by liberal japonicus
A thread for all your Paul Ryan thoughts. My own thought is that they chose him because he presents so many possibilities that the Dems will forget how to be as ruthless as they were with the Mitt Romney singing ad. A target rich environment, so to speak. Here's a quick collection of links about Ryan, from various places.
Ryan pick highlighting Romney's tax problem link
Krugman on Ryan link (Someone should be kicking themselves that Krugman's blog doesn't have tags)
Ezra Klein on Ryan link
A summary page with everything in one place about the Ryan budget link
Ryan's Catholic critics link link
I'm wondering if the Sikh shooting and gun control is going to come up as the temple is in Ryan's district.
Add your own in the comments.
I’m just delighted. Ryan on the ticket will force Rmoney and Ryan to talk about policy–if if it is to lie over and over and claim that they don’t support their own policies.
Also…Ryan doesn’t look to me like the kind of guy anyoe would want to have a beer with. He looks disdainful and weaselly to me.
My guess is they picked him because Romney knows a lot of conservatives still don’t trust him, and he needs the party unified behind him going into the general election.
The question of whether he gives Democrats ammunition is irrelevant, as the whole “Romney killed my wife!” line demonstrates this fall’s attack ads aren’t even going to be loosely based on reality. Short of Romney picking Jesse Jackson as his VP and then shooting himself in the head, we already know the line Obama is going to take: Romney/whoever is a racist/sexist/homophobe/killer. Facts won’t have any influence on the predetermined narrative.
The only ray of light is the recent revelation that it IS possible for the party line to be so outrageously dishonest for some in the MSM to rebel.
These two Nate Silver blog posts, (here and here) on VP picks in general and Ryan’s effect on the polls in particular, are good
And this Farley post at LGM has three links about Ryan’s Foreign Policy.
Short of Romney picking Jesse Jackson as his VP and then shooting himself in the head, we already know the line Obama is going to take
one will, of course, note that Obama didn’t put out any ad that implies that Romney is a killer.
but, yes, let’s cry about the lack of accuracy.
Ryan was a great choice, for the DC media. they adore him.
cleek, as I’m sure you know, the facts don’t matter.
Did you ever think we’d be living in the post-truth age? It still bothers me, but I guess I’m just a hopeless idealist.
Obama wo’t have to take any of those lines, Brett. All he has to do is play clips of Ryan and Rmoney talking. In fact the ad he got out on Ryan (it’s a UTube ad right now) is almost entirely Ryan and Rmoney talking supplimented with their voting record.
“Rmoney”… is that a typo? It fits.
Maybe it should be “Rmoney and rAyn” ?
No, it’s actually not a typo. It’s not original with me, either. There’s a photo making the Facebook rounds of the Rmoney family at a campaign stop. Each member is holding up a sign with one letter of the family name–and they have their name misspelled as “Rmoney”.
Looking it up, the pic is photoshopped.
This is a red-meaty post with a bunch of links to various views of Ryan, I recommend the Pierce and Ryan Lizza ones as well as this observation by Maddow on the main peg of the post, that there are a bunch of nuns who are opposing Ryan’s budget proposals.
Don’t mess with nuns. It’s not a warning. It’s not advice. It’s not a threat. It’s fact that I have learned from personal experience. Ask anybody in my family, if you mess with nuns, you will lose every time. You will always regret messing with nuns.
this fall’s attack ads aren’t even going to be loosely based on reality.
Brett, you are no doubt mostly correct, since attack ads seem to be that way routinely. But I wonder: are there a significant number of voters (and in a close election “a significant number” can be a pretty small one) who will ignore most of the attack ads. But who will actually pay attention if an ad is based on reality — say one which features Romney noting that under Ryan’s budget plan, he would pay no taxes at all.
I’ll concede that the number of such voters, even among independents, may not be huge. But in a close race, do you really want to kiss off anybody you didn’t have to? Because that’s what it appears to me that Romney has done.
Maybe the Romney campaign thinks that Ryan will turn out enough other voters to outweigh that loss. And I suppose that they oculd be right. But the only folks I can really see Ryan helping with are already so driven to get rid of Obama that I can’t see them staying home for anything short of Romney formally endorsing gay marriage and abortion on demand.
Romney killed my wife is going to morph into Paul Ryan killed everyone that ever died in his district. Plus all of the animals.
The only ray of light is the recent revelation that it IS possible for the party line to be so outrageously dishonest for some in the MSM to rebel.
This is another of those great examples of “the liberal media” in which Brett simultaneously trips over his own shoelaces and falls face first into a pie, since instead of an ad produced by a super-PAC which ostensibly does not coordinate with the campaign, the ad that SHOULD have done so is the ad actually produced BY THE ROMNEY CAMPAIGN which flat out lies about the waivers being granted to states concerning welfare-to-work programs, claiming that Obama wants to take your hard earned money and send it to worthless layabouts for doing nothing.
Your liberal media at work.
we already know the line Obama is going to take: Romney/whoever is a racist/sexist/homophobe/killer.
Right, they’ll switch from the extremely effective talk about what a disaster Romney’s economic plans would be for nearly everyone in this country, and how his prior experience is mostly worthless when not negative, and instead do this stupid thing you just said. That will definitely happen.
I think tristero has it right here–
link
I vaguely recall the Carter people feeling relieved that Reagan got the nomination in 1980. Reagan was genial, but had so many wild far-right positions they were happy to run against him. That worked out well. And those far-right positions became mainstream.
I vaguely recall the Carter people feeling relieved that Reagan got the nomination in 1980.
Yes, but Carter also had the hostage rescue blow up in his face, had a convention challenge by Ted Kennedy, and 3rd party candidate John Anderson took maybe 7% of the vote. Certainly, Reagan’s perceived weaknesses encouraged liberals to try and oust Carter, which led to a fracturing of the vote. The same thing could happen now when some folks, feeling empowered by the continuing train wreck of the Republican campaign (and the fact that they are going to Ryan is both a hail Mary pass and a sloppy brownnose to both the Tea Party and the Norquist faction) make arguments that there are no substantial differences between Romney and Obama or indeed between Repubs and Dems.
And I think that far right positions that became mainstream did so because Reagan was the perfect vessel to slide them into the mainstream. And when his hands off management blew up with Iran Contra, the Republicans brought in Howard Baker to clean up the mess, which tends to smooth over the memories of people. I don’t think that there is anyone on the bench to clean up the mess of this pair.
Donald, I also agree that people can’t be complacent. The propaganda machine is in full force. I rarely watch the Sunday morning shows, but I’ve watched some of them this morning. The false equivalencies are rampant, lj, not necessarily by the left so far, but by the usual suspects on TV. Fortunately, there are a few articulate voices telling the truth. I just hope they’re able to make their case above the noise.
Oh, yes, Romney is only ahead 46-44, he’s really imploding.
I take it you’ve been following the polls that over-sample Democrats? Yeah, Obama would probably be sitting pretty if Democratic turnout was going to exceed Republican by a considerably greater margin than any election in living history.
LOL Rasmussen and Breitbart. I mean, really.
Nothing to say about that outright lie of a Romney ad, then?
Brett, you are the first to use the word ‘implode’. Do you think that the Ryan choice was the choice of a campaign that is strong and confident, versus Portman or Rubio, either of which would have had an impact in the electoral college count (Portman/Ohio=18, Rubio/Florida=29, vs Ryan/Wisconsin=10)? If so, why?
Ryan’s amusing con(di)version recently from his public worship of Ayn Rand’s eliminationist “philosophy” regarding the Parasites, to his touching embrace of Saint Thomas Aquinas is a monstrous incoherence so mighty as to throw historians of the Third Reich at least momentarily off their head-scratching regarding Hitler’s deep empathy and kindness to dogs while murdering the Jews and the other Others, including NINOs (Nazis in name only).
I don’t believe though that Ryan is forcing his employees at gunpoint (isn’t that what it’s f*cking called now when someone in government issues a directive?) to read the Summa Theologiae, though maybe the Latin stayed his hand, unlike the prose of a third-rate Commissar in Stalin’s Soviet Union that runs ceaselessly all over the polis like the contents of a backed-up sewer from Rand’s sexy brain.
That THIS point of view, along with the absorption of the Republican Party into the John Birch Society, now is ascendant in this country will not stand:
“Shortly after Atlas Shrugged was published in 1957, Mr. Greenspan wrote a letter to The New York Times to counter a critic’s comment that “the book was written out of hate.” Mr. Greenspan wrote: “Atlas Shrugged is a celebration of life and happiness. Justice is unrelenting. Creative individuals and undeviating purpose and rationality achieve joy and fulfillment. Parasites who persistently avoid either purpose or reason perish as they should.”
From A Tiny Revolution via Digby. Mr. Greenspan, aka Alan, he of the near ending of finance.
“killed everyone in his district”, indeed.
Course, Ryan does like those earmarks for his district, thus serving as murderer and savior simultaneously for his beloved hometown of groveling parasites.
That and the fact that Mr. Galt is only here today because his parasite bug mother sucked the pap nipple of Social Security Survivor benefits, and then of course Mr Galt has never held a “real” (isn’t that the adjective we f*cking” use now to describe the activities of the few non-parasites who have survived Barack O’Lenin, the Commie murderer and fifth Beatle) job in the so-called private sector, choosing instead the thieving ways of public service including stealing my rmoney to pay for his filthy, parasitical children’s visits to the doctor and the Cheesecake Factory.
Christopher Hayes, who tears a new one for EVERY special person in this country regardless of political persuasion in his “Twilight of The Elites”, relates the story of the fat man, Roger Ailes, sitting at his usual reserved prime table at Michael’s, THE tony New York City restaurant, and regaling and whining to whomever can fit at the table, as every protein and carbohydrate source within a five-mile radius finds itself absorbed into his Jabba The Hut gob and down his sub-human, alien, reptilian gullet, how HE and his ilk are the put-upon victims in this brutal “thing” called a country HE and his ilk are very close to putting the finishing touches on.
He reminds me of the grossly projectile vomiting fat vermin in Monty Python’s “The Meaning of Life”, who orders 50 of everything on the menu, whines about the inadequacy of everything on the menu, consumes everything on the menu he just ordered and critiqued, and then vomits everything all over the diners sitting twenty feet away.
How does vermin Nixonian filth like that get to the top, considering that they are so top-heavy?
Probably because Republican assassins are better shots than Democratic assassins, having been trained by the NRA.
I hope “victim” is a prophecy. For the lot of them.
I can think of only a few reasons why a candidate picks someone for a running mate:
1) He’s a lock to win, and wants the best guy to take over if something happens to him.
This is, let us face it, extremely rare. The only cases in my lifetiem which might, might, fall into it are Reagan in 1980 and Johnson in 1964. And I don’t really think either of them are all that solid.
2) He’s got a preceived hole in his resume that he is trying to cover. Obama in 2008, Bush in 2000, etc.
3) He needs the votes that the VP candidate will bring in.
Usually this would be the 1-2% an someone might add who (as Governor or Senator) has won statewide elections in his home (swing) state. Or, occasionally (I’m thinking of Ferraro here), it’s a try for a whole demographic nationwide.
So where does the Ryan pick fit?
1) Nobody who’s paying attention thinks Romeny is a lock to win. Even people who are convinced he will win admit that it will be a near thing. So scratch the first one.
2) If there is a hole in Romney’s resume, I would say that it is far more in foreign policy than in domestic finance. And Ryan’s preceived strength is financial and domestic policy, not foreign affairs. (But perhaps someone here sees it differently.)
3) So, what votes would Ryan bring in? I don’t really see Wisconsin as a swing state that will turn the election. (Not to mention that Ryan hasn’t won state-wide elections there) And I can only see two possible nationwide demographics that might be at issue:
First, there may be some people on the right who are so distrustful of Romney that they would rather stay home and let Obama win that vote for him. Ryan might convince them to show up and vote.
But are there any conservative voters who like Ryan, but are not intent enough of beating Obama that they wouldn’t turn out anyway? It’s a big country, so there are probably a few of anything. But I just can’t see this as a big demographic. Microscopic would be more like it.
Which leaves, second, moderate/independent voters who incline to Obama more than Romney, but who a VP might convince to vote for the Republican ticket. I could see someone more moderate than Romney has been this year possibly accomplishing that. But Ryan? Really?
That only works if you believe that the reason a Republican would not win is thru not being conservative enough. Which, apparently, is where the Romney campaign is coming from. Unless someone has another reason to pick Ryan that I’ve overlooked.
If you buy into the reason in that last paragraph, all I can say is that your observations of politics have been rather different from mine over the years. The only example that would even be close is if you think that GHW Bush, had he won the nomination instead of Reagan, would somehow have lost to Carter.
the whole “Romney killed my wife!” line demonstrates this fall’s attack ads aren’t even going to be loosely based on reality.
Live by the super-pac, die by the super-pac.
