This is why we should have let the banks fail

No Comments

Steven Pearlstein writes in today’s Washington Post about how the President of one of the smaller banks used some entrepreneurial skills to put some TARP money to good use.

Kim Price, the President of Citizen’s South Bank, located across the river in Charlotte from Bank of American and Wachovia, did not need TARP money because his bank was failing.  In fact, his bank was conservative and planned for a $3 million loss this year, but ended up with a $3 million profit.  Here’s what he did:

Like many healthy banks, Citizens late last year figured it was in for a tough couple of years with the national recession and the continued turmoil in financial services, which anchors the regional economy. So it applied and won $20.5 million in bailout funds from the Treasury Department on the usual terms requiring a 5 percent annual dividend payment to the government. A few weeks ago, while reading a newspaper article, Price came up with an ingenious plan for how to use it.

The article was about the reluctance of people to buy a house in the current market, and what kinds of incentives had been used successfully by builders and bankers to get them to close a deal. Two stood out: lower rates and the waiving of closing costs. And that got Price to thinking: What if Citizens were to use its federal bailout money to offer below-market mortgage rates with no closing costs to consumers who would buy a house, or a house lot, from builders and developers who had borrowed money from Citizens?

Price asked some of his loan officers to check with the builders and developers, who not surprisingly were excited enough about the project to be willing to chip in some money to help cover a portion of the forgone closing costs. So last week, Citizens launched its marketing campaign for the $20.5 million program, in collaboration with its builder-developer customers, offering 30-year loans with an initial teaser rate of 3.5 percent for the first two years, rising to a fixed 5.5 percent rate (the current market rate) for the balance of the loan.

Its great to see smaller banks succeeding while the big ones are failing.  Its unfortunate that an executive like Price who makes under $500,000 is not rewarded more for his success.  I would love to see someone with his talents have the ability to rise up in the banking industry during the current upheaval.  Instead, by bailing out the big banks, the same execs who got us into this mess continue to run their companies, huge salaries and all.  It’s crazy to me.  I understand that rationale behind the bailouts, but one would think at a bare minimum, the money could have been used in more interesting and worthwhile ways.

Pearlstein ends with this:

So here’s a question the House Financial Services Committee might put to the Titans of Finance: How is it that Kim Price, a community banker with an undergraduate degree from Appalachian State University, a tiny executive staff and a pay package that you would consider insulting, somehow managed to come up with a more creative use for his government bailout money than any of you?

Besides for the subtle dig at Appalachian State, which I would assume he would use for any banker who has a degree from any non-ivy, I would love to hear how these CEOs would respond.

The Stimulus and Health Care: A Bad Idea

Betsy McCaughey’s article on Bloomberg titled “Ruin Your Health With the Obama Stimulus Plan” shines a light on a portion of the stimulus plan that I had not heard of until today.  Her article is impeccably sourced and links directly to pages in the stimulus bill.  It starts out with a provision that I don’t think many people will argue with, as the benefits are obvious:

The bill’s health rules will affect “every individual in the United States” (445, 454, 479). Your medical treatments will be tracked electronically by a federal system. Having electronic medical records at your fingertips, easily transferred to a hospital, is beneficial. It will help avoid duplicate tests and errors. 

From there, the bill moves farther, into more controversial and I think potentially disastrous territory:

One new bureaucracy, the National Coordinator of Health Information Technology, will monitor treatments to make sure your doctor is doing what the federal government deems appropriate and cost effective. The goal is to reduce costs and “guide” your doctor’s decisions (442, 446). These provisions in the stimulus bill are virtually identical to what Daschle prescribed in his 2008 book, “Critical: What We Can Do About the Health-Care Crisis.” According to Daschle, doctors have to give up autonomy and “learn to operate less like solo practitioners.”

