No, Class Warfare WILL Create Jobs!

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A number of people are talking about the spectacle of Representative John Fleming complaining about tax cuts on the wealthy him, suggesting that it will lead him to cut jobs. [my transcription]

Chris Jansing: With all due respect, Congressman, the WSJ estimated that your businesses, which I believe are a [sic] Subway sandwich shops and UPS stores–very successful–brought you last year over $6 million dollars.

Fleming: Yeah, that’s before you pay 500 employees, you pay rent, you pay equipment, and food. Ah, the actual net income of that was only a mere fraction of that amount.

Jansing: So you’re saying that if you have to pay more in taxes, you would have to get rid of some of those employees? These are not as successful businesses–

Fleming: I would say that since my net income–and again, that’s the individual rate that I told you about–the amount that I have to reinvest in my business and feed my family is more like $600,000 of that $6.3 million. And so by the time I feed my family, I have only $400,000 left over to invest in new locations, upgrade my locations, buy more equipment.

Now, aside from the point that Laura Clawson makes–which is that even if most of his costs are wages, then he’s only paying each of those claimed 500 employees $11,400 a year, and aside from the point that Sam Seder makes–which is that this $600,000 is on top of the $174,000 he makes as a Member of Congress (which of course also means he doesn’t have to pay for his own health care), Fleming is blowing smoke about how business owners are taxed.

They’re taxed after all business investments are deducted, not before.

That is, assuming Fleming isn’t paying himself a wage (it doesn’t sound that way given the way he mixes his reinvestment and “feed the family” amounts), then what happens is he reinvests $400,000 of his net profits, and then takes what is left over, $200,000, which is what he’d be taxed on. Say he paid an effective tax rate of 32% on that, so $64,000.

Under Obama’s plan, Fleming would:

  • Pay the tax rate he would have paid in 2001–effectively about 35%
  • Lose some deductions (only because of his Congressional salary though–without it, what he claims is his take home pay would not be high enough to hit the $250,000 income level at which those deductions are removed)

So say he paid 35% (he also might lose what I presume is a deduction for a second home in DC). That would mean he’d pay taxes of $70,000.

His poor family! Having to eat off of just 2.6 times the median pre-tax income of $49,445 in this country (not counting the Congressional salary, of course).

Lucky for Fleming, there is a way he can keep paying the same amount in taxes. If he reinvested $417,142 rather than $400,000 in his business, then he’d still pay the same $64,000. Sure, his family would really suffer, living off of just 2.4X the median pre-tax income (still ignoring the Congressional salary). [Update: As Mary points out, I’ve oversimplified this–100% of the investments aren’t deductible in the first year.]

But since he seems to be making a 10% return on his business, that’s not actually a bad idea–it’s as good an investment as you’re going to find in this day and age.

And the best part? Given the shitty wages he apparently pays his employees, the extra $17,142 he invests back in his businesses would more than … create a job!

The $648 Monthly Fine for Not Having a Job

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As part of the President’s deficit reduction plan, he proposes changing the rules to allow debt collectors to call people on their cell phones.

Allow agencies to contact delinquent debtors via their cellular phones. The Administration also proposes to amend the Communications Act of 1934 to facilitate collection of debts owed to or guaranteed by the Federal Government, by facilitating contact of delinquent debtors who are most readily reached on their cell phones. This provision is expected to provide substantial increases in collections, particularly as an increasing share of households no longer have landlines and rely instead on cell phones.

As soon as I read this, I thought of the widow in Hawaii whom Bank of America called 48 times a day because her late husband had missed one mortgage payment.

Deborah Crabtree, of Honolulu, Hawaii tragically lost her husband to cancer on Aug. 3. The bank to which he owed money, Bank of America, didn’t even wait for a day after his death to begin calling Crabtree to remind her that her husband had missed a $3,000 mortgage payment on their home.

Crabtree told Bank of America that she had $5,000 on hand, and that she needed this money to buy food and bury her husband. Convinced that Crabtree should be using this money to pay them, Bank of America repeatedly “robo-called” Crabtree during her husband’s wake, sometimes with only 15 minutes between each call.

Now, Crabtree is suing the bank, alleging that it called her up to 48 times a day, even repeatedly demanding evidence that her husband was dead, and once receiving it, losing it. Crabtree’s complaint cites the emotional distress and mental anguish caused by Bank of America’s behavior.

