Contributors

Monday, December 13, 2010

Trying Again

I've put up a fair amount of information regarding the shift of wealth in this country and how, unless you are very wealthy, you are being screwed over by the top two percent in this country. This will continue to happen as long as we have somewhere between 30 and 40 million people in our country who have a pathological hatred of government.

It's pretty clear to me that it's going to take a long time to convince some of you. More than likely I never will. Because even after all the information I have put up here, I still get questions like this.

Do you have some way of quantifying the gouging that you are talking about?

When I answer a question like this with figures and commentary (by myself and others), they dismiss it all as illogical and the sources as biased...ironically falling into the genetic fallacy trap of which I am so often accused. An example of this was a challenge that was recently issued to demonstrate a counterpoint to a recent study which showed the stimulus and TARP programs to be successful. I have to see such a model.

Still, the questions persist.

Ripped off HOW? How does someone else getting richer rip me, or you, off?

Trying again...

A Secretive Banking Elite Rules Derivatives Trading
Clubby Clearinghouses Limit Competition and Consumers Face Higher Prices.

The banks in this group, which is affiliated with a new derivatives clearinghouse, have fought to block other banks from entering the market, and they are also trying to thwart efforts to make full information on prices and fees freely available.

Banks’ influence over this market, and over clearinghouses like the one this select group advises, has costly implications for businesses large and small, like Dan Singer’s home heating-oil company in Westchester County, north of New York City.

This fall, many of Mr. Singer’s customers purchased fixed-rate plans to lock in winter heating oil at around $3 a gallon. While that price was above the prevailing $2.80 a gallon then, the contracts will protect homeowners if bitterly cold weather pushes the price higher.

But Mr. Singer wonders if his company, Robison Oil, should be getting a better deal. He uses derivatives like swaps and options to create his fixed plans. But he has no idea how much lower his prices — and his customers’ prices — could be, he says, because banks don’t disclose fees associated with the derivatives.

“At the end of the day, I don’t know if I got a fair price, or what they’re charging me,” Mr. Singer said.

Seems pretty straight forward to me. Any of you getting it now? Or we going to fall back into the "winning the argument-want him to fail-never be wrong" pathology again?

See, this is what happens when you don't have enough regulation. People are gouged out of money and purposefully left in the dark. Do they have any other choice? If you think they do, call Mr. Singer and tell him. Let me know how the conversation goes.

The marketplace as it functions now “adds up to higher costs to all Americans,” said Gary Gensler, the chairman of the Commodity Futures Trading Commission, which regulates most derivatives. More oversight of the banks in this market is needed, he said.

Sorry, Gary, but that's not going to happen any time soon. People think that government is the problem. Until they ditch their pathology, banks are going to continue these practices.

But, hey, what about the financial overhaul bill?

Under the Dodd-Frank financial overhaul, many derivatives will be traded via such clearinghouses. Mr. Gensler wants to lessen banks’ control over these new institutions. But Republican lawmakers, many of whom received large campaign contributions from bankers who want to influence how the derivatives rules are written, say they plan to push back against much of the coming reform. On Thursday, the commission canceled a vote over a proposal to make prices more transparent, raising speculation that Mr. Gensler did not have enough support from his fellow commissioners.

Excuse me, but doesn't the GOP want to support guys like Dan Singer? I guess they would rather support the banks.

“When you limit participation in the governance of an entity to a few like-minded institutions or individuals who have an interest in keeping competitors out, you have the potential for bad things to happen. It’s antitrust 101,” said Robert E. Litan, who helped oversee the Justice Department’s Nasdaq investigation as deputy assistant attorney general and is now a fellow at the Kauffman Foundation. “The history of derivatives trading is it has grown up as a very concentrated industry, and old habits are hard to break.”

And I'm the one that gets ripped for not having any depth, economically speaking.

But how exactly do these clearinghouses keep people out? And why is that relevant? More on that tomorrow.

16 comments:

Anonymous said...

“At the end of the day, I don’t know if I got a fair price, or what they’re charging me,” Mr. Singer said.


Sounds like his business is going to be a spectacular success.

dw

Anonymous said...

Obama donations (2008)
Goldman Sachs $994,795
Citigroup Inc $701,290
JPMorgan Chase & Co $695,132
Morgan Stanley $514,881


McCain Donations (2008)
Citigroup Inc $322,051
Morgan Stanley $273,452
Goldman Sachs $230,095
JPMorgan Chase & Co $228,107


Not sure where you get the bold-faced emphasis on those dirty Republican's campaign finance.

In fact, as I have continuously said, why bring R vs D into the discussion?

dw

Mark Ward said...

I bring them in because the Rs are trying to block legislation that will provide more oversight to this area. The Dems may have been financed by these companies but they are, at the very least, trying to regulate them more.

So, if the Dems are bought off by these guys, why are they are trying to stop them? This is also related to the hysteria over George Soros. If Soros is truly the evil manipulator the right claims him to be, why is he supporting laws that will hurt him financially? I think the answer comes from a place that is very hard to get to for libertarians and conservatives. And, yes, I will elaborate as our discussion continues.

GuardDuck said...

Mark,

Are you seriously slamming people who mistrust government, by using as an example a group of companies' lock on a market - whose lock was created and is currently enforced by that very same government that you don't distrust?

Please, go get a CAT scan, you have some synapses that aren't connecting.

Anonymous said...

From the NY Times Bio page:

During the Clinton administration, however, he [Gensler] played a central role in fending off tough regulation for exotic financial instruments for hedging against risk. Mr. Gensler, born in 1957, worked alongside Treasury Secretary Robert E. Rubin and Federal Reserve Chairman Alan Greenspan to block proposals by the commission to regulate the new instruments.

Well, they say it takes a thief to catch a thief....

dw

Anonymous said...

Tomorrow, will you please do my research for me? Include in your blog exactly what this article refers to as the threatened Republican 'pushback'.

Also, please give the confirmation dates for the 'fellow commisioners' who may not be supportive of the chairman, so that I can better understand the insidiousness of the Republicans. I should probably assume they were all Bush appointees...

dw

ps - And do please tell me how none of us are in control of ourselves. thx

jeff c. said...

Guard Duck-what on earth are you talking about? Did you even read the article? The government's lack of oversight does not equal creation of a lock and means NO enforcement. The pathology sadly continues.

Haplo9 said...

>When I answer a question like this with figures and commentary (by myself and others), they dismiss it all as illogical and the sources as biased...ironically falling into the genetic fallacy trap of which I am so often accused.

Mark, either you are simply lying about what happened, or you are unaware of what the word "quantifying" means in the context it was used in. Let's review. First, a relevant definition:

quantify: to determine, express, or measure the quantity of

So when you are asked to quantify something, it means that you will describe the number you are using the quantify said phenomenon. If, for example, I were to ask you how you are quantifying GM's interconnected-ness (which I did), you might respond with something like "I'm using the Knowles-Behr measure of interconnected-ness, which puts GM at 96 as compared to companies of similar size, which are generally in the 50 range." That would be a measure that I could go look up on my own, and say, "Gosh, Mark is right. GM really is hugely interconnected compared to other companies." Instead, the closest we got from you is this:

"Juris, I do have a measure. Spend a few minutes and research the various connections GM has all over the world. You're not thinking. Start, please."

And that was it. So whiff number 1 from Mark.

You were challenged again in the "A Chronic Lack" thread. This time, I asked you to quantify the gouging that you decried. This time you did better in that you actually linked to something - your good old Citigroup plutonomy document. Unfortunately, it has no measure of gouging that I can find - it just describes what they believe is increasing concentration of wealth into the hands of fewer people in certain countries, the US included. Regardless of whether the phenomenon they describe is true, how does that measure gouging of everyday people? I can think of one way - if you were to believe that if these wealthy people disappeared overnight, that everyone else would get richer by the amount that the wealthy used to make, then that might make sense. Is that what you believe?

So I guess you did somewhat better on the second attempt, you actually linked to something, even if it didn't support what you claimed. And I'll reiterate here - it's ok to just say you don't have any hard numbers, that its just your feeling that people are being gouged. That's known as being honest about what you do and what you don't know, and not letting your ego trapping yourself into making claims (about being able to quantify when you can't) you can't substantiate.

GuardDuck said...

Jeff,

Perhaps if you read the article again, but real slow this time....

Nevermind, I'll just quote said article.

regulators ordered banks to speed up plans — long in the making — to set up a clearinghouse to handle derivatives trading

Under the Dodd-Frank bill, the clearinghouses were given broad authority.

So in other words - a bunch of government idiots gave a group of businesses the power to control in secret a part of the market.

Now Mark bashes the bankers, for following the same damn rules that stupid government set up for them.

And Mark bashes those who think the government is stupid....


And you and Mark both think the key is for more regulation.....by the same stupid government people that gave the banks the monopolistic position in the first place.


Color me skeptical...

Haplo9 said...

>When I answer a question like this with figures and commentary (by myself and others), they dismiss it all as illogical and the sources as biased...ironically falling into the genetic fallacy trap of which I am so often accused.

Mark, either you are simply lying about what happened, or you are unaware of what the word "quantifying" means in the context it was used in. Let's review. First, a relevant definition:

quantify: to determine, express, or measure the quantity of

So when you are asked to quantify something, it means that you will describe the number you are using the quantify said phenomenon. If, for example, I were to ask you how you are quantifying GM's interconnected-ness (which I did), you might respond with something like "I'm using the Knowles-Behr measure of interconnected-ness, which puts GM at 96 as compared to companies of similar size, which are generally in the 50 range." That would be a measure that I could go look up on my own, and say, "Gosh, Mark is right. GM really is hugely interconnected compared to other companies." Instead, the closest we got from you is this:

"Juris, I do have a measure. Spend a few minutes and research the various connections GM has all over the world. You're not thinking. Start, please."

And that was it. So whiff number 1 from Mark.

Haplo9 said...

(cont)
You were challenged again in the "A Chronic Lack" thread. This time, I asked you to quantify the gouging that you decried. This time you did better in that you actually linked to something - your good old Citigroup plutonomy document. Unfortunately, it has no measure of gouging that I can find - it just describes what they believe is increasing concentration of wealth into the hands of fewer people in certain countries, the US included. Regardless of whether the phenomenon they describe is true, how does that measure gouging of everyday people? I can think of one way - if you were to believe that if these wealthy people disappeared overnight, that everyone else would get richer by the amount that the wealthy used to make, then that might make sense. Is that what you believe?

So I guess you did somewhat better on the second attempt, you actually linked to something, even if it didn't support what you claimed. And I'll reiterate here - it's ok to just say you don't have any hard numbers, that its just your feeling that people are being gouged. That's known as being honest about what you do and what you don't know, and not letting your ego trapping yourself into making claims (about being able to quantify when you can't) you can't substantiate.

Haplo9 said...

Now, on to the rest of your pro government pathology. I have an anecdote for you guys - it goes like this. Last week, I purchased a pencil. You know what happened? The store I purchased the pencil from refused to tell me their profit margin on the pencil was, so I have no idea if I got a fair price or not! Oh sure, I could do some research of my own, like looking up the cost for the raw materials for the pencil, trying to find the wholesale cost of the pencil, and estimating the labor cost of the pencil. Then I might be able to hazard a guess about the profit margin for the store that sold me the pencil, but really, it's much easier to complain about the damn store than do any of that. Why should I care about all that stuff?

Now, here's a question for y'all: in what way does my buying a pencil differ from Mr. Singer buying futures to lock in a price for heating oil? Answer: not much. The main difference is that he bases his livelihood on buying those futures, while I don't rely on the pencil. As a result, he should be far more incented to know what exactly those banks are doing by doing his own research. The other difference might be the market in which he buys derivatives vs pencils - the pencil market is quite open, and competition keeps prices down. Why isn't the same thing true in the market he operates in? As a note, heating oil futures are traded on the open market - you can go to something like etrade and start trading them today. So it's not clear to me what Mr. Singer's issue is here. Mark, can you clear my confusion up?

Finally (and this is something you guys might know if you had experienced a bit of reality outside the teaching and school bubble, like owning your own business): it isn't a good idea to tell customers and competitors what your costs are to produce a product. More to the point, very few businesses tell you this for any product, so why do you think that it should be different for the product Mr. Singer deals in?

Damn Teabaggers said...

If Soros is truly the evil manipulator the right claims him to be, why is he supporting laws that will hurt him financially?

What makes you think they will? You could be just as wrong about that assumption as you were about the same assumption that you extended to Warren Buffett.

You assumed that his statement that "people like me" should be taxed at a higher rate, because he pays "half the taxes of his secretary", was advocating higher taxes on himself. Well in all likelihood, he is taxed at a higher rate. The reason he pays less is because of his deductions. Is he on the news trying to get those deductions taken away? No. Is he required by law to take every deduction he can? No.

So the sole reason he pays less than his secretary is because he chooses to take those deductions, and has made no move to give them up, even though he has that freedom.

It sounds to me as if "people like me should be taxed at a higher rate" means "people like me who don't have my deductions should be taxed at a higher rate." In other words, he's advocating higher taxes for his business rivals, but not for himself.

But in your eyes, he is "supporting laws that will hurt him financially", is he not?

Evil White Capitalist Oppressor said...

Bigger corporations welcome and support increased regulations because the cost of such will put smaller rivals out of business, enabling the big guys to grab more market share. Democrats are a better friend to big business than you, and perhaps even they realize.
As for the guy not knowing the fees for the product he purchased, maybe he should have taken heed of some advice that's been around for about as long as written language: "Let the buyer beware".

Flat Earthers said...

What's the Latin for "Let the seller beware?" That should be the Democrat Party's motto. Caveat which?

juris imprudent said...

The Dems may have been financed by these companies but they are, at the very least, trying to regulate them more.

LMAO - you really believe that?

So tell us, exactly WHAT regulation would make Mr. Singer know he has a "fair deal" or not? And why do you trust the govt to get is right this time?