capital

by russell

No cites on this post, these are just my own thoughts.

As I'm sure I've mentioned, I write software for a living.  I also free-lance as a drummer, but I'll stick to the software for the moment.

I want to talk about capital.

I've been working in the software industry for a little over 25 years.  Over that time, I've become competent in a handful of programming languages, and a handful of technology stacks, on a handful of platforms.  I didn't go to school for computer science or IT, my undergraduate degree is in music, so by and large, I acquired this competency by sitting down in front of a machine with something like a compiler and an O'Reilly book and doing my homework, quite often on my own time.

I've learned how to orient myself quickly in strange code bases numbering in the hundreds of thousands of lines.  I've learned how to spot the problems that are really going to kick your ass from a mile away, and I've learned how to know which ones you can kind of let go of.

I've learned how to lead people through the process of understanding what it is they're trying to accomplish with the software they're paying me to write.  I've learned how to translate that into a description of something you can actually go and build.

I've learned how to ship useful, practical product - product that people will pay money for - out the door in a timely and profitable way.

All of this is normal for somebody with my level of experience, in my profession.  Any script kiddy can write code, all of the above is what professional software engineers get paid for.

And this is not unique to software, every occupation and trade has its own unique and particular domain of knowledge and expertise.

All of this generally gets described as a "skill set".  As a factor of production, since I don't own the business I work in, it generally gets lumped, somehow, under the general heading of "labor".  As "labor", it's a cost center.

But to me, personally, it's hard to see it as anything other than capital.  It's an asset that I bring to my work, that multiplies the value - the productive output - of my time, just as much as any other capital asset that is involved in what I do every working day.

Companies flirt around with this idea when they talk about "human capital".  Corporate brochures and websites will talk about how the folks that work there are their most valuable asset.

But when push comes to shove, human capital will always take a back seat to the green kind.  Every legal obligation that binds the actions of fiduciaries, every management incentive, every common business practice and legal institution, privileges ownership - people whose stake in the business is a money investment - over labor - people whose stake is the investment of their expertise, personal knowledge and wisdom, level of commitment, and daily effort.

Money trumps everything else.

What brings this to mind, to me, is reflecting on the fact that the US unemployment level is still flirting with 10 percent.  That means there are about 15 million people in this country who are ready, able, and willing to work, but who can find no useful thing to do.

15 million.

That is a third the population of Spain.  It's not quite half the population of Canada.  It's half again the population of Greece, or Portugal, or the Czech Republic.

All standing around with not a damned thing to do.

And that's the U3, the most conservative measure of unemployment.  Take the U6, and you can almost double that.

If there where that much green capital standing around idle, going to waste, you can bet your ass that somebody somewhere would be jumping through hoops of fire to change the situation.

Instead, it's people's very lives, and nobody can lift a damned finger.

It's a FUBAR world we live in.

Comments

[Chris J]

It's why I see the capital gains tax rate, to be more than an outrage -- it's a profound metaphor. Labor, human capital, gets whacked; money, green capital, gets coddled.

[Roger Moore]

If there where that much green capital standing around idle, going to waste, you can bet your ass that somebody somewhere would be jumping through hoops of fire to change the situation.

Yes, they would be jumping through hoops of fire to do something. What they'd be doing is chasing ever riskier and crazier investments to put it into in the hopes of making some kind of return. Maybe rich people would speculate in commodities futures, or internet stocks, or CDOs. They'd probably inflate a big bubble, only to see their money disappear when it collapsed.

[liberal japonicus]

More my problem than yours, but I have a hard time viewing what you are talking about, at least for me, as capital. Frex, I've played horn for over 30 years with varying degrees of seriousness. Every so often, some Japanese student studying horn turns up, I give them some lessons and its always gratis. I do martial arts, I teach the exchange students, again gratis. I also am the senior student in my dojo, and I often take the lessons. Again, free. I do pay my monthly fee to my teacher, who is the docho and I don't begrudge him that and I pay my iai teacher as well, though he charges so little that I also bring a big package of green tea and various other gifts when I visit. Of course, this is why I'm where I am and not somewhere else.

