Of Good Leaders and Society’s Safety

June 30, 2021 Leave a comment

Photo by Megan Thomas on Unsplash

The story is told in The Book of Mormon of a society in ancient America that was under constant threat and frequent attack from another people who were fierce and far more numerous.  They were also related, which made hostility acute and seemingly ineradicable—save one should eradicate the other.

Like everyone in the western hemisphere their roots were planted by immigration.  These immigrants from the Old World were largely from two interrelated families.  They barely got along while the founding patriarch, Lehi, lived.  When he died, leadership succession threatened bloodshed.  Rather than fight it out, one group, led by a younger son, Nephi, left.  The other group, which over time became larger, was led by the eldest son, Laman.

The two societies could hardly be more different, because their leaders, though brothers, could hardly be more different.  Laman was opposed to emigrating from the Old World.  Lehi was given a prophetic charge to leave.  God told Lehi (who like his contemporary, Jeremiah, was a prophet of Christ) that his city, Jerusalem, was doomed, descending into social disorder and vulnerable to predictable conquest.  Laman doubted the prophecy.  Nephi, supporting his father, was given divine confirmation of the Lord’s warning.

In Lehi’s day the differences were occasionally resolved, but only superficially.  Laman, and those who listened to him, having little faith in his father’s prophecies, only with reluctance cooperated.  Nephi believed.  With that faith, confirmed by his own communion with the Lord, Nephi was instrumental in facilitating the pilgrimage to what the Lord vouchsafed Lehi and his family would be a promised land.

For centuries following Lehi’s death, both sides tried, in their characteristic idioms, to bridge the schism.  The people of Nephi, according to the record, devised “many means to reclaim and restore” the people of Laman “to the knowledge of the truth”.  Their record reports, on the other hand, that the people of Laman “sought by the power of their arms to destroy us continually.” (Jacob 7:24)

Which would prevail?  In terms of reunification, neither succeeded for more than four hundred years.  Measured by prosperity, the people of Nephi flourished.  While the chronicle is brief, it describes a society as advanced as any global contemporary of the fourth century B.C.:

And we multiplied exceedingly, and spread upon the face of the land, and became exceedingly rich in gold, and in silver, and in precious things, and in fine workmanship of wood, in buildings, and in machinery, and also in iron and copper, and brass and steel, making all manner of tools of every kind to till the ground, and weapons of war. . . and all preparations for war. (Jarom 1:8)

Compare that with the description of the people of Laman, who fell into degradation:

. . . they became wild, and ferocious, and a blood-thirsty people, full of idolatry and filthiness; feeding upon beasts of prey; dwelling in tents, and wandering about in the wilderness with a short skin girdle about their loins and their heads shaven; and their skill was in the bow, and in the cimeter, and the ax. And many of them did eat nothing save it was raw meat . . . (Enos 1:20)

By one gauge, the people of Laman exceeded the people of Nephi, “they were exceedingly more numerous”.

The moral of the story is this.  The people of Nephi prospered, not only materially and socially, but they also succeeded in holding their enemies at bay, enemies whose hostility was implacable, constant, and fierce, and who were “exceedingly more numerous”.  How so?  The crowning message inscribed in the ancient records of the people of Nephi was that their kings and leaders “were mighty men in the faith of the Lord”.  Thereby the people were led in safety.  That is a vital message for our society, or any society.

Filed under abundant life, civilization, immigration, Jesus Christ, leadership, national security, prosperity, The Book of Mormon, war Tagged with , , , , , , , ,

Of Good Banking and the New Year

January 9, 2021 Leave a comment

Photo by bamagai at Unsplash

A year in retirement can give you perspective, particularly a year fraught with ample opportunity to do some good amidst challenge, risk, and danger of various flavors.  Such was the year behind us.  Does the year ahead offer any less?

Many such thoughts were brought to mind in a recent conversation with the chief financial officer of a community bank.  As you would guess, we discussed the outlook for banking.  I observed that the condition of the industry reminded me of the dot-com bust of 2000.  While the economy was in decline, hit a second time by the terrorist attacks of September 2001, the banking industry was thankfully in strong financial condition.  The dot-com bust had a securities market and Silicon Valley locus.

As in 2001, so also today, the banking industry is strongly capitalized, liquid with financial resources, well positioned to fund economic recovery.  Fortuitously, that position is matched by a host of potential customers, especially entrepreneurs eager to start up new businesses or expand ones that survived the government-led shutdowns.  Among those entrepreneurs are many people whose businesses closed not from bad business plans, but due to the Great Cessation of 2020.  That is to say, there are people who want to start new businesses who know how to run businesses, if government strictures will let them.

