“The Left Edge of the Possible?”: “Actually Beyond Right and Left”

Respectable Mr. Robert Kuttner depicts the current national situation pretty well. As he points out in his blog, “The Left Edge of the Possible” (http://www.huffingtonpost.com/robert-kuttner/the-left-edge-of-the-poss_b_828907.html), the real serious national political/economic issues are economic recovery and the budget, the health system, the banking/housing mess, American economic competitiveness in the world, rising gas price and global climate change.

Current national and global economic situation seems to become increasingly beyond the capacity of left and right of US politics. In other words, the right and left of US politics are increasingly limiting their abilityto smaller issues while being oblivious to eminent, bigger issues.  For example, Wisconsin Governor Walker’s attempt to rip of public workers’ right to organize that caused the consequent labor movement against it seems to be a complete sidetrack from what need to be done for the sake of solving current national issues of recession and joblessness, making things worse. Like there are not enough problems now.
Read the Article at HuffingtonPost

Llord anoints Kking;”rainforest waterfalls”.

Regarding “Federal Reserve ‘Will Be Gone’ In 25 Years, Top Financial Mind Predicts, Despite Geithner’s Vote Of Confidence”

Regarding Dr. Nassim Taleb’s criticism of the government’s bailout of financial sector:
“This transformation from private debt … to public debt” is “bad” from a risk standpoint and “immoral” from an ethical standpoint.” (Source: http://www.huffingtonpost.com/2010/09/30/nassim-taleb-federal-reserve-will-be-gone_n_746109.html)

Dr. Taleb may be true that making financial sector’s debt as public debt through government bailout of the sector doesn’t sound right from risk and ethical standpoints.

However, from the standpoints of national economic security and anti-Possible 2nd Great Depression, bailingout financial sector was inevitable, necessary evil, not for the love of greedy financiers (who will live happily ever after, with or without bailout, with their accumulated wealth hidden in their backyard) but for the love of country and the majority of population who would have actually bore the devastating aftershock, real costs of collapsing financial sectors if there had not been government bailout. To achieve bigger goals, maybe we should sacrifice smaller goals if they are conflicting each other and cannot be achieved all together.

It seems to be a matter of right priority setting; I believe, national economic security and preventing second great depression domestically and internationally should be in higher order than risks and ethics in the hierarchy of national priority. Save big chunk first and solve smaller problems one by one.

Fed may or may not exist in next a few decades if it keeps mis-estimating its costs and benefits and continue misjudgement.

“What should Chris Dodd Do?” – Response to Huffpost’s “Volcker Rule Dead? Lawmakers Say Key Reform To Shrink Banks Is Unlikely To Pass Senate”"

Regarding the remark, “”Chris is retiring so he wants to end his career with an important regulatory reform bill and he wants to make the bill bipartisan,” the staffer said. “He is not going to risk bipartisan support to make the White House happy.”

I believe, Mr Dodd should worry about how not to further anger “The Public” with a toothless financial reform bill, not “the White House.” The White House has been flexible and willing to compromise to certain level to pass bills. Actually, this very attitude of White House being willing to compromise, giving up some important features of health care bill and being too soft to financial sector/big banks, along with others, have been one of major causes of public anger and making them perceive the White House not being tough enough to do the job.

I am not sure the major issue here is supposed to be “bipartisanship,” which nobody believes that it will work, after seeing both parties’ political attitude and “opposition for the sake of opposition for whatever” political strategy. Rather Mr. Dodd should be careful not too much compromise to come up with a toothless financial reform bill, which may end up furthering public anger toward financial reform and disgrace his retirement. Though the effect of Scott Brown’s winning of senate seat will be further devastating on Senate’s functioning.
Read the Article at HuffingtonPost

Fixing the Financial Sector and Economist Joseph Stiglitz

Nobel Prize-winning economist, Joseph Stiglitz has been critical of the US government’s bailout of the banking sector and says that the government should not have bailed out the banking sector but should have used that money to help individuals in troubles. There should be further detailed discussion on this matter.

For now, for simplicity, let’s talk about how to fix the mistakes of the last one year’s efforts of fixing financial system. It’s been just one year, we still have time to fix it. What we need to do are:

(A) Regulate the financial sector; (B) Separate investment banks from commercial banks to prevent Wall Street’s continuous reckless gambling with other people’s money; install the Glass-Steagall Act; (C) Apply anti-trust law to the financial sector as well as health care sector; (D) As Ms. Huffington suggested, individuals move their money from Big Banks to smaller, community banks or credit union to break Big Banks’ monopoly power.

Here is one significant problem in fixing the mistakes/financial system.