So under Obama’s proposed rules, BoA might call someone 48 times a day on their cell phone? Say each one were billed as a 1 minute call, that would amount to 1,440 minutes a month–maybe double a pretty normal 700 minute/month plan. The remainder of those minutes might be billed at $.45 per minute, or a grand total of $648 a month, all so a debt collector can get money for Uncle Sam.

Add in the fact that the most likely group to fall in this category–students with federally backed loans, particularly those who used those federally backed loans to go to diploma mill for-profit colleges–and you’ve effectively got the Federal government penalizing these young adults a second time because they were preyed upon by a previously under-regulated industry a first time. Not to mention graduating from school into the post-crash economy.

In short, while I understand the necessity of finding a way to collect debt from those who don’t have a land-line, I also see how this policy will become the Bankruptcy Bill of the housing crisis, a policy with easily foreseeable devastating consequences that will exacerbate the popping of the next bubble that will pop.

A Gang of Deficit Fairy Phantoms

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Over the weekend, the Atlanta Journal-Constitution’s GA politics section published an article claiming that Saxby Chambliss’ Gang of Six has become a Gang of 38.

Saxby Chambliss’ Gang of Six has grown to 38 U.S. senators from both parties, who on Thursday urged the debt reduction “supercommittee” to aim high and secure $4 trillion in budget savings.

The Georgia Republican was joined by Sen. Mark Warner, D-Va., and a group too large to fit on the news conference stage to send a message to the 12-member joint committee created in the summer’s deal to raise the debt ceiling.

It’s nice of Chambliss’ home paper to present this unquestioningly.

But your first tip-off that something’s wrong is the quote of their other home Senator, Johnny Isakson, talking about just pulling the trigger on deficit cuts, to know something’s not right here.

“Nobody needs to really look too far for what we need to do,” said Sen. Johnny Isakson, R-Ga. “They just need to be willing to pull the trigger.”

After all, one of the tax reforms the Catfood Commission and the Gang of Six pushed was to cut the mortgage deduction. And, as a former realtor, Isakson is the real estate industry’s biggest friend in Congress. I’m guessing it would take a great deal to get Isakson to vote for cuts to the deduction.

Mind you, Chambliss did get 17 Democrats plus Lieberman and 18 Republicans to sign to … something. That something is an agreement in principle.

As a bipartisan group of Senators, we will encourage and support the Super Committee in fulfilling its mission. We are here to support a deficit reduction package consistent with the following principles that should:

  • Include enough deficit reduction to stabilize the debt as a share of the economy, and put the debt on a downward path, and provide fiscal certainty. We believe a reasonable target is at least $4 trillion, including previously enacted deficit measures. This will send the right message to the financial markets.
  • Use the established, bipartisan debt and deficit reduction frameworks as a starting point for discussions.
  • Focus on the major parts of the budget and include long-term entitlement reforms and pro-growth tax reform.
  • Be structured to grow the economy in the short, medium and long-term.
  • Work to include the American public and the business community in a broader discussion about the breadth of the issues, challenges and opportunities facing us. [my emphasis]

It does point to “existing frameworks,” aka, the Catfood Commission/Gang of Six. But using that as a “starting point” for discussions does not equate to an agreement from 36 Senators to cut the home mortgage deduction. Nor does it reflect broad support for further DOD cuts, which was also in the Catfood recommendations.

Nevertheless, if you happen to be a constituent of the following Democratic Senators, you might want to ask them why they are aiming to cut our social safety net:

  • Begich
  • Bennet
  • Carper
  • Conrad
  • Coons
  • Hagan
  • Klobuchar
  • Landrieu
  • McCaskill
  • Manchin
  • Nelson
  • Pryor
  • Shaheed
  • Tester
  • Mark Udall
  • Warner
  • Wyden

Interestingly, Klobuchar seems to have been added at a late minute. Also note that Dick Durbin is not on this list, even while he voted for the Catfood recommendations.

