Category Archives: canada

No Tea Party in Canada

By Marc Seltzer; originally published at care2.com on October 13, 2010
. . .
Democrats seem bewildered by the strength of the Tea Party movement.  Powerful incumbent Senators such as Boxer (CA) and Reid (NV), and numerous House Reps in leadership positions find themselves in difficult contests. Republicans are poised to gain significant numbers in the legislative branch in November’s mid-terms election.

Fighting back, Democrats and their supporters have gone after Tea Party-Republican candidates, focusing on their oddities, inconsistencies, and lack of coherent policies.  Rachel Maddow, among others, has exposed the remarkably poor caliber of some candidates propelled by the Tea Party to victory in the Republican primaries.

Be that as it may, the legitimate complaint of the Tea Party movement has not been effectively dealt with by Democrats.  The root groundswell of anti-government energy comes from fear and anger about deficit spending and debt.

Deficits matter.

In Canada, governments of the past decade worked hard to erase the substantial deficits of the 1990s.  When the 2008 financial crisis arrived, Canada was able to face the recession with sound economic fundamentals.   Increased public spending in 2009 and 2010 again created deficits, but helped Canada recover nearly all the jobs lost in 2008.  Embarking on a new deficit spending program did not faze the public, and Canadian leaders are now talking about returning to surplus budgets in the next 7 years.

There is no tea party movement in Canada.  National health care, yes.  Major tax protests, no.

For all the things wrong with aspects of the Tea Party movement, from blaming the Obama administration for current ills to dredging up misguided social views, the truth is that the U.S. would have braved the recession far more effectively if it had had a budget surplus.

In not addressing this aspect of the financial health of the nation directly from the start, with a coherent long-term plan, the Democrats have allowed the opposition to bundle legitimate disapproval of the government’s budget outlook with generalized anger at banks, unemployment, the Bush administration, Congress, taxes, and government spending.

It’s working for Republicans so far, and if this election looks bleak, imagine Sarah Palin filling a stadium near you in 2012.

(Marc Seltzer has been on paternity leave after the birth of his daughter in June.  Marc can also be heard reviewing U.S. Supreme Court cases at SupremePodcast.com)

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Shakespeare at the Monument-National Theatre

By Marc Seltzer

William Shakespeare wrote English history into many of his plays.  His Henry V chronicles the famed 15th century battle of Agincourt, in which an outnumbered regiment of Welsh and English soldiers, led by a young, devout King Henry V, faced a substantially larger army of Frenchmen.

Shakespeare’s audience were Londoners at the turn of the 16th century.  He schooled them in history even while he took liberties with fact to create stories of dramatic irony, intriguing character and English glory.  Henry V does not display the dark ingenuity and twisted psychology of a Hamlet or Macbeth.  There are no ghosts or witches, no vaulting ambition, murderous madness or overleap of the rules of royal succession.  Instead, Henry V is a beautiful examination of monarchal leadership, as Europe emerged from feudal hierarchy.

The Persephone production at the Monument-National presents a lively and fast-moving Henry V.  The large and able cast is led by Aaron Turner as King Henry.  Turner, and other standouts Alex Goldrich, Christopher Moore, Clive Brewer, Karine Lefebvre and Dustin Ruck, each playing a number of characters, keep the lines flowing gracefully, bringing the richness and complexity of Shakespeare’s tongue to life.

King Harry, as Henry V was known, is the good king, true to his country and to God.  Yet this is far from fairy-tale.  Harry is tested by a series of obstacles from traitors among the English lords and butchery by the French, to scenes of doubt and misbehavior among his common troops.  The King is an absolute monarch.  His will must be obeyed.  But in Shakespeare’s portrayal, the king’s nobility of spirit and justness of command make right the world:  Traitors pray thanks that their plots are uncovered before harm can result; even a childhood friend of the king is not spared punishment, where just rule is broken; and loyal kinsmen prefer to face the enemy outnumbered thus to gain the greater glory if they prevail.

Co-directed by Gabrielle Soskin and Christopher Moore, the production uses the large cast to great effect in scenes with choreographed movements and unified voices.  Costumes, by Sabrina Miller, conjured an army, but were at times confusing, especially where actors took on multiple roles.  Moreover, the weapons and additional vague references to modern warfare did not resonate through a unified production theme.

