After 9 months of hard fighting, yesterday financial reform came down to this: an amendment, proposed by Senators Jeff Merkley and Carl Levin that would have forced big banks to get rid of their speculative proprietary trading activities (i.e., a relatively strong version of the Volcker Rule.)
The amendment had picked up a great deal of support in recent weeks, partly because of unflagging support from Paul Volcker and partly because of the broader debate around the Brown-Kaufman amendment (which would have forced the biggest 6 banks to become smaller). Brown-Kaufman failed, 33-61, but it demonstrated that a growing number of senators were willing to confront the power of our biggest and worst banks.
Yet, at the end of the day, the Merkley-Levin amendment did not even get a vote. Why?
Partly this was because of procedural maneuvers. Merkley-Levin could only get a vote if another amendment, proposed by Senator Brownback (on exempting auto dealers from new consumer protection rules) got a vote. Late yesterday afternoon, Senator Brownback was persuaded, presumably by his Republican colleagues and by financial lobbyists, to withdraw his amendment.
Of course, Merkley-Levin was only in this awkward position because of an earlier lack of wholehearted support from the Democratic leadership – and from the White House. Again, the long reach of Wall Street was at work.
But the important point here is quite different. If Merkley-Levin did not have the votes, it was in the interest of the megabanks to have it come to the floor and be defeated. That would have been a clear victory for the status quo.
But Merkley-Levin had momentum and could potentially have passed – reflecting a big change of opinion within the Senate (and more broadly around the country). The big banks were forced into overdrive to stop it.
The Volcker Rule, in its weaker Dodd bill form (“do a study and think about implementing”), perhaps will survive the upcoming House-Senate conference – although, because this process likely will not be televised, all kinds of bad things may happen behind closed doors. Regulators may also take the Volcker Rule more seriously – but the most probable outcome is that the Fed and other officials will get a great deal of discretion regarding how to implement the principles, and they will completely fudge the issue.
Senator Jeff Merkley took to the Senate floor on Tuesday, complete with fist pounding, to air his frustration over the blockage of the Merkley-Levin amendment that would fortify the Volcker Rule. The rule restricts banks that have access to FDIC insurance from speculative trading. What he wanted to know: “Why is Wall Street winning and Main Street losing tonight in the US senate?” Watch his passionate speech:
Is this a joke? There’s a broad effort, lead by Shelby, to block a discussion and vote on the Merkley-Levin amendment. Even with a 60 vote requirement and some democratic senators missing (with “one hand tied behind our backs” as Merkley said on the floor), it is still being blocked. David Dayen has the best roundup of the financial massacre from last night. If you get a chance, watch video of Merkley and Levin fighting for their amendment last night. They were on fire.
Between the last minute changes, the way the bill has morphed into an endless stream of studies to be ignored at a later date, the dropping of any of the strong progressive resolution mechanisms in the House and the blocking of votes and discussion on Dorgan, Merkley-Levin and Cantwell’s amendments, this has really been a massacre of what was originally a fairly decent bill. Both Reid and the President need to step in before this situation becomes even worse.
Dorgan slipped in his amendment by attaching it to another amendment, which nobody seemed to have caught. The Senate voted immediately to not have a discussion on the Dorgan amendment, thus having to avoid any responsibility for it.
As we discussed before, members of the “Chartered Financial Analyst”, or CFA, community were polled about the Volcker Rule. CFA’s are considered extremely well-qualified within the financial sector, and here’s how they voted:
Even reforms supported by a majority of polled financial CFA’s can’t get a discussion on the Senate floor. But having to deal with it daily, CFA’s are likely to feel how concentrated, politically powerful and abusive the current US financial system has grown.
Mike Konczal is a fellow with the Roosevelt Institute.