Their problem is one of resources exhausted by trying to keep their businesses floating as the tide went out.  As the tide is coming back in, there is a ready supply of people who would like to have a go with a new boat.  Good bankers have always been in the business of finding and funding good risks. 

Banks grow as their customers and communities grow.  Good banking fosters and facilitates the generation, management, preservation, and application of wealth. 

Bad banking bleeds wealth, which is why failed banks should be allowed to fail, to end the drain on the economy and to make room for the productive work of good banks, new and old.  Good bankers do their work by insightful weighing of opportunities and risks, tailoring terms and conditions to such opportunities and risks.  Bad banking either mistakes opportunities, or it miscalculates or ignores risk, or both.  Which, by the way, is why governments should stay out of the business of banking (other than as prudential supervisors), as the history of government shows an atrocious record of missing opportunities and miscalculating risk, sometimes for the short-term benefit of government’s associates.

The other day I saw a happy video from the chief executive officer of a southwestern bank.  Her timely message was of gratitude to the bank’s customers for constant communication and support.  In return, she offered a reaffirmed invitation apropos to serving in a way tailored to customers’ financial needs.  Reach out to the bank, including its CEO, 24-7 for financial service.  In conclusion, she pledged the bank to “connect you with others in our community who can serve you best.”  Now, that is good banking.

Filed under banking, economic growth, Great Cessation, markets, prosperity, retirement, statism, wealth Tagged with , , , , , , ,

Of Generations and Economic Life

March 30, 2020 Leave a comment

Photo by Lindy Baker on Unsplash

Consider these items, taken from one of the social media platforms that specializes in brief, non-reflective commentary:

  • The older generation has to realize that life is never going back to the way it was, that it is changing. 
  • Life is more important than economics.

Perhaps you have seen similar comments.  They are currently in fashion.  As with most silly fashions, I am tempted to ignore them and count on change to fade the fashion into fashion’s forgetfulness.  They betray such depths of ignorance, however, that I find them too hard to pass by as nothing of interest to see.  In times of panic and hysteria, even social media mobs can foment danger.

Hence, I will try a more reflective social media platform to add a few comments of my own.  I readily confess that I may be part of that “older generation.”

Beginning then with the first item, the generational point, to call it superficial is to ascribe to it too much depth.  It is intellectually vacuous.  I would suggest that the last group of people whom you need to convince that life is change is older people.  Every day they face changes, some they like, some they do not, and few that offer a chance of “going back to the way it was.”  Each new morning brings something lost, a new pain, a departed friend, a concluded experience, or a disappointment.  There are also happy changes, a new acquaintance, something accomplished, a new delightful member of the family, a wonderful discovery, a pleasant work-saving invention, inspiration, valuable experience.  Older generations cope with it all as well as any other.

That is to say, that this is not exclusive to older people.  It is, in fact, the stuff of life for all, from youngest to oldest.  We all must face change.  It is just that older people have experienced more years of life, filled with change.  I stress that there are many changes in which we rejoice, ways to which we would hate to return.  I am happy I made it through my teen years and would never wish to go back.  I am quite certain that my father had no desire to return to the two wars he had to fight.  I am grateful each day for the evolving prosperity that our society has experienced for so many decades, that so much poverty and illness have been overcome.  My grandfather died of an incurable disease that today is easily cured—he missed the discovery of the cure by just a few years.  I never had to fear it.  I still pray for a change that might have saved my mother from the illness that slowly took her to the world of spirits.  Do let us talk about change, but let it not begin with the absurd notion that one generation welcomes it and another does not.

Now to reflect a bit on the second item, that supposes a difference between life and economics.  The writer is apparently unfamiliar with economics, formed entirely from life.  It is a life science, individually and in groups.  It is an effort to understand what living people do with their lives and why, and how to find ways for living people to get more from their lives.  For hundreds of years, the evolving discoveries we call “economics” have guided people and nations to raise billions of people from poverty and fuel human interaction allowing people across the world to cooperate in expanding prosperity.  It was the living reality of economics that first destroyed the old monarchies and in recent years wrecked such anti-economic despotisms as the old Soviet Union.  The lessons learned from economics have been the transforming engine that displays the day and night difference in human welfare and freedom—life and death—between South and North Korea.