The thing is (again, more my problem than yours) is that when we start thinking about it in the way you suggest, start thinking of how to 'monetize it' as the phrase goes, it really isn't what it was. I'm not looking at Russell, the guy who has some good insights into software and I could deal with well if I was in a neighboring cubical, but plug-in engineer #217, who, if I'm in management, I'm salivating over the fact that he'll be from the sub-continent and I can get him really cheap on a short term visa. Which I think is why money trumps everything. FUBAR it is.

[russell]

I'm not looking at Russell, the guy who has some good insights into software and I could deal with well if I was in a neighboring cubical, but plug-in engineer #217

To me, this gets to the heart of it.

Nothing is less fungible than people. Nothing is more fungible than money.

And, when you're talking about something you do that somebody else is making money off of, it's already monetized.

I do lots of things for love as well, including some software things. I'm talking about people's stake in money-making enterprises.

[Fraud Guy]

Money = numbers.

Numbers are easy to count, track, and play with.

People = 10($TbE}FGP(*#@)(*#%IUhDf972hy41Q5

I can point a statistician at a set of data, and they can find a certain amount of fraudulent activity, based upon a model that they create. Their model can be replicated, developed, and sold.

Let me work through that same data, and I will find more fraud, but miss some of what the formula found. I can train someone in how to look for fraud with a high success rate, and they can in turn train someone.

I am more effective, but less efficient, and certainly less quantifiable. I also demand a certain amount of attention and respect.

Management prefers the former to the latter.

[Fraud Guy]

Another illustrative story.

My father worked for 35 years in the meat packing industry, working his way up to supervisor. Unfortunately, he had to jump a number of jobs because of consolidations, until it became difficult to find a new job as a partially crippled (arthritis of the hands) 60 year old handling 80+ pound cases of meat.

Finally, he got his last job, which had the latest database software with bar code scanning to maintain inventory. This software had a 98%+ accuracy rate after 2 years of work, so there were some losses due to missed counts. As supervisor, my father would select, move and load boxes with the other workers off and on trucks and into storage.

After about a month of working deliveries, he started overriding the inventory system when selecting and loading the cases of meat. When asked why by the manager, my father, told them that the system was wrong. The manager asked him to prove it.

Instead of preparing a spreadsheet outlining the accuracy of the system, he took one of the system's load sheets, looked at the order, and told the workers which boxes to collect from where to fulfill the order. The inventory system had a 2% overage on the truckload. My father was withing a few pounds, or closer to .05%. He had also selected the oldest inventory of each cut of meat, compared to the inventory system getting some boxes off of the latest inbound shipment.

For the next 18 months, they let my father determine the loads and packing of all orders, working 14 hour days in freezers, hauling 60-120 pound boxes.

Then his arthritis got too bad, and he was let go.

Numbers never tell the story. And while a collection of anecdotes do not equal data, they can be far more accurate than any sampling.

[Sebastian]

"If there where that much green capital standing around idle, going to waste, you can bet your ass that somebody somewhere would be jumping through hoops of fire to change the situation."

Actually one of the key problems right now is that there is an enormous amount of green money capital just sitting in banks not getting loaned out. I personally know a number of small, successful local businesses (none of them mine unfortunately) who are ready to expand but can't get loans from the hyper risk-averse banks nowadays.

Anecdata: Good friend runs a successful brunch restaurant. Been running it for 15 years, line always out the door, even in bad times. He negotiated with the landlord to get the two shops next to him so he could expand. Had a credit line for rennovation and equipment. Secured a ten year lease. Architect was drawing up the plans. When the money market accounts almost froze (is that almost 2 years ago now?) his tax guy told him to convert the whole line of credit to cash because banks were about to freeze everything. He went in the next day, and it was too late, they froze the credit line.

