Category: regulation

John Roberts Looks to Keep Pigment Rich Folks From Voting

1 Comment

It’s no surprise that mere days after non white voters gave Democrats their margin of victory in the Presidential and Senate elections, the Roberts court has decided to review the voting rights act:

The Supreme Court agreed on Friday to review a legal challenge to the Voting Rights Act, a landmark law adopted in 1965 to protect African-American voters who had faced decades of discrimination at the polls.

 The court’s decision comes just days after a presidential election in which Latino and African-American voters played a big role in re-electing Democratic President Barack Obama, reflecting a basic shift in national demographics.

 The high court accepted an appeal brought by Shelby County, Alabama, challenging a core provision of the act that requires nine states and several local governments with a history of bias to get federal permission to change their election procedures.

 Arguments in the case will likely be heard by the Supreme Court in early 2013, with a decision expected by the end of June.

 Some justices on the nine-member court, including Chief Justice John Roberts, have signaled in earlier cases discomfort with policies that draw distinctions based on race.

 In a 2009 Voting Rights Act case, the Supreme Court avoided ruling on the law’s constitutionality. The court suggested that the federal “preclearance” requirement may no longer be needed or constitutional. Roberts, dissenting from a 2006 voting-rights decision, criticized what he called “a sordid business, this divvying us up by race.”

 ………

Make no mistake here, this is the conservative wing of the supreme court looking to get Jim Crow voting regulations going again, because it favors conservatives in elections.


 “The America that elected and reelected Barack Obama as its first African-American president is far different than when the Voting Rights Act was first enacted in 1965. Congress unwisely reauthorized a bill that is stuck in a Jim Crow-era time warp,” he [Edward Blum, professional bigot and American Enterprise Institute Scholar*] said in a statement.

Yes, Mr. Blum, no racism in the good old USA. 

You might want to check out the Jezebel post, “Twitter Racists React to ‘That Nigger’ Getting Reelected.”

*But I am repeating myself.

It’s Bank Failure Friday!!!

No Comments

It’s been a pretty busy week.

First, the FDIC insured institutions. Here they are, ordered, and numbered for the year so far.

  1. Heritage Bank of Florida, Lutz, FL
  2. Citizens First National Bank, Princeton, IL

Full FDIC list

Also, we had 3 credit union closings:

  1. ​U.S. Central Bridge Corporate Federal Credit Union, Lexana, KS
  2. El Paso Federal Credit Union, El Paso, TX
  3. Women’s Southwest Federal Credit Union, Dallas, TX

Note that the U.S. Central Bridge Corporate Federal Credit Union is a corporate credit union, which means that they are a credit union for the consumer credit unions, which serve the public, and provide services like account clearing and liquidity, so it’s kind of a big deal.

Full NCUA list

So, here is the graph pr0n with last years numbers for comparison (FDIC only):

And This is Why Targeted Wildcat Strikes are Necessary

No Comments

Because just about every official institution at every level is virulently anti-union. Case in point, the World Bank:

The World Bank has taken the extremely dubious science of deregulation one step further by creating a guide, known as the Doing Business report, that quantifies the regulatory “burden” that investors may face in various countries. The 2013 report was released this week.

Echoing the corporate “job creator” mythology of the Washington consensus, Doing Business encourages financiers and governments to erode public-interest protections, including safeguards for unions and workers. Labor groups say the publication’s warped views on regulation and worker protections effectively gives a statistical justification for leveraging economic aid or investment to pressure countries to privatize, deregulate and undermine unions.

Labor advocates are particularly critical of the section of the report that crystallizes these views, the “Employing Workers Indicator” (EWI) which purports to measure labor policy “as it affects the hiring and redundancy of workers and the rigidity of working hours.” Despite the World Bank’s past assurances that its analysis of labor regulations won’t factor into the main rankings on business friendliness, critics fear that these data nonetheless filter into the report’s evaluations, and in turn imply labor laws essentially impede development.

This is not just the “technocrats” who have this opinion. It’s the overwhelming majority on the so-called “center-left”.

Whenever you hear a Democrat talking about “training” so that workers are ready for “the new economy”, they are saying that they think that labor unions are an anachronism, and they won’t do anything to support them.

We need a real Labo(u)r party in the United States, because the political establishment is hostile to unions.

Why Hasn’t Jon Corzine Been Indicted?

No Comments

The Wall Street Journal notes that there were no effective capital controls or accounting standards at MF Global:

As MF Global Holdings Ltd. teetered last October, an accountant in its Chicago office got an urgent question from regulators: How much cash did the firm have left?

 It is supposed to be an easy question for brokerage firms to answer, even in the middle of a crisis. U.S. rules set tight controls on the accounting, oversight and movement of money that belongs to customers or firms themselves.

 This will require a significant effort,” the MF Global accountant, Matthew Hughey, wrote in an email to seven colleagues at 4:24 a.m. on Oct. 27, 2011. A copy of the email was reviewed by The Wall Street Journal.

