Although all of the public attention and drama has focused on the health care legislation, there is news about the financial-reform bill as well.
Yesterday, March 22, the Senate Banking Committee voted in favor of the bill formulated by Christopher Dodd, of Connecticut, the commitee's chair. The Committee was split along party lines, 13 to 10.
The bill is similar to one the House of Representatives passed in December 2009, also with a split along party lines.
One important addition that this bill has and that one didn't is the Volcker rule: the prohibition of certain activities for banks that accept retail deposits. In some sense this is a return to the old Glass-Steagal Act. But not really.
Glass-Steagal created a wall between banks on the one hand and brokerage activities on the other. That is the wall that came crumbling down in the late Clinton period and this bill would not attempt to erect it anew. It would make some what more discriminating bans than that. Still, whether it would work, toward its presumed goal of limiting systemic risk, and how it would work, in specific administrative terms -- these are not easy questions to answer.
Interestingly, the Obama administration itself was late to pick up on the cause of the "Volcker rule." It showed no interest in the matter until after Scott Brown won his election in Massachusetts. Thereafter, it wanted to re-assert its populist cred, and this seemed to be an easy way to do that.
Showing posts with label Barack Obama. Show all posts
Showing posts with label Barack Obama. Show all posts
Tuesday, March 23, 2010
Monday, August 10, 2009
Stephen Bainbridge
Stephen Bainbridge, a professor at UCLA School of Law, has written on "Shareholder activism in the Obama Era."
His thesis is that the financial crisis of last fall and the new administration it did so much to give us have allowed a certain theory of corporate governance to gain new traction -- an institutional-investor-centered theory would shift power toward pension fund managers and their like. Bainbridge is somewhat wary about the likely effects.
My own view is that in general Bainbridge is too enamoured of boards of directors. He is a believer in a board-centered theory of corporate management, one in which boards are possessed of enormous discretion, and any interference therewith is likely to be a bad thing because ... well, because it hampers them.
Such worries are misplaced. As I believe recent history shows, boards that are not held accountable from outside can become locked into disastrous strategies, as at LTCM, can trust untrustworthy managers, as at Enron, etc. There must be a disruptive influence. Andrew lo's work on the "path dependency" to which boards can become maladaptively prey may shine some light here, I think.
His thesis is that the financial crisis of last fall and the new administration it did so much to give us have allowed a certain theory of corporate governance to gain new traction -- an institutional-investor-centered theory would shift power toward pension fund managers and their like. Bainbridge is somewhat wary about the likely effects.
My own view is that in general Bainbridge is too enamoured of boards of directors. He is a believer in a board-centered theory of corporate management, one in which boards are possessed of enormous discretion, and any interference therewith is likely to be a bad thing because ... well, because it hampers them.
Such worries are misplaced. As I believe recent history shows, boards that are not held accountable from outside can become locked into disastrous strategies, as at LTCM, can trust untrustworthy managers, as at Enron, etc. There must be a disruptive influence. Andrew lo's work on the "path dependency" to which boards can become maladaptively prey may shine some light here, I think.
Wednesday, June 17, 2009
Three brief items
1. Ackman on the board of GGP
It is good to hear that Bill Ackman, the principal of Pershing Square, has not been thrown into any funk by his recent defeat in the Target proxy fight.
On Monday, June 8 he became a member of the board of directors of General Growth Properties, another of Pershing Square's portfolio companies. He controls 7.5% of GGP's equity.
GGP is in bankruptcy, and Pershing Square sought last month to become its debtor in possession lender. That didn't work out, because GGP got slightly better termns from a group including Farallon, Elliott Associates and others.
For a skeptical view of a recent Ackman presentation on GGP, go here.
2. Providence Claims Victory over Avalon
The Providence Service Corporation announced Monday that, based on a preliminary vote count provided by its proxy solicitor, its stockholders have overwhelmingly re-elected Providence's two director nominees, Fletcher Jay McCusker and Kristi L. Meints.
The challengers, nominated by the Avalon Group received support from less than 2% of the shares held by non-affiliates of the Avalon Group and voted in the election of directors.
