Showing posts with label banking. Show all posts
Showing posts with label banking. Show all posts

26 May 2018

A Proposal for the Reasonable Republicans Who Still Walk Among Us

Under Trump, Republicans are not just pursuing bad policy but bad strategy. As they frantically pursue policies that veer further and further right, these neo-Republicans may be driving Democrats further left.

Hitler would have never risen to power without communists. Communists had real power in Europe (they'd seized control of Russia shortly before Hitler emerged as a political figure) and Hitler was able to use legitimate fear of communists to win support. The way he credibly framed himself to many Germans was that he wasn't an extremist; he was only taking extreme measures to protect Germany.

A similar thing could happen in the wake of Trump. McConnell and Ryan are frantically running around, dismantling every reasonable compromise they can find. They've created a tax cut that will drive annual deficits north of a trillion a year. (That alone would have - just a few years ago much less a few decades ago - dominated media coverage.) They've rolled back regulations requiring banks demonstrate the ability to suffer a downturn without igniting a recession. (Before banking regulations of consequence, from 1900 to 1933, the US was in a recession 48% of the time. Since then it has been in recession only 14% of the time.) They are slashing funding for healthcare, even for children. They're so frightened of immigrants that they are breaking up families and losing the children of people who cross the border. They've gone after free trade, protection of national parks, gutted healthcare for the poor and are making abortion, birth control and healthcare for new mothers difficult to get, following the lead of Texas where maternal mortality is 10X higher than it is in countries like Italy or Japan. Yes. You read that right. New mothers in Texas die at double the rate they did just a few years ago, and at 10X the rate of mothers in other countries. This after policies similar to those advocated by Trump Republicans were put in place.

Now let's imagine that none of that offends or disturbs you. That is, let's imagine that you are a Republican who still supports Trump. So why should my friends and relatives who are so proud of their party find this disturbing? Because everyone else does and one of the many consequences of this is that you've just given extremists on the left what is equivalent to what the communists gave Hitler: an obviously evil and dangerous foe who justifies extremist countermeasures.

You want to roll back reasonable banking regulations? This is not just stupid in its own right; it is stupid because it could give more power to the folks on the left who have never liked banks or stock markets. You don't just raise the risk of a bad recession; you raise the risk that you could lose what has created so much wealth in this country.

You can believe that your system doesn't owe anything to the poor but even if you aren't moved by compassion, you should be moved by greed. If a growing percentage of people see no benefit in the system you defend, they will vote for it to go away. In your greed to get the next 5% of after tax income you could easily lose 50%.

I think that it is true in politics that for every action there is a reaction. The day that Obama was sworn in the country rejoiced at the end of racism .... and the enrollment level at neo-Nazi and white supremacist sites was 10X its normal rate. This reactions to actions dynamic suggests that anyone thinking a move ahead will take care not to take radical actions that will provoke a radical reaction. As Republicans continue to defend a man as reprehensible as Donald Trump, their support among people who can't get the senior discount at Denny's has steadily dropped. The GOP is the party of old white guys and those guys (us guys) are steadily dying.  If the next election were held only among those 35 and younger, Republicans would fare about as well as the Whig Party and in a few decades the "next" election will be among those 35 and younger.

I'm an old guy. I should be yelling at the Bernie Sanders kids to get off my lawn. I should be the conservative voice in American politics. Given the excesses of the Republican Party, I'm instead a flaming liberal. I believe that our financial system is wonderful and getting rich is great; and that markets should be regulated and that crooks (think Bernie Madoff) are as likely to show up on Wall Street as the back streets of poor neighbors and the rest of us need to be protected from them by smart policing and good regulations that looks as skeptically at bankers in suits as teenagers in hoodies. I think that a city of two million, half of whom are immigrants and a city of two million, all of whom are native born, will have the same number of jobs and consumers and the idea that immigrants steal jobs is absurd. I think that the corporation is one of the great inventions of modern times, and that CEOs have too much unchecked power and that there should be more opportunities for employees to make as much or more than their CEOs, that the pay of CEOs ought not to be 350X that of their typical employee. I believe that for-profit pharmaceuticals and healthcare provider companies have made us healthier and that the profit-motives has driven innovation that steadily make us healthier in ways that just saving money by emphasizing low costs would not; and yet I also believe that healthcare should be a right. I believe that we do need troops ready to intervene around the world and yet I believe that this should be done sparingly and we need far, far more humility about imposing ourselves onto other people. I believe that a person who wants to treat a sperm and egg at the moment of conception no differently than a baby has that right but cannot impose such a belief onto other reasonable and decent people who think that this zygote that cannot be seen won't be anything equivalent to a person for months. I think that societies should do all they can to encourage two-parent households but that single-mothers and their children should be generously supported so that both feel appreciated and loved by the community and that kids of single parents have more opportunity. I believe only most people - not everyone - should own a gun and that no one - not even special people - should own weapons like nuclear bombs or automatic weapons specifically designed to kill dozens or millions of people.