Trash Talk: NCAA Shame, Ephs and Jeffs

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Marcy is correct, the article this week in the Atlantic magazine by Taylor Branch is an absolute must read. Entitled The Shame of College Sports, the article opens with a 2001 investigatory hearing in front of the Knight commission, a NCAA oversight board where slimy promoter Sonny Vaccaro matter of factly tells the Commission exactly what is going on in their sport; the Commission is incredulous, in denial and clearly thinks Vaccaro is scum. The reverse is, of course, the truth.

The list of scandals goes on. With each revelation, there is much wringing of hands. Critics scold schools for breaking faith with their educational mission, and for failing to enforce the sanctity of “amateurism.” Sportswriters denounce the NCAA for both tyranny and impotence in its quest to “clean up” college sports. Observers on all sides express jumbled emotions about youth and innocence, venting against professional mores or greedy amateurs.

For all the outrage, the real scandal is not that students are getting illegally paid or recruited, it’s that two of the noble principles on which the NCAA justifies its existence—“amateurism” and the “student-athlete”—are cynical hoaxes, legalistic confections propagated by the universities so they can exploit the skills and fame of young athletes. The tragedy at the heart of college sports is not that some college athletes are getting paid, but that more of them are not.

It is a long article that stretches in time from the beginning of college football in the late 1800s through the Cam Newton sham “investigation and disposition” prior to last season’s BCS Championship game. Coming on the heels of the stunning article on the corruption surrounding the Miami Hurricanes football program, it is a pretty stark reminder of just how filthy big time college athletics really are.

Many people have taken to advocating that college athletes be paid – above and beyond their scholarship terms – for their “services”. College basketball analyst Jay Bilas rants about doing so near daily in his Twitter stream. Personally, I am not sure that is the solution either. Do athletes at USC and Notre Dame get paid more because their brands bring in more? How much do each athlete get paid? Does Andrew Luck get paid a lot more than his left tackle? What about the universities not in say the top 64 programs, whose programs may not even be profitable, what do they do? What about basketball, baseball and track athletes? What about the girls and Title IX? I don’t know what the answer is, but I don’t like this one.

Interestingly enough, two of the most notoriously dirty major programs square off today when the Ohio State Felons take on the Miami Hurriconvicts in Miami. Nearly ten years ago, these two teams played for the National Championship (which Ohio State, true to their criminal form, stole from the Hurricanes on a horrid no-call on interference in the end zone in the last seconds). Now it is just another game. If only they could both lose.

To try to find a ray of clean and hope in this sick muck, let’s talk about teams that still play for the love of the game and the sport. Or so I am told. That’s right, I’m talking Ephs and Jeffs! The Williams Ephs open their 2011 season today at the always tough Bowdoin at Whiitier Field. While bitter arch rival, the Amherst Jeffs, open their season on the road against the fierce Bates Bobcats. Man, the stories we could tell about these games. Hopefully Marcy, Neil and/or Adam Bonin will come along and tell those stories cause, well you know, the ASU Sun Devils didn’t ever play those guys, I got nuthin!

In other games of note, Boise State already just tore up Toledo last night, and don’t be fooled, Toledo is a pretty good team. The BCS needs to get their heads out of their asses and give Boise some love. And Kellen Moore is simply amazing. The one truly huge game this weekend is Oklahoma down in Seminole land to take on Florida State. Oklahoma is, as befitting the number one ranked team, the favorite; but I dunno, I think FSU may be a sleeper here and, if their QB picks up where Christian Ponder left off, will win. I am agains personally interested in seeing Arizona State, who travel to Illinois. Been quite a while since ASU has been able to withstand prosperity, so being ranked at number 22 is a little scary. If Brock Osweiler has another big game, they should be okay, but the running game is not that good right now.

As to the pros, well the Deetroit Lions are the story of the year! The Kitties get KC, who got their asses kicked last week, at home in Ford Stadium. Look for Deetroit to go 2-0! Bears and Saint and Pats versus Bolts are the only other real excitement this week. I am going to let Marcy and Randiego battle that preview out in comments.

SPECIAL UPDATE!! – Uh, it turns out we gots some restless natives in these here parts, and they been demanding extra coverage. In another CRITICAL game, likely rivaled in scope only by the epic Cowboys/49ers tilt, Colt McCoy and the Cleveland Brownies are on the road at the Colts, and the Brownies are road favorites by 3. Wow. I must say, however, the fate of this game lies with Peyton. Peyton Hillis that is;the other one ain’t walking through that door. Oh, and speaking of Deetroit, Rosalind is right, the Tigers clinched their division yesterday. Congratulations, you gotta love Jim Leyland and Justin Verlander, who may yet be the first 25 game winner in MLB in decades (since Bob Welch).

