The Old Man and the Street -modified Volcker Rule survives FinReg negotiations ~ the Good, the Bad & the Ugly…

Dems did quite a hatchet job in the wee small hours of the morning. Here are the major provisions, they have left most of the implementation to regulators, (the heretofore Eeeevil Federal Reserve gets the Consumer Protection Agency!) and there is a 5 yr window on most changes

WSJ:

(…)VOLCKER RULE: Would curb propriety trading by the largest financial firms, though banks could make de minimus investments in hedge and private-equity funds. Those investments would be limited to 3% or less of a bank’s Tier 1 capital. Banks would be prohibited from bailing out a fund in which they are invested.

Scott Brown R-MA got this 3% for the mutual funds in MA. I cannot wait to hear the JPMChase conference call on earnings in July to see what Jamie Dimon has to say about this. He thought he had killed the Volcker Rule at least twice. The Tall Man always comes back!

DERIVATIVES: Would for the first time extend comprehensive regulation to the over-the-counter derivatives market, including the trading of the products and the companies that sell them. Would require many routine derivatives to be traded on exchanges and routed through clearinghouses. Customized swaps could still be traded over-the-counter, but they would have to be reported to central repositories so regulators could get a broader picture of what’s going on in the market. Would impose new capital, margin, reporting, record-keeping and business conduct rules on firms that deal in derivatives.

So this is the big exciting deal for Chicago! A whole new trading desk to establish, a clearinghouse. (FD-We hold CME shares). Looking to see what the deal is on Warren Buffet’s Berkshire holdings-does he have to put up capital or what? He lobbied HARD against it via Ben Nelson

DERIVATIVES SPIN-OFF: Would require banks to spin off only their riskiest derivatives trading operations into affiliates, in a late-night compromise struck to scale back a controversial provision championed by Sen. Blanche Lincoln (D., Ark.). Banks would be able to retain operations for interest-rate swaps, foreign-exchange swaps, and gold and silver swaps among others. Firms would be required to push trading in agriculture, uncleared commodities, most metals, and energy swaps to their affiliates.

Okay so JPMChase’s silver position is still in the game, they called in like 15 people to surround Blanche last night pushing her to cave, impressed she got anything to go through on this frankly, the pressure was enormous.

CONSUMER AGENCY: Would create a new Consumer Financial Protection Bureau within the Federal Reserve, with rulemaking and some enforcement power over banks and non-banks that offer consumer financial products or services such as credit cards, mortgages and other loans. The new watchdog would have authority to examine and enforce regulations for all mortgage-related businesses; banks and credit unions with assets of more than $10 billion in assets; pay day lenders, check cashers and certain other non-bank financial firms. Auto dealers won a hard-fought exemption from the Bureau’s reach.

Yes Auto Dealers are exempt. Cuz used car salesmen are known far and wide as honest individuals looking out for the consumer -HA HA! And of course it is seated within the Fed.

BANK CAPITAL STANDARDS: Would set new size- and risk-based capital standards, including a prohibition on large bank holding companies treating trust-preferred securities as Tier 1 capital, a key measure of a bank’s strength. Would grandfather trust-preferred securities for banks with less than $15 billion in assets, enabling them to continue treating the securities as Tier 1 capital. Larger banks would have five years to phase-out trust-preferred securities as Tier 1 capital.

Now this provision was raised to $15b to cover one Arkansas bank for Blanche. Hey this needed to be done, Tier 1 should really be Tier 1.

Here is a twofer, they gutted the most important part IMO

MORTGAGES: Would establish new national minimum underwriting standards for home mortgages. Lenders would be required for the first time to ensure that a borrower is able to repay a home loan by verifying the borrower’s income, credit history and job status. Would ban payments to brokers for steering borrowers to high-priced loans.

Well! What a novel idea! VERIFYING INCOME, CREDIT AND EMPLOYMENT before underwriting a mortgage! Why didn’t anyone think of this sooner? Frakkin maroons.

SECURITIZATION: Banks that package loans would, broadly, be required to keep 5% of the credit risk on their balance sheets. Would direct bank regulators to exempt from the rules a class of low-risk mortgages that meet certain minimum standards. Regulators could permit alternative risk-retention arrangements for the commercial mortgage-backed securities market.

