Why would we want banking innovation?

When I first heard about the recovery of major banks' profits I was encouraged, we made a big public investment to prevent a complete crash and they had apparently used that to recover and return to some sense of normalcy.  In that sense the bailing out of financial institutions seemed to work, and should be applauded.  The trouble is that the way in which they've recovered is disturbing, effectively returning to the same way they did business before that caused the economic crisis.

Goldman Sachs, JPMorgan Chase and others - which have received tens of billions of dollars in federal aid - are once more betting big on bonds, commodities and exotic financial products, trading that nearly stopped during the financial crisis.

That Wall Street is making money again in essentially the same ways that thrust the banking system into chaos last fall is reason for concern on several levels, financial analysts and government officials say.

There have been no significant changes to the federal rules governing their behavior. Proposals that have been made to better monitor the financial system and to police the products banks sell to consumers have been held up by lobbyists, legislators and turf-protecting regulators

This has been my concern since the crisis began.  One thing I thought Obama would do that would be an important change would be to re-regulate banking institutions to prevent the kind of gambling that they engaged in that got us where they are.  Obama does have a proposal for re-regulation of banks, so the problem isn't being completely ignored. The thing is that I don't feel like Obama's heart is really in this one, and while I'm in no position to comment on what will be an effective banking regulation, I highly suspect that anything Obama proposes and anything Congress can get behind, doesn't really address the problem.  What I find bizarre here is the talking point in response to arguments for more regulation, that we don't want to "prevent innovation by over regulating."  This is a variation off a traditional free-market talking point that in some contexts has some validity, the thing is that it really doesn't here.  What I've never heard anyone mention in response to someone who says this however is why we would even want our banks innovating.  Personally I want my bank, in an ideal perfect world (that doesn't exist) to protect my money and use it to lend out to people who will be able to pay it back.  I do not want my bank to be innovative, I want it to do the normal stuff and not engage in complex investment schemes like credit default swaps.  Now Apple Computers on the other hand I do want to innovate, I want them to try to make the next step and advance technology, that's good for the world, complex methods of shuffling money around and trading as though they have value things that really don't have any on the other hand, is not productive or helpful to the world in any way.  Why have I never heard anybody bring this up, is innovation in the case of a bank, actually a good thing that we should be protective of when considering new regulations?

The lack of any changes in the regulation of financial institutions yet has allowed them to return huge profits again, but by doing the same things they were doing before, by being innovative, and in the profits screwing up real people's lives.  Sorry, but lets please not show deference to the innovation argument as we consider new regulations on the banking industry, and please lets get on this before they crash our economy by innovating again.

a budget neutral economic stimulus for Oregon

I've been meaning to write this post for a couple of days now since the State of Oregon Economist Tom Potiowsky issued his report on the state of the Oregon economy on Thursday indicating that recovery may be particularly slow in Oregon.  Collins, Snowe, Specter, and Nelson put States in a real bind by negotiating a lot of the aid to States out of the stimulus bill back in February.  This put States in the position of having to cut spending or increase taxes in order to balance their books, creating what Krugman termed, "the problem of the 50 Herbert Hoovers."  The road to full recovery is likely to be slow to begin with, and if Oregon lags behind the rest of the nation, it could be an awfully tough road back.  It seems that while a second stimulus would be very useful from the federal level, a State-level stimulus package in Oregon would be particularly useful, but there's no way it can happen given Oregon's budgetary situation.  That's why I was taken with an idea I originally bumped into in the the Washington Monthly about a month ago of taxing College Endowments as an economic stimulus (I for the life of me can't seem to find this post).  The point being that because College Endowments have become a status symbol, they're holding on to them instead of spending them.  Last time I checked the endowment was supposed to be sort of a "rainy day fund," and if now is not a rainy day I don't know what is.  In defense of Universities, there has been a sizable dropoff in the size of endowments recently due to the fact that donors are tightening their belts.  A policy that could force Universities to spend their endowments rather than holding on to them would be very beneficial to those communities.  As a result, college endowments being currently tax free nonprofits, I propose setting a temporary tax on college endowments in the State of Oregon to force them to put some of that money into the economy, there are a number of beneficial uses that this money could be put towards.

