Investment

Can the Koch Brothers Be a Political Asset for Democrats?

Flickr/Donkey Hotey

For while there, conservatives saw the hand of George Soros behind every conspiracy. It was always a little strange, not because there wasn't a certain truth underneath it—Soros has, in fact, given lots of money to liberal political causes (and he is an actual international Jewish financier, which certainly set a certain type of mind buzzing)—but because the idea of a billionaire using his money to shape America's politics isn't something conservatives object to. Quite the contrary; they think there ought to be a lot more of it.

Democrats, on the other hand, are not so friendly to the idea, which is why it's understandable that Charles and David Koch have taken on a larger role in the liberal imagination than Soros had in the conservative one (they've also spent a lot more money on politics than Soros ever did). But can Democrats convince voters who are not already liberals to be mad at the Kochs? That's how they're responding to the brothers' involvement in multiple Senate races this year, fighting back against the Koch's ads with with a public campaign against them.

While I don't think it's impossible that this could work, I'm skeptical. Greg Sargent explains the thinking:

Robbing Illinois's Public Employees

In the span of a few hours on December 3, two Midwestern states changed America’s relationship to its public employees, perhaps irrevocably. If courts approve plans for bankruptcy in Detroit and a new law in Illinois, retirees who worked their careers as sanitation engineers and teachers, firefighters and police officers, public defenders and city clerks, under a promise of pension benefits protected by state constitutions, will not receive their promised share. “This is a bipartisan collection of politicians who essentially don’t respect democracy,” says Steve Kreisberg, Director of Research and Collective Bargaining for the public employee union AFSCME. “They authorized a violation of their own state constitutions.”

Obamacare's Critical Moment

And to think, we actually thought the hard part was over.

At times like this, with the Obama administration weathering yet another controversy regarding the stumbling beginnings of the Affordable Care Act, it's useful to remind ourselves that this too shall pass. I've been plenty critical of how healthcare.gov has been handled (see here, or here, or here), but eventually it will get fixed, at least to the point at which it works well enough. Likewise, the fears now being experienced by people with individual insurance policies will, by and large, turn out to be unfounded. There will be some who have to pay more than they've been paying, but in almost all cases they'll be getting more too.

But there's no doubt that this is an escalating problem for the administration. The person who got sold a cheap insurance policy on the individual market because the insurer was confident that either a) they probably wouldn't get sick any time soon, or b) the policy was so stingy (whether the customer knew it or not) that the insurer wouldn't have to pay anything even if they did, has now become the victim whom all agree must be made whole. We're all talking endlessly about Obama's "If you like your current plan, you can keep it" pledge, but the fact is that if you have one of these junk insurance plans, you only like it if you haven't had to use it. But no matter—the people on these plans (and not, say, people who are finally getting Medicaid, because they're poor so who cares) are now the only people that matter. Congress is obsessed with them, the news media is obsessed with them, and Something Must Be Done.

The administration is clearly spooked, and so are Democrats. But everyone needs to take a breath and ask themselves whether what they do in the next couple of weeks is something they'll be able to live with in a year or five years or twenty years.

Time to Investigate Those Insurance Company Letters

As a follow-up to this post, I want to talk about the thing that spawns some of these phony Obamacare victim stories: the letters that insurers are sending to people in the individual market. People all over the country are getting these letters, which say "We're cancelling your current policy because of the new health care law. Here's another policy you can get for much more money." Reporters are doing stories about these people and their terrifying letters without bothering to check what other insurance options are available to them.

There's something fishy going on here, not just from the reporters, but from the insurance companies. It's time somebody did a detailed investigation of these letters to find out just what they're telling their customers. Because they could have told them, "As a result of the new health care law, your plan, StrawberryCare, has now been changed to include more benefits. The premium is going up, just as your premium has gone up every year since forever." But instead, they're just eliminating those plans entirely and offering people new plans. If the woman I discussed from that NBC story is any indication, what the insurance company is offering is something much more expensive, even though they might have something cheaper available. They may be taking the opportunity to try to shunt people into higher-priced plans. It's as though you get a letter from your car dealer saying, "That 2010 Toyota Corolla you're leasing has been recalled. We can supply you with a Toyota Avalon for twice the price." They're not telling you that you can also get a 2013 Toyota Corolla for something like what you're paying now.

I'm not sure that's what's happening, and it may be happening only with some insurers but not others. But with hundreds of thousands of these letters going out and frightening people into thinking they have no choice but to sign up for a much more expensive plan, it's definitely something someone should look into. Like, say, giant news organizations with lots of money and resources.

Big Bank Punishments Don't Fit Their Crimes

AP Images/Richard Drew

With the Justice Department desperate to rehabilitate its image as a diligent prosecutor of financial fraud, securing a headline like “the largest fine against a single company in history” is a lifeline. A tentative deal would force JPMorgan Chase to pay a $9 billion fine and commit $4 billion in mortgage relief, to settle multiple investigations into their mortgage-backed securities business. The bank stands accused of knowingly selling investors mortgage bonds backed by loans that didn’t meet quality control standards outlined in its investment materials. JPMorgan Chase wants to “pay for peace” in this deal, ending all civil litigation around mortgage-backed securities by state and federal law enforcement (at least one criminal case would remain open).

