Is Modern Banking Fundamentally Flawed?

Jamie Dimon, CEO of JP Morgan Chase and board member of the New York Federal Reserve (a banking regulatory body), advocates not only that financial regulation reform is not necessary, but also that deregulation is the best course for the American financial sector. Meanwhile, JP Morgan lost $2 billion in an effort to reduce risk. President Obama quickly pointed out that if one of the smartest bankers in the room can preside over such a massive loss, then a deregulated financial sector would likely present us with an unacceptably high level of risk to the entire financial system (and economy). Elizabeth Warren suggested that relying on bankers to regulate themselves would not reduce the systemic risk. The alternative would seem to be strengthening financial regulation, even though—according to Sen. Dick Durbin—“the banks own Congress.”

The full essay is at " Banking as Flawed."

Market or Government: Which Should Reduce Systemic Risk in the Banking Industry?

If the five largest banks—JP Morgan, Bank of America, Citigroup, Goldman Sachs, and Morgan Stanley—are too big to fail and yet substandard operationally on account of their respective complexities (e.g., investment banking added to commercial banking), might it be that the market-based decisions of investors will relegate the giants, which by the way had price-to-book value ratios of between .37 to .77 in May 2012, thereby solving the problem of systemic risk?

The full essay is at "Reducing Systemic Risk: The Market or Government?"

Toronto Police as Aggressors at G-20 Summit

Police employees “ignored basic rights,” jailed people illegally, used excessive force and escalated violence at protests surrounding the G-20 meeting in Toronto in 2010, according to the Office of the Independent Police Review Director. The report could lead to charges against police employees and strengthen the hand of civil lawsuits filed against the police department. Because the police employees acted with an attitude of impunity, anything less than stiff prison sentences would be insufficient as a deterrent.

The full essay is at "Toronto Police as the Aggressors: A Conflict of Interest." 

The 2012 U.S.Trade Deficit: An Analysis

Coming in at 2.7% of GDP, the U.S. trade deficit fell to $107.5 billion in the third quarter of 2012—down 9 percent from the second quarter’s $118.1 billion, which was 3% of the economy at the time. The current account includes merchandise, services, and investment flows. The surpluses in services and investment were out-done by the deficit in merchandise to produce the overall trade deficit. According to the New York Times, the “improvement in the current account in the third quarter reflected a decline in the deficit on goods and a small increase in the surplus on services, led by a gain in foreign earnings made by financial services, insurance and professional services provided by companies in the United States. The surplus on investment earnings narrowed to $50.8 billion, down from $52.1 billion in the second quarter.” Most of the decline in the deficit on goods reflected a decline in the foreign oil bill, according to Paul Ashworth at Capital Economics.

Analysis is at "2012 U.S. Trade Deficit" 

ICE Bought NYSE: Profiting from the Rules?

“Tell me what the rules are, and I’ll make money with them.” This statement, made by Jeffrey Sprecher of Intercontinental Exchange, captures well the attitude that business practitioners should have toward government regulation in a republic. That is to say, businesses should be regulation-takers rather than makers. For the regulatees to make regulation to which they themselves would be subject is an oxymoron, or contradiction in terms. At the very least, it involves a conflict of interest. At the macro level, business as “regulation-maker” effectively turns a democracy into a plutocracy. Accordingly, the strategic use of regulation should pertain to the use side, rather than the regulating side. Crafting regulations—essentially dictating them to legislators or regulators—in order to make money from them takes the strategic use of regulation too far.

 The full essay is at "Profiting from the Rules on Wall Street."

The U.S. Military in Iraq: Were Human Rights Ignored?

Philip Alston, a United Nations human rights official, warned the U.S. Government in 2006 that he had received information indicating that Iraqi reports of American troops executing an Iraqi family were true. Five of the victims were children five years old or younger. According to Alston, the troops “entered the house [after a 25 minute gun battle], handcuffed all residents and executed all of them.” He noted that the troops attacked the house in part because they suspected that the family was involved in the killing of two American troops earlier in March, 2006. If this is true, both the vengeful attack and the subsequent investigation by the U.S. military, which concluded that the report of the execution was false, demonstrate what can go wrong when conflicts of interest are ignored.

The full essay is at "Human Rights in a Military Occupation."

Does a Supermajority Undercut Constitutionalism?

How “extreme” can a legislative supermajority get in its legislation? Can constitutional safeguards act as a check where a legislative supermajority can enact amendments at will? A judiciary protecting the rights of individuals as well as a people against over-reaches by a government is limited by constitutional provisions presumably set in stone yet actually in erasable parchment. Complicating an answer, the term extreme may be applied to a piece of legislation by one person and refused by another. I come from a medium-sized city in the Midwest, where extreme has been thought to apply to commuting to work by bicycle. Where a pathological fear of change grips a town, you don’t have to go far to find someone proscribing something or other as too extreme At the level of the U.S. governmental institutions, one political party might deem universal health insurance through extant private insurance companies as extreme—tantamount to demonic European socialism—while another party might view continuing to use private insurance companies as merely reformist rather than extreme. A supermajority can take advantage of such a difference in descriptive judgments to argue that a significant constitutional change is actually a minor change and thus not worth worrying about. 

How “extreme” can a legislative supermajority get in its legislation? Can constitutional safeguards act as a check where a legislative supermajority can enact amendments at will? A judiciary protecting the rights of individuals as well as a people against over-reaches by a government is limited by constitutional provisions presumably set in stone yet actually in erasable parchment. Complicating an answer, the term extreme may be applied to a piece of legislation by one person and refused by another. I come from a medium-sized city in the Midwest, where extreme has been thought to apply to commuting to work by bicycle. Where a pathological fear of change grips a town, you don’t have to go far to find someone proscribing something or other as too extreme At the level of the U.S. governmental institutions, one political party might deem universal health insurance through extant private insurance companies as extreme—tantamount to demonic European socialism—while another party might view continuing to use private insurance companies as merely reformist rather than extreme. A supermajority can take advantage of such a difference in descriptive judgments to argue that a significant constitutional change is actually a minor change and thus not worth worrying about. 

The full essay is at "Supermajority and Constitutionalism."