In a few years the rate of money flow and inflation will start to catch up to each other, eventually sparking a recession, a new analysis from Dick Bove said.» Read More
If you follow the story of the Basel Capital Accords, you know it's rather tricky business.
The current incarnation, Basel III, is being workshopped even as you read this post.
Regulatory proposals usually begin with the high minded intention of improving market stability, efficiency, transparency and so on.
But they usually fail to achieve any of those goals.
The reasons for failure are manifold: Markets are dynamic and difficult to handicap, every trade has two sides, risk is difficult to quantify. And so on.
In fact, there may be nearly as many reasons for regulatory failures as there are failed regulatory regimes. (Ok: Not quite as many — but you get the point.)
Joseph Cotterill, at The Financial Times Alphaville, wrote a recent piece hashing through some potential points of failure for Basel III.
The primary problem is that banks can still carry highly rated sovereign debt as zero risk weighted assets on their books. In light of the deterioration of credit quality of many European sovereigns, this is obviously risk-weighting divorced from reality.
In an interview with the British newspaper The Times, Julian Assange has confirmed that WikiLeaks is holding a vast cache of documents from a major US bank.
Today the Federal Communications Commission is expected to vote in favor of "net neutrality" which will prohibit broadband providers from being the ultimate deciders of their Internet traffic.
This battle has been going on for about five years and even after its expected passage, the Republican-led House next year is anticipated to take up this issue again.
Companies like Amazon.com , Skype and Netflix have voiced their opposition on the new rules. Proponents say the rules would prohibit phone and cable companies from playing favorites or discriminate when it comes to opening or closing their virtual doors if you will, to web traffic.
But as with any regulation there are two sides to it.
One of the leading "net neutrality" skeptics is Congresswoman Marsha Blackburn \(R-T,\) member of the Energy and Commerce Committee, which has jurisdiction over the Federal Communications Commission. In the Republican led House next year, Blackburn will be the Vice Chairman of the Subcommittee on Commerce, Manufacturing, and Trade. I decided to sit down with the Representative to get her concerns on what this regulation could mean for business.
The move of Peter Orszag from the Office of Management and Budget to Citigroup has sparked a renewed debate about the tight knit fabric that wraps Wall Street and Washington, DC. together.
This is a debate that is always worth renewing.
Will Wilkinson started the debate off by pointing to the seemingly inevitable capture of well-intentioned government programs by special interests.
Moody's Warns on Portuguese Debt (NY Times via Reuters) "Moody's Investor Service warned on Tuesday it may downgrade debt-ridden Portugal's A1 rating by one or two notches after a review that will take up to three months, citing weak growth prospects and high borrowing costs. Portugal has moved into the eye of the storm in Europe's debt crisis, with markets worried it will be next to take a bailout after Ireland and Greece, although Moody's said its solvency was not in question. The cost of insuring Portuguese sovereign debt against default rose in response and the euro slipped a touch."
TD-Bank Agrees to Buy Chrysler Financial for $6.3 Billion (CNBC via Reuters) "Toronto-Dominion Bank has agreed to buy Chrysler Financial from private equity firm Cerberus Capital Management for $6.3 billion, making Canada's No. 2 bank one of North America's top five bank-owned auto lenders. TD said Tuesday the purchase consists of net assets of $5.9 billion and about $400 million in goodwill. The bank does not intend to issue common equity in connection with the deal. Under the terms of the agreement, TD's U.S. unit — TD Bank — will acquire Chrysler Financial in the United States, and TD will acquire Chrysler Financial in Canada."
Controversial 'Net Neutrality' Rules About to Pass FCC \(Wall Street Journal\) "The top communications regulator won support to pass contentious new rules for Internet traffic, a move likely to face legal challenges and create uncertainty about Internet regulation. The Federal Communications Commission is set to approve on Tuesday Chairman Julius Genachowski's proposed rules governing net neutrality—a concept aimed at preventing Internet providers from interfering with web traffic. The rules are expected to bar providers from discriminating against legal Internet traffic and require more transparency. They also would let broadband providers for the first time charge more to companies that want faster service for delivery of games, videos or other services."
