Category Archives: Congress

Menendez provides an end around the Corona virus aid hold up.

Last Friday, U.S. Senator Bob Menendez, Democrat of New jersey, introduced S. 3550, the Municipal Bonds Emergency Act.  The bill aims to amend the Federal Reserve Act to permit the Board of Governors of the Federal Reserve System to engage in certain open market operations during unusual and exigent circumstances.  The Federal Reserve’s authority would be extended to purchase bonds with any maturity period versus the current six month maturity period under Section 14 of the Federal Reserve Act.

Mr. Menendez’s rationale for the bill is to provide cities with another avenue of financing the rising costs of addressing the COVID-19.  Mr Menendez’s argument for the bill may get an additional boost given that the U.S. Senate failed to advance a bill that is apparently blocking negotiations for a corona virus response bill that would provide between $1 trillion to $2 trillion in support, including financial aid for individuals, small businesses, and affected airlines, according to reporting by Reuters.

The bill holding up the process, HR 748, is a designed to repeal an excise tax on high-cost employer-sponsored insurance coverage. It appears that Republicans want to get the bill, which was introduced back in July 2019, out of the way before proceeding to a, now estimated, $2 trillion stimulus package that contains financial support for banks, hospitals, other health care providers, and individuals.

Until tomorrow, we stay in wait and see mode….

 

Part I. Three questions before voting: Why are we a union? (And when is California grape season?)

I only eat grapes produced in California.  This is the time of the year where the only grapes I find in the local grocery stores are either from Chile, Mexico, or Peru.  The taste of grapes from those countries never appealed to me.  Maybe the pickers are in a rush to get the grapes to the American market sacrificing sweetness for the chance that the consumer has a taste for grapes from Central and South America.  Maybe it’s the soil; its nutrients, irrigation, or the environment they grow in.  I don’t know.  I just prefer the texture and taste of California grapes.

I have been to California three times; twice to San Francisco and once to San Diego.  Nice towns; picturesque.  The people never really stood out as warm and hospitable, but after near forty years in the South, I probably expect too much in terms of hospitality.  Last time that I was in Brooklyn, for example, I had to adjust my “friendly meter” because New Yorkers have no time for spare eye contact and smiling with a brother.  Not to say New Yorkers are rude.  On the contrary, New Yorkers are some of the nicest people I have met.  Their way of expressing themselves in public is simply different from people in the South.

For Americans of a more cosmopolitan ilk, being able to visit different regions of the United States and experience the culture and food may excite them.  From a political perspective, however, does it mean that these states, have to bear the costs and burdens of being united under one federal government?  Why should Americans want to maintain this union?

The reason I pose this question is primarily due to the upcoming presidential elections and the expectations voters impose on the candidates.  My general observation of the electorate finds a voter who expects one of these men, either Joe Biden, Bernie Sanders, or incumbent president Donald Trump to help make their lives better.  They expect that the current or future president should utter words and implement policy that emanates from the halls of the White House and trickles into the voter’s bedroom, office, grocery store, schools, and bank accounts.  They expect to be saved.  They expect to be uplifted.  They expect to be made whole.  They expect to prosper and have a good life.

Candidates play on these expectations by pushing the right emotional buttons, by sharing the properly tuned narrative that hopefully gets the voter to exercise their franchise in a candidate’s favor.  One example of this is the mantra emerging from the Corona virus crisis, “We are all in this together.”  Federal, state, and local elected officials have been trying to assure Americans that under their leadership the virus will be contained and that if Americans take the proper precautions, this too shall pass….

Assure the voter.  Ensure the vote.

The average voter takes little if any time to re-read her national history much less critically analyze the Constitution of the United States.  This failure to take another look at the nation’s make-up creates a thought void that a politician can play on.

To fill the void, the voter should challenge any and all narratives they have been subjected to since first watching “School House Rock.”  One such narrative is the purpose of the “perfect union.

