Wednesday, April 29, 2009

SF Mechanist's Health Care Proposal

Off topic, but I thought I'd throw it out there, since it's making the rounds on the blogs.

I believe that in clinics and hospitals funded by government (county, medicaid/cal, medicare), private insurance (including HMOs and PPOs), and private pay, Americans get good health care. Exceptions abound, here as anywhere, but overall the quality is good. The problem on all levels it is ridiculously expensive and burdened with heavy administrative costs.

"Single-payer" health care does not leave me with any confidence the situation will improve.

So, my system attempts the following: maintain current levels of care and availability for all, dispense with the notion of "free" health care because it isn't and in fact it is valuable, but still maintains high levels of care for people if they can't afford it, and reduces costs overall. It is a return to a fee-for-service system with government subsidies, loans, and backing.

Starting with fee-for-service, free market principles bring its advantages to the efficiency of the system. Health care delivery becomes a negotiation between doctors and patients of what is available and what patients wish to pay for. If it is too expensive, rather than shoving it to government, patients can talk about options, such as generic medications.

But say there is a catastrophic emergency, or one is diagnosed with HIV or cancer, and is unemployed or the working poor. Necessary health care is still rendered regardless of the ability to pay, and then the patient is billed for reasonable costs of services; there needs to be an office that helps patients negotiate such costs like insurance companies now have to assure they are not being gouged. But assuming the bill is reasonable and reflects the market value of services provided, the patient owes it.

If the patient cannot pay, then the government pays it, probably starting with Medicare, but the patient still owes the government for the cost. It is not the kind of bill that is sent to the collection agency, and if the patient remains working poor for life, they might never pay it. But if they win the lottery or come upon a sizable inheritance, then they would have to pay it.

If with job promotions or better education they reach a point where they could start to pay their health care bills off, then deals could be made such that it wouldn't be a serious burden, but over the years some headway could be made toward paying back what they owe.

Medical treatment that serves public health and safety—i.e. immunizations, tuberculosis treatment, and some mental health and substance abuse services—can still be made available by government subsidy.

Insurance savings would be considerable. I believe this system would maintain or even improve current health care standards, greatly reduce costs, and insure that necessary treatment is made available for all.

Tuesday, April 28, 2009

Swine Flu

It seems kind of overkill, but Obama is requesting $1.5B to go combat the swine flu; on the other hand, nowadays it seems like pocket change when it comes to government spending. I know people are dying but there is no particular treatment of the flu other than managing its complications.

For those curious, $1.5B amounts to $10.88 T*Bux. Well worth it if it stops you from getting the flu, swine or otherwise, though I imagine, if approved, it will simply disappear into the public health care bureaucracy without tangible benefit.

Friday, April 24, 2009

The Stress Test

So, results of the "stress test" for banks—to see how viable they would remain under favorable and not-so-favorable economic forecasts—were supposed to be in today, and most of what was revealed is we are going to have to wait until later to hear anything of substance about the stress test.

In the better scenario, and economic turnaround is coming soon, and unemployment and the credit contraction won't get worse than it currently is. In the worse condition, present economic factors particularly real estate, decline moderately through this year and then level off in 2010. There is some acknowledgment that things could go still worse than that.

If the banks were able to pull some accounting rabbit out of the hat, I'm sure we would have heard the results today.

Monday, April 20, 2009

Banking Profits

Starting with Citibank's announcement that marked the beginning of this bear run, further increases in the DJIA has been punctuated by reports of profits from the different banks, including Bank of America, Wells Fargo, JPMorgan, and now the latest: Merril Lynch, of all things.

Stepping back and looking at the broader picture, one has to seriously question this new profitability of banks in Q1 2009. First, most of the banks would be effectively bankrupt if not for the committment from the Fed, Treasury Department, and Congress to keep them afloat no matter how many toxic loans they underwrote. Second, we have an easing of mark-to-market accounting such that banks can freely overvalue their assets. We have bailout money pouring in hand over fist. Now TARP money banks are supposed to pay back. But bailout money that came in indirectly via AIG they have no obligation to repay (and AIG will collapse before it pays anything back), and now they have non-recourse government guarantees of toxic asset purchases throught the public-private investment program, which will amount to either a direct transfer of tax money to the banks obligation-free, or an expansion of the money supply by the $500B alotted through the program.

Banks are not profiting. Banks are bankrupt without the system bending over backward to keep them from sinking like a rock.

Wednesday, April 15, 2009


We all know that the U.S. National debt could pave a road to the moon and back in so many dollar bills. Statistics like that abound. but it is unrelated to everyday experience, and still leaves the true impact of this issue blissfully abstract.

Since recent bailout measures are approaching a trillion dollars a pop, to bring it home, I’d like to introduce "T*Bux," or how much money an average U.S. taxpayer owes on a government expenditure.