However, in a week in which the leaders of present day Great Britain and France announced that they would combine their nuclear testing programs in an effort to save costs and further solidify their mutual security interests, one can admire the long path of history.  As Henry V plays Montreal, les Anglais et les Français have opportunity to see a worthy production by the bard of Avon.

After seeing the stage production, you may enjoy one of the great film versions of Henry V, Kenneth Branagh’s 1989 triumph or Lawrence Olivier’s 1944 timely production.  Branagh’s staging and delivery of the St. Crispian’s speech “And gentlemen in England now a-bed, shall think themselves accursed they were not here“ would make Shakespeare stand at reveille, while Lawrence Olivier’s wooing of Princess Katherine gushes charm and respect at a profound moment of cross-channel cooperation.

At the Monument-National, 1182 St.-Laurent Blvd., Montreal Wednesday through Saturday until November 13, at 8:30 p.m., and matinée times Friday November 12th at 12:30 p.m. and Saturday November 13, at 2:00 p.m.

Are Republicans Lying About Financial Reform?

By Marc Seltzer; originally posted on April 20, 2010, at care2.com

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As the Senate moves towards consideration of financial industry reform, politics again threatens to overwhelm substance in the debate.  Conservatives have attacked Democratic legislation with the moniker “bailouts forever.”  Political writer Mark Halperin charged Republicans with “intentionally misreading the law,” echoing claims of angry Senate Dems.  Unlike with health care reform, where budget complexity defied evaluation without experts and CBO forecasts, the core principles of financial reform are fairly straight forward.

The following is what you need to know to make your own decision:

A.  Protections against risky behavior by financial institutions


1. Capital Requirements

Companies will be forced to keep more money available — “capitalization” or “capital reserves” — to protect themselves against losses so that typical companies will not be at risk of collapse in a downturn.  Sufficient capital could have eliminated the need for bailouts of financial institutions in 2008-2009.

2.  Leverage Restrictions
Financial companies will be limited in how much money they borrow and put at risk. Many institutions make money by investing and taking risk with borrowed funds.  This extends their gains in boom times, but threatens overwhelming losses in a bust.  Private companies are still allowed to place their bets, even risky bets, but they cannot do so using such high percentages of borrowed funds, creating a risk of nonpayment when their investments go bad.

Capital and Leverage rules are the key to protecting the economy from a 2008-style crisis. No longer would the great extent of irresponsible risk be tolerated.  With each individual company taking less risk, a severe downturn in the economy could drive some financial entities out of business, but would not threaten the entire financial industry and thus require government assistance.

Watch out for “too big to fail” arguments from the Left (“break up the banks”) or Right (“endless bailouts”). Canada has five of the largest banks in the world and none faltered.  Canada’s financial institutions are regulated with the same type of serious oversight included in current US proposals.  Capital requirements for Canadian banks were held at 7 percent going into this crisis, while the global average was closer to 4 percent. Canada’s chief financial regulator, OSFI Superintendent Julie Dickson, remarked in November 2008, “We have seen how strong capital cushions in Canada have paid off to the benefit of our institutions and overall financial system.” (My comparison of the U.S. administration’s proposals with the Canadian regulatory system)

The point is, capital, leverage and risk management are more important than size.  In fact, no one financial institution in the US was too big to fail as far as the effect on jobs, small business loans or the stock market.  The problem was that many separate but co-dependent entities were unable to handle a downturn and would have failed within a period of months, if not for government intervention.  Early in the Great Depression 5000 banks failed.  Making each bank smaller is irrelevant, if they all fail.

B.  Specifically dealing with failing companies.

1.  Closing companies down — “FDIC Resolution Authority”
The administration’s proposal is to use the FDIC (Federal Depository Insurance Corporation), which currently closes banks that are failing, to close all financial institutions, when they fall below financial operating requirements.  The FDIC is highly regarded for efficient and effective “weekend” bank closures.  FDIC agents take over Friday at 5:00 p.m., and Monday the bank is open for customers, but under FDIC supervision.  The FDIC locates a new buyer quickly and gets out of the way once new management takes over.  Previously, there was no law permitting FDIC action on failing financial institutions that were not technically chartered banks.  Thus, Bear Sterns, Lehman Brothers, Citi, etc., could not have been closed by the FDIC.

