WEDNESDAY SEPTEMBER 9, 2009

Government Competition

The healthcare debate continues and President Obama will speak before Congress this evening on the subject. Much has been made of the need for a government or public option. One prominent congressman stated the public option was necessary to provide price competition for insurance companies. In theory, the presence of the public option would keep those evil, profit seeking insurance companies honest and drive the cost of health insurance lower. But wait, isn’t the government (Medicare, Medicaid, Schip, VA) roughly 50% of healthcare already? One would think such a large “competitive” presence would have fostered the elusive cost savings a long time ago.


Regardless of where one sits on the healthcare debate, the idea that government must be a market competitor to maintain price discovery should scare everyone. Healthcare today. What industry tomorrow? Any profitable industry will be at risk of the “need” for a government presence to drive down costs. As a consumer, the price of everything is too high!   Bring on the competition! As an investor, this is not such a promising concept. Conceptually, every industry would “benefit” (read: less profit and lower stock prices) from government competition.

 

But as the saying goes, “be careful of what you ask for!” After all, Fannie Mae and Freddie Mac were government sponsored entities established to “compete” in the mortgage market and drive down the cost of homeownership. How did that work out?

POSTED AT 1899-12-30 15:15:00.0

KEN ENTENMANN, CFA
SENIOR VICE PRESIDENT AND
THE DIRECTOR OF INVESTMENT MANAGEMENT SERVICES

Ken is a Senior Vice President and the Director of the Trust and Investment Services at Alliance Bank, N.A. He has 23 years of investment experience and oversees the management of assets totaling $1 billion. He holds a B.S. in Applied Economics and Business Management from Cornell University and an M.B.A. from the William E. Simon Graduate School of Business Administration at the University of Rochester. He has also earned his Chartered Financial Analyst designation. He is a member of the Executive Committee of the Trust Division of the New York Banker's Association. He is also a director of the Central New York Community Foundation.

RECENT POSTS

Targeted and Temporary


Better Unemployment Number


The "Safety of Bonds" Myth


Just like that!


Ugly August


Bright Side of Double Dip Fears


All eyes on Wyoming


Lack of Business Confidence


Are bonds forecasting a double dip?


Are rates too high?

The opinions expressed here do not represent the views of Alliance Financial Corporation and Alliance Bank, N.A. This communication is not an offer or solicitation for the purchase or sale of any security, is for general informational purposes only and does not provide personalized investment advice. When making personal investment decisions you should consult your investment adviser or rely on your own research. Copyright 2008.