Free Markets, Free People

banks


Why you have to react to every story about government overreach

No, this isn’t a story about the “War on Christmas”, it’s a story that uses Christmas and its symbols as an example of government overreach.

A bank in Oklahoma was forced by federal bank regulators to remove Christian verses and symbols because the Federal bank examiners thought they were “inappropriate”.

Really?

This is the “separation of the church and state” and “non-discrimination” gone wild.  Last time I checked, most banks were private enterprises which were regulated by the federal government.  Furthermore the supposed doctrine of “separation of church and state” doesn’t apply to private enterprises.  It is a prohibition aimed at the  federal government.  And yes, I know it’s not found in the Constitution per se, but the phrase “freedom of religion” is enough for me to agree that the state should not be promoting a single religion.

That said, it has absolutely no say over what a private enterprise might promote or favor.

Which brings us to “non-discrimination”, which one assumes is the real basis for the ruling by the feds here.  The reason for the federal bank examiners decision is a regulation penned by bureaucrats with apparently no understanding of private markets and no concern whatsoever about the impact of their regulation on the real world.  And they essentially decided to interpret those regulations any darn way they feel like interpreting them:

Specifically, the feds believed, the symbols violated the discouragement clause of Regulation B of the bank regulations. According to the clause, "…the use of words, symbols, models and other forms of communication … express, imply or suggest a discriminatory preference or policy of exclusion."

The feds interpret that to mean, for example, a Jew or Muslim or atheist may be offended and believe they may be discriminated against at this bank. It is an appearance of discrimination.

BS.  Here’s a dirty little secret about private enterprises such as banks – if people feel “discriminated” against, they can go elsewhere.  Yup, they actually have a choice.   Don’t like bible verses and Christian crosses, bank at a bank that doesn’t have them.  There is no requirement for a Muslim or atheist to bank there.  None.  Don’t like the Perkins County Bank for that reason?  Go across the street to the Stroud National Bank for heaven sake.

When did the possibility that someone might be offended become the top problem we face, such that the federal government feels the need to move preemptively to ensure that doesn’t happen.

What’s next, the removal of all pork products from grocery stores because they may offend Muslims?  The removal of crosses from church steeples because atheists traveling by may take offense?  This is lunacy.

But, to the point of the title – this little story was picked up and blasted around the blogosphere.  Guess what?

The small-town bank in Oklahoma will be able to restore its Christian signs and symbols after all, thanks in part to public outcry against the Federal Reserve.

That’s right – the bureaucrats backed down.  Why?

The story garnered national attention overnight from bloggers and Twitter users who posted links to KOCO.com’s story.

This is the power of the blogosphere – something that is a force to be reckoned with when riled up and one that people seem to take rather lightly at times.  It’s also an example of why even the smallest stories of government overreach should be addressed.   In fact, it puts and exclamation point on the saying “the price of freedom is eternal vigilance!”

~McQ


Oh, by all means – tax the banks

And yes, if you’re wondering, I’m being highly facetious with the title.

But that’s the growing consensus among our political leadership – at least that brand of it which believes such taxes are actually paid by the institutions themselves.  And you have to love the reasoning:

The U.S. and European governments are moving toward a consensus on taxing large banks to cover the cost of any future bailouts rather than asking taxpayers to foot the bill, as happened regularly in past banking crises.

The tax proposals vary. Germany and Sweden would use the money to fund a “resolution authority” that would use the money to shut troubled banks whose failure would put the broader economy at risk. Others, such as France, would assess the fee after a crisis passed.

What’s wrong with that, you say? Well anyone – if you’re going to be bailed out and you know it, where the aversion to risk come from? Why not play with other people’s money a little more if there’s no death penalty for doing so? If you are a assured a fail-safe position, why not go for broke?

It seems to provide a perverse incentive to do exactly what you don’t want to see happen.

Our leadership is split on how they should approach it. I bet it doesn’t take you much time to figure out what part of the leadership sides with France’s concept and which would like to see an ongoing tax fund. You’re right, the administration wants to see assessments made after the fact and the Congress prefers a slush fund they can plunder an ongoing fund established (Unsurprisingly Ezra Klein of juicebox mafia fame finds this the most satisfying solution of the two).

Either way, it’s going to cost you money.

And instead of leaving the banks with the threat of punishment by the market for stupid risks (failure), they’ll collect money from you in the form of higher fees and other costs and pass them on to the government so it can subsidize their bad behavior and then wonder why its regulations didn’t work.

Oh, wait, we’ve already wondered about that, haven’t we? I know, let’s make even more regulations.

The core problem? It, like health care, remains unaddressed.

~McQ


Will Proposed Bank Regulations Kill US Bank Competitiveness?

That is certainly what New York City Mayor Michael Bloomberg believes.  And, surprisingly, his position is supported by none other than the Secreatary of the Treasury, Timothy Geitner.

The proposed bank regulations, all driven by President Obama’s war on Wall Street, would limit big bank’s trading and size. Obama claims that the nation will never again be held hostage by institutions deemed “too big to fail”.

Well, here’s a clue – the only ones who claimed they were too big to fail and threw all that money at them are the same ones now trying to regulate them into noncompetitiveness. You’d almost think this was part of a plan if you didn’t believe they weren’t smart enough or quick enough to do such a thing. But, as they’ve claimed, they won’t let a crisis go to waste.

