Final draft of proposed financial regulatory reforms released today...

Below I have embedded the final 89 page report, found at FinancialStability.gov, which outlines the scope of reforms sought by the the Obama Administration to the financial system. The highly respected appeals court judge Richard Posner just slammed the report as dripping with "Roosevelt envy" on CNBC, but having clearly not read it yet I will reserve my personal opinion for a later date. Comments welcome and encouraged. 

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Obama speech endorsing indefinite detentions for "preventive" purposes...

Rachel Maddow is a very liberal political commentator on MSNBC who typically gives Barack Obama the benefit of the doubt on everything he says/does. However, in her reporting of President Obama's speech at the National Archives in late May regarding President Bush's "ad hoc legal framework" for indefinite detentions of POWs at Guantanamo Bay she does her fellow liberals, and all Americans for that matter, a great service by reading through Obama's B.S.  
In his speech, after artfully chastising the Bush Administration's alledgedly unconstitutional policies, the president argues for establishing what amounts to an ad hoc legal framework for PREVENTIVE INDEFINITE DETENTIONS!! The only real distinction between Bush's policy and Obama's would be that Bush detained indefinitely for crimes committed, while Obama would indefinitely detain for crimes to be committed one day. Watch this video and hear it from straight from Maddow herself...

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Draft of Obama's Regulatory Revamp

Today was a truly historic day for the financial industry as President Obama released his long anticipated plan for overhauling the financial regulatory system. Embedded below is a draft of this plan. I would love to hear what everyone thinks.

Obama's Financial Sector Reform Proposal
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Kennedy-Dodd Health Reform Bill: Mandates and Subsidies

Below I have shared a terrific outline of the Democratic health care reform package, which has been dubbed the Kennedy-Dodd Health Care Reform Bill, as it currently reads. The outline was written by Keith Hennessey and makes several very excellent points about the truly disruptive nature of this legislation, which is supported by the president, were it to pass in its current form. I have also embedded the full text of the bill as it exists today for those of you who are interested.

KeithHennessey.com » Understanding the Kennedy health care bill

Here are 15 things to know about the draft Kennedy-Dodd health bill.

  1. The Kennedy-Dodd bill would create an individual mandate requiring
    you to buy a “qualified” health insurance plan, as defined by the
    government. If you don’t have “qualified” health insurance for a given
    month, you will pay a new Federal tax. Incredibly, the amount and
    structure of this new tax is left to the discretion of the Secretaries
    of Treasury and Health and Human Services (HHS), whose only guidance is
    “to establish the minimum practicable amount that can accomplish the
    goal of enhancing participation in qualifying coverage (as so
    defined).” The new Medical Advisory Council (see #3D) could
    exempt classes of people from this new tax. To avoid this tax, you
    would have to report your health insurance information for each month
    of the prior year to the Secretary of HHS, along with “any such other
    information as the Secretary may prescribe.”
  2. The bill would also create an employer mandate. Employers would
    have to offer insurance to their employees. Employers would have to
    pay at least a certain percentage (TBD) of the premium, and at least a
    certain dollar amount (TBD). Any employer that did not would pay a new
    tax. Again, the amount and structure of the tax is left to the
    discretion of the Secretaries of Treasury and HHS. Small employers
    (TBD) would be exempt.
  3. In the Kennedy-Dodd bill, the government would define a qualified plan:

    1. All health insurance would be required to have guaranteed issue and
      renewal, modified community rating, no exclusions for pre-existing
      conditions, no lifetime or annual limits on benefits, and family
      policies would have to cover “children” up to age 26.
    2. A qualified plan would have to meet one of three levels of
      standardized cost-sharing defined by the government, “gold, silver, and
      bronze.” Details TBD.
    3. Plans would be required to cover a list of preventive services approved by the Federal government.
    4. A qualified plan would have to cover “essential health benefits,” as defined by a new Medical Advisory Council (MAC),
      appointed by the Secretary of Health and Human Services. The MAC would
      determine what items and services are “essential benefits.” The MAC
      would have to include items and services in at least the following
      categories: ambulatory patient services, emergency services,
      hospitalization, maternity and new born care, medical and surgical,
      mental health, prescription drugs, rehab and lab services,
      preventive/wellness services, pediatric services, and anything else the
      MAC thought appropriate.
    5. The MAC would also define what “affordable and available coverage”
      is for different income levels, affecting who has to pay the tax if
      they don’t buy health insurance. The MAC’s rules would go into effect
      unless Congress passed a joint resolution (under a fast-track process)
      to turn them off.

