Two Bills of Interest Advancing In Congress

pgn674 writes "While the Emergency Economic Stabilization Act of 2008 failed to pass in the House of Representatives, two other bills of interest to this community are currently moving through the US lawmaking process. One is the Broadband Data Improvement Act, which Communications Workers of America claims will help us towards bringing high-speed Internet access to all Americans. It will have the FCC increase their granularity in reporting the Internet accessibility of an area in the US, and redefine broadband measurements. It has passed through the House and the Senate, and differences in the passed versions are currently being resolved. The other bill is the Webcaster Settlement Act of 2008. Pandora is excited for this one as it will give them time to negotiate with SoundExchange (i.e. the RIAA) for new, more affordable royalty rates. The bill is currently in the Senate, and is expected to pass with ease."

Comments

Broadband improvement?

[Chas]

Didn't we ALREADY give the telecom industry a whole assload of cash to improve broadband in this country?

And exactly WHERE did that money go?

What?

What?

I can't hear you over that gi-normous flushing sound!

Thank the Editor

[pgn674]

When I wrote this up, I somehow thought that the House, the Senate, and the President were the three branches of the US government, instead of Judicial, Legislative, and Executive. I'd written saying that the House and Senate were branches, when they're both part of the Legislative branch. I thank the editor for catching that and modifying my submission a bit to fix it, thus saving my face :)

Re:Legislation is not free

[Sancho]

Recessions are bad for morale, and bad morale means that the people are more likely to take an interest in those doing the governing. It makes sense for our absurd two-party system to play hot-potato with the recession. Put it off as long as possible, and hope that your party isn't in control when it hits.

Of course, informed people realize that recessions are a natural part of the economy. I guess it sucks to be born into one, but thems the breaks, right?

It's like Mutually Assured Destruction.

[hey!]

There's been a lot of exaggeration and misdirection on both sides of this. Credit has not completely dried up ... yet. However it is heading that way and the closer it gets the less root causes matter. You don't tell a lung cancer patient that he ought to have stopped smoking years ago. But you don't invite him to light up in his oxygen tent either.

The problem with the bailout bill is not the sheer dollar figure; the $700 billion, after all, doesn't have to be spent. The fund might accomplish what needs to by spending, say, $100 billion. The difference between what needs to be spent and what could be spent is the double edged sword of this proposal. The existence of a huge reserve creates confidence in the stabilization of credit -- very important.

This is how the Fed control the money supply: through manipulating expectations. People don't think the Fed is going to lower interest rates much, so the power of that lever on the economy is lessened. One of the bailout bill's provisions is to lower the floor on what the Fed can set the reserve rate (the cash on hand banks need to keep to cover possible withdrawals) to zero. Actually doing so would be, of course insane.

The Fed has models which say where the point of insanity comes; let's say that is 2%, and we're at 2.2%. If you know the floor is really 2%, then you know that the Fed can't lower the rate below 2%, then lowering the rate from 2.2% to 2.1% isn't going to change your behavior. If you don't know how low the Fed can go, then old Ben can simply be seen thoughtfully caressing the reserve rate lever. He doesn't actually have to push it to 2.1%, if you think he might, and go even lower, you are going to get your dollars into loans fast. If you don't their value could be seriously deflated sitting on your balance sheet.

The $700 billion figure is kind of like that. You'd be mad to set out to spend that kind of money on distressed investments. But the fact that you could is important. Suppose you really need $100 billion, and that's what you have available. You've spent $90 billion, and people are thinking "that about wraps it up for the fund." When you throw out the next five billion, people aren't even paying attention. It does very little to increase confidence in making a loan to some other institution, so you might as well not spend it at all. If you have $610 billion left, the impact of that five billion you're thinking about using is greater, even before you actually spend it, than the impact of spending five billion when it's half of what you've got left.

Unfortunately, that brings us to the other edge of the sword. Suppose we really only need to spend $100 billion, and the remaining $600 billion is there for psychology. Well, you've just created the biggest slush fund in history and handed it to an administration that is not renowned for its prudence, whatever else you may say about it. You could do a lot of favors with $600 billion.

The problem is Constitutional. The Executive isn't supposed to have a lot of leeway in how it spends money, but the size of that pot of money could buy a lot of indirect leeway.

Personally, I think the answer is to stage the funds. Wall Street does this all the time. When you buy a company, sometimes you snap it up, but frequently you stage the investment in order to make the company jump through a series of hoops.

So, let's say we created a $150 billion fund, and replenished it quarterly in each of the following quarters. If the $150 simply disappeared without a trace, then we could stop the infusion. This reduces the incentive for firms to make abusive claims because they might need the fund to be there next quarter. We can dream up new encumbrances on the funds every quarter as specific abuses arise. If in some quarter we only spent $10 billion in some quarter, we'd only put that much in, but if we spent $100 billion, there would be no questio