In fact, this is another battle in the long class war against the rich. Nothing symbolizes the “rich” like Wall Street. And nothing serves Democrats in trouble better than a populist cause (or at least one they deem to be populist). So while voters continue to send messages to the Democrats via VA, NJ and MA, health care reform implodes and the President’s job approval rating tanks, he’s warring on the institutions which are critical to the economic recovery of the nation.

How freakin’ tone deaf can one be?

Mayor Bloomberg has some immediate local issues that concern him – possible layoffs and the erosion of the tax base. But he also recognizes that handicapping US banks when no such handicaps exist for foreign banks, hurts their long term competitiveness and will therefore have negative long term consequences.

Obama’s proposals would prevent banks or financial institutions that own banks from investing in, owning or sponsoring a hedge fund or private equity fund.

He called for a new cap on the size of banks in relation to the overall financial sector that would take into account not only bank deposits, which are already capped, but also liabilities and other non-deposit funding sources.

The proposed rules also would bar institutions from proprietary trading operations that are for their own profit and unrelated to serving customers

According to sources, Geithner says the proposed regulations “do not necessarily get at the root of the problems and excesses that fueled the recent financial meltdown.”

He’s not alone in that criticism:

Lawrence White, a professor at New York University’s Stern School of Business and a former regulator, said Obama’s proposals were “a solution to the wrong problem.”

“They have this rhetoric that it was proprietary trading that was the problem,” White said. “That’s wrong.”

Of course the Obama war on Wall Street is certainly having an effect – bank shares have declined as has the dollar against other currencies.

If you don’t get the idea that this is mostly an ideologically driven “war” trying to cash in on populist anger at a time when nothing is going well for the administration, you’re not paying attention. It also points to an “war of choice” based in a very poor understanding of economics and the fact that we’re engaged in a global economy where competitiveness is critical. If these regulations pass and when the recovery falters because banks are hobbled and noncompetitive, I’m sure that somehow the White House will again play the “greed” card out in a effort to hide the effects of their own short-sighted and ideologically driven economic malpractice.

~McQ


Quote Of The Day

Reports are out that Obama had this to say at a meeting of CEOs of major banks last week in the White House:

As first reported by Politico’s Eamon Javers, and confirmed by ABC News with industry sources, some bankers gave explanations for the industry’s high salaries, such as “competing for talent on an international market.”

But, President Obama cut them off.

“My administration is the only thing between you and the pitchforks,” the president told them.

The gall of that statement is staggering. Imagine the sheriff inciting a crowd against the businesses of a town and then running to the business owners and telling them, “I’m the only thing between you and the pitchforks”.

Obama’s fingerprints are all over those pitchforks.

~McQ


Reaping, Sowing, etc.

Glad they finally noticed:

The Obama administration is increasingly concerned about a populist backlash against banks and Wall Street, worried that anger at financial institutions could also end up being directed at Congress and the White House and could complicate President Obama’s agenda.

Of course the greatest stoker of this populist backlash has been the Obama administration. I’ll be the first to agree that some of the financial institutions, such as AIG recently, have played into the populist condemnation by the administration, but instead of being specific about the AIGs of the world, they have instead gone after an entire industry to the point that “banks and Wall Street” are synonymous with crooks, swindlers and liars. Having established that narrative, seemingly purposely, there’s now a huge backlash building which may, in fact, cripple the administration’s efforts pertaining to both.

“We’ve got enormous problems that need to be addressed,” David Axelrod, Mr. Obama’s senior adviser, said in an interview. “And it’s hard to address because there’s a lot of anger about the irresponsibility that led us to this point.”

“This has been welling up for a long time,” he said.

Mr. Obama’s aides said any surge of such a sentiment could complicate efforts to win Congressional approval for the additional bailout packages that Mr. Obama has signaled will be necessary to stabilize the banking system.

As it is, there have already been moves in Congress to limit compensation to executives at banks and Wall Street firms that are receiving government help to survive.

Beyond that, a shifting political mood challenges Mr. Obama’s political skills, as he seeks to acknowledge the anger without becoming a target of it. A central question for Mr. Obama is whether his cool style — “in a time of crisis, we cannot afford to govern out of anger,” he said in his address to Congress last month — will prove effective when the country may be feeling more emotional.

And the country is feeling emotional because the administration has been making emotional arguments targeting the industry it wants to help. Not very smart politics. And they’ve now finally realized that.

“Never underestimate the capacity of angry populism in times of economic stress,” said Robert Reich, a professor of public policy at the University of California, Berkeley, and labor secretary under President Bill Clinton. “A big challenge for President Obama will be to maintain a rational and tactical public discussion in the midst of this severe downturn. The desire for culprits at times like this is strong.”

The “culprit” has been identified. In their desire to escape blame, government officials in Congress and elsewhere have almost unanimously used their access to the media to vilify banks and Wall Street while pretending they had no hand whatsoever in this debacle. Unfortunately they’ve been quite successful in the scapegoating. However, having established the narrative, they now have to attempt to reverse it because the public rage they’ve helped stoke may prevent them from doing what they think they need to do to turn the financial industry around.

The entire problem that the administration is now recognizing is one of their own making and another indication of their inexperience and lack of foresight. It’s one thing to demonize such industries when campaigning, it is, as they’re learning, an entirely different thing when you do it as the President of the United States. The administration now has to figure out how to reverse a narrative they helped build and establish. That should be interesting to watch.

~McQ