Lessons from economics, properly understood and efficiently applied, are what will allow our economy, currently in sharp decline from government policies, to revive as quickly as possible from the Great Cessation.  People want to live their lives and express their humanity by being at work, developing their talents, providing for their families, going to school, traveling, discovering, inventing, engaging in cultural activities, uplifting others, building, planting, healing, and hundreds of millions of other things—add your list to these economic activities.  Economics teaches us how to do these things in ever increasing and satisfying ways, as more people are experiencing today than ever before.  This is life.  Economics is important, because life is important.

A concluding thought, one which I would enjoy discussing with someone of whatever generation.  There are some things that do not change, and there is danger of the highest order in pretending that they do.

Filed under abundant life, civilization, economics, Great Cessation, life, prosperity Tagged with , , , , ,

Of Majorities and Modesty

November 18, 2014 Leave a comment

Perhaps with some weeks enough dust has settled to allow a few reactions to the recent American elections, with more perspective than can be gathered from listening to reporters interviewing reporters. I will offer views that focus mostly on the results of the congressional elections, drawing upon experience from more than two decades of work in the Senate.

I do not, however, wish to minimize the importance of the elections for governors and state legislatures. In fact, I suspect that the next President of the United States will more than likely be a current or former governor than a Washington politico. Most Presidents, historically, have come from the state governments, which I find encouraging for our federal system. Moreover, judging from what we have seen, former Senators do not seem to make very good Presidents. I cannot name one to whom we can look with admiration for what he accomplished in the White House. There seems to be too much Washington blindness in them to govern effectively for our whole nation.

I am straying to an election yet to come, though. Back to this year’s results, I will begin with the view that we should expect, with the media-scorned Republicans holding the majority in both House and Senate, that the finger of blame for all problems—real or imagined—will be pointed at “Congress.” Disputes between legislative and executive branches will tend to be cast as exposing the nation to great danger as a result of congressional intransigence and/or “politics,” as if no real issues of policy—no questions of life, freedom, or wealth—are involved.

It is happening already. In one bizarre report I heard this week on a major network “news” report, some Amtrak railroad drawbridge in the northeast is over a hundred years old and prone to getting stuck when it opens to let ships pass. Amtrak wants a billion dollars or so to fix it, but, as the “news” story would have it, Republicans in the new Congress “are not looking for ways to spend money.” That was the story. Note the nothing new here. The bridge has been around for a hundred years and did not suddenly become prone to malfunction this November. But the election has now made it a story; a problem is arising, not because the President or the Democrats in Congress for several years did not seek to fix it, but because the new Republican majorities are not interested in spending money. The bridge is not the problem in the story, the Republicans are. Expect more of this kind of media “news.”

Second observation: in recent decades Congress has increasingly surrendered more and more authority to the executive branch, including to the regulatory agencies. The Senate, under the misleadership of Majority Leader Harry Read, has given up even more power and authority (perhaps in another post I will expound on lessons from the Senate of Rome, which by avoiding decisions paved the way for the Caesars—who were all too ready to make decisions). The Democrats retain full control of the executive branch. No small thing. In the remaining two years of the Obama Administration look for more aggressive activity from the White House and the regulators as they test just what they can try by regulation and regulatory fiat, without any detours to Capitol Hill. To quote Jacob Marley’s ghost, “Much!”

When it comes to big Republican plans to make major changes, the quidnuncs will be fed explanations of the thinness of the Republican majorities, along with the “responsibility” of Republicans to share power with Democrats that the Democrats failed to win at the ballot box. When it comes to work that needs to be done, the repeated common wisdom will be that the Republicans have the majority, so nothing should stop them from getting on with the job. There will be little mention that the President can veto what Congress passes, and that Democrats in the Senate will likely filibuster anything that the White House threatens to veto, saving the President the trouble—and political risk.

Yet, there are things that the Republicans, even with working but not overwhelming majorities in Congress, will be able to do. Most important, they get to set the agenda. They get to decide what issues will be debated, what hearings will be held, what will be put to a vote, even when they may not have the votes to break Democrat opposition in the Senate. It will be some relief that instead of the familiar series of proposals to curb liberties, raise taxes, or stifle economic growth and opportunity, the agenda will tend toward ideas of freedom and prosperity, though actual accomplishments will of necessity be modest against the strong opposition of the President and his media allies. I will take modest improvements over the calamitous policy fails of the past several years.