Yeah, that First Amendment freedom is SOOO much more murderous than the Second Amendment exercised in movie theaters and mosques.
Brett’s second link goes to a piece by John Nolte: a guy who thinks a Skittles ad is clear evidence that Hollywood is pushing a pro-bestiality agenda.
” The same thing could happen now when some folks, feeling empowered by the continuing train wreck of the Republican campaign (and the fact that they are going to Ryan is both a hail Mary pass and a sloppy brownnose to both the Tea Party and the Norquist faction) make arguments that there are no substantial differences between Romney and Obama or indeed between Repubs and Dems.”
What we really need to see are polls, but as someone who is a fan of Greenwald and other Obama bashers I still doubt that there are enough people to my left who are so disgusted that they will vote 3rd party in large numbers. Nader 2000 was probably the high point in vote getting from my demographic, so to speak. There might be enough to make a difference in a swing state, of course. But swing states, by definition, are open to influence by all sorts of factors.
I think for now the most worrisome source of false equivalencies is, (and here for once I agree with sapient) comes from the Very Serious People in the center.
And speaking of Glenn, he’s got a Ryan-bashing piece up today–
the rights brittle heroes
Cleek, by “beastiality” and “Skittles”, Nolte means Treyvon Martin.
By normal behavior in our culture, he means George Zimmerman.
And since the walrus was Paul, I don’t see why smooching with the cute Beatle’s animal totem is so repulsive to a Ted Nugent fan like Nolte.
“LOL Rasmussen and Breitbart. I mean, really.”
You know, it’s that flat refusal to confront anything coming from a source you don’t like that has trapped so much of the left in an echo chamber. Your dislike of Rasmussen and Breitbart doesn’t do anything to change the percentages of Democrats and Republicans showing up to vote, vs the percentage being polled by various pollsters. Polls that wildly over-sample Democrats might provide you with entertaining reading, but are they a good basis upon which to make plans?
Here’s another source Phil doesn’t like who differs with Rasmussen and Brietbart:
http://www.redstate.com/erick/2012/08/11/not-enough/
Rmoney quote, regarding the trend:
“I am still not worried, but I am getting concerned. This election is trending away from Romney as the economy deteriorates and more Americans believe the economy is getting worse. That should be a red flag for the GOP.”
Great, now I’m quoting Foghorn Leghorn Erickson to counter Tasmanian Devil Rasmussen and Yosemite Sam Breitbart.
and yes, LOL Brietbart at the very least. His silence in death is so much more articulate and suitable than his noise in life.
I think the choice of Ryan serves to firm up the base. He should appeal to Catholics and libertarians as well as the religious right. The corporate media babblers really like Ryan, so that will score a number of uninformed voters.
That business about how the Dems were happy to run against Reagan is a myth, just as the current headline on Raw Story about the joy of the dems over the Ryan choice is pure corporate media myth building.
There’s little point in arguing the merits of one national horserace poll over another; in 2004 and 2008, sites that aggregated state polls to get estimates of electoral-vote counts, like RealClearPolitics, electoral-vote.com, 538, and (especially) Sam Wang’s election.princeton.edu all did pretty well. Wang tripped up in 2004 by skewing his final result with an arbitrary assumption that undecideds would break heavily for Kerry, but his unaltered poll aggregation was spot-on with a narrow win for Bush, and he never made that mistake again.
Anyway, these sites all currently show Obama ahead in the electoral count by a significant margin, and that’s where the race has been ever since the campaign started, with the only exception being a short period just after Romney clinched the Republican nomination.
The race could change. Romney will probably get a temporary convention bounce, as usually happens. But to insist that Romney’s actually ahead you would have to posit that state-level polling by the vast majority of sources has a new, pervasive systematic bias that wasn’t there in 2008 or 2004.
Anything to say about that Romney ad, Brett?
For libertarians, only to the degree someone worse could have been picked. Given his voting record, there’s very little for libertarians to like about Ryan.
Well, he’s not bad on the 2nd amendment. But, yes, looking over his positions on the issues, the best I could say was, “Could have been worse.”
I read just a few days ago (it might even have been a link* from one thread here) that there is something paradoxical about Ryan. A lot of people, when told about the details of the Ryan budget, simply do not believe that any member of the US Congress (hoewever despised the institution is) would seriously come up with something ‘that evil’. Those people then conclude that it must be a Dem propaganda lie/smear and consequently think higher of Mr.Ryan because he is the ‘victim’ of said perceived lie.
—
I think Mitt should pray to lose. Should he win, he will have to constantly check his back because there will be a constant risk of getting stabbed in order to get the ‘real deal’ on the throne.
[No, I do not think Ryan will personally murder Mitt but I think there will be many on the fringe that will consider that option]
*I think it was on vagabondscholar quoting some other author
Yeah, never cross those libertarian nuns.
“A lot of people, when told about the details of the Ryan budget, simply do not believe that any member of the US Congress (hoewever despised the institution is) would seriously come up with something ‘that evil’. ”
A lot of people don’t think borrowing slightly less from the Chinese on the credit of future generations to fund entitlement programs is “evil”.
Hartmut,
I had exactly that same thought. But I have been careful not to post it anywhere — why give some nut ideas?
Obviously the Romney campaign either didn’t think of it, or decided that the level of risk was worth it.
Entitlement programs? What? The DOD is chopped liver? You might also notice it is totally “unfunded” now and into the infinite future.
Just thought I would clue you in on that.
The Chinese, on the other hand, are working feverishly to keep their currency low (thus, they buy treasuries) in order to promote exports. We get real stuff. They get a “product” that can be created anytime in infinite amounts at the click of a computer mouse. Tell, how smart that is.
The Chinese government, IMO, views US treasury purchases as part of their munitions budget, for future economic war. While our need of them as a creditor has warped our foreign policy.
But, again, despite the priorities of the Ryan budget, (Not my own, I’d drastically cut the offense department’s budget.) it betrays an interesting view of evil, to so label such a feeble effort in the direction of merely reducing deficits.
But it’s not a new observation that liberals have a rather Manichaean view of the world, with their political opponents cast in the role of EVIL.
But it’s not a new observation [by me on this board despite ample evidence to the contrary] that liberals have a rather Manichaean view of the world, with their political opponents cast in the role of EVIL.
There, fixed that for you.
liberals have a rather Manichaean view of the world, with their political opponents cast in the role of EVIL.
Since I have observed conservatives doing exactly the samething, that would suggest either
a) moderates (as opponents of both) are evil, or
b) moderates (not being the demons of either) are the only good guys.
I rather prefer the latter conclusion….
While our need of them as a creditor has warped our foreign policy.
We do not “need” them as a creditor in any sense.
So I’ll see your manichaenism and raise you one apolcalypse.
Right at the top of the page …
(just a little reminder)
Brett, do you really believe Paul Ryan’s budget plan is not a sham? It includes the ultimate “magic asterisk,” purporting to raise a huge sum by “closing loopholes” (unspecified).
That’s alpolkalypse: where we’re all ushered into the afterlife, with musical score by Al Yankovic.
I hadn’t thought of this.
The reality is that Ryan is now every Republicans’ running mate whether they like it or not, forcing GOP candidates who would just as soon run from the debate over senior citizen entitlements to embrace the third rail of American politics like never before.
One GOP insider lamented that party leaders “have spent the last year” trying to take Medicare off the political front burner, but the Ryan pick “puts it all back out there now.”
“One GOP insider lamented that party leaders “have spent the last year” trying to take Medicare off the political front burner, but the Ryan pick “puts it all back out there now.””
Yup, that’s a positive. The party leaders, you must understand, have no goals beyond holding power, and exploiting it for personal gain. As long as they get their way, the party is utterly worthless as a vehicle for actually accomplishing anything.
And that’s the case for all values of “party”.
‘A lot of people don’t think borrowing slightly less from the Chinese on the credit of future generations to fund entitlement programs is “evil”.’
A lot of Americans don’t think taxing themselves slightly more on the current account of present generations to fund entitlement programs is “evil”.
Oddly, a lot of Chinese wonder what the hell we’re doing too.
We’re being yanked into the afterlife with a musical score by Usher.
“But it’s not a new observation that liberals have a rather Manichaean view of the world, with their political opponents cast in the role of EVIL.”
Is that you, Groucho? Paint and paste. It’s worth it, Brett.
http://www.youtube.com/watch?v=j5lU52aWTJo
But, if not, remember this dialogue between the Cary Grant and Shirley Temple characters in “The Bachelor and The Bobby-Soxer”?
Richard Nugent: Hey, you remind me of a man.
Susan Turner: What man?
Richard Nugent: Man with the power.
Susan Turner: What power?
Richard Nugent: Power of hoodoo.
Susan Turner: Hoodoo?
Richard Nugent: You do.
Susan Turner: Do what?
Richard Nugent: Remind me of a man…
I speak in tongues.
I have to actually agree with the basics of Brett’s 07:04 AM post but I would expand it to the absolute majority of congressbeings (federal and state) and the percentage of those ‘in for the actual job’ is further diminished by an inreasing number of zealots (there is of course a large overlap since many of the zealots are also personally corrupt).
Off topic, I too now get the impression that captcha is mindreading. My post yesterday about a potential murder od Mitt had ‘INRI’ and the one preceding this had ‘those gangecy’ which looks like those gangsters’ to me 😉
For the Mark Brothers, I’ll cut and paste anytime…
“That business about how the Dems were happy to run against Reagan is a myth, ”
I’ve read that, but you don’t show it was a “myth” by finding that some Democrats realized that Reagan had to be taken seriously. I remember at the time that the Carter people thought they could beat Reagan by pointing out his extremism and his ignorance. Why wouldn’t they have thought so? Reagan was extreme and Reagan was ignorant. Unfortunately he was also had that sunny disposition which seems to matter to some voters, or at least the press says it does.
“a) moderates (as opponents of both) are evil, or
b) moderates (not being the demons of either) are the only good guys.
I rather prefer the latter conclusion….”
Depends on what you mean by moderate. A lot of self-described centrists have insisted on treating the Dick Cheneys and the Paul Ryans with respect. I don’t know if I’d call that “evil”, but it’s not helpful.
It’s a little unfair, given the date (October 20, 2001), but moderates are usually praised for their bipartisanship and this story below illustrates the flaws in that kind of thinking. VIrtually every bipartisan statement made by these Democrats seems remarkably foolish now (and should have then).
link
That’s alpolkalypse: where we’re all ushered into the afterlife, with musical score by Al Yankovic.
Now THIS is an eschatology I can support.
Donald, while I agree that what you describe is a problem, quoting an article that came out a month after 9/11 (with quotes presumably gathered earlier) seems more than “a little” unfair.
There’s a YOutube out of Ryan speaking to a group at a town meeting session. He blames the defict on entitlements, lying, of course. Then a seventy one year old man int he audience begins to shout that he paid into his unemployment and social security and medicare. Guards knock the man to the ground and drag him away while Ryna jokes that he hopes he has taken his blood pressure pills. The creeps in the audience laugh.
No, not evil at all!
I’ve seen a couple of posts on other blogs suggesting that picking Ryan will ensure that the subject of Romney’s taxes stays active. Now if Romney is just waiting to pick his moment to reveal several more years’ tax returns, picking Ryan and keeping the topic alive may be something that helps with setting up the Democrats for a takedown.
But I seem to remember a quote from Romney, while criticizing the Ryan budget, saying that under Ryan’s plan he, Romney, would pay no taxes. If that memory is correct, it could be a PR nightmare. And if there is a video of Romney saying that, it is a gift beyond compare to the Obama campaign.
And if there is a video of Romney saying that, it is a gift beyond compare to the Obama campaign.
and here’s that gift.
Romney said ‘I’d pay no taxes’ line during one of the Republican debates, so video is certainly available. I’m not sure how politically useful it is though; we have his 2010 tax returns and they already show that almost all of Romney income that year was investment income that would be taxed at 0% if Ryan’s policies were implemented (the exception was $300K in speaking fees).
Laura, that video is here, the part you talk about is at around 3:05.
VIrtually every bipartisan statement made by these Democrats seems remarkably foolish now (and should have then).
Would you say this is a position that both sides should take, never give the other side any credit whatsoever?
Would you say this is a position that both sides should take, never give the other side any credit whatsoever?
I’m not Donald, but I don’t think there’s any conflict here. You can say that sometimes Republicans behave correctly or ethically while still believing that all the centrist statements in the piece Donald cited were proved wrong by later events. I mean, I think all those statements are dumb but I also think George Bush did some good things worth praising.
A little unfair, LJ, but not that unfair. That idiocy didn’t fade away after a month–it’s why some centrist Democrats supported the Iraq War. It’s why the opposition was tarnished as a bunch of dirty fracking hippies. But I suppose it was only the DFH’s who were suspicious of Cheney, Rumsfeld, and Saint Colin Powell at the time.
