Todd Suomela's Library tagged federal →  View Popular

What should not be missed in all this is the absurdity that is the contemporary Senate. You need 50 votes to pass a bill. You need 60 votes to overcome a parliamentary trick that allows 40 senators to talk about cheese whiz until everyone else heads home for the night. But some priorities -- deficit reduction and the budget among them -- were judged too important to face the filibuster. There was no particular rationale given for that shortcut, but the relevant senators have clung tightly to its terms. Last week, Sen. Robert Byrd, now in his late 80s, reiterated that reconciliation was "a process intended for deficit reduction," and using it for health reform and cap and trade "is an outrage that must be resisted."

But the reconciliation process has been used for plenty that did not reduce deficits. Both of President Bush's tax-cut plans traveled through the process. And the very senators who speak reverentially of the filibuster now, voted for reconciliation then. Judd Gregg, in fact, voted for reconciliation every time it was used in the Bush era.

Central bankers attempted to fix the problem, but they may have made it
worse. In the late '80s, the Fed and Wall Street leaders, joined by
foreign central banks, created an international regulatory regime that
requires banks to hold greater levels of capital instead of bank
reserves. Reserves are the Fed's traditional cushion for ensuring the
"safety and soundness" of the system. Banks were required to post
non-interest-bearing accounts on their balance sheets to backstop
deposits and as the means for the central bank to brake bank lending. It
was assumed that the new capital requirements would do the same.
Instead, the so-called Basel Accords (named for the Bank of
International Settlements in Basel, Switzerland) applied very little
restraint on lending but created an unintended vulnerability for
banking. The new rules have acted like a pro-cyclical force--driving
banks into a deeper hole as the crisis has spread because bank capital
is destroyed directly by the mounting losses from market securities. The
more banks lose on their rotten assets, the more capital they have to
borrow from wary investors, who understandably refuse to play. That
spreads the panic and failure that governments are trying to cure with
public money.

Meanwhile, acting at the behest of bankers, the Fed has practically
eliminated the old safety cushion by allowing reserve levels to fall
nearly to zero. Bankers complained that reserves were a drag on profits
and were no longer needed given the capital rules. In a shocking new
arrangement, the Fed, with approval from Congress, has started to pay
interest to the banks on their reserves. The commercial banks already
enjoyed privileges and protections from the government that were
unavailable to any other business sector. Now they insist on getting
paid for their public subsidy.