The alternative approach, proposed by critics of the FDIC model, is to allow failing financial institutions that are not banks to file for bankruptcy.  Advocates say that bankruptcy courts have more expertise than the FDIC at large complicated business structures.  However, bankruptcy does allow the management to continue through the failure and to propose corrective plans, using the bankruptcy court to deal with creditors.

In the 2008-2009 crisis, insurer AIG would have had to file bankruptcy, if the federal government did not bail it out.  In bankruptcy, AIG and its management would still have aimed to protect their own interests, despite the anticipated international catastrophe of its own making. (Many financial institutions had used AIG to insure themselves against losses; AIG’s collapse would have led to additional major collapses worldwide)

According to the proposed “FDIC resolution authority” model, the financial institution will be taken over and immediately managed by experts with the public’s interest in mind.  Presumably, the bankruptcy model would also protect the larger financial system, since higher capital and leverage standards, discussed above, would serve to lower the amount of damage that any one institution could cause in failure. However, the FDIC, as a banking regulator, has expertise in the financial system, while bankruptcy courts handle competing public and private interests in all types of businesses, and may not always have a view to protecting financial stability.  Remember, the purpose of the new law is to stop poor decision-making of a few entities from impacting the entire industry and the wider economy.

2.  Industry-Financed Disaster Fund
The Senate legislation plans for the financial institutions to contribute to a fund to be used if needed in closing companies.  The 50 billion dollar fund would shield taxpayers from having to pay for any costs incurred by failing financial institutions.  While the new law intends to avoid bailouts altogether, by making financial institutions less risky, more self-sufficient, and by closing them before they create systemic damage, it provides that any bailouts that do occur will be paid from a fund created with private financial company fees.

Should industry-financed bailouts be allowed? Imagine, for example, that a financial institution failure would cause a functioning private hospital to be shut down for a week while it sought new financing from another bank.  In that case, not because of a threat to the wider economy, but because of other public purposes, short-term bailout financing, using the institution-financed fund, might be deemed appropriate, at no cost to the tax payer.

The reason that Congress is rejecting the idea of outlawing any possibility of bailouts, is that it is possible that public purposes will be served by having a bailout option.  What is different here is that the government will not be forced into bailout because the new capital and leverage requirements will protect the wider economy.  Thus, Republican claims that bailouts using public funds will continue, do not take into account the fact that new capital and leverage requirements are the primary defense against systemic risk.  It is not by pledging, even through legislation, to avoid bailouts that we will be protected.  It is by stopping companies from taking so much risk that the entire system is put in danger of collapse.

C.  Consumer Protection

Fundamental consumer protections already exist to keep financial institutions from stealing or mismanaging their customers assets.  However, as the Madoff scandal illustrates, the government is not always effective in policing.  In addition, in the real estate market, many homebuyers obtained mortgages without fully comprehending the terms and consequences.  The new law aims to provide additional protection for consumers.  Krugman: Looters in Loafers

The financial industry is strongly against the consumer protection provisions, partly because they do not know how aggressive the new body will be in regulating business practices.  (Auto-finance example)  The current proposal puts a new consumer-protection agency under the authority of the Federal Reserve.  As the Federal Reserve traditionally regulates banks and manages monetary policy, including the interest rates that banks are charged to borrow funds for their business operations, the issue for the new consumer protection regulator will be how independent it remains from Fed regulators with different goals, and determining what level of protection balances business objectives with consumer rights.

These are the core ideas behind the administration’s plan, as spearheaded by Treasury Secretary Timothy Geithner and now incorporated into Democratic legislation.  As Congressional leaders posture about whether to support or oppose the plan and why, decide for yourself what’s politics and what’s substance.

More by Marc Seltzer:  Hate that Obama’s Near the Middle, Think Again!
Questioning Conventional Wisdom

Will Republicans return to power in November?  Listen to Marc Seltzer and Jessica Pieklo discuss political prospects at Redefining America:  Constitution and Leadership 2010

April 22, 2010 UPDATE: NY Times updates Dems efforts to push forward in the Senate and Republican opposition.