So for more than a year, he has been bleeding the rent on the two vacant shops next to him. He can't renovate. He can't install the larger kitchen. As a result he isn't hiring about 12 waiters.

For whatever it is worth....

[Countme--In]

Russell, that's a beautiful piece of expression.

Fraud Guy, the phrase "let go", in reference to your father, is ineffably sad.

People don't lose jobs, the jobs lose them.

But we, as a society, frame the plight of the unemployed, the cast-off, the uninsured, the "unproductive", the undeserving in a sadistic, malign way.

America is not particularly civilized. If it were, there would be consequences for this behavior.

We're a collection of predators using up labor capital, eating the file clerks when the numbers don't add up.

It's rational.

It's rational.

[Countme--In]

Sebastian, that's a sad story.

Kevin Drum has news, via Forbes, that Julian Assange, the Wikileaks guy, next year will dump the internal documents of a very large bank, unless he is assassinated or jailed on bogus charges by a government/banking consortium.

At the very least, it might provide chaotic transparency.

It might also bring down the entire world banking system, when people see for themselves the correspondence of those who have effed them.

[Tony P.]

Actually one of the key problems right now is that there is an enormous amount of green money capital just sitting in banks not getting loaned out.

How does that work, exactly? How does money "just sit" in a bank? Surely, we're not talking about piles of cash in the vault. So, how does a bank (or the banking system as a whole) "sit" on money?

I can imagine how it might have worked in the good old days when "money" was gold coins. But even back then, what did it profit a bank to just serve as a warehouse for shiny metal disks? A bank would have to LEND some of the money, at interest, just to cover the cost of guarding its reserves. If banks don't lend to SOMEBODY, how can they "make money"?

So what I really want to know is who the "somebody" is.

--TP

[Sebastian]

At the moment it works because the Federal Reserve is providing incentives to keep more cash.

[Tony P.]

What "incentives"? And do you really mean "cash"?

--TP

[Charles S]

Partly, it seems, literally cash: Just look at the biggest American banks. Bank of America, while shrinking its assets and loan portfolio, has $172 billion in cash on its balance sheet. Citibank is sitting on $185 billion in cash; JPMorgan Chase has $72 billion. Yet just try to get a new loan from any of them.

But mostly treasury bonds.

[Sebastian]

Tony, the Fed currently subsidizes reserves by paying 0.25% on excess reserves. See Marginal Revolution and Naked Capitalism.

[russell]

Actually one of the key problems right now is that there is an enormous amount of green money capital just sitting in banks not getting loaned out.

And how many hoops have the feds jumped through in the last two years to try to get that money flowing?

How does that compare with what they've done to get people working?

[Rob in CT]

Well, that's a question of the Stimulus and the Auto Bailout vs. TARP, TARPII, QE and QE2 (did I miss one?).

[someotherdude]

Capital is money in motion.

If money is in my pocket, or in my mattress, it is "money" but if it's in a bank collecting interest, or invested in some venture, (creating more money, which is profit, to turn into capital, hopefully) it becomes "capital"

I think I learned this from Marx in Kapital, and he got that definition from some Scotsman.

[GoodOleBoy]

'And how many hoops have the feds jumped through in the last two years to try to get that money flowing?

How does that compare with what they've done to get people working?'

Russell:

Isn't statement 2 one of the hoops of statement 1, but it has not worked.

It seems somehow the Fed should be able to reduce the level of accommodation to banks that fail to meet the requirements of their public charter.

[Obdurodon]

Chris J pretty much made the same point I was going to. It's absolutely heinous that we tax labor more than (financial) capital. In a world that was either just *or* efficient, the most directly wealth-creating activity - production and innovation, not arbitrage - would be the most lightly taxed.

[bobbyp]

Banks allegedly serve a useful social function by diverting capital to its most productive use. Currently they find it more productive to invest their free reserves in treasuries or other similar instruments.

So Seb's anecdote aside, on can only conclude that there just are not a whole lot of loan opportunities out there...either that or bankers as a class are totally clueless.

