Moneybeat: A lighter touch

MARY REICHARD, HOST: Coming up next on The World and Everything in It: The Monday Moneybeat.

NICK EICHER, HOST: Time now to talk business, markets, and the economy with financial analyst and adviser David Bahnsen. David heads up the wealth management firm The Bahnsen Group. He is here now. Good morning to you, David.

DAVID BAHNSEN: Well, good morning to you. Good to be with you.

EICHER: I did enjoy your Dividend Cafe newsletter this weekend and you suggested there that financial deregulation could be as big a story in 2025 as the debate over the Trump tax cut. Talk about why you think that is.

BAHNSEN: Yeah, I think it’s a very important topic because I think that there is a broad sense in which the concept of financial regulation sounds like a really good thing to a society that is still reasonably close to and certainly remembering of the 2008 crisis.

If what we meant by financial regulation was not having things happen systemically that threatened to bring down our financial system, there’s very few people who would be opposed to that.

When we talk about financial deregulation, we talk about two categories.

One is eliminating silly things that are counterproductive, unhelpful. This week the Consumer Financial Protection Bureau, finally passing a federal restriction geared towards limiting the overdraft fees that banks are allowed to charge.

Now, one would think that this is not exactly what the CFPB was set to do to try to eliminate various things that are systemic and could bring down our whole system and having federal rules about the fees that a bank can charge would be kind of outside their mandate and maybe just a little bit small-ball, silly.

However, there’s actually a much bigger issue here. We’ve talked about it in the past with credit card interest. All they have to do is say, “Well, if we’re going to have people overcharging accounts, creating administrative burden, not to mention taking use of our capital for a period of time, you know, what we used to refer to as writing bad checks. It just happens to be at ATM level, then we’re going to close accounts.”

So, there is just a counterproductive sense to that kind of stuff, but that is really secondary to what the bigger issue is that I’m referring to, which is how much we’re allowed to do in our financial sector to drive growth. There is a level at which capital can be recklessly deployed at banks and there is a level at which it is so conservatively restrained that there is not enough liquidity in our financial system to drive new investment. I believe that by having a more sensible growth-oriented approach to regulation, there is a major opportunity in the new administration to do things more sensibly and reasonably, and of course not recklessly.

EICHER: One of those regulators is the Federal Trade Commission and we learned about chairman Lina Khan’s replacement, Andrew Ferguson. Now he’s on the commission so he won’t have to go through confirmation to be elevated to chairman of the SEC, with Khan going out. But I assume you see this as very good news from a free-market standpoint.

BAHNSEN: I think you said he was currently in the SEC. He’s currently in the FTC, he’s being named chairman, and that’s why he doesn’t need confirmation.

So, there were two appointments that we could be talking about here. Paul Atkins at SEC, who has been an SEC commissioner before and now has been named to be chairman.

That’s the Securities and Exchange Commission, which has oversight of a lot of issues related to financial markets.

Lina Khan is currently the head of the Federal Trade Commission and President-elect Trump named Andrew Ferguson to take that position. Ferguson is a really big proponent of free markets, and of a corporate America that is going to have to deal with the pain of its own bad decisions, not using federal regulation to try to keep it from hurting itself.

Now it is trying to use it to protect consumers. It’s trying to use it to protect one actor from another actor, but not use regulation to try to protect what the government believes could be a bad deal. That’s just totally outside the bounds of what the FTC was created for.

And so I think his role with FTC is to protect free exchange, and I’ve been very impressed with the things that I’ve seen from Andrew Ferguson—and far more than not only what we have now at Lina Khan but some of the people I was concerned could be considered in that role.

EICHER: David, this is something we talked about last week, just a few days ago here on the program. But I’ve been curious what you’d say about it: some of the commentary around health insurance that veers into kind of justification of violent criminality, the killing of the insurance CEO. A surprising amount of the commentary, both from the left and some corners of the right are saying we need to have a conversation about healthcare costs. I think you could shed some light on this story, help us have a better understanding, would you like to talk about that?

BAHNSEN: I do very much. You know, Nick, let me first say that I would prefer to not have to address what health insurance as an industry ought to do in the aftermath of one of its leading executives being assassinated. Because I don’t think that murderers get to provoke national conversations through acts of murder and violence. So, I was a little dismayed this week by the CEO of United Healthcare penning an op-ed to talk about, you know, “let’s look at the industry and what can be done better and so forth.”

It may have been wonderful ideas and it may be a great sentiment, but there is almost a sense which it feels like quasi-capitulation to assassins.

To the extent that the health insurance industry is a very legitimate part of the U.S. economy and it’s always open to scrutiny and critique, then I’ll do that, but this murderer didn’t deserve the right to provoke it.

I’m sure everybody is hearing my point.

The health insurance industry is basically a governmental industry. The amount of regulation around the legislation that exist at a federal level is insurmountable.

I mean, we have given, especially after the Affordable Care Act, a monumental amount of control to the federal government. Now, there are some who will say, “well, then, why don’t we just close the loop and go all the way?” Because right now I think you have almost the worst of all worlds where it’s a private insurance industry, but it’s quasi-private because of that deep regulatory apparatus and legislative requirement. Some might just say, “OK, fine, nationalized healthcare, go to a single payer like other countries.”

I most certainly don’t support that.

Nick, at the end of the day here’s the bottom line for everyone to understand. They do not make money by not insuring people. They make money by insuring people. So you want more people in the risk pool and in the economics of it.

If you do not pay out claims that are black-and-white legitimate, then you’re breaking the law and you’re going to get sued and you’re going to lose, OK? If it’s not black and white, it’s gray area, you do not keep business by declining payments and giving people ample incentive to move to other carriers.

But what we’re really talking about our claims that are denied or a level of a claim that is paid that upsets people because their policy doesn’t cover it and they wish it covered it or they wish it covered more of it.

And I understand entirely that people want sometimes what can be very very expensive coverage for their loved ones, and sometimes certain levels are not covered. Now that has to do with what the basic level of the policy is.

But our society never had the conversation, and Obamacare enabled us to not have to have it about how we want to view health care.

Is it something that is a right and we’re somehow going to force people to provide it without compensation or without market forces around their compensation? Or do we believe it’s something that we want to make available in the public square subject to market forces (like everything else we do) and allow competition and quality?

I think the demonization of the people that are providing the payment for this is allowing us to not understand that the insurance around health care is not the same thing as the cost of the health care that they’re not even privy to. They don’t even see it. There’s so much opacity around this that it’s totally distorted the conversation.

That’s not because of the insurance industry. That’s because of the governmental involvement in the health-care industry. It’s made this a very complicated topic and we’re not making progress.

EICHER: David Bahnsen, founder, managing partner, and chief investment officer of The Bahnsen Group. David’s Dividend Café is available to you for free at dividendcafe.com. David, thanks, enjoyed it. Hope you have a great week, talk next week!

BAHNSEN: Thanks so much, Nick.

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