it is they want to regulate, they have no business trying to regulate it—that’s on top of regulators need to be limiting on their regulatory activities in the first place.

Reputational risk assessments in particular are entirely subjective, and that just excuses and enables administrations of whatever stripe to regulate out of business any enterprise of which the regulators or their political bosses disapprove.

The market is fully capable of assessing reputational risk, and it should be left free to do so without government “assistance.”

That’s One Spin

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The DC Circuit Court has denied Anthropic’s appeal of a DoD decision to cut the company out of Defense contracts as a security risk to Defense supply chains. Meanwhile a Northern District of California Federal court judge has upheld Anthropic’s appeal on free speech grounds. This, of course, creates a split of sorts that, ultimately, the Supreme Court will need to resolve, unless the 9th Circuit overrules the District judge wih a ruling that substantially aligns with the DC Circuit.

What’s interesting, though, is Computer & Communications Industry Association CEO Matt Schruers’ characterization of the split.

The DC Circuit’s denial will prolong ambiguities regarding whether political considerations can drive federal procurement[.]

This is Schruers’ conclusory characterization centered on his preferred outcome. It couldn’t possibly be the California district judge’s ruling that is prolonging ambiguities.

The Strait and Victory

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There is a two week cease fire more or less in progress in the US-Iran portion of the US/Israeli war against Iran, one that is subject to the Islamic Republic of Iran agreeing to the COMPLETE, IMMEDIATE, and SAFE OPENING of the Strait of Hormuz. Iran has not done so.

On Wednesday [after the cease fire nominally went into effect], Iran told mediators that it would limit the number of ships crossing the Strait of Hormuz to around a dozen a day and charge tolls. The Iranian navy also told ships anchored nearby that they still needed Iran’s permission to cross the strait. “If any vessel tries to transit without permission, [it] will be destroyed,” according to a recording reviewed by The Wall Street Journal.

The White House is insisting that what the Iranian personnel say in public is radically different from what they’re saying in private. Either way, though, those are just words. Actions matter, and so far those actions include a lack of tanker and cargo ship movement through the strait beyond a few that have paid as much as $2 million in protection money to the Iranians. That’s not a COMPLETE, IMMEDIATE, and SAFE OPENING.

Meanwhile, Iran is attempting after the fact to alter the terms of the cease fire to include Lebanon and Israel’s campaign against the Iranian terrorist surrogate Hezbollah. That that’s a separate matter is unimportant to Iran as its personnel, once again, welch on an agreement, tap things along, and stall, stall, stall.

That Iran’s military capacity has been devastated is true enough.

…strikes destroyed roughly 80% of Iran’s air defenses, more than 1,500 targets, as well as more than 450 ballistic missile storage facilities and 800 one-way attack drone storage facilities. The operation has also decimated Iran’s defense industrial base, Caine said, including shattering more than 80% of its missile factories.

But those numbers are just the modern body count, and they’re just as meaningless without context. How do those losses compare with what Iran started with? How many of those missiles, rockets, drones, and launch systems does it have left? How many of those small boats? How much of its industrial base is left?

The current situation seems similar to that of the Rome-Carthage wars, particularly the second one. From Adrian Goldsworthy’s The Fall of Carthage:

Despite their appalling losses, the string of humiliating defeats, the defections of some Italian allies, and the continuing malevolent presence of Hannibal’s army in Italy, the Romans simply refused to come to terms with the Carthaginians…. They were then able to beat the enemy on every other front and force the undefeated Hannibal to evacuate Italy…. The Carthaginians expected a war to end in a negotiated peace. The Romans expected a war to end in total victory or their own annihilation, something which no contemporary state had the resources to achieve.

We’re not dead yet, say the Iranian negotiators, so we haven’t lost.

It’s time for them to die.

Big Brother’s Nanny Sister

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President Donald Trump (R) wants to let businesses allow private equity investments be included in their 401(k) Plans so employees can invest in them with their retirement savings. After all, unions, those voting bloc and funders for the Progressive-Democratic Party do, with enthusiasm.

Nope, say those same Progressive-Democratic Party politicians. We get to do it. You others don’t. Just look at those collapsing private equity funds now. Besides, the Labor Department is only letting those 401(k)s have risky investments that could include Trump meme coins.

Labor says otherwise.

The Labor Department is proposing to clarify that employers don’t violate their fiduciary duty merely by incorporating private equity, real estate and other “alternative” investments in 401(k) fund options.

Nothing else.

I agree that private equity is a terrible, horrible, no good, very bad investment. However, that’s a matter for the individual investor to decide. It should not be a matter for Nanny Statists like Party politicians to actively bar, nor should it be a matter for Republicans of any stripe to passively bar by not permitting.

Caveat emptor, and caveat collocator.

Bah—Who Needs National Defense?

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A letter writer in The Wall Street Journal‘s Tuesday Letters section was unhappy with the spending proposal for and attendant priority given to defense spending. He didn’t seem to see any need for spending there.

I read with some alarm the enthusiastic commentary in your editorial regarding the proposed $1.5 trillion defense budget….
… Diverting expenditures to military weapons and away from social needs—housing, food and medical care—isn’t sensible nor is it possible, given current domestic needs.

What isn’t sensible is not funding our ability to defend ourselves in a world of many powerful enemy nations, at least one of which has sworn to surpass and dominate us.

Any free nation needs to be able to defend itself, or it won’t be free for long, and all the social needs—housing, food, and medical care—it gets, such as they might be, will be dictated by that nation’s conqueror. National defense must be that nation’s government’s first priority.

I decline to live under a People’s Republic of China tyranny. Or to see my nation simply destroyed by a nuclear armed Iran that has no other goal aside from visiting the same extermination on Israel.