Month: July 2009

Just got back from Nashville.  I was there for the Music City Bowl, Coach Nehlen’s last game.  Very interesting place.  4% unemployment.  Diverse economy …. publishing (75% of all Gideon Bibles are printed there, health care and, of course, entertainment).  No income tax.  A 9% sales tax.  Many religions are headquartered there.  Vanderbilt University (tuition $50,000 per year) is in downtown Nashville.

I visited the Country Music Hall of Fame twice.  It seems after World War II what had been “country music” noticed that singing cowboys like Gene Autry and Roy Rodgers were popular.  There was also a negative connotation to country music, namely, the hillbilly perception.  So country stars started wearing cowboy hats and dressing like cowboys to “borrow” the respectibility of the great America hero from post-war Hollywood, namely the cowboy.  Thus was born country western music.

I stood in RCA Studio B where Elvis recorded over 200 of his songs.  An amazing place.  I also visited The Hermitage where President/General Andrew Jackson (founder of the Democratic Party) lived.  Also went to the Legends on Second Avenue.  This bar is covered with record album covers going back well into the fifties.  Amazing.

Stayed at Opryland which is a easy place to get lost in.  The biosphere, however, is a sight to see. 

We went to the Grand Ole Opry.  Little Jimmy Dickens (West Virginian), Charlie Daniels, Bill Anderson, Trace Atkins and others performed.  Saw the Ryman as well, the original home of the GOO.  Hank Williams is all over that town.  He died (or was determined to be dead) in Oak Hill, West Virginia at the gas station just across from Herbert Jones’ Lundale Farm.  My father was his West Virginia executor.

Nice vacation.

Just the most impressive voice around when it comes to regulatory reform in the financial area – that’s who.  Shelia Blair is the head of the FDIC, the government agency which insures deposits in banks.  She was appointed by George Bush and retained by BHO.

This lady spotted the subprime problem years ago before anyone on main street or in Congress had even heard of the phrase.  She raised the alarm and was ignored – basically by everybody who mattered.  She also believes as do I that financial institutions cannot ever again be allowed to grow “to big to fail.”  I have read articles about her and seen her on Sixty Minutes.  And in this age of government taxpayer funded bailouts, let’s remember one thing.  When a bank fails, the FDIC steps in, takes over the non-performing loans, puts in enough money to cover the deposits and either shuts in the bank down or sells what is left at auction to a healthy bank.  Who pays for this bailout?  The banks do.  Not the taxpayer.  Banks are assessed insurance premiums each year by the FDIC. Sound like a solution that could be expanded beyond banks to investment banks and brokerage houses.  Yep. 

I sincerely hope that the politicians and US VOTERS will listen to and make efforts to find out the opinions of Shelia Blair.  This lady is the real deal in a time when we desperately need real solutions and real reform not compromise solutions and pandering platitudes.

 

Personally, I like BHO’s idea of a publicly run health care insurance company to compete with and make the private insurers honest.  In West Virginia, the lawyer malpractice insurance rates began to rise in the early 1990″s just like the medical malpractice rates.  The  West Virginia State Bar joined a few other small states and formed its own non-profit legal malpractice carrier.  It is still active today.  Oh by the way, legal malpractice premiums in West Virginia stopped rising and have remained reasonable and affordable ever since.

Commentors bemoan the “unfairness” of a public entity competing with a private entity.  How would you like it, they say, if the government opened a hot dog stand right beside your stand?  With public dollars, they can run you out of business!  Hogwash.  Government and the private sector already compete side by side. 

You can ride the subway or pay for a cab.  Your choice.

You can go to a public golf course owned by the city or join a private club.  Your choice.

You can go to a public pool or join a private one.  Your choice.

You can watch public television or the networks.  Your choice.

You can allow the police to protect you or hire a private security guard.  Your choice.

You can go to the county owned hospital or the private one.  Your choice.

You can mail something at the post office or use FedEx, UPS or DHL.  Your choice.

Please don’t argue that the mere idea of a public option is somehow obviously unfair, unworkable and unimaginable.  It is all around us every day.

 

Sarah Palin will resign as governor.  Makes no sense to me.  Her Twitter explanation is also ungrammatical.  Good grief.

And then there’s Joe Biden.  Will someone please tell him to stop answering tough questions by saying “look”?  In his interviews, whenever he gets a question he doesn’t like he goes “look” and then says something.  He also refers to the Obama-Biden administration is his answers.  Joe likes to talk which is fine but lose the attitude, Joe.

 

We keep hearing that the cost of health care is going up each year.  I think there are two components in that idea of “cost” and if such is the case I imagine the distinction needs to be considered and understood in any reform efforts.  When someone says, “health care costs rose by six percent over last year” three conclusions can be drawn.

1.  The cost of health care services and goods rose per unit price by 6%.

2.  Patients requested and received 6% more services than last year.

3.  A combination of the two.

What is interesting is number 2.  Suppose the auto industry announced that it had sold six percent more cars this year than last.  Everyone would rejoice.  Good news.  But if because of expanded coverage, new procedures or increased demand the “health care industry” makes six percent more sales than last year, everyone goes “stiff legged” and bemoans the “increasing cost of health care.”

This reaction is, of course, because few if anyone actually pays for their own health care.  The insurance company or the government pays.  So when more sales are made this causes the “price” of health care to rise not because doctors have necessarily raised their fees but perhaps because they saw more patients, ordered more tests and performed more procedures. This is the item 2 component.  In fact, some medical costs have actually fallen.

The conclusion of this analysis would therefore be that Americans (largely defined) are “buying” more health care than they can afford.  Now that is one difficult problem to solve.

The question now becomes this:  How do we create a WalMart model for the delivery of health care services?  At WalMart the quality is good and the prices are low.  But when the customer doesn’t pay the cost, how is the customer attracted to an efficient WalHealthMart?

Wish I had the answer.

 

 

Finally, the saga of what happened and why appears to be complete.  The primary culprits are Wall Street “masters of the universe” investment bankers who created a “monster” called mortgage-backed securities that were not based on sound economics but rather on “sizzle” and flawed assumptions.  The credit bomb eventually exploded because greed by the bankers and borrowing citizens created a “bubble” which burst and froze the credit system.  To a lesser extent the federal regulators and federal politicans are also at fault for not reigning in this abuse but quite frankly it is hard to blame them too much since their culpability arises only with 20/20 hindsight.

The only thing I still don’t understand is why the “toxic assets” as these securities are called apparently still have no value or stated another way can’t be valued.  Certainly all of the mortgages supporting these securities are not bad.  Why can’t someone value the instruments and figure out what the real loss is?  I have not heard a good answer or explanation on that.

I know we are now going to expand the regulatory powers of various agencies and the Federal Reserve to hopefully prevent this from happening again.  For my money (pardon the pun) I think the problem is that banks have been allowed to merge and merge and merge and become far too large.  Too big to fail is what caused this mess.  If we had more but smaller banks and investment houses then it is still possible that all of them will make the same mistakes but I doubt that.  I think we should look at “busting up” these large private institutions and change if need be the anti-trust laws to prevent market concentration in the financial services area.