Tag: Finance

Not Expecting This from the AEI

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The Numbers


Are Stark

Given that rich Wall Street pigs are a major funding source, I am surprised that the American Enterprise Institute has published a study that the S&P 500 index has out-performed hedge funds by about an factor of five. 

When one considers the fees, 2% of the fund +20% of the gains, it’s clear that, absent possible tax evasion and money laundering, hedge funds are a sucker bet:

In 2007, Warren Buffett entered into a famous bet that an unmanaged, low-cost S&P 500 stock index fund would out-perform an actively-managed group of high-cost hedge funds over the ten-year period from 2008 to 2017, when performance was measured net of fees, costs, and expenses. See previous CD posts about Buffett’s bet here and here. In Warren Buffett’s 2017 annual letter to shareholders (released on February 24, 2018), he summarized the result of his bet in the section “’The Bet’ is Over and Has Delivered an Unforeseen Investment Lesson” as follows:

Last year, at the 90% mark, I gave you a detailed report on a ten-year bet I made on December 19, 2007. Now I have the final tally – and, in several respects, it’s an eye-opener. I made the bet to publicize my conviction that my pick – a virtually cost-free investment in an unmanaged S&P 500 index fund – would, over time, deliver better results than those achieved by most investment professionals, however well-regarded and incentivized those “helpers” may be.

………

Performance comes, performance goes. Fees never falter.

………

A final lesson from our bet: Stick with big, “easy” decisions and eschew activity. During the ten-year bet, the 200-plus hedge-fund managers who were involved almost certainly made tens of thousands of buy and sell decisions. Most of those managers undoubtedly thought hard about their decisions, each of which they believed would prove advantageous. In the process of investing, they studied 10-Ks, interviewed managements, read trade journals and conferred with Wall Street analysts.

………

Repeat: Most investors will get better financial results over time with with low-cost, unmanaged index funds than from high-cost actively managed stock funds and hedge funds run by highly-paid investment professionals, however well-regarded and incentivized those “helpers” may be.

MP: To get started following Warren Buffett’s investment advice, if you haven’t already, you can open an account in the Vanguard 500 Index Fund Admiral Shares with a minimum investment of $3,000 and the expense ratio is almost zero — only 0.04% (1/25th of one percent) or only $4 per year for every $10,000 invested!

I’ve been saying this for years, but I did not expect this from the corporate drones at AEI.

Destroying Wall Street for the Lulz

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If I was a Hedge Fund losing billions to Reddit shitposters, I would get a second job driving for Uber, cut out the Starbuck’s, and skip the avocado toast.

— Jean-Paul Blarte: Mall Cop (@OldPappyThomas) January 27, 2021

This is Beautiful


The Hedge Funds are Pissants

MaY NeEd tO gEt BaiLeD oUt pic.twitter.com/JrGW4hsxyI

— Aimee into the Sun🌹 (@AimeeDemaio) January 27, 2021

Too True


The inevitable sea shanty

to be clear. This has nothing to do with gamestop as a business. They are just a piece of rope being used in a tug of war between internet nerds and wall st suits.

the rally cry on r/wallstreet bets:

“we can remain retarded for longer than they can stay solvent!”

— Shaan Puri (@ShaanVP) January 26, 2021

The real bottom line

It appears that a bunch of Redditors have taken down at least 2 hedge funds, and on one side are the titans of Wall Street saying something must be done to stop this, and on the other side is literally everyone else in the world, who are pointing and laughing:

GameStop’s stock price continued to soar in after-hours trading last night to over $300. While many are waiting for it to come crashing back down, it might be too late for some major hedge funds. With the stock still sitting at well over $250 a share (unthinkable just last year when it was trading at under $5) after the market reopened, Melvin Capital, one of the largest hedge funds betting against the company, is reportedly getting out of the game after suffering major losses, seemingly driven out by amateurs trading on their phones and joking on Reddit in what continues to be one of the most bizarre stories of 2021 so far.

“Melvin Capital closed out its short position in GameStop on Tuesday afternoon after taking a huge loss,” the fund’s manager told CNBC this morning.

The firm, which was worth about $12.5 billion before the battle between short sellers and Redditors began, bet big against GameStop and a number of other companies, only to see 30% of the fund disappear over the last few days. That prompted other billionaires to swoop in and lend Melvin $2.75 billion to help cover the losses. Andrew Left, a notorious short-seller activist, also announced in a new YouTube video today that his investment firm moved away from most of its bets against GameStop’s stock at “a loss of 100%.”

