This being April 1st, in a normal world, it would be time for a fun post poking fun at something or playing a bloggers version of an internet prank.
But these are not normal times, and there is nothing funny about the current world situation.
So instead, I ‘d love to get the answer to some economic questions that continue to bother me – especially in light of the Orange Monster’s refusal to do the right thing and to accept responsibility for his monumental screw-ups during this crisis. It did not have to have been this way for the United States.
Question #1: Why are sitting members of Congress allowed to trade stocks?
Background to this question is here:
Sen. Kelly Loeffler (R-GA) benefited from stock trades worth millions of dollars shortly before the general public was alerted to the severity of the Covid-19 crisis, selling off shares in industries that have been adversely affected by the coronavirus pandemic and buying shares of companies that have benefited, according to an Atlanta Journal-Constitution (AJC) report published late Tuesday.
Loeffler, who sits on the Senate Health Committee, first began selling stocks on January 24 — the same day that committee held a private all-members session on Covid-19 — and continued making trades in late February and early March.
According to her latest financial disclosure, which the senator provided to the AJC, her largest transaction involved the sale of $18.7 million in Intercontinental Exchange stock in three separate deals dated February 26 and March 11. Intercontinental Exchange operates global exchanges for several financial and commodity markets — and since Loeffler made her first sale, its stock has fallen by 16 percent.
When challenged over the trades following prior reporting by the Daily Beast, Loeffler said the transactions were handled by third-party advisers, given that she is an elected official and her husband, Jeffrey Sprecher, is chair of the New York Stock Exchange and chair and CEO of its holding company, Intercontinental Exchange.
Additionally, a spokesperson for the senator told the AJC that the sell-offs were pre-planned in order to pay taxes, cover transaction costs, and produce “liquidity.”
Excuse me while I sneeze. Horseshit!
Loeffler maintains that an investment firm handles the transactions and that all that the couple does is set a general investment strategy. That’s very hard to believe when you realize that her husband is head of the company that runs the New York Stock exchange. Furthermore, the STOCK Act, a law that went into effect in 2012, makes it illegal for senators to use inside information for financial gain.
I have three specific issues here: 1) A third party executing trades is not the same as totally blind trust. It presumes that she has detailed knowledge of the investments and the trades that are to be made. 2) 18.7 million dollars is a lot of money. It’s obscene for her to be that rich. ( Let’s not forget, she was appointed a Senator by Georgia’s governor Kemp, who used voter impression to win his own election and probably was bribed influenced to give this woman a Senate seat she neither deserves nor has earned). And 3) the timing is incredibly suspect – especially when you look at her public pronouncements around the same period.
Question #2: Why does a private company run the New York Stock Exchange? Why is it not run by the Federal Government as public trust activity?
There is no right answer to this question save for the fact that it has always been so. The NYSE was founded in 1792. The other answer you most often get is that the NYSE is not the only place stocks are traded. There is, of course, the NASDAQ, after all, and it too used to be a publically traded company. The tie in with Loeffler began when, in 2012, Intercontinental Exchange (ICE) announced it would buy NYSE Euronext. ( NYSE merged with Euronext in 2007) Her husband is the CEO of Intercontinental Exchange.
It’s by any reasonable definition a conflict of interest for the Senator and one more reason why she should have had to place all her assets into an airtight blind trust. She sits on the Senate subcommittee that oversees futures markets, meaning she directly regulates the business activities of the person she sleeps with who is her husband. That she has a net worth of over 500 million is a whole other problem, aggravated by the Supreme Court’s misguided Citizens United decision.
Now the counter-argument is that she earned that money ( probably the hard way :-D), and she should not have to be impoverished to be a Senator. I refuse to accept that. There are ways for her to invest in a portfolio and put distance between her and the portfolio. Many fine public servants have done that – and as a Senator, she has to be above the hint of monetary corruption. The idea that “these are rich people whose finances are too complicated for we unfrozen caveman citizens to understand” is ridiculous. This is why mutual funds were made. If she wants to be rich, then stay in the private sector.
And getting directly back to the question, I still cannot understand why the SEC does not run the exchange as a public trust – as a part of its regulatory responsibilities to ensure the good of all Americans. The exchange itself should be a not for profit activity and given the amount of money that people make on Wall Street, paying some of that money back to the US seems only right.
Question #3: Why in the hell is there currently a bidding war over ventilators?
Take some time and listen to this story first before we discuss this.
Pretty much every day, New York Governor Andrew Cuomo says the same thing in his press briefings. The states all need ventilators and there aren’t enough, so they’ve been competing.
“You now literally will have a company call you up and say, ‘Well, California just outbid you.’ Cuomo said at a press conference Tuesday. “It’s like being on eBay, with 50 other states bidding on a ventilator.”
California bids. Illinois bids. Florida bids. New York bids.
We are in the middle of a national emergency, and states are in a bidding war? Are companies being allowed to make a profit on the misery of thousands of people? What the hell is wrong with these people?
My journalistic hero sums it up well:
Therefore, all the excuses that the president* has used for not using the DPA more widely in response to this pandemic, and in response to desperate pleas from the country’s governors, are absolute moonshine. He prefers the way things are working now. He wants governors to compete against FEMA, lose, and then have to beg for ventilators and PPE, which he can dole out like pork-barrel projects to help his re-election campaign. And he’s got help, too. From Bloomberg:
That argument is similar to the U.S. Chamber’s. Companies are voluntarily “doing everything that the government is asking for them to do,” said the Chamber’s chief policy officer, Neil Bradley, in an interview. He confirmed the group had lobbied the White House not to use the Defense Production Act…
On Tuesday, 16 state attorneys general sent Trump a letter urging him to immediately use his DPA powers. Six Democratic senators, led by Elizabeth Warren, slammed the U.S. Chamber, a Republican-allied trade group, calling its lobbying of the White House to not use the law “shameful.” In a March 23 letter, the senators said it placed “the short-term desires of its members above the economic and public health needs of hundreds of millions of American families.” The letter asks the Chamber to say on whose behalf it was lobbying, but Warren’s office on Wednesday said it hadn’t received an answer.
Using the DPA on GM isn’t enough. It should have been invoked and employed across the entire manufacturing economy and noting that, for once, the president* didn’t present himself as a rodeo clown in public doesn’t alter the fact that nothing but ruin follows in the man’s wake.
It would usually be here that the supposedly “decent people” on the front porch of many political or military blogs would start ranting abut “socialism” or “becoming Venezuela”. None of that is true and when they ineveitably would shout about being uncivil to them, I would commend these words to them:
The response to COVID-19 should be a Federal Effort with coordinated production along the lines of the Controlled Materials Plan of World War II fame. The price should be fixed at the Federal Level or the Federal Government should be buying them all and distributing according to need.
That would assume, of course, that we had a competent President who was not surrounded by a family of grifters. Unfortunately, we don’t.