  4. Health insurance plans could not charge higher premiums for risky
    behaviors: “Such rate shall not vary by health status-related factors,
    … or any other factor not described in paragraph (1).” Smokers,
    drinkers, drug users, and those in terrible physical shape would all
    have their premiums subsidized by the healthy.
  5. Guaranteed issue and renewal combined with modified community
    rating would dramatically increase premiums for the overwhelming
    majority of those Americans who now have private health insurance. New
    Jersey is the best example of health insurance mandates gone wild. In
    the name of protecting their citizens, premiums are extremely high to
    cover the cross-subsidization of those who are uninsurable.
  6. The bill would expand Medicaid to cover everyone up to 150% of
    poverty, with the Federal government paying all incremental costs (no
    State share). This means adding childless adults with income below
    150% of the poverty line.
  7. People from 150% of poverty up to 500% (!!) would get their health
    insurance subsidized (on a sliding scale). If this were in effect in
    2009, a family of four with income of $110,000 would get a small
    subsidy. The bill does not indicate the source of funds to finance
    these subsidies.
  8. People in high cost areas (e.g., New York City, Boston, South
    Florida, Chicago, Los Angeles) would get much bigger subsidies than
    those in low cost areas (e.g., much of the rest of the country,
    especially in rural areas). The subsidies are calculated as a
    percentage of the “reference premium,” which is determined based on the
    cost of plans sold in that particular geographic area
  9. There would be a “public plan option” of health insurance offered
    by the federal government. In this new government health plan, the
    federal government would pay health care providers Medicare rates +
    10%. The +10% is clearly intended to attract short-term legislative
    support from medical providers. I hope they are not so naive that they
    think that differential would last.
  10. Group health plans with 250 or fewer members would be prohibited from self-insuring. ERISA would only be for big businesses.
  11. States would have to set up “gateways” (health insurance exchanges)
    to market only qualified health insurance plans. If they don’t, the
    Feds will set up a gateway for them.
  12. Health insurance plans in existence before the law would not have
    to meet the new insurance standards. This creates a weird bifurcated
    system and means you would (probably) be subject to a different set of
    rules when you change jobs.
  13. The bill does not specify what spending will be cut or what taxes
    will be raised to pay for the increased spending. That is presumably
    for the Finance Committee to determine, since it’s their jurisdiction.
  14. The bill defines an “eligible individual” as “a citizen or national
    of the United States or an alien lawfully admitted to the United States
    for permanent residence or an alien lawfully present in the United
  15. The bill would create a new pot of money for state gateways to pay
    “navigators” to educate people about the new bill, distribute
    information about health plans, and help people enroll. Navigators
    receiving federal funds “may include … unions, …”

This would have severe effects on the more than 100 million Americans who have private health insurance today:

  • The government would mandate not only that you must buy health insurance, but what health insurance counts as “qualifying.”
  • Health insurance premiums would rise as a result of the law, meaning lower wages.
  • A government-appointed board would determine what items and
    services are “essential benefits” that your qualifying plan must cover.
  • You would find a tremendous new disincentive to switch jobs,
    because your new health insurance may be subject to the new rules and
    would therefore be significantly more expensive.
  • Those who keep themselves healthy would be subsidizing premiums for those with risky or unhealthy behaviors.
  • Far more than half of all Americans would be eligible for subsidies, but we have not yet been told who would pay the bill.
  • The Secretaries of Treasury and HHS would have unlimited discretion
    to impose new taxes on individuals and employers who do not comply with
    the new mandates.
  • The Secretary of HHS could mandate that you provide him or her with “any such other information as [he/she] may prescribe.”

Kennedy-Dodd Health Care Reform Bill (First Draft)

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Health Care Information Technology Must Come First

President Obama has made no secret of his desire to forge ahead with ambitious health care reform legislation despite the economic crisis and soaring current account deficits with no end in sight. Obama wear's his philosophy on his sleeve: health care reform will be a central and unavoidable precursor to tightening federal spending over the long-term. I believe the president is absolutely correct, but I think he is putting the cart before the horse if he tries to overhaul the marketplace for health care providers before fully investing in and committing to the development of a nationwide health information technology foundation.