………

Meanwhile, the ensuing chaos caused GameStop stock trading to be temporarily halted yet again this morning and caused outages on the trading app Robinhood. Other companies like Blackberry and AMC are also seeing smaller, though still dramatic stock climbs, as Reddit traders attempt to go boost other companies massively shorted by big hedge funds.

All of this is the culmination of a long game that’s been brewing on the WallStreetBets subreddit for a while now as amateur day traders decided to turn the misfortunes of a floundering brick-and-mortar game seller into their cause celebre for dunking on professional investment firms. In some ways it’s a very complicated story driven by the weird mechanics of Wall Street, but in other ways it’s a familiar tale of extremely online people trying to stick it to someone, in part to make a buck, but also for the “lulz.” Here’s a quick rundown of how things got here.

Short version:  A bunch or Redditors, seeing that the moribund console game store GameStop was the most shorted stock in America, decided to take down said short sellers by bidding up the price and creating a “Short Squeeze”.

The mechanism is such that the hedge funds are incredibly exposed to this, and at least one had to be bailed out by other Wall Street Parasites because it was essentially insolvent.

What’s more, it appears that the same thing is happening with AMC Theaters, Bed Bath & Beyond, and Blackberry as I am typing this. (Scroll down) 

One thing that is not clear at this point is whether some other hedge fund type entity might be involved in this on the other side, though even if they did, they have done nothing illegal, since the information, “Let’s do it for the lulz,” is both accurate and publicly available.

One thing that is clear at this point is that this entire affair is showing most of the short selling activity out there serves no useful purpose, and that the arguments in favor of it, basically that shorting stocks create a financial incentive aggressive due diligence of companies, are 6 pounds of shit in a 5 pound bag.

It is one step removed from the infamous Bucket Shops of the early 1900s.

Well, Shit (It’s Bank Failure Friday!!! )

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 Do you know that I did not expect to see?

Two credit union failures in the first two full weeks of the year.

Today, the Indianapolis’ Newspaper Federal Credit Union of Indianapolis, IN was placed under conservatorship.

An article at American Banker says that they were shut down for, “Unsafe and unsound practices at Indianapolis’ Newspaper FCU,” though no specifics are given. 

It does look like they were attempting something rather speculative, and ultimately unsuccessful, over the past 12 months though.

Yeah, Right

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The American Hospital Association wants the Centers for Medicare & Medicaid Services (CMS) to suspend its price transparency regulations,  because it’s too burdensome.

Bullsh%$.

They just don’t want to be held to account for their deliberately opaque pricing structures and policies.

If there is one thing that hospitals get right, it’s how to charge people as much as is humanly possible:

Dive Brief:

  • The American Hospital Association filed an emergency motion for a stay, which means it’s seeking to stop the government from enforcing its price transparency rule, set to go into effect Jan. 1 if the law is not struck down in federal appeals court.
  • The AHA is still awaiting a final verdict from the court after the three-judge panel heard oral arguments in October. In the meantime, the group is hoping to bar the law from going into effect as hospitals are overwhelmed by the rollout of the coronavirus vaccines and record-high COVID-19 caseloads.
  • Emergency relief is warranted, AHA said, because CMS will start conducting audits of price transparency compliance and those not following the regulations face financial penalties, the parties said in a Monday filing.

Dive Insight:

A CMS bulletin from last Friday led AHA to file the emergency request with the federal appeals court. The notice informed providers that CMS is prepared to “audit a sample of hospitals for compliance starting in January” and those providers found in violation will face civil monetary penalties.

AHA argues that halting the policy is necessary given the “exceptional circumstances” the industry faces.

………

Meanwhile, the hospital lobby is still waiting on the ruling from federal appeals court. But after listening to oral arguments back in October, industry experts don’t feel AHA will prevail in the case, which is seeking to knock down the law.

The three-judge panel seemed highly skeptical that it is unlawful for the government to compel providers to publish the negotiated rates they reach with insurers for services provided to patients.

The hospitals can literally turn over pricing data at the press of a button, but the hospitals want to continue to profit over secrecy, and they are hoping to put one over on the incoming administration.

Of Course They Did

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The Federal Reserve has allowed banks to start issuing dividends and make stock buybacks again, because, after all, how can our financial system work without the masters of capitalism that we just bailed out (AGAIN!) having their damn stock options vest.