I don’t like the idea of some government bureaucrat possibly thousands of miles from my doctor’s office dictating what treatments I can and cannot receive. I do not want my doctor reviewing a script and a set of rules every time I come into the office. I would rather my doctor think critically about each decision and make a diagnosis and remedy on a case by case basis. The bill continues:

Keeping doctors informed of the newest medical findings is important, but enforcing uniformity goes too far. Hospitals and doctors that are not “meaningful users” of the new system will face penalties. “Meaningful user” isn’t defined in the bill. That will be left to the HHS secretary, who will be empowered to impose “more stringent measures of meaningful use over time” (511, 518, 540-541)

What penalties will deter your doctor from going beyond the electronically delivered protocols when your condition is atypical or you need an experimental treatment? The vagueness is intentional. In his book, Daschle proposed an appointed body with vast powers to make the “tough” decisions elected politicians won’t make.

So the plan is to “enforce uniformity” for doctors who are not “meaningful users” with “penalties” decided by the “HHS Secretary.”  This sounds like a plan for disaster.  It is even worse than the current HMO/Insurance company model because if this bill passes, people will not even have the option to pay for an experimental or risky procedure because the doctors will face “stiff penalties” for deviating from the bureaucratic regulations.  Daschle is seemingly in favor of an unelected body to make “tough” decisions on who should live and who should die.   In fact that is exactly what the bill would do:

[It creates] the Federal Coordinating Council for Comparative Effectiveness Research (190-192). The goal, Daschle’s book explained, is to slow the development and use of new medications and technologies because they are driving up costs. He praises Europeans for being more willing to accept “hopeless diagnoses” and “forgo experimental treatments,” and he chastises Americans for expecting too much from the health-care system. 

The goal is to “slow the development and use of new medications and technologies because they are driving up costs.”  While I agree that new treatments and technologies are driving up medical costs and that we should have a national debate on what to do about it, this method is asinine.  The article goes further:

The Federal Council is modeled after a U.K. board discussed in Daschle’s book. This board approves or rejects treatments using a formula that divides the cost of the treatment by the number of years the patient is likely to benefit. Treatments for younger patients are more often approved than treatments for diseases that affect the elderly, such as osteoporosis. 
In 2006, a U.K. health board decreed that elderly patients with macular degeneration had to wait until they went blind in one eye before they could get a costly new drug to save the other eye. It took almost three years of public protests before the board reversed its decision.

This solution for health care would be a disaster for America.  It would be like if when the car was first invented, the government stepped in and said “the car is getting too expensive, lets not innovate anymore, we are happy with where we are.”  If this had occurred, everyone would still be driving black model-Ts, without airbags, headlights, windshields, windshield wipers and all of the life saving innovations that have occurred since then.  It makes no sense to stifle innovation and experimental cures to appeal to the lowest common denominator.

We are supposed to accept that we are going to die earlier than necessary because our lives will not be cost effective?  We are supposed to trust a government appointee to run a formula that will let us know if we can get a treatment or not?  Further, if we are supposed to trust all of this, why is it being included in the stimulus bill?  If it passes, some entrepreneurial doctors will likely start clinics for experimental cures in other countries, leading to medical tourism like 70,000 British citizens do each year.  These doctors will leave America and begin to innovate other places, just like how some stem cell research left the United States after Bush forbid federal funding to some projects.

I think everyone agrees that something needs to be done to try to solve the rising costs of health care, but America needs a frank and open debate on health care.  Whether we end up with universal health care or some other plan, Americas need to know what is going on.  A bill of this magnitude should not be attached to a stimulus bill that is being pushed through Congress at top speed.  Hopefully this gets struck from the bill and it is brought up again at a later date.

“Get Your Obama Check”

When I logged into Facebook today, one of the ads on the right hand side (the ones that don’t get blocked by adblock), grabbed my attention.  Normally all of the ads are pictures of girls with the caption “Am I Your Wife” or “Meet Hot Girls” or MLM pyramid schemes.

