Tuesday, February 26, 2013: Unfinished Business on TBTF
Unfinished Business: We have not fixed "too big to fail" (TBTF). There is very little disagreement about this. If the conditions which occurred in 2008 were to repeat, the federal government would again be asked to "bail out" the large banks in order to stem a financial catastrophe. But, it gets worse. This TBTF condition means that the biggest banks can access capital for much less than can smaller banks. This means that there is not a competitive market when you want to get a loan. And, the 6 biggest banks have a greater share of the total banking sector now than they did in 2008. So, they are even more TBTF than they were then!
The French government used $1.2 billion of European Union taxpayer funds to bail out a TBTF bank in France just a couple of weeks ago. No, the problem is not solved.
Some have proposed breaking up the big banks. OK. How do we do it? By region or business line? Do we break each into 2 or twenty banks?
No, the government should not arbitrarily dictate a bank’s reorganization. Neither should taxpayer funds be at risk as capital to effectively subsidize these institutions to the detriment of a competitive market and your ability to get a loan.
So, what do we do? The link below connects to a 5:27 minute interview I did with Yahoo! Finance on my solution to this problem. It was one of the many that covered the introduction of my legislative proposal to solve TBTF: H.R. 613, the Systemic Risk Mitigation Act. It is getting a lot of chatter in the financial world. Whether you think I got it all right here or not isn’t the point. It is time to start working on real solutions. The status quo is unacceptable. We need to make TBTF and its attendant problems a part of history. And, this is something we can all work together to accomplish. This is a non-partisan mission in the best interest of this nation.
I will stay on this issue until we begin act on it.
Friday, February 15, 2013: My Questions to CBO Director Elmendorf
Budget Outlook: On Wednesday, the House Budget Committee invited the Director of the nonpartisan Congressional Budget Office (CBO), Douglas Elmendorf, to testify at a hearing on the CBO's Budget and Economic Outlook. I had the opportunity to ask the CBO Director a few questions regarding his opinion about where we stand economically. By the way, just so you know where I think we stand, in my opening remarks to the Director, I refer to us as being, "in a little bit of a pickle."
In my exchange, I brought up three issues pertaining to our looming debt crisis: (1) The steps and timing necessary to avoid a European-like fiscal collapse. (2) The long-term, negative consequences of not implementing the cuts mandated by the Sequester. (3) The fact that "loophole"-closing proposals made recently by Democrats have not included the deductions that every taxpayers uses, and, therefore, have not made any noticeable impact on the deficit.
I thought you might be interested in watching that exchange:
For a link to the entire House Budget Committee Hearing on the CBO’s Budget and Economic Outlook, click here: http://budget.house.gov/hearingschedule2013/hearing262013.htm
Wednesday, January 30, 2013 - Violence
Violence: Let me begin this discussion by joining in the mixture of sorrow, disgust and anguish that is universally felt by all Americans at the recent spate of killings resulting in the deaths of children and students in schools and colleges around the country. The Sandy Hook Elementary school tragedy is one that will not, and should not, leave our collective memories for many years. My daily prayers include the families of these young victims. There is no disagreement that such violence is on the increase in our country. There is similarly no dispute that we must have a reasoned and serious debate about its causes and potential solutions.
With this writing, I will enter that debate.
With a few exceptions, the proposals to reduce such violence have been focused on increased gun control legislation. Some have also talked about increased mental health funding and reporting, while others have suggested armed guards in schools as a solution. I believe that these proposals all deal with the symptoms rather than the causes of such violence. Furthermore, I believe that most of these proposals are actually counterproductive in that they distract us from what perhaps are much more difficult and deep-seated issues that we are fearful of or simply unwilling to address.
Fifty years ago, there were far fewer gun controls than exist today. Increasingly restrictive gun control legislation has been passed at all levels of government in a continual manner over the last 50 years. But, unfortunately, as gun control has increased, so has gun violence. These sorts of killings did not occur nearly to the degree they do now in the 50s or 60s, when gun control legislation was just beginning to be enacted. Now, I am not going to make the argument that more gun control leads to more gun violence. Many will make this argument legitimately by pointing out that gun control disarms law-abiding citizens while those who desire to commit murder (which is, by the way, illegal) are not bothered by breaking gun laws to do so. Thereby, the lawless can be more reckless knowing that the lawful will be unarmed. This argument has standing and certainly the statistics support this conclusion. But, as I said, I will leave that argument for others to make.
So, there is no record of gun control in this country resulting in less gun violence. As far as the other commonly mentioned “solutions" to this growing problem, mental health restrictions have their own issues - which I won't get into in detail here. And, if we are going to have armed guards in all schools, why stop there? What about movie theaters? Or shopping centers? Or any other place where a number of people gather? A society where we have a policeman on every block is not a society that any of us should want to approach.
In the humble view of this writer, the real problem here is that there is something societal going on. Something that may not have anything to do with laws at all, but with changes in our culture over the last 50 years that have made horrific acts of violence a more commonplace and more acceptable behavior than was ever before the case. Moreover, these acts appear to be more justifiable in the minds of those perpetrating the violence. Mass killers or want-to-be killers are unhappy people who are mad at the world and/or blame specific individuals for their lot in life. This is not new. What is new, however, is that societal norms which in the past would have restrained such an extreme level of reactive behavior seem to no longer exist. What has caused this?
I don't think there is any one cause. Far from it, actually. Instead, I think this behavioral shift is a result of an interconnected web of conditions in society that have changed, and are still changing, how we view the world around us and how we react to it. Now, I am no social scientist. I must admit that I enter this discussion with a fair amount of trepidation. But, the topic is too important to just stand on the sidelines. Therefore, I will offer up six conditions that I believe have changed during my lifetime in the culture of America that are directly contributing to the violence we are witnessing:
• The "Me" Society: I grew up in Los Angeles. The freeways were jammed even when I got my drivers' license, but road rage was rare. Today, it is uncommon to not witness road rage on my drive to work. Why? I suggest that this is part of the "me" society and the "me" generation. "My" time is more valuable than anyone else's time. People cut off someone driving a little slower than they with an indignant attitude of, “How dare that person interfere with my valuable mission, which is clearly more important than his or hers?!" Achieving "my" wants is a goal that should not be interrupted by the lesser wants of others. These days, it seems, it is all about "me". If it's all about "me", clearly the person next to me doesn't matter.
• The Irresponsible Society: Nothing that goes wrong is our own fault any more. It may be the fault of a teacher, a parent, or maybe an ex-girl or boyfriend. The ads on TV tell me that it’s the fault of my employer, or the people who made my soft drink, or someone who assembled my car without a warning. One thing's for sure, it’s not "my fault"!! Phil Mickelson was lucky! Steve Jobs "didn't build that", someone else did it and he was just lucky enough to get the credit. I could have been the world's best golfer or have had all kinds of success if "the man" (whoever you believe "the man" to be) hadn't kept me down. Others get success by luck and my failures are their fault. This is increasingly the thinking of a society that continues to diminish the concept of personal responsibility. With this comes the desire for revenge against whomever I deem to have caused my problems - since it clearly wasn't me.
• The Secular Society: Regular attendance of church or synagogue has declined in recent decades. Fewer people consider themselves religious. We have removed God from our schools and, increasingly, from all institutions of government. This society based on Judeo-Christian values is becoming less Judeo-Christian. The values, principles and standards of behavior in the Bible can never be replaced by a social studies textbook. Has removing God from so much of our lives today created a nurturing environment for evil to take root?
• The Non-Family Society: The much maligned "nuclear family" was not so bad a thing after all. But, whether your family is "nuclear" or otherwise structured, the centrality of the family unit to modern culture has been undoubtedly diminished. Family units are much more likely to break up than ever before with the end result of leaving many people adrift. A village cannot fully replace the emotional support of a family and neither can friends. We should place more value on the family unit and on keeping it together.
• The "Just Win Baby" Society: Play harder! Be tougher! Win at all costs! Really? At all costs? Is that what we are about now? The end justifies the means? In the financial world, it seems many play by these rules. But, this mindset is not unique to that world. If it’s OK to climb the ladder by stepping on the dreams of others, what else is OK?
• The Violence Society: Hollywood, and other purveyors of entertainment, have a profit motive. As such, I often think they do not lead society, but try to reflect it. But, there is no doubt that they have an influence. There is no doubt that the characteristics of TV, movies and song lyrics have changed over the decades. There is much more celebrated and gratuitous violence. In response to the question, "Why does anyone need a gun like that?", I recently heard someone say, "Well, why does anyone need a Quentin Tarantino movie?". Good point.
