Yahoo! News, Tuesday early afternoon

Dr. Black, Wednesday, just before noon.

Brad DeLong, about fifteen minutes after Dr. Black

Me, Monday morning.

But this isn't a "First Mover" claim. It's a note that there are no "savings" in getting rid of the website. There aren't even the "registration fee" that applies to private enterprises. Commenter Bryan at Skippy notes:

The Federal government is the registrar for the .gov TLD [Top Level Domain], so the only cost is storage and bandwidth on government servers.

The cost of locating and removing a site is probably the equivalent of 20 years of ignoring it.

So not only is "the Sheriff" going after chump change, the actions aren't even going to save any money.

The difference between Joe Biden and Paul Ryan appears to be that one isn't even talking about real money.

I left out of the last post why David Vitter (claims) he is blocking the two SEC nominees:

Sen. David Vitter (R., La.) will block two nominees to the Securities and Exchange Commission until the agency announces whether victims of R. Allen Stanford's alleged Ponzi scheme are owed compensation from the Securities Investor Protection Corp....

"We've known for some time that the SEC waited far too long to take action against Allen Stanford, and now they're dragging their feet in responding to the victims. I will continue to hold them accountable—including holding these nominations—until these fraud victims get an up-or-down answer from the SEC," Mr. Vitter said in a statement.

Well, economics can help him here. Even old economics, such as the pieces cited by Casey Mulligan in a disingenuous piece he wrote for the NYT last week. (No NYT link from this non-subscriber. I believe the NBER pieces are ungated, but haven't checked from a network without access.) As the Stigler piece notes, optimal spending should be based on your expectation of catching criminal activity.*

So I expect that David Vitter is up in arms about what his colleagues in the House are doing:

The Republican-led House of Representatives is poised to pass, as early as Wednesday, a sweeping spending bill that would slash funding for the regulatory agency responsible for policing against excessive speculation and price manipulation in oil markets.

This rather understates the CFTC's purvey. As their website notes:

Congress created the Commodity Futures Trading Commission (CFTC) in 1974 as an independent agency with the mandate to regulate commodity futures and option markets in the United States. The agency's mandate has been renewed and expanded several times since then, most recently by the Commodity Futures Modernization Act of 2000....

[T]he futures industry has become increasingly varied over time and today encompasses a vast array of highly complex financial futures contracts.

Today, the CFTC assures the economic utility of the futures markets by encouraging their competitiveness and efficiency, protecting market participants against fraud, manipulation, and abusive trading practices, and by ensuring the financial integrity of the clearing process. Through effective oversight, the CFTC enables the futures markets to serve the important function of providing a means for price discovery and offsetting price risk. [emphasis mine]

That's right; the CFTC is responsible for regulating derivative trading activity. Which is why...

The Obama administration requested more than $300 million for the fiscal year that ends on Sept. 30, a steep increase because the CFTC gained sweeping new powers under last year's broad revamp of financial regulation—short-handed as the Dodd-Frank Act.

This is pure Stigler. More responsibility, higher expectation of detecting malfeasance, higher budget necessary for optimal crime enforcement. Otherwise, you end up more criminal activity going undetected as the risk of being caught is reduced.**

So what is the House doing?

The House bill would provide $171.9 million for the agency, a decrease of about $30 million from the $202.2 million given to the agency the prior year.

With the duties expanded by around 50%, the budget gets cut by 15%. Within the Stigler framework, we should expect (without any multiplier effect***) that it will be 43% less likely that any given criminal activity that falls under the CFTC's jurisdiction will be detected and prosecuted.

The House wants to make the Stanford Ponzi scheme, or something similar, more likely to occur. Will David Vitter be decrying this, even as he blocks nominees?

*That this concept is outdated at best is subject for a future post, but it's a fine baseline assumption.

**As I said, it's a simplified model, but functional if one assumes continuities.

***Short version: this is where the model needs to be revised. The incentives to commit crimes are greater (detection less likely). That Mulligan could find no better cite than these works as the defence of his idiocy (as noted, no NYT link from me) is damning.

David Vitter (R-DiaperPuta) stands firm:

Sen. David Vitter (R., La.) will block two nominees to the Securities and Exchange Commission...

Daniel Gallagher Jr., a partner at the law firm Wilmer Cutler Pickering Hale & Dorr LLP who was nominated to join the SEC, and agency commissioner Luis Aguilar, who was nominated for a second term....both require Senate confirmation, haven't encountered any substantive opposition partly because they were paired together as a Republican and a Democrat in order to reduce incentives for partisans to blow up their nominations.