"We appreciate the strong support of our stockholders and look forward to moving beyond the Avalon Group's disruptive and distracting proxy contest and their self-interested agenda and returning our full attention to delivering on Providence's very significant potential and enhancing value for ALL Providence stockholders," said Fletcher Jay McCusker, Providence's chief executive.
3. Reform of Financial Regulatory System
This afternoon, POTUS will formally unveil the administration's new plan for regulation of financial services.
One of the key points is that the Federal Reserve will get greater control over institutions thought to pose "systemic risk" to the system. Also, the FDIC will gain new authority to seize and liquidate troubled institutions.
But some of the reforms that seem to many of us the obvious moves, like consolidating the CFTC with the SEC, aren't in the program at all.
It is good to hear that Bill Ackman, the principal of Pershing Square, has not been thrown into any funk by his recent defeat in the Target proxy fight.
On Monday, June 8 he became a member of the board of directors of General Growth Properties, another of Pershing Square's portfolio companies. He controls 7.5% of GGP's equity.
GGP is in bankruptcy, and Pershing Square sought last month to become its debtor in possession lender. That didn't work out, because GGP got slightly better termns from a group including Farallon, Elliott Associates and others.
For a skeptical view of a recent Ackman presentation on GGP, go here.
2. Providence Claims Victory over Avalon
The Providence Service Corporation announced Monday that, based on a preliminary vote count provided by its proxy solicitor, its stockholders have overwhelmingly re-elected Providence's two director nominees, Fletcher Jay McCusker and Kristi L. Meints.
The challengers, nominated by the Avalon Group received support from less than 2% of the shares held by non-affiliates of the Avalon Group and voted in the election of directors.
"We appreciate the strong support of our stockholders and look forward to moving beyond the Avalon Group's disruptive and distracting proxy contest and their self-interested agenda and returning our full attention to delivering on Providence's very significant potential and enhancing value for ALL Providence stockholders," said Fletcher Jay McCusker, Providence's chief executive.
3. Reform of Financial Regulatory System
This afternoon, POTUS will formally unveil the administration's new plan for regulation of financial services.
One of the key points is that the Federal Reserve will get greater control over institutions thought to pose "systemic risk" to the system. Also, the FDIC will gain new authority to seize and liquidate troubled institutions.
But some of the reforms that seem to many of us the obvious moves, like consolidating the CFTC with the SEC, aren't in the program at all.
Sunday, February 15, 2009
The next big thing
The new President's first legislative victory is in the record books. He has his stimulus plan. Happy President's Day, Mr. President!
The biggest domestic issue on his agenda now is the one that most impacts the concerns of this humble blog. The Obama administration and its allies in Congress will turn to an overhaul of the financial-regulatory system.
What does "overhaul" mean? Right now it means a swirl of different and contending ideas. Some would have the CFTC combine with the SEC into one agency, along the lines of the Financial Services Authority in the UK.
Some would have the banking regulators, too, brought into the recharting.
But, so that it won't be just a re-charting, most plans would involve a beefing up of money and people devoted to the enforcement of regulations and the pursuit of lawbreakers.
Here's a link to an article in the Wall Street Journal earlier this month reviewing some of the ideas and some of the participants.
My own view? Frankly I've completely lost confidence in my predictive abilities of late.
The biggest domestic issue on his agenda now is the one that most impacts the concerns of this humble blog. The Obama administration and its allies in Congress will turn to an overhaul of the financial-regulatory system.
What does "overhaul" mean? Right now it means a swirl of different and contending ideas. Some would have the CFTC combine with the SEC into one agency, along the lines of the Financial Services Authority in the UK.
Some would have the banking regulators, too, brought into the recharting.
But, so that it won't be just a re-charting, most plans would involve a beefing up of money and people devoted to the enforcement of regulations and the pursuit of lawbreakers.
Here's a link to an article in the Wall Street Journal earlier this month reviewing some of the ideas and some of the participants.
My own view? Frankly I've completely lost confidence in my predictive abilities of late.
Monday, January 26, 2009
Lowering the rating on US Treasury bonds.
Yesterday, after babbling along a bit about The New York Times, the new administration, etc., I ended up with a brief discussion of the credit rating agencies. I want to pursue that point today.