(E) Who is going to take care of “special interest politics, lobbyists, and corrupted/bribed Senators” ? Aren’t these the major road-blockers in the process of reforms? Also, we need (F) to install the law to prevent them from working for corporations of conflicting interests after retiring from their public posts, too. We need to make sure that these people don’t get on the way of fixing the mistakes / malfunctioning financial system. Isn’t this the biggest challenge of all?

http://www.huffingtonpost.com/2010/01/19/freefall-excerpt-its-not_n_427509.html

Update:

Oh, some hours before I posted this blog, there was an announcement that the White House is going to propose some  measures to restrict “Big Banks.” According to the report, “President Barack Obama on Thursday is expected to propose new limits on the size and risk taken by the country’s biggest banks, marking the administration’s latest assault on Wall Street in what could mark a return, at least in spirit, to some of the curbs on finance put in place during the Great Depression, according to congressional sources and administration officials.” For this news, refer to:

“Proposal Set to Curb Bank Giants”,

http://online.wsj.com/article/SB10001424052748704320104575015910344117800.html

Housing Foreclosures still Not Decreasing ?: My Response to Huffington Post’s “The Economist The Obama Administration Should Have Listened To.”

Politics seems to be hard guessing work based on trials and errors. An example may be seen in today’s news (November 12, 2009) by Huffington Post reporter, Shahien Nasiripour. Mr. Nasiripour reported that when the administration decided on spending the tax payer fund of $75 billion on a plan to reduce troubled-homeowners’ monthly mortgage payments and, therefore, housing foreclosures earlier this year, Pres. Obama should have listened to economists, John D. Geanakoplos and Susan P. Koniak’s suggestion that the administration should reduce the principals that troubled homeowners owed to banks and mortgage servicers instead of trying to reducing their interest rates as a way of reducing homeowners’ monthly payments. As a result, the government plan of reducing interest rates has not been successful in reducing the rate of housing foreclosures up to now. The report by Mr. Nasiripour can be found at below website.

http://www.huffingtonpost.com/2009/11/12/the-economist-the-obama-a_n_355022.html

This blog post consists of my comments to the article by Mr. Nasiripour at Huffington Post.
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Economists Geanakoplos and Koniak’ proposal to help troubled homeowners sounds convincing.

I am not sure whether it is reasonable to put the blame of current not-working program of easing foreclosures purely on President Obama. Although he is in the spot to take all blames, including those for others like ex-president, his advisors / staffs, or skimmers of housing market. The blame should rather go to the dominant voices, primary policy advisors that surrounded Mr. Obama and led him to take the current path. As Mr. Obama himself had not been an economist or financier, he must have relied on dominant voices, opinions around him to make the decision.

What I wish is, at that time of making the decision of plan for solving foreclosure problem and hearing different economists’ different approaches to solve the problem, President should have hold intensive forums / discussion panels with many economists to debate, weigh the pros and cons of different approaches in order to reach the final choice (or did he do that?). Of course, even if he had done so, if the voice of economists who support Prof. Geanakoplos and Koniak’s approach had been dominated by the voices of opposing groups, still the result would have been same. In politics, the power of persuasion seems to be more lethal weapon than that of “truth, justice.”

Now, at least before spending more housing money, the administration may conduct the mid-term, or staged evaluations of the program and make adjustments / amendment to the program to make it work better.

Ideally, I wish the administration to create a “Law,” titles as “National Emergency Act” or something like that. The law may dictate that, in case of national emergency such as depression or natural disaster, the government should have the power of interfering, regulating, and rewriting the codes of corporate business activities in order to recover from emergency situations to normal conditions, especially when corporate acts damage public / national interests and trigger national emergency situation. Under this law, the government can temporarily or permanently freeze or decrease corporate profits and/or executive compensations until the emergency situation recovers to normal, healthy economic condition or if there are dangers of recurring situations of the same emergency / disaster¬. And the government can ban any lobby activities by the offending corporates/industry against the government’s intervention.
At the same time, economists should “Re-Write” the text book economic assumption of human being as “reasonable decision makers” in “Free Market System.” This understanding on the nature of human beings has been proved by the fact that many corporate executives (and/or their lawyers?) have proved to be very insanely, excessively-greedy, dangerously risk- taking, toxicaly harmful existences to the society. By changing this economic assumption, it may discourage some people from praising their love for “Free Market System” when others are dying without medical care, losing jobs or houses, or don’t have food on their dinner tables because of these corporate villains. No individual or corporate interests should be allowed to go against the interests of majority of country.

Mr./Ms. Learneddemocrat commented to my comments as below.
“Lim, there are countries that do exactly that, even without a “disaster”. Venezuela comes to mind as well as Cuba…..even Russia. Perhaps you should consider taking up residency there. I am pretty sure once you spend quality time living in such a place, you will consider the free market system and the true meaning of capitistic society the better choice. Been there, lived that.”

Initially I was confused that this comment is complementary. But now I consider that this commentator may not have quite grasped the essence of what I said. My reply to him/her was as below.
“In Asian countries, such as Japan or South Korea, the governments had crafted and guided their economic / industrial developments. Their government interventions on industries and promoting competitive industries have contributed to these countries’ rapid economic developments, success stories, calling them East Asian Tigers. In the midst of U.S. economic disaster and chaos, why not learn from the lessons of these Asian success stories?”

Sometimes, government intervention can be very productive if it is designed carefully. It doesn’t have to be called as socialism. Thesedays, the word “Socialism” seems to be the most popular name calling for any kind of policies or ideas, regardless of their true nature, that some people don’t like.