“Would you say this is a position that both sides should take, never give the other side any credit whatsoever”
Not quite. I think people who are bipartisan and unified in taking stupid positions should unify under one party label, so the rest of us could make fun of them without feeling like there are party loyalties standing in the way.
There is such a thing as sensible bipartisanship, but it’s a very rare thing these days. Ideologically there was much more overlap between the two parties if you go back a few decades, so bipartisanship wasn’t necessarily synonymous back then with centrist or conservative Democrats giving Republicans most of what they want.
Remember Mark Hatfield? An evangelical Christian Republican senator who was pro-life and anti-death penalty and in favor of civil rights for gays? A mixture that is a little hard to imagine nowadays.
Well, the people quoted in that article are not ones I think about (James P. Moran, Norm Dicks). Also note that on the second page, Daschle and Rahm Emmanuel, pushback on the notion of Gore not being as good as Bush.
“A lot of Americans don’t think taxing themselves slightly more on the current account of present generations to fund entitlement programs is “evil”.”
I hear this BS line over and over from liberals. You know what? You don’t need a law to tax yourself slightly more. Just cut the IRS a bigger check at the end of the year. IIRC, there’s even a line on the form to do that.
This isn’t about Democrats supporting taxing themselves slightly more. It’s about taxing other people quite a bit more than slightly more. In fact, given the extent to which the budget is out of ballance, hellishly more.
so bipartisanship wasn’t necessarily synonymous back then with centrist or conservative Democrats giving Republicans most of what they want.
“bipartisanship” is a dirty word to partisans of all stripes. if you take them at their word, the GOP base feels that their party leadership is too cozy with the Dems, and too willing to compromise with them.
and, partisans of all stripes scoff at the notion that the other side has anything to complain about, since they obviously get their way 100% of the time.
I know it is a pipe dream, but I long for the idea where figuring out the right thing to do is considered a higher political value than worrying about whether or not it is ‘your’ side or ‘the other side’ voting for it. I’m sick to death of hearing “that sounds like a good idea but I can’t back it because the other side supports it”.
Partisans of all stripes are very damaging to the country. The fact that Republican partisans are currently more damaging doesn’t change the statement.
Pretty sure that “themselves” referred to “Americans,” which makes Brett’s reading . . . interesting, for someone who just recently accused others of Manicheanism.
Taxation is a designated power, btw, so.
“”bipartisanship” is a dirty word to partisans of all stripes. ”
Whatever. I was thinking of specific issues, like many Democrats lining up with Republicans in a bipartisan decision to invade Iraq, or where Simpson Bowles is considered bipartisan and therefore “good” because it’s bipartisan, or would be if the Republicans didn’t think that getting 100 percent of what they want is their own definition of bipartisan.
“Partisans of all stripes are very damaging to the country”
People with stupid policies that are enacted are very damaging to the country. Whether they are partisan or bipartisan is a morally neutral quality, though the word “bipartisan” has picked up this aura of moral virtue it doesn’t necessarily deserve.
LJ, they push back by claiming that Gore would have been at least as hawkish as Bush. Emmanuel was for the Iraq War–he wasn’t in Congress in time to vote for it, but he was for it–
link
So his praise isn’t something I’d be pointing to.
Daschle said Bush was rushing to war in March 2003, so his record is more mixed (he voted for the authorization to use force in October 2002).
Partisans of all stripes are very damaging to the country.
Please fill us in on the “bi-partisan” solution that should have been adopted in 1860 and saved the day.
Or today’s abortion debate.
We are rapidly reaching the McKinley/Hoover Mendoza Line where we have to decide, as a country, whether the future is to include a modicum of widely shared justice, humanity, ecological sanity, and possibly some prosperity or we just turn it all over to a select few of the rich and their bootlickers to have as a playground for their pathological self-interest.
For those of you reaching for your partisanship eliminators, I include a substantial number of the current Dem leadership in the bootlicker camp.
You know what? You don’t need a law to tax yourself slightly more.
Terrific. Let’s just have a law (no, law is a dirty word. Let’s call it a social compact. No, wait, that would involve cooperation and possibly infringe on somebody’s individual liberty….For simplicity, let us just continue.)….that everybody can just volunteer how much in taxes to pay. Talk about easy!
Shorter response: BB’s Bullsh*t statement is so absurd the refutation writes itself.
the word “bipartisan” has picked up this aura of moral virtue it doesn’t necessarily deserve
no, it doesn’t deserve any kind of superior moral aura. but i suspect a lot of the media gets excited about instances of true bipartisanship because they are so rare these days.
Tax warm piss and bullets:
http://www.cnn.com/2012/08/13/justice/texas-am-shooting/index.html
Raise the tax on chalk outlines, funeral homes, burial plots, and coffins too, so Americans aren’t so incented to leap into them en masse every, what is it now, every week and a half, though I wouldn’t set your watches by it.
You could place a user tax on every utterance by NRA and Gun Owners of America flak too which, given the frequency with which they have to step to the microphone, adjust their crotches, and defend the increasing ratio of bullets to oxygen in the air we breathe, we’d have the deficit paid off by Christmas.
Come to think, the EPA needs to look into bullet pollution. I took a deep breath the other day and practically choked on the ammo.
I do believe there is a correlation between the amount of horsesh*t particulate kicked into the air in certain environs and bullet pollution.
Does OBWI have a check your concealed forearms at the door policy in comment sections, because there’s a tenseness in the room and I noticed the piano player quietly stopped playing and made scarce-like?
roll up your sleeves and conceal those firearms, boys.
Speaking of relevant CAPCHAs, which lj remarked on somewhere recently, my last one’s first word was istinke.
What, has Brett now captured the CAPCHA?
Like Pepe Le’peu, I remain oblivious to my parfume.
What?
“Terrific. Let’s just have a law (no, law is a dirty word. Let’s call it a social compact. No, wait, that would involve cooperation and possibly infringe on somebody’s individual liberty….For simplicity, let us just continue.)….that everybody can just volunteer how much in taxes to pay. Talk about easy!”
That riff was positively weird. Is that what comes up when you free-associate on “cooperation”? Infringing people’s liberty? What’s the first thing that comes to mind when the word “war” is mentioned? Peace?
My point here was simply that, what with ‘progressive’ taxation, it’s mostly a case of people volunteering to raise somebody else’s taxes. Which isn’t, strictly speaking, “voluntary”. Or noble. It’s just sponging off somebody else, and pretending you’re civic minded.
Kind of the whole point of progressive taxation, isn’t it? To separate the cost of government from the benefit, so that people will vote for crap you’d never convince them was worth it if they actually had to pay for it themselves.
No, it’s to prevent the entrenchment of generational aristocracies so we don’t have to wheel out the guillotines every few generations.
Also, we don’t tax people, we tax incomes. Anyone who wants to pay less is free to make less. That’s why all those CEOs are rushing to lower their incomes when anticipating the horrible, terrible, no good, very bad prospect of the 4% higher tax rates that prevailed in 1996.
“This isn’t about Democrats supporting taxing themselves slightly more. It’s about taxing other people quite a bit more than slightly more. In fact, given the extent to which the budget is out of ballance, hellishly more”
Taxes on the top 2% are at an historic low right now. Raising them would not be hellish. In fact ending the Bush tax cuts wouldn’t make a noticable difference if the life of many of the two percenters. They would still have an abundance of money.
Also, given that the 2% trend to be Repubicans, it is only fair that they get a taz increase. After all it was their party that created most of the budget deficet.Why shouldn’t they pay to clean up their party’s mess?
Also, we don’t tax people, we tax incomes.
Actually, we tax people’s incomes, and corporations’.
Anyone who wants to pay less is free to make less.
Theoretically true. In practice, if the high wage earners dialed it back considerably, you’d have no tax base.
That’s why all those CEOs are rushing to lower their incomes when anticipating the horrible, terrible, no good, very bad prospect of the 4% higher tax rates that prevailed in 1996.
Yes, all those CEO’s who, with their spouses, have a combined income of 250K or more.
“No, it’s to prevent the entrenchment of generational aristocracies so we don’t have to wheel out the guillotines every few generations.”
I see, so you’re asserting that progressive taxation has resulted in a diminishment of income inequality?
Look at this from another perspective: The wealthy, under progressive taxation, are a convenience to the government. They provide many fewer targets for taxation, against whom much greater scrutiny can be applied. If 50 million people participate in a black market, there’s not much the government can do. If 5 billionaires do, they’re easy marks for the government.
Similarly with economic concentration in business, and regulation. The government finds big business easier to regulate, fewer control points.
Government is encouraging economic concentration. Income inequality, the dominance of mega-corps over small businesses. It is doing this because the fewer entities it has to deal with, the easier a time it has.
Just try collecting a kickback from 200 small businesses. Just try it. They don’t, individually, have the discretionary funds to give your wife a $300k a year no work job, that they can abolish once she doesn’t need it anymore. To give a random example.
For that kind of convenience you need economic concentration. THAT is why income inequality keeps getting worse and worse. Because it’s useful to government.
And progressive taxation makes it more useful.
Theoretically true. In practice, if the high wage earners dialed it back considerably, you’d have no tax base.
Yes, we’ll, we’ve had four years of Randian supermen threatening to go Galt, and not a single one has done it, so. In any case, it’s simply the reciprocal of Brett’s oft-refuted “If you want to pay higher taxes just send a check.” Or are only conservatives allowed to use that formulation?
Yes, all those CEO’s who, with their spouses, have a combined income of 250K or more.
And?
Perhaps Dan Hicks was referring to Galtian supermen when he asked “How can I miss you when you won’t go away?”
Or are only conservatives allowed to use that formulation?
Actually, I missed the limited target you were addressing. Carry on.
And?
Your statement suggests it’s only mega rich CEO’s who will be taxed. That’s not even remotely the case. If you want intellectually honest debate . . .
That’s not at all what I meant to suggest, McK; I was merely referring to a subset of the whole. Yes, a return to the Pre-Bush top rate would affect all income over $250k. Likewise, retaining the under-$250k rates will benefit those same people up to the $250,001st dollar of income.
Until Brett figures out who does and doesn’t pay, for example, FICA; and until he explains in excruciating mathematical detail how flat or regressive taxation is supposed to deter generational accumulation of wealth, I’m not going to engage him further. As King Arthur once said, “What a silly person.”
LJ, they push back by claiming that Gore would have been at least as hawkish as Bush.
So it isn’t bipartisanship that is the problem, it is that the majority of politicians disagree with what you want. This is not to say that your point of view is wrong, but bitching about bipartisanship when what really bothers you is the position they hold seems a bit passive aggressive.
The numbers, please:
http://taxfoundation.org/article/us-federal-individual-income-tax-rates-history-1913-2011-nominal-and-inflation-adjusted-brackets/
Great table. Scroll all the way back to 1913. Let’s take, oh, 1954, when, I believe Eisenhower, not quite three years into the Communist takeover of the United States, was President.
Numbers adjusted for inflation for easy comparison to today.
24 tax brackets from 20% at the low to 91% at the high.
The 20% bracket encompassed all those making from $0 to $16,682 in today’s dollars.
91% bracket for everyone above $1,668,250.
The 34% bracket then, comparable to the HIGHEST marginal bracket today, was for those earning $66,730 to $83,412.
The 38% bracket then, comparable to the 39.5% bracket everyone is having coronaries over today, started at the $83,412 and went to $100,095.
Then up from there.
All economic indicators were far superior to our current mess today, from employment to GDP to the number of dogs in every pot, to the deficit, to the quality of the witchhunts.
John Boehner has wept under Klieg lights for those halcyon days.
The only unhappy semi-person was Bonzo the Chimpanzee. He was laid off because his co-star and love-interest Ronald Reagan was a lazy good-for-nothing whining get of a bonobo and up and quit, which sent evolutionists back to the drawing boards to redraw the family tree.
The rest of the monkeys paid their taxes and the folks in the 38% bracket I don’t believe, if I remember correctly, were stocking heavy firepower to overthrow the oppressive government.
There may have been a guy named Shrover Cleaverquist, who was sending a pledge around which stipulated the tax bracket should NEVER, ever rise above 91%, but folks laughed at him and ordered another Sazerac because times was good.
A short time later, his habit of wearing his pleated plaid shorts high on his waist led to genital enstranglement and gangrene of the crotch and he died a slow, excruciating death.
Cleaverquist’s widow married Sammy Davis Junior, which was about the time John Boehner began to have second thoughts about the Fabulous 1950’s.
If lj could lift that link to full linkiness so folks could ignore it more conveniently, I’d be happy happy.
“Yes, we’ll, we’ve had four years of Randian supermen threatening to go Galt, and not a single one has done it, so.”
Really? Have you considered that the economic slump we’re in consists exactly of people going Galt? Not in the dramatic fashion of a Rand novel, of course, but in the sense of hunkering down and refusing to take risks. Going Galt in place.
