Saturday, July 28, 2012

Shooting Other People

Gary Silverman of the Financial Times, writes in his column, New York Notebook, July 27, 2012 about one of the victims in the recent Colorado shooting, Caleb Medley, age 23. Caleb worked at Target and Walmart but his real love was appearing in amature stand-up comedy venues in the Denver area. He was shot in the right eye and of this writing is in an induced coma. Oh, his wife, age 21 was uninjured and just had their first child. Both mother and child are doing well.

Because of the international outrage and publicity, Caleb's friends have been able to collect a lot of money for his care and maintenance. This is great and of course our thoughts and prayers go out to Caleb, his wife, child and all the families and victims of this senseless tragedy.

But suppose, as Silverman does, Caleb had been an innocent bystander at one of the comedy clubs and he got shot in the right eye with a subsequent induced coma, and had a 21 year old wife with a brand new baby. And suppose he was uninsured ( as he is). Family and friends would probably hold a fund raiser, but otherwise the rest of the world moves on. Here is where Silverman believes:

"If we as a people have a right to bear arms in this country and, without debating the details, the Second Amendment to the US Constitution says something about that - then, we as a people bear some responsibility for the improper use of those arms. Perhaps we should impose a new tax on the sale of weapons and ammunition to raise money for the care of the victims of gun violence."

Silverman is open to better ideas, but if your suggestion is to do something about the Second Amendment 'forgetaboutit'. A majority of citizens support it, politicians are afraid to touch it and there exists a powerful and very wealthy gun lobby in this country.

So back to Mr. Silverman's idea. Look at your cell phone bill you may see a charge under something like, Taxes, Fees and Surcharges eluding to a "911 service, or discounted lifeline service for low-income subscribers." Also there may be a charge for, "… federally mandated programs such as wireless-number portability, services for hearing- and speech-impaired subscribers, and technology for enhanced 911 services, which track your location in case of an emergency." Just for fun I might add that at one time you were paying and excise tax for the Spanish-American War and while it no longer applies to your cell phone bill, I think it applies to land lines.

If you drive you must first past a driving and written test along with certain physical and mental thresholds. But, in additon almost all states require insurance before you can legally drive a car. And, the last time I checked, 21 states require you to carry uninsured or underinsured motorist coverage.

So, what do you think? Where are the Calebs of this world who suffer traumatic injuries from the everyday gun violence?  I imagine indirectly were are all paying for their care and maintenance, plus through various welfare programs we maybe paying for the people they left behind? 

Thursday, July 19, 2012

Too Big To Fail Is Too Big To Exist

The title of this post is taken from Simon Johnson's excellent blog article. Professor Johnson sums up the current situation regarding the Libor rate fixing, U. S. banks probable culpability and the role of U.S. regulators.

Now here is a quote, that if nothing else, justifies breaking up these too big to fail banks:  "One argument now being advanced from some financial circles against large fines for the banks involved is that this would reduce their shareholder capital enough to constitute a risk to the financial system."
 Really? Why should investors pay for the malfeasance of criminals that they had no awareness of nor control over? That's the CEO's and Board of Directors authority. Excuse me, but why not take their money and bonuses? This is the same old 'sky is falling' rhetoric used by big business along with government regulations are 'job killing'. No, what is job killing is the increasingly declining trust of investors in financial institutions. 
Professor Johnson quoting Dennis Kellehr of Better Markets, “Slapping handcuffs on these traders has to be the next step,” adding, “Handcuffs, squeeze them, handcuffs, squeeze them and move up the chain.” Mr. Kelleher continued, “This is an open and shut case” and “this is egregious criminal conduct.”

Source: New York Times, Business Day, Economix Blog, "The Federal Reserve and the Libor Scandal, by Simon Johnson, July 19, 2012.

Tuesday, July 17, 2012

Update to Bad Science

In June I blogged about the short-falls in peer reviewed research articles, emphasizing medical research. You can read about it here.

