It’s Saturday!

Happy Saturday Sky Dancers!! It’s a beautiful fall day here in Indiana, but I’m looking forward to getting back to Boston. I’ll be taking off in a couple of days and I hope to be home by Tuesday or Wednesday. My mom is going along for the ride so she can hang out with her youngest grandsons for awhile. It will be fun, because she’ll be there over Halloween. But enough about my boring life–let’s get to the news.

This story is a couple of days old, but still worth reading. Via BDBlue at Corrente, Which GOP candidate do you think has raised the most money from Wall Street?

Barack Obama!

Despite frosty relations with the titans of Wall Street, President Obama has still managed to raise far more money this year from the financial and banking sector than Mitt Romney or any other Republican presidential candidate, according to new fundraising data.

Obama’s key advantage over the GOP field is the ability to collect bigger checks because he raises money for both his own campaign committee and for the Democratic National Committee, which will aid in his reelection effort.

As a result, Obama has brought in more money from employees of banks, hedge funds and other financial service companies than all of the GOP candidates combined, according to a Washington Post analysis of contribution data. The numbers show that Obama retains a persistent reservoir of support among Democratic financiers who have backed him since he was an underdog presidential candidate four years ago.

And get this–Obama has raised nearly twice as much as Romney from the Mittster’s old firm, Bain Capital! So don’t believe all those stories in the media about the Wall Street titans switching to Mitt.

Here’s another “breaking news” story from Forbes: US Businesses Not Being Strangled By Regulation And Taxation, World Bank Says. Gee, no kidding? But the Republicans say that’s the main cause of our economic problems, don’t they?

The World Bank uses indicators such as time spent to set up a business to getting credit, among other things, in benchmarking the 183 countries it ranks in “Doing Business”. The report measures and tracks changes in the regulations applied to domestic companies in 11 areas in their life cycle–such as investors rights, taxation, cross border transactions, legality and enforcement of contracts and bankruptcy law. A fundamental premise of doing business is that economic activity requires good rules that are transparent and accessible to all, not just big business. Such regulations should be efficient, the World Bank states, striking a balance between safeguarding some important aspects of the business environment and avoiding distortions that impose unreasonable costs on businesses. “Where business regulation is burdensome and competition limited, success depends more on whom you know than on what you can do. But where regulations are relatively easy to comply with and accessible to all who need to use them, anyone with talent and a good idea should be able to start and grow a business (legally),” the World Bank said.

Where does the supposed regulation and taxation crippled U.S. stand in the rankings? It is number four, trailing behind New Zealand (3), Hong Kong (2) and Singapore (1).

What it looks like from the research desks at one of the most powerful and elite multilateral institutions on the planet is a U.S. that does not have the government in its way, but a U.S. whose government is more out of the way than it is in every other major economy on earth, including mainland China.

Wow, I wonder if Congressman Paul Ryan reads Forbes? Naaaah… probably too far left for him. And speaking of Ryan, he appeared at a town hall meeting in Muskego, WI yesterday and made a complete ass of himself as usual. From Think Progress:

During a town hall today, House Budget Committee Chairman Paul Ryan (R-WI) was asked by Matthew Lowe, a student, why the GOP wants to cut Pell Grants. Ryan responded by saying that the program is “unsustainable,” before telling Lowe that he should be working three jobs and taking out student loans to pay for college, instead of using Pell Grants:

LOWE: I come from a very middle-class family and under President Obama, I get $5,500 per year to pay for school, which doesn’t come close to covering all of the funding, but it helps ease the burden. Under your plan, you cut it by 15 percent. I was just curious why you would cut a grant that goes directly to the middle- and lower-class people that need it the most.

RYAN: ‘Cause Pell Grants have become unsustainable. It’s all borrowed money…Look, I worked three jobs to pay off my student loans after college. I didn’t get grants, I got loans, and we need to have a system of viable student loans to be able to do this.

That’s funny. I read that Ryan used his father’s Social Security survivor benefits to put himself through college. I’d like to see some documentation on those three jobs he claims he worked while attending classes, writing papers, and studying for exams. Besides, I’ll bet the unemployment rate for college-age kids wasn’t at depression levels back then.

And speaking of paying for college, here’s an interesting piece at Truthout by Ellen Brown: Can the Fed Prevent the Next Crisis by Eliminating Interest on Student Loan Debt?

Among the demands of the Wall Street protesters is student debt forgiveness – a debt “jubilee.” Occupy Philly has a “Student Loan Jubilee Working Group,” and other groups are studying the issue. Commentators say debt forgiveness is impossible. Who would foot the bill? But there is one deep pocket that could pull it off – the Federal Reserve. In its first quantitative easing program (QE1), the Fed removed $1.3 trillion in toxic assets from the books of Wall Street banks. For QE4, it could remove $1 trillion in toxic debt from the backs of millions of students.

The economy would only be the better for it, as was shown by the GI Bill, which provided virtually free higher education for returning veterans, along with low-interest loans for housing and business. The GI Bill had a sevenfold return. It was one of the best investments Congress ever made.