Speaking of Galt, here’s when it all started to go bad:
http://www.cracked.com/video_18426_ayn-rand-5Bplaceholder5D.html
Hey, Brett, look at the tax rates in 1954 in the my 7:30 link and consider how quickly the economy grew, probably because the John Galts of the time shut up in place and liked it.
The Ayn Rand Institute is in Irvine California, and the Atlas Society is in Washington D.C..
Jimmy Wales, a Gatian, and founder of Wikipedia, is all over the United States.
None of them has chucked it in for Galt’s Gulch and judging by the For Hire tabs at their websites, the 35% high marginal rate hasn’t put the kibosh on job creation.
You’d think they’d stay in bed in the morning.
Kind of the whole point of progressive taxation, isn’t it? To separate the cost of government from the benefit, so that people will vote for crap you’d never convince them was worth it if they actually had to pay for it themselves.
I hear this BS line over and over from conservatives.
Here is the point of a progressive tax regime:
To rephrase in terms of more modern economic concepts, a progressive tax regime reflects the relative marginal utility of the dollar taxed, rather than its absolute value.
Thanks for asking.
Partisans of all stripes are very damaging to the country.
I no longer agree with this, and am more than pleased to call myself a partisan.
The Republican doctrine du jour is that we all are, or ought to be, self-reliant individuals, competing for our piece of the pie, be it large or small, according to our talents and inclinations, and that the purpose of government is no more or less than to facilitate that process.
I think that’s utter horseshit. I think, as a doctrine, that it has bugger-all to do with the founding principles of the nation, and I think it’s nothing more than a thin intellectual justification for self-serving greed and callousness.
I’m a partisan. Romney, Ryan, Brett, McKinney, and any number of other folks are on one side, and I’m on the other. I don’t see that I have a whole lot in common with them, so I don’t see the basis for finding a middle ground.
They’ll prevail, or folks like me will, and it’ll play out however it plays out.
Not my choice, I’m just living in a world I did not make.
But no, I’m not interested in bi-partisanship. Sometimes it’s useful, right now it’s not.
Have you considered that the economic slump we’re in consists exactly of people going Galt?
About 2.5 million persons were marginally attached to the labor force in July, little different from a year earlier. These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.
Among the marginally attached, there were 821,000 discouraged workers in June, little different from a year earlier. Discouraged workers are persons not currently looking for work because they believe no jobs are available for them.
Depending on how you count, somewhere between 821,000 and 2.5 million people have gone Galt. They’ve packed it in and are presumably living in Mom’s basement, or are couch-surfing among their friends, or are doing odd jobs under the table, or are living in their cars, or whatever.
Somewhere between 821,000 and 2.5 million people who have just given the f**k up.
That is a tragedy.
Some guy who’s sitting on his money because it’s just not sufficiently renumerative for him to “take a risk” is a guy I just don’t give a crap about. Just between you and me.
Never f*ck with a nun named Russell.
What the nun said.
I’d add that the Galtean SuperHeroes are doing fine.
One reason the small businesspeople are holding back is because the folks Russell brings to our attention can’t purchase the former’s good and services because the Galtean Supermen like Mitt Rmoney deep-sixed their jobs.
Yes, the small businesspeople will cite Obamacare as well.
They could have had universal insurance, had they not been Death Paneled and then corporations and owners would (be relieved of healthcare duties and returned the money they spend on employee’s healthcare insurance to the employees in the form of higher pay and pensions and to shareholders in the form of dividends and capital gains distributions) have gone to Disneyland via Barbados, the money never to be seen again.
Generalization, for effect.
Ah, hell, it’s all true.
“This is not to say that your point of view is wrong, but bitching about bipartisanship when what really bothers you is the position they hold seems a bit passive aggressive.”
Your own way of criticizing people “seems” a bit passive aggressive, LJ. I’ve always thought that about your approach. You don’t argue against my point, so you start going meta and use that pseudo-objective term “seems” and go into psychoanalysis.
It should be obvious what I think is wrong with “bipartisanship” is that it is presented as a virtue in itself when it clearly isn’t. There is often a mainstream consensus in favor of some really stupid policies, but people often talk as though bipartisanship is in itself a goal we should be striving for. The partisan/bipartisan axis is orthogonal to the good policy/bad policy axis. Not opposite, just orthogonal. The bipartisan support for the Iraq War, arguably the most catastrophic decision made by our political class in the past twenty years is a good illustration of what I meant and I’m just delighted to have your permission to think that the Iraq War was a mistake, because it means I can use it in the way that I did. Please keep me informed of all other circumstances where I can use a not terribly controversial notion (such as the one that going into Iraq for no good reason and causing the deaths of hundreds of thousands of people is a bad idea) to illustrate a point I might want to make about the silly notion that bipartisan decision = good decision.
In case I need to spell it out, there are also bipartisan decisions that are good ones. As Turb said, even Bush did some good things–increasing funding to fight AIDS in Africa, for instance and while I haven’t looked it up, I would guess he had bipartisan support.
If you want intellectually honest debate . . .
one would actually provide a calculation of how much more a person would pay in income tax on an income that went from $250k to, say, $275k, and then make the case as to how much economic havoc results.
The ball is in your court. Keep your eye on it and swing easy.
What is the etiology of this malevolent ‘government’ that Brett refers to? Did it arise sui generis around 1932? If so, why not sooner? Or later? What is its ultimate desire? Is there an overarching plan? Is it a self-conscious animate being?
If it’s a conspiracy, it seems to be amazingly successful? How does one join up?
There’s an interesting video of an interview by Mike Wallace with Ayn Rand on youtube. Not for the faint of heart.
My point here was simply that…you and only you seem to know the point at which taxes transition magically from ‘voluntary’ to the ‘untrammelled despotism of the parasites’ or some psychotic vision of a self-conscious ‘government’ undergoing some kind of weird Hegelian dialectical process of self-realization of its due as the ultimate overweening power in the universe I guess.
That’s nice.
one would actually provide a calculation of how much more a person would pay in income tax on an income that went from $250k to, say, $275k
If the federal earned income tax top bracket went from 35% to 39.6%, that person would be liable for an additional $1,150.00. Assuming they were liable for the full hit, no deductions etc.
That’s slightly more than .4% – point four percent, not four percent – of their total income.
We’re ruled by children.
And for the record, Ayn Rand was a misanthropic freak of a human being, a half-assed thinker at best, and a crappy writer. The fact that her work is cited by “serious” people is perhaps the single most damning thing in modern American public discourse. She was, palpably, a fraud and a self-aggrandizing weirdo.
For crying out loud in a bathtub. Ayn freaking Rand. It’s like saying your world view was inspired by Stewie freaking Griffin. At least Stewie is funny.
Intentionally, I mean.
I watched that interview with Rand, Sapient.
I’m trying to imagine dear rational Ayn hectoring (in roughly a 322-paragraph Randian monologue of stupifying Objectivist boilerplate, “Frank, as John Galt stated without equivocation …”) her poor cuckolded husband, Frank, regarding his deficiencies and undeserving status, as she was schtupping Nathaniel Brandon while the young Alan Greenspan rifled through her underwear drawer on the sly looking for the ultimate Objectivist dildo that would supply the world with love, and then years later, coming to the elderly Frank and requesting his help filling out those Medicare forms for the parasites downtown.
“We’re ruled by children.”
With the exception of the eyeglass prescriptions … Pol Pot, Catholic priests, and Randian libertarians are united in their attraction to the young to carry out their business.
Your own way of criticizing people “seems” a bit passive aggressive, LJ. I’ve always thought that about your approach. You don’t argue against my point, so you start going meta and use that pseudo-objective term “seems” and go into psychoanalysis.
Sorry you think that. I don’t want to mindread, but when you tell me that Rahm Emmanuel supported the Iraq War, I really wonder if you are thinking this thru or if this is a knee jerk reaction. You acknowledge that when you say that this is orthogonal to the policy problems. The OP is about Ryan, and you want to bring up the Iraq War, so I’m not sure who’s been meta here.
I tend to think that the fact that the Iraq War was a mistake isn’t because it was bipartisan and I don’t think that bringing up the national discourse a month after 9-11 really tells us anything about the problems of bipartisianship.
Have you considered that the economic slump we’re in consists exactly of people going Galt?
No. What theory of economics leads you to such a postulate? And, if true, tell us further why we should not simply take away the power of these apparently small in number but pathologically narcissistic simpletons to dictate the economic well being of billions of people on a whim?
” I really wonder if you are thinking this thru or if this is a knee jerk reaction.”
I really wonder if you know what a condescending jerk you sound like. Seriously. I really wonder that and I’ve wondered about this for as long as I’ve seen you do this to people (i.e, for years). How could you type something like that and not realize that it sounds for all the world like a passive aggressive way to insult someone? That’s what it is, isn’t it? Or do you really think that your habit of standing above the other person and commenting on what their state of mind must be is supposed to bring calm and peace and balance to the universe?
“You acknowledge that when you say that this is orthogonal to the policy problems.”
I brought up the Iraq War because it is the clearest example I can think of where the glories of bipartisan thinking were wildly overrated. It seemed like a nonrebuttable way to make that point, assuming, as I did, that one sees the Iraq War as a catastrophic and unnecessary mistake which many (not all) Democrats participated in making, but I didn’t anticipate your reaction. Ryan himself is the beneficiary of the silly misguided centrist quest for rational far right types with which they can reach a “bipartisan” consensus. That’s been Krugman’s point, arguably since the 2000 Presidential campaign. People on left leaning blogs have been talking (to my delight) about the dangers of kneejerk centrism and the search for bipartisan solutions for quite a long time. The dangers are easy to see–first, much of the time political consensus is just a question of the Villagers talking to each other and ruling out dissident thought as non-serious. (Again, Iraq is the obvious example.) And second, with the current Republican Party a bipartisan consensus is defined to be one where the Democrats give in on every important point, so if you try to meet them halfway or three quarters of the way, they say it isn’t enough and then blame the Democrats for not compromising.
There. That ought to give you plenty to go meta over.
And, if you did, what would you replace congress with?
This sort of presumes that they have any such power. And if they really do, how do you propose to stop them?
The whole notion of “going Galt” rests on the fact that other people need you for their economic well being (to use your phrasing) than you need them, and that by removing yourself from their world, you will be just fine and they will, possibly, realize just how badly they really need you and live the rest of their pathetic existences with that knowledge. Loosely speaking; not quoting Rand in any way.
Now, if the people proposing to “go Galt” are thinking that and are right about that, the world is in big trouble if they exit from the public economic arena somehow. And if they are somehow right about that, there’s little anyone can do to stop them if they do go Galt. If they’re wrong, well, you can point and laugh and go about your lives as normal.
Or there could be some third (and fourth, etc) possibility that I haven’t considered. Enlighten me.
Oh, and as for the article one month after 9/11, two points. First, that attitude lasted well into 2003. It wasn’t some aberration. I’m not sure that it would be so great if it was just an aberration (aren’t these people supposed to be serious in times of crisis?), but it wasn’t. And you brought up Rahm specifically, so I pointed out that he is an illustration of the problem as he was a supporter of the Iraq invasion.
The whole notion of “going Galt” rests on turtles.
Not to use an anecdote to typify the downturn of the world’s largest economy, but here’s the case with my older brother:
He has a business that sells consumer audio, home theater equipment, car stereo, etc. Think of him as having Crutchfield kind of inventory diversity without the mail order part. Sometime in the last few years, the rules on loan collateralization changed even while the economy (including property values) was slumping, and so he and every other business like his had to, after much protesting and kicking-screaming, cough up an extra wad of cash to bring their loan up to par collateralization. I believe this meant a couple of hundred thousand dollars for him in a time when he was drawing zero income from his business.
Not going Galt in place, just rather screwed by the rules. He’s one of those business owners unwilling to take risks at present not because he’s going Galt, but rather because he has no breathing room whatever and fears greatly the next rule change (or: slide in property value) that could tie another lead anchor to the feet of businesses barely keeping a nostril above water.
It’s not self-removal; it’s real fear that he’d lose it all.
So your older brother took out loans for his business. He used leverage.
How is the person who doesn’t take out loans going to compete with your brother? He can’t.
Your brother was willing to take the risk, and anyone who wasn’t willing to use leverage was out of the business. They couldn’t compete.
Now of course, your brother is in trouble. We are supposed to feel sorry for him. He has been driving all the sober businessmen out of business for a decade or so, but let’s take a moment to feel sorry for your brother.
Textbook Minsky economics.
Someone who starts a business without taking out loans is of course unaffected by this rule change.
I am not sure what argument you’re making, here. My brother leveraged his business when he started it, well over a decade ago. It’s just like buying a house: you take out a mortgage using property value as collateral.
I am not asking you to feel sorry for anyone; my anecdote was by way of explanation rather than sympathy-gathering.
Textbook you’re not understanding what I am saying, and vice versa.
As for people wanting to start a business right now by taking out a business loan: good fncking luck with that.
