Wall Street Greed: The True Consumer Advocate Reply


By Mark Quiner

Public outrage at Wall Street Banks has been apparent for more than a year. Democrats are capitalizing on this opportunity as they seek to pass a financial reform bill that increases regulations on large financial institutions. One of these key provisions being debated is to ban banks from having their own financial derivatives trading desks.

This is no time to stifle financial innovation. This is the time for Congress to reduce regulation and enact policies that foster innovation in new financial derivatives and support Wall Street profitability. It’s in the interest of the country.

The argument goes that speculation in financial derivatives caused the economic meltdown. Therefore this speculation is only good for banks profitability and bad for the average citizen. As a nod to the fundamental purpose of these instruments, Democrats say laws will be written that only allow banks to trade derivatives for the purpose of client risk management – hedging to offset fluctuations in raw material prices.

Democrats are missing the boat. Speculation and hedging go hand in hand and one cannot exist without the other.

Hedging is a strategy where companies buy securities to offset risks associated with fluctuating raw material prices. For example, a farmer will sell corn futures to offset the potential for declines in corn prices, effectively locking in a price. This is a fundamental business strategy that can be employed in any industry from energy, to agriculture to debt markets.

Financial derivatives are tools that are used for hedging purposes. A financial derivative is a piece of paper that gets value from the underlying commodity it represents. Instead of making or taking delivery on the commodity at expiration, the derivative is settled against an index that represents the physical commodity price. Derivatives are a key component to effective hedging as they allow companies to manage risk without worrying about the financial and logistical burdens of dealing with the physical commodity.

Another key component to effective hedging is market liquidity. Regulating or outright banning banks’ financial derivatives trading desks could have crippling effects on these markets liquidity and efficiency.

Effective hedges are not possible without speculators – the companies that make the markets. Wall Street banks run speculative trading desks for physical and financial commodity products. These companies act as market makers, always willing to buy and sell at a certain price. They place bets not only on the direction of a single commodity, but on the differentials between physical commodities and financial derivatives, and on the differentials between products along a supply chain. For example, a speculator could bet that the spread between crude oil and motor gasoline is undervalued and could widen.

This speculation brings efficiency to commodity supply chains by providing liquidity. A ready supply of speculators willing to buy and sell at a given price ensures that markets stay in line with supply and demand fundamentals. Speculators smooth out ups and downs in markets by taking contrarian positions. Market liquidity ensures a narrow gap between a buy and sell price, called a bid/ask spread. A narrow bid/ask spread ensures that a hedger can unwind a position in a financial derivative at will with minimal risk. When bid/ask spreads widen due to lack of market liquidity, the risk to a hedger of participating in the market is greatly enhanced.

Without financial speculators market efficiency breaks down. Companies that sell key goods from gasoline to corn to plastic bags cannot predict profitability. They will go out of business. Supply chains fall apart, gas stations run out of fuel and grocery store shelves will become bare. For all of Congress’ talk about consumer protection, trying to stifle speculation will achieve the exact opposite.

Wall Street speculation is the true consumer advocate. If a financial reform bill bans banks from trading derivatives, Congress needs to kill it.

Iowa needs tax relief 1


As seen in the Des Moines Register March 21, 2010

I’ve enjoyed a life long love affair with Iowa. I think it’s the best place in America to live.

From the beauty of our land to the down-to-earth  people with good values and common sense, Iowa offers me what I want out of life.

We’re faced with some problems, though.

I’ve had the pleasure of having my oldest son in town on a visit in March. Unfortunately, he decided to leave Iowa upon his graduation from the University of Iowa a few years ago.  Opportunity first led him to Alaska and then to Houston, where he now lives and works.

I hope opportunity leads him back to Iowa some day.  Same goes for my daughter in North Carolina, and my son at Iowa State.

Does Iowa offer opportunity?  Yes it does, but it could offer more.

We need more jobs in Iowa.

Our tax policies may be holding us back according to the Tax Foundation, a Washington D.C. think tank specializing in tax policy.

They produce the Tax Foundation’s State Business Tax Climate Index.  The index ranks states on the basis of five facets of their overall tax systems, including corporate and individual  income tax rates, sales tax, unemployment insurance, and property tax rates.

According to the Tax Foundation, Iowa ranks number 46.  Our neighbor, South Dakota, has the most favorable tax climate for business in the country.  Does tax policy affect employment?

Let’s compare.  From 2000 to 2008, the number of full and part time jobs in South Dakota increased by 9.9% according to the U.S. Department of Commerce.  In Iowa, these jobs only increased by 5.4 percent.