Why the 'Jobs Number' Doesn't Tell the Full Story (Bloomberg) "Among the many statistics that economic policymakers look to, none matters more than the "jobs number," and 2010 was the year it refused to drop. Today the national unemployment rate hovers near where it began the year, just shy of 10 percent. For all its totemic power, the jobs number masks a messier reality. It is only an estimate, like a poll or a Nielsen rating, the product of a complex process of research and calculation. Without understanding the assumptions built into the figure, we can't fully understand what it can and cannot tell us. "
CNBC's Christina Cheddar Berk: Retail Strong Heading into Holidays (CNBC) "Cash registers are continuing to ring up big sales in the final days before Christmas, easing fears of a front-loaded holiday season. Customer Growth Partners President Craig Johnson expects this holiday season to surpass 2007's total sales record of $508 billion. This means that not only will this holiday season post the strongest year-over-year growth since 2005's 6.1 percent gain, but it could be the best since 1999's 8.8 percent increase, he said."
"Funding Fight Looms on Health and Finance Laws" (WSJ) "A Senate deal to fund the federal government until March doesn't include money to launch new health care and financial industry regulations, setting up an early Republican victory in the battle over spending priorities. The deal to fund the government until March 4 is expected to come to the Senate floor for a vote Tuesday. The estimated $218 billion measure is expected to clear the Senate and House before a Tuesday Dec. 21 deadline, when current government spending authority expires. If the resolution passes without funding to ramp up President Barack Obama's health-care overhaul or beef up agencies that regulate Wall Street, the fate of those regulatory efforts will be decided after Republicans assume control of the House and gain votes in the Senate."
WikiLeaks founder Julian Assange is out of the British jail where he was held until recently, and he's once again making trouble for the US financial sector.
"I had a long face-to-face interview with Assange today," the Times of London correspondent Alexi Mostrous said on Twitter. "He says he has enough material to make bosses of a major US bank resign."
Over the weekend, WikiLeaks sent out messages on Twitter urging Bank of America customers to leave the bank. It's widely believed that BofA is the bank targeted by WikiLeaks .
Over the weekend, Joe Nocera of the New York Times accused the primer issued by four Republican members of the Financial Crisis Inquiry Commission of attempting to explain the crisis with dogma.
The Republican minority, fearing their view would get short shrift, pre-emptively put forward a CliffsNotes version of their theory of the case. In other words, they responded to a report that hasn't even yet been written, much less read and voted on by the members, Nocera wrote :
Now Peter Wallison, one of those four Republican commissioners, has fired back in a blog post titled Joe Nocera's Hypocritical Attack. He begins with attacking the idea of a pre-response:
The primer that I and three of my Republican colleagues signed sought to outline the major issues that we thought the Commission should address. It was not a reply to or a dissent from the report of the Democratic majority, which is still a work in progress. It was issued on December 15 because that was the date on which, under the law that established the Commission, its report was supposed to be issued, and the primer was released in recognition of this statutory deadline. It is now being used by the left to attack us as partisans for dissenting from the Commission's report even before the report has been issued. Nocera's article is an example of such treatment.
The dispute gets really interesting when it gets specific and substantive, however. Nocera argues that the story line in which the government helped create the housing bubble is wrong because it wasn't the government that pushed Fannie Mae and Freddie Mac into subprime lending. It was the market.
If chaos in the municipal bond markets is the big financial story of 2011 heaven help us all.
The story of weakness in the muni market is threatening to cross over into the mainstream media — just as the U.S. housing market story crossed when that bubble spectacularly imploded — like an economic supernova metamorphosed into a financial black hole.
60 Minutes did a layman's introduction last night to the budget woes faced by the states. (Meredith Whitney spoke on camera: She called the state debt issue "certainly the largest threat to the U.S. economy". ) The Wall Street Journal ran a piece this morning on the ongoing woes in muni-land. And The Financial Times Alphaville did a wrap-up today , linking to other troubling stories they'd done in the past.
So what is going on here?
If you're new to the topic, here's a summary necessarily stripped of nuance in the interest of concision.
Like seemingly everyone else in this economy, some of our individual states are in serious financial trouble.
In a few years the rate of money flow and inflation will start to catch up to each other, causing a recession, analysis from Dick Bove said.
Turney Duff tells the story of his spectacular rise and fall on Wall Street in his book, “The Buy Side.” In this Q&A, he talks about how life is different now — and his biggest regret.
Stock valuations are "not excessive," but they're "not cheap" either, Wells Capital's James Paulsen tells CNBC.