Filed under Barack Obama, bureaucracy, Congress, economic growth, elections, federalism, freedom, government, House of Representatives, media, politics, prosperity, Rome, Senate, taxes, Washington Tagged with , , , , , , , , , , , , , , ,

Of Unbanked and “Underbanked”

October 11, 2014 Leave a comment

Speaking of banks, as I did on this page a short time ago, there are those who are concerned that too many people in the United States are “unbanked” or “underbanked.” By the former they seem to mean those who do not use any banking services, particularly who do not have any bank accounts. By the former, they mean those who obtain some banking services from businesses that are not banks. The very existence of the terms, and the way that they are used by those who use them, implies that being “unbanked” or “underbanked” is a bad thing.

I will here disclose that I have worked for banks for nearly 10 years and for all I know may continue to do so for some time into the future. Whatever bias or color to my views that this condition provides I will nevertheless try to comment from a fair and factual point of view.

My first point, therefore, is that I am not prepared to assert that absolutely everyone should have a bank account. I can easily envision the value of a bank account for most if not all people, but I concede that they should be allowed to choose for themselves and that it would be terribly wrong to force people into banks. I acknowledge that there are some alternative providers of financial services who seem to please their customers, and I do not deny that banks can benefit from good competition. Banks have a long history of drawing upon the ideas and innovations of non-banks, just as non-banks have been eager to try their hand at successful new products and services that banks have pioneered. Bank customers have benefited the most from that process, as the variety and value of financial products have expanded, and the United States has led the world in the discovery of new and useful financial services.

Having said that, the nation cannot do well without a strong, vibrant, and prosperous banking industry. Our nation and people grow as we save financial resources and invest them in improvements for the future, whether new homes, new factories, or new ideas of how to do and make things better, faster, and cheaper. That is a major part of what banks do and are all about.

Moreover, there are a lot of things we do and a lot of places we go because we know that our ability to pay and get paid—to exchange things we value less for things that we value more (the reason we buy and sell things and use money to do it)—is secure, reliable, accurate, and relatively quick. That is our payments system, and banks created it and are at the center of it.

Americans also like the idea of becoming wealthier and expect to do so. If that seems a commonplace to you, recognize that it is not so in all parts of the world, where getting by from day to day is about the most to which people can aspire, for whom poverty is a way of life that they expect to bequeath to their children. To the extent that this miserable condition is becoming less the case in much of the world, that more people are beginning to believe that they can build and improve their wellbeing for themselves and their posterity, this new-found hope for accumulating wealth is attributable to the dispersion of principles of freedom and prosperity that Americans take for granted but which are new to much of the world. The global adoption of many American principles of prosperity has been a major contribution of the New World to the Old World and to all mankind.

Now get ready for the bold but true statement: you cannot get there and stay there without banks and the services that banks provide. Banks gather wealth, safeguard wealth, allow it to be used efficiently, and apply it to building the future. That is why governments pay so much attention to banks, and also why it is so harmful when governments try to capture banks and channel their services to the personal gain of themselves and their cronies. That is also why misguided bank regulations are harmful—even if in subtle but powerful ways—to the nation and its people.

Which brings us back to the agenda of the “unbanked” and the “underbanked.” In the United States, chief causes for people remaining “unbanked” are regulations that make banking more difficult and services more expensive; cultural barriers for people who come from societies where personal banking is either unknown or where the experience has been one of banks used by local governments to harvest wealth from people to enrich the governing elites and their cronies (much of Latin America, for example); and people who for whatever reason just do not prefer to use banks. The first cause regulators can solve but have largely been resistant to solving; the second can be overcome by time and experience and is showing signs of that; and the third cause is no more of a problem than people who prefer to rent rather than own their home, to eat eggs without grits, or who do not like the New York Yankees. I do not have to understand the personal preference to acknowledge it.

The concept of “underbanked” (that government needs to help banks figure out how to serve people who may get some banking services outside of banks) I fear may be a political device to harness American banks to serve the cronies of the “underbanked” advocates. We have already seen this game with the Community Reinvestment Act (CRA) regulations, adopted ostensibly to ensure that banks lend to their local communities (as if bankers, unlike other businessmen, need government regulation to notice business opportunities right under their own nose). In practice, CRA has been used to coerce banks into providing loans and even grants to and through poverty advocacy agencies that tend to prosper more than the people whom they claim to be helping. The folks who fret about the “underbanked” have marvelous formulas and plans for other people’s money to solve problems about which the people to be helped seem little concerned. I have never heard of any truly “underbanked” people themselves calling for the firm hand of government to get them into the banking system; if they want banking services, they just go and get them.

