Page 2 of 2 Public interest RIP By Julian Delasantellis
Voila! By being able to report mortgage loan and mortgage loan derivative
values at levels far in excess of what they would receive in the actual, traded
markets, the "stress tests" came in far more favorable for the banks than
previously expected. (See
Oh, impotent Washington!, Asia Times Online, May 14, 2009.)
By passing the stress tests, the banks seem to have realized that they had
garnered on themselves a veritable Good Housekeeping Seal of Approval; if
trouble comes, would the Federal Reserve and/or US government really let these
companies go down the tubes, after vouchsafing for them with the stress tests?
Suddenly, the 19 TARP banks and brokerages were the flavor on the day on Wall
Street; in May alone, the TARP banks raised over $75 billion
in stock and other new bank capital - albeit all of it pricier than the TARP's
5% dividend coupon.
But there was no thought of applying that sum to making new loans that the
world economy needed so badly. No, job 1 for the banks is to pay the TARP money
back (they're still haggling over just how much they have to pay the government
to get the warrants back - their opening offer is zero. So the hated
compensation limits could be done away with. In Billy Wilder's 1950 Sunset
Boulevard, washed-up film actress Norma Desmond (Gloria Swanson),
replies to a fan who asked if she used to be big in pictures with "I'm still
big - the pictures just got smaller." Here, the bankers seem to be saying,
"We're still worth our gargantuan 2007 pay packets - it's just the loans we
made and put our supposed honor behind that got crappier."
Income support for CEOs
Therefore, with the TARP's function now degraded to be nothing much more than
an income support operation for banking CEOs, it can hardly be surprising that
the original function of the program, buying up toxic mortgage assets, is once
again falling by the wayside. Recent reports have it that Geithner's Public
Private Initiative Program (PPIP), designed to use leveraged TARP money to deal
with the toxic assets problem, is on hold; the banks are, if anything, using
their questionable mark-to-model valuations to demand even higher prices for
the still, in reality, depreciating assets. "After all", Mr Bank Bigshot must
be thinking, "If you're gonna pay me like it's 2007, my assets must be worth
what they were in 2007."
The Economist magazine places these events within the context of something it
calls "TARP revisionism". This is the new spin the bankers are weaving - that
they were just sitting quietly and productively in their office when WHAM! -
the government forced them to take all this money they really didn't want.
Like the fictions produced by the Ministry of Truth in George Orwell's 1984,
these lies serve myriad purposes. It sends down the memory hole the real
experience of last September, with the entire banking system perhaps just hours
away from extinction due to the bankers' mendacities, in favor of fibs much
more to the industry's liking, with, strong, determined, Ayn Rand-type
banking/capitalist avatars steering through the rough seas of commerce, while
shallow government guttersnipes forever blocked their path.
This, it is hoped, will forestall what the bankers really fear - the
introduction of new banking and financial system regulations designed to
prevent what the industry most wants, another gloriously irrational but wildly
popular and profitable financial bubble. With the very real possibility that
the Obama administration may simply run out of political time before its dream
of an economic recovery based not on more financial leverage but on investments
in infrastructure and green energy can be realized, the banking oligarchs may
very well get their wish.
As the oligarchs always do. It's a rare week that the people only suffer one
shellacking from the elite, and last week was not a rare week. The other loss
was related to health care.
Go to a cocktail party in America, you'll probably find the medical doctor in
the group by the window gazing longingly at his Mercedes SL550. Engage him in
conversation, and I can guarantee what the subject will be - an extended,
vitriolic jeremiad against America's health insurance companies.
"The insurance companies are always on my back," the good doctor will complain.
"I'm always on the phone with them trying to get authorizations for patient
care. I have to hire full-time assistants at $30 an hour just to deal with the
insurance companies. God, healthcare would be so much better without the
insurance companies."
Therefore, one might find it surprising that, when faced with an opportunity to
deliver a devastating killstrike that could very well have put the industry out
of business, the medical industry just took up the cudgels for their hated foe,
declaring, in the words of the 1969 Hollies song, "He ain't heavy, he's my
brother."
Amazingly enough, the incredibly complex issue of US healthcare, its
astronomical cost and the totally related factor of the 47 million Americans
who can't afford the insurance to pay for it, has come down to one single
factor - whether a non-profit so-called "public plan" will be initiated at some
level of government to compete with the mostly private, for profit entities
that provide most of the health insurance coverage for non-elderly Americans.
(Those are insured under the government's Medicare program, a single-payer
insurance plan with operating and expense costs around 4% of the total budget,
as opposed to the almost 25% costs of profit, bloated salaries, inefficient
management and just plain waste common in the private plans.)
The public plan defenders say that with these lower overhead costs, the savings
can be used to cover the uninsured, and, eventually, bring competitive pressure
to bear on the high insurance premiums of the for-profit plans.