There are arguments against a complete student debt write-off, including that it would reward private universities that are already charging too much and it would unfairly exclude other forms of debt from relief. But the point here is that it could be done and it (or some similar form of consumer “jubilee”) would represent a significant stimulus to the economy.

According to Brown, student loan debt is “the next Black Swan.”

Here’s another stupid Republican story for you. Eric Cantor was scheduled to give a speech yesterday at the elite Wharton School of Business at the University of Pennsylvania. Cantor was to speak on what Republicans plan to do about income inequality. The school was so excited that they opened the talk to the public. In addition, there was to be a protest by several groups, including Occupy Philly.

Guess what Cantor did? He wimped out and cancelled. ROFLOL! From the LA Times:

Cantor was scheduled to speak on income inequity at a lecture hosted by the Wharton business school. The Virginia Republican’s office said he called off the speech after learning that protesters planned to rally outside and attendance would not be limited to students and others affiliated with the school.

Ron Ozio, director of media relations at University of Pennsylvania, said the business school “deeply regrets” that the event was canceled.

“The university community was looking forward to hearing Majority Leader Cantor’s comments on important public issues, and we hope there will be another opportunity for him to speak on campus,” Ozio said in a statement. “The Wharton speaker series is typically open to the general public, and that is how the event with Majority Leader Cantor was billed. We very much regret if there was any misunderstanding with the Majority Leader’s office on the staging of his presentation.”

This is pretty disgusting: Libyans line up to see Gaddafi’s body on display; groups call for probe into death

International human rights groups called Friday for an investigation into the death of former Libyan leader Moammar Gaddafi as gory new videos showed him being spat at and punched by revolutionaries and as skepticism mounted about official claims that he was shot in crossfire after being captured.

The new cellphone videos cast a shadow over the revolutionaries even as they were celebrating the end of their eight-month struggle to wrest control of the country. NATO had backed the rebels in the name of shielding pro-democracy civilians from Gaddafi’s brutality.

“The government version certainly does not fit with the reality we have seen on the ground,” said Peter Bouckaert of Human Rights Watch, who has been investigating the capture of Gaddafi in his home town of Sirte. Amnesty International warned that the killing could be a war crime.

Why do I suspect the U.S. Government gave the go-ahead for Gaddafi to be executed, just like Osama bin Laden? You might want to read Joseph Cannon’s take on this one.

Finally, late last night the Volker Rule was number 1 in Google’s top stories. From the NYT:

When Paul Volcker called for new rules in 2009 to curb risk-taking by banks, and thus avoid making taxpayers liable in the future for the kind of reckless speculation that caused the financial crisis and resulting bailout, he outlined his proposal in a three-page letter to the president.

Last year, when the Dodd-Frank Wall Street Reform and Consumer Protection Act went to Congress, the Volcker Rule that it contained took up 10 pages.

Last week, when the proposed regulations for the Volcker Rule finally emerged for public comment, the text had swelled to 298 pages and was accompanied by more than 1,300 questions about 400 topics.

Wall Street firms have spent countless millions of dollars trying to water down the original Volcker proposal and have succeeded in inserting numerous exemptions. Now they’re claiming it’s too complex to understand and too costly to adopt.

Gee, what a surprise. I wonder how many of those millions were taxpayer dollars?

So…what are you reading and blogging about today?


K Street Apologia

The President has written a WSJ op-ed and an executive order to declare war on ‘unnecessary’ regulation while  looking for necessary regulation.   He’s evidently a little bit pregnant.

This must be the new and improved, more business friendly President.  (Like he wasn’t business friendly enough already? What about bailing out GM, Chrysler, and most of the finance industry?)   This is the one that needs to raise $1 billion in campaign funds for re-election and knows it won’t come from unemployed and financially struggling voters.

From his WSJ Op Ed:

This order requires that federal agencies ensure that regulations protect our safety, health and environment while promoting economic growth. And it orders a government-wide review of the rules already on the books to remove outdated regulations that stifle job creation and make our economy less competitive. It’s a review that will help bring order to regulations that have become a patchwork of overlapping rules, the result of tinkering by administrations and legislators of both parties and the influence of special interests in Washington over decades.

When is the last time you read a Democratic politician that suggested something like “remove outdated regulations that stifle job creation and make our economy less competitive”?  There’s something even more weird and ironic about this sudden urge to op ed for the WSJ.   This is an interesting day for the release of a new improved middle path that’s sounds like something the Club for Growth can really sink its teeth into.  On this very same day, “The Financial Stability Oversight Council on Tuesday released its six-month study into the Volcker rule and held its third public meeting.” according to FT Alphaville. This group has just made it very clear that removing what several administrations thought was “outdated regulations that stifle job creation and make our economy less competitive” caused the biggest financial melt down and global recession since The Great Depression.  They want more regulation not less.

At the moment, banks are playing musical Special Purpose Vehicles; a delightful accounting parlor game that does nothing to get rid of systemic risk.  According to the FT article, this includes “creatively shuffling their more obvious proprietary trading operations internally (for example, into asset management and ETF desks) and externally into spun-off funds”.  Sure, like that saved ENRON all that nasty embarrassment of bad decision making.

