Basel II-Much

The Basel Committee on Banking Supervision was supposed to suggest guidelines that would make international banks safer, more depositor trustworthy, etcetera, etcetera, etcetera. The fundamental objective of the Committee’s work was to revise the 1988 Accord (Basel I) and develop a framework that would further strengthen the soundness and stability of the international banking system while maintaining sufficient consistency that ‘capital adequacy regulation’ (read “state protection”) will not be a significant source of competitive inequality among international banks. In other words disallow one country from letting their banks accept more risk. In crafting Basel II, the Committee said that it believed that the revised framework (which adopted three ‘pillars’: minimum capital requirements, supervisory review, and market discipline) will promote the adoption of stronger risk management practices by the banking industry. The bankers themselves felt that Basel II would benefit those banks with better risk management metrics. Now, after years of work, there is some thought that Basel II prescribes exactly the wrong thing for a recession. Basel II requires higher and higher safety margins as portfolios are found to be more and more risky. The result is that banks are tightening credit at exactly the time when credit itself is seen as being too tight. As our government hands back 67 cents in the form of a stimulant (of course, after taking a dollar of your tax money) and begging you to spend it quickly, the banks are telling you that your loan will not be renewed. Maybe all that the government hand outs will go toward paying down debt. Not necessarily a bad thing for economy but certainly not what the wonks in the Wash. intended. We say that the law of unintended consequences trumps all, which is why a little humility from those who think they control anything, would be a good thing.
--Paul Marotta

See you and Raise you

A Harvard Law Professor is protesting a Massachusetts proposal to criminalize online poker, even when no money is being bet. Prof Charles Neeson, founder of the “Global Poker Strategic Thinking Society” at Harvard said, “I don’t think filling our expensive jail cells with poker players is what Massachusetts voters had in mind when they elected Deval Patrick.” Neeson founded the Society to tout poker’s educational benefits. We think the Gov would benefit from a bit of poker himself.

--Paul Marotta

No Chads Here Al

Whatever you think of him or his ideas, you have to admit that Al Gore has been entertaining since giving up the public sector. Now the VP turned VC is taking his TV cable company public. But he’s shown an undemocratic distrust of tyranny of the majority and taken shares with 10 times as many votes for himself. His company Current Media, LLC, will convert into a corporation, issue super-voting Series B Common to Gore and sell mundane Series A Common to investors. The IPO is being underwritten by JP Morgan. The Company owes Gore $2 million and pays him over $1 million a year, but his stock ownership is not finalized yet. We think maybe the Florida hanging-chad had something to do with Gore’s insistence on super-voting stock.
--Paul Marotta

Open Primary OK

The Supremes final score was 7 to 2 in a case involving Washington State’s open or blanket primary system. The two controlling political parties challenged a Washington state initiative that allowed those with the top two primary vote totals to enter the general election in November. The law would allow two persons from the same party to end up in the November election and also allowed anybody to run in any primary designating themselves as any political affiliation they wanted. No primary has yet been held under the new law because injunctions were granted early on. The law was challenged on grounds that it violated a political party’s members’ freedom of association. The District court granted the parties’ motion for summary judgment and the Ninth Circuit affirmed (in part,. we suspect, to move the case along to whence it belonged). But the Supremes reversed. Justice Thomas, noting the disfavor of facial versus actual challenges, and writing for the majority, said, “[i]f the ballot is designed in such a manner that no reasonable voter would believe that the candidates listed there are nominees or members of, or otherwise associated with, the parties that candidate claimed to ‘prefer,’ the ... primary system would likely pass constitutional muster.” Scalia and Kennedy dissented, opining that Washington’s system allowed the preempting of the political parties’ trademarks, so-to-speak, at the most crucial stage of the election. We say, “Go for it.” Anything that shakes up those who are entrenched in government and gives people a broader choice is only a bad thing, if they don’t choose you. Why should the dems and pubs assume they each get a candidate in the general election, when others might get more votes?

--Paul Marotta