Find more Jo Jo Gunne songs at Myspace Music

Maybe Iraq Should Just Replace Idaho as Our 50th State

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Back when Tony Fratto was arguing that we should shut down post offices because he uses the InterToobz and therefore only ventures into an actual post office once a year, I noted that we would effectively be kicking huge portions of our rural areas out of our country if we presumed everyone could replace the postal service with broadband, as the map here makes clear.

The NYT has a story focusing on one of the places Fratto is apparently willing to lose as part of this country: Idaho, which just got rated as the state with the worst broadband access. The story starts with an anecdote of how bears brought down a manufacturing company’s broadband. But I was particularly struck by this quote.

“We have a guy here who was dropped into remote, isolated areas of Iraq to set up their telecommunications systems,” said Christine L. Frei, director of the Clearwater Economic Development Association in Lewiston. “He told me, ‘We had better communications in Iraq than you have in central Idaho.’ ”

So Iraq can have broadband, but not ID. And Pocatello, ID, the city with the worst download speeds in the nation, stands to lose one of its post offices, as do 22 other cities in the state. Maybe they can just replace the postal workers with bears…

Meanwhile, it’s not just postal services that Republicans would rather build in Iraq than in Idaho. All those Republicans refusing to fund schools and infrastructure to create jobs were happy to use deficit spending to do so in Iraq and Afganistan.

Majority Leader Eric Cantor (R-VA) voted for over $120 billion to rebuild Iraq and Afghanistan, funds that were used to construct and repair schools, roads, bridges, and other critical infrastructure.

Now, Cantor is opposing President Obama’s proposal to spend $30 billion to modernize 35,000 American schools. Reuters has the story:

U.S. House Republican Leader Eric Cantor said on Monday he will not support President Barack Obama’s proposal to renovate U.S. schools as part of the administration’s bill to spur job growth.

He added that Obama should focus instead on cutting federal regulations that he says kill U.S. jobs…

The president’s proposal is a modest effort. The total maintenance and repair backlog at U.S. schools is estimated at $270 billion to $500 billion. While the funding Obama is proposing is fully offset, Cantor voted to build schools in Iraq and Afghanistan with deficit spending.

These things–schools and highways and post offices–are what make us a country, a country that includes cities and suburbs and rural areas. But Republicans think we can’t or don’t need to afford to be a country anymore.

Republicans are literally choosing to fund our empire over our own country. I guess that makes it clear where their priorities lie.

It’s the Bush Record on Jobs (and His Role in the Deficit) Cheney Should Be Embarrassed About

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Amanda Terkel has most of the story of Dick Cheney’s flip flop on the deficit: speaking to Rush Limbaugh today, Cheney expressed “embarrassment” about the debt limit fight.

“Now, these last few months have been pretty messy,” said Cheney. “I think like a lot of people I was embarrassed when they lowered our credit rating from AAA to AA. I literally felt embarrassed for my country.”

“But I also think that the fact that we’ve gotten to this point where we are faced with a crisis in terms of the debt problem, that that’s going to give those of us who want to address that issue and fix it the leverage that we haven’t had up until now, in terms of insisting on the kinds of policies that will be painful, but in the long run are necessary if we’re going to restore full faith and credit in the United States government.”

She goes on to note the atrocious Bush/Cheney record on deficits, and the quotes the passage from his autobiographical novel where he tries to explain away his “deficits don’t matter” comment.

In his new memoir “In My Time,” Cheney argued that that quote was misinterpreted.

“[O]f course I thought deficits mattered,” he wrote. “I just believed that it was important to see them in context, to note that while Ronald Reagan’s dramatic increases in the defense budget and his historic tax cuts did push the deficit from 2.7 percent of the gross domestic product in fiscal year 1980 to 6 percent in fiscal year 1983, his spending on defense helped put the Soviet Union out of business, and his tax cuts helped spur on the longest sustained waves of prosperity in our history.”

