Everything that needs to be said has already been said.
But since no one was listening, everything must be said again.

Andre Gide

Tuesday, October 4, 2011

It's not the uncertainty--it's the certainty

I have moved over to the "it's not the uncertainty" camp. The president's statement below seems to make it absolutely certain what rewards are likely to lie ahead for those dare to dream of profit:

 “This is exactly why we need this Consumer Finance Protection Bureau that we set up that is ready to go," Obama said. "This is exactly why we need somebody who's sole job it is to prevent this kind of stuff from happening. ... You can stop it because if you say to the banks, ‘You don't have some inherent right just to – you know, get a certain amount of profit. If your customers – are being mistreated. That you have to treat them fairly and transparently.”

The story is reported here: Obama Blasts Bank of America's Debit Fees.

Is this really the type of language that is expected to instill the confidence that is needed to stimulate investment?  And do people really believe that they will not pay for services rendered if this this (more transparent) fee structure is prohbited?  


  1. How about the idea of a post bank?

  2. A post bank? Please expand, Jesse...

  3. PostBank: A Postmodern theory of inflation and money based on the ambivalent deconstruction of the post-stagflationary asymmetries in Krugmania.

  4. Where is the market failure that justifies government intervention?

  5. I'm not sure what "petulant" means, but might the word apply to a government banker complaining about the government jawboning banks?

  6. @The Arthurian: Sure. But it might apply even more broadly (am suggesting the mirror). ;)

    Btw, hate to break it to you, but the Federal Reserve branches are not part of the government.

  7. LOL - love the twist on certainty. Speaking of "what ails us", you may have seen/heard Paul Kasriel's of Northern Trust blog post on uncertainity vs. credit supply? Nice bit of rhetoric arguing against "uncertainity" as a blanket catch-all excuse and for Fed expansion of credit supply. Ironically, I have it from very good sources within his very own institution that credit demand is very weak and the sales folks are having are very difficult time finding business w/good credit that want to borrow. Instead, sales folks are chasing lower quality borrowers to make their numbers - and this w/commercial loan rates at record lows. If credit demand is this weak with rates this low and lenders have to chase riskier borrowers, wouldn't that alone suggest that businesses are applying an implicit risk premium of some huge number to the cost of borrowing? Maybe its not the interest rate on the loan, but a discount "investment rate of political risk". (There must be a zillion papers and dissertations on this topic...."

  8. Oh, I broke my mirror. Curse the luck!

    I don't remember Milton Friedman being so specific in that footnote (in Money Mischief, I think). So only the Home Office is "govt"? Okay.

    Thanks DA

  9. BoMo,

    On this last point, Pastor and Veronesi have a new NBER working paper out pricing political risk:


  10. If it's the certainty, which might be correct, does anyone out there think that the climate for business investment will improve over the next few months given the last few months have seen Obama's poll numbers steadily and signficantly decline?

    David, did we cross paths at UWO?

  11. Jack, I believe we did. You were working with Andreas Hornstein, I think. But it was a long time ago, and my memory is hazy. Email me!

  12. @David, the concept of "post bank" here is that government programs are meted out through a government-controlled bank via the post office and provides a base level of service for those in need. I think this is what Japan does. Private banks can serve those who are operating in the private sector and provide services commensurate with the costs and benefit.

    The problem with banking fees is that they are portioned on those with low incomes who have less ability to move their accounts; taking $ out of their pockets that would be spent otherwise through bank fees isn't in the public good, especially these days when we want more spending.

    I don't know much about the details, but adding more bank fees to the most disadvantaged won't help money velocity. Look at BoA's capital reserves.

  13. jesse,

    It seemed to me that the BoA only introduced this change in pricing policy to circumvent the prohibition of gathering fees in other ways. It's always the same story, and it's just plain nuts the way some people--politicians in particular--organize their thinking on these matters.

    But I guess we get the government we deserve.

  14. speaking of nuts...ever watched squirrels in the fall?