Tag: Financial Regulation

Fin Reg: A Joke In The Making

Daily Agitator

From the VOMITORIUM

The battle has been raging now for about 4 months and all the politicians have come out and said they want the Banksters to pay for their gambling ways with the taxpayer’s money.  But really just how serious are these guys and gals that get tons of cash for the re-election funds from the very people they are saying that they want to control and dial them down a peg or two?

The bill has cleared the Senate and now goes on to the House for tweaking before the final vote and the signature by the Prez…..but is it going to be the “Fix All” that the Congress wants us to believe?

We keep hearing just how much this will reform Wall Street and the gambling that has been going on for the last ten years…..to this I say….CRAP!

A proposal to regulate derivatives. The White House and its lieutenants in the House and Senate are prepared to scale back or remove a provision that would require big financial firms to spin off their derivatives trading desks.  This one provision is NOT controlling the gambling on Wall Street.

And there is more that will NOT be in the new bill when it is finalized…….there will be a one time audit of the Fed and it will not be a complete audit and so far I do not see any limits on the “Too big Too fail”, there will be NO fix……

And the financial stocks should be another indicator that it is NOT a good reform bill….why?  When it was passed by the House their stocks took a sharp upturn….that leads one to believe that there is NO substantive change in the way banks will do business.  From the Newser website:

Despite their public protestations, behind closed doors, Wall Street executives are pretty pleased with how financial reform legislation is shaping up, sources tell the New York Times . “If you talk to anyone privately, there’s a sigh of relief,” says one investment banker. “It’ll crimp the profit pool initially by 15-20%, but there’s no breakup of any institution or onerous new taxes.” Though their least favorite provisions—like regulations on bank sizes, or caps on credit card rates—died in the Senate, there’s still plenty they don’t like in the bill, but given the magnitude of their financial crisis screw-ups, they’ve resigned themselves to some reforms. The health care bill will affect its industry “exponentially more than this legislation is going to change Wall Street,” says one investor and ex-Treasury deputy. “It’s not even close.”

If you think the the economy will be safer when the full bill is passed then you are delusional….we will face this problem again and again and ………and finally…the joke will be on you, the taxpayer…….Why?  You WILL keep paying and paying and……..If justice is what you seek then you will NOT find it in this bill, as it is today……

BETTER LUCK NEXT TIME!

FinReg And You

Just like health reform, Financial reform is taking heat from both sides….some want less other want more and in the end we will get something that is neither reform or change…the bankers will continue their gambling ways and the government will continue to look the other way while appearing to care what happens to the Main Street gang…all that said….the vote on FinReg is quickly approaching….the debate is raging and of course, it is slowly being watered down but as it stands now, how will the FinReg as it is today effect you?

From an article from the AP:

1. Free credit scores

2. Make FDIC insurance increase permanent

3. Extend fiduciary duty to investment advisers

4. Ban the use of credit checks for employment

5. Exclude non-financial merchants

6. Set rules for payday loans

7. Credit card interest rate caps

These are the proposals in the FinReg bill that will effect the normal person….most are good ideas and should protect the people from the predators on Wall Street….because they are pretty good, they will most likely be either watered down or eliminated in the final version of the bill when it is voted on by the Senate…..

In the meantime, the GOP is working hard to prevent anything from passing that would stop the BS the banks did that caused the massive economic meltdown……and it will effect YOU if this happens again…why?  It is YOUR money they are giving away to the banksters (banks + gangsters)……..

Senate Republicans yesterday blocked three amendments Wall Street hates. The first and most controversial, known as Levin-Merkley, would have banned commercial banks from trading for their own benefit with taxpayer money. The second would regulate payday loans, while the third would ban the type of credit default swap linked to the financial crisis, notes the Huffington Post.

You may be a conserv or a liberal…does not matter….we are talking about allowing a group of people to gamble with YOUR money….they keep the profits and stick YOU with the losses…..is that what you want from these reps in Washington?  If so, at least make them kiss you will they hump you!

