Should The US Regulate Big Banks To Reduce Their Power?

Politicians have long argued over the importance of regulating big banks — those so-called “too big to fail” institutions whose over-lending led to the housing bubble bursting in 2008 — and to the longest recession in American history. How do we keep a bank’s power in check? Should we even try? And how do we punish banks that use their power to wend through legally gray areas? The answers aren’t easy to come by, and no one seems to agree.

Bank of America debt collectors are one of the most fearsome authorities on debt in the industry. Whereas most other banks sell off debt to a third party (which will then try to collect on its own), Bank of America does this dirty work itself. And considering how easy it is to obtain a loan from the bank, this is a common practice. It’s not at all unusual for the bank to find itself in the court for harassment — or to take a debtor to court on its own.

Is it fair that they have the power to do this? Isn’t it their fault for giving loans to people who can’t repay?

The pandemic has put a new spin on the issues at hand. In the earlier months, federal watchdogs allowed banks to exempt U.S. government bonds that were previously treated as assets. That was a measure that was taken to make it less likely that Wall Street would face tremors in the early days — while ensuring that banks would continue to provide loans or credit to individuals, households, and small businesses.

Head of research at Pepperstone, Christ Weston, said, “If the SLR is not extended, the concern is we’ll see financial institutions dump a chunk of their U.S. Treasury exposure, which would see yields spike and send short-term shock waves through markets.”

For better or worse, the pandemic has relaxed the urgency to regulate big banks — and even increased the risk that future actions will result in economic turmoil. 

FX macro strategist John Velis said, “The Fed has punted on the SLR extension question so far, but again, we will be looking at the press conference — to see if Powell is pushed on this and what his attitude is.”

Senators Elizabeth Warren and Sherrod Brown predictably said that SLR exemption extension would be a big mistake, and that now was the time to increase regulation — not eliminate it altogether. 

Bankers have already realized the uncertainty in the future. Primary broker-dealer holdings at U.S. banks recently experienced a weekly decline that broke records. U.S. government bond holdings fell to a low of $185.8 billion. This could be a sign of serious trouble — but no one knows for sure, and we don’t know if it’s short-term or long-term.

Economist Lauren Goodwin said, “For most investors, this is potentially a cause of market indigestion, not a major risk to positioning.”

How Will Future Policies Under Biden Shift Chinese Relationship?

A number of the policies left over from the Trump era have left Biden with limited options on what to do about China — especially involving trade and digital goods. It’s no secret that China is ramping up tech operations, and that has major implications for the future of digital economies, which can be much more complex and internationally integrated than traditional cash money systems.

Right now, here’s what we know about the current state of economic affairs: The United States Federal Reserve plans to keep interest rates very low for several years in order to continue purchasing assets. The purpose behind this plan is obvious. The economy is in shambles right now, and they want to flood it with money to prop it up. That’s what the economic relief package recently passed by Congress was all about.

But the Chinese are worried that this cash will create rumblings in financial markets there.

Former central bank adviser Huang Yiping said, “What worries me the most is the next adjustment of Fed policies.”

Another fear is that the American economic plan will work too well, forcing the Federal Reserve to respond by increasing those interest rates sooner rather than later.

US Federal Reserve chair Jerome Powell said, “These measures, along with our strong guidance on interest rates and on our balance sheet, will ensure that monetary policy will continue to deliver powerful support to the economy until the recovery is complete.”

Financiers overseas understand that the $1.9 trillion bill recently passed in the United States is only the first step for a Biden Administration, and will likely be followed with a somewhat less feasible plan to boost infrastructure spending by late 2021.

Huang said, “There’s no free lunch. We all remember what happened in 2014-15. The US [Federal Reserve] is the world’s major central bank. Once it quits quantitative easing and raises rates, we could encounter capital exodus, currency depreciation and falling asset prices.”