The purpose of the union, of an interstate compact, was to ensure that goods, services, and labor could move freely between and through the States.  The primary purpose was never about creating one happy culture but one happy commercial flow and customs and tax zone.  For an example, Article I Section II notes the apportionment of direct taxes among the States.  And in the discussion of Congress’ power and duties, found in Article I Section VIII, four of the first five clauses discuss taxes, duties, imports and excises.  They also discuss Congress’ power to borrow money, regulate money, and mint coin.

Feeling good about mother, apple pie, (California grapes) and the flag are not mentioned.

And while the rationale stated in the preamble expressed the expectation of a perfect union, the establishment of justice, providing a common defense, providing for the general welfare, and securing liberty, this thought, this view or philosophy of the world was held by the aristocracy who had a vested interest in protecting the flow of capital and increasing its returns by having a national government structure in place that protected its flow.

Democracy was an ingenious way of preventing collateral damage.  In order to validate the hierarchy, a narrative had to be created that a “perfect union” was necessary for the benefits of liberty to flow and an aristocracy of learned and/or propertied white men should lead it.

I ask why a union with, say, Delaware, be viewed as necessary to my well being or welfare?  Does Delaware supply me clothing, food, education, or manufactured goods?Does Delaware provide me financial capital to seed my enterprises or personal consumption, and even if it did, does allowing its two U.S. senators and a couple congressmen to vote on affairs that directly impact my state provide a worthy exchange for my liberty?

If a voter cannot demonstrate how being in a union made up of different cultural views, terrains, economies, justify the potential negative impact their votes can have on her state or more importantly, her personal freedoms, then excitement about a national vote is severely misplaced.

If she accepts the status quo, that the perfect union provides her personal benefit, then her second question should be, what is the best political-economic mechanism to guide the union’s path?

That question I leave for Part II.  Until then, I will wait patiently for the California grape season…

Balkanizing internet regulation is out of step with the uniformity needs of financial technology

The eye-catcher ….

In two weeks, state utility regulators will convene in San Antonio, Texas for the National Association of Regulatory Utility Commissioners annual meeting to discuss how they can leverage a recent decision by the United States Court of Appeals-DC Circuit that the Federal Communications Commission cannot preempt state regulation of concerns over consumer access to and privacy on the internet via broadband.

Some states such as California have moved ahead with their own net neutrality laws, hoping to enforce consumer protections by prohibiting internet access providers from lowering traffic speed from certain websites or preventing internet service providers from favoring their own content by blocking a consumer’s access to content that the consumer prefers.

The state-by-state approach problem

The problem with a state-by-state approach for a financial technology firm is the uncertainty that data and capital face when they traverse state borders. Will a content delivery firm tasked with storing and transmitting financial data on behalf of a financial technology firm have to enter into different interconnection agreements per state because of the differing consumer privacy laws encountered in each state?  Will differing requirements on paid prioritization result in financial data traffic slowing down depending on which state border it crosses?

There is an irony that on a global basis, the United States is a staunch proponent of freer cross-border data flows, but would run the risk of subjecting those same data flows to a hodge-podge of regulations that create digital toll roads for financial data traffic.

The changing consumer taste in banking

What federal and state policy makers should be focusing on is ensuring the amount of bandwidth necessary for digital transmission of financial data and capital is available.  Our use of digital banking services will not be shrinking anytime soon.  MediaCom Business cited data in a blog post that 92% of millennials make their choices as to where to bank based on the digital services a bank offers.  Legacy banks hoping to compete with digital upstarts are accepting this type of demand an, as found by consulting firm Accenture, are exploring how best to integrate and deploy technology necessary for meeting this demand.

Recommendation: Seamless versus Balkanization

The supply of digital banking and payment systems services combined with increasing demand for these services means more bandwidth is needed in order to optimize the consumer experience.  State and federal policy makers can facilitate this need for increased bandwidth by focusing policy on ensuring the delivery of this infrastructure.  Coming up with 50 different rules on net neutrality is more distraction than help.

What should be spawned in next month’s NARUC meeting is a recommendation for national legislation on consumer privacy.  Consumer privacy concerns should no longer be leveraged to create 50-plus fiefdoms for net neutrality.  Transmission of information, data, and knowledge should be a seamless experience for consumer and firms that use financial technology to transmit value and capital.