Poor Anna, Poor Tess
Why He Is Like He Is
Kellyanne & the Hatch Act
|Kellyanne with spouse|
Many years ago, I was active in the South Ward Young Democratic Club in Newark, N.J. We had a member who had a minor city job of some sort downtown in Newark’s City Hall. Whenever he was asked to participate in some campaign activity or other, he excused himself by saying the Hatch Act prevented him, as a government employee, from political campaigning. (Since the Hatch Act pertained to Federal employees, his excuse was an invalid one, but we didn’t know any better and never challenged him.)
The funds in or moving through these accounts enable them to access further funds (for which they themselves pay interest) from the Federal government, and that is the larger pool of money banks use to make their real profits, which is the interest paid to them for home loans, auto loans, mortgages and most importantly, loans and credit made available to businesses of all sizes to enable them to operate as if they had their anticipated profits already in their accounts.
Sometimes, a bank may not even bother with the “seed money” provided by retail savings and checking accounts to have a large pool of money to thusly invest. Their sole customers are those to whom they provide money. We call them “investment banks (Goldman Sachs is an example)” as opposed to those that still also have retail customers for savings and checking as well (Wells Fargo is an example of such “commercial banks”).
Of course, ostensibly purely retail financial institutions such as credit unions and savings banks also depend on how they invest the money they are holding to make them profitable, something the profits made from their retail customers cannot alone do. And for all intents and purposes, “pseudo-banks,” those companies in the venture capital and private equity fields, require that the money they lend or invest produce income at a generous interest rate, just as “real” banks do. No one goes into the money business with the aim of failing.
The real money insurance companies make is from the interest they earn from the loans and investments they make on the enormous amounts of money they are holding to cover future claims. (An investment banker I knew once, looking at this pool of money, greedily referred to insurance companies as “cash cows.”) The long-term interest rates plugged into their actuarial assumptions are usually far more conservative than what the insurance companies’ investments actually earn. Hence, insurance companies usually make a lot of money. (When an insurance company fails, and it does happen, it is usually because its management has fallen into the hands of sales-oriented marketing people recklessly attempting to increase that pool of money to invest, rather than traditional conservative number-crunchers.)
|Federal Reserve Bank's DC headquarters|