Tag: Finance

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The current behavior of the Democratic Party and its allies in media and academia…and especially that of the Biden admistration…reminds me of the 1991 movie Other People’s Money.  The main character, known as Larry the Liquidator, specializes in acquiring companies for the purpose of selling off their assets.  When the film opens, his new target […]

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Andrew McCarthy is wrong this time. He calls not only for a policy of regime change but also for President Trump to call for “regime change” in Iran. McCarthy should pay closer attention to the history of American presidents talking up “liberation” or regime change. Consider both President Eisenhower and President George H.W. Bush, and […]

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Trumping Middle East Hands: Iran [Updated]

 

Start from the position that the Iranian people are hostages in their own country to a regime based on an idea, perhaps an ideology, concocted in the 1970s and propounded clearly only after Khomeini’s faction had control in the Iranian Revolution of 1979. Consider that there has been popular unrest against the regime. Factor in that the rulers are savvy and ruthless, with an elite military force keeping the regular military and the populace in check, while extending regime influence regionally and globally. The Khomeinists seem to have a strong hand, with some high cards, so how do we set about trumping their hand? Moving towards answers that are feasible takes more than hand-waving and posturing.

The U.S. military has long recognized that it was only one instrument in Uncle Sam’s tool belt, and that military strategy needed to be integrated with plans and actions by the rest of the government. This became called a “whole of government” approach. For many years, military officers, in their advanced schooling, were instructed in consideration of four “instruments of national power:” Diplomacy, Information, Military, and Economy (DIME).

DIME was useful for getting officers with around twenty years of military planning and operations under their belts to think more broadly. However, Uncle Sam actually has a larger set of tools, and uses them. To capture these other tools, DIME became DIMEFIL:

In this AEI Events Podcast, a group of financial experts and historians meet to evaluate the Glass-Steagall Act and the extent to which it can address current and upcoming challenges in American finance in an event hosted by AEI’s Paul H. Kupiec. In the keynote address, Dr. Richard Sylla (New York University Stern School) points out that the real problem of the financial banks was shadow banks – not universal banks – which the Glass-Steagall Act would fail to address.

In a following panel discussion, experts assess the prospects of passing the Glass-Steagall Act, in addition to the implications for banks and their respective bank holding companies. Panelists include Martin Baily, (The Brookings Institution), Oliver Ireland (Morrison and Foerster LLP), Paul H. Kupiec (AEI), and Norbert Michel (The Heritage Foundation). The discussion is moderated by Alex J. Pollock (R Street Institute).

Fast Way Up the Ladder: Borrow from Your Family

 

shutterstock_38771464An interesting study that comes to the wrong conclusion, in Forbes:

It’s no surprise that friends and family are a valuable resource providing help and support when needed in America, at all levels of income. But in a new study released today, The Pew Charitable Trusts has quantified the financial support they’re most apt to provide—showing that the persistent debate over income inequality in the United States extends deeper than you might think. While households of all incomes help members of their families financially, wealthier families tend to provide financial assistance toward paying for education or housing—areas that build wealth. But when lower-income families turn to their relatives for help, it is most often to cover short-term financial needs and emergencies according to Diana Elliott, research manager in financial security and mobility with Pew.

The conclusion, wrapped in a now-familiar evocation of the problems with income inequality, is here:

No Guarantees for the “If” in SIFI

 

In the aftermath of the 2008-09 financial crisis, the Democratic Congress pushed through a law commonly known as Dodd-Frank. It was effectively Obamacare for the financial services industry: An unwieldy 2,300-page grab-bag of a bill, much of which irrelevant to the problems it purported to address, full of self-contradictory provisions, ineffective in dealing with the problems it purported to address, written vaguely and giving great power to regulators to flesh out the details. The stated motivation of the law was to make sure no financial institution would again be “too big to fail”. However, it instead codified the notion in “systemically important financial institutions”, or SIFIs. Once designated a SIFI, an institution is subject to extraordinary federal oversight. But there is an upside: Everyone in the market understands SIFI designation as an admission that the government will take extraordinary measures, if necessary, to ensure that company stays a going concern.