Medical Malpractice Caps Set To Reduce Economic Bleeding

Medical malpractice cases targeting nursing homes and VA clinics have climbed rapidly over the past decade, and lawmakers are scrambling to place caps on these types of lawsuits to reduce the overall damage to the economy — while others ask if they really have the right to limit how much compensation someone is owed, especially when the negligent party should hardly benefit from a cap (which they would). 

Like most issues plaguing our country right now, the issue of whether or not to place caps on certain types of lawsuits is a largely partisan one. Democrats favor reducing or eliminating caps, while Republicans argue that caps are necessary to protect businesses from frivolous lawsuits.

A Democratic United States District Court Judge recently ruled that the VA must pay Manchester, Connecticut resident Eric March a whopping $9.47 million after a routine hernia operation left him with a perforated abdomen, expensive bills, and excruciating pain.

The lawsuit read: “In June 2015, [plaintiff] was admitted to the West Haven VA hospital for a laparoscopic hernia repair procedure. In the days following his discharge from the hospital he complained of pain and a fever. He went to another hospital where a CT scan determined he had a perforated abdomen. On further investigation, a doctor discovered that March’s bowels had leaked out of the perforation in his abdomen, and he had a severe infection.”

VA doctors were not helpful during court proceedings, arguing over which doctor had actually followed up with March after the operation; Visit website here.

March’s attorney Kathleen Nastri of Koskoff, Koskoff and Bieder said, “This is a veteran who had entrusted his care to the doctors at the U.S. VA and it is clear to me something went terribly wrong during the surgery.”

This isn’t the first instance of malpractice involving the VA in recent months. Vietnam War veteran Joe Marrable resided in the Eagles Nest Community Living Center to receive long-term care following a bad cancer diagnosis, only to be attacked by a colony of fire ants. 

The subsequent lawsuit described the conditions in the care facility: “For months, fire ants swarmed the U.S. Department of Veterans Affairs-run nursing home in which Marrable was a live-in patient. And the VA did little to remove the insects.”

Marrable was not the only one to come out of the facility with fire ant bites.  

Family attorney Josh Sacks said, “The family is determined to raise awareness about the treatment of the veterans at these facilities and make sure that things such as this don’t happen again to any other veterans. That’s their dual goal in pursuing the claim, and I think they have a keen interest in making sure that their father, who served honorably in the Air Force, is remembered with dignity and respect.”

The family’s other attorney, Brewster Rawls, agrees: “I think it is important that the VA be accountable, and that veterans get the care they deserve and certainly the respect they deserve. When you don’t have a lot of time left, it makes it all the more precious for that person and their family.”

Should Debt Collectors Be Allowed To Reap The Rewards Of Economic Relief Payments?

In the ten days following passage of the new economic relief in Congress, the Internal Revenue Service tried to send out (by mail or electronic transfer) 100 million checks to Americans and businesses in need. But in the days immediately after Congress passed the relief, news articles about the possibility of debt collectors swooping in to steal those funds were published by the hour. Should debt collectors be allowed to steal those payments?

Not according to a new law from Virginia Attorney General Mark Herring and Delegate Hala Ayala (D-51st District). Virginia authorities had already discovered the loophole allowing debt collectors to take the funds away from the most vulnerable Americans during the last round of $600 checks — and they decided to close the loophole immediately. A bill doing exactly that was passed late last year during a special legislative session.

Herring said, “The most recent round of federal payments represents a lifeline for so many Virginia families who are still struggling to make ends meet because of the economic impacts of the COVID pandemic. Virginians should not have to worry about creditors or debt collectors taking all of their much-needed stimulus money and I’m glad Delegate Ayala and I were able to work together to get this important legislation passed. As we continue to navigate these unprecedented times, we must always put Virginians and their families first.”

Many Americans have been unemployed since early last year due to the coronavirus pandemic, a situation that got them into debt in the first place. It would be downright cruel to tease any form of financial relief, only to have it stolen by debt collectors.

Ayala said, “Thousands of Virginia families are still struggling to support themselves during this uncertain economic time and they need this stimulus funding to go towards food, rent, utilities and other necessities. This past year has forced us to come up with creative solutions in order to support Virginians and their families through these difficult times and I want to thank Attorney General Herring for his help with this legislation.”

