Wednesday, May 30, 2012

This might make NWest's head explode

Spent most of the evening programming a cable remote, since technology makes our lives so much easier, so I'm taking a quick break from the religion discussion.  Instead, I'm going to take a quick look at a bill for which there are no fewer than three features which would make it appalling to Austrians and libertarians, like frequent commenter and friend of the blog NWest.  Here's an article which describes the bill.

1.  The bill focuses on a bank which was affected by the Dodd-Frank finance reform act.  Because its assets were just over $15 billion by a certain date, it was forced by Dodd-Frank to have a higher capital reserve, or amount of cash it is required by law to have in its possession at any time.  It's kind of like the law in Ocean's Eleven that forced the casino to keep a bunch of chips in the vault on the night of the heist.

2.  Because the capital reserve requirement would fuck over this one bank in New York, which donates to lots of politicians including one Barack Hussein Obama, it looks suspicious when people are supporting this bill which would only affect this one bank and allow it to essentially have $300 million that it's allowed to spend instead of having to keep it in reserve.  The bank essentially gets $300 million as a result of this bill, and it's donated lots of money to lots of people, including the President.  This item actually looks bad whether or not you're an Austrian.

3.  But it's not just any corporation kinda-sorta getting $300 million as the result of a single act of Congress.  It's a bank, which thanks to fractional reserve banking, can turn that $300 million into $4.5 billion in loans, essentially indirectly altering the monetary policy of the nation through an expansion of the money supply.

What makes it especially tough is that most people pretty much agree that the bank shouldn't have to kick in the extra cash, but it has to under the law as it stands today.  Doing what would make logical sense  requires lots of people who would have a powerful reason (lots of donations) to do the bank's bidding no matter what to vote for a bill that only helps one rich corporation, but would, at least to a Keynesian, help everybody.

Quite a sticky situation.

1 comment:

NWest said...

Don't worry Jeff, I've got a nice long roll of duct tape at my desk. I'm always sure to wrap it around my head before I read the blog, just so I at least have all the pieces after it explodes ;-)