Information technology has transformed the fabric of civilization and industry in the US and around the world in ways unimaginable even 10 years ago. For the first time in history information is truly ubiquitous and free flowing. However, the largest US industry, Health Care, has largely failed to adopt IT in any meaningful way to enhance the quality of care received by patients. Despite this fundamental fallacy amongst health care providers, little more than token recognition has been paid to the matter by federal policymakers until very recently.

The recent American Recovery and Reinvestment Act (ARRA) was the first major federal injection of long-term capital ($48B+ over five years) into developing health IT infrastructure that is likely to have a real impact on patient outcomes. Physicians are offered real (though inadequate) incentives to adopt electronic health records and states are provided a true capital foundation upon which the technologies needed to expand coverage and value penetration. The stimulus funds are to be administered primarily by the newly formed Office of the National Coordinator (ONC) for Health Information Technology in the Department of Health and Human Services (HHS). However, it seems unlikely that this communications technology will be quickly adopted by providers and physicians, both of whom still lack any meaningful incentive to change.

I believe strongly that the marketplace for health insurance cannot experience fundamental reform until the broader health care industry has adopted the most basic value-added information technologies into the care delivery cycle and the true impact of this information flow on the quality of care can be quantified. To attempt radical health reform before this has been accomplished would be like prescribing treatment for a disease before assessing the patient's symptoms and issuing a diagnosis.

President Obama has a mandate to make sweeping changes to the way America is governed, this cannot be denied, and he appears to be intently focused on doing just that during the first two year of his presidency. It would be unfortunate if his party's legislative supramajority and his own impatience for gradual reform lead him to lose touch with realities of his capabilities as a mere mortal. Don't forget Mr President, "All glory is fleeting".

Weekly Address: President Obama Calls for Real Health Care Reform

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The Coming Collapse of America: Understanding the scope of US entitlements

For those of you that love reading about the impending collapse of our great country, here is an article from Forbes about two weeks back that summarizes the findings of two Federally conducted audits of the outstanding liabilities for both Social Security and Medicare/Medicaid, each released in the past few weeks. The first report was prepared by the Social Security Administration, and the second by the Dept of Health and Human Services. I just want to make sure everyone is clear and fully informed about the reality of the situation before we proceed with these conversations.

I hate to tell everyone, but the conclusion of these non-partisan reports make it clear that nothing is impossible when it comes to the Federal government making promises it can keep. The only clever way to fix problems as big as these is to either cut liabilities (LOL) or radically increase taxes. To fully off-set the liablities acknowledged in these reports, every American's welfare contributions would have to be increased 81% every year forever.

To quote the Forbes piece:

To put it another way, the total unfunded indebtedness of Social Security and Medicare comes to $106.4 trillion. That is how much larger the nation's capital stock would have to be today, all of it owned by the Social Security and Medicare trust funds, to generate enough income to pay all the benefits that have been promised over and above future payroll taxes. But the nation's total private net worth is only $51.5 trillion, according to the Federal Reserve. In effect, we have promised the elderly benefits equal to more than twice the nation's total wealth on top of the payroll tax.
Of course, theoretically, benefits could be cut to prevent the necessity of a massive tax increase. But how likely is that? The percentage of the population that benefits from Social Security and Medicare is growing daily as the baby boom generation ages and longevity increases. And the elderly vote in the highest percentage of any age group, so their political influence is even greater than their numbers.

It is easy to dismiss Wikipedia, but these numbers are all too real and there is not a damn thing Obama has/will do about it because he doesn't really care about young Americans, he cares about getting elected and he knows damn well every stupid 20-30 year-old voter, even those with college educations, will probably vote for him no matter what he does for us because (a) its "cool", (b) none of my peers have any concept of BULL SHIT, or (c) everyone under 30 really doesn't care if their future is taken into consideration by policymakers.

Unless Obama does something to start correcting these shortfalls, yes you guessed it, we will continue to get f***ed by our parents even after they are long when the government they left us collapses under it's obligations. By that time, we can point fingers at nobody but ourselves because it seems unlikely we will do anything to help our own cause.

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How long will FDIC be able to guarantee deposits?

The FDIC deposit insurance fund, which was featured on 60 minutes this weekend, has never allowed a depositor to lose even one penny of guaranteed deposits. Currently deposits are guaranteed up to $250,000 in all FDIC insured institutions. This insurance has to this point been funded entirely by the banking industry, as opposed to the Federal printing press, this may be on the verge of a tipping point. Imagine the panic in the streets if the FDIC is even perceived to be slightly vulnerable to the shocks in the small to mid cap domestic banking market, which has already experienced 30 seizures this year, over a dozen more than last year and we are exactly halfway through the Hell of 2009 today.