I wrote that "I'd just like to point out in a cynical spirit that S&P and Moody's could strike back were they to feel really threatened by any regulatory change. They could lower the credit rating of US Treasury bonds. How devastating would that be to the ability of the US to keep borrowing on a world-historically absurd scale."
The chairman of S&P's sovereign ratings committee, John Chambers, raised the issue of lowering that rating four months ago.
Now, ask yourself: does this really have deterrent value? Would it be devastating? I can imagine treasury Secy Geithner telling President Obama, "Our bonds will be just as valuable the day after their downgrade as they were the day before. There will still be the uninterrupted history, from Alexander Hamilton's day to my own, in which every payment has been made on every bond. Are there lots of other institutions with such a 200-year-plus track record? Let's not fear S&P. They can't make our bonds unattractive by calling them names."
But if Geithner gives such a speech to the Prez, won't it imply that markets can IN GENERAL look beyond the S&P rating (and the Moody's rating too) and reach rational conclusions about the instruments being rated?
Are the ratings agencies irrelevant, or are they important? If they are important enough to be worth regulating, aren't they important enough to be a serious threat to the marketability of bonds?
Obama might after all reply to Geithner in our imagined conversation in the Oval Office: "If we shouldn't fear S&P, it is because they don't really matter to the buyers of such instruments. But if they don't really matter, what is the point of regulating them?"
And that would be a very good question.
I wrote that "I'd just like to point out in a cynical spirit that S&P and Moody's could strike back were they to feel really threatened by any regulatory change. They could lower the credit rating of US Treasury bonds. How devastating would that be to the ability of the US to keep borrowing on a world-historically absurd scale."
The chairman of S&P's sovereign ratings committee, John Chambers, raised the issue of lowering that rating four months ago.
Now, ask yourself: does this really have deterrent value? Would it be devastating? I can imagine treasury Secy Geithner telling President Obama, "Our bonds will be just as valuable the day after their downgrade as they were the day before. There will still be the uninterrupted history, from Alexander Hamilton's day to my own, in which every payment has been made on every bond. Are there lots of other institutions with such a 200-year-plus track record? Let's not fear S&P. They can't make our bonds unattractive by calling them names."
But if Geithner gives such a speech to the Prez, won't it imply that markets can IN GENERAL look beyond the S&P rating (and the Moody's rating too) and reach rational conclusions about the instruments being rated?
Are the ratings agencies irrelevant, or are they important? If they are important enough to be worth regulating, aren't they important enough to be a serious threat to the marketability of bonds?
Obama might after all reply to Geithner in our imagined conversation in the Oval Office: "If we shouldn't fear S&P, it is because they don't really matter to the buyers of such instruments. But if they don't really matter, what is the point of regulating them?"
And that would be a very good question.
Sunday, December 21, 2008
New boss at the SEC
Many of the announcements that have been coming from the camp of the President-elect in recent weeks have been designed to assure us that not too much will change.
They've made these announcements even at the expense of disillusioning their base. One example (IMHO a trivial one) involves the choice of Rick Warren to pray at the inaugural ceremony.
Another example, one that has a good deal more to d with the pulic welfare, as well as with the interests of this blog, than who does the ceremonial praying, is: who will head the Securities and Exchange Commission?
Subect to Senate approval, Obama's answer to that question is Mary Schapiro.
The world of Wall Street knows Ms Schapiro. They're comfortable with her. This seems to have been her chief recommendation for the president-elect. At the press conference announcing this pick, he read from her resume: Mary Schapiro currently serves as the chief executive officer of the Financial Industry Regulatory Authority, the largest regulator for all securities firms that do business with the United States. Before that, she served as an SEC commissioner, and as chairwoman of the Commodity Futures Trading Commission
FINRA, of course, isn't a "regulator" in the public-sector sense. It's a New York based brokerage industry self-regulatory body. ("Not that there's anything wrong with that," I say in Seinfeldian tones. My goal here is clarity we can believe in.)
Schapiro was an SEC commissioner for six years, a period that began while Ronald Reagan was in office, continued through the presidency of the elder Bush, and into that of Bill Clinton. Under Clinton, she moved to the CFTC, where she served from late 1994 until early 1996 -- about 15 months. She thereafter accepted a job with the self-regulatory arm of the NASD. That arm then merged (in the distant summer of 2007) with the self-reg folks at NYSE to become FINRA.