The rate of growth in business ownership is faster in South Dakota than Iowa this past decade.  So is personal income.

The Tax Foundation offers insights as to why.  Here are key findings from their research:

• Local and state taxes can have an adverse impact on employment.

• Corporate income tax rates have the greatest negative affect on job creation.  (South Dakota has no personal or corporate income tax).

• High property tax rates are a major deterrent to new business start ups, because they are paid regardless of the businesses’ profitability.

The bottom three states on the Tax Foundation’s index in order are New Jersey (#50), New York, and California.  What do they have in common?  They’re bleeding jobs.  Why?  An unfavorable tax environment for business is a major reason.

The next governor of Iowa needs to get it right on this issue.  I was able to reach one gubernatorial candidate prior to deadline. Bob Vander Plaats told me the number one issue he hears on the campaign trail from business owners concerns our high property tax rates.  He would like to see property tax relief to spur economic development throughout the state.  Even more, he’d like to get government out of the business of picking winners and losers by dangling carrots in the form of tax credits and incentives.  He advocates a level playing field with lower personal and corporate income tax rates coupled with property tax relief.  In other words, economic development without gimmicks.

Last year, the U.S. News and World Report rated Iowa the second worst state in the county in which to start a business (West Virginia finished last).  They were critical of our high level of government interference in the guise of very high capital gains taxes, high corporate income taxes, and high unemployment taxes on wages.

It doesn’t have to be this way.

We have the best people in American living right here in Iowa.  And yet we’re not realizing our full potential because of unsound economic policy.  Iowa’s policy encourages business decisions on the basis of political forces as much as market forces.

There is more to economic development than tax policy. But in light of our current standing, tax relief is the place to start.

Grassley knows how to create jobs. Obama doesn’t. 1


When President Obama was sworn in as President, America’s unemployment rate was 8.5 percent.  Fifteen months later, it had climbed to 10.2 percent.

When President Obama was sworn in as President, Iowa’s unemployment rate was 6.2 percent.  Fifteen months later, it had climbed to 7.4 percent.

The President’s economic initiatives aren’t producing jobs.

I wrote the piece that follows for the Des Moines Register last December.  It appeared on December 13th, 2009.  The piece was based on a telephone interview I had with Senator Charles Grassley.  Senator Grassley presented a proven path to job creation:  an expansion of free trade.  Specifically, the Senator discussed the merits of the pending Korean Free Trade Agreement.

The bill has been held up by Democratic Party politics.

Since then, unemployment for the U.S. has increased a half a percent  and the unemployment rate for Iowa has increased even more.

While Democrats dither, Iowans are losing their jobs.

The President believes increased taxes, increased government spending, and increases in government regulation are the path to job creation.  He said as much this week when he was in Iowa.

There are legitimate pros and cons to pending Wall Street reform, but they’re not the key to job growth.

Free trade is.  And it doesn’t increase our taxes.  It doesn’t increase government spending.  And it doesn’t increase government regulation.  Senator Grassley gets it.  He’s worked in the private sector.

The President is too beholden to unions and Democratic Party pressure groups to advance the Korean Free Trade Agreement.

He doesn’t get it.  Our job as voters is to promote the positive message of free trade to the rest of our congressional delegation.

Iowa needs jobs.  Read the piece that follow for details.  Then get on the phone and call your representatives in Congress to support the Korean Free Trade Agreement.

Be sure to rate this post.

My Tea Party Introduction 2


I attended the Tea Party rally at the State Capital in Des Moines last Friday, my first.  I had three specific things I was looking for:

  1. What is the single biggest issue of concern to this movement?
  2. How many people would show up?
  3. Are the people in this movement normal?

Let me answer these questions in reverse order.  Yes, the people in attendance were normal.  I wanted to see for myself, because Speaker Pelosi and President Obama suggest otherwise.

It is true that they recited the Pledge of Allegiance without flinching.  And they belted out a heartfelt rendition of the National Anthem.  Are those normal occurrences at rallies attended by liberals?  Perhaps.

One fellow had a small American flag protruding from his hat.  The overall sense that I had from the crowd is that they love America.

The Des Moines Register reported that about 1200 people attended the rally.  Sounds good.  It’s hard to estimate large crowds for me.   The group was energized by the speakers, passionate about the message.

So what is the message?  Is there a single theme?  Yes.

The Tea Party Movement is all about independence.

The speakers talked about the size of government, about runaway government spending, about government intrusion into our lives in ways never intended by the Founding Fathers.  To quote Ronald Reagan, they want big government off their backs.

Ultimately, they agree with the first Democratic President, Thomas Jefferson, who said the government that governs least governs best.

