New York Times -- Banks Seek to Keep Profits as New Oversight Rules Loom
The big banks won big Thursday as Democratic lawmakers, with the help of the New England Republican caucus, finally extruded the Dodd-Frank financial bill.
The big six get VIP regulation and permanent status as too big to fail. They’ll be able to soak up capital from around the world with the implicit backing of the U.S. Treasury as smaller banks struggle for cash and contend with niggling new regulations.
The Journal has a helpful explanation of how the package may affect consumers.
The graphics are most useful and the forecasting is good. But I warn those seeking clarity that the conclusion is that the measure will likely squeeze consumers and make credit more dear but we won’t know how squeezed or how dear until the dozens and dozens of new rules and regulations are written and all of the new bureaucratic posts are filled. Will the diversity compliance officers be terrors or annoyances? Will the consumer credit board accept complaints or be out conducting stings?
The Journal editorial on the uncertainty sewn by the legislation is useful too. The Editorial page does it by the numbers, comparing the measure to the Sarbanes-Oxley rules, the 2002 response to the Enron grift hailed by President Obama’s predecessor as the “the most far-reaching reforms of American business practices” since the Great Depression.
Sarbanes-Oxley led to the flight of capital from American markets and opened the door wider to the new, piratical breed of hedge funders who destroy capital in the name of personal profits. That law created 16 new rules. This law creates 533 new rules.
But writers Eric Dash and Nelson Schwartz explain that no matter how complex or invasive the new standards are, the big banks are certain to find a way to maintain profits and pass the costs and headaches on to customers. And as bank failures continue at an alarming rate and big banks get bigger inside the government’s regulatory warren, consumers will have few alternatives but to accept onerous fees and poor service.
Listening to President Obama’s golfing buddy and finance guru Jamie Dimon brag about soaking consumers is almost unbearable.
“‘If you’re a restaurant and you can’t charge for the soda, you’re going to charge more for the burger,’ said Jamie Dimon, the chairman and chief executive of JPMorgan Chase, after his bank reported a $4.8 billion profit for the second quarter on Thursday. ‘Over time, it will all be repriced into the business.’
Short term, the changes imposed by this legislation and other recent reforms could cut profits for the banking industry by as much as 11 percent, analysts estimate. Long term, Wall Street will be able to plug at least part of that hole by doing what it does best: inventing products that take advantage of the new regulations.”
Wall Street Journal -- Goldman Settles Its Battle With SEC
Give the boys at Goldman credit – they have a flair for the dramatic.
About an hour after the Senate passed the Dodd-Frank financial bill, the SEC announced that Goldman would pay to get off the hook on charges that it misled investors about mortgage investments.
The message – now that the masters of the universe have won in Washington, they’ll pay their tribute money.
The charges were kind of cockamamie, but Goldman’s real offense was finding a way to profit so lavishly from the collapse of a housing bubble they helped inflate. It was unseemly and the gang from Goldman, especially the fabulous Fab Tourre, seemed so deserving of punishment by the cosmos.
But if this $550 million settlement is the price of shorting the mortgage market, it is the best half-billion that’s been spent in a long time. It’s like getting flagged for pass interference when you’re up by a touchdown in the 4th quarter and just got burned by a wide receiver. Totally worth it.
And with its new VIP status, Goldman will make back the penalty cash fast. Expect the company’s stock to get back on the good foot soon.
Susanne Craig and Kara Scannell explain that much of the fine money won’t even go to the Treasury but to European banks that made bad bets.
“The settlement includes a $535 million civil penalty and the handover of $15 million in profits Goldman made on the Abacus deal. Goldman will pay $250 million to investors in the Abacus deal, including $150 million to IKB Deutsche Industriebank AG, a German bank that invested the same amount in a slice of the mortgage securities. The U.S. government gets the remaining $300 million.”
New York Times -- Obama Pushes Through Agenda Despite Political Risks
It’s surprising to see writer Sheryl Gay Stolberg, a smart reporter, following the Thursday thumb sucker by Politico’s John Harris and Jim VandeHei.
Both pieces ask the question of why it is that President Obama is increasingly unpopular despite the fact that he is so accomplished. He’s had the stimulus, Obamacare, Dodd-Frank, why hasn’t that translated to success with voters?
Harris and VandeHei have staked their professional career on the viability of Obama. Their publication’s main asset is access to the administration. If the public is put off by Obama or doesn’t care what he had for lunch anymore, Politico has a problem.
They make good points about the politically ineffective administration and it’s poor message control, but miss the most obvious answer: It is in large part because of his accomplishments that the president and his party are in such bad odor.