They do NOT have to retain 5% of the credit risk on ‘plain vanilla mortgages’. Listen IMO they should ABSOLUTELY HAVE TO RETAIN A MINIMAL EXPOSURE ON EVERY SINGLE MORTGAGE THEY WRITE.  Skin in the game for them as well as the home buyer. Ya dig? But noooooo…

The details are left to the regulators throughout, so the fox is guarding the henhouse again – regulatory capture baby. This TBTF issue is alive and well as we enter the second leg down in housing and UE remains elevated at 10%. Our stress tests did not foresee the continued decline in housing values coupled with extended prolonged 10% UE. These guys need more capital. Treasury wanted authority to do bail outs and it looks like they still have it.:

NEW REGULATORY AUTHORITY: Gives federal regulators new authority to seize and break up large troubled financial firms without taxpayer bailouts in cases where the firm’s collapse could destabilize the financial system. Sets up a liquidation procedure run by the FDIC. Treasury would supply funds to cover the up-front costs of winding down the failed firm, but the government would have to put a “repayment plan” in place. Regulators would recoup any losses incurred from the wind-down afterwards by assessing fees on financial firms with more than $50 billion in assets.

FINANCIAL STABILITY COUNCIL: Would establish a new, 10-member Financial Stability Oversight Council, comprising existing regulators charged with monitoring and addressing system-wide risks to the nation’s financial stability. Among its duties, the council would recommend to the Fed stricter capital, leverage and other rules for large, complex financial firms that are judged to threaten the financial system. In extreme cases, it would have the power to break up financial firms.

We wait for further drill down on details and regulatory implementation timelines. JPMChase seems to have taken the biggest hit IMO, and ha ha ha since Jamie Dimon LOOOOVED him some Obama. Maroons.

June 25, 2010. Tags: , , , , , , , , , , , . CITI, citigroup, Economy, FDIC, Finance, Housing, Obama Administration, Politics, TARP, Taxes, Wall St. Comments off.

Scott Brown comes through on FinReg bill for MA – Dems prepare to gut Volcker Rule and exempt MASS Mutual Funds…

Well I predicted this was a done deal when Sen Brown voted for cloture on FinReg. He would only have done so if the Dem leadership guaranteed the big mutual funds in Massachusetts were protected (contrary to the wailing of Allahpundit at HA), they will be:

WSJ:

…Democrats worked Wednesday on an agreement that would weaken a provision known as the Volcker Rule, which would bar banks from investing their own money in hedge funds and private-equity firms.

Under the terms of the discussions, large banks could be allowed to invest up to 3% of their capital in these funds. This is higher than a 2% threshold under consideration a few days ago. Details remain in flux.

The changes are designed to win the support of Sen. Scott Brown (R., Mass.), who had said he would vote against the overhaul if financial companies, notably the big mutual funds based in his state, weren’t allowed to make small investments in different types of funds. Sen. Christopher Dodd (D., Conn.) and Mr. Brown met Wednesday to discuss a potential deal…….

June 24, 2010. Tags: , , , , , , . Economy, Obama Administration, Politics, TARP, Taxes, Wall St. 1 comment.

FINREG: Scott Brown had it right, Barney Frank is already gutting the derivatives regs…

Knew this was coming, and so did Scott Brown, thus his cloture vote to end debate. The GOP pundits (I mean you AllahPundit!) who were bashing him will owe him an apology when the Cmte releases the final bill and it has no teeth on derivatives..

Anywho, Scott Brown voted for cloture b/c Reid and Frank TOLD HIM the derivatives killing language would be stripped, and it will.

WSJ:

House Financial Services Committee Chairman Barney Frank (D., Mass.) on Tuesday said the White House’s proposal to stop banks from certain risky trading practices would “very likely” be in the final financial overhaul, but he said a separate provision to force banks to spin off their derivatives businesses “goes too far.”..

…Mr. Frank’s opposition to the derivatives spin-off proposal, which has been championed by Senate Agriculture Committee Chairman Blanche Lincoln (D., Ark.), raises the chances that this provision will likely be altered or stripped out completely because Mr. Frank’s comments on it were pointed.