But senators often use the confirmation process to pressure federal agencies to meet various demands. By placing a "hold" on the nominees, Mr. Vitter is delaying a confirmation vote by the Senate.

BarryO was strangely silent during Vitter's re-election campaign, not once declaring that having committed an actual crime would be a reason to resign.

by Mike Kimel

On the Job Market

Recently, my employer went through a merger. As part of the process, my position disappeared. I turned down a different position that was offered, the result being that at the end of the month I will no longer be with my current employer. Yes, I am aware of how bad the job market is, and yes, I learned a lot at and enjoyed my job, but without getting into a lot of inside baseball, it was time to go. In fact, it has been time to go for a while. Sometimes it takes something like this to tell you something you already know. So, yes, I have butterflies in my stomach (I've never been on the job market with this many mouths to feed), but I'm also looking forward to what comes next.

So... time to assess the situation. Here's what I got.

More below the fold...

I wisecracked yesterday chez DeLong that, given the current political climate, I wouldn't invest in a company without political connections using his money, let alone my own.

What I didn't realize at the time was that the Supreme Court already had decided earlier yesterday that investing in mutual funds should be a hazardous activity:

Janus Capital Group Inc (JNS.N) and a subsidiary cannot be held liable in a lawsuit by shareholders over allegedly false statements in prospectuses for several Janus mutual funds, the U.S. Supreme Court ruled on Monday....

More below the fold...

Traditionally, non-commercial banking (i.e., everything except savings deposits and consumer loans) was about one of two things:

1. Tax arbitrage or
   
2. Regulatory arbitrage
   
   The rest is window dressing; that is, it was basic financial intermediation, usually for the purpose of helping Corporate and/or High Net Worth clients.*
   
   That was until the late 1990s and the Noughts, when the third level came to liquidity-prominence:
   
   
3. Credit rating arbitrage

The third is the most chimerical of all, becausemdash;unless you're selling to or buying from the company that is involved (which has correlation issues, as I noted long ago)—neither party (in theory) has control over the outcome of events. It's asymmetric information on both sides: not so much gambling against the house as shooting craps in the alley, not certain whether there is a bobby down the block.

More below the fold...

Demand destruction. Demand destruction. Demand destruction.

That is all one seemed to hear from analysts and managers for months as food and energy prices soared. But now that we are actually seeing demand destruction, no one seems to recognize it.

More below the fold...

by Mike Kimel

The Historical Relationship Between the Economy and the S&P 500, Part 3: The S&P 500 and the Employment to Population Ratio

A few weeks ago, I had two posts looking at the relationship between the S&P 500 and real GDP (Part 1 and Part 2).

The first post noted that using data from 1950 to the present, the adjusted close of the S&P 500 appears to lead real GDP by about 10 quarters... and real GDP appears to lead the S&P 500 by 16 quarters. That is, each factor appears to influence the other with a lead time of a few years. In the second post, I noted that while the S&P 500's influence over real GDP appears to have remained relatively stable over the decades, real GDP's influence over the stock market seems to have gone by the wayside some time in the 1970s.

Today's post is similar to Post #1, but instead of looking at how the S&P 500 influences real GDP and vice versa, it looks at the relationship between the S&P 500 and the civilian employment to population rate.

More below the fold...

by Beverly Mann

Ah! It’s not about regulating markets, after all! It’s about regulating the individual!

ATLANTA — In perhaps the weightiest of the dozens of challenges to the Obama health care law, a panel of appellate judges grappled Wednesday with the essential quandary of the case: if the federal government can require Americans to buy medical insurance, what constitutional limit would prevent it from mandating all manner of purchases and activities?
—Kevin Sack, New York Times, Jun. 8

In my last post, Markets and the ACA: Why the Supreme Court Will Uphold the ACA, I wrote:

[Santa Clara law prof. and ACA-litigation blogger Brad Joondeph is] right (see my earlier post), but only if, as he says earlier, the market for health insurance is defined so narrowly that health insurance is viewed as a commodity, a product, independent of the product’s purpose and effect. And then, the constitutional issue would not, I think, be whether Congress has the authority under the Commerce Clause, aided by the Necessary and Proper Clause, to regulate the health insurance market, but instead whether this violates some other constitutional limitation. You know: the slippery-slope-to-government-compelled-consumption-of-broccoli argument.

Turns out I was onto something.

More below the fold...