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Dodd-Frank Opposition Adopt New Scare Tactics
On Friday, April 7th, opposers to the Dodd-Frank act reacted in a new way. Due to the fact that they do not have the voting power to repeal the act, the opposition (mostly of the republican party) is taking on new scare tactics. Instead of attacking the whole bill, the opposition is going to attack it piece by piece. Since the Bill is 120 pages long (small font), the opposition has alot of substance for fire power. However, attacking the bill piece by piece will only slow the necessary process of reform. The populus of America believes that this act is necessary and should be installed with fluency. However with minorities attacking it, I am confident the bill will waste time defending unncessecary scare tactics. The primary incentive to fight the bill is to give President Obama a worse reputation where hopefully a republican candidate can win the next presidential race.
The writers of the Dodd-Frank act did not immune the bill to changes. The primary appeal of the act in the first place was that it was easily responsive to change. Since our economy is going through a drastic change, sections of the DF act are most likely to be altered in some fashion. However, a full out attach on each section through political incentive is not only wrong, but unconstitutional.
The original article was found in the Wall St Journal on April 6
the link : http://online.wsj.com/article/SB10001424052748704013604576248982186837122.html
Fed’s Raskin says Concentrated Banking System lacks Credibility
Original URl (Bloomberg Article) : http://www.bloomberg.com/news/2011-04-07/fed-s-raskin-says-concentrated-banking-system-lacks-resiliency.html
Female Govenor of the Federal Reserve said today that our nations banking system, filled with large institutions lacks resiliency during times of financial change. A system with a diverse range of banks from size to niche would be much better for our nations defense. Raskin, who was appointed by Obama in october, became the first and only female govenor on the FED. In a conference last week she said the following:
“We need to create within the Dodd-Frank regulatory architecture a supervisory and examination program that encourages diversification and forward-looking strategies as a means to ensuring a healthy financial system and a steady flow of loans to creditworthy borrowers,” Raskin said at the New York Fed’s Community Banker Conference.
Considering myself a student of the Dodd-Frank Act, I agree with Raskin. Like I have said before, the best thing about the DF bill is that it is subject to change with the times. Diversification amongst our financial sector is most important, primarily because it increases competition of the industry. Currently, Banks use the perception that Volatillity = Risk, to generate much greater profits than everyone else. With more diversification and therefore competition, the Banking system will become more efficient, less corrupt and subject to reform.
Raskin did not discuss the actual monetary policy in her speech, most likely because since she is new, her credibility dwindles. After the stimulus news went public she said “The need for diversification is one of the great lessons of the crisis. In order to sustain the economic recovery, we need strong, well-run community banks that operate in a framework of smart and effective supervision.” By this she is reaffirming her position stated above. I am very happy with obamas choice to appoint Raskin and believe she has great things ahead of her. I pray that she firmly argues this diversification argument because it is crucial to the success of our nation.
A picture of Govenor Raskin is below:
A video on Financial Regulation surrounding the Bernie Madoff Ponzi Scheme
HuffPO: Jamie Dimon Worries that Financial Regulation Will DOOM banking forever
Yesterday, Jamie Dimon, CEO of Banking giant J.P. Morgan Chase and arguably the most influential person on Wall St said in a public interview that he believes Financial Regulation will kill the financial sector. While he has great support for his argument, he has major incentive surrounding anti-regulatory measures. Less regulation means that JP Morgan will, in fact, make more money, Dimon will be thought of as more powerful and more successful and much more wealthy than he is now. However, the financial services industry will most likely need to change their practices if there comes a time when the government pushes more regulation.
In 2007, the 70-1 leveraged bank ($70 in debt per $1 in capital), was engaged in risky operations. A lack of regulation allowed JP Morgan to be leveraged so high and gave them incentive to conduct high risk proprietary trading operations (trading on the banks behalf). This behavior, was a major reason why the unemployment rate in our country is at its highest level in twenty years and the economy is struggling for growth.
The Interviewer of Dimon issued the following post on his blog
“Jamie Dimon, chief executive of JPMorgan Chase, launched a broadside against financial regulation on Wednesday, warning that new capital rules could be “the nail in our coffin for big American banks.” …Restrictions on debit card fees charged to retailers are also coming under attack in Congress….”It basically penalises us for having debit cards,” he said. “I think it was very unfairly done in the middle of the night with no facts and analysis whatsoever. This is not the way legislation should be done.”
It is in no way unfair when the financial sector is still, undoubtly engaged in risky transactions because it gives them higher paychecks. Due to that the risk is not fully on them, Bankers and traders working for leveraged banks have the opportunity to make millions of dollars while no downside exists. Regulation needs to curb this because the financial industry has become a “money” monopoly. They have created anti-competative nature on capital the way that a monopoly creates anti-competative industry. I think Dimon, while extremely intellgent, has way to much incentive to be credible in any anti-regulation argument.
GOP Challanges Dodd-Frank Bill in sight of next Election
Last week Senate Republican leaders said that they will support attempts to overrun the “Dodd-Frank” act that was pitched in 2010 and voted into place. Republicans argue that the plan is ineffective and was only accepted because there was nothing better. While the Dodd-Frank act does not cover every thing, it has the abillity to mold to future situations. Since the bill was instated there have already been at least ten major changes. Because of this, I do not find it to be ineffective but rather incomplete.