Most SIFIs are banks. Three, however, are insurance companies. AIG and Prudential have welcomed their designation. MetLife, in contrast, has fought it at every opportunity. The company sued the government to be taken off the list. And on Tuesday, the company announced plans to break itself up.

“Ethnic Spoils System” Indeed

 

This, ladies and gentlemen, is what ethnic favoritism looks like. Ethnic favoritism isn’t “code words,” or “pandering to the fears of white America.Via the WSJ:

By the end of this week, the U.S. government will be a step closer to sending out millions of dollars to minority borrowers who were allegedly discriminated against by auto lender Ally Financial Inc. But there is a potential hitch: No one knows for certain whether all the people getting the checks will actually be minorities.

For the Fed, One-Eighth of a Point and Done

 

One-EighthAs stocks endure their worst correction since 2011, and the battle between Fed doves and hawks rages on over a quarter-of-a-percentage-point rate liftoff, the much-anticipated August employment numbers made for a surprisingly mediocre report.

Nonfarm payrolls came in below consensus at 173,000. But private payrolls increased only 140,000, the smallest gain in five months. Compared with the average post-1960 recoveries, private-sector jobs are nearly 6 million below that long-run trend line.

The unemployment rate fell to 5.1 percent. But the labor-force participation rate remained low at 62.6 percent, as did the 59.4 percent employment-to-population ratio.

What’s Driving China’s US Treasury Sell-Off?

 

financial-crisisIt’s natural that some Americans see in the market’s recent convulsions evidence of a deliberate Chinese plan to crash the US economy. Economic warfare was, after all, a favored and often successful tactic of the Soviet Union. But the Soviets always calculated their risks and took logical measures: They moved when they had more to gain than lose. I’m thus more inclined to see in China’s precipitous stock-market decline the folly of attempting to circumvent the laws of economics.

In the past decade, alarmists have warned that China was poised to overtake the US. These warnings are reminiscent of those about Japan in the 1980s and 1990s. Some now believe China owns the US by virtue of its $4 trillion-plus foreign debt holdings. They survey China’s apparently rapid economic growth and conclude that China’s a major, unstoppable economic force.

China had logical economic reasons for accumulating US Treasuries. Despite the destructive economic policies of successive US governments, particularly this one, US Treasuries are still considered the world’s best credit risk. Although the dollar is a sorrowful currency investment, American debt instruments carry little-to-no risk of default. For nations such as China, which during the 1990s was barely credit-worthy and seeking to undertake major development projects with few cash reserves, leverage is the only viable alternative. But obtaining foreign capital investment requires collateral. China had none, save weapons; like the former Soviet Union, it relied upon arms sales to prop up its annual income. Creditors need to know that their investments are reasonably guaranteed in the event of insolvency. A loan backed by US Treasuries is a relatively secure investment.

Wall Street Should Stop Complaining About New Bank Capital Rules

 

Wall Street is kvetching up a storm over modest toughening of megabank capital requirements by federal regulators. “This rule puts American financial institutions at a clear disadvantage against overseas competitors,” Tim Pawlenty, chief executive of The Financial Services Roundtable and former GOP presidential candidate, told Reuters.

The new rule increases the required leverage ratio – the amount of equity capital a bank holds as a share of assets — to 5% versus the 3% ratio in the international Basel III agreement. Under the new rule, megabanks could borrow only 95% of money they lend versus 97% under Basel. By 2018, they would have to rely more on selling stock or retained earnings.

Has Anyone Told You Just How Evil Kickstarter Is? — Fredosphere

 

Barry Ritholtz of Bloomberg View wants you to know Kickstarter is evil—at least when corporations get into the act. Oculus, the virtual reality company recently bought by Facebook for a couple billion, received an infusion of $2.4 million early in its history thanks to a Kickstarter campaign. This kind of corporate funding became legal thanks to the JOBS Act of 2012.

Ritholtz does not like the JOBS Act: