Allan Sloan explains why plans for breaking up big breaks that run into trouble, the “living wills” prescribed in the Dodds-Frank financial reform legislation, are inadequate:

Living wills sure sound great. Unfortunately, they can’t possibly work if we have anything resembling the 2008–09 panic, in which financial markets essentially closed down. It’s not just me saying that—lots of players, including the Treasury’s former chief restructuring officer, Jim Millstein, are saying it too. The problem is exacerbated because Dodd-Frank bars the Fed from helping stricken institutions the way it did during the height of the panic. The only financing allowed is from the Federal Deposit Insurance Corp., which isn’t likely to want to take the heat for financing the purchase of stricken institutions’ assets at bargain prices by rich, powerful outfits like Goldman Sachs (GS), J.P. Morgan (JPM), Blackstone (BX), KKR (KKR), or Carlyle.

“There are few, if any, institutions with the balance sheet to support the purchase of one of these businesses in good times,” Millstein says. “In a crisis, when funding in the credit and equity markets is unavailable, no one will be able to do it unless the FDIC supports the purchase with debt and equity financing [which he considers unlikely]. Therefore, there is no credible way to break them up and sell them during a crisis.” Depressing, but true.

The obvious and painful solution is to break up institutions that present systemic risk now. It will never be done. Where else would regulators get multi-million dollar jobs after their term in public service?

Investor Clifford Asness, writing in the Wall Street Journal, critiques the “uncertainty” explanation for the slow growth in the economy and provides an alternative explanation:

Consider two uncertain situations. In the first, our business is waiting to find out the location decision for a customer’s new industrial plant, so we know where to build our new supply facility. Until this is resolved, we will not invest in building nor will we hire staff. In the second situation, we know we are in for some pain, someone is going to make our business less productive and profitable, but we do not yet know how much. Planning is marginally more difficult, but the main reason we will not grow in the second situation is that investment is less attractive regardless of the precise resolution of uncertainty.

In the first case, uncertainty is the obstacle. Once it is resolved, we invest. In the second case, uncertainty is a small part of the problem. The large part is simply that bad things are happening. The day we are told “well, it’s exactly a 30% hit to productivity and profits,” all uncertainty is resolved—yet we will still not invest or hire.

The immediate retort, I presume, will be to point to large corporate profits and substantial reserves being retained by some companies. Profits from booming sales overseas do little to spur hiring and spending here in the United States. Quite to the contrary, they’re more likely to encourage overseas investment which to a large degree is what we’ve seen over the last couple of years.

I don’t understand the obsession with Sarah Palin. I thought she was a perfectly charming governor of Alaska. President? Not so much. Not interested.

I don’t understand why anybody thinks there’s a resolution to the Israeli-Palestinian problem. Every president of my lifetime including the incumbent apparently has thought so. What solution can hold if the most radical and violent have veto power?

I don’t understand the Obama Administration’s position on fiscal stimulus. Do they believe in it or not? Given that all but one of the administration’s senior economic advisors has resigned in remarkably short order, I suspect they didn’t understand it, either.

I don’t understand why you’d send crotch shots of yourself to people you don’t know. Heck, I don’t understand why you’d send crotch shots of yourself to people you know.

I don’t understand why President Obama hasn’t done a better job of selling his policies to the American people.

I don’t know when daringly different crosses the line into more of the same, cf. Lady Gaga. As I see it she’s essentially Marlene Dietrich 3.0 (who may have been Louise Brooks 2.0 but that’s before my time). Being Amish: daringly different. Meat dresses? Zzzzzz.

I don’t understand why those who are most in favor of action to fight climate change don’t lead by example or propose a solution that will deal with whatever problem exists. The proposals I’ve seen have been laughably inadequate.

I don’t understand why people complain that wages for entry level and unskilled workers are too low and that we should have a lot more of them. I can understand one view or the other just not in combination.

That’s a start. I may come up with others as the day wears on.

Update

I have realized that I don’t understand what the phrase “economic potential” means. I’m seeing it a lot lately. I understand the definition: the total capacity of an economy to produce goods and services. How is it measured? Dollars? I think that’s begging the question, i.e. does the ability to produce goods and services that have zero value contribute to economic potential?

Let me try that again. Let’s say you have 10,000 unemployed buggy whip makers and all the buggy whips that can conceivably be bought have already been made. What “economic potential” do those 10,000 unemployed buggy whip makers represent? I think zero but if that’s the case then the phrase has no meaning, at least not in the contexts that I’m seeing it used.

Update 2

Another one. I don’t understand why the U. S. healthcare system in which 60% of all spending comes from tax dollars is a free market system and the French system in which 85-90% of spending comes from tax dollars is socialized medicine.

This afternoon I had the 1952 movie, The Snows of Kilimanjaro, on sort of as background music when, somewhat to my surprise, I heard a gorgeous alto sax solo in a barroom scene. Sure enough, it was jazz great Benny Carter in an uncredited role.

You hear this all the time in movies about jazz or jazz musicians. So, for example, Harry James dubbed Kirk Douglas’s trumpet solos in Young Man With a Horn and Danny Kaye’s trumpet playing in Five Pennies, a fictionalized biography of Red Nichols, was provided by Red Nichols himself. Louis Armstrong appeared (and played) in a dozen movies and Duke Ellington appeared in a half dozen (including an uncredited role in Anatomy of a Murder).

However, I wonder how many small, often uncredited performances by jazz greats there are in movies that aren’t about jazz or jazz musicians. I should probably start keeping a list.

