Posts Tagged ‘gubbermint’

Inept Regulation, Real Costs

The following two messages were discovered, adjacent to one another in an inbox, while cleaning out some old mail.

Subject: *NY FED SUSPENDS NEW BUSINESS WITH MF GLOBAL
Date: 31 Oct 2011 07:38:46 -0400

Bloomberg Bullet Points on
MF Global…

*NY FED COMMENTS IN STATEMENT ON WEBSITE

*MF GLOBAL SUSPENDED BY NY FED: CNBC

*NY FED SUSPENDS NEW BUSINESS WITH MF GLOBAL

*NY FED SAYS MF GLOBAL SUSPENDED FROM CONDUCTING NEW BUSINESS

And 25 minutes prior to these
headlines, we saw:

*MF GLOBAL SHARES HALTED

*MF GLOBAL SHARES HALTED FOR NEWS PENDING, CNBC SAYS

Subject: *MF GLOBAL FINANCE FILES FOR BANKRUPTCY
Date: 31 Oct 2011 10:19:09 -0400

Just Out…Headlines only…

*MF GLOBAL FINANCE FILES FOR BANKRUPTCY

*MF GLOBAL UNIT LISTS UP TO $50 MILLION IN DEBT IN COURT FILING

*MF GLOBAL ESTIMATED ASSETS $100 MLN TO $500 MLN IN COURT PAPERS

*MF GLOBAL HOLDINGS, BROKER-DEALER UNIT ALSO FILE FOR BANKRUPTCY

Look at the dates of these two stories. The Federal Reserve is arguably one of the most effective regulators (at least partly due to insulation from partisan political considerations and a left-handed compliment to be sure). Still, they apparently didn’t know there was a problem with MF Global, or only took decisive action hours before the firm declared bankruptcy. Note also the possibility that it was the oft-maligned market that may have been the Fed’s first clue and, at any rate, reacted before the regulator.

The Bloomberg headlines are less than clear, but my initial reading was that MF Global was being cut off from new business with the Fed. If that reading is correct, the Fed acted first to protect the Fed, and left everyone else to fend for themselves. Those with unfettered faith in the ability of gubbermint to insulate us from every ill always whine about the “harsh realities” of unfettered competition. That’s a straw man, as this country hasn’t seen unfettered free enterprise in nearly a century (or more).

The industries which elicit the loudest cries over “unfairness” and “greed” when harsh realities are meted out after they blow up, are invariably the most regulated (banking, insurance, autos, etc.). Those which are less regulated don’t seem to blow up. When was the last time Apple, Google, Facebook, Twitter, Microsoft, Cisco, etc. needed a federal bailout? Where is the real innovation and economic value being delivered — in the most regulated, or less regulated industries?

Government regulators protecting the populace is a pipe dream. They protect themselves. The costs — both bureaucratic overhead and compliance, all born by we the people — are not.

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Green Pipe Dreams I

An article yesterday morning in Mercury News’ SilconValley.com tells the story of a “rough patch” that “high-flying Solyndra” has hit. The company manufactures solar panels. Despite $1 billion venture capital funding and a $535 million loan guarantee from DOE, the company is struggling and analysts don’t see a way forward.

President Obama held the firm up as a “green” poster child during a visit less than a year ago.

Jumping to conclusions from one anecdotal data point, in one article, does not generally indicate reasoned understanding. Nonetheless, Mercury News is no right wing puppet and the story includes some damning facts.

The article also raises the obligatory China card (who can compete with their labor costs?), but contains its own refutation of that scaremongering.

Solyndra’s manufacturing costs are $3/watt, but the distractingly vague “many low-cost Chinese manufacturers” have costs in the $1.10-$1.20/watt range. There, that’s it. Those damn Chinese and their “massive government support.” Except Solyndra has received similar support (what is $535 million, if not massive?). Still more relevant is that another competitor, First Solar of Tempe, AZ, has manufacturing costs of $.75/watt, expected to be at $.53 by 2014.

Even if Solyndra could compete with the Chinese, they’d be beat by a company right here in the good ol’ US of A. So why raise China? Maybe to fill the story without having to ask the question: What in God’s green earth makes people believe the gubbermint can pick winners and losers?

I’m not even asking whether government should make such choices (the consequences of which — abuse of power for personal gain — should give liberals the heebie-jeebies, rather than the orgasms it seems to do).  No, the objection is to whether they can make such choices effectively. Government “investment” (a misnomer if there ever was one) will inevitably lead to misallocation of limited resources, making us all worse off.

Before I get the obligatory “ok government hater, don’t call 911 the next time you have an emergency” straw man objections, I’m not advocating no government, but a properly limited one. $535 million (even if “only” loan guarantees) to a company with a possibly fundamentally flawed business model, no matter how great a product, is $535 million down the toilet. It is unavailable (whether privately or publicly, capital is fungible and this capital is gone) for investment  in a viable enterprise that might create 1000 jobs rather than scuttle such plans as Solyndra has done.

<aside>
A company spokeswoman is quoted, “The company didn’t tell its story as well as it should have.” That sounds like some politicians, who can’t admit their schemes don’t work and aren’t wanted by the citizens. They delude themselves into believing they simply failed to effectively sell them to the ignorant masses.
</aside>

If those in public positions want to be hedge fund managers, or venture capitalists, then they should choose that route. Decisions like this, and mountains more just like them, prove why they don’t. They couldn’t succeed. But as a politician, or bureaucrat, they’re able to play assume a can opener all day long, with other people’s hard-earned money and without personal accountability. Don’t talk to me about the accountability of the ballot box. There are enough voters with short memories that we’re still electing politicians based on the same failed promises of the last 40 years. (Probably longer, but that’s all I remember.)

Stop already with “green jobs of the future” promoted by those who don’t even know the past. Enough with government “investment.” With apologies to the many teachers who don’t deserve it, consider this epigram: Those who can, do. Those who can’t, teach. Without apology I add the corollary: Those who can’t teach become politicians and bureaucrats.

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