What Happens If We Increase The Minimum Wage?

The recent dispute in Congress that the United States federal government should raise the minimum wage, which stands at $7.25 an hour and has not been raised since July 24, 2009 — during President Obama’s first term in office when the Democratic Party still had power in all branches of government. It’s worth noting that the vast majority of developed nations have implemented a minimum wage in some form, and most of those countries have implemented a higher minimum wage than the United States.

These countries include Australia, France, Germany, New Zealand, Netherlands, Belgium, the United Kingdom, Canada, Ireland, Korea, Spain, and Slovenia. Those with lower minimum wages include Poland, Israel, Turkey, Lithuania, Portugal, the Czech Republic, Greece, Hungary, Estonia, Latvia, Costa Rica, Slovak Republic, Chile, Colombia, the Russian Federation, Brazil, and Mexico.

It’s also worth noting that many service professions allow employers to pay less than minimum wage when they expect employees will be tipped to make the difference (legally the employer has to make up the difference if they are not). Any waiter pay graphic will showcase that many of these professions utilize a “tipping pool” to allow employers to reallocate another person’s pay to a person with a job that isn’t normally tipped — thereby allowing the employer to pay the second person less than minimum wage as well.

Economists have a fairly well-rounded understanding of what happens when the minimum wage is increased, which means people are free to form their own opinions of whether or not raising it is a good idea for a particular society.

For example, many people will argue against the minimum wage because raising it means that the cost of living will go up as well. What they rarely say is that the cost of living will go up even if you do not raise the minimum wage. Other impacts are easily defined: many workers would be lifted from poverty levels or not have to work more than one job, while others would find it more difficult to find work in the first place. Raising the minimum wage seems to be a balancing act, if nothing else, and our legislators have yet to get the balance just right.

Other opponents of raising the minimum wage believe that it will lead to inflation or make American companies less competitive here at home and in international markets. Job losses, they say, would result.

According to a report released by the Congressional Budget Office (CBO) in 2019, the standard of living would be raised for approximately 17 million people if the wages were raised to at least $15 an hour by 2025. Over a million of these people would be scooped up from poverty. Another benefit would be the reduced entitlement benefits required to be doled out by the United States government. Productivity might also rise with the wages, as workers are more likely to be happy and relaxed. Less stress experienced by employees has always translated well for businesses.

Illinois Leaders Struggle To Determine Who’s At The Top Of The Economic Food Chain

Here’s an unsettling fact: the world economy becomes stronger as more people reside below the poverty level. Sounds like nonsense, right? Remember that capitalism is a young system — and a broken one, many would argue — and that we have yet to fully understand how to run it to the benefit of all. That’s why the growing wealth income disparities exist. But why is our economy stronger when the majority of people are poor?

It’s simple. A strong economy requires two things: production and consumption, and preferably in nearly equal parts. The workers produce, they are paid for that labor, and then they buy what other workers produce. It’s a cycle. But the cycle doesn’t work well when laborers produce, are paid, and then don’t consume (i.e. make purchases). That’s why a strong economy can’t sustain itself without the poor — because the poor are much more likely to spend every cent they earn.

The middle class and ultra-rich, though? They don’t spend. They save more than they earn, taking money out of the cycle and preventing the economy from becoming more robust. If that system sounds less than ideal, well, that’s capitalism. Take it or leave it.

Many of our legislative bodies have yet to figure out who resides at the top of the food chain: is it the individuals who produce and consume the most, or is it the ultra-rich business owners who provide some jobs for those who produce and consume the most?

Pat Devaney is secretary treasurer for the Illinois AFL-CIO. He said, “I would suggest that our experiences, observations and frustration caused by the inadequate investment in IDES should be an illustration on why we should invest in our state agencies.”

This comes as Democrats and Republicans argue over whether to implement fail-safe measures to help either individuals or organizations. Neither party seems willing to do both — even though compromise might be the most beneficial thing for the economy.