Financial stability is secondary to making sure that Wall Street CEOs get the obscene bonuses:

The Federal Reserve has given America’s most profitable banks the green light to resume share buybacks for the first quarter of next year, even though it found that the country’s biggest lenders could face pandemic-related loan losses of more than $600bn.

The US central bank’s decision to lift a six-month ban on buybacks followed months of public protests by profitable lenders, including Morgan Stanley and JPMorgan Chase, several of whom immediately signalled their intention to restart purchases.

Many analysts and investors expected the Fed to hold firm to its restrictions, as the US continues to suffer record coronavirus cases and deaths and lawmakers struggle to agree stimulus measures to boost the economy through another round of shutdowns.

………

Lael Brainard was the only one of the Fed’s five-person board of governors to vote against freeing banks up to return more to shareholders.

“Today’s action nearly doubles the amount of capital permitted to be paid out relative to last quarter,” she said in a statement. “Prudence would call for more modest payouts to preserve lending to households and borrowers during an exceptionally challenging winter.”

Just a small reminder:  The Federal Reserve does not work for the American people, or even for the benefit of the financial system.  It works for the bankers.

We are going to buy out these rat-f%$#s again sooner rather than later.

It’s Always a Certain Kind of Democrat Who Does This

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You know the type, plays at being progressive, but is a tool of the FIRE (Finance Insurance and Real Estate) sector.

They have been exhorting the citizens of their state/city/county to stay home, and not go out, and then they get caught unmasked on a night on the town.

You saw it with Cuomo, Newsome, Sisolak, and now the darling of the hedge funds, Gina Raimondo.

Honestly, I’m less concerned about her going to a wine bar than I am with her cutting (outrageously high fee) deals with private equity firms, including her own firm.

Have you noticed that this always happens to a certain type of Democrat? 

You know the type, the polite term for them is hypocritical corrupt mother-f%$#ers.  (The impolite term is, “Pig felchers.”*)

*If you don’t know what that means, for the love of God, DON’T GOOGLE IT.

Some Good (Non-Brexit) News Out of Old Blighty

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MasterCard will be subject to a class action suit over anti-competitive and deceptive fees.

This may not seem to be a big deal to Americans, but this is a first in British jurisprudence, and marks a major change in consumer law:

The UK Supreme Court on Friday allowed a 14 billion pound ($18.5 billion) class action to proceed against Mastercard for allegedly overcharging more than 46 million people in Britain over a 15-year period in a landmark judgment.

The complex case, brought after Mastercard lost an appeal against a 2007 European Commission ruling that its fees were anti-competitive, could entitle adults in Britain to 300 pounds each if it is successful.

The court dismissed a Mastercard appeal, setting the scene for Britain’s first mass consumer claim brought under a new legal regime and establishing a standard for a string of other, stalled class actions.

………

The case will now be sent back to the Competition Appeal Tribunal (CAT), nominated in 2015 to oversees Britain’s fledgling, U.S.-style “opt-out” collective class actions for breaches of UK or European Union competition law.

………

The case centres on so-called interchange fees which credit and debit card companies say they levy on merchants’ banks to cover the costs of card services, security and innovation.

………

Anthony Maton, the global vice-chair of law firm Hausfeld, which is advising on other class actions, said: “This is a revolution in English law.”

This is indeed a big move, and a welcome one.

Not Enough Bullets

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In the midst of rising Covid-19 cases, and an explosion of evictions, the CEO of Blackstone is crowing about jacking up rents across the country. 

Getting Wall Street and hedge funds out of real estate should to be a priority of the Biden and the Democratic Party.

It won’t be a priority, but it should be:

The world’s largest private equity firm has bankrolled campaigns against rent control and been accused by the United Nations of fueling a global housing crisis. Now, as millions are threatened with eviction during the pandemic, Blackstone’s top executive is openly bragging that the firm is making huge profits off of rent increases.

At the Goldman Sachs’ Financial Services Conference on December 9, Blackstone’s billionaire CEO Stephen Schwartzman boasted that after the 2008 financial crisis, his firm was able to cash in on the mortgage crisis. At the time, the company was able to buy up foreclosed homes and convert them into rental properties subsequently plagued by accusations of dilapidation and excessive fees — all while it received a big financial boost from the government. 

Schwartzman, a top Republican donor and close ally of President Trump, indicated his firm is positioning itself for a similar jackpot.