Americans view the stimulus with regret and the health care program with fear and anger. The bank bill is another 2,000-page bundle of confusion. Voters don’t want a carbon tax and resent the president’s refusal to address illegal immigration without an amnesty program. He’s treading water on foreign policy, but everything else is bad news on policy.
Worst, Obama is starting to get the blame for the incipient double-dip recession not because Americans think he is doing nothing, but because they think his is doing the wrong thing. You can call Obamacare a jobs bill, but that doesn’t make it one. Add that it took three months to plug a hole in the Gulf of Mexico and you get the picture of a presidency moving with vigor, but in the wrong direction
Charles Krauthammer today depicts Obama as having intentionally used up his political capital in the first step toward undoing Reganism with the knockout blow to be delivered in 2013 – that Obama is laying in wait for his next round. Certainly that’s the way Team Obama sees it. But these guys are a mess. They may think they’re rope-a-doping America, but I see a hardening of opposition and a breakdown on the president’s team (my column on the increasing Democratic dissonance is here.)
If Obama were spinning his wheels, Americans might be giving him the benefit of the doubt, but since he’s passing all of this stuff with new regulations and new spending, potentially beneficial uncertainty gives way to certain opposition.
Stolberg doesn’t quite get there either but does point out that Americans see Obama as doing the wrong things on the issues they care about and spending too much effort on the wrong things.
So I guess if you have to follow a Politico thumb sucker, you should at least improve it.
“If Republicans reclaim control of the House, the Senate or both, Mr. Obama will find himself in a situation similar to that of the last Democratic president, Bill Clinton, who lost control of the House in 1994 in a historic realignment. Mr. Clinton responded by steering toward the center, searching for issues on which he could find Republicans to cooperate.
If Mr. Obama’s new tack on the energy bill is any guide, he may be willing to refashion himself as a pragmatist who will compromise in exchange for smaller victories. The coming elections may answer the question of how far the president, having had a taste of big things, is willing to bend.”
Politico -- Angle bests Reid in second quarter
The belief that Harry Reid would whip Sharron Angle with ease may have been formed prematurely.
Angle has lost the lofty leads that all Republicans once enjoyed over Reid from the anybody-but-Harry days of the spring. Now that’s she’s a somebody instead of an anybody, Angle has seen her numbers drift down to a small lead over the direly unpopular Senate majority leader.
The belief among many is that as Reid starts spending her into oblivion, Angle will fall down into the low 40s and stay there through the election with Reid eking out a plurality thanks to minor party voters.
But Angle’s got spunk and with national conservatives determined to see Reid defeated, she may have enough money to compete. It will be hard for Reid to spend his $9 million between now and election day. He can buy up all the ad time and send a piece of mail to every home in Nevada with that money and still have plenty left to pay political consultants to tell him he is winning. But now it looks like Angle will have enough dough to have a real statewide organization and make her case to voters.
Shira Toeplitz explains:
“Sharron Angle raised significantly more cash than Senate Majority Leader Harry Reid these past three months, bringing in $2.29 million from May 20 through the end of June alone, for a total haul for the quarter of about $2.6 million… Reid raised $2.4 million in these past three months, which included fundraising visits from President Barack Obama and former President Bill Clinton… Angle’s campaign boasted that toward the end of the primary, she raised $54,500 every day through the end of June. She also said she raised $1.3 million online..”
Peggy Noonan -- Youth Has Outlived Its Usefulness
Ms. Noonan doesn’t know it, but she’s written a lovely belated birthday present to my father, still working as a coal broker on his 79th birthday this week.
She might have been asking about Beez himself when she asked the question: “You walk into the offices of a great corporation now, look around and think: Where are the grown-ups?”
Ms. Noonan, there’s one at his desk in Pittsburgh this morning humbly helping (much) younger executives make good choices and treating customers and suppliers with the kindness and deference that are the marks of real wisdom in business.
Kudos to him for still doing it even after his heart broke with the passing of his beloved wife of 51 years.
Kudos to his bosses for keeping him on.
Kudos also to Ms. Noonan for reminding all of us who know him to make the most of having one so wise as John Stirewalt in our lives.
“This is a nation—a world—badly in need of adult supervision. In the 50th anniversary commentary this week of Harper Lee's masterpiece, ‘To Kill A Mockingbird,’ a book long derided as middlebrow by middlebrows, no one fully noted the centrality, the cosmic force, that propelled the book, and that is the idea of the father. Of the human longing to be safe and watched over by one stronger. And so we have the wise and grounded Atticus Finch, who understands the world and pursues justice anyway, and who can be relied upon. ‘He would be there all night, and he would be there when Jem waked up in the morning.’ That's the last sentence. Ms. Lee was some kind of genius to throw the ball that soft, and that hard.”