Students-Have been hit with an enormous tuition increase this year, if Universities dedicated some of their endowment to not increasing tuition then students would both not be forced to drop out due to affordability, which is a long term positive and increases the likelihood that Universities will be able to rebuild their endowments in the future, as well as allowing those students who do stay in college to engage in more discretionary spending locally, this helps local businesses.

Infrastructure-Invest in new buildings and/or more maintenance on campus, this allows plumbers, carpenters, drywallers... to stay in business, keeping unemployment down and leading to more local spending.

General Operations-Kill all spending freezes and layoffs, keeps people employed and allows departments to operate as they did two years ago, once again (are we noticing a theme here?) this means more spending in the local economy by not forcing academic departments to do things like not using any more paper, and keeping people employed.

The circumstances surrounding the money reserved in college endowments is a tricky issue, and some of that money can't be spent.  Without a thorough study of the status of endowments in Oregon I can't speculate on how much they can actually start spending in the near future, but any policy that forces them to spend more seems to me like it would be a good idea.  The following are the total amount of the endowments for Oregon Colleges and Universities, so we can imagine what 1/2 or 1/4 of that put into the local economy would do for Portland, Corvallis, Eugene, or Salem.  And the best part is, its not only budget neutral, but budget enhancing, as the State gets a chunk of whatever doesn't get spent.

University of Oregon-$498 million
Oregon State University-$476 million
Willamette University-$283 million
Lewis and Clark College-$231 million
University of Portland-$95 million
Linfield College-$71 million
Portland State University-$47 million
Southern Oregon University-$20 million
Western Oregon University-$10 million
Eastern Oregon University-$3 million
*list not based on who has the biggest endowments, but who I thought about

That's a lot of money out there that could be boosting the economy and is instead sitting in a bank account somewhere, there are very good ways it could be spent to help students, faculty, and the university itself.  Any policy that gets them to spend a chunk of that is a net good, tax them for this year (and this year only) and see what they decide to use rather than give back to the State, and what they do give back to the State helps prevent cuts to education, infrastructure, or the Oregon Health Plan.

George Will: The Working Class Arent Human

Sounds pretty rediculous eh? But I've read it twice and that clearly seems to be what George Will is saying, that low wage workers are not in fact people. In a bad article opposing the minimum wage, one of the worst such article I've read not for its position but because it isnt well written or well argued, George Will ended with the following:

But the minimum wage should be the same everywhere: $0. Labor is a commodity; governments make messes when they decree commodities' prices. Washington, which has its hands full delivering the mail and defending the shores, should let the market do well what Washington does poorly. But that is a good idea whose time will never come again.

Labor is a commodity? Now I know a lot of economists like to talk in this language, even a lot of liberal economists do it, but lets think about the assumption being made to make that statement. You don't hear Will or anyone else talking about entrepreneurs as a "commodity," in part because they arent a commodity just as labor isnt, but also because they understand that to treat a person as a commodity is to make them something non human, something that is merely bought and sold, not something to be engaged with, not something to concerned for the well being of. At best maybe the "commodity" argument contends that labor is like a dairy cow, something whose health and life need to be protected only because production stops without it.

Please Mr. Will, you wrote a shitty article to begin with, but please dont reduce your fellow human beings whose well being and general welfare need to be defended to a mere commodity. They are far more important to our country and to our economy than a mere cow. Our fellow human beings have value to us far beyond any capital good, or any good at all for that matter, please dont demean their existence by reducing them to such an unimportant social status, it just shows your readers that you're self concerned and antisocial, and I'm sure you dont want them knowing that.