“You always have winners and losers — Blackstone was a huge winner coming out of the global financial crisis and I think something similar is going to happen,” he said.

Noting that about half of his private equity firm’s revenues are now from real estate, Schwarzman added: “We’re the largest owner of real estate in the private world. And that asset class has boomed with huge increases in rents, almost no occupancies, [and] rent collections from almost everyone.”

………

Blackstone has also been evicting residents during the pandemic, according to court filings compiled by the Private Equity Stakeholder Project. And Blackstone has faced a legal showdown with New York tenants at one of the city’s largest rental complexes, which it owns. There, the company has been trying to exempt thousands of units from rent regulation laws. The company has reportedly even kept Manhattan units empty rather than face rent control regulations.

During the Goldman Sachs conference, Schwarzman seemed to insinuate that his firm may buy up even more residential real estate to try to squeeze even more revenue out of renters in the pandemic-ravaged economy.

Wall Street is the enemy of a good and just society, and it should be treated as such.

Arthur Anderson Squared

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It increasingly appears that accounting firm Ernst & Young covered up fraud by the defunct German electronic payments firm Wirecard.

Here’s hoping that regulators go medieval on their ass:

Germany’s audit watchdog suspects EY partners knew they were issuing a “factually inaccurate” audit for Wirecard in 2017, according to four people familiar with the matter.

Apas, the Berlin-based audit oversight body, has reported EY to prosecutors, telling them that the firm may have acted criminally during its work for Wirecard, which collapsed into insolvency earlier this year in one of Europe’s largest fraud scandals.

Wirecard, a once high-flying German payments company, was audited by EY for more than a decade and until 2019 always received unqualified audits.

However, in 2017 EY was just days away from denying Wirecard the crucial all-clear, according to documents reviewed by Apas. On March 29 of that year EY warned Wirecard that a qualified audit was imminent and shared a draft version of a qualified opinion with its client, people familiar with the documents told the FT.

………

Just days later, the auditors changed their minds. On April 5, they signed an audit opinion that stated: “Our audit has not led to any reservations.”

Apas found that it was unreasonable to believe that the issues could have been resolved within a few days, according to people familiar with the matter. The watchdog told prosecutors that therefore EY’s unqualified audit was “factually inaccurate”.

Last week the EY auditing partners, Andreas Loetscher and Martin Dahmen told MPs that they were being probed by Apas over their work for Wirecard and declined to give testimony to the parliamentary inquiry commission into Wirecard.

………

Munich prosecutors are evaluating the evidence sent by Apas and have not decided whether to open a criminal investigation of EY partners. Under German law, auditors found guilty of such misconduct can be punished with up to three years in jail.

I’m rooting for Munich prosecutors to do the right thing here, which, in light of prosecutions in Munich, feels a bit strange to me.

Prosecutions, even without convictions serve as a deterrent, and convictions, even with relative short sentences are a real deterrent.

This Is Not a Bad Thing

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It appears that the City of London’s position as money launderer to the world is threatened by Brexit.

Financial companies are moving their EU operations to nations that will stay in the EU.

While the PTB in the UK are freaking out about this, this is actually a good thing.

The average Briton has been harmed by the growth of the UK financial industry, much in the same way that US citizens have been harmed by the US financial industry.

Above a certain size, a bloated financial industry reduces growth and becomes parasitic.

London will become more affordable for people who do productive work, and the resources and brain power that have been devoted to financial engineering will go to productive pursuits.

If these people move to Paris, or Frankfurt, or Brussels, it will make the lives of the people there worse, and the lives of the people in south east England better.

The UK will end up a more humane and more equal place as a result.

I Do Not Approve

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I do not approve of Wall Street rich pigs trying to dictate political outcomes, even if it is put a boot into Donald J. Trump’s flabby white ass.

Wall Street executives are threatening not to drop money on the Georgia Senate runoffs unless Trump concedes.

I get that they want this.  I want Trump to die in flagrante delicto with Mike Pence, but that does not mean that I am entitled to this.  

Get over yourselves.  You are lucky and rich, and not better than anyone else.

You deserve no special favors:

Concerned that President Trump’s refusal to accept the election results is hurting the country, more than 160 top American executives asked the administration on Monday to immediately acknowledge Joseph R. Biden Jr. as the president-elect and begin the transition to a new administration.