Comment to NPR story: Experts Say Bills Won’t End ‘Too Big To Fail’

Comment to NPR story:  Experts Say Bills Won’t End ‘Too Big To Fail’

I disagree. The new legislation uses higher capital requirements and lower leverage limits to control systemic risk. This is the right approach. It makes the entire financial industry less risky and more insulated from downturns. “Break up the banks” sounds more anti Wall Street and sounds tougher, but remember in the Great Depression 5000 banks failed in the early years. It is no better for 5000 small banks to fail than it is for 10 large banks to collapse. What counts is that all banks are more regulated with stronger restrictions. Canada has superbanks, among the largest in the world, but suffered no financial crisis and required no bailouts. Canada’s banks incurred losses, but they were small compared to resources of the banks, because regulators there expect banks to be better capitalized and they can demand bigger banks, which pose more risk the system, to meet higher requirements than small ones. For a comparison of Geithner’s plans and Canadian approach: https://marcivanseltzer.wordpress.com/2010/01/29/what-can-canada-teach-us-about-banking/

Hate That Obama’s Near the Middle? Think Again

(Photo:  Obama speaking in Europe, where his views are well received and highly regarded)

By Marc Seltzer; originally published on April 13, 2010, at care2.com

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Contrary to all the talk of disenchantment with the state of the nation, there is reason to be optimistic that President Obama is leading the government in exactly the right direction.  While his critics voice disappointment and outrage, calling on Mr. Obama to govern to the left and to the right, President Obama governs by judgment, not ideology.  This will always disappoint ideologues who see the world through conservative or liberal glasses, but do critics have credible political ideas behind them?

At the outset, a few things need to be set straight.  First, the biggest thing President Obama has done since taking office is not health care reform.  (Complete Story)

Universal Coverage or Maintaining the Status Quo?

Photo credit: cdc.gov

By Marc Seltzer; originally published on March 13, 2010 at care2.com.

. .

For all the smoke and mirrors, all the outrageous claims, and all the frustration about what is not in the Democrat’s health care reform legislation, the fundamental impact of the proposed reform is very simple.  The Senate bill, soon to be voted on by the House, uses public funds to insure Americans who do not have insurance.  (Making sense of the polling, from the Washington Post)

In providing for universal coverage, it satisfies President Obama’s preeminent campaign goal — one he has not walked away from despite profound economic turmoil and deep political resistance.

It is amazing that the debate over such a simple idea took so long and involved so many distractions.

Republicans do not want to spend public funds to insure the uninsured — plain and simple.  Though they do not say it so clearly, instead, hiding behind claims that the deficit, the recession, and public opinion polls are the reason that the bill is wrong for America.

Smoke and mirrors.  (Krugman dispels some myths)

President Obama seeks to add an entitlement, consistent with contemporary democratic principles of capitalism with a social safety net.  Republicans, consistent with principles of individual effort and individual reward, seek to resist it.

What is more puzzling is why the left is so fractured in its desire for reform.  There has not been a serious proposal for an open-enrollment public option or for single payer public insurance on the table since the beginning.  This is not to say that the United States wont move towards public insurance or public medicine in the long run.  But with only a subsidy and insurance regulation on the table, the left’s threats to undermine President Obama’s universal coverage program because it does not do away with the for profit medical system makes little sense.

What would make sense is to take a longer range view:  To believe that universal coverage is an important step in the direction of providing good care for all; to trust that reforms included in this legislation can be used to regulate for-profit insurance practices to eliminate exclusions and rescissions which kept people who wanted insurance from receiving it; and to recognize that a variety of reasonable cost-containment measures will be used to slow the growth of health care inflation.

I have written often about deficits and debt, reform of fee for service medicine and changing financial incentives in health care.  And I think this legislation is serious medicine for the problems we have in these respects.  And I have spoken with Canadians and Europeans who love their publicly funding health care systems.  And I still think that this legislation is a serious attempt to insure that all Americans can receive adequate health care.  If I were like most supporters of this health care reform, I would say that this legislation is poor, for one reason or another, and then suggest that it was the best we could get under the circumstances.  But this legislation is powerful, historic and designed to solve the problems we face.  So why, complain?

Pass the bill.

(Sign the petition)
. .
More thoughts on national issues: my podcast ramblings and conversations with Jessica Pieklo.

March 19, 2010 Update:  Paul Krugman sounding more positive, as well, in the New York Times.

Podcast March 9, 2010

March 9, 2010 “My Show

Health care reform vote counting.  Tension or media hype? (Wall Street Journal)

Democrats and Republicans differ on universal coverage.  Cost cutting in tax on high value insurance plans gets little credit.

Military tribunals and civilians courts.  Will legislating the answer help or hurt?