What A Difference A Word Makes

Daily Agitator

The economy in the US is going to crap in a hand basket…..we need massive financial reform if we are to ever avoid the same meltdown that was suffered in 2008….the Congress is working on FinReg as we speak…..but there is a slight problem….it is the word “significant”…..one word can bring the whole reform thing to a halt because somebody somewhere wants to turn it into a political game…..this is what we have as far as governance goes….the games people play.

As reported on Newser:

Republicans have found another reason to oppose financial reform: They claim it will impose regulations on dentists, florists, and plenty of other small businesses, all because of a single word: “significantly.” The Senate bill states that the Consumer Protection Agency will only regulate those who provide significant consumer financial products. But it doesn’t define what’s significant, Republicans argue, meaning it could apply to financing small businesses provide their customers. The argument comes straight from a Chamber of Commerce talking point, Politico reveals. Democrats are willing to better define the word—Chris Dodd worked with Olympia Snowe on an amendment that should clear things up—but find the whole kerfuffle disingenuous. “I realize the word ‘significantly’ is what people want to work on, and I am willing to listen,” said Dodd. “But don’t make me debate completely false allegations about what is in the bill.”

The Chamber has become a lobbyists tool in the past decade or so…they do the bidding of every corporation and industry that will pay them the big bucks for their opposition…..they seem to have NO principle other than the opposition to whatever bill that will control the practices of an industry….

It is NOT about protecting the taxpayer and consumer…it is about stopping all reform…it seems everyone is dancing to the beat of the banks…..a casino industry with NO regulations…..gambling with taxpayer money, where they win they keep all the profit and if they lose the taxpayer assumes the responsibility for their loses…..a great way to gamble, too bad you cannot get this deal from the government YOU fund…..

Bastards! One And All!

Daily Agitator

I spent a good portion of my day watching the Senate hearings into the Goldman-Sachs scam….there is only so much arrogance I could stand….the pricks from Goldman were anything but forthright…they NEVER answered a single question and this went on for 6 hours maybe more…..

They were well trained and coached by their attorneys and they proved, at least to me, just how bad we need to cut the dicks off these self-centered toads……but I will not hold my breath….I do not see the Congress growing a complete set of nuts in this matter……

Yes, I thought the guys from Goldman were arrogant and self-indulgent……the Senators were angry….trying to reflect the anger by their folks back home…..this was a show also….these dipsticks have nothing to be angry about…why?  These are the same people that allowed this gambling scam to go forward…..How is that, Professor?

They are the ones in 1999 that repealed the Glass-Steagall Act…..and I know what the Hell is that?  The easy answer is:

Legislation passed by Congress authorizing deposit insurance and prohibiting commercial banks from owning full-service brokerage firms. Under Glass-Steagall, these banks were prohibited from investment banking activities, such as underwriting corporate securities or municipal revenue bonds. The law was designed to insulate bank depositors from the risk involved when a bank deals in securities and to prevent a bank collapse like the one that occurred during the Great Depression. The original separation of commercial and investment banking had already significantly eroded when, on November 12, 1999 the Financial Services Modernization Act of 1999 was signed into law, repealing parts of the 1933 Glass-Steagall Act and the 1956 Bank Holding Company Act and effectively allowing banks, brokers, and insurers into each other’s businesses. Basically, the 1999 Act allows banks to affiliate with securities firms and insurers through a holding company structure and permits nationally chartered banks to engage in most financial activities through direct subsidiaries. While provisions of Glass-Steagall continue to restrict banks from most underwriting activities and securities firms from taking deposits, these restrictions apply only to the banks and securities firms, not to their Financial Holding Company affiliates and are, therefore, technical.

Everyone in Washington is to blame, as much as the bankers for the problems we have now…..so to watch these Senators feign anger is sickening and to watch the guys from Wall Street sounded like they are a victim in all this is just as putrid as the Senators.

Once again we come to responsibility….NO one is to blame….is the cry….”sh*t happens!” seems to be the norm……they ALL are responsible for the economic mess….everyone involved needs to hone up to their complacency in the financial crisis….they were warned in 1999 to what they were doing and they did not heed the word…..the people need to be angry with ALL those involved in the scam and that started with Gramm-Leach-Bliley Act that let the banks run wild unchecked and Pres. Clinton who also thought this was a sterling idea…….Repubs as well as Dems are the cause of your problems…..stop whining!  And make else dipsticks take credit where credit is due!