But that’s not all Cheney said about the tax cuts that created this deficit. On the following page, he made this even more absurd claim:

The Bush-era tax cuts helped grow the economy and create jobs, and I was glad to see them extended in December 2010 for two more years. If the Obama administration had reversed course and let tax rates rise across the board, the results would have been devastating.

Setting aside Cheney’s failure to consider the more logical choice–forcing Republicans to let taxes on rich people like himself go up–there’s the bigger problem with Cheney’s claim that the tax cuts “helped grow the economy and create jobs.”

They didn’t create any.

(Both graphs from this post.)

The first Bush-Cheney giveaway was passed on June 7, 2001. After which, jobs kept disappearing (though 9/11 made things worse). The second Bush-Cheney giveaway was passed on May 28, 2003. And while those cuts did precede a period where jobs actually were created in some months, Bush and Cheney never created enough jobs to stay very far ahead of population growth. They had the worst job creation record in history.

So Cheney’s complete story is this:

1) He did too care about deficits even when he was telling his Treasury Secretary he didn’t and even when he was launching two unpaid for wars.

2) Those tax cuts created jobs (only they didn’t).

3) Now that the things Cheney himself did to create a deficit crisis (such as one exists) have turned a surplus into a deficit, he’s “embarrassed.”

4) But he still supports doing things–like extending those tax cuts that didn’t create jobs–that create an even bigger hole in the deficit.

I agree Cheney should be embarrassed. But he’s got far more to be embarrassed about than the hostage taking by his own party.

Government Contracting: Lower Wages, But Higher Cost

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POGO has a must-read report showing what actually happens when the Federal government outsources jobs: while the actual workers doing the jobs may make less than government (unionized) workers, the work costs more overall.

POGO’s study analyzed the total compensation paid to federal and private sector employees, and annual billing rates for contractor employees across 35 occupational classifications covering over 550 service activities. Our findings were shocking—POGO estimates the government pays billions more annually in taxpayer dollars to hire contractors than it would to hire federal employees to perform comparable services. Specifically, POGO’s study shows that the federal government approves service contract billing rates—deemed fair and reasonable—that pay contractors 1.83 times more than the government pays federal employees in total compensation, and more than 2 times the total compensation paid in the private sector for comparable services. [emphasis original]

In other words, not only is the federal government spending a lot more by paying contractors, in the end it pays more even than the private sector for the same function.

And while limitations on the data prevented POGO from pinpointing where those costs came from, it did suggest two obvious sources: profit and executive compensation.

Contractors make profits by providing services,[95] and that is a sound business practice. The federal government also provides services, but does so without making any profit. The critical question is not whether contractors are entitled to earn profits but whether the government is paying higher costs to contractors for comparable services that could be provided by federal employees.

Because POGO’s cost analyses were limited to contracts for services entered into under GSA’s Schedule program, we did not address the issue of contractors’ executive compensation.[96] Federal law currently permits a contractor to bill the federal government a portion of executive compensation.

For example during FY 2010, contractors were allowed to bill the government up to $693,951[97] of a contractor’s executive compensation.[98] While that rate may reflect only a partial level of an executive’s corporate compensation, it constitutes approximately three times the level of actual salary the federal government pays its top executives. For example, in 2010, the President was paid $400,000 per annum, the Speaker of the House was paid $223,500 per annum, the Senate Majority Party Leader and the Senate Minority Party Leader, as well as the House Majority and Minority Leaders, were each paid $193,400 per annum, and Cabinet Members were paid $199,700 per annum.[99] The fact that high-level executives in the private sector often receive seven-figure salaries and benefit packages should not have any bearing on how much those executives should bill federal taxpayers, which should not exceed the salary paid to senior federal employees performing comparable work. [emphasis original]

And for some functions, the outsourced work is a gross rip-off, as with the Claims Assistance Clerks we’re paying more for than Federal judges.

The most egregious example of an outsourced occupational classification that resulted in excessive costs rather than cost savings is claims assistance and examining—administrative support positions that involve examining, reviewing, developing, adjusting, reconsidering, or recommending authorization of claims by or against the federal government. To provide these services, on average, federal employees are fully compensated at $57,292 per year, private sector employees are fully compensated at $75,637 per year, and the average annual contractor billing rate is $276,598 per year. POGO found the government may therefore be paying contractors, on average, nearly 5 times what it pays government employees to perform the same services.[77] Put another way, the government may be paying the contractor providing support services for claims assistance and examining more than it does federal judges or administrative law judges, who earn less than $200,000 per year.[78] Contractors may be billing the government, on average, approximately 3.66 times what private sector employees are compensated for performing similar services.