This ad said “Get your Obama Check” with an obviously photoshopped picture of Obama holding a government check over the bottom half of his face.  The caption said “The government is giving away billions of dollars to stimulate the economy.  Find out how I got $12,000.”
I clicked on the link because I was curious to see if this was in any way, shape or form associated with Obama.  I thought it wasn’t, but since the Obama campaign was the most tech savvy and used social networks the most in the history of politics, I thought there could be a possibility it was a new Obama program to reach Facebook users.
The first link led me to a “blog” by a guy who claimed to be from Chicago, named Tom.  It is one of the fakest looking blogs of all time.  He claims that he got 12k from the government, allowing him to pay off his 10k credit card debt, take a 1k vacation and save 1k.  All this occurred within 30 days of him asking to government for money.  He says:

My name is Tom and I am from Chicago, IL.  After hearing all the news on the Government Bailout of the banks and the possibility of an Auto industry bailout, I decided there had to be a way for me to get some money like that from the government. Because if anyone needs a bailout, it is hard working Americans like myself, who have a hard time keeping their head above water.  After Doing some research I found that the US government has all kinds of free grants available to the public, for all sorts of reasons, that often go unclaimed. And these grants are not loans, they are checks you never have to pay back, funded by different government agencies. And if they don’t give what they were budgeted, they actually get less money the following year. So these government employee processors are just approving application after application, especially if no one is applying for these financial aid programs. So after researching on Yahoo Answers, I found a program that helps guide you through the process and I signed up for Goverment Funded Grants.

But most importantly I want to help other people get the money they are entitled to and not stand by while all these fat cats from large companies get rich off government bailouts. We all deserve to live debt free, so I am glad I signed up.

At the end of the “blog” you can click on a link that takes you to a page that prominently features Obama.  It asks you to sign up to receive info on how to get your free cash.

Beyond the obvious idiocy of these claims, its amazing that the Obama administration allows these people to use his image so prominently.  First it was drug dealers, now its people trying to capitalize on the recession and America’s laziness and desire for get rich quick solutions.  It will be interesting to see if Facebook continues to run these ads or if anyone protests their inclusion of Obama’s face.  You would think that at least one of President Obama’s zealous college student supporters would have reported this by now.
EDIT: Forrest commented below saying that the site uses IP locations to change where “Tom” is from based on where you are browsing from.  Shady.  I still see these ads on Facebook and the “get your obama check” websites are still up.  Secret Service, what’s up?

Sprint, Fox and 24: A Rant

Sprint must be the dumbest cell phone company around right now.  First, they have those black and white ads with Dan Hesse, their CEO, walking down the street.  Who is going to buy a cool phone because the CEO tells you about the company?  I can answer that.  Nobody.  They also have that annoying classical music playing throughout the commercials.  You can see it here:

I decided to watch 24 on Fox’s website since I missed last week’s episode because I was working.  This is a great idea and a great service, especially for a series like 24, where it is essential to see every episode in the correct order so that the show makes sense.  The only problem is that Fox has to put commercials into the middle of the show.
I understand completely why they need to do it and it makes perfect sense, but the execution is curious at best, moronic at worst, which brings me back to Sprint.
There are 7 commercial spots during a 43 minute episode of 24.  For whatever reason, Sprint and Fox decided the best way to advertise would be for the same company to put the same ad in all 7 spots.  This is a horrible idea in the first place, but its even worse when the 7 commercials are all Sprint’s horrible commercials.  Not only are the commercials bad, but they are also ironic.  The phone they are advertising is called the Rant.  Whoever named that phone must have had this commercial in mind because that’s what it inspires: Rants.
By the 3rd commercial break, I vowed I would write a Rant in my blog.  By the 5th, I decided that I would never buy a sprint product and would look to watch 24 any other way possible, including the myriad of pirated broadcasts.  By the 6th, I was about to break my computer and by the 7th, I was thinking to myself that I wouldn’t complain if Mr. Bauer had to use some of his tricks of the trade to get some info out of Mr. Hesse.  Luckily for Mr. Hesse, my computer and me, there wasn’t an 8th commercial break.
I do not know what both Sprint and Fox were thinking, but whatever it was, they failed miserably.  Not only do I now hate Sprint, but the repetitive commercials are going to drive me away from Fox’s service, onto a different website that does not make Fox any money.  If companies want to continue to make online content like this a viable ancillary revenue stream, they are going to have to learn to continue to adapt.  They cannot show the same commercial, even a great one, 7 times to a viewer in 40 minutes.  It will never work.
Maybe someone at AT&T or Verizon paid Fox to put seven Sprint commercials in a row during 24.  That’s about the only explanation that makes sense.
Here’s the offending ad: