Archive for the ‘persuit of knowledge’ Category

DANGER: THE EROSION OF UNITY IN OUR COUNTRY. THE ELECTION OF NOVEMBER 2012 MAY NOT SLOW IT

Tuesday, January 24th, 2012

Major Underlying  Cause
The distribution of wealth and opportunity in the United States has become unfair and  unbalanced

Evidence
(1) The spread of the “Occupy” movement
(2) Two-thirds of Americans believe there are “strong conflicts” between rich and poor in the U.S. [source: Pew Research Center, poll dated 12/6-19/11]
(3) The financial services industry grew from 5%-6% of GDP in the 1980’s to 16%-17% in 2006. The top 1% of earners accounted for 24% of all income in 2011.
(4) Based on the 2010 census, personal consumer debt is about $2.4 trillion, or $7,800 for every adult and child in the U.S..  70% of the GDP in the U.S. is from consumer spending.

Moral Relevance of the Situation

(1) Fairness is a basic and universal moral principle, which concerns equal sharing of benefits and pains, within culturally variable limits. But the principle of fairness is violated when there is no sharing of the pain of an economic crisis. An example is the housing crisis where the lenders have little pain (because they do not modify the mortgages and can sell the foreclosed houses), and the borrowers have all the discomfort.
(2) Another example of unfairness is the reduced opportunity for upward mobility in the U.S. in comparison with Europe, because parental economic difficulties carry over to the educational access of the next generation.
(3) These problems lead to a reduction in public trust in government.

What  to Do

(1) Keep informed. Read the IPPA website (www.ippa.us). Do not be passive.

BETTER REGULATION OF THE FINANCIAL RATING AGENCIES

Monday, January 23rd, 2012

The failure of the rating agencies to accurately audit the derivatives market played a role in the financial collapse of 2008. In spite of all available evidence of wrongdoing there has still not been adequate regulation, including in the Dodd-Frank bill passed by Congress last year. The cozy arrangement by which the rating agencies were paid by the institutions whose derivatives and other financial products they were rating is well known.
 One solution reported by Gretchen Mortenson [1] in October was suggested by Paul Volker, former head of the Federal Reserve. It was to rotate the rating agencies on a regular basis for each financial institution, which would provide a check and balance system. Another suggestion to solve the question of compensation for the rating agencies would be by taxing the banking/investment industry institutions themselves on their financial transactions. These funds would then be used by a newly formed independent Federal agency to compensate the rating agencies based on a set fee schedule, not in any way tied to a specific rating of a financial product.
  IPPA feels that both of these plans to correct insufficiencies in regulation of the rating agencies should be implemented in the very near future to ensure that both individual and institutional investors can have confidence in the audits of the rating agencies.

1. Mortenson, Gretchen NY Times 10/22, 2011