For precisely that reason, the private plans are opposed to the public plan;
for all the private sector likes to talk about the glories of competition, it's
an entirely different story when competition forces lower salaries for
corporate chieftains. In that effort, the industry has tasked its paid flunkies
in Congress, mostly Republicans, but with a lot of Democrats as well, to
conduct kamikaze raids against the public plan before it can get to Obama's
desk for signing.
With their history of animosity, you might have expected the doctors to side
with the public plan advocates in opposition to the insurance companies.
Not a chance. It seems that the lion has lain down with the lamb. From a press
release last week by the American Medical Association, the nation's largest
doctor's group.
The AMA does not believe that creating a public health
insurance option for non-disabled individuals under age 65 is the best way to
expand health insurance coverage and lower costs. The introduction of a new
public plan threatens to restrict patient choice by driving out private
insurers, which currently provide coverage for nearly 70% of Americans.
Why this new appreciation for the role of health insurers? The statement
continues - whaddaya think the chances are that the answer comes down to money?
"If private insurers are pushed out of the market, the corresponding surge in
public plan participation would likely lead to an explosion of costs that would
need to be absorbed by taxpayers."
The doctors just let the cat out of the bag - the problem isn't that the public
plan wouldn't work; the problem is that it would.
I've always wondered why political analysts have never wondered why the states
bordering Canada in the United States tend to be "blue", left-leaning
Democratic states; in the 2008 presidential election, 10 of the 13 states
sharing a land or littoral border with Canada voted for Obama.
Most Americans know that countries such as Canada and the United Kingdom have
publicly funded "single-payer" health plans. They seem to do well with them;
whether a leftist or rightist is in power on Parliament Hill in Ottawa or
Westminster in London, there's never much of a move to change this.
Conservatives in the US see this possible acceptance of government healthcare
as a threat. They are wiling to spread any measure of truth, near truth, half
truth, or outright lie, to discredit these systems.
On the GOPUSA website, Richard Olivasto attempts to keep the flock in line:
"Canadians describe the massive costs of nationalized health care, the poor
quality of service, and of lengthy delays to gain access to providers. In
Britain, it's more of the same; plus, we are told of 'turndowns' for certain
individuals deemed too old to receive the 'universal' care they need."
Could it be that those in the Canadian border states have actually seen enough
of life across the border to see through this dross?
In general, the conservative critique of government-run healthcare is that
under it medical services are "rationed"; some bureaucrat decides who will get
care, when they will get the care, and who will not. Is there rationing in the
United States? Of course there is.
In general, rationing in government-run health systems is based on need; the
person with bones protruding from flesh is going to be seen by an orthopedist a
lot sooner than someone with a sprain from mowing the lawn.
In the United States, care is rationed not by need, but by money. If you have
insurance you'll get all the care you need and then probably some, whether you
need it or not - an example of this would be Latisse, the pricey prescription
drug recently approved by the government to promote eyebrow growth.
If you don't have insurance, you can suffer through your ailment, or go to an
emergency room for care that will most likely bankrupt you. Either way, it
would be unlikely that you'd receive the type of follow-up care needed to
maintain your health after you left the emergency room. It's cruel and it's
heartless, especially when a child has to suffer due to the poverty of its
parents, but it's also absolutely vital and essential. It is only in denying
care to the uninsured, rationing, that the country can afford to treat the
insured in the manner it does.
OK, what if those 47 million Americans without insurance suddenly had it -
they'd use it, right? As demonstrated with the now long waits for care in
Massachusetts under its still-nascent public plan system, a huge wave of new
demand would hit the medical industry. Doctors could be working sunup to
sundown, seven days a week, and if the popularity of the public plan did indeed
lead to some private plans going out of business, as is the most fervent wish
of many public-plan advocates, the resulting public-plan behemoth, in essence,
a developing single-payer in and of itself, would have more than enough
bargaining power to force doctors' reimbursements down.
So the doctors had to choose between supporting universal coverage and better
health for all their patients, and possibly sacrificing salary, or supporting
the insurance companies and maintaining their cushy lifestyle. Looks like it's
another loss for the Washington Generals; it's far more plausible that the lion
will lay down with the lamb should there be a pot of juicy gold for the two to
split up.
The lights come down, the show rolls on, maybe to next stop at so-called "cap
and trade" proposals aimed at combating global warming. If you believe
differently, if you believe that the underdog Generals or people could win
their next, or any forthcoming contest, I would ask you to send me the amount
of money, preferably the largest amount of money possible, you're willing to
wager on this fantasy well prior to the General's next scheduled contest
against the Globetrotters, June 20 in Sao Paolo, Brazil.
Julian Delasantellis is a management consultant, private investor and
educator in international business in the US state of Washington. He can be
reached at juliandelasantellis@yahoo.com.
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