FinReg: GOP Style

Lots and lots of words and speeches about the necessity for some sort of regs on the financial markets….Dems have a plan (one that does not go far enough, IMO) and there was suppose to be a vote sometime this week, but now the GOP is back to slowing down all bills in an attempt to under mine all of the Obama proposals…..

The NY Times is reporting:

Republicans, including Senator Richard C. Shelby of Alabama, have said they would use the procedural vote to block the start of debate on the Democrats’ bill unless the Democrats agree to make substantial changes in it. But in a political climate of public impatience and anger at Wall Street, it was not clear how long the Republicans could hold ranks in delaying the bill.

Republicans also said they would propose regulatory language aimed at the giant mortgage entities, Fannie Mae and Freddie Mac, which for practical purposes are now wholly controlled by the federal government. Some Republicans say the absence of the mortgage giants from the financial regulation bill is a glaring omission, while Democrats say they need to be dealt with in separate legislation.

More on the GOP FinReg Plan…..Their alternative proposal includes several similar provisions, including establishing a board to oversee systemic risk, consolidating banking regulation, and reducing Federal Reserve independence (though, to be fair, the GOP doesn’t expand Fed authority anywhere close to what the Obama plan does). The GOP’s plan disappointingly does not address attacks on hedge funds and derivative contracts, and it expands the role of the Securities and Exchange Commission (SEC). However, the Republicans are chiefly focused on ending the policy of “too big to fail” and are opposed to bailouts, which is very encouraging. Here is a comparison of three key provisions that favor the GOP:

Why do they continue to play a game…..why not sit down and negotiate with the Dems on the proposals they have?  There seems to be plenty of room for compromise in both plans.  Why is it necessary to hold press conferences and play games that Repub consultant Lutz diagrams for them?  Does that mean that Repubs have NO original ideas?  If they do why is this Lutz guy doing all the writing and talking points for them?

Once again……the games politicians play get in the way of REAL reform…….and where is the loud mouths in the Tea Party?  They started with the original bailout and morphed into the right wing spin machine….but yet they do not seem to have an opinion on FinReg…..so where are they?  Speak up people!

The Repo Men

Professor’s Classroom

Subject:  Economics/Finance

NO!  I am not doing a review of some Hollywood mind dribble about guys that repossess organs that are in arrears…..NOPE!….I am talking about the theft occurring on Wall Street…..

A definition, a simple one, for therm economic term of REPO:

An agreement in which one party sells a security to another party and agrees to buy it back on a specified date for a specified PRICE. CENTRAL BANKS deal in short-term repos to provide LIQUIDITY to the FINANCIAL SYSTEM, buying SECURITIES from BANKS with cash on the condition that the banks will repurchase them a few weeks later.

There is the theft that was pulled on the American people that damn near brought the country down around our ears…..in other words, they used worthless non-existent paper as collateral for the money they were given and when it came to the day the sale was called in…there was nothing of value to use to raise the cash to pay back the money…..

But there was another……DERIVATIVES:

Financial ASSETS that “derive” their value from other assets. For example, an option to buy a SHARE is derived from the share. Some politicians and others responsible for financial REGULATION blame the growing use of derivatives for increasing VOLATILITY in asset PRICES, and for being a source of danger to their users. Economists mostly regard derivatives as a good thing, allowing more precise pricing of financial RISK and better RISK MANAGEMENT. However, they concede that when derivatives are misused the LEVERAGE that is often an integral part of them can have devastating consequences. So they come with an economists’ health warning: if you don’t understand it, don’t use it.

The world of derivatives is riddled with jargon. Here are translations of the most important bits.

• A forward contract commits the user to buying or selling an asset at a specific price on a specific date in the future.

• A future is a forward contract that is traded on an exchange.

A swap is a contract by which two parties exchange the cashflow linked to a liability or an asset. For example, two companies, one with a loan on a fixed INTEREST RATE over ten years and the other with a similar loan on a floating interest rate over the same period, may agree to take over each other’s obligations, so that the first pays the floating rate and the second the fixed rate.• An option is a contract that gives the buyer the right, but not the obligation, to sell or buy a particular asset at a particular price, on or before a specified date.