Tom Friedman’s Worst Column Ever

AP Photo/Mark Lennihan

Sometimes, Tom Friedman writes a column that is such complete baloney it makes you want to retch. Rather than risking soiling my shoes, here is a point-by-point rebuttal to Friedman’s opus du jour, titled: “Sorry, Kids. We Ate It All.”

Friedman’s column swallows whole the budgetary malarkey of the corporate Fix-the-Debt lobby and its Wall Street sponsors. Namely, the reduced horizons of the next generation are the result of the gluttony of old folks—and of unions.

Hey, Wall Street—The Club for Growth Is Not Your Friend

Here we go again: Financial markets are plummeting thanks to the threat of a government shutdown and, beyond that, another debt ceiling crisis. One of the great bull markets of recent years is being derailed by a bunch of extreme conservatives in Congress.

Have Too Many Cooks Spoiled Obamacare?

AP Images/J. Scott Applewhite

It's safe to say that if Americans don't understand the Affordable Care Act (ACA) by now—and they don't—they never will. The slightly better news is that consumers don't have to understand it in order to benefit from it, but even so, almost all the problems the ACA has encountered or will encounter are a result of the law's enormous complexity. That complexity grew out of early decisions made by Barack Obama, but along the way Congress added their own layers of complexity in order to pass it, then conservatives on the Supreme Court added some more. There were reasons, most of them perfectly good, for each of these decisions; everyone thought they were responding to reality or doing what was in the best interests of the country. But as full implementation of the law is upon us, we should acknowledge how much damage has been done by all this complexity.

The Commodities Market: A Big Bank Love Story

The Fed loosened rules to allow banks to buy commodities, driving up everyday prices for consumers. Who the next chair is matters if these kinds of practices are ever to be stopped. 

AP Images/Carolyn Kaster

Who becomes the next Federal Reserve chair matters, not only because of the implications for economic and monetary policy, but because the Fed remains one of the nation’s chief financial regulators. There are dozens of policies, some we don’t even know about, over which the Fed wields critical influence. While the past year has seen a small but important shift toward tighter controls, particularly on the largest Wall Street institutions, all of that could change if President Barack Obama selects another deregulator in the Greenspan tradition.

George Packer's U.S.A.

AP Images/David Samson

In the quest to understand what happened to the U.S. economy since the 2008 meltdown and the recession that followed, the challenge has been figuring out how far back to pull the lens. Early books on the crisis zoomed in on airless rooms occupied by panicked CEOs and government officials during the pathetic last few months of the Bush administration and the beginning of this one. More expansively reported accounts looked at lower-level traders and fly-by-night firms, expanding the scope to recognize a decade of mortgage fraud and exploitation of would-be homeowners and investors, along with the Washington corruption that allowed the profiteers to thrive unpunished.

Dimon Forever

flickr/757Live

The main item of business before JP Morgan Chase’s annual shareholder meeting, which will convene today in Tampa, is whether JPM CEO Jamie Dimon will be stripped of his additional post as chairman of JPM’s board of directors. A range of institutional investors concerned about the over-concentration of power atop the nation’s most powerful institutions, and upset by the $6 billion loss JPM took last year at its London trading desk, won roughly 40 percent shareholder support last year to separate the two positions. This year, they hope to do better, even though the bank’s public-relations offensive on Dimon’s behalf has made the prospect of winning a majority more difficult.

The Shame of Pension-Advance Loans

http://rapidpensionadvances.com/

The financial services industry is second to none in dreaming up ways to rip off Americans. Show me a a financial product—credit cards, mortgages, checking accounts, 401(k)s, annuities—and I'll show you a stack of consumer complaints documenting how banks and other firms have sought to bleed dry the American public. 

Wall Street's Grand Bargain

Flickr/ White House

Three developments in finance cropped up in the last days that must be read as a single story.

First, Blankfein, Dimon, and the rest of the Wall Street bigwigs visited the White House to meet with the president and his team. That team consisted of Denis McDonough (Chief of Staff); Valerie Jarrett (Senior Adviser); Cecilia Munoz (Domestic Policy Adviser); Gene Sperling (National Economic Council Director); and Alan Krueger, (Chairman, Council of Economic Advisers). The meeting was secret, but we can deduce much from its attendance.

Industry-Funded High-Frequency Trading Study Falls Short

I recently published an article in response to a study of high-frequency trading (“HFT”) by Professor Charles M. Jones of Columbia Business School and an opinion piece he published simultaneously in Politico. My article focused on the funding of the research by Citadel LLP, a major HFT user. It also pointed out broad concerns about the study, which asserts that computer-based algorithmic trading provides substantial net value to the economy.

Gone In 22 Seconds: How Frequent is High Frequency Trading?

Flickr/Ars Electronica

This is a story of journalists and economists, and the confusion that can ensue when they communicate. 

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