 The reason Mr. Hughey couldn’t answer the question for regulators: Employees at MF Global couldn’t keep track of exactly how much money it had at any given moment, even before the company began to wobble, according to Mr. Hughey’s email. Officials had been trying to fix the problem for months.

 As regulators and lawmakers plow ahead with investigations that began when MF Global tumbled into bankruptcy a year ago this week, yawning gaps in the New York company’s procedures for moving and keeping track of money are getting new attention.

 A private lawsuit expected to be updated early next month is expected to highlight such issues and how they are tied to the more than $1 billion that went missing from customer accounts as MF Global failed last October, according to people involved in the suit.

 A House financial services committee report, which will be released in the next few weeks, is expected to scrutinize how regulators handled MF Global. It is unclear how much focus will be given to the deficiencies in internal computer systems and procedures at the firm.

………

There are no signs that prosecutors are planning to bring criminal charges related to the firm’s demise.

Jon S. Corzine and Henri J. Steenkamp, MF Global’s chief executive and finance chief, respectively, have told lawmakers that they believed internal controls at the company were sound when they signed securities filings in 2011. Their signatures were required under the Sarbanes-Oxley corporate-governance law.

Mr. Corzine, a former Goldman Sachs Group Inc. chairman, strongly backed the 2002 law while he was a Democratic U.S. senator from New Jersey. He has repeatedly denied any wrongdoing related to MF Global. A spokesman for Mr. Corzine declined to comment Sunday. Mr. Steenkamp’s lawyer and Mr. Hughey couldn’t be reached for comment. A lawyer for Mr. Hughey declined to comment.

(emphasis mine)

Under Sarbanes Oxley, Jon Corzine personally certified that MF Global had established and was maintainied “internal controls” and “designed such internal controls to ensure that material information relating to the company and its consolidated subsidiaries is made known to such officers by others within those entities, particularly during the period in which the periodic reports are being prepared.” (From the Wiki)

The didn’t. It wasn’t even close, and Jon Corzine was in violation of the law, and should be subject to criminal penalties.

What have we heard from the Department of Justice? **crickets**

It is a disgrace.

But It’s Not Happening Here

No Comments

It looks like the rest of the industrial world is seriously address the risks and effects of high frequency trading:

After years of emulating the flashy United States stock markets, countries around the globe are now using America as a model for what they don’t want to look like.

Industry leaders and regulators in several countries including Canada, Australia and Germany have adopted or proposed limits on high-speed trading and other technological developments that have come to define United States markets.

The flurry of international activity is particularly striking because regulators have been slow to act in the United States, where trading firms and investors have been hardest hit by a series of market disruptions, including the flash crash of 2010 and the runaway trading in August by Knight Capital that cost it $440 million in just hours. While the Securities and Exchange Commission is hosting a round table on the topic on Tuesday, the agency has not proposed any major new rules this year.

Here is the kicker, unlike the claims of the HFT mafia, it turns out that markets run better when they have limits placed on them:

The broadest and fastest changes have come out of Canada, where this spring regulators began increasing the fees charged to firms that flood the market with orders. The research and trading firm ITG found that the change had already made trading more efficient by reducing the crush of data burdening the market’s computer systems.

Now Canadian trading desks are preparing for rules that will come into effect on Oct. 15 and curtail the growth of the sophisticated trading venues known as dark pools that have proliferated in the United States. While the regulation has been hotly debated, many Canadian bankers and investors have said they don’t want to go any further down the road that has taken the United States from having one major exchange a decade ago to having 13 official exchanges and dozens of dark pools today.

It’s time to realize that most financial innovation is not an advance in the art, but rather an exercise in fraud and rent seeking, and we need to stop it.

It’s More than Just Jobless Thursday

1 Comment

But let’s start with the fact that initial jobless claims jumped to 380,000, though tropical storm Isaac may have contributed to those numbers.

The bigger news is that the Federal Reserve has officially begun the 3rd round of quantitative easing (QE3):

The Federal Reserve opened a new chapter Thursday in its efforts to stimulate the economy, saying that it intends to buy large quantities of mortgage bonds, and potentially other assets, until the job market improves substantially.

 This is the first time that the Fed has tied the duration of an aid program to its economic objectives. And, in announcing the change, the central bank made clear that its primary reason was not a deterioration in its economic outlook, but a determination to respond more forcefully — in effect, an acknowledgment that its incremental approach until now had been flawed.

 The concern about unemployment also reflects a significant shift in the priorities of the nation’s central bank, which has long focused on inflation. Inflation is now running below the Fed’s 2 percent annual target. But with the unemployment rate above 8 percent, the Fed’s policy-making committee suggested Thursday that it might tolerate a period of somewhat higher inflation, promising to maintain stimulus efforts “for a considerable time after the economic recovery strengthens.”

 “The weak job market should concern every American,” the Fed’s chairman, Ben S. Bernanke, said at a news conference. The goal of the new policies, he added, “is to quicken the recovery, to help the economy begin to grow quickly enough to generate new jobs.”