• An over-the-counter is a derivative that is not traded on an exchange but is purchased from, say, an investment BANK.

• Exotics are derivatives that are complex or are available in emerging economies.

• Plain-vanilla derivatives, in contrast to exotics, are typically exchange-traded, relate to developed economies and are comparatively uncomplicated.

Another fairly normal financial exercise….but once in the hands of greedy Wall Street traders it became a thing of ugliness…the second prong of the financial disintegration of the world’s financial markets…..in this case worthless sub prime mortgages were the culprit….when they were packaged and sold to raise money…..it was dishonest for the banks and institutions knew that they were worthless when they were sold….a SCAM is a polite word to describe the theft……

The two practices that I covered are nothing short of theft….but then their is a third prong to this…..the bailout.  After really bad practices and the economy crashing the country was sold on the idea that these institutions were too big to fail and were given billions to save their companies from ruin……then a year later still using taxpayers money……these companies gave employees massive bonuses….still using taxpayer money…..and there is the final prong…….yet another theft of cash but this time they are stealing taxpayer money….that means YOUR money…….anger resides on Main Street and to save these thieves from being fed to the wolves the Congress is working on a financial reform bill……..at best the bill, if passed as is, is a YAWN and a tap on the pee pee for the financial thieves that we trust our economy to……will we ever learn?

To Be Continued……..

Mr. Dodd Has A Plan

With the heated back and forth of the health reform, very little has been reported on the new financial reform bill….Sen. Dodd and some Repub from Tennessee are quietly negotiating for the passage of a financial reform bill….now that it is pretty close Dodd has hit the airways to try and block any  “tea bag”-esque attacks that the health reform bill has received.

I was going to write a piece trying to explain Dodd’s lame attempt to regulate the thieves but the Washington Post beat me to it and theirs is a lot simple and more understandable than mine would have been:

1 A Consumer Financial Protection Bureau, housed inside the Federal Reserve, would write and enforce rules protecting borrowers from abuse by lenders.

WHAT IT MEANS: The location of the agency is a nod to Republicans and conservative Democrats who oppose the creation of a free-standing consumer agency, but everything else about this proposal is designed to please liberals, giving the consumer agency sweeping powers and imposing few checks on that authority.

2 A Financial Stability Oversight Council, chaired by the Treasury secretary, would coordinate federal efforts to identify and manage risks to the financial system and the broader economy.

What it means: Dodd wanted to give the council broad responsibility for policing systemic risks. After massive administration pressure, he agreed instead to give much of that power to the Fed. The oversight council will instead function essentially as the Fed’s board of directors on regulatory issues, signing off on its decisions.

3 A new process would allow for the liquidation of large, failing financial firms.

WHAT IT ME ANS: Companies could be liquidated by joint agreement of the Treasury Department, the Fed and the Federal Deposit Insurance Corp., which already administers bank failures and would play a similar role in the new process. Costs would be paid from a $50 billion pool of money gathered from large financial companies.

4 Credit-rating agencies would be regulated and liable for errors.

WHAT IT MEANS: Breaking with the administration and the House version of financial reform, Dodd’s bill would hold Moody’s, Standard & Poor’s and other rating agencies potentially liable for their judgments about the safety of bonds and other investments. The industry also would be regulated by the Securities and Exchange Commission.

5 Banks would face new limits on trading and investment activities.

WHAT IT MEANS: The bill would restrict banks from running their own investment portfolios or hedge funds, an administration proposal known as the “Volcker Rule” that Dodd initially had rejected. The bill also would regulate the massive trade in derivatives, increasing the proportion of such trades that are publicly reported.

6 Some renovations would be made to the structure of federal banking regulation.

WHAT IT MEANS: Dodd abandoned his earlier proposal to create a single banking regulator after critics argued that the upside was not worth the effort. The bill still would eliminate the Office of Thrift Supervision. The Fed’s authority over smaller banks would be split between the FDIC and the Office of the Comptroller of the Currency.