What would you have them do, underwrite more office towers and strip malls?

Russell: The whole point of capitalism is accumulation. See Doug Henwood for details.

[Nate]

I think I'll join in anecdote time.

Back during my internship, we were a small office, and one of the guys was an older gentleman who'd been an engineer for at least thirty years, having worked his way up from a civil engineering technology degree to his PE through learning while doing. When the economy slowed down, though, first he was taking a furlough day each week, then they let him go once the project he'd been heading was sent out to bid. The thing is, this was a small office, with him, me as the intern, two other engineers who were less than 4 years out of school, a CAD tech, a newly transfered engineer, and the regional manager.

I'm sure with years of experience, he was making good money, more than me or the new guys, but 30 years of practical experience doesn't seem to me like the kind of thing you want to let go easliy.

[RogueDem]

"Money is like muck, not good except it be spread." (Francis Bacon 1625)

[Countme--In]

bobbyp:

Sebastian's links are fascinating reading, particularly Naked Capitalism. It seems that despite the perception that the Fed is engaged in quantitative easing, what it is really doing is encouraging (paying) banks to build reserves rather than to lend -- if in fact there is demand for loans out there -- given the economy's high debt load.

Which works against one half of its charter -- you know -- the one in which the Fed needs to maximize employment -- which by the way is the one Paul Ryan and the Republican Party say Dagny Taggert (thrusting her ideological hips and pleasuring herself against non-subsidized architecture) told them the Fed should abandon.

The question is .... why? Remarks by the NY Fed at the link seem to indicate that the FED is trying to give itself more flexibility to combat inflation (the other half of its charter -- price stability) once the economy begins to recover.

What?

Now, I may have read this stuff wrong (someone please correct me, if so) or perhaps I haven't slammed my head against the wall enough times to permit absorption of the material, but opposing views expressed in the link say Bernanke (student of the Depression) is making the same mistake the Fed committed in 1936-37, leading up to the second swoon back into Depression.

Here's a link with an opposing view.

http://www.washingtonsblog.com/2009/09/steve-keen-out-thinks-larry-summers.html

So, is Fed policy "quantitative easing" of is it part of the austerity fetish sweeping the misguided and benighted globe?

[wj]

Nothing is less fungible than people. Nothing is more fungible than money.

That, I think, goes to the heart of the problem.n The managers who make layoff decisions spend most of their time dealing with things like budgets, i.e. money. So when they go to deal with people, the "it's all fungible" worldview is where they start. And, by the time we are talking third and fourth level managers, they generally have no clue about what their staff actually does, let alone what real value they are adding.

So you get idiocies like "across the board 10% lay-offs." What that say really is "I have no clue who is valuable to my company, so I'm making a blind gesture. In reality, there are some people who add more value than others. Maybe even who save the company more money than their fully-loaded salary (I've been there). But unless they can and do take the path Fraud Guy's father did, the level of management recognition for that fact on the ground is probably going to be minimal.

In summary, where we have a serious shortage of human capital seems frequently to be in middle and upper management. Because a good manager will actually know which of his people are important to keep, and which ones will hurt the least to let go. But good managers are always in short supply.

[GoodOleBoy]

'So Seb's anecdote aside, on can only conclude that there just are not a whole lot of loan opportunities out there...either that or bankers as a class are totally clueless.

What would you have them do, underwrite more office towers and strip malls?'

I had a decade working as a banker and another two decades of business interaction with banks, so I vote for clueless. They are risk averse ( that is, they never saw or thought there was any serious risk in the residential mortgage market or in the related products marketed by Wall St). Even after the S & L debacle in the eighties, commercial banks moved into mortgages increasing their absolute exposure or concentration by 3 to 4 times. Maybe they just don't really have an understanding of the commercial lending function anymore. And I'm not talking about loans for office towers or strip malls. These are just more real estate loans.

