Friday, September 27, 2013
The Pope, the President and the Wall Street Journal
That was the week that was.
Title of a British TV program in the 1960s
The editorial page of the Wall Street Journal has a way of taking the fun out of lots of things. Two events occurred during the week of September 15th that caused me to think that in a world consumed by violence and hatred there might be modest cause for optimism. Thanks to the editorial page, I have learned that my excitement about the advent of one event was premature, if not entirely misplaced and I eagerly await its judgment on the second.
The first event was the news from Tehran that its new president seemed to be a different sort from the clown qua president Mahmoud Ahmadinejad, who had preceded him. The new president, Hassan Rouhani, had responded with conciliatory tones to a letter from President Obama in which Mr. Obama suggested relations between Iran and the western world could improve if Tehran were willing to “cooperate with the international community, keep [its] commitments and remove ambiguities.” There appears to be concern among those who know such things that if Mr. Rouhani does not act quickly to inject sense into Iran’s policies vis a vis the rest of the world, he will soon be sidelined by hardliners in the government. Mr. Rouhani’s words were not the only encouraging signs following his election. The military was given a backseat in governance and there have been domestic liberalizations, including the freeing of 18 political prisoners. Although after his election he declined to take an opportunity presented to him during a press conference to disavow his predecessor’s assertion that the holocaust was a fiction, in an interview in New York during his visit to the United Nations he told Christiane Amanpour that the holocaust was “reprehensible and condemnable.” Not all the news was good, however. In late August the authorities began a crackdown on women deemed inappropriately attired. That notwithstanding, the news from Tehran was welcomed by many. Not by the editorial page of the Wall Street Journal.
In commenting on Mr. Obama’s response to the recent election by writing a friendly letter to the new president, the editorial page observed that Mr. Obama has never “taken no for an answer from Tehran. Despite being rebuffed for five years, he sent another entreaty after Mr. Rouhani’s election in June.” The writers are of the school that once there have been sufficient rebuffs from a presumed adversary the prudent course is to make no further attempt to achieve a rapprochement but instead continue to inflict pain on the citizens of the country whose leaders seemed intransigent, as if there were some virtue in abandoning the hope of bringing adversaries to the table. Now that I have learned why I should not be as enthusiastic about Mr. Rouhani’s response as I was, I am waiting for the WSJ to advise me why the other event last week is not as hopeful as it seems. That event was, of course, Pope Francis’s comments suggesting that the Roman Catholic Church should alter its doctrinaire approach to certain issues.
In an interview with a Jesuit publication the Pope observed that the church had become “obsessed” with abortion, gay marriage and contraception, and said the “pastoral ministry cannot be obsessed with the transmission of a disjointed multitude of doctrines to be imposed insistently. We have to find a new balance, otherwise even the moral edifice of the church is likely to fall like a house of cards. . . .” Those words sounded like a chorus of heavenly angels to many who heard them since it suggested that the new Pope was more in tune with the 21st Century than his predecessor and his predecessor’s predecessor had been. The women in the church were also thrilled to hear what the Pope said, more especially because one month following his installation he had endorsed the attack on the Leadership Conference of Women Religious (LCRW) that was begun under his predecessor.
News of his interview was accompanied by a couple of sour notes. The first was sung when the Pope, speaking to a group of gynecologists at the Vatican, said that abortions were a symptom of a throw away culture and Catholic doctors should not perform them, hardly a surprising statement that does not gainsay his opposition to the church’s unremitting focus on abortion and the other issues to which he referred. The enthusiasm of the women had to be further tempered by what he did the day after his interview was published. In reshuffling some key positions in the church he left in place Archbishop Gerhard Mueller, prefect of the Congregation for the Doctrine of the Faith who is in charge of investigating the Leadership Conference of Women Religious Nuns who are suspected of opposing the church’s position on the priesthood and homosexuality.
The foregoing notwithstanding, thoughtful people cannot help but be encouraged by what the Pope has said and how he has acted since being elected, notwithstanding the foregoing. Enthusiasm aside, I will wait for the editors of WSJ editorial page to let me know why I, as in the case of Iran, am wrong to feel encouraged. They are a Wise Set of Journalists.
