If Pete Rose ran the banking industry...

...it would probably look...pretty much like it already does.

No, I don't see bankers out setting hitting records. But bankers do bet against their own team. All the time. Trillions of dollars are devoted to hedging; basically just placing bets against your own investments--your own team.

In just about any other industry this would never be tolerated. In sports, this will get you banned from the industry altogether--like Pete Rose who got banned from baseball forever after betting against his own team. Imagine lawyers who could place bets on themselves losing cases. They'd be disbarred faster than you can say "unethical behavior."

Yet we allow this kind of behavior in finance. Of course, there are valid reasons given for why this is appropriate. But a case could be made that lawyers would benefit from this in much the same way that bankers do.

Many lawyers work on a contingency basis, collecting a fee only if they win the case. Of course, lawyers have to take a pretty large cut to justify the risk they take by investing so much time and energy into a project that may pay out absolutely nothing. Imagine if lawyers could hedge by betting against themselves. By removing the risk, lawyers could charge much lower fees to clients who can only afford to pay if they win. Lawyers reduce risk. Clients get lower fees. Everybody wins! Right?

That's pretty much the same argument that's made in the finance industry. Bankers, investors, finance professionals all have to take considerable risks when they pick investments. If they can bet against their own investments, they minimize risk resulting in more predictable returns. And this in turn allows them (theoretically) to charge lower fees for services. So what's wrong with it?

Well, would you hire a lawyer that bets against himself? Finance pros do a much better jobs of concealing this behavior with exotic names for products, but ultimately they're doing the same thing.

Maybe this is the kind of problem that the market would solve if people are simply made aware of what's really going on. But some things are simply too important to wait for the market to achieve what we all know is the desired result. Lawyers aren't allowed to bet against themselves, it creates a clear conflict of interest. So we need to stop bankers, who have an obligation to protect people's investments and by extension their well-being, from betting against themselves and their clients.

The economy is booming for some

Just a quick article I ran across while checking stock prices: How the Rich are Winning. There's nothing surprising in the article, except for the source. Reading an article with this content (various measures of how the top 1% inhabit a different world from everybody else) wouldn't be very surprising on HuffingtonPost or some liberal political organization. I would take it with a grain of salt knowing it may be largely true but probably contains some misrepresentation and facts out-of-context to make political points. But coming from MarketWatch, a news organization dedicated to covering financial markets, it's pretty shocking.

Let the Republicans win

Like most mid-term elections, the coming mid-terms will probably see the party out of power make significant gains in the House and Senate (see fivethirtyeight.com, for example). It seems the Republican strategy of the last couple years has been simply oppose everything (even plans they proposed and have always supported*) in a thinly-veiled attempt to make it impossible for Dems to accomplish anything. And, disgustingly, it appears the strategy has worked and voters will reward Republicans for this behavior that most parents wouldn't tolerate from an 8 year old. But I think we'll be better off if Republicans take control of at least one branch of Congress. Here's why:

Politics is a game, and the goal is to win by getting elected. So game theory should be considered in examining current Republican behavior and what is likely to change the current obstructionist environment. In politics, you don't win the game if your opponent does something good and is able to take all the credit. So Republicans, being completely out of power, have known that they can not allow anything positive to be accomplished because there is no way they can take credit for it. That's why they have consistently opposed legislation based on Republican ideas* since Obama was inaugurated. Republican opposition has nothing to do with their fears that plans would fail, but that they would succeed. Viewed from the perspective of game theory, if Dems succeed, Reps lose.

But, if Reps are able to take control of the House and/or Senate, suddenly they have the opportunity to claim credit for success. The bi-partisan legislation of the last two years* has so outraged Reps not because it was partisan (it certainly was not), but because the Dems would be able to claim all credit for it. With Reps controlling something, they have a stake in the outcome and have incentives to do something positive. By allowing the Reps some power, and some opportunity to claim credit for success, then we re-align the game so that the interests of Reps are no longer in opposition to the interests of the nation. As a result, with Reps achieving some level of power, we will see Reps go along with positive legislation because a win for the country can be claimed as a win for Reps as well.

It's childish. But politics is a childish game. So unless Republicans can be sufficiently marginalized that they have no influence, the next best alternative is to let Republicans control one branch of government. Just don't let them control all branches because we just saw what a disaster that was...

*Just a few examples of how the current Congress and Administration have been governing from the center/slightly right of center:

Defense: De-escalated one war, but escalated another. Overall defense spending and troop deployments continue to rise. A Republican remains Secretary of Defense. The new administration claims to have ended torture (there's some question about those claims), but have done nothing to investigate crimes (under US and international law) that appear to have been committed by the past administration. Overall: pretty centrist/right-of-center.

Economy: Continued Bush policy of bailing out big businesses based on the supply-side belief that if you take care of the wealthiest members of society, the benefits trickle down to the rest of society. Economic stimulus plan was a pretty equal mix of government spending (left) and tax cuts (right). Advisors are composed largely of individuals with considerable private sector background. Proposals for top marginal tax rate remain significantly lower than the top marginal tax rate during most of the Reagan years. Overall: centrist/right-of-center.

Energy: More investment in alternative/renewable energy than previous administration, though no large-scale commitment. No definitive steps toward putting a price on carbon. Support for expanded off-shore drilling. Overall: centrist.

Health Care: Single payer never considered. Public option removed from plan. Final plan is based entirely on private delivery of health insurance. The plan is very similar to what Republicans have proposed for decades as an acceptable alternative to government delivery of health care. Indeed, the plan is much like what a Republican governor passed in Massachussetts. Overall: Centrist/right-of-center.

I could go on, but that should give the idea. On a policy level, the current administration and congress have pursued a clearly centrist legislative agenda. Allegations of partisanship are based entirely on the fact that Democrats hold all the power and Republicans have withheld votes for purely political reasons...not because the ideas are so far to the left of what Republicans have traditionally advocated until just two years ago.