$30 Million First National Bank Regulatory Costs Due to Dodd-Frank Replacing Clear Rules with Regulator “Wild Card” Leeway

(p. 1D) The president of First National of Nebraska, the nation’s largest privately held banking firm, said new federal regulatory and compliance efforts stand to cost the company as much as $30 million this year.
“It is a big uncertainty in the banking world,” said Dan O’Neill, speaking Wednesday at the company’s annual meeting in Omaha. “They are not operating off of concrete rules. A lot of it is their interpretation.”
The federal Consumer Financial Protection Bureau was formed as a result of the federal Dodd-Frank laws passed in 2010 after widespread bank failures and bailouts using taxpayer money. . . .
. . .
The bureau, he said, worries banks because there is not a “clear body of rules” from which the regulator is operating in evaluating the fairness of a bank’s business practices. He said the agency’s regulators have a lot of leeway in deciding what to do af-(p. 2D)ter examining a bank; penalties for running afoul include fines.
“So it is a bit of a wild card,” he said.

For the full story, see:
Russell Hubbard. “First National Chief Says Regulatory Costs Mounting.” Omaha World-Herald (THURSDAY, JUNE 20, 2013): 1D-2D.
(Note: ellipses added.)

Federal Food Regs Drive Sharon Penner to Stop Baking for Nebraska Children

PennerSharonSlicesHerBakedBread2013-06-11.jpg “Sharon Penner slices fresh bread, which she bakes a few times a week for Hampton, Neb., students. Penner, who has fed the town’s schoolchildren for 43 years, saw new school nutrition rules that cut many of her goodies as a sign it was time to retire. With her in the school kitchen is assistant Judy Hitzemann.” Source of caption and photo: online version of the Omaha World-Herald article quoted and cited below.

Have we gone too far when the preferences of Michelle Obama rule over the preferences of the parents of Hampton, Nebraska? And is it clear that the parents are wrong in thinking that fresh-baked bread (see photo above) and a timely pat on the shoulder (see photo below), are worth some extra calories?

(p. 1A) HAMPTON, Neb. — Blame the broccoli. Blame the mandarin oranges. Blame all their cousins, from apples to yams, for removing Mrs. Penner’s butter bars from the school lunch counter.

Then blame Mrs. Obama for removing Mrs. Penner.
So goes the thinking in this no-stoplight village of 423 people about 20 minutes northwest of York.
When the new federal school nutrition mandates went into effect this year, championed by first lady Michelle Obama, fresh-baked brownies, cookies and other sugary goodies disappeared from the school menu. And Sharon Penner, who has been feeding schoolchildren here for 43 years, decided it was a sign from above to retire.
Friday [May 17, 2013] will be the last school lunch the 70-year-old prepares for the Hampton Hawks.
Mrs. Penner is hanging up her apron.
“She is?” asked an incredulous sixth-grader named Treavar Pekar. (p. 2A) He stopped cold from scrubbing some of the six tables in the small cafeteria when I broke the news after lunch.
“NOOOOO!!!!!”
That about sums up the community response.

For the full story, see:
Grace, Erin. “Time to Hang Up Her Purple Apron.” Omaha World-Herald (FRIDAY, MAY 17, 2013): 1A-2A.
(Note: ellipses, and bracketed date, added.)
(Note: the online version of the article has the title “Grace: Hampton lunch lady ready to hang up apron.”)

PennerSharonComfortsBryceJoseph2013-06-11.jpg “Sharon Penner with Bryce Joseph, who needed some help after dropping his breakfast tray.” Source of caption and photo: online version of the Omaha World-Herald article quoted and cited above.

Berkshire Agrees to Buy No More than 25% of DaVita, Firm Accused of Medicare Fraud

Warren Buffett’s Berkshire Hathaway has agreed to cap its ownership of DaVita Healthcare Partners at 25%. A previous entry on this blog quoted a story saying that Ted Weschler is behind Berkshire’s purchases of DaVita stock. An even earlier entry on this blog discussed accusations that DaVita Healthcare Partners has committed substantial healthcare fraud by charging the taxpayer millions of dollars for medicine that is needlessly thrown away.