Ultimately, they believe a government governs best when it makes people stronger by breeding independence.

Ultimately, they believe that the current direction of the country is exactly wrong, that we are weakening the very fiber of America by breeding government dependence.

I saw several Republican candidates at the rally.  However, Republicans would be sadly mistaken if they think this is a Republican crowd.  The Tea Party exists partly because Republicans didn’t act like Republicans when they controlled the Congress and the White House.

A reminder to Republicans:  President Obama is still more popular than you according to the RealClearPolitics polling averages (http://www.realclearpolitics.com/).

Republicans can pick up a lot of Tea Party votes if they act like Republicans.  If they regain power, will they exhibit the same political resolve that Mr. Obama and Ms. Pelosi have demonstrated in advancing their big government agenda?

THE NATIONAL CREED IS UNDER ATTACK 2


What is the glue that holds this great nation together?

Think about it.  The foundation of any family or nation is its shared value system.

America has stood united throughout its history because, despite differences in political beliefs, race and religion, we have a shared set of values.  The belief system was stated beautifully by Thomas Jefferson in the Declaration of Independence in what became known as the “National Creed.”  It states what America stands for, that each person enjoys God-given rights.  These rights include life, liberty, and the pursuit of happiness.

The National Creed is the bedrock of the U.S. Constitution and the Bill of Rights.  And yet today, the Democratic Party adamantly rejects, in their rhetoric and their legislative initiatives, each component of the Creed as envisioned by our Founding Fathers.

There is no middle ground in this clash of values.  America is at war with itself.

Were the Founding Fathers right?

Do all have a right to life?

Democratic legislators, by their actions, say “No”. They have paved the way for tax-funded abortions in their health care initiatives. They seek to revoke conscious-protection provisions that would require doctors and hospitals to perform abortions even if they have moral objections.

This is a big deal.  One in eight hospitals are affiliated with the pro-life Catholic Church. These hospitals employ 750,000 workers.  Do rank and file Democrats really want to force these institutions to make this choice:  perform abortions, which they consider to be murder, or shut their doors?

What about liberty?

Today’s Democratic Party is not concerned with liberty as much as it is with equality, even if it is at the expense of someone else’s civil liberties.

Nowhere was this more evident than with the President’s nomination of Sonia Sotomayor to the Supreme Court last year.  Judge Sotomayor sat on a circuit court panel that struck a blow against liberty by ruling against Frank Ricci.

Mr. Ricci was a poor student, impaired by learning disabilities.  He became a firefighter in Connecticut.  His department announced an opportunity for promotion, which he wanted.  Unfortunately, it required him to pass a test that he was ill-prepared to handle.

Undeterred, he quit his second job and invested over a thousand dollars in books.  Because of dyslexia, he hired someone to read to him.  He studied eight to thirteen hours a day.  His hard work paid off.  He finished sixth on the exam, which qualified him for promotion.  But the city threw out the results because no African-American fighters scored high enough to be promoted.

Ricci and nineteen others sued, charging they were discriminated against on the basis of race.  Judge Sotomayor said tough luck.  She embraces the philosophy of the Democratic Party that promotes identity politics.  Liberty can always be sacrificed in the name of equality.

What about the pursuit of happiness?

George Mason, who is considered the father of the Bill of Rights, said that “all men are by nature equally free and independent, and have certain inherent rights … namely, the enjoyment of life and liberty, with the means of acquiring and possessing property…”

The Founders considered the right to property to be fundamental. In today’s Democratic Party, the pursuit of happiness has become all about lifestyle choices that are at odds with our core values. Property is something to be redistributed at the whim of the state in the name of equality.

Do fundamental rights come from God?

Finally, do these inalienable rights flow from our Creator? Democrats and their pressure groups, such as the ACLU, have successfully expunged most public references to a Creator.  And the attacks on God continue.  Just this week, U.S. District Judge Barbara Crabb, appointed to the court by President Carter in 1979, ruled that a National Day of Prayer is unconstitutional.

Keep in mind that when Congress set a day aside for prayer in 1952, they didn’t tell you to Whom you had to pray.  It could be Jesus, Allah, or Mother Earth.

Keep in mind, a national day of prayer is an idea that’s been around since President John Adams.  He called for “a day of solemn humiliation, fasting, and prayer,” during which citizens of all faiths were asked to pray “that our country may be protected from all the dangers which threaten it”.

Keep in mind, if you don’t want to pray, you don’t have to!

Our Founding Fathers had it right.  America’s greatness and unity reside in its values.  To my many Democratic friends: call your party to accountability.  They have drifted too far from what this country is all about.