A propos of nothing in particular the chart above is of police-reported motor vehicle thefts in Chicago from April 2008 through the end of December 2009. I compiled the data out of simple curiosity and once I’d done it I thought I may as well post it.

The data is drawn from a very interesting database of crime statistics provided at the Chicago Tribune’s web site. I may use it some time to produce a graph of the number of homicides related to the number of homicide convictions which I strongly suspect will be very interesting.

I’m not sure what conclusion if any to draw from the data above. The only thing that occurred to me was that you’d almost think there was a quota!

Here as promised are some pictures of my grandmother, Esther Wagner Schuler’s, wedding dress. We were reluctant to remove it from the cleaner’s bag and this is the best we could do under the circumstances. A bit of glare and other issues but not too bad. You can click on any of these images for a larger picture.

Update

A regular reader suggests that the dress is made of cotton or, possibly, linen batiste. After a bit of research I think that’s probably correct. Also, one of my sisters, a contemporary size 4, says with some confidence that the dress is probably a two or even a zero. Esther very likely wore a corset when she wore this dress. Modern girls, of course, would never resort to such a thing (they’d call it something else).

Full length

Upper bodice

Below waist

Lower skirt detail

Bottom hem

Left sleeve

Neckline

Right sleeve

Another full length

The feet are those of my lovely wife who stood on the island in the kitchen taking these pictures.

I got an interesting bit of news today. Last week my wife and I took my grandmother’s wedding dress to our cleaner, one of the best and most reliable in the Chicago area, to be handwashed.

The garment was first worn by my father’s mother at my grandparents’ wedding a century ago. It’s in the style of the early 20th century, a layer of netting over an underlayer with a pink ribbon and rosettes at the waist. I believe that the netting is linen and the underlayer is silk. It’s possible that the netting is cotton but I wonder if it would have lasted so long if that were the case.

My wife tells me that after its bath the garment is beautiful and could be worn. I may take a picture of it and post it.

The binding at the bottom hem probably needs to be removed and there are a few tatters in the netting here and there. Not bad shape for a centenarian. We should probably all expect a few tatters in that amount of time.

Update

I’ve just seen the dress as it has come back from the cleaners. With the exception of a couple of places where pink sateen blanket binding which had been used on the interior of the garment has disintegrated the dress is in gorgeous shape. I’m even more puzzled by the what it’s made of having seen it again than I was before. Very loosely woven cotton muslin? I’m really not sure. I’ll ask the cleaner and see if he has any idea.

I’m sure how you remember that a few months ago the state of Illinois, hard up for revenue, imposed new income taxes on individuals and companies. The story continues:

The ink was barely dry on the new taxes before major employers announced their unhappiness. The equipment giant Caterpillar, the spinal cord of the Peoria economy, says the higher business and personal income taxes will cost the company and its 23,000 Illinois employees $40 million a year. “I want to stay here, but as the leader of this business I have to do what’s right for Caterpillar when making decisions about where to invest,” CEO Doug Oberhelman said in the wake of the tax increase, adding that Illinois “is not favorable to business.”

Caterpillar has long built new facilities outside Illinois to avoid the United Auto Workers, most recently in Texas. And after the Quinn tax hike, at least six states—from Virginia to zero income tax South Dakota—offered lower costs if the firm relocated. Caterpillar is staying put for now.

When the cellphone business Motorola Mobility hinted this spring that it might leave for San Diego, Mr. Quinn bounced into action. “I know how to work with the big businesses,” he declared to the media, as he rushed—taxpayer checkbook in hand—to keep the company in the state. Motorola pocketed $100 million in tax incentives last month to stay in Libertyville.

In addition to Caterpillar and Motorola Sears, Navistar, Continental Tire, Groupon (!), and U. S. Cellular have all lined up for incentives and are feeding at the trough. The Chicago Tribune remarks:

We’re seeing these threats because Illinois government does not welcome business.

We’re seeing these threats because Illinois has failed to address its broad fiscal problems and has massive debts that will fall on taxpayers.

We’re seeing these threats because rival states are pushing to be more open to business. Illinois is the outlier.

Did you hear Quinn on Thursday? In one sentence he summed up the hostile, government-centric view of this state. “The taxpayers of Illinois aren’t going to subsidize private companies unless they give something back to the people of Illinois,” he said.

They give something back! They give people jobs, Governor!

There will be several outcomes from all of this wheeling and dealing. First, the state won’t realize the revenue that was projected from the tax increase. That was obvious from the get-go. Where will they turn now?

But even more pernicious in my view is that the state is picking winners and losers. Motorola can secure breaks from the state but smaller businesses (which may in aggregate employ more people) can’t. Big retailers get tax breaks. Small stores don’t.

Add to that the companies that won’t even think about moving to Illinois because of an unfriendly business climate (in addition to an unfriendly ordinary sort of climate, said as as I watch the thunderstorm outside my window). What is seen and unseen.

Simon Johnson critiques a speech given by Treasury Secretary Tim Geithner earlier this week:

Mr. Geithner’s thinking is completely flawed on bank size. The right lesson should be: big banks have gotten themselves into trouble almost everywhere; U.S. banks are very big; these banks have an incentive to become even bigger; one or more of these banks will reach the brink of failure soon.

This has been a long time complaint of mine. IMO if it’s too big to be allowed to fail, it’s too big to be allowed to exist.

Big banks are also a greater risk of regulatory capture than small ones. They’re certainly morely likely to hire retiring regulators and apparatchiks at big salaries than small banks are and, worse, regulators know it. They’re also far better positioned for lobbying to ensure that legislation is favorable to them.