Somewhat amusing sidebar: the first plan was to name the merged entiity SIRA, for "Securities Industry Regulatory Authority." That name was abandoned for reasons havibg something to do with Danish cartoonists, i.e. it was deemed insensitive because of its similarity to an Arabic term describing the traditional biographies of the prophet Mohammed. FINRA was adopted as least likely to give any offense to anybody.
You can make of this what you will. Personally, I have to leave now to worship at the holy church of flyng spaghetti, where we study our finra texts carefully for signs of the apocalypse. And we're really offended by this appointment.
They've made these announcements even at the expense of disillusioning their base. One example (IMHO a trivial one) involves the choice of Rick Warren to pray at the inaugural ceremony.
Another example, one that has a good deal more to d with the pulic welfare, as well as with the interests of this blog, than who does the ceremonial praying, is: who will head the Securities and Exchange Commission?
Subect to Senate approval, Obama's answer to that question is Mary Schapiro.
The world of Wall Street knows Ms Schapiro. They're comfortable with her. This seems to have been her chief recommendation for the president-elect. At the press conference announcing this pick, he read from her resume: Mary Schapiro currently serves as the chief executive officer of the Financial Industry Regulatory Authority, the largest regulator for all securities firms that do business with the United States. Before that, she served as an SEC commissioner, and as chairwoman of the Commodity Futures Trading Commission
FINRA, of course, isn't a "regulator" in the public-sector sense. It's a New York based brokerage industry self-regulatory body. ("Not that there's anything wrong with that," I say in Seinfeldian tones. My goal here is clarity we can believe in.)
Schapiro was an SEC commissioner for six years, a period that began while Ronald Reagan was in office, continued through the presidency of the elder Bush, and into that of Bill Clinton. Under Clinton, she moved to the CFTC, where she served from late 1994 until early 1996 -- about 15 months. She thereafter accepted a job with the self-regulatory arm of the NASD. That arm then merged (in the distant summer of 2007) with the self-reg folks at NYSE to become FINRA.
Somewhat amusing sidebar: the first plan was to name the merged entiity SIRA, for "Securities Industry Regulatory Authority." That name was abandoned for reasons havibg something to do with Danish cartoonists, i.e. it was deemed insensitive because of its similarity to an Arabic term describing the traditional biographies of the prophet Mohammed. FINRA was adopted as least likely to give any offense to anybody.
You can make of this what you will. Personally, I have to leave now to worship at the holy church of flyng spaghetti, where we study our finra texts carefully for signs of the apocalypse. And we're really offended by this appointment.
Wednesday, November 12, 2008
The next Treasury Secretary?
There's a good deal of speculation these days about the composition of the incoming Obama cabinet. It gets almost as much attention in the broadcast networks' news shows as the choice of a new White House puppy.
One intriuing bit of guesswork is that Timothy Geithner may be the next Treasury Secretary.
Geithner, who since November 2003 has been president of the New York Fed, would be a non-partisan choice, certain of Senate approval sans fireworks. He has held important posts under both the Clinton and the Bush (II) administrations, and is himself an avowed independent.
The New York Fed, institutionally, is the Wall Street annex of the federal reserve system itself. Though the brains of our central bank has to stay in Washington, it has to have both its eyes and its hands in southern Manhattan.
Geithner was profiled in the June issue of Portfolio, by Gary Weiss. In those innocent days, before the Lehman collapse, before the stock market panic of September and October that killed the McCain campaign and led to the nationalization of key financial firms -- before all of that, Weiss focused on Geithner's "informal brains trust," a group of Wall Street luminaries with whom he has been consulting.
These may also be figures of moment in Washington for all or some of the next four years: John Thain; Gerald Corrigan; Paul Volcker. No spring chickens in the group. John Thain is the reative youngster, at a spry 55 years. Volcker was the head of the Federal Reserve in the late Carter and early Reagan years, for goodness sake. Corrigan was Volcker's special assistant in those days.
If the Obama administration recruits its economic team from such a crowd, it will have made the decsion that the country needs some old wise white-haired heads around, for when those emergency calls come in at 3 AM from Greenwich, CT or the Isle of Man.