Even one of Mr. Trump’s stalwart supporters, Stephen A. Schwarzman, the chief executive of Blackstone, the private equity firm, said in a statement that “the outcome is very certain today and the country should move on.” While he did not sign a letter sent to the administration by the other executives, he said he was “now ready to help President-elect Biden and his team.”

Signatories to the letter included the chief executives of Mastercard, Visa, MetLife, Accenture, the Carlyle Group, Condé Nast, McGraw-Hill, WeWork and American International Group, among others. They included some of the most important players in the financial industry: David M. Solomon, the chief executive of Goldman Sachs; Laurence D. Fink, chief executive of the asset management giant BlackRock; Jon Gray, Blackstone’s president; and Henry R. Kravis, a prominent Republican donor who is the co-chief executive of KKR, a private equity firm.

The letter was also signed by George H. Walker, the chief executive of the money manager Neuberger Berman and a second cousin to President George W. Bush, and Jeff T. Blau, the chief executive of one of New York City’s largest private developers, the Related Companies, who has been a major donor to the National Republican Senatorial Committee, filings show.

………

As a way of gaining leverage over the G.O.P., some of the corporate executives who signed on to the joint letter Monday have also discussed withholding campaign donations from the two Republican Senate candidates in Georgia unless party leaders agree to push for a presidential transition, according to four people who participated in a conference call Friday in which the notion was discussed. The two runoff elections in Georgia, which will take place in early January, will determine the balance of power in the United States Senate.

………

At least one participant, Rob Speyer, the chief executive of Tishman Speyer, suggested that some wealthy donors had already been considering withholding support, according to four people with knowledge of his comments.

Call me old fashioned, but I think that if you are going to chase a monster out town, it should be peasants with torches and pitch forks, not the princelings of finance.

They Will Collapse in a Major Accounting Scandal Scandal

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A Kazakh “Fintech” company just debuted on the London Stock Exchange with a $6.5 billion valuation. 

The people hawking this company are touting it as the future of personal finance and E-Commerce of Kazakhstan.

It’s Wirecard all over again, or the third film in the Borat Sagdiyev movie trilogy, but this sets off my scam warning something fierce:

With most staff working from home, the headquarters of Kazakhstan’s fintech hero Kaspi.kz exudes a sleepiness ill-fitting for a company whose rapid rise has been accelerated by the coronavirus pandemic.

Kaspi, Kazakhstan’s payment systems and e-commerce leader, became the Central Asian country’s most valuable firm after it was valued at $6.5 billion on the London stock exchange in October in what was the United Kingdom’s second largest float of this year.

The listing took commentators by surprise, coming after a failed attempt — falling short of a $4 billon market cap valuation — the year before.

But Kaspi’s Georgia-born CEO Mikheil Lomtadze, told AFP that the company and its investors, including Goldman Sachs and CIS-focused Baring Vostok — were not fazed by the false start.

“We believe that we have a lot of space for further growth, and we were not in any hurry to do our IPO,” said Lomtadze in the company’s head offices in Almaty.

Lomtadze, sporting an open-necked shirt and jeans, told AFP that beyond China, where online payment systems Alipay and WeChat have become ubiquitous, there are few markets that have seen user behaviour so utterly transformed by mobile payments as Kazakhstan.

“We are frontrunners in digitising the country,” Lomtadze said.

I don’t know about you, but I just filled up my bullsh%$ bingo card.

1 Part COVID Plus 1 Part Trump Fatigue Equals………

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The motion to end debate on gold-standard whack job Judy Shelton failing today.

Charles Grassley is out, having tested positive for Covid-19, and Rick “Bat-Boy” Scott was quarantining after having been exposed to someone who tested positive, so there were not enough votes to approve her:

Judy Shelton’s nomination to the Federal Reserve Board of Governors was blocked in the Senate on Tuesday, with bipartisan opposition to the controversial economist and GOP absences prompted by the coronavirus imperiling her candidacy.

The vote had been expected to be razor-thin for Shelton, who was nominated by President Trump despite her past criticism of the central bank and her unorthodox views of monetary policy. But after the vote was scheduled, two Republicans, Sens. Rick Scott (Fla.) and Charles E. Grassley (Iowa), announced they were quarantining themselves after being exposed to the coronavirus and could not attend. (Grassley on Tuesday evening announced he had tested positive for the virus.) Two Republican senators voted against advancing Shelton on Tuesday; a third GOP senator who does not support her, Sen. Lamar Alexander (Tenn.), was not in attendance for the vote Tuesday.