Federal judges have been lobbying for raises for some time, because judges can make so much more in the private sector. I do hope they use this factoid to prove their point.

And, as the report’s narrative of NeoLiberal Democrat followed by corporatist Republican shows, the problem is just getting worse. Not only has Obama backed off his early efforts to insource, but Bush effectively created an entirely new federal workforce during his term.

Since 1999, the size of the federal employee workforce has remained relatively constant at about 2 million,[6] while the contractor workforce has increased radically—from an estimated 4.4 million to 7.6 million in 2005.[7] In other words, the federal contractor workforce dwarfs the federal employee workforce nearly four-fold.

3.2 million new government jobs in the first half of the Bush Administration (this excludes things like military and postal service jobs). It’s as if Bush created one and a half new federal workforces in a matter of years, all while claiming to make government smaller.

Then again, these contractors are paying a lot to the same politicians who allow this to persist. So I suspect it’s not going to end anytime soon.

We’re Getting Poorer

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The headline news from the Census bureau’s poverty numbers today is that median income continues to fall, a pretty significant 2.3% last year.

Real median household income in the United States in 2010 was $49,445, a 2.3 percent decline from the 2009 median.

So in addition to the rising commodity prices not counted in inflation, Americans are also suffering an inflation-like effect as their wages get smaller and smaller.

The other incredibly troubling piece of this news is that child poverty continues to increase–faster than for other age groups.

The poverty rate increased for children younger than 18 (from 20.7 percent in 2009 to 22.0 percent in 2010) and people 18 to 64 (from 12.9 percent in 2009 to 13.7 percent in 2010), while it was not statistically different for people 65 and older (9.0 percent).

The kids, of course, are exposed to all sorts of developmental issues, with food scarcity and education inequality, which will haunt them for the rest of their life. When will our country start to get alarmed that over a fifth of our kids are in poverty?

There are a few more details of interest the Census release focused on, such as the number of “doubled up” households, which seems to tie closely to adult kids living at home.

  • Doubled-up households are defined as households that include at least one “additional” adult: a person 18 or older who is not enrolled in school and is not the householder, spouse or cohabiting partner of the householder. In spring 2007, prior to the recession, doubled-up households totaled 19.7 million. By spring 2011, the number of doubled-up households had increased by 2.0 million to 21.8 million and the percent rose by 1.3 percentage points from 17.0 percent to 18.3 percent.
  • In spring 2011, 5.9 million young adults age 25-34 (14.2 percent) resided in their parents’ household, compared with 4.7 million (11.8 percent) before the recession, an increase of 2.4 percentage points.

Also, as would be suspected but in what I believe is important to emphasize nevertheless, flyover country is getting poorer more quickly than the Northeast.

U.S.
 $50,599 $49,445 *-2.3
Northeast
 $53,949 $53,283 -1.2
Midwest.
 $49,684 $48,445 *-2.5
South
 $46,368 $45,492 *-1.9
West
 $54,722 $53,142 *-2.9

This, I suspect, offers one explanation for why we’re not more worried about this. While a percentage drop in median income is real, unlike the rest of the country, it is not statistically significant.

Jamie Dimon: The Face of America’s Free Market Politburo

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Sorry for the Jamie Dimon obsession today, but the extended article from his interview with the Financial Time is just as infuriating as his whining about “anti-American” banking rules. In this one, this so-called capitalist lays out his solution to mortgage woes: a Larry Summers figure should invite a bunch of public companies down to DC for a private meeting at which they’ll decide what the market will look like.

Meanwhile, the increasingly distant relationship between politicians and financial leaders has, Mr Dimon suggests, caused its own problems. In the 1990s, Larry Summers as Treasury secretary allegedly phoned a recalcitrant regulator and told her he had 13 bankers in his office who said proposed rules on derivatives could create economic chaos. Reformers saw this as supremely unhealthy. But a meeting between regulators, banks and investors could usher in a grand bargain over the future of mortgage finance, according to Mr Dimon.

“The right way … is to convene all the people involved in the markets, discuss all the plusses and minuses, talk about what you want, design a new mortgage market and go,” he says.

“We’re raring to go. If someone called me and said: ‘Come on down’, I’d get on an airplane and do it today. And so would every major bank.”

As it is, the various plans for mortgages – like other regulations – create overlap that ends up with an unworkable system, he says. “You could design several different types of mortgage market that would work but you can’t design a warthog – you can’t have it be non-recourse, pre-payable, fixed rate, 500 days to foreclose and think you can have a mortgage market. It’s got to work for investors, it’s got to work for everybody.”

Dimon (or the FT–this is a bit unclear) is advocating doing what Summers did when he forced Sheila Bair to back off her consideration of regulations on derivatives. Most people now believe that Bair was right in that dispute, that regulations would have limited the damage of our recent crash. But Dimon, it appears, would like to repeat the short-sighted decisions about regulation that got us into this mess.

And note how “all the people involved in the markets” for Dimon includes regulators, banksters, and investors, but no actual consumers?

Can’t let the riff raff into the Politburo.

Note, too, that Dimon’s promise that “all the major banks” would be at the table if called comes just a week after the banksters blew off Tom Miller and the other Attorneys General trying to give them a Get Out of Jail Free card for their mortgage servicing abuses.

On that note, Dimon whines that the crappy housing market has held back the banks’ recovery. That’s like saying, “If people would just recover from their radiation poisoning more quickly, the country would be better able to recover from having nuked them.” There’s no self-consciousness here, no admission that the woes of the banks (and the economy generally) stem from the banks having marketed of a bunch of shitpile put together using faulty securitization in the first place.

In a normal recovery, some of these issues would diminish in significance. A resurgent housing market would not only help bank profits and cushion the impact of regulation but stem the lawsuits that have engulfed the industry.

If mortgage-backed securities perform better, investors have little incentive to sue for the way banks mishandled their construction.

If only investors didn’t have good reason to sue, they wouldn’t sue.

Which sort of makes clear that when Dimon complains about double jeopardy, he is again bidding for an AG settlement that releases the banks from their other shitpile liability.

But we are not there. “My guess is the legacy litigation is going to go on for three to 10 years because every securitisation is different,” says Mr Dimon. “We are geared up and we’ve hired some top experts that do nothing but this. We’ve put away billions of dollars [in reserves against losses] already. It’s an unfortunate drag on the company but we’re still looking at the mortgage business as a very important business going forward and these are legacy problems that will have to work themselves out.”

One litigation issue that participants say should be settled is the foreclosure mess, where banks improperly processed the mechanism for repossessing homes of people not making their payments.

State attorneys-general want a big financial settlement, including help for struggling homeowners. Banks, though, will only pay up if they get a broad release from future litigation. “Obviously some errors were made regarding who signed off on files,” says Mr Dimon. “We are working hard to settle these matters. But you can’t settle something and be subject to double jeopardy – that’s the issue. But we’re willing to be punished for what we’ve done wrong.”

Dimon, of course, is pretending that robo-signing fraud was the only crime the banks committed here, and that the big banks don’t have a range of liabilities.

Altogether, this poor capitalist is whining and bitching that the government is not helping banks avoid the consequences of their past decisions.

After Trading with the Enemy, JP Morgan Chase Whines for Regulators to Fight “Anti-American” Regulations

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Two and a half weeks ago, JP Morgan Chase signed an $88.3 million settlement with the government. JPMC traded with Iran, Sudan, Liberia, and Cuba, all in violation of Treasury’s various trade restrictions. When subpoenaed on the Sudan transfer, JPMC at first denied it had the documents in question. While I think many of these sanctions (particularly the Cuban ones) are silly, the settlement revealed that JPMC thought it was above rules designed to serve America’s self-interest.

Which is why I find MOTU Jamie Dimon’s wail for help fighting “anti-American” regulations so distasteful.

The United States should consider pulling out of the Basel group of global regulators, Jamie Dimon, chief executive of JPMorgan Chase, said in an interview with the Financial Times.

[snip]

“I’m very close to thinking the U.S. shouldn’t be in Basel anymore. I would not have agreed to rules that are blatantly anti-American,” he said in the interview.

“Our regulators should go there and say: ‘If it’s not in the interests of the U.S., we’re not doing it’.”