“Banks ought to be able to hedge their own risks,” Mr. Frank said. He said banks would be prohibited from overly risky derivatives activities by the Volcker Rule and that the separate provision wouldn’t be necessary.

“I don’t see the need for a separate rule regarding derivatives because the restriction on banks engaging in proprietary activities would apply to derivatives as well as everything else,” Mr. Frank said.

He said banks would be able to do derivatives under the rules established by the bill “for their own commercial risk or their customers, but they will not be able to run separate profit centers where they trade them.”…

May 25, 2010. Tags: , , , , , , . Economy, Finance, Obama Administration, Politics, Wall St. 1 comment.

Financial Regulatory Reform bill cloture vote FAILS

and the beat goes on..and so does debate on FINREG…

only Harry Reid would bring something this important up for cloture when he doesn’t have the frakkin votes, luckily the markets are closing right now, DOW down 70…

May 19, 2010. Tags: , , , , . Politics. Comments off.

Market Movers: Meredith Whitney on the small business credit crunch and NY Fed’s Empire business conditions index PLUNGES…

The double dip is coming baby, believe it, and the Congress Critters attempts to ‘help us’  are making it worse…Read the entire piece by Meredith Whitney for the coming layoffs at the state level..

WSJ:

…Unless real focus is afforded to re-engaging small businesses in this country, we will have a tragic and dangerous unemployment level for an extended period of time. Small businesses fund themselves exactly the way consumers do, with credit cards and home equity lines. Over the past two years, more than $1.5 trillion in credit-card lines have been cut, and those cuts are increasing by the day. Due to dramatic declines in home values, home-equity lines as a funding option are effectively off the table. Proposed regulatory reform—specifically interest-rate caps and interchange fees—will merely exacerbate the cycle of credit contraction plaguing small businesses.

If banks are not allowed to effectively price for risk, they will not take the risk. Right now we need banks, and particularly community banks, more than ever to step in and provide liquidity to small businesses. Interest-rate caps and interchange fees will more likely drive consumer credit out of the market and many community banks out of business….

…It is important now to support any and all lending activities that would enable small businesses to begin hiring again. If the regulatory reform passes with rate-cap and interchange regulation amendments incorporated, small businesses will be hurt rather than helped. Politicians and regulators need to appreciate the core structural challenges facing unemployment in the U.S….

Empire State general business conditions index- CNBC:

…The New York Fed’s “Empire State” general business conditions index fell to 19.11 in May from 31.86 in April.

Economists polled by Reuters had expected a May figure of 30.00….

...The new orders index fell to 14.30 from 29.49 in April….

May 17, 2010. Tags: , , , , , , , , , , . Economy, Finance, Obama Administration, Politics, Taxes, Unemployment Statistics, Wall St. Comments off.

Updates: A Few Good Traders…Goldman Sachs on the Hill…

(more…)

April 27, 2010. Tags: , , , , , , . Economy, Finance, Obama Administration, Politics, Popular Culture, TARP, Wall St. Comments off.

Jamie’s Cryin’..again: Another Obama backer complains about Obama policies…

Are we officially sick of these idjits who backed Obama cryin about his policies yet? Cause it’s getting real old, real fast…Jamie’s cryin again..shoulda backed Hillary…at least I get to listen to a good tune whenever Dimon starts whining about Obama bank policy.

Read Jamie’s letter to shareholders this quarter here

Jamie got another big profile in the WSJ on his complaints about Obama, notice the title of the piece, Mr Dimon Goes to Washington, as if he is a man of the people fighting for us. Uhhh Jamie the narrative was written by your choice Obama, live with it:

…But when White House Chief of Staff Rahm Emanuel called a top J.P. Morgan executive to ask for the bank’s support in creating a new consumer-protection agency, the executive—former Commerce Secretary William Daley—said no, according to people familiar with the conversation. His boss believed that sufficient consumer safeguards were already on the books.

At a recent White House lunch with President Barack Obama and a handful of other executives, Mr. Dimon, 54 years old, complained to the president that the administration’s anti-bank rhetoric “isn’t helpful,” because it demoralizes businesses and employees, according to a person familiar with his comments.