The last-minute shifts proved too much for Republicans to overcome, at least for now. Although the GOP holds 53 seats in the Senate, Majority Leader Mitch McConnell (R-Ky.) was able to muster only 48 Republican senators to end the filibuster on Shelton’s nomination. In the end, he voted against moving the nomination forward as well, a procedural move that allows him to bring up Shelton’s nomination at a later time.

………

Apart from Lael Brainard, Trump has put every other Fed governor in his or her current post. But the seven-seat board has been operating with two vacancies for a few years, and Trump has struggled to get his final nominees through. In 2019, two of Trump’s picks, Stephen Moore and Herman Cain, withdrew their bids after intense scrutiny for their past remarks and views about women jeopardized their chances at confirmation.

Oh, right.  Nominating someone whose qualifications for the position was that he ran a pizza chain.  I remember that now.

Shelton’s nomination was particularly controversial given her calls for a return to the gold standard, which the nation fully abandoned in 1971. She advised Trump’s 2016 presidential run and has been outspoken against the Fed as an institution. She also was criticized for altering some of her views to appear in closer agreement with Trump’s aggressive push for lower interest rates, which some senators worried would insert politics into Fed decisions.

………

Underscoring how critical every Republican vote will be in the waning weeks of this year, McConnell urged senators during a private party lunch Tuesday to be careful and healthy so the GOP-controlled majority can finish work that remains to be done, such as confirming nominees to the circuit courts, according to three people directly familiar with his closed-door remarks.

Am I a bad person for hoping that the chef at this party was brewing a case of Coronavirus, and coughed all over the food?

In perhaps an indication of the Republicans’ middling enthusiasm for Shelton, no GOP senators spoke on the Senate floor in favor of her nomination on Monday or as of Tuesday afternoon. McConnell praised the slate of judicial nominees that the Senate was on track to confirm, but said nothing about Shelton directly.

His counterpart, Senate Minority Leader Charles E. Schumer (D-N.Y.), was not as tight-lipped.

“Judy Shelton is not only unqualified for the job; she is a threat to our economic recovery and doesn’t belong on the Fed,” Schumer said Tuesday. “And thanks to the bipartisan coalition that opposed her nomination today, she isn’t any closer to being there.”

The election is over, Trump has the attention span of a gnat on a meth binge, and the business elites are not impressed by Shelton.

It’s no surprise that the Republicans are not going to the wall for this one.

World Class Snark

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Loretta Donelan explains that it’s unfair to forgive student loan debt, because if it is, “How Will I Have An Automatic Advantage Over My Peers?”

Recently, I’ve heard a lot of politicians talking about cancelling everyone’s student loan debt. Some people are for it, some people are against it, some people already paid off their loans and don’t want others to have better lives than them, but there’s one thing that no one is talking about: if all my peers’ student loan debt is cancelled, how will I personally have an automatic advantage over them?

It’s maybe a 5 minute read, and it is hysterical.

Jason Furman Sucks Wet Farts from Dead Pigeons

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This you? https://t.co/feb7Ndm4kO pic.twitter.com/Y08lUEx5dw

— Capricciola🦉 (@Capricciola) November 16, 2020

Obama Administration #1 Wanker

One of the suggestions fro boosting the economy, and one that does not have to go through what will likely be a Republican Senate, is the mass forgiveness student loans.

It would have the effect of removing a burden from millions of recent, and not so recent, college graduates, improving their credit scores and making them more likely to make big ticket purchases, start families, etc.

Jason Furman, one of the strongest advocates of austerity in the Obama administration thinks that this is a bad idea, which, in an of itself, is probably the strongest endorsement for such a policy that you can find.

The post financial crisis economy was a recovery only for the Wall Street banks bailed out, the insurance companies bailed in by Obamacare, and other parasitic speculators who had the ear of Obama, Geithner, and their Evil Minions™.

For some reason ordinary people getting a break is beyond the pale for the Democratic Party establishment (There is no Democratic Party establishment):

Since the election, the Prospect has been getting a certain degree of attention for a series we did last fall called the Day One Agenda. In it we posited a number of things a Democratic president can do without having to pass new legislation, comprising a full and robust agenda of tangible progress. Considering that Joe Biden may face a hostile legislature as president, with control of the Senate in the hands of Mitch McConnell, the Day One Agenda has taken on new importance.