One intriuing bit of guesswork is that Timothy Geithner may be the next Treasury Secretary.
Geithner, who since November 2003 has been president of the New York Fed, would be a non-partisan choice, certain of Senate approval sans fireworks. He has held important posts under both the Clinton and the Bush (II) administrations, and is himself an avowed independent.
The New York Fed, institutionally, is the Wall Street annex of the federal reserve system itself. Though the brains of our central bank has to stay in Washington, it has to have both its eyes and its hands in southern Manhattan.
Geithner was profiled in the June issue of Portfolio, by Gary Weiss. In those innocent days, before the Lehman collapse, before the stock market panic of September and October that killed the McCain campaign and led to the nationalization of key financial firms -- before all of that, Weiss focused on Geithner's "informal brains trust," a group of Wall Street luminaries with whom he has been consulting.
These may also be figures of moment in Washington for all or some of the next four years: John Thain; Gerald Corrigan; Paul Volcker. No spring chickens in the group. John Thain is the reative youngster, at a spry 55 years. Volcker was the head of the Federal Reserve in the late Carter and early Reagan years, for goodness sake. Corrigan was Volcker's special assistant in those days.
If the Obama administration recruits its economic team from such a crowd, it will have made the decsion that the country needs some old wise white-haired heads around, for when those emergency calls come in at 3 AM from Greenwich, CT or the Isle of Man.
Tuesday, November 4, 2008
Election Day thoughts
First, I hope for my own sake and that of my fellow countrymen and women that the decision today isn't especially close so we don't end up spending the next two months debating about hanging chads, butterfly ballots, disputed absentee ballots from military bases, or whatnot.
It appears, from what little we know so far (I'm writing a little after 9:30 AM in the east) that this will not be the case. Senator Obama seems likely to end the night with a mandate.
I'm not especially trusting of polls, but I do have a high opinion of the efficacy of prediction markets such as this one. Intrade is showing as I write that you have to pay more than 91 cents for a chance to win a dollar on the bet that Obama will become President. You can buy onto McCain's Straight Talk bandwagon for just 9 cents. It is petty clear what that means.
In terms of economic/financial policy, I suspect a Prsident Obama would go along with the rising call in Europe and East Asia for a new Bretton Woods-style conference to develop a global system for the co-ordination of monetary policies, exchange rates, etc. What would come out of such a conference? One likely result would be the formalization of a new role for the Chinese yuan as the central pillar in this new system. It is the only currency that could possibly hold the position that the US dollar once did.
That's an index of the size of the changes underway and the changes to come.
It appears, from what little we know so far (I'm writing a little after 9:30 AM in the east) that this will not be the case. Senator Obama seems likely to end the night with a mandate.
I'm not especially trusting of polls, but I do have a high opinion of the efficacy of prediction markets such as this one. Intrade is showing as I write that you have to pay more than 91 cents for a chance to win a dollar on the bet that Obama will become President. You can buy onto McCain's Straight Talk bandwagon for just 9 cents. It is petty clear what that means.
In terms of economic/financial policy, I suspect a Prsident Obama would go along with the rising call in Europe and East Asia for a new Bretton Woods-style conference to develop a global system for the co-ordination of monetary policies, exchange rates, etc. What would come out of such a conference? One likely result would be the formalization of a new role for the Chinese yuan as the central pillar in this new system. It is the only currency that could possibly hold the position that the US dollar once did.
That's an index of the size of the changes underway and the changes to come.
Monday, August 25, 2008
Talking about Biden's Son
My readers are no doubt aware that the presumptive Democratic Party nominee for President, Sen. Barack Obama, has now selected Joseph Biden, a sort of Senate foreign-policy mandarin, as his running mate.
This means that Biden, and his immediate family members, come in for the usual scrutiny that follows such an announcement.
One of the first consequences of the new scrutiny involves Biden's son, Hunter, who was for a time the president of a hedge fund group, Paradigm Companies.
Hunter and his uncle James Biden (the Senator's brother) are now engaged in civil litigation with Anthony Lotito Jr., a former Paradigm partner. Lotito accuses the Bidens, and they in turn accuse him, of fraud.
The Washington Post had a big write up on the matter yesterday.