None of this is controversial. Unless you're a Trump supporting Republican. And given that these Republicans have decided that reasonable compromise represents an abandonment of principles, they are running full tilt into a set of policies that future generation will find baffling and offensive. This alone is enough to criticize them for but there is more; their excesses could easily provoke excesses in the other direction.

So, friends and family who have historically voted Republican but consider yourself reasonable, I have a proposal. Stop voting for candidates who support Trump. Instead, vote for Democrats who are reasonable rather than ideological. Make sure that the blue wave - which may come in months or years - brings in candidates who are moderates like me rather than the flaming liberals you like to pretend we all are.

One last thing. If you feel like you have to vote Republican regardless of how extremist the policies have become, you are are not reasonable. You are an ideologue. Your first filter should be to vote only for reasonable, intelligent, competent and decent human beings; once you have your choice of two or more such candidates, then it's great to choose based on ideological preference. If instead you filter only by ideology and then between good and reasonable people when they're available, you are reasonable only as a last resort. That's not reasonable.

09 September 2014

Why iPay May Be Apple's Most Lucrative Product Yet

iPay may prove to be Apple's most lucrative product.

Today, Apple announced the release of two new iPhones, an iWatch, and iPay, which will work like a mobile wallet. They've teamed with various credit card companies like VISA, Mastercard and AMEX to enable iPhone users to simply pay with their phones as if their favorite device was a credit card.

On the surface that might sound fairly innocuous. They are certainly not the first to offer the ability to make a digital purchase, as reported by Molly Wood here. But it's worth remembering that Apple wasn't the first company to make a digital music player. They just made it wildly popular.

First, some background. During the 20th century, a quiet revolution transformed finance. One of the reasons it might have been so quiet is that it has the oddly eye-glazing name of banking disintermediation. But disintermediation gets to the heart of how the Information Economy transformed finance, which plays right into Apple's new market.

Once upon a time, bankers were uniquely positioned upon a wall that separated the folks saving money from those who wanted to borrow it. They could take money from the savers, paying them 1% for their money, and then loan it to the borrowers at 10% (less or more). Upon their wall, they were uniquely positioned to see each party, parties who could not see each other. Savers and borrowers didn't know each other so the banker played intermediary. This is a pretty lucrative position to be in. Still. (Last year Citigroup's revenues were $76 billion.)

But information technology has made it easier for borrowers and savers to find each other without the bank playing intermediary. As the cost of information has dropped, this wall separating borrowers and savers has slowly lowered, and with it the bankers' lofty perch. This disintermediation has a long history, one I explore in my book. The most recent instance of disintermediation is peer-to-peer lending. Lending Club, a San Francisco-based company founded in 2007, has facilitated $4 billion in loans. They are to lending what eHarmony is to romance. Why pay the banks the 9% difference between what you get for saving and she has to pay to borrow when you two can split the difference? There are billions - trillions - that can be retained within households by cutting out the bank. But of course far fewer people know and trust Lending Club than Apple.

Now Apple will get millions of people comfortable with the natural extension of what Dee Hock, VISA's founding CEO, realized years ago: money is just information. As millions of Apple users become comfortable with the idea of using their phones for purchases, it won't be long before they become comfortable using their phones - and the extensive networks they represent - for loans. People hate banks and love Apple. It's perfectly plausible that Apple's foray into finance will do to banks what their popularization of the iPod did to record companies.

And there is a lot of money to be had in finance. More, even, then in music.

14 July 2009

There's gold in them thar banks

Thanks to a good quarter, the average employee at Goldman Sachs is on track to earn $900,000 this year. This only months after the US government bailed out the big banks with $125 billion.

I like this, though. It shows restraint. You'll note that the average pay will be under $1 million. Very crafty of those bankers to stay off the radar like that. And to think some people say that their inflated sense of self worth clouds their judgment when it comes to managing public perception.

25 September 2008

Bernie and the Bad Psychology of Republican Politics

Maddie's eyes had a twinkle as she poured the packets of sugar into her diet coke. "That Omama guy had better look out now," she said happily.

"Excuse me?" Bernard asked, looking confused as he touched his hearing aid.

"McCain has announced that he's putting on his campaign suspenders! He's getting serious now."

"Um," I offered hesitantly. "I think that you might have that wrong."

"Huh?" Maddie frowned. And then she followed my eyes to her glass and laughed. "Oh! This?" she waved the sugar packets. "I just add the sugar because they say that the artificial sweetener in diet coke is not good for you, so I add the natural stuff."

"No," I said. "John McCain suspended his campaign. There was no mention of a wardrobe malfunction or costume change."

"Although," Bernard drew himself up, running his thumbs through his own suspenders, "there is nothing wrong with suspenders."

"If you want people to know you were born before World War II," I mumbled. "But it might be time for someone in Washington to don a cape," I added.

Bernard leaned forward. "McCain's problem has nothing to do with his wardrobe. His is a psychological problem."

"What?" I asked, my attention momentarily diverted by the arrival of my Reuben sandwich.

"It's called all or nothing thinking," Bernard said. "I read about it. It is a cognitive disorder."

"You and your books!" Maddie said with a shake of her head.

Bernard gave her a look and continued. "This really happens. Some kid gets a B on her report card and suddenly, she thinks that she'll never get into medical school and since she can never be a doctor, she'll never find any career that interests her and since she has no future now she doesn't even want to go to school. It's called all or nothing thinking," Bernard said. "It is one of the worst kinds of distortions of reality, because reality is rarely so stark - a choice between bliss or your own personal purgatory."

"What does that have to do with the way John McCain dresses?" Maddie asked.

"Nothing!" Bernard said. "I'm talking about his speeches over the last couple of weeks. And Bush's speeches. Two weeks ago, the fundamentals are sound, everyone should just stop worrying and go shopping. This week, we're in a financial crisis. We have to pay $1.3 trillion to bailout out banks and brokers! You know how much that is? Out of 170 countries, $1.3 trillion would make you the 10th largest economy on the planet! Just smaller than Canada, just larger than Brazil and tied with France! Suddenly, we go from everything is fine to teetering on the edge of disaster?"

"So, you think that McCain's problem is psychological?"

"Yes! Those Republicans have nothing but contempt for subtlety, and yet life is always shades of gray."

"So why don't they just say so?" I ask, as it turns out, stupidly.

"Because the people who vote Republican don't want nuance, complexity or subtlety. They have no patience for it. They pay for the simplification of reality. That's why they put candidates in office - to assure them that life is predictable and makes sense."

"You are talking in circles again, Bernie." Maddie reached over to pat his hand and turned towards me. "Even when he was a kid we could never follow him. He could never make things simple. For him it was always layers of complexity."

"Reality is complex!" Bernard insisted.

"So you say, Bernie," Maddie tucked her head down and took another bite. "So you say."


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“The neurotic person distorts reality, makes demands upon it, imposes premature conceptualizations upon it, is afraid of the unknown and of novelty, is too much determined by his interpersonal needs to be a good reporter of reality, is too easily frightened, is too eager for other people’s approval, etc. It may be expected that as a culture improves, thereby improving the health of all its citizens, truth seeking should improve.”
- Abraham Maslow

28 April 2008

iBank

Dee Hock is still oddly unknown. He is the one founding CEO of a company that went on to do more than a trillion (yes, that is with a "T") in transactions: he founded VISA. Dee Hock fundamentally re-thought the very notion of money, realizing that its natural evolution would be towards bytes and bits. Money began in forms like pelts and shells and today is nothing more than electronic blips.

In yet another trend, in the last couple of decades, nonbank financial institutions have taken over more and more of deposit and credit business.

So, I'm sitting somewhere the other day, noting how many people have iPods or variants on them. Why can't they double as credit cards / wallets? Why not use them for purchases? When will Apple essentially become a bank? (Probably about the same time that kids begin to denominate all their transactions in songs.)