There We Go Again!

Article excerpt

It's not often that one gets the opportunity to mix quotes from former President Ronald Reagan, Hall of Fame catcher Yogi Berra, and philosopher and cultural critic George Santayana all in the same paragraph. However, the words of these men resonated with me in the weeks preceding this late-June writing.

Reagan's quip, used as the title for this column (I've replaced "you" with "we"), was made during a seemingly exasperating moment in his 1980 debate with President Jimmy Carter; Berra's famous line "deja vu all over again" (also used by Alan Cohen in his contribution to this issue) was allegedly made after New York Yankee teammates Roger Maris and Mickey Mantle hit consecutive home runs; and Santayana's caution that "those who cannot remember the past are condemned to repeat it" has been invoked repeatedly as a warning to those who ignore historical lessons.

All of these words seem to apply appropriately to recent newsworthy events: the latest debacle in our financial sector, courtesy of J.P. Morgan Chase & Co.; the threat to repeat the 11th-hour drama and attendant uncertainty that characterized last year's debt ceiling standoff and budget debate; and the reemergence of efforts by congressional Republicans and those on the right to sacrifice our social safety net for tax breaks for our more affluent citizens. Although the attention directed to these events has been largely in terms of their implications for our financial and fiscal health, they can have important implications for population health and for health care delivery, more generally. Finally, as Inquiry was going to press, the Supreme Court issued its anxiously awaited ruling on the constitutionality of the Patient Protection and Affordable Care Act's (ACA) individual mandate. In rather dramatic fashion, the court voted 5-4 to uphold the individual mandate and the entire ACA. However, the court's decision has set the stage for subsequent deja vu moments as proponents and opponents of national health reform continue their defense and criticism of the ACA. I briefly discuss some of the implications of the court's ruling and leave a more complete discussion for a subsequent column.

The Financial Sector Once Again

Amid reports of a new round of trading in high-risk financial instruments by Wall Street investment houses, and the ongoing contentious debate over whether our financial institutions remain "too big to fail" and warrant greater oversight and more transparent transactions, the news of May 10 was especially jarring. J.P Morgan Chase & Co., the financial behemoth acclaimed for its enlightened management in the calamitous months preceding the Great Recession, had incurred a profound trading loss of $2 billion from highly speculative and risky transactions. The news grew worse over the next several days as it became clear that the initial loss would increase by at least 50% to approximately $3 billion, or perhaps as much as $9 billion, according to recent estimates. It is also noteworthy that this recent incident occurred on the heels of the collapse of Jon Corzine's MF Global, Inc., yet another victim of speculative trading.

Several facts are particularly unsettling about the J.P. Morgan incident. First, despite the fallout of the 2008 financial crisis and efforts to fully implement the Dodd-Frank legislation regulating financial institutions, analysts who have repeatedly warned that the elements are in place for a future financial catastrophe appear to be prescient. In particular, with no firewall separating banks' commercial and investment activities and no vigorous oversight in the trading of highly speculative derivative securities (the Volcker Rule), Morgan's London office drew upon proprietary funds--government-backed savings deposits rather than its own resources--to finance what was essentially a cumulatively large hedge fund bet. As a result, Morgan placed its depositors and, ultimately, taxpayers at risk. …