One of the more high-impact (and controversial) of these measures is the Education Department’s ability to cancel student debt under something called “compromise and settlement authority.” The federal government directly issues almost all student debt, and has the discretion to reduce balances completely, or anything short of that.

Since Chuck Schumer and Elizabeth Warren have been calling for student debt relief by executive authority, it appears that the powers that be are getting nervous about something actually potentially happening, as they’re fashioning a list of reasons to shoot it down. Former Obama administration top economist Jason Furman is taking the lead on this. He started by insisting that student debt forgiveness would be taxable, which… no. There’s a long history here, but suffice to say that the government forgives student debt all the time without making it a taxable event, and the IRS has every discretion to follow its past rulings (and remember this will be Biden’s IRS) and say that student loans are a non-taxable scholarship.

Undaunted, Furman admitted “some ambiguity” with his claim (which I guess is the new way of saying “I was wrong”) but nevertheless stated that student loan forgiveness wouldn’t be worth it because it would only be a “small positive” multiplier from an economic standpoint. “Give someone $10 a year for 10 years and they won’t spend $100 more today,” he wrote.

Now, there are a million reasons to cancel student debt that aren’t economic in nature. Student debt acts like a medieval indenture and if we have the power to eliminate it we should. But on the economic point, what we’ve done with student debt during the pandemic (which maybe Furman doesn’t know about?) makes it more urgent that cancellation proceed on the first day in office. 

……… 

The Trump administration put that pause in effect back in March—there’s that executive branch power flashing again—meaning that 33 million Americans have not needed to make student loan payments since then. This has been an unsung part of the economic effect of coronavirus relief: taking hundreds dollars a month (the average payment is $393) off the books of 33 million people really improves their budget.

But this is coming to an end. Last week the Education Department started informing borrowers that the freeze on payments ends December 31. At one point President Trump said he would extend it, but that was before the election was RIGGED and all non-spiteful governing stopped. So 33 million Americans will have the sudden shock of an additional large bill, with many of them out of work and having exhausted their pandemic assistance and even unemployment benefits.

………

There are those who will preach about the unfairness of it all, that those who didn’t go to college or paid off their loans get nothing. This pitting of people against one another is bad even in the best of times. (There are also plenty of executive actions you can pair with this to make it broad-based; seizing drug patents to lower prescription prices, for example, or high-road contracting that would force all federal contractors to pay a $15/hour minimum wage.) In the worst of times like right now, it’s downright stupid. Forcing billions in payments back would hurt everybody. The family that has to pay again will eat out less, or put off that new piece of furniture they wanted. The entire economy will get socked.

It’s not seizing drug patents.  It’s called compulsory licensing.

Big pharma still gets its vig, it just does not get to print money.

Because Trump likely won’t budge, we’re going to have a chaotic three weeks (absent Congressional action) when student loan payments are back. Biden can make this significantly better in a very visible way. And he can do it by himself.

Do this.

There will be gnashing of teeth from the Republicans and the conservative wing of the Democratic Party (but I repeat myself), but who gives a crap.

F%$# them with Cheney’s dick.

H/t Atrios.

It’s Bank Failure Friday!!! (On Sunday)

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We now have the 4th bank failure of the year, just 1 week after the the 3rd bank failure, this time it’s the Almena State Bank of Almena, KS.

So, we now have as many commercial bank failures in 2020 as we did in 2019.

I can’t help but think that there was some regulatory forbearance going on for electoral advantage, and that now that the election is just over a week away, the political appointees are too busy updating their resumes to worry about this.

Full FDIC list

It’s Bank Failure Friday!!!

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After an almost 6 month hiatus, we have the 3rd bank failure of the year, First City Bank of Florida, of Fort Walton Beach FL.

I’m not sure if it means anything, except the obvious that the economy is beginning to hit the banks.

It may be the first of a few, or the first of a tsunami.  No clue as to which one.

By way of context here is the Full FDIC list going back a number of years.

Still not at a number where graphing makes sense though.

Quote of the Day

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It’s really not complicated. Most hedge funds are brilliant vehicles designed to make their managers rich. That doesn’t mean they’re doing anything illegal, or maybe even unethical. It’s capitalism. It just means they’re generally a terrible investment, like a new car or a $30,000 handbag. Only with hedge funds, you don’t even get the car or the bag.

—Brett Arends at Marketwatch

This has been in plain sight for decades.  The only mystery us why so many people, and particularly nominally savvy investors, continue to throw their money away.

My theory is that there is corruption involved.