I have the haunting suspicion that the “underbanked” advocates would if they could use banks the same way found in the abandoned societies of the “unbanked,” where banking services came through the hands of people who knew better than others and always made sure to get their cut for their benevolence. That is not really banking, and that is symptomatic of why people flee those lands. The wealth creation of such captive banks seems to be for someone else. If it happens in America, where will the people go?

Filed under "unbanked", America, banking, benevolence, choice, Community Reinvestment Act, economic growth, exceptionalism, immigration, investment, money, personal finance, poverty, prosperity, Uncategorized, wealth Tagged with , , , , , , , , , , , , , ,

Of Banks and Over Taxed Regulators

September 27, 2014 1 Comment

Banks, who needs them? A quick question and a quick answer: a thriving, prospering banking system is essential for a thriving, prospering modern economy. Banks bring together the resources of savers and the needs of borrowers, particularly borrowers who seek funds to establish or expand businesses or families and individuals who use occasional borrowing to smooth out their income (good banking principles penalize people who would borrow in order to live beyond their means, but more on that at another time).

Banks also created and maintain the payments system, the means by which money is transferred quickly and accurately throughout the nation and even internationally. Bank services include as well a variety of wealth management tools by which individuals, families, businesses, and governments can store, grow, and make best use of their financial wealth.

Without banks, almost none of these services would be available. Many non-banks provide bank-like services, but they all come to find the need to rest their own services at some point on a bank.

Banking in the United States has grown with the nation, from very simple institutions in the eighteenth and early nineteenth centuries, to a wide variety of bank types, charters, and business models, as diverse as the financial demands of the customers of the largest and most diverse economy in the world. I once presented at a meeting in Chicago a list of about two-dozen different types of banks in the United States. We have national banks, state chartered banks, small community banks, larger regional banks, and very large banks with extensive national and international business products and services. All of these operate and compete together, with a body of customers behind each one who think that their bank offers the best available choice of services that they want. No other nation in the world has a banking industry like ours.

The recent recession and financial panic—and the inevitable politicizing of finance that came in its wake—have thrown much into confusion and imposed upon sound and prudent bank supervision harmful ideas born of reckless sloganeering and hubristic financial engineering. The complexity of banking—no more complex than information technology, communications systems, or modern manufacturing—has been superseded by even more complex bank regulation.

The rules governing banking are too much and too many to function reasonably. They have become more than the very human people in the multitude of bank regulatory agencies can manage. The disciplining role of markets and the valuable service of banker judgment have in large measure been replaced by bureaucratic procedures and the judgments of government officials. These officials have had little if any practical experience making loans, taking deposits and putting them to work, building financial wealth, or otherwise providing products to customers. Government officials cannot run businesses. Now, their government jobs have become so demanding and complex, that they will not be able to do their own jobs, either. Too much has been placed upon them.

Those most harmed by all of this are bank customers. For the moment, bank profits are up, but that is because their losses are down as they recover from the recession, not because services to customers are expanding. As a result of government interest rate policies, depositors earn almost nothing on the money that they place in banks. The expanding oversight involvement of bank regulators makes it dangerous for banks to offer new services to customers; the risk of breaking any of thousands of pages of regulations has become too great. It takes almost half an hour to open a new bank account, something that used to take minutes. Fewer credit-worthy borrowers today qualify for mortgages than just a year ago, before new regulations went into effect. The number of banks has been declining in recent years, dropping at the rate of nearly one for every business day, week in and week out. Only one new bank has been opened since 2010. We have fewer banks today than the nation had in 1893. A stagnant industry is less able to evolve to meet changing customer needs and preferences.

For the good of all of us who rely upon banking services, and for the sanity of financial regulators, we need to return to the principles of good banking. We need to restore a system of supervision that is measured, not by how much banker judgment it takes over, but by how it adds value to the ability of banks to serve customers. Government agencies—and the laws that they administer—that are derived from a founding document that begins with the words, “We the People,” should do nothing less, and nothing more.

On another day I would like to share some thoughts about how banks are being goaded to become their own enemies.

Filed under banking, BCFP, bubbles, Dodd-Frank Act, economic growth, government, interest rates, markets, prosperity, statism, wealth Tagged with , , , , , , , , , , ,

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