Dean Baker has up a good post on credit default swaps (CDSs). He notes that CDSs transfer risk from the party best able to understand it to those who don’t understand it and that CDSs often don’t, actually, provide useful information on default risk.
Credit default swaps, at the end of the day are just insurance. They insure against loss of money due to default. Thus, they should be regulated like insurance.
Ae standard rule of insurance underwriting is that someone buying insurance must NEVER be better off if the event occurs than if it doesn’t. Ideally, they should always take a loss, the insurance should not make them completely whole.
This means, if you want to keep CDSs (and I’m fine with banning them outright), that:
1) no naked CDS’s should be written. ie. you can’t bet on a company going under unless you have loaned money to that company. You can’t sell a CDS to someone who doesn’t have that risk.
2) you cannot have a CDS whose value equals the value of your loans, otherwise you will want the business to fail. I would suggest an absolute maximum of 80% of the value of the loans. There’s a case for less.
I used to work in life insurance. In life insurance there are many studies which show that people who are worth more dead than alive, tend to die more often than they should. I am entirely confident the same is true of companies and government debt defaults. Since companies defaulting when they could survive is not in the public interest, credit default swaps need to be regulated so that it isn’t in the interest of holders of CDSs to put a knife into companies which would otherwise live, or to yawn and say “nope, not making a deal, we’re better of with you dead. Too bad what happens to the unsecured creditors, workers, stockholders and everyone else.”
Let me get this straight, Kos wants to primary one of the most reliable and principled progressives in Congress (perhaps the most principled one) because Kucinich doesn’t want to vote for a bill which will force Americans to buy crappy health insurance from private companies?
First they came for Massa, and now, not being able to find any dirt on Kucinich, they’re putting the pressure on, and Kos is going along with it?
Because, lord knows, what progressives should spend their time and money is primarying someone like Kucinich. What they should do is start an left wing fucking civil war so that Obama, Hoyer and Rahm Emmanuel can sit back and laugh as the left wing tears itself apart over a bill which, whether you want it passed or not, no one who is on the left wing should think is better than mediocre.
Be very clear, if “progressives” like Kos want to primary Kucinich, many other progressives will defend him and fight for him. So, instead of picking up new seats, we’ll be wasting time and money fighting over a seat already held by a progressive.
Those who want to go after Kucinich are acting as Obama and Rahm’s heavies. Acting as enforcers for a President who believes in indefinite detention without trial, who has expanded the war in Afghanistan, gutted civil rights and who wants to force every American to buy health insurance from private companies.
It’s time for Kos’s 15 minutes to end. The man’s stupidity, hubris and willingness to be used by a president who is objectively a conservative means he is now doing more damage to the left than good.
(I am informed that it’s too late to primary Kucinich in 2010. Thank goodness. Still a stupid threat in most ways.)
So, there’s a push on for a vote, now that Massa has been forced out and the kneecappers have made clear what happens to progressives who won’t play ball on HCR.
The bottom line is that health care reform is a giveaway to special interests, funded by cuts from Medicare and forcing people to buy insurance or pay or a fine. There’s some decent stuff in it, but less than folks think (for example, old folks can be charged multiple times what young folks are).
I’m still opposed. I don’t think the good outweighs the bad. This is not a case of “we can get better if it fails”, this is a case of “this is worse than nothing.”
Whatever the problem, the solutions are always the same:
This austerity plan aims at saving some € 4.8 billion at the expense of the Greek population, for the purpose of repaying creditors. The money saved will also be used to pay the fees of Goldman Sachs, a bank which we now know helped the government conceal part of its debt. Among the measures to be taken:
a freeze on recruitment and reduction of civil servants’ salaries (heavily reduced 13th and 14th months, reduced bonuses, coming after a 10 % decrease in salaries decided in January);
Somehow progressive tax increases never seem to occur. Somehow a pan-European Tobin tax never happens.
The interesting question though is this: how many European governments played the exact same games Greece did? How many are concealing their true fiscal picture, which is much worse than people think?
The answer, dear friends, is most of them. Including the Germans, who have been acting very high and mighty.
The only people in the world even stupider about financial engineering than the US were the Europeans, who bought toxic waste by the boatload.
They forgot what Americans forgot. There’s no free lunch.
Ever.
The bottom line is that:
I still think there will probably be a jobs recovery of sorts in the spring. But I wouldn’t be surprised if I’m wrong. And I expect the next economic down-leg to happen by the fall.
Rowdy protesters blocked major gates at two California universities and smashed the windows of a car Thursday amid campus protests across the nation against deep cuts in education funding.
Protesters at the University of California, Santa Cruz surrounded the car while its driver was inside.
The uninjured driver was not trying to get onto campus and appeared to have been singled out at random, Santa Cruz police Capt. Steve Clark said.
University provost David Kliger said there were reports of protesters carrying clubs and knives, but Clark could not confirm those reports.
California higher education has been cut significantly and students have been hit with tuition hikes around 30%. That’s rather a lot. The students are, of course, correct, that it is ludicrous that California, which is wealthier than most countries, can’t fund higher education properly. But, as I’ve said before, this is what Californians have voted for, again and again. Without a rewrite of the California constitution, including allowing the legislature to overturn referendum results, it isn’t going to get fixed.
Especially since fixing it would require allowing property tax increases and increasing high end income tax rates significantly.
Too many people in California are clinging to their little slice of heaven, no realizing that they are dooming themselves and everyone else.
This is the US, writ large. California is the bellweather of America.
Of course, if enough people get upset enough to protest, beyond just students, and to do so in whether “allowed” or not, then California and America’s elites might get the message that they’re threatened.
When the first set of Greek riots happened last year the EU’s elites let them go on—until they spread beyond Greece. This time, when the Greeks started rioting, they suddenly started talking seriously about helping Greece. Such help will come with some pretty ugly terms, but it’s better than no help.
Rioting tends to concentrate the mind of elites. People forget the huge riots, marches, factories being occupied and all out wars between police, private dicks and unions that were common occurances in the US right through the Great Depression.
FDR saved capitalism because it needed saving from the American population, who had had it with the excesses of unregulated capitalism and financial games run amok.
He did so by making capitalism and the government work for ordinary people. Since then, with a couple major exceptions, most of what he did has been undone, but Americans are only beginning to realize what that will mean, and brainwashed by years of big lie propaganda, there is a real danger they may respond by demanding not that capitalism be made to work for everyone, but instead for ideological policies like a flat tax which will make the situation even worse.
If so, they’ll get what they demand, but not what they want.
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