US President Obama has vowed he will push communist financial reform’s through before he leaves office. Draconian legislation like Dodd-Frank and the ridiculous Volker Rule are key to the communist agenda set by the current administration.
A Desperate Obama launched an onslaught against banks and Republicans this week for working to block financial reform and return America to prosperity, Obama, now one of the least popular Presidents in history, is yet again using a populist tone to cash in on public anger over Wall Street practices.
Obama is heading towards a 2012 election without hope of victory due to his inability to create jobs or spark a significant recovery even after spending a record amount during his office.
Obama already has a reputation for his anti-business stance starting with his harsh rhetoric about corporate compensation at the beginning of his term.
The US Communist party said of the 2008 election of Obama: Obama’s 2008 victory was more than a progressive move; it was a dialectical leap ushering in a qualitatively new era of struggle. Marx once compared revolutionary struggle with the work of the mole, who sometimes burrows so far beneath the ground that he leaves no trace of his movement on the surface. This is the old revolutionary ‘mole,’ not only showing his traces on the surface but also breaking through.
The old pattern of politics as usual has been broken. It may not have happened as we expected but what matters is that it happened. The message is clear: We can and must defeat the ultra-right, by uniting the broadest possible coalition that will represent an overwhelming majority of the people in a new political dynamic.
A look at the Obama Reforms
Since Barack Obama took office, $38 billion in new major regulations have been introduced, imposing an unprecedented burden on businesses, according to last month’s report by the Heritage Foundation.
An overly regulated environment is creating uncertainty — and uncertainty is perhaps the greatest obstacle for investing and hiring. The administration hastily introduced the 2,300 page Dodd Frank Wall Street Reform and Consumer Protection Act in the depths of the recession without fully understanding and studying the potential consequences of such unprecedented legislation.
To put the Dodd Frank bill in perspective, it is ten times the length of the Sarbanes-Oxley Act (66 pages) and the Gramm-Leach-Bliley Act (145 pages) combined. While a moderate level of regulation is necessary in large and vital sectors of the economy such as finance, housing, and healthcare, regulation is not the solution to the current economic problems that face the United States.
The administration must stop demonizing banks — as if they are not vital to the growth of credit and new business formation — and consider a moratorium on new regulations, an idea made popular by Presidential candidate Texas Governor Rick Perry.
Frank Keating in the Wall St Journal said “imagine a manufacturing company that deployed more than half of its work force as Occupational Health and Safety Administration (OSHA) compliance officers. Such a company would be unable to grow, let alone contribute to broader economic growth.
Yet banks across the country are feeling a similar pull on resources as the Dodd-Frank Act is implemented. Already federal regulators have issued 4,870 Federal Register pages of proposed or final rules affecting banks. Many more are still to come—for a grand total of more than 240 rules. And that’s on top of about 50 new or expanded regulations unrelated to Dodd-Frank that banks have had to absorb over the past two years.
Managing this mountainous regulatory burden is a significant challenge for a bank of any size. but for the median-sized bank—with 37 employees—it’s overwhelming. The cost of regulatory compliance as a share of operating expenses is two and a half times greater for small banks than for large banks.”
Mr Keating is not alone, Jamie Dimon has argued along the same line, “We’ve been through two stress tests, one at the Treasury, one at the Fed. I believe most of the banks passed the recent ones with flying colors,” Jamie Dimon, JP Morgan Chase & Co.’s chief executive officer, told Fed Chairman Ben S. Bernanke June 7. “Now we’re told there are going to be even higher capital requirements,” and “we know there are 300 rules coming. Has anyone bothered to study the cumulative effect of all these things?”
One month later, Dimon’s boldness has proven to be less an emblem of power than a cry of frustration. Global banking supervisors are poised to impose higher capital requirements that Wall Street complains will crimp profits, hamstring its fight against foreign rivals and damage the U.S. economy. And Dimon, 55, who kept JPMorgan largely clear of the subprime mortgage fiasco and helped stabilize the financial system in 2008 by acquiring Bear Stearns Cos. and Washington Mutual Inc., will face the same new strictures as the industry’s rogues.
Another indication of the changing regulatory environment took place almost a month earlier and an ocean away. During a May 17 confirmation hearing on his appointment to a new British financial watchdog, Donald Kohn, a former Fed vice chairman, told British lawmakers he had abandoned his belief that bankers’ self-interest would keep markets safe.
“I placed too much confidence in the ability of the private market participants to police themselves,” he testified.
Today Financial Services Companies are under attack on Wall St
The Federal Housing Finance Agency, which oversees mortgage giants Fannie Mae and Freddie Mac, is expected to file suit against Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank, among other banks, the Times reported, citing three unidentified individuals briefed on the matter.
The suits stem from subpoenas the finance agency issued to banks last year. They could be filed as early as Friday, the Times said, but if not filed Friday it said the suits would come on Tuesday.
The government will argue the banks, which pooled the mortgages and sold them as securities to investors, failed to perform due diligence required under securities law and missed evidence that borrowers’ incomes were falsified or inflated, the Times reported.
Fannie Mae and Freddie Mac lost more than $30 billion, due partly to their purchases of mortgage-backed securities, when the housing bubble burst in late 2008. Those losses were covered mostly with taxpayers’ money.