While this report is trying to pick up the pieces of  nuclear financial meltdown by suggesting which gaps in regulation need to be filled, the President is chatting up the CEO set on the WSJ op-ed page.  There are not even any code words or in-between the lines nudge, nudge wink, winks in these statements.  He’s just pandering away.

As the executive order I am signing makes clear, we are seeking more affordable, less intrusive means to achieve the same ends—giving careful consideration to benefits and costs. This means writing rules with more input from experts, businesses and ordinary citizens. It means using disclosure as a tool to inform consumers of their choices, rather than restricting those choices. And it means making sure the government does more of its work online, just like companies are doing.

Does this mean the bidding window is open on which regulations the K street minions want thrown out next?  That worked so well with looking the other way for the shadow banking industry and letting the commercial banking industry run a virtual casino, didn’t it?  There’s a list of ten major regulatory blueprints coming from The Financial Stability Oversight Council.  Are investors, holders of 401ks, pension plans, and savers expected to take any of this seriously given the Wall Street missive?

Regulations reflect the social cost of private consumption and private production of goods and services that have bad side effects.  (See this Wikipedia entry on market externalities for more information.)  Markets with externalities have bad side effects that do not fall completely on the private producer or the private consumer.   This leads to market inefficiency.  Goods and services with negative externalties get overproduced, they are under priced,  overconsumed and the side costs hit all of us with some of us suffering more than others. Usually, the ones that suffer the most are those least able to get out of the way or stop the problem.   The experiences of Hinkley California, people that get lung cancer from secondary smoke, and any of us that were invested in financial or housing assets in the last five years suggests that you cannot just let people and businesses run amok and hope they’ll do right by the people they hurt.  Without an effective and accessible judicial system and a vigorous system of sticks and regulatory oversight, you get all kinds of social costs that we get to manage without having any of the fun of buying and using the product or service.  Ask me.  I’ve spent the last five years living with the results of badly built levees and dealing with the first year of a BP Oil disaster.  Let’s  point to my 403(B)  and my home price that are still in a recovering state from the shadow banking boys run amok. I’m sure you can list a boatload of the ones that the Federal Government ignored recently to give business a more ‘competitive environment” too that have cost you more than they’ve been worth.  Sure, they’re now creating more jobs along the Gulf Coast right now but would you seriously let one of your children on to a fishing boat or deep water drilling rig?  Do you seriously want your child sitting next to a chain smoker day in and day out?

So, my next question is did I just read that every regulation is now going up to the highest bidder?  Maybe, at least,  if we get them off the books, we won’t have the moral hazard of thinking any one pays attention to them anymore.  If that’s the case, we should all be trial attorneys litigating hazard suits.  From where I sit–in a city reeling from the social costs of externalities–our biggest problem is that no one takes regulations or regulators seriously any more because the federal government prioritizes the bottom lines of the perpetrators and not the suffering and the well being of the victims.


Bernanke Rules

atlant-fed-eagleIs The Fed under Chairman Ben Bernanke  finally beginning to adopt the tougher lending regulations and rules that would’ve prevented much of the havoc of the last two years?  In a speech on April 17, Bernanke stated that damage done to the economy was not likely to be undone any time soon.  This gives more credence to the idea that we may see an L-shaped recovery.  In other words, be prepared to scuttle across the bottom for a very long time. But did the speech deliver the assurances we need that necessary steps and regulations w lending practices and financial innovations are in the works?  I don’t think so.

Here’s some interesting analysis by Craig Torres at Bloomberg.com.

Federal Reserve Chairman Ben S. Bernanke said the collapse of U.S. lending will probably cause “long-lasting” damage to home prices, household wealth and borrowers’ good credit score.

“One would be forgiven for concluding that the assumed benefits of financial innovation are not all they were cracked up to be,” the Fed chairman said today in a speech at the central bank’s community affairs conference in Washington. “The damage from this turn in the credit cycle — in terms of lost wealth, lost homes, and blemished credit histories — is likely to be long-lasting.”

The U.S. central bank has cut the benchmark lending rate to as low as zero and taken unprecedented steps to stem the credit crisis through direct support of consumer finance and mortgage lending. The Fed plans to purchase as much as $1.25 trillion in agency mortgage-backed securities this year to support the housing market and is providing financing for securities backed by loans to consumers and small businesses.

Bernanke and the Federal Reserve Board approved rules last July to toughen restrictions on mortgages, banning high-cost loans to borrowers with no verified income or assets and curbing penalties for repaying a loan early. The action came after members of Congress and other regulators urged the Fed to use its authority to prevent abusive lending.

This suggests Bernanke does not see home values going back up any time soon.  It also suggests that the lending markets are not likely to return to their heyday.  Does this mean, however, that we’re finally going to see the regulation and enforcement of prudent underwriting standards and no more hide the trash in a bundle and pass it to the next sucker?

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