Friday, September 20, 2013
A Chastened Morgan Chase?
Dimon Is Forever (Redux)
Almost the name of a James Bond film
It’s been a really great year for Jamie Dimon. As folks who follow such things know, he’s the chairman of the board of JPMorgan Chase and the chief executive officer of the bank. He almost wasn’t. In May the bank held its annual meeting in Tampa Florida and there was some thought that shareholders might think that Mr. Dimon should not hold both positions. The majority of the shareholders didn’t agree. He kept both positions. When a similar proposal was before the shareholders in 2012, 40% of the shareholders voted to split up the job. In 2013 that number dropped to 32%. Mr. Dimon owed his retention to what is widely viewed as his success at navigating the financial crisis of the last few years that felled many a lesser giant. It was also a great year for Mr. Dimon because some of what appeared to be problems were set aside.
In July 2013 the bank settled the Electricity-Market case. The case arose out of allegations that the bank’s Houston-based electricity-trading desk made $125 million in unjust profits out of its activities in California and Midwest electricity markets during the preceding two years. The settlement was the result of an enforcement order entered by the Federal Energy Regulatory Commission. As part of the settlement the bank admitted no wrongdoing. (In those kinds of settlements the people paying the big bucks usually decline to admit to any wrongdoing. They just pay to make the problem go away.) In this case the bank’s non-wrongdoing ended with it paying $410 million dollars. Of that amount, $285 million was a fine and the rest was disgorgement of profits the non-inappropriate behavior generated. For the bank that was nothing more than a drop in the bucket since it typically has net earnings in the billions of dollars.
Another non-problem for Mr. Dimon (although that may yet change) was the welcome news in August that although the bank was being investigated in China for its hiring practices in that country, it was not yet being charged with violating U.S. laws prohibiting bribery. The China story suggested Morgan Chase officers working in China may have hired children of powerful Chinese officials in order to curry favor with officials who were in a position to, and did, award lucrative contracts to the bank. Whether the actions of the bank in hiring relatives of those in a position to bestow business on the bank were violations of the anti-bribery laws in the U.S. time will almost certainly tell us.
On September 19, 2013, the bank got welcome news that another matter that had been vexing it for some time had finally been resolved. On that date it was announced that the bank had settled a matter with the Consumer Financial Protection Bureau by agreeing to pay a $309 million fine for defrauding customers. As a result of the settlement we learned that the bank was billing customers for services it wasn’t providing. In addition to agreeing to pay the fine, it also agreed to give refunds to the customers it had cheated. And as if getting that bit of unpleasantness behind it wasn’t enough for one day, that day brought another piece of good news for the bank. The bank had brought to an end, at least in part, another troublesome matter.
Since May 2012 the bank has been dealing with investigations arising out of the activities of one of its star traders in London known as “the whale.” As a result of the whale’s trading activities the bank suffered $6 billion in losses. The losses triggered charges against the bank by assorted regulatory agencies. As a result of the settlement that was announced, the bank will pay the Federal Reserve $200 million for what is described as “deficiencies in risk management.” It will pay $300 million to the Office of the Comptroller of the Currency, $200 million to the Securities and Exchange Commission and $220 million to the United Kingdom’s Financial Conduct Authority, for a total of $920 million. The fines were not the only punishment imposed on the bank. In an unusual part of such settlements, this particular settlement will reportedly include an admission of wrongdoing by the bank although as of this writing it is unclear how comprehensive such a confession will be. Time will tell.
When news of the London Whale’s activities became public, Mr. Dimon reportedly said that the entire matter was nothing more than a “tempest in a teapot.” Since he was both the chief executive officer and chairman of the board he was in a position to know and, therefore, his comments were reassuring. They were also wrong. He now accepts responsibility for the teapot which, it turns out, was destroyed by the tempest. So was his reputation, sort of. He is still chairman of the board and chief executive of the bank. He still has an annual salary of $1.5 million in cash and $10 million in stock. He still has the confidence and respect of people who matter. Not people like me.