Chart and comment below from Tyler Durden of Zero Hedge, my favorite finance blog, and probably favorite financial news source period.

The FDIC's Deposit Insurance Fund has plunged to an all time low of just $13 billion as of March 31, or 0.27% of $4.8 trillion in insured deposits. It is worth nothing that since March 31, 15 new banks have failed which includes the biggest one so far this year, BankUnited (which Marla has a special fondness for in her heart and will be providing some ongoing entertainment on). It is thus safe to say that the $13 billion has been spent in the past 2 months, especially since banks no longer issue debt under the TLGP (of which, nonetheless, there was $336 billion outstanding at March 31 - somehow when banks are talking about repaying TARP, their FDIC-guaranteed debt, by far the biggest crutch to the banking system, is conveniently never mentioned) and therefore no longer pay FDIC guaranteed debt issuance associated fees. For many more thoughts on this phenomenon, go here.

Also, DIF-Insured deposits have hit an all time record high of $4.8 trillion, an increase of $90 billion from December 31 as depositors have been seeking a safe haven from the market in Q1. It is unknown if they would have done so, had they known their "insured" deposits will cover only the first 0.27% of depositors if there is another bank failure tsunami. As there is only one more month left in Q2 it will be curious to see it there will be a rotation out of deposits into investments at June 30, concurrent with the time we will know what the current level on the DIF is. Of course, as this data will be available some time in September, by then it may be completely worthless as one would imagine at some point the mystical futures buying force, end of month convenient fund deleveraging, or whatever else you want to call it, will have finally exhausted its market pulling strength.

Blog Rally: Raising Awareness for Public Participation in Healthcare X PRIZE Development

Blog Rally (b’lôg răl’ē) adj.
  1. A coordinated, simultaneous presentation of identical or similar material on numerous blogs for the purpose of engaging large numbers of readers and/or persuading them to adopt a certain position or take a certain action.
  2. The simultaneous nature of a blog rally can create the result of joining the efforts of otherwise independent bloggers for an agreed-upon purpose.
We are entering an unprecedented season of change for the United States health care system. Americans are united by their desire to fundamentally reform our current system into one that delivers on the promise of freedom, equity, and best outcomes for best value. In this season of reform, we will see all kinds of ideas presented from all across the political spectrum. Many of these ideas will be prescriptive, and don’t harness the power of innovation to create the dramatic breakthroughs required to create a next generation health system.
We believe there is a better way.
This belief is founded in the idea that aligned incentives can be a powerful way to spur innovation and seek breakthrough ideas from the most unlikely sources. Many of the reform ideas being put forward may not include some of the best thinking, the collective experience, and the most meaningful ways to truly implement change. To address this issue, the X PRIZE Foundation, along with WellPoint Inc and WellPoint Foundation as sponsor, has introduced a $10MM prize for health care innovators to implement a new model of health. The focus of the prize is to increase health care value by 50% in a 10,000 person community over a three year period.
The Healthcare X PRIZE team has released an Initial Prize Design and is actively seeking public comment. We are hoping, and encouraging everyone at every opportunity, to engage in this effort to help design a system of care that can produce dramatic breakthroughs at both an individual vitality and community health level.
Here is your opportunity to contribute:
  1. Download the Initial Prize Design
  2. Share you comments regarding the prize concept, the measurement framework, and the likelihood of this prize to impact health and health care reform.
  3. Share the Initial Prize Design document with as many of your health, innovation, design, technology, academic, business, political, and patient friends as you can to provide an opportunity for their participation
We hope this blog rally amplifies our efforts to solicit feedback from every source possible as we understand that innovation does not always have a corporate address. We hope your engagement starts a viral movement of interest driven by individual people who realize their voice can and must be included. Let’s ensure that all of us – and the people we love – can have a health system that aligns health finance, care delivery, and individual incentives in a way that optimizes individual vitality and community health. Together, we can ensure the best ideas are able to come forward in a transparent competition designed to accelerate health innovation. We look forward to your participation.

Special thanks to Paul Levy for both demonstrating the value of collaborative effort and suggesting we utilize a blog rally for this crowdsourcing effort.  Participating bloggers and media include include:
HXP - Initial Prize Design_v1

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