(p. 2D) Berkshire agreed not to buy more than 25 percent of DaVita HealthCare Partners Inc., a national network of medical infusion clinics.
Berkshire investment manager Ted Weschler has been buying DaVita stock for Berkshire since joining the Omaha investment company last year, totaling about 14 percent of the company, Bloomberg reported.
Weschler and DaVita President Javier Rodriguez signed a “standstill agreement” last week, a document often intended to clarify whether an investor wants to acquire controlling interest in a business. Some have speculated that Berkshire wants to acquire all of DaVita’s stock, which artificially inflates the price of its shares.
DaVita legal officer Kim Rivera said Berkshire is a “supportive investor with a long-term view.”

For the full story, see:
Steve Jordon. “WARREN WATCH; At Berkshire meeting, See’s candymaker outshines Warren Buffett.” Omaha World-Herald (SUNDAY, MAY 12, 2013): 1D & 2D.

The Eccentric History of How Bureaucratic Paper-Pushing Drives Clerks Crazy

TheDemonOfWritingBK2013-05-13.jpg

Source of book image: http://d.gr-assets.com/books/1360928417l/15904345.jpg

(p. C4) If paperwork studies have an unofficial standard-bearer and theoretician, it’s Mr. Kafka. In “The Demon of Writing” he lays out a concise if eccentric intellectual history of people’s relationship with the paperwork that governs (and gums up) so many aspects of modern life. The rise of modern bureaucracy is a well-established topic in sociology and political science, where it is often related as a tale of increasing order and rationality. But the paper’s-eye view championed by Mr. Kafka tells a more chaotic story of things going wrong, or at least getting seriously messy.

It’s an idea that makes perfect sense to any modern cubicle dweller whose overflowing desk stands as a rebuke to the utopian promise of the paperless office. But Mr. Kafka traces the modern age of paperwork to the French Revolution and the Declaration of the Rights of Man, which guaranteed citizens the right to request a full accounting of the government. An explosion of paper followed, along with jokes, gripes and tirades against the indignity of rule by paper-pushing clerks, a fair number of whom, judging from the stories in Mr. Kafka’s book, went mad.

For the full story, see:
JENNIFER SCHUESSLER. “The Paper Trail Through History.” The New York Times (Mon., December 17, 2012): C1 & C4.
(Note: the online version of the story has the date December 16, 2012.)

Kafka’s book, mentioned above, is:
Kafka, Ben. The Demon of Writing: Powers and Failures of Paperwork. Cambridge, Mass.: Zone Books, 2012.

KafkaBenAuthor2013-05-13.jpg “Ben Kafka, author of “The Demon of Writing: Powers and Failures of Paperwork.”” Source of caption and photo: online version of the NYT article quoted and cited above.

When Howard Phillips Was Told He Could Not Dismantle His Agency, He Resigned

PhillipsHowardOfficeOfEconomicOpportunity2013-05-12.jpg

“Mr. Phillips [on left] was named the head of the Office of Economic Opportunity in 1973 during President Richard M. Nixon’s administration.” Source of caption and photo: online version of the NYT obituary quoted and cited below.

(p. A24) Howard J. Phillips, a pillar of conservative activism who ran for president three times on the ticket of a political party he helped found, died . . . at his home in Vienna, Va. He was 72.

. . .
Mr. Phillips’s integrity as a conservative was on display in President Richard M. Nixon’s administration. In early 1973, the president signaled his intention to withhold financing from the Office of Economic Opportunity, an antipoverty agency with roots in President Lyndon B. Johnson’s war on poverty. The president named Mr. Phillips acting director and charged him with dismantling it.
“I believe Richard Nixon epitomizes the American dream and represents all that is great in America,” Mr. Phillips said at the time.
Nixon was unable to carry out his plans, however, after Democrats successfully sued to prevent him from starving an agency that Congress had authorized. And when Nixon yielded and continued to finance Johnson’s Great Society programs, Mr. Phillips considered the president to have broken his word and resigned.

