Economics @ ITT

Why Should Taxpayers Give Big Banks $83 Billion a Year?

Posted in economics, Income Redistribution, macroeconomics, Moral Hazard, Policy Issues, Regulation by ittecon on February 22, 2013

On television, in interviews and inmeetings with investors, executives of the biggest U.S. banks—notably JPMorgan Chase & Co. Chief Executive Jamie Dimon—makethe case that size is a competitive advantage. It helps them lower costs and vie for customers on an international scale. Limiting it, they warn, would impair profitability and weaken the country’s position in global finance.

So what if we told you that, by our calculations, the largest U.S. banks aren’t really profitable at all? What if the billions of dollars they allegedly earn for their shareholders were almost entirely a gift from U.S. taxpayers?

via Why Should Taxpayers Give Big Banks $83 Billion a Year? – Bloomberg.

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The Geithner Doctrine

Posted in economics, Moral Hazard by ittecon on February 7, 2013

Now that Tim Geithner has resigned as US Treasury secretary, it is time to survey the damage wrought from four years of his approach to the financial crisis. The “Geithner doctrine” made the preservation of the largest banks, no matter the consequences, a top priority of the US government. Aside from moral hazard, it has also meant the perversion of the US criminal justice system. The US faces a two-tiered system of justice that, if left unchecked by the incoming Treasury and regulatory teams, all but assures more excessive risk-taking, more crime and more crises.

via The Geithner Doctrine | LinkedIn.

Healthcare Reform: Rhetoric vs. Reality

Posted in economics, Moral Hazard, Policy Issues by ittecon on January 20, 2011

Virtually everyone agrees that our healthcare system is unsustainable in its current form. The impact of escalating healthcare costs combined with mediocre value created for each dollar spent has finally entered the national consciousness.

via Healthcare Reform: Rhetoric vs. Reality – Nicole Perlroth – Everything Ventured – Forbes.

Posted in economics, Moral Hazard, Policy Issues by ittecon on April 12, 2010

Most Americans seem to believe that we should tighten our belts and balance the budget. They are willing to make budget cuts, but not where it would make any significant difference. As this article, The Futility of Budget Cuts, points out, people are more than wiling to cut mass transit, housing, agriculture, environment and foreign aid. The problem is that all tolled, these programs barely amount to 3 percent of the budget. The programs large enough to make a difference are defense, health care programs, and social security. Of course, defense is a sacred cow in US politics, there is no political will to overhaul the health care systems in any meaningful way, and social security has a funding problem in general, so we are told we are left with the choice of taxes, taxes, or taxes. And so it  goes…

The blue bars represent what people suggest should be cut, and the red bars represent the percentage of the budget.

Regulatory Capture 101

Posted in economics, microeconomics, Moral Hazard, Policy Issues, Regulation by ittecon on April 9, 2010

The Financial Crisis Inquiry Commission hearings continue to be a boring mess, peppered with a few moments of significant insight. Throughout most of yesterday’s hearing featuring the nation’s top bank regulator, Comptroller of the Currency John Dugan, Commissioners treated their witness as a credible expert, rather than a culpable catalyst of the crash.

You’d never know it from Dugan’s calm, mousey demeanor before the FCIC, but he spent several years working as a high-powered bank lobbyist before being appointed to his current job by George W. Bush in 2005. Since then, he’s been a major defender of big banks, pushing to defang consumer protection regulations and provide legal cover for subprime predators.

This is how this article, Why Is It So Hard To Hold Wall Street Accountable?, by Josh Carter begins, and it is a textbook case of regulatory capture.

EPA Energy Scam

Posted in economics, environment, Humour, microeconomics, Moral Hazard, Policy Issues, Regulation by ittecon on March 30, 2010

It goes without saying that everybody needs a gas alarm clock, but it is important to find one that is energy efficient. For this, the EPA offers a consumer service to assess product efficiency.

EnergyScam – Business – The Atlantic.

Much may be said about how inefficient the government is and how this is preceisely why it should not be running a health care system. What will not be said is how many times time happens in a corporate setting, whethe rdeliberately or otherwise.

Too Big to Fail

Posted in economics, Moral Hazard, Policy Issues by ittecon on August 28, 2009