Fat Cat Bankers??!!

On Sunday, December 13, 2009 President Obama referred to American bankers as "fat cat bankers" who "just do not get it." This was said during an interview on CBS's "60 Minutes." He was referring to bankers inability to understand why Americans were upset with their large bonuses after taking bailout money. I guess President Obama forgot that the sub prime lending which caused the banking and credit crisis started when Fannie Mae and Freddie Mac had to be put in conversatorship in September 2008. President Obama, who said that he would not have anything to do with lobbyists, did accept $120,000.00 from Fannie Mae and Freddie Mac during his 144 days in the US Senate. In a similar vein, there was an article in the New York Times that 4 bailout recipients are still struggling and may need further government funding. Guess who's on this list. If you say Fannie Mae and Freddie Mac, you're today's winner.
Please remember this, it was sub prime lending that set off this recession. Why did banks and mortgage companies make loans to people that could not handle these loans? One big hint, the community reinvestment act. This act requires banks to conduct business with all communities within their service area. The act was passed to prevent redlining, the practice of not engaging in risky and imprudent transactions such as sub prime loans. The US government encouraged and cajoled the "fat cat bankers" to make high risk mortgages with the implicit guarantee that the government would back up the loans if defaults became a problem.

The latest on congressional spending

According to the Associated Press, the house democrats are pushing through a $1.1 trillion (think 11 zeros and 3 commas to the right of the 1.1) spending bill in addition to whatever they finally decide (if anything) on the health care debacle often referred to as overhaul or reform.

The folks at Taxpayers for Common Sense found $3.9 billion funding congressional pet projects known as earmarks. They counted 5227 altogether. On a state by state basis this is over 100 earmarks per state. On a congressional district basis using 435 districts this is 12 per district. President Obama said he would read through every line of legislation and strike out unnecessary spending.

I wonder how many earmarks there were before his careful scrutiny of the bill??

Transparency with the stimulus funds report

I just finished reading an interesting article on the Phoenix Arizona tv Channel 12 news website about the uproar over the errors in the stimulus quarterly reports. Apparently lots of funds were sent to nonexistent congressional districts. Fortunately, there were also lots of jobs created or saved in these same phantom districts. The Franklin Center for Public and Government Integrity reports there were over 440 phantom districts in the stimulus reports.

This amazes me since there are only 435 congressional districts in the USA. I am not an accountant or auditor, but it seems to me that if X amount of funds were paid to phantom districts then there should also be X amount of funds missing from the total paid to the non-phantom i.e. real congressional districts. Channel 12 reports that it appears most of the phantom funds were paid to the intended receivers, they just made a little error in reporting the district number.

I am certain this can be corrected sooner or later. Maybe the stimulus reports should only be done by states and not districts. After all transparency means the ability to see something clearly. Phantom means invisible.

If we, the American people, will have accounting problems with the $787 billion stimulus spending, what problems will we encounter if Obama/Pelosi care gets enacted? The senate finance version was about 1000 pages, the house version 1990 pages. We cannot afford the printing costs of these proposed bills. What will happen when if it is passed and employers, insurers and health care providers have to figure out how to cope with it? I am thinking, if the government cannot do better than this with the stimulus, we may have a health care revolution in the near future.

Poll shows (kinda sorta) increased support for public option.

The WashingtonPost.com ran an article today about a poll that shows increased public support for a public option in the health care overhaul debate. Seniors and independents raised support for the infamous public option to a spellbinding 57%. Of course, there are a few caveats that will not fit into a headline or sound bite.

First, the public option has to be administered by the states, not the federal government. Second, only people without access to affordable private or employer provided plans can participate in the public option. Since the public option provisions all call for federal subsidies as "seed money" I doubt that the states will really run these programs. Too many state administered programs are vying for federal funds and subsidies as it is, what will be different about this one?

And now for the $64,000 question. What is affordable insurance? It will probably be a percentage of annual income. But what percent is a very big and very loaded question.

My prediction is if the public option is voted into law, these provisions will not be respected by congress. Congress will get its way on a short term basis and find themselves facing another republican or better yet independent revolution in 2010 or 2012 at the latest.

Health care math

The Congressional Budget Office announced that the Senate finance committee's bill will cost $829 billion over the next 10 years while generating revenue of $911 billion over the next 10 years. The revenue will be from taxes, fees and penalties in the proposed legislation. This will result in a net deficit reduction of $81 billion. When I subtract $911 billion from $829 billion I get $82 billion. But I am not going to make a big deal of this, I'll attribute it to rounding down. What I do want to rant about is some of the assumptions used here. First, the CBO uses the estimates of the bill for the Cadillac tax, a tax on high cost health insurance plans. Many members of congress have labeled the insurance industry as profit motivated to the point of greed and avarice. (This is a vampire calling a mosquito a blood sucking fiend) What makes anybody think the insurers will not cut back on selling these plans and pass on the tax cost to the buyers who still purchase these Cadillac plans?
The CBO is the same agency that said on July 16,2009 that none of the proposed health care bills would do anything to bring down the curve in health care costs. See my earlier post on the same day for details. In less than 4 months a complete reversal in the impact of health care bills occurred? Wow, I'm impressed.(more sarcasm) Anyone who has suffered the mental torture of an economics class and can still remember any of it will tell you economists always add the caveat "all other things being equal" to anything they say. In real life this does not work, so I doubt that the $81 billion dollar savings will survive the next 10 years.
And another point, this is still proposed legislation, the finance committee will vote on it tomorrow then the process starts over again trying to get the bill signed by the Senate and then it will go to the house of reps. Remember what our wildcat house speaker Nancy Pelosi said? A health care bill will not pass the house without a public option. Let's hope Ms. Pelosi can adjust to the fact that most Americans do not want more government, especially government selling health insurance. More to come as this saga unfolds.

Good Grief, Barack Obama!!

With apologies to the Charles Schulz estate and peanuts fans everywhere, how else can I put it? Friday a week ago, the IOC awarded the 2016 Olympic games to Rio De Janeiro over Chicago. Big shock to the media since there was a "Dream Team" lobbying for Chicago as the host city. Yesterday, President Obama won the Nobel Peace Prize. Another big surprise. The Nobel committee said Obama's promise of nuclear disarmament and diplomacy were the virtues that influenced their vote. I only have one problem with this. The nomination deadline was February 1, 2009. Mr. Obama was sworn in as President January 20, 2009. He won the presidential campaign November 4, 2008. He did not have very much time to turn his potential into acts. The combination of this nomination with Al Gore's Nobel Peace Prize for unfounded and bad science makes me lose faith in the Nobel Prize Committee.

A few random rants and thoughts

One trend that disturbs me is health care overhaul zealots blaming opposition to obamacare on racism. This is not only absurd but completely unfounded by facts. Mr. Obama got 96% of the black vote. Big deal, so what. Even 100% of a minority is still a minority. Mr. Obama got elected President of the USA by not only black people, but white, hispanic & asian people as well. The only people using race as an issue are the Charley Rangels of the world. He told a predominantly black audience in his district over the august congressional recess that opponents to obamacare and the public option just could not accept the fact that a black man was the President of the USA. Mr. Rangel was probably just "playing the audience" to rally support for the misnamed public option. Again, do the math. Mr Obama was elected POTUS by 52% of all the American Voters.
People that say no other president has received so much criticism have not been in the USA very long or have the memory spans of a very brain damaged fruit fly. Criticism is part of the job for any president. To his credit, Mr. Obama has recognized this fact. Now if he will just recognize the fact that he has over 3 years to improve, not tear down the USA's health care system he will accomplish more than he could with his current strategies.