It is obvious that the Republicans are using the Dodd-Frank act as leverage for their next presidential election. I agree that the Dodd-Frank needs help and is yet complete, however a new bill is not necessary. The demise of the DF act and the instatement of a new bill will not only be costly, but the cost will be unnecessary. Its funny because today, Republican GOP announced a budget where spending is 170mil less than Obama’s proposal. I think the 170 million would be FULLY swept up by a repeal of the Dodd-Frank and the instatement of a new act.
A MUST SEE: “END THE FED” Video
Above is a video created by the national association of Inflation that had very little credibility amongst regulators and is considered more of a superstious entity than one of any true meaning. However the video they created that is Anti-FED is in its simplest form extremely persuasive. For my final project (MAP), I will use some clips from this video as leverage.
The video basically argues that the FED has deroded the value of the dollar. However this is not a bad thing because the rest of the global economy is now on a “Fiat” or “of no value” currency. The switch from the gold standard to “Fiatt currency” is one of the greatest economic growth moves ever. By doing so the economy became more efficient by twenty fold. Transaction costs have decreased, barter is abolished and technology has been rampent. Without the move in currency, the Internet would in No sense be what it is today.
However, Watch the video for entertainment purposes only. The use of rhetoric is great but the underlying assumptions are false.
Bernanke Responds to Public Pressure for more FED Transparency
Today Chairman Bernanke commented on the latest pressure by public speakers for more transparency by the FED. Throughout history the FED has been as secretive as any other public corporation with their ideas. Modern economic theory of goverment and business proposes that it is due to the FEDS lack of transparency that they are able to sway markets and actually have control over the dollars purchasing power. New Classical economists argue that if the FED can not “Trick” or “Suprise” the markets, they can not accomplish many of their goals. However in the long run, the FED can not let the markets know exactly when they are “subtly suprising” them because then people would catch on and be able to call the FEDS next move.
Today, the ultra secretive FED is starting to change its ways. Today, the FED disclosed for the first time which banks borrowed from its discount window during their darkest hours in 2007 and 2008 and the amount to which they had borrowed. If this data was released in 2008, stockholders would flee and the bailout would of been much much larger. The FED still has not disclosed the details of the loans and the type of collateral Banks had to give up for the loans which would determine the risks that the fed took.
Today many people are scared of not having control or letting others run an important part of their lives. The truth as I believe it is that if the FED is completely transparent, it would have no more power than any other bank and therefore would be useless. While this point is argued by many, it is not clear how transparent the FED will be in the future or how powerful their role in the process of monetary policy will be.
A great article on this from Bloomberg.com is available at the following URL:
Big Event in Washington This Week: Elizabeth Warren (Bbama Admin for Financial Reform) Vs. Jamie Dimon (J.P. Morgan C.E.O.)
THE FIGHT IS ON!
Obama administration consumer protector Elizabeth Wareen will face off against James Dimon, from banking giant JP Morgan Chase in Washington this Wenesday. The debate will involve others but will focus on the Dodd-Frank and regulatory reform from a consumer, banking, business, academic and govermental perspective. Legislaters from all over the country are expected to attend and as of now I am not sure if it will be broadcasted on television.
Warren is helping the administration set up the Consumer Financial Protection Bureau (CFPB), a watchdog called for by Dodd-Frank to shield consumers from abusive practices in the mortgage and credit card businesses. The remarks by Warren and Dimon will generate headlines, although analysts said other financial regulation news this week will have more impact on banks and the markets.”The big event next week in Washington is the long-anticipated release of the rules implementing the Dodd-Frank risk retention requirement,” said Brian Gardner, a senior policy analyst at investment firm Keefe Bruyette & Woods.
I will post again after the debate with commentary and hopefully video. I am very curious what Dimon will be arguing because J.P. Morgan was strong during the financial crisis and one of the first banks to pay back the U.S. Treasury debt.
U.S. Agencies may spend over 1 BILLION DOLLARS to initiate the Dodd-Frank Act
Just for fun, this is not real currency (Duh)
News came out today that the American goverment has come to a conclusion that initiation of the Dodd-Frank act in its entirety will cost nearly ONE BILLION DOLLARS. To those who do not know how to compare this to a benchmark, this is more money than the stimuls package took to instate, times 10x. I do not want to project this one billion dollar cost in a negative light because, in my opinion it is necessary and America can not afford to cut any corners. In the whole scheme of things, one billion dollars is a small fee to pay for radical regulation. If the Dodd-Frank Act provides the regulation that is needed, the one billion dollars will be a great and substantially high return investment. However if the Dodd-Frank bill shows to be ineffective, America has wasted money once again.
This story is getting more hits than it should because most people were not expecting the act to cost more than a few million in salaries and fees. The one billion number factors in opportunity costs and purchases that could in itself give America greater return than its t-bond interest rate. We will wait and see what happens. I will be sure to keep you all updated.
Once again, Thank you for reading!
WOW! A New HBO series “Too Big To Fail” outlining the financial Crisis (including Dodd-Frank Bill)
Today I felt excitement that I jhave not fet for awhile. HBO is starting to shoot a series about the most recent credit crisis called “Too Big to Fail”. Paul Giamatti is playing Ben Bernanke, James Caan as “Dick Fuld” (Lehman Brothers CEO) and many more famous, prestigous actors taking roles for this extraordinary event. I am hoping this series sheds a realistic and pejorative light on the financial crisis however as the entertainment industry has shown us in the past, who knows. The link where I found a preview for this miniseries is below. According to inside sources, HBO is trying to make the most realistic story possible, with a script referencing primary sources.
THERE IS ALWAYS A BULL MARKET SOMEWHERE
Financial Regulation 