Is something better than nothing?  I hear a lot of the henceforths and heretowiths …..in other words legal-ese and the “too big to fail” group will still have its relief valve….US, we will still be on the hook whenever they screw up….I guess it is a start….but like health reform…..it is NOT reform….it is a tweak of an already broken system.

The New Finance Bill

Once again I bow to the wisdom of the AP….they do it so much better than the rest of us…..I will post the entire report:

Q. Who does it affect?

A. Financial institutions, both banks and nonbanks; homeowners, borrowers and credit card holders; insurance companies; hedge funds; traders in complex derivatives; and securities rating companies.

Q. How would it avoid another Wall Street crisis?

A. It creates a Financial Services Oversight Council made up of the Treasury secretary, the Federal Reserve chairman and heads of regulatory agencies. The council would monitor the financial markets to watch for potential threats to financial system. It would identify firms and activities that should be subject to heightened standards, including requirements that they place more money in their reserves. Companies would have to plan for their own demise, detailing how they would be dismantled if they fail. The government could dismantle even healthy firms if they are considered a grave risk to the economy.

Q. Who would pay for a failing firm?

A. Failing banks are dissolved now by the Federal Deposit Insurance Corp. The legislation proposes that the costs of large nonbank institutions that fail first be paid for by shareholders and creditors. Even secured creditors would have to take a hit, losing up to 10 percent of their security. If the failure still has damaging financial repercussions, the FDIC would tap a special $150 billion fund paid for by large institutions with $50 billion in assets or more, or hedge funds with at least $10 billion in assets.

Q. What are consumers likely to see?

A. The legislation creates a Consumer Finance Protection Agency that would oversee consumer lending — mortgages, credit cards, payday loans and terms on savings accounts. It would take consumer regulation and enforcement powers away from bank regulators. Under current law, states cannot supersede federal consumer laws, but the legislation would permit states in some instances to impose tougher consumer laws on financial institutions. Banks could escape state laws by claiming they “materially” impair the business of banking. Several industries would be exempt from CFPA oversight, including retailers, auto dealers, lawyers and accountants.

Q. What else does it do?

A. It brings the unregulated $600 trillion derivatives market under government oversight. Derivatives are complex financial instruments, such as credit default swaps, blamed for accelerating the Wall Street panic last year. Some companies that use them to hedge against risk from new requirements in the overhaul legislation would get exceptions. Hedge funds, which operated in shadow financial markets, would have to be registered with the government.

Q. What about those executive salaries?

A. Company shareholders would get a nonbinding vote on the pay of top executives. Federal banking regulators would have to approve compensation practices, though not actual pay, at banks and bank holding companies.

Once again the AP did a masterful job of explaining the bill as simply as possible making it understandable to anyone willing to read and learn…..

Can Wall Street Be Regulated?

By now all the world knows is how big Wall Street is and how they can make or break an economy…..and recently they broke the whole damn thing!

And because they, Wall Street, was too big to fail….there is a growing attitude in Washington that these little turds need to be more accountable for their actions….something they are fighting tooth and nail to avoid…..

It all began (I think) with Sen, Cantwell…..as reported in the Huffington Post:

Morning Meeting, Dylan Ratigan brought on Senator Maria Cantwell (D-Wash.) to discuss the ongoing attempts to achieve a measure of financial reform, so that the widespread systemic failures of “too big to fail” banking institutions that cratered the economy maybe don’t happen again. Cantwell went off: “The shenanigans just began here in Washington.” Cantwell continued, “What is moving through on the House side is a bill that supposedly has a new rule, but has so many loopholes that the loophole eats the rule. We want to say we have transparency and regulation, but it will continue to have loopholes.”At issue were some specific holes in the Defense against Wall Street’s Dark Arts. First: no government oversight of which derivatives get traded on open, transparent exchanges. Instead of the SEC or other regulators making decisions on what goes on the exchange, the exchange would be overseen by banks, who are strongly incentivized to keep derivatives off of exchanges, where they make less money.

