What Happened to the Democratization of Wall Street?

The New York Times this morning reports on announcements from financial institutions following the latest round of "stress tests" by the Federal Reserve:

 JPMorgan Chase announced Tuesday that it would...  increase its quarterly dividend payment by a nickel, to 30 cents... Wells Fargo increased its dividend by 10 cents, to 22 cents. John Stumpf, the bank’s chairman and chief executive said, “We are extremely pleased to reward our shareholders.” American Express, the credit card issuer, also announced it would increase its quarterly dividend by 2 cents, to 20 cents a share. Meanwhile, U.S. Bancorp raised its quarterly dividend, too, by 7 cents, to 19.5 cents.

But they note the appall some take from these actions:

“It’s frankly irresponsible to allow banks to quickly empty their coffers,” said Neil Barofsky, the former inspector general for the Troubled Asset Relief Program. “They should be holding onto this money.”

What an odd sign of the times! Now, I'm certainly not the first person in line to defend the likes of JP Morgan Chase, but if I get this right, there's outrage by some government officials that banks would dare to share their profits with their SHAREHOLDERS, as if sharing the profits of a company with its owners is somehow irresponsible. I wonder what their take is on the obscene salaries and bonuses at times paid out to employees, without regard to profits?

Let's put this in perspective: we're not talking about these banks stripping assets to pay off investors and top executives. JP Morgan Chase's (JPM) increased $0.30/share brings their dividend yield to 2.68% at today's prices; and Wells Fargo's (WFC) increase to $0.22/share brings their dividend yield to 2.59%; American Express' yield grows to 1.4%; and US Bank's (USB) hits the lofty heights of 2.47%. Hardly the profligate, irresponsible embarrassment of riches Barofsky's statement implies.

And who are those shareholders? My guess is a good percentage of them are everyday investors with vacation savings and retirement accounts, who frankly deserve a bit of the share in profits from the companies they invest in.

I guess that's why it was called the Troubled Assets Relief Program, not the Distressed Shareholders Relief Fund.

Education: Budgetary Strawman

Rep. Paul Ryan (WI-1), Chair of the House Budget Committee, has been recently quoted attacking President Obama as "a pyromaniac in a field of strawmen". Cute turn of phrase. Unfortunately, it characterizes most of our nation's political figures, including Ryan himself. There was an article in yesterday's New York Times entitled "Anti-Federalism in G.O.P. Race Aims at Education". While I might be inclined to dismiss attacks on education as a drive toward insular ignorance, as I read the article I began to think there is surely merit in rethinking our nation's approach to education, and to consider that there might be cause for reducing spending on education without compromising our nation's strengths.

As an "unschooling" dad and entrepreneur, I find that "No Child Left Behind" and "Race to the Top" both overvalue conformity and standardized testing over creativity and innovation. The Economist recently did a profile (without questioning the underlying assumption of validity) showing a global obsession with standardized tests. Perhaps Obama's recent moves to relax the federal education-related requirements on states and locales is a move in the right direction.

But I wondered if calls to reduce or abolish the Department of Education might not have some moment, in this age of austerity. This is a difficult question for me as a research entrepreneur since I have and plan to again propose R&D projects to the DoEd. Reducing their budget necessarily reduces my opportunities. But I firmly believe in supporting the greatest good for the greatest number even when that sometimes counters my own short-sighted self-interest. So I took a look at Third Way's "Your Federal Tax Receipt" to get a handle on just how big the federal education budget is, to determine how much fat might be cut. Um... talk about strawmen!

Over all expenditures for education related items amount to less than 3% of the federal budget, more than half of which is for elementary and secondary education. That still leaves a little room for trimming some of the arguably misguided federal mandates toward conformity and standardization. The push for our children to acquire skills for the workforce sounds a bit too much like the call for maleable assembly-line workers of a century ago. To this entrepreneur, it lacks the drive toward innovation that I'd prefer. Still 2.9% is not a smoking gun. Far from a bloated bureaucracy, DoEd administration accounts for a mere $0.12 per $1000 in taxes collected.

After elementary and secondary education, another 1.1% is accounted for by Pell Grants, special education, and rehabilitation services, which seem worthy enough. Expenditures for "Innovation and Improvement" at $0.29 per $1000, and the Institute of Education Sciences at $0.17 are neglibile as well. Even if Michelle Bachman or Rick Perry were able to shutter the Department of Education, the result on the deficit would be akin to you or me finding a dime on the street once in a while and sending it to the IRS. Put in perspective, the same $1000 in taxes pays for $204.39 in Social Security benefits, $130.67 in Medicare, and $47.06 on operations in Iraq and Afghanistan.

Come on America, isn't time we put aside pettiness, and work together to resolve our nation's ills? Let's make the hard choices, and set our priorities to what will create the most benefit despite our political or ideological leanings. What would be so wrong about rallying behind both Barack Obama's and Scott Walker's efforts to create high-quality jobs? Who cares who gets the credit! Ideologies don't garner results. That comes from rolling up our sleeves and getting dirty together, rather than simply slinging the dirt around.

Corporate Welfare America

David Kocieniewski published an article in today's New York Times entitled "Where Pay for Chiefs Outstrips U.S. Taxes," reporting on a study that found many of the highest paid chief executives lead corporations with the lowest tax burden, despite bumper profits. Now, the issue here is not principally the widening income gap between rich and middle class. Putting aside whether a corporate CEO or any employee of a firm is worth $18m/year (which by the way translates to $8,653.85 per hour for a standard year of 2080... hell, let's give them the benefit of the doubt, they work hard, let's say 80 hours per week... well then, it's only $4,326.92/hour!), the notable finding is that current United States policy is "rewarding tax avoidance rather than innovation."

“We have no evidence that C.E.O.’s are fashioning, with their executive leadership, more effective and efficient enterprises,” the study concluded. “On the other hand, ample evidence suggests that C.E.O.’s and their corporations are expending considerably more energy on avoiding taxes than perhaps ever before — at a time when the federal government desperately needs more revenue to maintain basic services for the American people.”

That's something for the policy wonks in Washington to consider as they move ahead with tax reform and deficit reduction plans.