 The need for new stimulus reflects the disappointing condition of the American economy, which continues to struggle between crisis and prosperity three years after the official end of the recession. More than 20 million Americans cannot find full-time jobs. Median household income has declined. The housing market remains depressed.

You know, you guys should have been running around with your hair on fire a few years ago.

Of course, with interest rates at the zero bound, the people who are supposed to do this is the Congress, because fiscal stimulus works better under these situation, but between the gutlessness of the Democrats, and the active sabotage of the economy by the Republicans, it’s not like there is going to be any help from that end.

Dodd Frank is Working

No Comments

Not.

Case in point, the new clearinghouses are allowing for “collateral transformation” which serves to once again misstate counter-party risk to the detriment of society and the markets:

More obviously troubling was a Bloomberg story on how major financial firms are going to undermine the effectiveness of clearinghouses by engaging in “collateral transformation”:

Starting next year, new rules designed to prevent another meltdown will force traders to post U.S. Treasury bonds or other top-rated holdings to guarantee more of their bets. The change takes effect as the $10.8 trillion market for Treasuries is already stretched thin by banks rebuilding balance sheets and investors seeking safety, leaving fewer bonds available to backstop the $648 trillion derivatives market.

The solution: At least seven banks plan to let customers swap lower-rated securities that don’t meet standards in return for a loan of Treasuries or similar holdings that do qualify, a process dubbed “collateral transformation.” That’s raising concerns among investors, bank executives and academics that measures intended to avert risk are hiding it instead.

Understand what is happening here: clearinghouses are one of the major elements of Dodd Frank to reduce counterparty risks. But the banks are proposing to vitiate that via this “collateral transformation” which will simply create new, large volume counterparty exposures to deal with fictive clearinghouse risk reduction program. And get a load of this:

U.S. regulators implementing the rules haven’t said how the collateral demands for derivatives trades will be met. Nor have they run their own analyses of risks that might be created by the banks’ bond-lending programs, people with knowledge of the matter said. Steve Adamske, a spokesman for the U.S. Commodity Futures Trading Commission, and Barbara Hagenbaugh at the Federal Reserve declined to comment

Translation: the regulators are aware of the banks’ plans to finesse the clearinghouse requirements, and they neither intend to put a kebosh on it (which could easily be done by taking the position that any collateral transformation to meet clearinghouse requirements was an integrated part of the clearinghouse posting and could not be done separately on bank balance sheets) nor understand the impact of their flatfootedness.

The problem is that with complexity (“Innovation”) does not create benefits as much as it creates opportunities for fraud. (Saroff’s rule restated)

The problem is that finance lends itself to the selling of snake oil even more than does the sale of patent medicine, and the excesses of patent medicine, most notably Radithor, led to the requirement that medications be proven safe and effective before being foisted off on the public.

We need the same policy for financial instruments.

Paul Ryan, Insider Trader

No Comments
Click for full size


Found on Facebook

Brad Delong looks at Paul Ryans trading records in 2008, and concludes that he had to be trading on information from the Federal Reserve and the Treasury:

I don’t want to hire as my vice president and federal budget czar somebody who uses Congressional inside information to profit by switching his portfolio back and forth between Citigroup and Goldman five times a year: I want somebody with better ethics.

I don’t want to hire as my vice president and federal budget czar somebody who investing very part-time with no analytical support and without inside information switches his portfolio back and forth between Citigroup and Goldman five times a year: I want somebody with a better brain.

Look at the trades. He’s clearly trading on inside information.

Iceland Gets it Right, Part XXVII

No Comments

Now Iceland is separating its commercial and its investment banks:

Iceland was brought to the brink of bankruptcy when its biggest banks failed four years ago. Now, the site of the world’s most spectacular financial collapse is becoming a pioneer in banking reform.

“We’ve been burned by this and that’s why we have to look very closely at what we need to do to prevent it happening again,” Economy MinisterSteingrimur J. Sigfusson said in an interview. “Icelanders are more interested in taking greater steps than small steps when it comes to regulating banking.”

His party, the junior member in Prime Minister Johanna Sigurdardottir’s coalition, has submitted a motion to parliament to stop banks using state-backed deposits to finance risky investments. The move puts Iceland on course to become the first western nation since the global financial crisis hit five years ago to force banking conglomerates to split their business.

It’s a proposal that’s gaining traction elsewhere. Even Sanford “Sandy” Weill, whose 1998 creation of New York-based Citigroup Inc. (C) triggered the Gramm-Leach-Bliley Act that paved the way for financial behemoths, now says investment banks should be separated from deposit-taking banks. Opponents including JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon say diverse businesses are needed to spread risk across divisions and stay competitive.

Gee, Glass Steagall was a good idea.

There is a shocker.

They appear to be the only government in the world that has had the fortitude and the foresight to actually learn from their own financial disaster.