The U.S. Census is 307,212,123, per July 2009 estimate. As of 2007, there were just under half, or 138 million taxpayers in the U.S.

Ordinary calculators can’t handle 1 tillion divided by 138 million, so, knocking 6 zeros from each, we have 1,000,000 divided by 138. Or the T*Bux on $1T is $7250 per taxpayer, rounding off. This is the figure that will be used to make calculations.

The TARP is running $0.7 trillion, so that's $5075 T*Bux per average taxpayer. Quite the extortion when you look at it that way, what we are personally handing to the banks for screwing up our economy. Oh, sure, they'll pay it back. Well probably not AIG which alone, by my last count, has a $.18T tab, or $1305 T*Bux, for just one insurance company. What is lost for good is the $0.5T going to Public-Private Investment Program (PPIP) to guarantee toxic assets bought at inflated prices, or $3625 per taxpayer. Obama’s stimulus is $0.78T, or $5655 T*Bux in addition. The U.S. National debt ceiling, which we are very close to, is $12.1T, or $87,000 T*Bux.

After what we owe on our houses, the second biggest taxpayer indebtedness will usually be to fund government, with cars and credit cards and such weighing in at a distant third place.

As population estimates change, T*Bux will be revised.

Sunday, April 12, 2009

Are We Halfway There Yet?

Thought I would just check in this Easter. Bailout news seems to have abated as the DJIA creeps back into the low 8000's, and with quantitative easing, mortgage rates are dropping to the 4%-range (mainly directed at refinancing), and the program to buy around $500B of toxic assets from banks at inflated prices is moving forward if not currently underway.

News keeps cropping up around how the rates of acceleration of worsening economic factors, such has house price declines and joblessness, is getting less bad as months go on, and eyeballing the economic situation, I'm guessing the credit unwind is reaching the halfway mark. There would still be around 2 years Alt-A resets ahead of us, and banks are still hanging onto a lot of foreclosed property to limit supply. Even after the credit bubble is fully unwound this all would still be followed by a period of economic contraction though tight credit, made worse by a declining tax base and increasing deficits leaving fewer bailout options as time goes forth.

But I'm guessing we are closer to economic stabilization by a return to fundamentals than we are to the speculative peak of the bubble. But I'm not believing calls that the correction is over and we can now look forward to good economic times.

In other words, I expect to see good news coming as prices move toward affordability.

Thursday, April 2, 2009

Easing of Mark-to-Market

So I saw the DJIA this morning and saw a sharp upward spike just peeking over 8000. Since it reached the mid-6000's, its has been rising steadily over the last month. But this shift seemed abrupt so, curious, I went to Google news and the only financial news that pertained was an easing of mark-to-market accounting regarding the toxic assets held by banks.

No doubt this relates to the so-called "public-private" program to bid for the toxic assets of banks, which will be almost fully government-subsidized non-recourse (for the taxpayer) purchases in a highly manipulated bidding system where only a few insiders would be allowed to participate. As it is shaping up it will amount to handing $500B of taxpayer money to banks in a sneaky way. More commentary to follow when it springs in to action.

The Market is a strange beast, but pretending there is money in the system where there isn't doesn't make it so. Though, maybe the market is salivating over the taxpayer money it sees headed its way.

Wednesday, April 1, 2009

Visit to Wells Fargo

When I first started this site, just over a year ago, I had planned to focus more on things like CD rates and bank promotional specials. As it turned out, there was more bailout news than I was expecting, and more correction of the economy, and so attention turned to that.

But I'd like to refocus on cash as an investment, starting now. I've discussed before my little adventures with a Washington Mutual money market account, which is still going fine.

So I went to Wells Fargo today because a CD was maturing, and they called me several times encouraging me to open a checking account. I looked over their rates: 3-month CD's were at a miserable 0.80%, 9-month was 1.4%, and the "premiere" savings account they were pushing was at 1.15%. You can get over 3% only with a 36-month term. Maybe I just go in at the wrong time, but Wells Fargo has never impressed me with their rates. I was inclined to stay with the 3-mo CD's, but got talked into the savings account.

Most of the bigger banks I use are pushing checking accounts, even when I insist I'm never going to use it. Not sure why. The banker was kind enough to shred the free checks that came with it.

So in casual chatter I asked when Wachovia would be absorbed into Wells Fargo, and he didn't anticipate it would be for a year or two. By contrast, Washington Mutual is already Chase. Since I have an account with Wachovia I asked if FDIC covers the accounts separately, as two different accounts, which it does for now. However he didn't seem too sure that the FDIC limit of $250,000 through the end of this year would be made permanent. It felt like he was inclined to believe it would revert back to $100,000.