[wj]

A thought about "human capital." It depends on who we are talking about.

For me, what I know about my profession is capital -- it's something that I can use to create a valuable product that someone will pay for. But that doesn't mean that it is capital for the person who hires me. For him, it's merely one of the requirements for whatever labor he is hiring.

That's not to say that what I know can't be capital for him. But that isn't what I know about my profession. It's what I know about the way his specific firm works. What I know about the way the company software, for example, does things (like whether it is picking meat last-in/first-out vs. first-in/first-out). Because that knowledge isn't something he can just ask for in a new hire.

[Marty]

"So, is Fed policy "quantitative easing" of is it part of the austerity fetish sweeping the misguided and benighted globe?"

Yes.

The QE2 is symbolic and will have little effect on a system that is already liquid. The size is small and thus easily undone. The banks, and the economy in general have lots of money available, no one much is trying to borrow. Short of a Fed TARP like program to force companies to borrow (bad idea) the liquidity doesn't get used until there is demand for expansion.

Anecdotal data of individual small businesses and individuals being turned down for loans aside, the demand for borrowing is very limited. The banks are protecting their capital for things like government health checks and potential regulatory hits, along with the cost of each new investigation so yes some loans are too risky today that would have been ok in 2007. The business climate is telling every executive to maximize cash to reduce risk.

Keep in mind that corporate America is flush with cash and is only borrowing to reduce their own debt servicing costs, while retaining their cash for the right time to invest it.

The challenge is to provide an incentive for them to invest, which is a demand generation question combined with stable fiscal and monetary policy that allows them to build confidence that they know how to make money in the new climate.

[Francis]

One reason that the big banks are holding onto huge mountains of cash is that they're getting ready to get hammered in mortgage loan securitization litigation, as follows:

1. Bank originates and/or buys mortgage.
2. Bank sells note and mortgage to trust.
3. Banks sticks note in a file, and fails to comply with NY and state-of-origination law regarding transfer of notes (ie, stamp the back of the note and mortgage).
4. Purchasers of securities issued by trust reach critical mass and force trustee (who, because it is a big bank itself, has been doing nothing) to examine each non-performing note in its portfolio and put the loan back to the originator if the note was never properly transferred to the trust in the first place.
5. Because the originator has no defense, it loses and buys the loan, sending a chunk of cash to the trust. Repeat for several billion dollars.

Litigation by securities holders against trustees is just starting to spool up. It should get going seriously in the next year.

[Nate]

Why is it every time I hear talkabout how companies are afraid to invest in "unstable" environments, I hear echoes of how brave and clever and important the people running the companies are?

If our corporate masters were really as brave and clever and important as they think they are, they wouldn't be so scared by a little uncertainty. Which makes me think that either a) the talk of uncertainty is cover for some other reason, or b) they're not really as brave and clever as they want us to think they are, or c) a and b. I'm thinking it's mostly c.

[chmood]

Banks aren't lending now for the exact same reason vultures don't kill: they're waiting for the economy - that is, the mass of the people - to bottom out, so they can pick the bones clean with NO risk.

Just like they did in pre-Keynesian days.

Republican desire to 'remove the uncertainty' for business (and *how* exactly will cutting personal income-tax rates affect this?) is no more than a decision to flat-line the economy.

[Countme--In]

Is this why?

Why what?

Is this why the Fed is paying the banks to increase reserves?

http://www.nhregister.com/articles/2010/09/13/news/bb5banks091310.txt?viewmode=default

[Countme--In]

I'm uncertain if I'll be able to afford health insurance in six months.

I hope everyone is so rationally understanding of the kind of crappy behavior that might incentivize.

[chmood]

"Rules and punishment for the menial classes; incentives and understanding for the ruling classes"

[hairshirthedonist]

The QE2 is symbolic and will have little effect on a system that is already liquid.

Quite right. It should be clear that monetary policy is pushing on a string at this point. Insufficient demand is the problem, and fiscal policy, that is - targeted spending, is the best way to create demand, get the money moving again, and decrease unemployment.

[Jacob Davies]

Completely agree with the thoughts expressed in the post. The differential treatment of financial and physical capital as opposed to human capital amounts to a subsidy encouraging the former over the latter; in other words, the exact opposite of what we have been told is the new world order, where physical manufacturing is less important than the skills and knowledge of highly-educated humans.

Not coincidentally, physical and financial capital is also the easiest to move across borders for regulatory and tax arbitrage, making it nice and easy for those make money from owning and selling things to redistribute income from those who make money from making or doing things. At fantastic low tax rates (or no tax at all for much of the capital held outside the US).

The system is set up to extract the maximum possible from those who invest in their own skills and distribute as much as possible of that to people who were born with a lot of money or were lucky when gambling in the stock market. I disapprove.

[Catsy]

One reason that the big banks are holding onto huge mountains of cash is that they're getting ready to get hammered in mortgage loan securitization litigation

This is the single most persuasive argument I've heard yet for why large banks, generally speaking, aren't lending.

In other words, that they're building up these immense cash reserves as a buffer against the losses they're going to suffer once the chips in this whole mortgage fraud nightmare finally settle. And the more reckless or fraudulent they've been, the more they're going to lose.

[Alec]

Why am I reminded of this:
http://www.dilbert.com/fast/1993-03-03/

[hairshirthedonist]

This is the single most persuasive argument I've heard yet for why large banks, generally speaking, aren't lending.

I don't know. It makes too much sense and sounds too prudent for our banks.

[Countme--In]

Krugman (and others) is now worried about Italy:

http://krugman.blogs.nytimes.com/2010/11/30/the-italian-job/

How would the disintegration of the Eurozone, the implosion of the euro, and what I expect would be a flood of assets into the dollar, affect Fed policy as it now.

You would have many European countries in the southern tier impose capital controls, which is completely understandable considering the way international capital just has its way with the human capital in country after country.

Is part of what the Fed doing right now getting ready for outrageous instability in capital markets?

I don't know. Just asking.

[Jacob Davies]

Preparing for unrealized (and unaccounted-for) losses is the argument that makes sense to me too.

Basically, the banks are still bankrupt, if they actually had to mark their mortgage-related assets to market. By rights, everyone who works for them should have been fired and they (and other investors) should have lost everything they had in the company's stock. At the very least, they should be in a restructuring in which the courts would examine their books, fire their entire senior management team, wipe out shareholders, and haircut those foolish enough to lend to these banks, while preserving depositors and perhaps creating a new bank whose assets are actually valued at a reasonable level.

Instead, the banks are being given time and massive financial support in the form of low-interest loans, interest on reserves, Treasury-bond arbitrage, etc to rebuild their assets so they're not technically bankrupt any more. Of course, they wouldn't go so far as to not pay bonuses to rebuild their asset base - that would be ... un-American. Because asset-stripping your bankrupt institution is as American as apple pie, aggressive colonial wars, and rampant bribery.

[Ugh]

fire their entire senior management team, wipe out shareholders, and haircut those foolish enough to lend to these banks, while preserving depositors and perhaps creating a new bank whose assets are actually valued at a reasonable level.

Aren't depositors lending to the banks?

[Jacob Davies]

Yes, but they're generally distinguished from large institutional creditors in bankruptcy. You and I (at least below the $250k threshold) are considered not to have sufficient information or motivation to assess the risk of our bank going broke, and FDIC insurance has been considered a fairly cheap (and equitable) way of protecting against bank runs.

The same is not true for other banks or pension funds or hedge funds, say.

[Catsy]

I don't know. It makes too much sense and sounds too prudent for our banks.

While I'm inclined to snark agreement with this, I think there's a level of imminence and directness in the foreclosure crisis that doesn't exist for the other risks with which they've played fast and loose.

To put it another way, the risk from all the games they've been playing with creative securitization is like a report about gun violence on the rise in your neighborhood, while the foreclosure fraud crisis is like a loaded gun pointed at your head.