Friday, September 13, 2013
The Pesky Poor
If a free society cannot help the many who are poor
It cannot save the few who are rich.
— John F. Kennedy, Inaugural Address
One of the questions the curious voter from time to time wonders, is how a person can distinguish good government handouts from bad government handouts. The answer to that question is not as obvious as it would seem to be to the uninitiated. The question was most recently posed (and answered) by U.S. Representative, Stephen Fincher, a member of the House of Representatives from the 8th Congressional District in Tennessee.
Mr. Fincher has distinguished himself by standing up for the right of the poor to prove their self-sufficiency by not partaking of the food stamp program. Because the poor are not always as motivated as they should be and in the case of parents with children but without funds to care for them, unable to keep their lives together, Mr. Fincher believes they should work harder to earn what they require to live as he, and others like him, do. The problem he is helping them address is their dependence on the Supplemental Nutrition Assistance Program formerly known as the food stamp program.
According to the Department of Agriculture, an estimated 14.5 percent of American households “were food insecure” some time during 2012.” The Department of Agriculture says people who are food insecure have 26% less money to spend on food than households where hunger is not a member of the family. People who have food “security” are people who have access “at all times to enough food for an active, healthy life.” As a result of the recession from which the country is slowly recovering, almost 48 million% Americans out of a population of 313.9 million are now receiving food stamps to help them avoid becoming “food insecure.” As part of the budget negotiations that are taking place during the rare times when members of Congress are not on vacation, Republicans are proposing that the Supplemental Nutrition Assistance Program formerly known as the food stamp program be itself reduced by $40 billion over the next 10 years. If that goal is met it is estimated that in excess of four million people will lose their food stamps and join the ranks of the “food insecure.” The legislation that the House hopes will accomplish this is part of the 2013 Farm Subsidies Bill that the House hopes to vote on by the end of September. One of the enthusiastic supporters of the bill and its attendant cuts to the food stamps program is Mr. Fincher.
Mr. Fincher is a member of the House Committee on Agriculture and in May he and many of his colleagues on that Committee voted in favor of a bill that increases farm subsidies for crop insurance and decreases funding for food stamps. Following his vote in May he explained it saying: “The role of citizens, of Christianity, of humanity, is to take care of each other, not for Washington to steal from those in the country and give to others in the country.” Quoting the Bible to explain what might otherwise be seen as excessively stingy he said: “The one who is unwilling to work shall not eat.” Eating is not the same thing as farming. Farming is what produces the stuff that those who can afford it eat and helping farmers with subsidies is not, as Mr. Fincher would be the first to tell you, the same as stealing from those in the country and giving to others in the country.
According to the Environmental Working Group, a research organization that keeps track of government subsidies, Mr. Fincher is one of the biggest beneficiaries of federal farm subsidies. Between1995 and 2012 Fincher Farms in Tennessee received payments totaling $4,180,287, almost all of that from commodity subsidies. In collecting those subsidies his farm was one of the ten percent in Tennessee that collected 87 percent of all subsidies paid in that state. Seventy eight percent of Tennessee farms received no subsidies.
Of course neither the farm program nor food stamps are without their limits. Assistance under the food stamp program comes to an end if the recipient has modest amounts of income calculated under formulae published by the federal government. The gross income for a family of three must be below 130 percent of the poverty line or $25,400 a year, its net income must be below the poverty line and it must have assets of $2000 or less in order to qualify for food stamps. Similarly, there are limits on how much a farmer can earn before losing subsidies. A farmer, like Mr. Fincher, who earns more than $750,000 in farm income or $500,000 in non-farm income is no longer eligible to participate in the farm subsidy program.
There are just a few weeks left before the fiscal year comes to a close. It appears likely that Congress may extend the farm bill for another year. If it gets to a vote it is obvious how Mr. Fincher will vote. After all, he’s a farmer, not a filcher like the hungry and the poor.