How Does Divorce Impact The Economy — And How Should Economic Law Reflect This?

There have been about a bajillion studies done on divorce and its relationship with our economy. Is divorce a good thing? Is it a bad thing? Economically speaking, it depends on who you ask. But it seems difficult to argue with the ethics for divorce. Women experience suicide at a far lower rate ever since Reagan’s policy of “no-fault” divorce spread from California to other states.

Knowing you want a divorce is one thing — but following through with it is another. Many people find saying the words “I want a divorce” to a partner to be one of the hardest things they have ever had to do. But hiding it can cause even more friction in a deteriorating relationship. What’s healthiest for each individual involved in the crossfire? Interestingly, it’s usually the same thing that is best for the economy. 

That means that divorce is often the best possible outcome for all parties — both foreign and domestic, if you will. Humans are notorious for retaining more energy and proving more productive when they are healthy and happy. Add stress, remove certain components of a healthy relationship, or strip away the ability of a person to remain content in life, and you almost always ensure that they slow down. That means that one person’s bad relationship can extend outward to affect many other aspects of society — including the overall economy.

Part of the reason couples actually stay in marriage is a bad economy. Those who are having trouble financially are much less likely to add to their woes by even considering divorce, much less following through with one. When the economy bounces back, though, couples tend to split apart. This was readily apparent after the economic recession of 2008. By 2012, couples were divorcing at a much higher rate. Economists rejoiced! 

Other economists actually propose that divorces might create the conditions necessary for an economic recovery! This is in part due to the fact that more singles means more real estate being scooped up. Add to that the fact that divorced singles are much more likely to hold jobs, and you can see why economists might believe remaining apart is the best thing for our economy.

Of course, not everyone agrees. According to a convenient — and we’re sure not biased — study published by the Marriage and Religion Research Institute, marriage is important not just to a society’s ability to remain, well, a society, but also to its ability to maintain a healthy economy. Interestingly, the study determined that the reason that divorce adversely affects the economy is the increase in the number of households because that means a greater need for housing, power, and resources. 

Of course, that doesn’t seem to make sense. The economy is driven by our output, or how much we produce. Before that matters, though, you have to add consumption to the equation. Using more power means a company is making more money. Buying another home means someone is making more money. The more money we spend, the more money other people make, and then they spend more too. That’s how the economy actually works.

What Is Philadelphia’s “Black Workers Matter” Economic Recovery Package

Sadly, anything titled “Black Workers Matter” was destined for a controversial reception. That was a bill recently passed by the Philadelphia City Council to make sure that many minority workers will still have the jobs from which they were laid off when the coronavirus pandemic first started. The bill should provide almost guaranteed employment for about 12,000 people in the hospitality sector. 

The package was first introduced by Councilmembers Helen Gym, Kenyatta Johnson and Isaiah Thomas. 

The package includes protections for workers who might otherwise be replaced by temporary contractors and also for workers whose place of employment was sold. 

The council members acknowledged that the hospitality industry was very hard hit by COVID-19, and continues to suffer. Employment has collapsed by about 38 percent since the onset of the pandemic. The bill acknowledges that this impact disproportionately affected African American workers — who represent a majority of the tourism workforce. 

Helen Gym said, “Today, City Council sent a message that we will not only support the tourism industry — we will protect the jobs of the workers who built it and will rebuild it as the economy reopens. The bill protects our City’s public health by ensuring the industry is staffed by the most experienced workers. For too long, studies have found Black workers are the first to be laid-off and the last to be rehired after an economic downturn. We will not stand for that in our city. Instead, we are building a recovery led by workers, prioritizing the needs of their families and communities.”

The legislation comes as lawmakers in towns and cities are struggling to adopt measures to reduce the impact of the coronavirus pandemic that has led to a widespread economic downturn. 

Thomas said, “This pandemic has hurt our local and national economy with many industries looking at months if not years of financial hardship — the hospitality industry being one of the most economically impacted sectors.”

