Monday, June 28, 2010

Financial Regulation Winners and Losers

Let’s talk about Obama’s biggest achievement, THE achievement that will rally the public to the Democratic side in the upcoming election: FINANCIAL REFORM. . . (yawn), sorry. Any ways, here are the winners and losers. You probably won’t be surprised to hear that the well-connected banks are the winners and you are the loser.

The winners. . .

1. Goldman Sachs and the investment banks. This bill changes nothing for these boys (see 5 below).

2. Fannie Mae and Freddie Mac. These monster slush funds and dumping grounds for former Democratic staffers are big winners because somehow the Democrats couldn’t find it in their corrupt little hearts to fix their regulations. . . even though Fannie Mae and Freddie Mac directly caused the financial meltdown and will cost taxpayers $389 billion. Laughably, the MSM actually calls Fannie and Freddie “losers” on this because the lack of new regulations means the evil Republicans will keep talking about them. Boogey boogey boogey!!

3. Wal-Mart and the Retailers. Wal-Mart won a reduction in the amount that credit card companies can charge retailers for the use of a credit card -- which will save retailers $20 billion a year, which the Democrats are sure will be passed on to consumers. Wink wink.

4. Massachusetts Banks. To get Scott Brown’s vote, the bill includes exemptions for State Street bank and other Massachusetts banks from “the Volcker Rule,” which will keep banks everywhere outside of Massachusetts from trading with their own money. . . mostly.

5. CME Group. Blanche Lincoln forced a provision into the bill that requires that derivates be cleared by a third party and traded on an open exchange. The organization who led this charge is the CME Group, which coincidentally, provides just such an exchange! It's like a Christmas miracle!

6. Derivative Traders. Blanche Lincoln wanted to appear to crack down on the $600 trillion market in derivatives. So she put in place regulations that prevent banks from trading the more exotic derivatives. . . unless they do it through subsidiaries. This shell game is what is causing the MSM to call Goldman and the boys “losers” in this. Not coincidentally, the stock of Goldman and the boys went up between 4% and 6% right after this "punishing bill" was announced.

The losers. . .

1. Bank Customers. Bank fees are going up about $19 billion a year, almost the exact same amount the retailers won’t be sharing with you. If you believe the Democrats, then banks will pay these fees. If you aren’t stupid, then you know bank customers will pay these fees.

2. Retail Customers. Retailers also won the right to require minimum dollar amounts on credit card purchases.

3. The Democrats and the Liberal Press. The Democrats believe that they have finally achieved something they can sell to the public, and they are going to make this the focus of their campaign. Heh heh heh. . . oops, I mean, oh no, whatever will we do now!

4. Us. This bill does nothing to stop future bailouts, does nothing to clean up our archaic regulatory scheme, and simply ensconces the principle that big lobbyists get what they want from our government, and you pay for it. Moreover, a golden opportunity for true bi-partisan, expert-based reform is squandered. . . as usual.

In fact, the only good thing to come out of this bill is that mortgage issuers will now be required to hold 5% stakes in the mortgages they issue. This will slow mortgages and make them more expensive, but it will also help slow the growth of legal-yet-basically-fraudulent mortgages because the issuers will now stand to lose when they make bad mortgages.

There you have it. I hope you’re still awake. . . so do the Democrats.


BoilerRoomElf said...

Zzzzzzzzz.... zzzzzzzz...

You want us asleep at the boilers again, chief?

Nah, really we've got the Elf Credit Union where do most of our banking, but it sounds like we're still going to get screwed, eh?

AndrewPrice said...

How did I know you would be the first to fall alseep?! LOL!

Seriously, I'm amazed that they are putting all of their eggs in this "wonky" basket? No one outside of industry people will care about this.

I didn't know you had a credit union down there? What else have you got going on?

AndrewPrice said...

By the way everyone, interestingly, the death of Robert Byrd is complicating this as they no longer have the votes to pass this monster in the Senate. So look for more favors to be handed out to sweeten the give-away pot.

BoilerRoomElf said...

Well, no one is going to care until they can't use their credit card to buy just a pack of cookies at Walmart anymore.

Then they'll be angry!

Credit union, commissary, health clinic... we're a regular Elf Base down here.

AndrewPrice said...

Wonderful. Sounds like it's time for a cruise missile strike on the basement. . . er, sounds great! Keep up the good work.

Yeah, groups like 7/11 in particular are upset that people are putting "micro purchases" on credit cards. They claim they are losing money on those transactions. We'll see how they handle it, but I would expect something like a $5 minimum on credit card purchases. . . which will anger people.

MegaTroll said...

How did I know that when the Democrats get together to regulate something, the public was going to be left holding the back?

CrispyRice said...

See, Andrew, this is the kind of thing that does turn me in a big way, but I have a nagging suspicion that I'm going to pay for ignoring it in a big bad way.

Do the Dems really think I'm going to laud them for their efforts when the only thing that I get from it is - "I'm probably getting the short end of the stick?"

AndrewPrice said...

Mega, Because that's the way the Democrats work. They claim to be progressives, but they really are nothing more than influence peddlers. Their whole philosophy is "the handout."

AndrewPrice said...

Crispy, They have been blinded by the populist rhetoric. They think that because people are upset at banks and financial institutions (especially on the left), that all they have to do is to stand up and say "we beat those guys down for you" and you'll just drop to your knees and praise them.

But with their track record, there is no reason for anyone to think anything other than "I'm about to get screwed."

Moreover, the reality is that this is the sort of thing people expect their government to do. They don't jump up and down and clap when it gets done. They get angry if it isn't done, but they don't give points for doing it.

This is the legislative equivalent to a restaurant announcing that they just cleaned their ovens!!

Ed said...

Bend of America, here it comes.

Ed said...

Oh and good riddance to Sen. Byrd.

AndrewPrice said...

Both statements are short and to the point Ed. Not much I can add to them!

Joel Farnham said...


Speaking of Senator Bird, are there any other things affected by his death?

AndrewPrice said...

Joel, Right now the whole Senate calendar will probably be grinding to a halt again, as they'll have to figure out if they have enough votes for anything.

I'm not sure yet if this will affect Kagan or not. He's not on the Judiciary Committee, so his death won't interfere with that. It makes a filibuster easier, but there are already too many Republicans on record supporting her.

It will affect (and probably finally kill off) any chance of an energy bill. This should also scare the heck out of the coal industry.

In West Virginia, they're going to be fighting over their confused laws over how long the next term will be. There aren't enough Republicans to affect things there, but the Democrats form various corrupt little factions who fight each other just as much as Dems/Repubs normally do. So expect a good deal of "shotgun shack" intrigue.

Beyond that, I'm not sure what else it might affect.

Unknown said...

Andrew: The left wing of the Democratic Party is an example of "a little knowledge is a dangerous thing." They know just enough about economics to get everything wrong. But one thing they do know--whether their form of regulation works or it doesn't, either way it grants them extraordinary and probably unconstitutional power.

AndrewPrice said...

Lawhawk, That true. But this bill wasn't done by their left flank. This bill was put together by their party leadership and it was nothing but a pay off to contributors.

Tennessee Jed said...

Andrew, I was going to comment, but I think I need to go make a pot of coffee first. My reaction to this bill is the same one offered by the sorority girls who were left at the "Death Delayed" Club ("Mind if we dance with your dates?) in Animal House: e.g. "eeewwwww!" ;=)

AndrewPrice said...

Jed, Get the coffee. . . drink a 100 cans of coke. . . pop a couple no-doze. . . and then come share your thoughts! LOL!

I'm sure the Democrats are waiting anxiously to hear how this changes your whole mind about them!

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