The agency filed suit against UBS in July, seeking to recover at least $900 million for taxpayers, and the individuals told the Times the new suits would be similar in scope.
A spokesman for the Federal Housing Finance Agency was not immediately available for comment.
U.S. securities regulators have taken the unprecedented step of asking high-frequency trading firms to hand over the details of their trading strategies, and in some cases, their secret computer codes.
The requests for proprietary code and algorithm parameters by the Financial Industry Regulatory Authority (FINRA), a Wall Street brokerage regulator, are part of investigations into suspicious market activity, said Tom Gira, executive vice president of FINRA’s market regulation unit.
“It’s not a fishing expedition or educational exercise. It’s because there’s something that’s troubling us in the marketplace,” he said in an interview.
The Securities and Exchange Commission, meanwhile, has also begun making requests for proprietary algorithmic trading data as part of its authority to examine financial firms for compliance with U.S. regulations, according to agency officials and outside lawyers.
Shayne Heffernan: Steps to Real Global Growth
The USA and Europe have failed to spark a sustained recovery despite trillions in poorly directed bailout funds, now the calls for Austerity calls and a new Tax push threaten to truly derail growth in the western world.
Political maneuvering and Financial Smokescreens like QE’s and Twists replaced real economic stimulus over the last 3 years since the 2008 financial crisis. They have all been proven failures, Social Programs and Discounted Institutional landing do not replace hard core spending. The United States Federal Reserve actions were 100% negated by Dodd-Frank and the ridiculous Volker Rule, Institutions were offered discounted lending, however new regulations made the use of the funds by Banks impossible.
So 3 years and trillions later a recession is still on the table, unemployment remains, and will remain at record levels.
Austerity is not a bad thing, however it needs to be directed towards the size and cost of Government, NOT aimed at the citizenry. Government and the cost of Government in the Western world remains too high, new and increasingly complicated legislation makes the cost of government drift higher.
Now in Europe and the USA we see calls for Austerity, Tax Hikes, Basel Bank Rules and More and More Legislation, an insidious combination that will pave the way for a lengthy recession in the West. It will also open the door to the East, Corporations and Individuals will depart overly onerous government and make their home in emerging markets, as wee have seen happen for the last decade.
The lack of Infrastructure spending in the USA and Europe is staggering when compared to the huge developments undertaken in China and South East Asia.
Shayne Heffernan: Steps to Real Global Growth
A Powerful Leadership like Theodore Roosevelt with his Panama Canal or the Dwight Eisenhower Road System, the USA and Europe need a leader that can unite the country behind some large Public Infrastructure Developments and end the political circus that plays out daily in the media.
In Europe and the USA there needs to be real spending by Government, Roads and Especially Rail offer a direct line to impact the economic growth of both regions. The USA should be developing a rail network that covers North America and links to the emerging markets in South America, Europe could be investing in high speed rail networks that reach directly into Asia.
Europe and Asia need to lower rates.
Governments must shrink, however possible, society can not afford the governments that have developed.
Dodd-Frank and Volker style legislation must be overturned.
Basel III Bank Rules must be withdrawn.
Europe and the USA must lower taxes and make it attractive to start business in the country.
The Volker Rule, Denounced
The UK business secretary’s strong public criticism of the Obama proposals reflects widespread frustrations among ministers at a “sweeping” overhaul that was conceived and announced to the world without consultation with the UK.
Lord Mandelson’s comments are especially unwelcome in the White House as they came on the day that the Obama administration sent legislative proposals to Capitol Hill that would create the so-called “Volcker rule”.
Under the Obama-Volker plan, which shocked financial institutions and countries world wide when it was announced in January, provides that bank be barred from proprietary trading and owning hedge funds.
Stressing that Britain’s preferred co-ordinated action on banking supervision, Lord Mandelson said: “President Obama’s proposals on banking regulation, I have to say, came as a bit of a surprise to people working on the G-20 agenda and it is important that we keep the multinational agenda firmly on track.”
He argued that the so-called Volcker rule was over ambitious. “Trying to apply sweeping rules about the structure, content and range of activities of banking entities is too difficult to do,” he said. “Whatever their size, whatever their range of activities, you need good regulation first. “It’s the principle and practice of regulation you have to focus on, not the size of banks,” he added.
The proposed “rule”, named after Paul Volcker, its chief architect and former chairman of the Federal Reserve, faces an uphill struggle in the US Congress, with Democrats and Republicans questioning why the President saw fit to drop in the proposal late in the regulatory overhaul.
Banks are lobbied furiously against the proposal, which is designed to prevent institutions that benefit from government guarantees over their deposits from engaging in risky activity.
In comments that echo those of Lord Mandelson, Charles Dallara, managing director of the Institute of International Finance, which represents the largest global banks, called on countries to work together to avoid “fragmenting” a regulatory reform process begun at the Group of 20. “Either the G-20 leaders believe that the G-20 framework is the way to go or they do not,” he said.
And so it continues, the good news is Obama has lost so much support that his chances of passing any legislation now is almost Zero.
Shayne Heffernan oversees the management of funds for institutions and high net worth individuals.
Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services. www.livetradingnews.com
- Too Big To Fail Under Dodd-Frank (baselinescenario.com)
- Obama chides banks, taps anger over Wall St – Reuters (news.google.com)