And all the hoopla has not stopped there…..as reported in the WSJ:

A key House panel voted Wednesday to give government the power to break up large financial firms whose collapse might threaten the broader economy, despite aggressive lobbying by major financial institutions to kill the measure.The amendment illustrates how some lawmakers are willing to go beyond the authority sought by the White House — which stopped short of giving regulators power to break up healthy firms — in the redrawing of the financial world’s regulatory framework.

A divided House Financial Services Committee voted 38-29 to approve an amendment offered by Rep. Paul Kanjorski (D, Penn.) that would allow a council of regulators to determine whether factors including the size or interconnectedness of an individual firm pose “a grave threat to the United States.” Such a firm could be prohibited from merging with another firm or be required to sell business units or assets.

The amendment is part of a broader legislative overhaul of financial-sector rules pending in Congress. If enacted, the government would have the authority to act aggressively to deal with a systemically risky failure before problems become too unwieldy.

All in all a good start at controlling the runaway theft of Wall Street…but will it succeed?  Most likely it will not…..Wall Street has “friends” in Washington…all of whom are bought and paid for….these “friends” will not allow Wall Street to lose any of their clout…..

The beast of Wall Street has been allowed to run free for way too long to try and domesticate it now……it may get those trying some votes back home but it will do little to control or tame Wall Street….

Obama’s New Bank Regulations

As I have said in the past…millionaires policing millionaires……

The plan outlined by Obama calls for enhanced powers for the Federal Reserve to oversee big financial firms, both bank and non-bank companies; higher capital reserve and liquidity requirements; minimal government oversight of some hedge funds; a privately-run clearinghouse for some forms of derivative trading; and a requirement that lenders retain a small stake in loans they sell to the banks to be turned into securities.

All of these requirements can be easily circumvented by the banks. Moreover, the political forces responsible for enforcing them are bound hand and foot to Wall Street.

The panoply of existing federal regulatory agencies is for the most part to remain in place. Obama made much of the creation of a new body, the Consumer Financial Protection Agency, which he said would protect consumers against predatory practices by mortgage lenders and credit card companies. However, this agency will have no new powers beyond those previously spread out among other agencies.

The centerpiece of the plan is a proposal to allow the Fed and the Federal Deposit Insurance Corporation to seize and wind down big banks and non-bank financial firms whose failure would pose a “systemic threat.” This is considered necessary precisely because none of the other proposals challenge the ability of banks, hedge funds, insurance companies and other financial firms to engage in speculative practices that are certain, at some future point, to threaten another financial collapse. It amounts to the institutionalization of taxpayer bailouts of the financial system, in place of the ad hoc methods employed in the present crisis.

The comparison of Obama’s plan to the regulatory reforms of the 1930s is specious. In the depths of the Depression, Roosevelt imposed significant structural reforms to rein in the banks and save American capitalism from the threat of social revolution. A cornerstone of these reforms was the Glass-Steagall Act of 1933, which erected a barrier between commercial banks and investment banks.

Glass-Steagall was repealed in 1999, during the Clinton administration. That was a milestone in the deregulation of the banks. It was part of a process, stretching back to the early 1980s, in which the US ruling elite has turned increasingly to financial manipulation to generate profit and personal wealth, while dismantling huge sections of industry and waging relentless war against the jobs and wages of the working class.

The result has been a colossal growth of social inequality and the emergence of a financial oligarchy that dominates the political life of the country. Both parties are at the beck and call of Wall Street, and are incapable of enacting any measures to rein in its plundering of the social wealth.

Obama and the Democratic-controlled Congress have ruled out a return to Glass-Steagall. They have rejected capping executive pay. Nor is there any suggestion of closing down the casino for credit default swaps, collateralized debt obligations, structured investment vehicles and other exotic forms of speculation that played a major role in the financial crash.

I have been saying the same thing for months and it is good to see that I am not a lone voice out there calling a turd a turd.

Also, let me see if I have this right……a former head of the NY fed has given more and sweeping power to the Federal Reserve?  Is that about right?  The Fed is far from a rational organization and to give them more power than they have now may be a disasterous move.  Everyone in the media is so concerned with the raising deficits, but few are focusing on what is being done behind the scene and that a repeat of the crap we are now in is not that far fetched.