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.

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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.

How to create more jobs for America Reply


As seen in the Des Moines Register on December 13, 2009

America needs more jobs. 

Unemployment is killing us. I know of so many people who have lost their job and many of those still employed feel insecure.

The President held a “jobs summit” to look for solutions.

I don’t trust the President’s judgment when it comes to creating jobs.  He’s never run a business or even worked in the business sector. In fact, he is openly adversarial to the private sector.

What does he believe in?  Higher taxes on oil companies.  Higher taxes on capital gains.  Higher income taxes for high income earners.  More government regulations on practically everything.  Budget-busting stimulus packages.

His ideas aren’t creating jobs.  They deter job creation because they increase the cost of doing business.  They increase the risk associated with running a business.

The President and his party could do something very practical right now to create jobs:  approve the Korea Free Trade Agreement.

South Korea is a huge market for manufacturing, services, and especially agriculture products.  The upside to the agreement is substantial.

The man who helped negotiate the treaty in 2007 was in Des Moines over Thanksgiving.  David Spooner was Assistant Secretary for Import Administration under President Bush.  He told me: “The Korean agreement would reduce our trade deficit.  As we try to pull out of our recession, it should be a no-brainer to pass a trade bill that will reduce our trade deficit.  The average job linked to exports earns 17% more than the non export-related jobs.  The trade agreement would promote quality jobs.”

Did you know Korea is the sixth largest export market for pork?  Japan is number one.  But according to the Iowa Pork Producer’s website, pork exports to Korea could surpass Japan’s once the treaty is fully implemented.  Even more, they project the agreement would give our pork producers an increase of $10 per hog marketed.

This is good news for Iowa.

Iowa Congressman, Leonard Boswell, supports the treaty:  “The U.S. – South Korea Free Trade Agreement is a significant opportunity for Iowa as an agricultural commodity state and the home of agriculture manufacturing companies.”

I talked to Senator Grassley about the bill.  He called the agreement “vital”, even more important that the one we have with Canada, who is our biggest trading partner.  He pointed out that the U.S. converted trade deficits into surpluses after implementation of trade agreements with Chile, Morocco, Bahrain, Oman, Central America, and the Dominican Republic.

After implementation of agreements with Singapore, Australia, and Peru, our trade surpluses with those countries got even bigger.  And Korea is a much bigger trading partner than any of these.  The upside is off the charts.  Grassley quotes Department of Commerce figures that tell us every billion dollar increase in U.S. exports create 20,000 jobs.

Free trade is good for America generally and Iowa specifically.

The treaty is negotiated.  The work is done.  So what’s the hold up?

Democratic Party politics.

Representative Boswell’s support notwithstanding, President Obama and his party are  dragging their feet.  They want to go back to the drawing board on this agreement to appease Big Labor who want more protectionism built into the agreement.

There’s no time to dither.  Senator Grassley points out that the European Union has just initialed their own trade agreement with Korea.  In a letter to President Obama, Senator Grassley says:  “If we fail to implement our pending trade agreements promptly, we will place our producers and their workers at a serious competitive disadvantage.  It would be both senseless and irresponsible for us to do so.”

Let’s set politics aside and support policies that really create jobs.  The Korea Trade Agreement is the perfect place to start.

Does Obamacare require you to pay for abortions? Reply


Yes.

Despite the furious debate between President Obama and a few conscientious Democrats, like Bart Stupak, you and I are required by force of law to pay taxes that will abort babies.

Despite an Executive Order to the contrary, the long anticipated dream of the Democratic Party has been realized.  Tax-payer funded abortions are here.

I will point out how the Executive Order is circumvented in a moment.  First, let us review the three philosophies affected by the new abortion entitlement.

Group One

The first was clearly articulated in a letter to the editor in yesterday’s Des Moines Register (in response to my column the week before).  I quote:  “A fetus is a growth like a tumor – not a person, and has no human rights whatsoever.”

In other words, a fetus is an inhuman blob, a tumor, perhaps much like a gall bladder gone bad.  It is not a person.  To Americans with this philosophy, there is nothing objectionable to tax-payer funded abortions.  To this group, there is much to be said of ridding the world of unwanted babies, much as there is much to be said of ridding the world of gall bladders gone bad.

This group sees no moral issue with abortion.

Group Two

Group Two consists of President Obama and most of the Democratic Party.  They believe abortion should be rare, but safe.  This group gives tacit acknowledgement to the humanity of the fetus.  Why else should abortions be rare?  You wouldn’t say that if you viewed the fetus as being equivalent to a tumor, as Group One does.  However, despite its humanity, group two is unwilling to grant the fetus human rights and allows its destruction for any reason.

Group Two typically mouths the platitude:  “while I’m personally against abortion, I can’t impose my view on others.”

Group Three

Group Three views the fetus as a baby, as a human being, as a person with full human rights.

Notwithstanding the platitudes mentioned above, Group Two in fact joined with Group One in pushing for taxpayer funded abortions in the healthcare debate.

Even more, they agitate to remove conscience safeguards for pro life healthcare providers.  In fact, they very much wish to foist their view on others.

Group Three, of which I am a member, recoils in horror and shame at the thought that our tax dollars are used to destroy innocent human life in the womb.

At this point, you may want to know why Group Three is so worked up.  After all, the President issued an Executive Order to keep abortion out of the health care bill.  Right?

Unfortunately, there are loopholes.  The United States Catholic Bishops issued a summary of these loopholes:

***

• Federal funds in the Act can be used for elective abortions. For example, the Act authorizes and appropriates $7 billion over five years (increased to $9.5 billion by the Health Care and Education Reconciliation Act of 2010) for services at Community Health Centers.  These funds are not covered by the Hyde amendment (as they are not appropriated through the Labor/HHS appropriations bill governed by that amendment), or by the Act’s own abortion limitation in Sec. 1303 (as that provision relates only to tax credits or cost-sharing reductions for qualified health plans, and does not govern all funds in the bill).  So the funds can be used directly for elective abortions.

• The Act uses federal funds to subsidize health plans that cover abortions. Sec. 1303 limits only the direct use of a federal tax credit specifically to fund abortion coverage; it tries to segregate funds within health plans, to keep federal funds distinct from funds directly used for abortions.  But the credits are still used to pay overall premiums for health plans covering elective abortions.  This violates the policy of current federal laws on abortion funding, including the Hyde amendment, which forbid use of federal funds for any part of a health benefits package that covers elective abortions.  By subsidizing plans that cover abortion, the federal government will expand abortion coverage and make abortions more accessible.

· The Act uses federal power to force Americans to pay for other people’s abortions even if they are morally opposed.

The Act mandates that insurance companies deciding to cover elective abortions in a health plan “shall… collect from each enrollee in the plan (without regard to the enrollee’s age, sex, or family status) a separate payment” for such abortions.  While the Act says that one plan in each exchange will not cover elective abortions, every other plan may cover them  — and everyone purchasing those plans, because they best meet his or her family’s needs, will be required by federal law to fund abortions.  No accommodation is permitted for people morally opposed to abortion.  This creates a more overt threat to conscience than insurers engage in now, because in many plans receiving federal subsidies everyone will have to make separate payments solely and specifically for other people’s abortions.  Saying that this payment is not a “tax dollar” is no help if it is required by government.

***

What gives the Catholic Bishop’s such credibility is that if the Stupak language was kept in the bill, the Bishops found much to commend in the rest of the bill.  (I humbly demur, but that is a post for another day.)

Does Obamacare require you to pay for abortions?  Yes.