Mr. Dimon’s disdain for the process has been crescendoing for some time. Last spring, he showed his irritation over the Treasury’s requirement that banks raise fresh funds before they quit TARP. Speaking at a June hospitality industry conference in New York, Mr. Dimon read aloud a fictitious letter to Treasury Secretary Timothy Geithner. “Dear Timmy, we are happy to be able to pay back the $25 billion you lent us. We hope you enjoyed the experience as much as we did.”…

Ouch!! Jamie was one of our picks for Tres Sec before it was fashionable…you know that dig hurt Timmeh…WSJ cannot seem to decide if it is pro Jamie here, they note his newly redesigned office like they were the NYT doing a hit piece on John Thain at Merrill…

…In a recent interview on the 48th floor of J.P. Morgan’s newly redone minimalist Park Avenue headquarters, Mr. Dimon showed little sign of backing down. “The incessant broad-based vilification of the banking industry isn’t fair and it is damaging,” Mr. Dimon said. “Punishing whole industries, whether you were reckless or not, just isn’t the way to do things.”

A number of political insiders say they’ve grown weary of Mr. Dimon’s protestations, viewing him as just another elite New York banker out to protect his turf. Some note that the bank profited handsomely during the financial crisis, when it scooped up securities firm Bear Stearns Cos. Inc. and Washington Mutual Inc.’s failed banking operations at bargain prices.

Rep. Brad Sherman, a California Democrat and senior member of the House Financial Services Committee, said J.P. Morgan benefits from its “ability to create awe and fear and a belief that the world will end if they are not pampered.”…

lol, tsk, tsk Jamie what did you expect?? seriously?? crony capitalism not feelin good when you arent the crony?

…Mr. Dimon has said he is trying to be constructive in dealing with Washington, hoping that his feedback can help lawmakers. And he isn’t fighting all of their proposals. He agrees, for instance, with the notion that banks shouldn’t be considered too big to fail and supports the idea that regulators should have the ability to wind down a failing institution. People close to Mr. Dimon say that he still supports the Obama administration, but has felt blindsided by some aspects of the overhaul…

…But Mr. Dimon’s patience with Washington soon wore thin as political leaders tried to force banks that had taken TARP funds to lend more and slash executive compensation. He was particularly rankled by a new rule putting visa restrictions on TARP recipients who wanted to hire skilled foreign workers.

Although the curbs didn’t affect many J.P. Morgan employees, Mr. Dimon was infuriated, telling his colleagues the move was “un-American,” say people who heard his remarks. On a conference call to discuss the bank’s earnings, Mr. Dimon referred to the TARP program as a “scarlet letter.”

Let’s all agree Marcy Captur D-OH is an idiot, cuz, ya know she is (anyone else remember the hearing when she accused Ben Bernanke of working for Golden Slacks, lol, she had confused him with Paulson pfft!), but the point is Team O isnt protecting the banks like he no doubt promised them he would, wink, wink, nudge, nudge…

In April 2009, Ohio Democrat Rep. Marcy Kaptur confronted Mr. Dimon at dinner at a Washington hotel with other lawmakers. “I have just come from my district and our Realtors told us this morning your company was absolutely the worst to deal with in terms of the foreclosure crisis,” Ms. Kaptur recalls saying to the CEO. “He looked at me, straight in the eye, and said, ‘That can’t possibly be true.’ ”

She rattled off all the people in her district who were losing their homes. Mr. Dimon replied that J.P. Morgan employed 20,000 people in her state, and that he often spoke with the governor and the mayor of Columbus, Ohio, where the bank has extensive call-center and data-processing operations….

Jamie’s feelings are hurt!@ Oh Noes!

…Mr. Dimon acknowledges that jousting with officials—especially during a heated regulatory climate—is simply a part of conducting business. But addressing a room full of J.P. Morgan investors recently, he said of the bankers’ taint: “It hurts your feelings a little bit.”…

Fools.

April 7, 2010. Tags: , , , , , , , , , . Economy, FDIC, Finance, Obama Administration, Politics, Popular Culture, TARP, Taxes, Wall St. Comments off.

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