Donald, it’s too bad you don’t like the way I put my comments, but there’s not much I can do about that, I’m not forcing you to read them. I think there’s an interesting discussion about bipartisianship in domestic policy versus foreign policy, and I’m sure I could have put it better, but there doesn’t seem much point in trying to discuss it with you.
in a time when he was drawing zero income from his business.
I think this is the nub of it, and yes, point taken. At the micro level, when times get tough creditors tighten the reins. I mean your brother’s loan is their investment and asset. In bad times, they tend to get nervous. At an aggregate level, it makes no sense, and this behavior is actually pro-cyclical.
At another level, I am simply astounded by those (not you necessarily) who cry big crocodile tears because banks (those heartless profit maximizing thugs) are refusing to loan money to businesses who have no customers….who’da’ thought?….but will splutter in anger at the thought of extending unemployment benefits to workers who will undoubtedly now be able to spend a few bucks at local businesses which, by the way, is the reason they exist.
Sometime in the last few years, the rules on loan collateralization changed
I’m in complete sympathy with your brother, and I’m well aware that he is far from the only small business owner who has been screwed in the wake of the financial meltdown of the last five years.
Further, I fully agree that the phenomenon of “going Galt” is less a matter of gifted ubermenschen withholding their productivity, and more a matter of regular hard-working folks trying not to get their financial heads chopped off.
All of it – investors holding back, people unable to find useful work, all of it – is a colossal waste.
The question I would ask is:
Why did the loan collateralization rules change?
Walk that back and see where the bread crumb trail leads.
Someone who starts a business without taking out loans is of course unaffected by this rule change.
This is ridiculous. People who try to start businesses without trying to take out loans are affected by people trying to start businesses by taking out loans. They have to compete against them.
I have an idea: Let’s forget about income tax rates and put a transaction tax on stock trades. The supercomputers can pay down the deficit. Or maybe they’ll go Galt, leaving the rest of us to figure out how we’ll manage with fewer fincancial crises.
hairshirtthedonist: Brilliant!
I trade stocks in the intermediate term and that’s another line of bullsh*t I’m willing to put forward, including raising my and Barbara Streisand’s and Brett’s income taxes across the board.
I’ve been googling loan collateralization rule-changes and have come up with buppus in relation to Slart’s brother’s quandry.
While Slart’s brother obviously had decided not to go Galt and wants to expand his business in a the current downturn, rather than remaining “conservative”, apparently the banking system has become more “conservative”.
It obviously has something to do with the financial crisis in which “conservatives” in name only refused regulation and “conservative” collaterization had gone awry, even to the extent of mis-regulated bankers saying “yes” on the loan forms to the question “Does this candidate have sufficient collatoral”, when the answer was “No”, in English and Spanish.
Because the bankers at the time were going Galt and acting in their very own self-interest.
They were probably schtupping Nathaniel Brandon too behind their husbands and wives backs, rationalism being what it is.
Of course, the complaint now is “why can’t we schtup like we could under Bush?”
” but there doesn’t seem much point in trying to discuss it with you.”
Well, you are consistent. Rather than even acknowledge that I responded to your points, including in my last post, you continue to pretend you’re above all the petty personal stuff which you yourself initiated. I didn’t expect anything better and maybe I’ll take this outside tomorrow.
If liberals only want to tax other people (i.e. “the rich”), I suppose conservatives only want to severely damage other people (i.e. “the poor”), being the “Budget Heroes” that they are.
Key excerpt:
Somehow “by this rule change” seems to have flown past you in a blur, unread.
I’ve been considering Sebastian’s pipe dream way up thread regarding partisanship’s damages, and I plead guilty.
But then, I thinks to myself, the Supreme Court decision in the Citizen’s United case was like dumping anabolic steroids and human growth hormones into the water coolers in every Major League Baseball dugout as a way of combating drug cheating in the sport.
If money is free speech, then so is partisanship. The biggest partisans with the most money and the most free speech are …. the forces with the most to win under a regime of radical and anonymous partisanship.
Gasoline on fire, etc.
It’s going to lead to catastrophe for the United States.
I’d say we’re roughly at the 1855 point in our history, bound to repeat.
And I’m supposed to make nice?
When Karl Rove is dead …. maybe.
Somehow “by this rule change” seems to have flown past you in a blur, unread.
Yes and yes. The ‘rule change’ was in response to securitized home mortgages being rendered valueless, or impossible to value or whatever. Was their a problem with defaults in small and middle sized operating lines of credit? No. Did the feds pass a rule, in response to a non-problem, that created new and unnecessary problems for small/medium businesses? Yes. Did it matter to the feds, for example, that on our business line of credit, my wife and I pledged our personal assets that are (1) unencumbered, (2) double our credit limit and four times our highest balance and (3) not exempt from levy by creditors? Not in the least. What about a thirty two year credit history of paying early or on time–does that get you any relief from the ‘new rule’? Not a bit.
Many is the time I’ve read comments here arguing that lower tax rates won’t stimulate the economy and to prove the point, the writer points to the huge cash reserves many large companies have built up.
I’ve never addressed those comments directly, but Slarti’s point dovetails with my own observations: under Obama’s regulatory regime (see ‘new rule’ as but one of many examples), there is a significant level of uncertainty that militates against significant new ventures. ACA is another wild card that makes long term predictions dicey and militates against additional risk taking.
I can’t cite an article or a poll of business leaders–maybe someone else can–but I know enough executive level people in enough publicly traded companies who’ve said the same thing to me and others informally to the point where it does not appear to be random.
Changing subjects to the austerity issue: it may be cruel, but it is also inevitable. By definition, the principal consumers of governmental services will be hardest hit. Is this bad? Yes, it is bad for everyone who depends solely or mostly on the gov’t for support when that support is cut back or ceases to grow. However, continued spending of money we don’t have, in the amounts we are spending, is not sustainable. So, at some point, something is going to have to give. Relatively modest cuts and reductions now or wholesale cuts in the not so distant future are the choices.
Did the feds pass a rule, in response to a non-problem, that created new and unnecessary problems for small/medium businesses? Yes.
I might have missed it (apologies if I have), but what specific federal government rule change are you talking about here?
Changing subjects to the austerity issue: it may be cruel, but it is also inevitable. By definition, the principal consumers of governmental services will be hardest hit.
You are, of course, talking about investment banks, oil companies and defense contractors, right?
McT:
I’m a little out of my depth here (hey, welcome to YELP!) but here’s evidence that this bank lending slow-down for small and mid-sized firms is worldwide phenomena in reaction to the financial meltdown.
http://www2.accaglobal.com/documents/surviving_drought.pdf
It’s hard to parse how new rules (pending a cite) may be exacerbating the lending slowdown and how the natural inclination of bankers to clam up after such a debacle differ in effect and quantity.
Remember, after Lehman failed, the money markets were not clearing.
And, there was no evidence at the time (even among the Galtean superheros who were pissing in their pants, leaving us with the bucket we’re deciding what to do with) that they would until irrevocable financial chaos would have ensued.
Thus the stimulus.
I’m open to the idea that new banking rules in the U.S (pending a cite) are another bit of the overall austerity being foisted on the world’s economy from Greece to Slart’s brother to the victims of MckT’s formula for righting the ship by voiding ballast (otherwise known as folks dependent on social programs who simultaneously can’t be hired by Slart’s brother nor purchase his products).
If there is a rule gumming up the works for Slart’s brother, it’s likely something Merkel-like, and all of that must go.
Did the feds pass a rule, in response to a non-problem
You left me behind at “non-problem”.
The unfortunate thing about any form of government intervention is that it’s always a very, very blunt instrument. One size fits all.
The other unfortunate thing about government intervention is that it tends to arrive after the horse is out of the barn.
Governments, and especially at the state and federal level, are large and inefficient bureaucracies. It’s a pity they have to get involved at all, because whenever they do, they leave new and unintended problems in their wake.
Know what would be really nice? If the banks, when presented with relaxed lending standards intended to make home ownership available to less wealthy people, didn’t respond by writing paper for anyone with a pulse who walked through the door.
It would be nice if, when some gee-whiz smart dude walked into a financial C-level’s office and told him his cool new equation meant that he could leverage a great big pile of other people’s money from here to freaking Jupiter, didn’t scratch his head and say “sorry junior but I’m not sure that makes sense”, rather than doubling down on any pile of stinking turds he could lay his hands on.
It would be nice if people would not be so f**king greedy that their irresponsibility didn’t threaten to burn the whole damned place down.
Then uncle sam would not have to wade into the china shop with his bull in tow.
I’m sorry slarti’s brother is up against it, and I’m sorry you’ve had to put personal assets up to secure your business line of credit.
All of that sucks.
Millions of people, literally, have been ruined or damned close to ruined, and I do mean utterly. That sucks. too.
Doesn’t it?
But the reason we have wonderful things like stupid, inefficient new rules for loan collateral is that the MOTU supermen were about an inch from burning the whole damned place down.
And not for nothing, but the unregulated financial disneyworld that put the matches in their hands were, in fact, the product of regulatory changes as well, and fairly recent ones at that. I didn’t hear the business community complaining about “regulatory uncertainty” when the result was a loosening of the leash.
under Obama’s regulatory regime (see ‘new rule’ as but one of many examples), there is a significant level of uncertainty that militates against significant new ventures.
This is absolutely NOT true. Utterly. Irrevocably. Invoking magic fairy dust to buck up the weak will of “investors” will not change this. It will not change this when we are, collectively, down and out, without much money, and desperately trying to pay down debt with what little we have.
To expect businesses to underdate significant investment when demand for their output is slack is simply beyond silly. It is pure propaganda.
Answer me this McTex, when do bankers call in loans? When things are great or when the sh*t hits the fan?
QED. I rest my cast, yr. honor.
Tex may be referring to this, but you will notice (a.) it is a proposed rule; and (b.) higher capital ratios mean less leverage and likely less profit without, you know, working hard.
Pity.
The unfortunate thing about any form of government intervention is that it’s always a very, very blunt instrument. One size fits all.
It doesn’t have to be a blunt instrument. Requiring stepped up security for performing, personally guaranteed loans bears no relationship to stupid home loans.
How to fix home loans? Require minimum 10% down and do a credit check. Do not lend to people with bad credit histories, even if this means a disparate impact on X or Y segment of the population. Best rule for making good home loans: the loan originator retains serious skin in the game, a minimum of 20%.
I didn’t hear the business community complaining about “regulatory uncertainty” when the result was a loosening of the leash.
The ‘business community’ is multiple orders of magnitude larger and different from investment bankers. The IB’s that ran the securitized mortgage racket are a small part of the business community. I’m part of the business community and it’s obvious someone rigged the very narrow regulatory scheme applicable to blending IB with commercial and personal banking and that that was a big part of the problem. Which doesn’t, in turn, means anyone and everyone should feel the regulatory lash.
but here’s evidence that this bank lending slow-down for small and mid-sized firms is worldwide phenomena in reaction to the financial meltdown.
There’s a missing link here. In the aftermath of 2008, among the rules put into place is a stepped up capitalization requirement on lending that applies regardless of the loan’s security. That limits the amount of money a bank can lend, even when the risk is minimal to non-existent. For example: me. The amount of money we borrow for our business is quite small, relatively speaking, and could be paid back anytime if we felt like (and, actually, we do feel like and will be retiring the balance at the end of the month).
To me, makes no sense to tell local and regional commercial banks that played no role in the financial crisis that their rules have changed.
These rule changes adversely affect the economy in two ways. First, as in Slarti’s brother’s case (and as indicated in the article you cite to), businesses can’t get the money they need to grow. Second, when unwise, arbitrary and unnecessary rules are imposed, when valid objections are given short shrift by regulators, the larger business community wonders: what other unnecessary rules are coming down the pike? It does not inspire confidence.
but what specific federal government rule change are you talking about here?
It has to do with bank capitalization in relation to outstanding loans. Which may be a different rule than the one Slart’s brother tripped over.
Tex may be referring to this, but you will notice (a.) it is a proposed rule; and (b.) higher capital ratios mean less leverage and likely less profit without, you know, working hard.
Pity.
Actually, the higher capitalization requirements have been the rule. The rule apparently is going to get worse. And, not knowing what business you’re in, if you can’t borrow money, you normally can’t start a business from scratch. I know I couldn’t have done so. No amount of hard work changes the hard numbers when you need, say, 150K up front to get going.
[…]
What you see is the evolution of two things over the past 25 years. One is the monetary base, and the other is the monetary base once you strip “excess reserves” (money banks are keeping parked at the Fed over and above what regulations require them to keep) out of data. As you can see, for most of the period there’s absolutely no divergence between the trends. Then in 2008, Ben Bernanke decided that the Fed should start paying interest on excess reserves and also embarked on a large increase in the monetary base. The chart makes clear, however, that relative to trend all of this money creation has just gone into excess reserves.
[…]
The Monetary Base Is Irrelevant
Now that, Charles, was truly facinating. It may offer an explanation for why inflation hasn’t taken off, (Taken off worse, anyway; Anybody who buys groceries knows real inflation is higher than the CPI.) and why the stimulus didn’t simulate. (Sure, Solyndra, but it’s not like the entire stimulus was blown on green scams.) And why it’s so incredibly difficult to get a mortgage, too.
With the fed paying interest to the banks on over half the monetary base, the banks have no incentive to make loans, they can basically get by without any customer besides the fed.
What do these business people think the rate of return is for a risk free investment?
If you want to make money on an investment, you either get the government to protect some way of extracting rents, or you take risk.
When did the corporate business plan shift from managing risks to whining about them?
If you don’t want to take risks, put your money in treasuries and enjoy your 1.72%. Greedier than that? Take risks.
Yes, given the catastrophe of the financial sector in the last 5 years, the government is going to implement measures to make sure that you are not taking the profit for yourself while pawning the risk off on the rest of us.
Deal with it.
I didn’t expect anything better and maybe I’ll take this outside tomorrow.
Fine Donald, I’m putting a post up there now.
It doesn’t have to be a blunt instrument.
That’s true. However, it tends to be.
From my point of view, things work best when folks use their heads, are responsible, and don’t make Uncle to step in.
But if they don’t, I’m fine with Uncle stepping in.
Just my two cents.
The ‘business community’ is multiple orders of magnitude larger and different from investment bankers. The IB’s that ran the securitized mortgage racket are a small part of the business community. I’m part of the business community and it’s obvious someone rigged the very narrow regulatory scheme applicable to blending IB with commercial and personal banking and that that was a big part of the problem.
This is a very good, and provides me an opportunity to scale back my earlier statement.
You are correct, the folks answering the phone for the “cui” part of “cui bono” when we talk about financial deregulation are investment bankers.
You are also in my understanding correct that the blending of investment and commercial banking was “rigged”, in the sense of being influenced by a smallish population of people with lots of money to throw around.
A simple return to Glass/Steagal would have answered the mail, IMVHO. I don’t see it on the horizon.
I quite agree that the rules that apply to investment bankers should not apply to folks making small business loans. As always, both you and I are not living in a world of our own making.
and, since every sentence deserves a proper subject, allow me to change:
“This is a very good”
to:
“This is a very good point”
Thank you.
Brett (and Tex),
If you had a sure fire business opportunity, or have a business that you want to expand, then you go to a lender and ask for a loan. The lender will want you to put up collateral and pay interest. If you don’t get the loan, it’s most likely that you (a.) have a really dumb business plan; (b.) are woefully undercapitalized; or(c.) refused the terms of the loan.
Do you really believe that if banks had tons of AAA credit worthy customers beating on their doors begging for funds at ANY PRICE that they would just turn them away?* Do you really and honestly believe this?
Really?
(*cf, “laundering”, money)
Actually, my observation had to do with mortgages. It’s virtually impossible for most of the population to get one today, even as the housing stock is rotting away due to sitting empty.
It’s virtually impossible for most of the population to get one today
i know my financial circumstances are not typical (well, they’re typical for a C++ programmer of 18 years…), but i just got a mortgage. and my little sister, fresh out of grad school for social work, just got one too.
Anybody who buys groceries knows real inflation is higher than the CPI.
The droughts would have driven up food prices under any fiscal/monetary regime (though I probably don’t need to tell you that, and it’s a side point, anyway).
That said, not only are banks more cautious, but so are borrowers. The private sector, in aggregate, is saving (or, equivalently, paying down debt or deleveraging). Remember that, again, in aggregate, households were already up to their eyeballs in debt, be it credit card, mortgage or otherwise. Not only don’t they want additional debt, they are trying to pay down the debt they already have. The stimulus was not sufficient to fully offset and overcome this private-sector saving (or debt-reduction) desire.
So the stimulus wasn’t very stimulating relative to an economy where the private sector was heavily dissaving (i.e. debt spending), but it was stimulative relative to what the later deleveraging economy would have looked like without it. It averted a far more severe recession or maybe a full-blown depression.
But, yes, the explosion of excess reserves held at the Fed are apiece with private-sector saving far exceeding investment, all of which offsets stimulus (i.e. planned government deficit spending).
I’m fairly certain that the amount of collateral banks require someone to put up in exchange for a loan has nothing to do with the capitalization requirements for banks. This is because the collateral is not counted as part of the bank’s capital because…it does not belong to the bank (again, IIRC).
You put up $10 in collateral, bank puts $10 in cash on the asset side of the balance sheet, and a $10 liability on the other side. Not net increase in equity/capital.
Now, higher capital requirements certainly make bankers unable to lend more money, e.g., if there is a 10% capital requirement and the bank starts with $100 it can lend $90. But if the capital requirement is 15%, it can only lend $85. So, yes, harder to get a loan today than before.
So why require more collateral? I think it’s just that post 2008, everyone is worried everything is more risky than it looks.
Actually, my observation had to do with mortgages.
I must have missed something. It was my impression that a mortgage was a loan of funds by a bank to a customer that was backed by an asset and secured by some level of comfort that the monies would be paid back. How this differs from a business loan or a line of credit apparently escapes me.
Obviously banks prefer to loan reserves to the fed at .25% rather than 4-5% for a mortgage. I suppose nobody can get a credit card today, either.
And here I thought conservatives would relish a return to traditional values, one of which is the maxim that the only people banks make loans to are those who don’t need them.
What do these business people think the rate of return is for a risk free investment?
The lender will want you to put up collateral and pay interest. If you don’t get the loan, it’s most likely that you (a.) have a really dumb business plan; (b.) are woefully undercapitalized; or(c.) refused the terms of the loan.
Are either of you writing from recent, personal experience? If so, I’d like some details. I will repeat: banks–commercial lending institutions, not Goldman Sachs–in the aftermath of the 2008 debacle have stepped up loan capitalization requirements that are divorced from collateral. They only can lend X amount, even if the borrower is good as gold. So, businesses get less or no money, because of the capitalization requirements.
You can snark all you want in defense of the regulatory state, but I doubt seriously that you live up close and personal with it or that you have employees whose livelihood is also tied to your ability to borrow money.
Money isn’t borrowed only to expand. There are cash flow cycles. When operating funds dry up, you borrow against receivables. Another thing banks are doing, in anticipation of bank regulators giving them grief on loan collateralization, is limiting the age of receivables against which the bank will lend, regardless of the the receivable’s viability.
Russell, a blunt instrument that falls far beyond the needed target does exactly what? Group punishment? You want people back to work? How is this kind of thing in aid of that?
a blunt instrument that falls far beyond the needed target does exactly what?
ooh, I know this one!
it wins the state for Governor Romney by stopping many wrong-thinkers from voting.
I will repeat: banks–commercial lending institutions, not Goldman Sachs–in the aftermath of the 2008 debacle have stepped up loan capitalization requirements that are divorced from collateral.
The capitalization requirements have always been divorced from collateral. Banks could meet their capitalization requirements with zero collateral, or 100% collateral, or 200% collateral. But they don’t want your collateral, they want their money back + interest.
Meanwhile, they have this pot of money (capital) set aside in case they suffer losses on some of their loans.
To walk back a little my statement above, I suppose to the extent that capitalization requirements went from 10% to 15%, the banks may want more collateral from borrowers as the bankers now have more money at stake in the venture (although also a lower amount of loans outstanding), but there’s nothing in such an increase that legally requires them to up collateral requirements on any particular loan, or their whole portfolio.
Ugh, when capitalization requirements go up, there is less money to lend, regardless of the fact that there are loans to be made that are virtually risk free. So, what good purpose is served by doing so?
I have to wonder in what proportions the factors of increased capitalization requirements and general economic conditions are contributing to the behavior of commercial lending institutions. I don’t know what the specifics of the new requirements are or how they compare with the longer-term history of such requirements. I do know that the evaluation of default risk, given the economy – considering demand, employment and property values – is historically bad. I’m also not sure how instructive anecdota regarding particular businesses and particular banks is with regard to sorting those factors out.
For what it’s worth (what’s this thread’s title, again?), I’d give McKinney the thumbs-up for a line of credit if I could, and I don’t think anyone here thinks that making his life harder in that regard is a good thing, whether it’s the government or the banks, themselves, who are responsible. But we’re still very much in the shadow of a global financial crisis, and many institutions are being very cautious for many reasons.
Perhaps the pendulum has swung too far, but that’s because it was allowed to swing too far the other way while the FIRE sector was stuffing it’s pockets with enormous wads of money (without creating a comensurate creation of real value).
creating a creation? well, okay…
I’d give McKinney the thumbs-up for a line of credit if I could, and I don’t think anyone here thinks that making his life harder in that regard is a good thing, whether it’s the government or the banks, themselves, who are responsible.
Thanks, HSH. If I didn’t make this clear, for me, the new requirements were more of a inconvenience than anything else. For a variety of reasons, my infinitesimally small slice of the GDP has managed to bounce along just fine. Slarti’s brother is the better example, putting a business on hold to comply with unreasoned borrowing burdens on small businesses completely divorced from the housing debacle.
The larger point I tried to make early on is that the capitalization requirement is one of many that the Obama administration has imposed on the private sector. Fear of future, unknown regulations and fear of what ACA, and the currently unknown or unappreciated underlying ACA regulatory framework, are not inconsiderable factors in private enterprises’ reluctance to expand.
Make of this what you will.
Fear of future, unknown regulations and fear of what ACA, and the currently unknown or unappreciated underlying ACA regulatory framework, are not inconsiderable factors in private enterprises’ reluctance to expand.
when was the Golden Age of Business when Job Creators™ knew exactly what the government was going to do at an unspecified time in the future? when were the tax laws and regulations fixed in stone, deemed never to change?
HSH, yes, but the regulatory thing remains a significant issue. Also, and I should have been clear on this, I do not use ‘regulatory’ in the narrow sense of ‘new regulations’. Permitting is a huge issue (think offshore drilling) that is entirely a function of administrative discretion and policy.
when was the Golden Age of Business when Job Creators™ knew exactly what the government was going to do at an unspecified time in the future? when were the tax laws and regulations fixed in stone, deemed never to change?
Never, of course. However, recent past administrations–Republican and Democratic–have been viewed as more flexible and accommodating to the private sector, and thus the uncertainty level was not has high.
and thus the uncertainty level was not has high
it’s going to take a lot more than that to convince me that the “uncertainty” whine isn’t just a transparently phony way for the GOP-sainted Job Creators™ to try to get more tax-cutting wingnuts elected.
it’s going to take a lot more than that to convince me that the “uncertainty” whine isn’t just a transparently phony way for the GOP-sainted Job Creators™ to try to get more tax-cutting wingnuts elected.
I cited my sources in my initial comment. They are anecdotal. I am not writing to persuade anyone.
(think offshore drilling)
What could go wrong?
McTx: Ugh, when capitalization requirements go up, there is less money to lend, regardless of the fact that there are loans to be made that are virtually risk free.
Right, that’s why I wrote in my 9:33am: So, yes, harder to get a loan today than before. Which is also clear from my example. I guess I should have just pointed out you were using “capital” and “collateral” interchangeably and they’re not.
McTx: So, what good purpose is served by doing so?
Circumstances change. I’m sure you’ve taken all the necessary precautions (malpractice insurance, homeowners insurance, life insurance, health insurance etc.), but not everyone does. Further, not every loan is “risk-free,” so the capital requirement is there to provide a bank with a cushion in case some of its risky loans (which it is presumably charging a higher interest rate for) go bad.
And, ultimately, you’re not generally borrowing money from the bank, your borrowing money indirectly from the depositors of the bank. So the capital requirement ultimately protects them.
So, what good purpose is served by doing so?
Preventing banks from failing, I would think. Even if the type of bank you’re dealing with had no hand in the financial crisis, it may be vulnerable to the conditions the crisis spawned.
There is a larger underlying (or overarching?) problem being addressed, and you can’t simply assume that any inconvenience or difficulty a given remedy for that larger problem causes must be worse than what would happen absent that same remedy. It’s like assuming that your house getting wet while putting out a fire is worse than letting the fire burn. The only reason you would even consider such a notion is that you didn’t have to experience your house burning to the ground, thanks to the water thrown on it.
That’s not to say that whatever regulatory response to the crisis was enacted was perfect. I’m quite sure that’s not the case. But the reason things are the way they are is because the global financial system almost went down tubes. That’s a big fnking fire to put out, and sh1ts gonna get wet.
I guess I should have just pointed out you were using “capital” and “collateral” interchangeably and they’re not.
I don’t think I was doing that. I was trying to make the point that capitalization requirements ought, in a world that makes sense, be in relation to collateralization,i.e. the more and better the collateral, the more the risk is reduced and thus the less capitalization is needed.
So the capital requirement ultimately protects them.