Dimon is complaining because Basel’s rules require more reserves from the very largest banks–including JPMC–to hold 9.5% of reserves, as opposed to the 7% required from smaller banks. Just three of the eight banks with higher reserve requirements are from the US. The Basel rules also treat “covered bonds”–a European product–differently from mortgage backed securities with a GSE guarantee.

I’m particularly amused with the way Dimon describes “global financial firms” to be in the best interest of the US.

“I think any American president, secretary of Treasury, regulator or other leader would want strong, healthy global financial firms and not think that somehow we should give up that position in the world and that would be good for your country.”

Bank of America’s global status right now risks putting the US at great risk, because the bank is insolvent but regulators have a tough time unwinding it because of that global reach. We know that because a bunch of global financial firms crashed the economy just a few years ago.

There’s one more ugly irony about Dimon’s wail. His concern, he says, is that because of these rules, Asian banks will pick up market share in the US.

He’s saying this, of course, at a time when Obama is about to push through a trade deal with Korea–one that will ultimately cause American manufacturers to lose market share in the US–in significant part so JPMC and Goldman Sachs can spread their toxic finance to Korea. That is, he’s whining about competing on an uneven playing field with Asian banks at the same time as the government is helping his company get preferential access to Korea’s finance market.

Jamie Dimon wants to pretend he is both a free market capitalist and a good American. But his whining and the actions his bank have taken suggest he’s neither of those things.

Update: In the longer account of this interview, Dimon whines even more about how poor American banks won’t be able to compete against Asian and European banks.

In his office, looking relaxed in white shirt with two buttons undone, Mr Dimon is still exercised about what he sees as a “miscarriage of justice”. US policymakers, he says, have sold their banks down the river – the Yangtze river. “There are plenty of countries out there that are happy with the changes being implemented in the US. They realise that they can be huge beneficiaries of this. I’m talking about China, India, Singapore, Japan. I wouldn’t want to see, 20 years from now, the US asking, ‘what happened? How come the winners in the marketplace are all outside the US?’”

[snip]

Derivatives dealt off exchanges will need to use clearing houses – which Mr Dimon supports – and will be subject to margin rules governing how much collateral they have to supply.

These he does not like, particularly if, as currently framed, they apply to JPMorgan’s overseas businesses too. He fears British, French and German competitors might not be subject to the same standards and will gain market share.

Update: Yves Smith debunks Dimon’s jingoism.

Dimon manages to play yet another jingoistic card, acting as if Basel III singles out US banks when a majority of the financial firms subject to the most stringent rules are outside the US. And he raises the truly bizarre specter of “Asian” hordes invading the US. Huh? Does he mean HSBC? I presume not, that’s a UK bank. The only Asian bank in the top 10 is Mitsubishi UFJ, and the Japanese are not likely to be in aggressive expansion mode (they’ve never gotten the knack institutionally of hiring and managing good top level foreigners; I know of a very few Japanese executives who have figured it out and did a good job when they were posted in the US, but as soon as they were rotated back to Japan, their successors made a hash of what they had put in place).

The Chinese are even less likely to move in near term (long term is a completely different matter). First, the Chinese were apparently interested in investing in US players in the crisis and were rebuffed. But having worked repeatedly with foreign banks in the US, building a denovo operation (or using small acquisitions as a platform) is a completely different kettle of fish. And going from the Chinese market of heavy state control and limited product scope to the US is like saying a drayage company can operate a supersonic plane because both are in the transportation business. I’ve seen what a hard time foreign banks have had in the US with a vastly lesser skill gap (one they closed over a period of decades). The Chinese are too far behind skill-wise to constitute a threat in the US until they can acquire the skills via a major acquisition (and that was not the scenario Dimon was hinting at).

And it goes without saying that Dimon made clear that he believe that what is good for banks is good for the US, when that has been demonstrably false for at least the last decade.

What’s striking about Dimon’s comments is how brazen they are. He’s not making clever, narrowly accurate but substantively misleading comments. Much of what he says and implies is unadulterated bunk. The fact that he peddles this tripe shows how confident he is that his message will go unchallenged. And that in turn reveals that he is secure in his belief that the banks have won the war; all he is caviling about is the speed of the mop-up operation.