For the full obituary, see:
BRUCE WEBER. “Howard J. Phillips, Stalwart Conservative, Dies at 72.” The New York Times (Thurs., April 25, 2013): A24.
(Note: ellipses, and bracketed words in caption, added.)
(Note: the online version of the obituary has the date April 23, 2013.)

Harry Reid Hires GE Employee to Be His Chief Tax Policy Advisor

The “Capture Theory” associated with scholars George Stigler and Gabriel Kolko says that government regulatory bodies tend to be captured by the companies that they are intended to regulate. Stigler and Kolko would not be surprised by the passage quoted below.

(p. B5) . . . on Jan. 25, Mr. Reid’s office announced that he had appointed Cathy Koch as chief adviser to the majority leader for tax and economic policy. The news release lists Ms. Koch’s admirable and formidable experience in the public sector. “Prior to joining Senator Reid’s office,” the release says, “Koch served as tax chief at the Senate Finance Committee.”

It’s funny, though. The notice left something out. Because immediately before joining Mr. Reid’s office, Ms. Koch wasn’t in government. She was working for a large corporation.
Not just any corporation, but quite possibly the most influential company in America, and one that arguably stands to lose the most if there were any serious tax reform that closed corporate loopholes. Ms. Koch arrives at the senator’s office by way of General Electric.
Yes, General Electric, the company that paid almost no taxes in 2010. Just as the tax reform debate is heating up, Mr. Reid has put in place a person who is extraordinarily positioned to torpedo any tax reform that might draw a dollar out of G.E. — and, by extension, any big corporation.
Omitting her last job from the announcement must have merely been an oversight. By the way, no rules prevent Ms. Koch from meeting with G.E. or working on issues that would affect the company.

For the full story, see:
JESSE EISINGER, ProPublica. “A Revolving Door in Washington With Spin, but Less Visibility.” The New York Times (Thurs., February 21, 2013): B5.
(Note: ellipsis added.)
(Note: the online version of the story has the date February 20, 2013.)

Governments Stop Errol Joseph from Repairing His House

JosephErrolNewOrleansHouseFixer2013-05-04.jpg “Errol Joseph and his wife, Esther, at their Forstall Street property in New Orleans. Mr. Joseph, 62, had spent his life fixing houses.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A1) NEW ORLEANS — Errol Joseph has the doorknobs. He has the doors, too, as well as a bathtub and a couple of sinks, stacks of drywall, a hot water heater, pipes, an air-conditioner compressor, and big pink rolls of insulation. They are sitting in a shed.

A few blocks up the street sits the gaunt frame of a house, the skeleton in which all these insides are supposed to fit. They have sat apart for years. The gap between: permits, procedures, policies, rules and the capricious demands of bureaucracy.
As people in the Northeast set off on the road back from Hurricane Sandy, there are those here, like Mr. Joseph, who are keen to offer warnings that recovery can be far more difficult than they imagine. Mr. Joseph sees his own story as a cautionary tale, though he admits he is unsure what he would have, or should have, done differently.
“Do the right thing and fall further behind,” said Mr. Joseph, a big man with a soft voice.
. . .
(p. A4) But Mr. Joseph, who had spent his life repairing houses, figured he could do it himself, and would be back at home by that summer. He spent most of his rebuilding grant buying materials, including windows, shingles and everything else in the shed. In the spring of 2009, he elevated the frame of the house, leaving it propped on wooden cribbing.
Before he took any further steps, he contacted the state for an inspection, as he had been instructed.
Then the inspectors showed up.
” ‘Do not do anything to this house until you get a letter of continuance,’ ” he recalled one inspector saying. “He said that three times. He said you would lose your money.”
So Mr. Joseph did not do anything to the house. Months went by. No letter arrived. The inspector disappeared. Officials denied that anyone had ever said anything about a letter, said Mr. Joseph, who in his regular visits to state offices would then ask for written permission to move forward anyway.
In 2010, told that he would not be allowed to do the work himself, he drew up a contract with an elevation specialist. But permission from the state to move forward was still elusive. “Your paperwork is in the system,” Mr. Joseph was told.
Though Mr. Joseph did not know it, his paperwork was blocked for months in the federal clearance process, but for reasons that remain a mystery.
The drywall rotted in the shed. The frame sat in the elements. The city, unaware of Mr. Joseph’s travails, warned of demolition.