[Every year at Thanksgiving-time I resurrect a column written by a fellow teacher, Kent Dillon, about the real reason we celebrate this holiday. It is a story no longer told in the textbooks because it is thoroughly unPC, and undermines the idea that government is the solver of all problems. We were teachers, as well as part of the crew, at The Flint School, a private, academic boarding school aboard two large sailing ships, and we used the world as a campus. Kent wrote this for the students’ parents 45 years ago, so they would know what their c...
This year has been a wild ride for Chinese stocks, something that long-time investors have come to expect from a country that's seen 55 bull and bear markets since the ruling Communist Party first allowed equity trading in 1990. As the Shanghai Stock Exchange celebrates it's 25th anniversary on Thursday, here's a look at some of the key milestones on China's path from equity-market upstart to $7 trillion behemoth.
In my article from November 17, I touched on the growing number of retailers that report shrinking traffic and disappointing sales:
Our consumer-driven economy is not getting any help from suddenly sober shopaholics. In the most recent report, the Commerce Department reported that retail sales rose by a measly 0.1% in September. And it didn’t matter whether you wear Gucci loafers or Red Wing work boots.
Since then, the retail landscape has gotten even muddier.
The Commerce Department reported that retail sales increased by a miserly +0.1% in October, be...
Holiday trading kicked into gear, although volume for the S&P managed to push into a technical accumulation day. Things are likely to remain quiet through to next week and any sharp moves at this stage have a high risk of failure.
The top performing index on the day was the Russell 2000. It managed to add another decent gain o keep the string of higher closes running. It didn't quite close above 1,200, but it may do so Friday (with the aforementioned caveat of holiday trading). Overall action in this index has been positive, and relative performance to other indices continues to improve.
Some weeks when I write this article there is little new to talk about from the prior week. It’s always the Fed, global QE, China growth, election chatter, oil prices, etc. And then there are times like this in which there is so much happening that I don’t know where to start. Of course, the biggest market-moving news came the weekend before last when Paris was put face-to-face with the depths of human depravity and savagery. And yet the stock market responded with its best week of the year. As a result, the key issues dominating the front page and election chatter have moved from the economy and jobs to national security and a real war (rather than police ...
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I've decided to build our startup - Veritaseum, a peer-to-peer financial services platform, directly on top of the Bitcoin Blockchain. Many queried why I would voluntarily give up a lucrative advisory and consulting business to chase virtual coins in cyberspace. That's exactly why I decided to do it. That level of misunderstanding of what is essentially the second coming of the Internet gave me a fundamental advantage over those who had deeper connections, more capital and more firepower. I was the first mover advantage holder.
You see, Bitcoin is not about coins, currency or price pops. It is a massive computing net...
1) The shares of one of my largest short positions (~3%), Exact Sciences, crashed by more than 46% yesterday. Below is the article I published this morning on SeekingAlpha, explaining why I think it’s still a great short and thus shorted more yesterday. Here’s a summary:
The U.S. Preventative Services Task Force’s Colorectal Cancer Screening Draft Recommendation issued yesterday is devastating for Exact Sciences’ only product, Cologuard.
I think this is the beginning of the end for the company.
My price target for the stock a year from now is $3, so I shorted more yes...
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Baxter Int. (BAX) is splitting off its BioSciences division into a new company called Baxalta. Shares of Baxalta will be given as a tax-free dividend, in the ratio of one to one, to BAX holders on record on June 17, 2015. That means, if you want to receive the Baxalta dividend, you need to buy the stock this week (on or before June 12).
Back in December, I wrote a post on my blog where I compared the performances of various ETFs related to the oil industry. I was looking for the best possible proxy to match the moves of oil prices if you didn't want to play with futures. At the time, I concluded that for medium term trades, USO and the leveraged ETFs UCO and SCO were the most promising. Longer term, broader ETFs like OIH and XLE might make better investment if oil prices do recover to more profitable prices since ETF linked to futures like USO, UCO and SCO do suffer from decay. It also seemed that DIG and DUG could be promising if OIH could recover as it should with the price of oil, but that they don't make a good proxy for the price of oil itself.
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at firstname.lastname@example.org with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
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