Maybe, if their deposit exceed 250K, but even still, it’s a rare rule that doesn’t have some rationale. Among people who think more regulation is good, it seems that if there is any reason at all for a regulation, the counter arguments lose, almost automatically. Where is the showing that your hypothetical depositor needed that kind of protection? Bad loans aren’t the product of capitalization, they are the product of poor underwriting and loose credit. The rule we are discussing imposes on good credit risks and existing lines of credit.
you can’t simply assume that any inconvenience or difficulty a given remedy for that larger problem causes must be worse than what would happen absent that same remedy.
I am not making that assumption. I am saying that regulations, rules, laws, etc ought to address actual, known problems. Prophylactic or anticipatory regulation should be rare and a last resort.
That’s a big fnking fire to put out, and sh1ts gonna get wet.
Ok, but the bad actors are limited in number and well known, so why soak everyone else? Slarti gave a concrete example of a business whose growth was stalled and whose existence was needlessly jeopardized. I confirmed that albeit with a lower order of magnitude imposition. This isn’t coincidence. Cumulatively, this is the opposite of stimulation. Too many people are getting wet and the justification is that a completely unrelated and very small in number group of idiots went off the reservation.
But, McKTx! That is just wingnuts taking one for the team by pretending to be too scared to hire & expand!
Stupid wingnutz.
taking one for the team by pretending to be too scared to hire & expand
beat that straw. beat it good.
i.e. the more and better the collateral, the more the risk is reduced and thus the less capitalization is needed.
I believe the rules allow for such, in terms of loan portfolios and risks of default. Capitalization ratios are related to the risk profiles of loans, but I don’t think it’s on a loan-per-loan basis. It’s a matter of the overall profile of the portfolio versus total capital on hand. Do you know differently, Mck? I could be wrong.
One of the things I pointed out, though, is that banks who had no hand in causing the crisis still are subject to its consequences. Everyone’s overall risk is higher, or, at the very least, everyone’s ability to accurately assess risk has been hindered. Capitalization requirements mitigate against risk. The crisis subjected even those banks who didn’t cause the crisis to greater risk. That’s why they’re getting wet, because they could catch on fire, whether they started the fire or not.
Lower risk loans are still preferable to higher risk loans. I don’t know what sort of risk Slart’s brother business represented, but it’s just an anecdote, anyway (not to minimize how it affects him personally, but in terms of sorting out the appropriateness and practical effects of increased capitalization requirements).
Firms, banks and households are generally holding tight to their money. That might be the best crappy outcome we could have expected under the circumstances. There’s no way to simply erase what happened, not even for the people who were innocent, and I don’t think anyone here has managed to sort out how much of the caution is due to regulation or generalized fear over the economy. And, even if we did know how much the caution and lack of lending was due to regulation, I don’t think we’d necessarily know that it wasn’t reasonably appropriate, anyway.
That’s why it’s called a crisis.
Do you know differently, Mck? I could be wrong.
I think I do. I am fairly sure there is a blanket, one size fits all minimum capitalization requirement that has the effect of limiting how much banks can lend and there is no flex even if the loans are performing, completely collateralized and personally guaranteed by solvent, no risk guarantors.
Everyone’s overall risk is higher, or, at the very least, everyone’s ability to accurately assess risk has been hindered. Capitalization requirements mitigate against risk. The crisis subjected even those banks who didn’t cause the crisis to greater risk.
Only if they were carrying a butt load of residential real estate loans. The whole business of lending–I have plenty of banker friends and I’ve borrowed lots of money over the years–is informed analysis of a given borrower’s risk. There are plenty of borrowers who are, for all practical purposes, risk free.
A very simple example: HSH has 100K in his 401(k), another 100K in an investment account, his fixed obligations are 50% of his after tax income, he pays his creditors on time or early and has done so for 20 years. HSH wants to borrow 10K, unsecured. What is the objective risk to the lender? Answer: close to zero.
Bonus: HSH plans to spend the 10K he borrows. Stimulus with no gov’t borrowing!!!!
I am fairly sure there is a blanket, one size fits all minimum capitalization requirement that has the effect of limiting how much banks can lend and there is no flex even if the loans are performing, completely collateralized and personally guaranteed by solvent, no risk guarantors.
OK, then please give a cite. If you can’t give a cite, that means that you don’t actually “know” that this is true.
I mean, I’m sure regulators have tightened capitalization requirements. But that doesn’t necessarily mean that such tightened requirements caused banks to change their small business loan collateral requirements. The regulatory changes happened in response to the financial crisis, but the banks were doing a lot of their own responses to the crisis: if you are an insolvent bank, you find ways to boost your solvency fast, no matter what the government says.
OK, then please give a cite. If you can’t give a cite, that means that you don’t actually “know” that this is true.
No I don’t have a cite. But, I have been told by my banker and several banker friends that this is the case and the terms of my loan changed as a result. Slarti reported the same thing impacting his brother. Take it for what it is worth.
If I screwed up so badly that the entire global financial system was endangered, I’d probably blame someone, anyone, besides myself when it came time to explain to people why they had to suffer. It seems pretty naive to take banker’s words at face value without any evidence.
I mean, what did you expect your banker to say McTex, “sorry, but since we insisted on giving out lots of loans without bothering to verify income or assets, we desperately need cash, so we’re going to take it from you”?
Tex,
This is really pretty simple. Many banks are looking at big black holes where their equity used to be. The government tells them to shape up. The usual way of doing this is to call in loans or raise more cash from the shareholders. Right now, a lot of loans on the books are, frankly, worth zero, and the shareholders are crying they don’t have any money either.
Meanwhile a lot of people are out of work, so no loans to them, eh? Many others are burdened with debt, the paying back of which is highly problematical (i.e., underwater mortgages). So how much in the way of new loans would they be out in the market searching for? The rest of us are scared sh&tless that we may be next, and are madly paying down debt.
Now what happens when everybody is trying to pay off their debt? Why, grasshopper, demand for loans from the banks goes down. This is fairly elementary. Also follow closely: When demand for borrowed money goes down, so do interest rates..you can demonstrate this to yourself easily. Draw a little “X” and label one “supply of loans” and one “demand for loans”. Move the lines around. You will notice the intersection point (“interest rate”) can go up and down.
If there are “a lot” of people with AAA credit out there begging for loans, rest assured, they are getting them if they can meet the terms desired by the seller. The terms have gotten tougher you say? Really? You might actually become aware that is not unusual in economic downturns, government regulations or no. After all, bankers get paid big to be more scared than the rest of us. This is loosely termed “fudiciary responsibility”.
Your whole shtick here reminds me of my complaint that Lamborginis cannot be purchased for $15,000, even when I can produce a pile of cash totalling $15,000. The response I get is generally laughter.
I hear this from everybody I talk to, so obviously it is god’s truth.
Bonus: HSH plans to spend the 10K he borrows. Stimulus with no gov’t borrowing!!!!
Yes, when you take out a loan, it is generally for buying something. The act of creating the loan increases the money supply. More money, more spending….more income for those on the receiving end of the spending. Now we have more reserves, but no loans…..BECAUSE THE DEMAND FOR LOANS IS DOWN. Sorry for the all caps.
You are basically putting out the absolute lie that banks are not lending becuase the big bad government essentially told them not to. If that were the case, they why would this big bad government go through all the trouble to flood the banking system with reserves? Just for fun?
Jeez.
What is the objective risk to the lender?
Past performance is no guarantee of future results.
You’ve heard that, right?
To give Tex some due, there’s THIS .
Note the dreaded proposed regulation does not take effect until 2019. I believe higher capitalization requirements have already been instituted for the larger banks.
Even Joey Stiglitz is concerned. Generally, he’s pretty good on this stuff. I may have overclubbed a bit, the general point stands. Lack of aggregate demand is responsible for the “low number of loans” not the bogeyman of government regulation.
The denominator of the risk-based capital ratio is the calculation of risk-weighted assets. What that means is that different assets, including different types of loans, carry different risks. The requirements may simply be fixed percentages thereafter, but what determines how much capital you have to have still depends on the types of capital and the types of assets. That’s probably why they wanted your loan to be so well collateralized – because it reduced the risk-weighting of the loan, which reduced the loan’s contribution to the bank’s capital requirement. AFAICT, your specific instance actually demonstrates the opposite of what you’re saying about how the requirements work, McK.
AFAICT, your specific instance actually demonstrates the opposite of what you’re saying about how the requirements work, McK.
Yes. If you are an iron clad deadbeat proof no risk lock to pay back the loan, why object to posting more collateral?
Where’s the beef?
I doubt seriously that you live up close and personal with it or that you have employees whose livelihood is also tied to your ability to borrow money.
Money isn’t borrowed only to expand. There are cash flow cycles. When operating funds dry up, you borrow against receivables
You borrow like that if you are a speculative borrower. Not if you’re a hedge borrower.
The hedge borrower’s employees didn’t need to worry about their employer’s ability to roll over loans over and over to make payroll. But as more and more speculative borrowers enter an industry, fewer hedge borrowers enter because their returns get lower and lower – they have to compete against people willing to take more risk, people who lobby government to allow them to take on more risk, people who try to hide how much risk they are taking.
And crucially, as you described, people willing to push that risk onto their employees and society as a whole.
Eventually an industry is completely dominated by speculative borrowers, and then Ponzi borrowers. Of course there is a crash, and of course employees get laid off, and of course lending standards get tightened afterwards.
Then the speculative and Ponzi borrowers wail, “Won’t anyone think about the poor employees! Doesn’t anyone sympathize with the uncertainty we have to endure!”
The employees would have been fine if lending standards and capital requirements had been kept high after the last crash, years ago.
the more and better the collateral, the more the risk is reduced and thus the less capitalization is needed
Of course the assets in capitalization requirements are risk weighted. Government debt is safer than corporate debt. Loans against collateral are safer than loans without. The devil is in the details.
The problem is that bankers always have incentive to game the rules to take on more risk. When the risks pay off, they get most of the benefit, when the risks don’t pay off, the costs are widely shared. Bankers will generally try to find the riskiest assets within a given asset class, etc.
HSH has 100K in his 401(k), another 100K in an investment account, his fixed obligations are 50% of his after tax income, he pays his creditors on time or early and has done so for 20 years. HSH wants to borrow 10K, unsecured. What is the objective risk to the lender? Answer: close to zero
The risk is even closer to zero if HSH pledges 10K of his investment account as collateral. So if he does, that counts less against the capitalization requirements.
And if HSH has 100K in his 401(K) he doesn’t need the banker anyway. He can borrow 10K against it and pay “interest” to himself. His risk is that the investment returns he would have gotten from the 401(K) are greater than the “interest” he repays. We can all live with that risk.
Russell, a blunt instrument that falls far beyond the needed target does exactly what? Group punishment? You want people back to work? How is this kind of thing in aid of that?
Tighter collateral requirements probably do little, if anything, to create more jobs. Most likely, the opposite.
Oddly enough, that isn’t what they’re intended to do, so I’m not sure that’s an indication that they’re unsuccessful as a public policy.
A friend of mine is going through her second round of chemo for breast cancer. It makes her sick as a dog.
What kind of medicine is that? It makes her puke, she doesn’t want to eat anything, she’s tired as hell.
Stupid doctor! Making her take medicine that makes her feel like crap!
I think it’s kinda like that. Yeah, we all feel like crap a lot of the time, but at least we’re not dead.
I fully get that tighter financial regulations are a PITA, and probably make life harder rather than easier for a non-trivial number of people.
Unfortunately, the alternative is that a bunch of greedy MF’ers burn the whole damned place down.
Public intervention doesn’t have to be a blunt instrument, but it generally is. Just like anything undertaken, by any medium to large sized organization, at any degree of scale that is bigger than a breadbox, is generally a blunt instrument.
I have a stapler in my top desk drawer at work. I never, ever, ever, ever, ever use a stapler. But it’s just easier for the office admin where I work to put a stapler in everybody’s desk when they come on board, rather than try to figure out who will actually use one and who will not.
Stupid office admin! Wasting at least one perfectly good stapler!!
I’m sure you get my point.
I can fully understand being somewhere between annoyed and bloody well pissed off, but perhaps you might think about directing your ire at the folks who dropped a turd in the punchbowl in the first place, rather than toward the Intrusive Big Government that’s trying to clean up the mess.
Coulda been game over, dude. But here we all are to tell the tale. It’s cost us all something, in one form or another, hasn’t it?
But at least we’re making it through. Most of us, anyway. Some, not.
But you and slarti’s brother, yeah, you’re still standing.
And not for nothing, but yeah, taking one for the team is not the worst way in the world to think about it.
I’ll take one last pass at this, then move on.
I emailed a friend who owns a company that owns a bank. Not an investment bank, but the kind of bank I and many other businesses and individuals go to for loans, checking services, etc. He confirmed what I’ve been saying.
Capitalization requirements went up after ’08. Those rules are going to change again.
A bank with X amount of capital, pre-’08, could lend with lower capitalization requirements than after ’08. So, after ’08, the same bank could lend less money, so businesses could borrow less money.
This is a rule that landed on institutions and businesses that played no role in the debacle and that were and remain essential to a recovery. Like it or not, if the private sector doesn’t grow, everyone who is currently screwed or on the verge thereof is well and truly screwed.
This is a rule that is independent of creditworthiness or collateral. It retards growth and it does so in a not-useful way.
And, to close this out, when it comes to paying back money, i.e. keeping one’s promises, past performance is absolutely the best indicator of future performance.
It would seem the obvious remedy would be to attract more depositors, therefore increasing the pool of deposits from which they can lend even under the higher capitalization requirements. Surely these titans of business can come up with ways to entice depositors to move from Bank A to Bank B. They certainly don’t lack for creativity when thinking of ways to extract fees from them.
I’m somewhat out of my depth (feet hanging over the edge in the shallow end) here, but here’s a summary of the Dodd-Frank legislation, including bank capital requirements.
http://www.mofo.com/files/Uploads/Images/SummaryDoddFrankAct.pdf
Thanks McTX for checking with a banker to confirm your experience with more stringent lending requirements, and yes, these are probably impeding lending and economic growth.
I had a feeling the discussion would go this way and I’d just like to add that I’m in the “What did you expect?” school of thought here.
After the financial collapse due to largely unregulated instruments going kablooey far in excess of institutions’ ability to handle the losses, depositor’s money had to be protected, particularly after the the TARP bailout.
Those who argue against TARP (it was dicey, but remember, after Lehman, the world’s money market were not clearing and were hours away from seizing up completely) perhaps rightly fear too big to fail policies vis a vis banks and investment banks, cannot (of course they CAN, but cripes!) now argue that shoring up the institutions’ capital reserve requirements is anything other an honest attempt to avoid the hated government stepping in again and bailing these guys out.
Absent TARP and Dodd-Frank (and whatever the European rules are called that Jaime Dimon termed “unAmerican”), the banks and the free market themselves, if they had survived to open their doors after the the financial debacle, would have imposed more stringent capital requirements on themselves, or so we’re told by free market theorists who yammer about government action impeding the market’s natural incentives and disincentives.
Actually, I think the quants would have doubled down on their bad bets, and absent TARP and Dodd-Frank, we’d be eating each other about now instead of having the leisure to second guess.
Blunt instrument that doesn’t account for individual cases — yes.
But, it’s what you use to hit a dumbass mule like Phil Gramm over the head, who, along with Robert Rubin amid a cast of thousands in technicolor, bullsh*t everyone about non-existent Chinese walls, and let exotic, toxic financial invention threaten the capital base of the country’s financial system.
Tweaks will happen, but slowly.
Not an investment bank, but the kind of bank I and many other businesses and individuals go to for loans, checking services, etc.
Maybe we should figure out a way to separate investment banking from commercial banking..?
I’m sympathetic to your situation McK, and to slarti’s brother’s, but I’m generally with the Count in “what did you expect?” territory.
Blunt instrument that doesn’t account for individual cases — yes.
Count, it’s a blunt instrument that doesn’t allow for judgment. But, going forward, when we talk about gov’t regs, let’s keep in mind the notion of blunt instruments. Also, let’s keep in mind actual cost/benefit analyses and ask if our gov’t should perform these in good faith prior to imposing a given blunt instrument.
A few points: Lehman was not a commercial bank, neither was Goldman, Merrill, AIG, GE financial, Morgan Stanley, etc. In fact the ones that survived registered as banks to qualify for TARP. The simple separation of investment banks from deposit banks really isn’t a solution to our financial system problems.
TARP was a good psychological stabilizer and could have been accomplished by the government providing guarantees, but it really wasn’t used to provide caital in large part. The takeover of Fannie and Freddie really was the lynchpin of stabilizing things, they aren’t banks.
The banks, lets take BofA, would have survived with the exception of the very most mortgage exposed. BofA less Countrywide Mortgage(not a bank) would be a great bank today and would have survived without the government.
WaMutual was a bank but almost entirely a mortgage generator, it failed anyway.
The problem wit Dodd-Frank at this point is it is still unpredictable in implementation, the international banks are more concerned with the Basel III and the retaraded and completely arbitrary stress tests. All the rest of the US financial system is still being impacted by the Dodd-Frank cost a unpredictability.
I expected regulations that didn’t create that convulted set of expectations and excplanations.
Overlapping sets.
it’s a blunt instrument that doesn’t allow for judgment.
McKinney, it’s the age old struggle of bright line rules vs. discretion/judgment when it comes to the law, no?
In tax, taxpayers complain of complexity, or lack of guidance, often saying either “we need a bright line rule” or “we don’t care what the rule is, just give us an answer!” And then, when the gov’t provides a rule or an answer, often the response is “no not THAT rule/answer!”
To take just one recent example, code section 7874 generally prevents american corporations from “inverting” (re-incorporating overseas to avoid the US taxation of worldwide income), but corporations can still do it if they have “substantial business activities” in the country where they invert. Taxpayers complained that this was too nebulous a standard, so in June Treasury wrote a bright line rule saying you met this test if and only if you had 25% of your assets, employees, and income in that country. Taxpayer then complained that they didn’t like this new bright line rule.
And on it goes.
Well, hell. I can do a last pass, too!
1. We tried lower capitalization ratios, wide open de-regulation, and frankly, uninhibited mammon worship. It failed utterly, miserably, completely, totally….well, I’m sure you get the drift.
2. We have heard from one very tiny subset of the population, i.e., small bankers, about how terrible these regulations are. Well, mostly they are terrible for them. It is also well to remember all of them enjoy a public subsidy….guaranteed deposits (FDIC).
3. The whining is reaching crescendo levels that can only be explained by the term “special pleading”.
4. We have millions of needlessly unemployed people who are suffering greatly, and I find this whining by well off bankers to be totally contemptible.
5. Again….the big reason there is no great demand for loans is depressed aggregate demand, not some imaginary “uncertainty”.
But to all: Have a nice day anyway.
Not going Galt in place, just rather screwed by the rules.
I’d like to reiterate that I’m thoroughly sympathetic to slarti’s brother. It sucks to invest money time and effort into something and see it not thriving, all due to circumstances out of your own control.
That said, it might be useful for folks who are pissed off about changes in government regulations for commercial lending to ponder:
1. why did the rules change?
2. are there any reasons other than the rule changes that commercial lenders might be gun-shy?
Maybe it’s not all due to that damned intrusive government, after all.
Maybe, absent the regulatory interventions of the last few years, slarti’s brother would not only find it hard to expand his business, but wouldn’t have any business, at all, whatsoever, and would instead by living off of whatever he could grow out in the back yard.
Not that there’s anything wrong with that.
Just a concept to ponder, y’all. He said for the nineteenth time.
It’s not about expanding the business, russell. It’s about having to cough up additional cash so that the bank doesn’t foreclose, even though he’s been making his payments on time. Cash that, in a long period of flat sales, is quite painful to acquire.
Sure, it’s good to have rules that make it tougher for us to repeat the events of the last few years. But the big, expensive horses have already escaped the barn.
I should ask him to write up exactly what happened to him, because I can’t recall the very important particulars. His business has survived, so far; that I do know.
“But the big, expensive horses have already escaped the barn.”
Thar’s the rub, in’t.
I guess my …. guess …. is that absent many of these recent rule changes, the bankers, generally speaking, might well anyway have watched the big, expensive horses gallop away over the hill with most of the expensive tack and perhaps the best Sunday-go-to-meetin phaetons in tow, never to be seen again, given the previous loose lending standards, and decided on their own to take the lash to the decent horseflesh who stayed in the barn, even while it was on fire, quietly munching on hay and minding their own business, since, to the bankers, a horse is a horse, of course, of course.
This is bad, no doubt about it. As both MckT and Slart have pointed out, innocents with good credit and borrowing records take the brunt too.
I believe during the Great Depression, both farmers, homeowners, and small businessmen, even those who were otherwise above water, found their loans had some barely readable small print that permitted the bank to recall their loans, leaving Ma Joad (Jane Darwell and her family without a pot to piss warmly in on any thread whatsoever in that famous movie about banking arithmetical pornography — “The Gapes of Math”.
(That last was for Ugh)
A famous Republican Treasury Secretary, of the do-nothing school, termed the process rot and liquidation.
It’s a wonderful life, until it isn’t, and Uncle Billy misplaced the good, old savings and loan’s money and there’s not a break to be had, and off we go to Potter’s Field discussing the finer points of lending standards.
While Mr. Potter becomes a regular on FOX and calls the little-guy victims a bunch of spittle-flecked names (parasites) while simultaneously throwing his money to political candidates who would gut whatever remaining government action (yes, bluntly, though these things will be fine-tuned over time) that protect the “consumer” (pigeons, parasites) and go right back to business as usual so that he and Donald Trump can dry hump each others’ expensive toupees in broad daylight on Main Street and call it a reality show and the resurgence of animal spirits.
We have no quarrels with each other.
It’s the Rick Sandovals of the world who as much as called Slart’s brother a “loser” and a “lucky ducky”.
Just for fun, for the sake of discussion, I’d like to know too about MckT’s previous lending standards during the run-up to the financial debacle.
What was their loan-loss ratio AND did they package mortgage and small business loans, dicey and otherwise, into “instruments” and sell them to unwitting Hungarian banks, thus removing the liabilities (banks call them assets, until they sell them to you, and then they become liabilities to collect on which to collect and apply service fees) from their books?
Please take a chair, the lending officer says, and then while later perusing the loan agreement, you squint at an item on page 47 entitled “User Fee For Chair Occupancy”, the cost of which has been amortized over the life of the loan, and the only reason it’s in writing is because the heavy hand of the government forced the bank at gunpoint to tell you about the chair clause, transparency supposedly benefiting markets, but then again maybe not.
For the record, I know little about horses or banks, and quite frankly, I’m afraid of both, because it’s my considered opinion, given the most cursory experience, that THEY ride you, with spurs and not sparing the crop.
I hope Slat’s brother gets a break and flourishes.
That was a long comment, but still short by one word.
“I’d like to know too about MckT’s previous lending standards” should read “I’d like to know too about MckT’s —BANK’S —- previous lending standards.”
It’s not about expanding the business, russell. It’s about having to cough up additional cash so that the bank doesn’t foreclose
I hear you slarti. I’m sure it’s a crappy situation.
A bank with X amount of capital, pre-’08, could lend with lower capitalization requirements than after ’08. So, after ’08, the same bank could lend less money, so businesses could borrow less money
This is not true. X here is not fixed. The same bank could increase its capital and then lend the same amount or more money.
To get more capital the bank can raise it from investors, it can pay out less dividends, it can pay smaller bonuses, etc.
If there really were borrowers out there wanting loans with risk “close to zero” any solvent bank would be able to attract new capital to make those loans.
If you are starting a small business that requires a loan that is paid back over well over a decade, or a loan tied to collateral where the bank can ask for more money if it decides the collateral has changed value, or a loan that has be to rolled over in order for you to make payroll every month, you are engaged in a risky investment. The returns on your investment are due in part to that risk, and in the current financial system, I the tax payer bear some of that risk. You get the profits, I bear the risk.
That’s what is being managed here, the tax payers have borne too much of the risk and gotten too little of the profits, and now that is changing.
Cry me a river.
This whole “Obama has cerated uncertainty, which is killing the economy,” business is a GOP talking point manufactured out of thin air.
In the spirit of unintended consequences, I offer this:
Sometimes it’s the bear that gets you.
Lucky the car the guy was driving had seat belts and airbags to combat both moose and bear collisions.
Lucky, as in someone forced the auto manufacturer at gunpoint to install the safety features.
Of course, maybe he was incented (unintended) to drive faster and more recklessly because of the features, in which case he must have been a behavioral economist, which is why those sorts die young, which is lucky for the rest of us.
The question is, why didn’t the Tyrannosaurous Rex preying nearby eat the three of them — moose, bear, and man — following the mayhem?
So, a moose, a bear, and an economist in a canoe walk into a bar …
So, a moose, a bear, and an economist in a canoe walk into a bar …
I was going to laugh uncontrollably over that, especially the guy who can, like Merlin, both sit in a canoe and walk anywhere (I guess it all depends on the assumptions you make, ceteris paribus)….
…and then I was overcome by a great wave of nauseous uncertainty and curled up into a ball on the floor begging for a special tax break.
R(Money):
“Big business is doing fine in many places — they get the loans they need, they can deal with all the regulation.”
DOING FINE!?DOING FINE!?DOING FINE!? OUT OF TOUCH!!! OUT OF TOUCH!!! OUT OF TOUCH!!!
that’s the appropriate response, right?
“They know how to find ways to get through the tax code, save money by putting various things in the places where there are low tax havens around the world for their businesses…But small business is getting crushed.”
small business should hire better accountants.