The Economics Of Human Trafficking Are Staggering

According to the Department of Homeland Security (DHS), human trafficking is defined as “the use of force, fraud, or coercion to obtain some type of labor or commercial sex act.” When we think of human trafficking, we usually think of young kids and women who are forced into this type of life — whether by kidnapping or an alternate means of pressure or financial stress. But we rarely consider what human trafficking costs us all every day.

Human trafficking has hidden fees. These cost us our security, economic growth, and innocence. Even though the concept of trafficking is receiving more widespread attention, there are still around 25 million individuals trafficked globally each year. Those who would use humans to advance their own financial interests make an estimated combined $32 to $150 billion every year.

Author of Illicit Moises Naim said, “Throughout the twentieth century, to the extent that governments paid attention to illicit trade at all, they framed it — to their public, and to themselves — as the work of criminal organizations…Only recently has this mindset began to shift.”

Big American sexual abuse law firms like Paul Mones struggle to ascertain the reasons why their case loads are on the rise even as international authorities clamp down on these heinous acts.

One of the reasons that trafficking costs world economies so much is because the trafficked individuals do not produce wages or salaries. That loss is likely undersold by authorities. A Department of State Trafficking in Persons Report suggests that the loss amounts to about $325 billion per year, which is notably even higher than the estimated gains made by those who perpetrate this type of crime.

The impact on economies that rely on tourism is massive. Countries like the Dominican Republic, Haiti, Moldova, the Philippines, and Zimbabwe rely on money from overseas to stay afloat. 

Another hidden cost is covered by the healthcare, which must help reduce the impact of the years of trauma inflicted upon these exploited individuals. 

According to the Council on Foreign Relations, “Exploring the ways in which human trafficking enables terrorist and armed groups, finances criminal organizations, and supports abusive regimes…[could undermine] our collective security.”

The paper continues to state that “analyzing how the COVID-19 pandemic has amplified economic instability worldwide and increased risks of human trafficking and forced labor” is important to understand how authorities and citizens themselves can protect the exploited. COVID-19 has presented a golden opportunity for traffickers through this instability.

Myths about human trafficking include: It only occurs in third-world countries or outside of the United States; it only occurs to those who live in poverty; sex trafficking is the same thing as human trafficking; victims must be forced/coerced; human smuggling is the same thing as human trafficking; victims always seek help when able. 

In order to fully understand human trafficking and all its implications, we must first ascertain why these misconceptions are false — and then work to educate those who still do not understand or strive to remain ignorant.

Should Undocumented Immigrants In The United States Be Allowed Driving Cards?

A routinely provided conservative argument is that undocumented immigrants (often frowned upon as “illegal immigrants,” a derrogatory, slanderous phrase), funnel cash away from our economy. They use our socialized benefits. Of course, another oft-repeated argument is that they take our jobs. How they can simultaneously use up our benefits and take our jobs is a confusing (and untrue) topic for another day. 

In any case, the state of Indiana is considering providing undocumented immigrants with the ability to retain a “driving card” after the Notre Dame Student Policy Network published a “Driving Card Privilege Project” study. The study provided insight into the possibility that driving cards for undocumented immigrants might improve many aspects of life, including: a reduced incident rate of hit-and-run accidents, improved law enforcement, increased state revenue, and increased revenue for car insurance companies.

Senate Bill 319 was presented last session, but the GOP decided not to move forward or pass the law.

The study says: “Indian’as current policy does not keep undocumented immigrants off the roads — but it does ensure that every time an immigrant drives in Indiana, they risk a citation for driving without a license and a string of legal consequences that could culminate in deportation. The current policy not only imposes significant costs on undocumented immigrants but by preventing drivers from being certified and purchasing insurance, it produces significant welfare and economic costs for all residents.”

Imagine you were in an accident with an undocumented individual (or rather, anyone who was unable to obtain insurance to cover an accident’s costs). The person runs because to do anything else would put them on the path to financial ruin. The police launch an investigation. Your insurance will only cover certain costs, but you have no one to sue. 

These are only a few of the hidden costs that add up when some residents are treated as if they don’t belong.