Of course, I am far from a saint. I have grown up in and through these societal changes and have not been unaffected by them. I've made some impolite moves on the road because I thought my time was more important than that of another driver. I've watched and enjoyed some violent movies, and I skipped church for a good decade while I questioned my own faith in a God I could not see. The point of my writing this is not to serve me up as any kind of example. It is to make us all question what we each are doing to contribute to the degradation of our society. And, even more importantly, what can each of us do to fix it?
I'm sure this hasn't been easy for many of you to read. It has not been easy for me to write. But, I am tired of watching our society get angrier and more dependent and more divided and self-serving. And, I’m sick of the political class blaming it all on a simple device that has existed for centuries.
There are no laws we can or should pass to deal with these societal problems. But, we need to have the discussion. We need leadership from a lot more places than Washington in order to deeply examine ourselves and the society we are creating. I am not suggesting that we try to go back to anything. You cannot "go back" nor should you as there are plenty of elements of society 50 years ago to which we do not want to return. But, we should be building a society around respect, personal responsibility, family, faith, and compassion. Indeed, we should begin to start paying attention to how we treat others. Not just how we treat some people. How we treat everyone. I'm not sure we've been doing that over the last few decades. In my view, the confluence of the six societal characteristics that I described above lead to a lot of angry people making rude gestures or using bad words. But, without question, for a few people, this anger drives them to pick up a weapon and use it.
I didn't write this missive to propose legislation. I didn't write it to criticize or slam one “side” or another. And, I refuse to add to the divisive political rhetoric with which you are already being inundated. I wrote it because I’m struggling with this question, too. I wrote it to force myself to think a little deeper, to encourage some difficult self-examination, and to bring about some changes in my own behavior. But, I also wrote it to make you think a little, too. Not just about your opinion, but also about what you might do differently. How you might act differently. If it has made you a little uncomfortable, then maybe I've been successful. As we seek to find and solve the root causes of these tragedies, I am convinced that the true remedies will not come from the top down. We must all engage in this difficult conversation together. I need to hear your thoughts, your ideas, your responses to my questions, and, ultimately, an honest assessment of your own self-examination. There is no quick-fix solution to this terribly complex issue, but I guarantee you that there are answers out there if we have the patience and determination to find them.
None of us ever want to again see the faces of tiny children cut down by a maniac. But, the way to prevent these tragedies will not be as simple as passing new legislation. Let us have the courage to confront the much more difficult, but much more substantive problems in society together. May God bless us that quest as He has long blessed this country.
Wednesday, January 23, 2013 - President Obama's Second Inaugural Address
President Obama's Second Inaugural Address: This native Californian was all bundled up to keep warm on a chilly Washington morning on Monday to witness the 57th United States Presidential Inaugural and hear President Obama's second inaugural address.
To be honest, I was inspired by the address.....
....but, not in the way the president might have wanted.
I'm a big football fan. There's nothing to bring you to your feet quite like the big touchdown pass. And, that is usually what brings accolades in the annals of football lore. But, just as important, and many times more important, is that tenacious defense. When you don't have the ball, you count on those 11 defensemen to keep you in the game. Oh sure, they can sometimes get a "pick-6" and score a touchdown. But usually, they just hold the line and keep bad things from happening. The undefeated 1972 Miami Dolphins were led by what was dubbed the "no name defense". They held the line and they were a big part of the only undefeated season in NFL history. As Republicans, we don't have the ball right now. We may control the House, but we are the minority party in Washington since everything else is Democrat-controlled. We are on defense.
The president's address started out rather well, I thought, as he talked about the enduring nature of our Republic and its establishment by some pretty bright and unquestionably brave guys. But then, the speech deteriorated rather badly, in the view of this attendee. You have probably already read or can read what he said. But, to this listener, there was not only no olive branch extended, but the president was confrontational. As he ticked off his points, what I heard was an agenda of, as Sir Winston Churchill once described it, the equal sharing of misery. I heard the mention of all kinds of specific groups that he would help, as well as the mention of classes. I did not hear about the only class that we have in this country - the American class. I heard a plea to lower medical costs when Obamacare has dramatically raised medical costs for everyone. I heard a strategy of disengagement around the world, which works fine until some part of the world rises up against us. And, Mr. President, making the strong weaker does not make the weak stronger. In fact, it does just the opposite.
What I heard was the antithesis of why I have been in public service for more than a dozen years.
And, I was inspired. Not because I liked what I heard. I obviously did not. Not because I was encouraged that there will be common ground upon which we may move the country forward. I believe that will not be the case. I was inspired because I now know what I have to do. The country will be led in the next four years by an individual who, if left to his own devices, will make this country weaker and less prosperous. Much of what he laid out will make us more and more like the weakest and most troubled of Europe's states: Focused on expanding failed programs, on driving out accomplishment and turning a blind eye to threats around the world.
I can't let that happen. We can't let that happen. I know that's not an agenda of progress. That agenda was delayed by the election results on November 6th. But, we can stop a lot of bad things from happening. We can have a tenacious defense. And, we can save America in order to reap the exceptionally bright future that is before us just waiting for the right leadership.
Thank you, Mr. President. Thank you for lighting a fire underneath me and the silent majority of others like me. This is a battle of ideas. Yours are wrong. Our swords and our shields are at the ready. Let the fight begin.
Monday, January 21, 2013 - Moral Imperative
Moral Imperative: I speak often in these pages about things fiscal, financial and economic. Given that I am a CPA and sit on three committees in Congress that deal with money (Budget, Financial Services and Joint Economic), this is to be expected. But, I am not all about money. And, the nation's problems are not all about money. As big a problem as our debts and deficits are, they are emblematic of deeper and actually more significant moral and cultural issues.
For some time now, we have heard of those who Tom Brokaw dubbed "the greatest generation", those who sacrificed through a world war to vanquish fascism and imperialism and leave a stronger America for their children. We can go back further to speak of the generation that took the risks to establish this country in the late 18th century or of the generation that fought the Civil War. In each case, said generation sacrificed in order to leave a better and more prosperous country of opportunity for their children.
But, what are we doing now? What will be the legacy of my generation? Our debt and deficit crisis is largely caused by giving ourselves health care and retirement benefits without paying for them. But, we "deserve" them. We are "entitled". We paid for them. The problem is that none of that is true. I have paid Medicare taxes my entire working life, and I started earning a paycheck when I was 16. I am 57 years old and, therefore, am 8 years away from Medicare benefits. In spite of that, I have only paid in 1/3 of the cost of the benefits I will likely receive. The rest, fully two-thirds of every doctor visit or medical procedure, will be borrowed. That means my kids will have to figure out how to pay for it.
I use myself as an example, but I am not unique here. No one receiving Medicare now or about to receive it has paid anywhere near the full cost. The same is true of Social Security, although those numbers are not as lopsided. And, we all want to care for the indigent, but we do not pay enough taxes to cover Medicaid expenses either.
So, as a society, we have decided that we want a bunch of stuff right now so that our standard of living will be higher...so that we can buy more things and live more comfortably. And, we don't want to pay for it. Instead, we demand that people in the future pay for it through less opportunity and lower expectations and a lower living standard. Instead of sacrificing to leave the next generation a brighter future, we are rewarding ourselves more than is our due and leaving the next generation with less opportunity, lower expectations and a lower living standard. It is selfish. It is just plain wrong.
The financial markets are also a part of the problem right now. Markets today are dominated by traders rather than investors. Those traders have a very short-term outlook. They are interested in the next week or maybe, at most, the next quarter. So, they want any accommodation that preserves their outlook for a few months and the heck with the long-term future. “I'll gladly pay you Tuesday for a hamburger today,” as the cartoon character J. Wellington Wimpy proclaimed in 1932, seems to have become Wall Street's motto. These short-term markets will hate what we might have to do to fix the problem. But, we must start becoming less concerned about the next 3 weeks in order to build a brighter future for the next 3 decades.
In the final analysis, that's really what this debt limit fight is about. The president and his minions want to give you something for nothing. That's the source of their political strength. You get health care and retirement and education all for free because you are "entitled" to it and somebody else will pay for it. Problem is that those “somebody else's”, like the "rich" and the "corporations", don't have even 10% of the money necessary to pay for it. So, the people paying will be your children. And, they will pay dearly.
I understand that the world moves on. I understand that things change. But, some principles are enduring. Whatever happened to the idea that you are entitled to nothing that you don't earn or show yourself to be deserving of? What about the idea that no matter how good or how modest my station in life is, I want my kids to have it better?
Our debt and this president's perpetual trillion dollar deficits are not just bad economic policy - they are morally reprehensible. We have to make a stand. Barack Obama will be president for 4 more years, to my great disappointment. We are better to make that stand now, even if it means we all have to suffer the trauma of going past the debt limit, than to condemn our children to the consequences of future collapse that will impact them for decades.
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