For the full story, see:
CAMPBELL ROBERTSON. “Katrina Rebuilder Can’t Rise Above Red Tape.” The New York Times (Thurs., February 21, 2012): A1 & A4.
(Note: ellipses added.)
(Note: the online version of the story has the date February 20, 2012, and has the title “Routed by Katrina, Stuck in Quagmire of Rules.”)

JosephErroBlockAfterKatrina2013-05-04.jpg “A photograph of Mr. Joseph’s block taken shortly after Hurricane Katrina. It took years to prove his house was salvageable.” Source of caption and photo: online version of the NYT article quoted and cited above.

Berkshire Buys Big into DaVita, Firm Accused of Medicare Fraud

Warren Buffett’s Berkshire Hathaway apparently has a large stake in DaVita Healthcare Partners. An earlier entry on this blog discussed accusations that DaVita Healthcare Partners has committed substantial healthcare fraud by charging the taxpayer millions of dollars for medicine that is needlessly thrown away. Apparently the DaVita investment is due to Ted Weschler, one of two deputies to whom Buffett has delegated the investment of some of Berkshire’s funds.

(p. 3D) Weschler is believed to be behind Berkshire’s aggressive move into DaVita Healthcare Partners — a stock he owned when he ran his own hedge fund. Berkshire bought 10.9 million shares last year, becoming Da-Vita’s largest stakeholder with 15.7 percent of the company. DaVita provides kidney dialy­sis services and is seen as a consistent cash-flow genera­tor. In November, the company closed its $4.7 billion purchase of Healthcare Partners, one of the country’s largest operators of medical groups and physi­cian networks. DaVita shares rose more than 35 percent in the past 12 months.

For the full story, see:

MarketWatch . “Buffett was avid hunter of 6 stocks last year; Wells Fargo, GM and DirecTV top Berkshire’s list.” Omaha World-Herald (Tues., March 12, 2013): 1D & 3D.

David Kay Johnston Defends Entrepreneurial Capitalism Against Crony Capitalism

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Source of book image: http://media.npr.org/assets/bakertaylor/covers/manually-added/fineprint_custom-c26eb6a3f6c4d9bc09220769911f3cbeaa900b7f-s6-c10.jpg

I saw an informative C-SPAN interview with David Cay Johnston a while back. I had known from Johnston’s previous books and reporting, that he was devoted to exposing the outrages of crony capitalism. What the interview revealed to me was that Johnston was not opposed to capitalism in general, and in fact viewed himself as friendly to entrepreneurial capitalism.

I believe that big companies are not bad when they got and stay big by honestly earning big profits from willing and delighted consumers. But big companies are bad when, as often happens, they use their size to get the government to suppress start-up competitors or to take money from taxpayers to subsidize their activities.
I have not yet read Johnston’s latest book on the big and bad, but I expect it to present sad, but useful, examples.

Book discussed:
Johnston, David Cay. The Fine Print: How Big Companies Use “Plain English” to Rob You Blind. New York: Portfolio, 2012.

The Costs of Green Jobs Policies

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Source of book image: http://javelindc.com/home/wp-content/uploads/2012/11/regulating_to_disaster.jpg

I caught part of a C-SPAN presentation on the Regulating to Disaster book. It sounded plausible and intriguing—consistent with other evidence I have seen that “green” jobs have been over-hyped and under-delivered.
Perhaps more important, there are the high opportunity costs of the tax dollars devoted to the “green” jobs, in terms of the non-green jobs that would have been created by entrepreneurs if less of their income had been taxed away.
I hope to look at the book in the near future.

Book discussed:
Furchtgott-Roth, Diana. Regulating to Disaster: How Green Jobs Policies Are Damaging America’s Economy. New York: Encounter Books, 2012.