What piques my interest is the possibility that Senator Biden at some point made a strategic decision, that it was better for him politically to have a son in the hedge fund industry than to have a son who is a lobbyist. The negative fall-out woiuld be lesser in the former case than in the latter.
Lotito's complaint: Senator Biden "was concerned with the impact that Hunter's lobbying activities might have on his expected campaign for the 2008 Democratic presidential nomination," and, "told Lotito that, in light of these concerns, his brother had asked him to seek Lotito's assistance in finding employment for Hunter in a non-lobbying capacity."
I wish hedge funds well, because in a sense they are a proxy for my own broader belief in a vigorous capitalist financial environment. So, I'm happy that the political climate is such that a powerful politician would set his son up in a hedge fund as a way of getting him out of harm's way.
This means that Biden, and his immediate family members, come in for the usual scrutiny that follows such an announcement.
One of the first consequences of the new scrutiny involves Biden's son, Hunter, who was for a time the president of a hedge fund group, Paradigm Companies.
Hunter and his uncle James Biden (the Senator's brother) are now engaged in civil litigation with Anthony Lotito Jr., a former Paradigm partner. Lotito accuses the Bidens, and they in turn accuse him, of fraud.
The Washington Post had a big write up on the matter yesterday.
What piques my interest is the possibility that Senator Biden at some point made a strategic decision, that it was better for him politically to have a son in the hedge fund industry than to have a son who is a lobbyist. The negative fall-out woiuld be lesser in the former case than in the latter.
Lotito's complaint: Senator Biden "was concerned with the impact that Hunter's lobbying activities might have on his expected campaign for the 2008 Democratic presidential nomination," and, "told Lotito that, in light of these concerns, his brother had asked him to seek Lotito's assistance in finding employment for Hunter in a non-lobbying capacity."
I wish hedge funds well, because in a sense they are a proxy for my own broader belief in a vigorous capitalist financial environment. So, I'm happy that the political climate is such that a powerful politician would set his son up in a hedge fund as a way of getting him out of harm's way.
Sunday, August 3, 2008
CME Buying Nymex: Advisory firms & politicians approve
Two leading proxy advisory firms have recommended the CME Group shareholders for in favor of the acquisition of the New York Mercantile Exchange at the shareholders' meeting August 18.
"Consolidation among exchange operators continues to be a viable growth strategy. The transaction will result in a more competitive exchange, offers NYMEX Holdings shareholders a financially fair consideration and is expected to be accretive to earnings for the surviving shareholders of CME Group," is how Glass Lewis put the key point.
This has never really become the political football it might have. There is a lot of talk in the halls of Congress these days about speculators and institutional investing and how forces at work through the commodities exchanges may be driving the price of crude oil and/or the price of gasoline higher than the underlying supply and demand considerations would warrant.
If there's any truth to that theory at all, the Nymex is key. And exchange consolidation could easily be portrayed, by a politician looking for a point to make, as a way of easing the least productive or rational or consumer-friendly forms of speculation out there. [I'm not making such a point, mind you, only commenting on what some hypothetical demagogue might be able to put together in this line].
But our politicians seem to be smiling rather benignly upon the CME/Nymex nuptials.
Get these mergers and acquisitions done while the gettin' is good. The climate may turn.
"Consolidation among exchange operators continues to be a viable growth strategy. The transaction will result in a more competitive exchange, offers NYMEX Holdings shareholders a financially fair consideration and is expected to be accretive to earnings for the surviving shareholders of CME Group," is how Glass Lewis put the key point.
This has never really become the political football it might have. There is a lot of talk in the halls of Congress these days about speculators and institutional investing and how forces at work through the commodities exchanges may be driving the price of crude oil and/or the price of gasoline higher than the underlying supply and demand considerations would warrant.
If there's any truth to that theory at all, the Nymex is key. And exchange consolidation could easily be portrayed, by a politician looking for a point to make, as a way of easing the least productive or rational or consumer-friendly forms of speculation out there. [I'm not making such a point, mind you, only commenting on what some hypothetical demagogue might be able to put together in this line].
But our politicians seem to be smiling rather benignly upon the CME/Nymex nuptials.
Get these mergers and acquisitions done while the gettin' is good. The climate may turn.
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