[Fraud Guy]

For wj and a few others on management quality.

The President of one of my previous companies, who was a huge success while running a division of another corporation, came to me and said that he decided that he wanted us (me) to cut our credit card processing costs by 25%.

I asked him if we were Wal-Mart?

Why?, he asked in reply.

Because 92% of our card processing fees were due to card interchange, which is a fixed level set by the card associations; 5% of our card processing costs were from our chargebacks, which we had already lowered from 43 to 17 basis points of gross sales, and the other 3% was variable fees tacked on by our processor, who was making about 5% margin on us only based on volume.

What about PayPal? they said they can lower our rates.

PayPal's fee structure would put about a 25% premium on our card processing, not a 25% reduction. They're basing their savings claim on the standard rates internet merchants pay for processing, not on the discounted rates we receive due to size, volume, and stability.

What does Wal-Mart have to do with that? he asked again.

The only place you're going to find a 25% savings is if you can get the card associations to drop their rates; and the only way you're going to have any ability to bargain is if you have Wal-Mart volume.

Oh, he replied. Now I understand.

Then he asked me the same question every three months until I left the company.

Which I left because the manager who he put above me after that conversation was the one who told him we could cut card processing costs.

[chmood]

SF writer Michael Bishop once told me that he was constantly being presented with 'ideas' for stories and novels, and the presenter would generally do so with the suggestion that Bishop write the piece, and the two of them split the money.

He always refused, politely as he could, saying that ideas are easy - it's the writing that's the real work, and he was not about to split the fruits of his labor with someone who had done none of it.

These idea-suggesters are really no different from those lordlings to whom 'Wealth of Nations' was addressed: they, too, thought that whatever they brought to any enterprise MUST be wholly different and preferable to any lesser contributions. History convinces me that aristocratic attitudes such as those that underscore the 'wealthy = special = in charge' equivalations of feudalism are the same as those that gave us a bail-out of Wall St. rather than Main St.

I have even come to see "The Reagan Revolution" and subsequent machinations on the "Right" as a concerted long-term effort to suborn the Constitution and the electoral process to ensure the installation of a crypto-feudal state in this country, masked as an erzatz 'democratic republic'.

I remind in passing that one of the characteristics of feudalism is that the rulers ruled BECAUSE they were rich, because wealth = power even then. The Age of Revolution made the wealthy targets in their own assumed right, so it became worthwhile - rather than BE the government outright - to simply operate the government by owning key personnel. My posited plan didn't take off until Rhode Island, then Delaware, set corporations free from the shackles of public control, public oversight, revokable charters, and circumscribed activity...at which point, our current situation (more or less) became vastly more likely.

So, the reason I bring this up here is because the distinction between capital and labor is more a class distinction than it is anything else. It's "just the way it is" - wouldn't be "fair" to do it any other way because OMG!11SOSHALIZZUMS!!

Capital, outside of this pervasive, quasi-religious devotion to its assumed merits that we see & hear ever day, serves an enabling function for those with vision, skill, and the time and inclination to produce something of value. That is its function, its contribution to the economy (ANY economy.)

Worthy of reward or compensation? Absolutely.
Entitlement to wield the whip hand? Absolutely not.

The perpetual top-dog/under-dog dynamic of the wealthy ruling/controlling/owning everyone else vs. well, everyone else, is inherently unstable, largely due to the measures top-dog must employ to stay on top.

[polyorchnid octopunch]

You know, I'm reading the article in the New Haven Register there, and it seems to me that very possibly this is being done as a way to force banks into the hands of the regulators. What happens when a bank is unable to fulfil those requirements by the dates specified? I see that's not addressed in the story.

More generally, I will have to admit that I'm with chmood on this one. The situation is completely topsy-turvy in its incentives. It's no wonder the US economy is circling the bowl in the way that it is; the system and context in which it functions is designed to fail.