One of the main problems was transparency and public access. Britain has taken the lead to revamp these two obstacles and you can read about it here.

Tuesday, July 10, 2012

Did I Get Screwed By Libor? … maybe

Libor (London interbank offered rate) had its origins in 1984. The British Bankers Association sought to stabilize various new investment markets that were being created and one method was to set, on a daily basis, the cost prime banks charged other prime banks to borrow money over differing periods of time (i.e a day, a month, two months and on).

This led to the BBAIRS (British Bankers Association Interest Rate Settlement). Now, prime banks who borrowed from other prime banks knew what their costs to borrow was going to be for that day and time period. With this information they wouldn't have to shop around for the cheapest money. They could now invest in the new market instruments and loan money at an interest rate profitable to them. Banks also knew what they had to pay out to investors in their banks.

Other bank regulators in other nations liked this concept and integrated it into their national systems. In 1986 BBAIRS morphed into Libor.

"The design of bbalibor has seen one significant change since its inception. Up until 1998, banks submitted quotes to the BBA LIBOR process line with the question: 'At what rate do you think interbank term deposits will be offered by one prime bank to another prime bank for a reasonable market size today at 11am?'

During 1998 this question changed, and has up until today* been : 'At what rate could you borrow funds, were you to do so by asking for and the accepting inter-bank offers in a reasonable market size just prior to 11am?

The quote goes on to note that a definiton of prime bank  could no longer be accurately defined and also that Libor interest rates were now submitted on each banks market activity rather than on an hypoththetical market.

So what does this have to do with you? The costs of borrowing money by banks filters down to your mortgage loans, credit card rates and other consumer loans. Barclays is currently the bank on the hot seat, but there will be others. As you will see from the NewYork Times Economix, Barclays actually lowered their Libor rate more than they raised it. So if your APR consumer loan was tied to Libor it went down more than it went up. That, of course  required other banks to collude on the daily Libor. Why would the want to help you? They don't, but it seems to be developing that lowering the Libor also lowered the interest these banks paid to investors that invested in the bank's investment funds. In many cases these were big investors like pension funds. Counterintuitive? Yes. Illegal? Yes.

*Not certain what day, "today" is.



New York Times; Business Day Section; Economix Blog, "The Libor Scandal's Consumer Upside", by Annie Lowery, 07-09-2012

LIBOR, information about the London InterBank Offered Rate
   This explains in some detail how the rate is calculated.

New York Times; DealB%k Blog, "Q&A:Understanding Libor" by Michael J. De La Merced, 07-10-2012

Monday, July 2, 2012

Baby, How'd We Ever Get This Way?: The History Of Health Care In The United States … sort of

  • It all started with a guy named Gavrilo Princip who assisnated Archduke Franz Ferdinand and Ferdinand's wife in 1914.
  • This eventually kicked off World War I and ended in a armistice that really, really punished Germany. The conditions of the armistice were so bad that the German people looked to Aldoph Hitler to get them out of their predicament.
  • Hitler kicked off World War II.
  • In the United States, we began mobilization, which took alot of men out of the labor market. The government also put a cap on wages. How were businesses to attract workers from an ever shrinking labor pool? Well, fringe benefits were not capped so offering health insurance was part of the solution. And labor was so scarce some employers overlooked pre-existing conditions. As a matter of fact some, but not all workers, were classified 4F which designated them as unfit for military service.
  • Gavrilo, you bastard see what you started. Oh, ironically, Germany has mandatory employer funded health care and has had some kind of health care regulations since 1883.

EyeWitness To History: "Assination of Archduke Ferdinand, 1914"

History Learning Site: Terms of the Armistice

CNBC: "Give Health Care A Chance To Evolve", By Robert Frank (New York Times), 07-01-2012

University of South Florida: "Health Insurance System and Reform in Germany CAGH", By Heide Castaneda, 02-12-2012