Larry Doyle's Blog, page 15

DANGER: Unknown Size, Location of Financial WMD

If there are hackers in far off countries who can figure out how to penetrate the computer systems of our nation’s banks and retailers, how is it that a full 5 years after the greatest crisis since the Depression that our financial regulators are not able to properly monitor the financial weapons of mass destruction, aka derivatives contracts, running throughout our system?

I will tell you how. Because the ‘too big to fail’ banks have zero interest in making that happen. If anybody needed any further reason to break up our ‘too big to fail’  banking oligopoly, Bloomberg provides it in this recent editorial:

The recent turmoil in emerging markets raises an urgent question: If things get worse, if markets plunge or a government defaults, do regulators know which banks, hedge funds or other institutions are most at risk? 

Almost six years after the crash, with financial regulation overhauled in the U.S. and elsewhere, you’d expect the answer to be yes. Actually, the short answer is no. Regulators charged with overseeing the financial system have vastly more data than they did before the last crisis, but not much more of a clue.

Five years ago, the extent and concentration of international exposure to the U.S. real estate bubble caught authorities everywhere off guard and almost sent the world into another depression. With precious little information on the investments and derivative contracts that connected financial institutions to one another, regulators were reduced to the role of firefighters. With little understanding of how far the damage could spread, governments had no choice but to risk trillions of taxpayer dollars on emergency guarantees and bailouts.

The experience led authorities to build better monitoring systems. One global initiative aims to gather real-time data on all derivative contracts, compiling the numbers in a way that would allow regulators to spot dangerous concentrations of risk. Another requires the world’s 20 or so largest financial institutions to report on their counterparties, so regulators can better understand how distress at one company could affect others.

Problem is, neither project is anywhere near completion. On derivatives, national regulators (and in many cases numerous separate regulators within countries) have focused on their own narrow areas of authority, creating a supervisory Babel. Some 22 repositories collect data in 11 different jurisdictions, all with their own reporting requirements, formats and mandates.

In the U.S., for example, the Securities and Exchange Commission is responsible for credit derivatives that insure against defaults on individual bonds, while the Commodity Futures Trading Commission handles the indexes that traders often use to hedge their bets on such derivatives.

Asking the big financial institutions about their counterparties is also problematic, because the institutions either don’t know or won’t say. (LD’s highlight: here it is folks, Wall Street owns Washington!!)

A report last month from the Senior Supervisors Group, which includes regulators from 10 countries, voiced exasperation: “Five years after the financial crisis, firms’ progress toward consistent, timely, and accurate reporting of top counterparty exposures fails to meet both supervisory expectations and industry self-identified best practices.” The report said that banks provided data riddled with preventable errors, and had difficulty reconciling information from different parts of their operations.

The upshot is that no single authority has a complete view of the obligations that connect companies around the world. Suppose U.S. hedge funds sold default insurance on a bunch of European banks that were up to their eyeballs in emerging-market debt: Nobody would see the whole picture or understand the risks. Last year, a CFTC official said that the available derivatives data was such a mess that the agency couldn’t see the enormous “London Whale” trades that led to more than $6.2 billion in losses at JPMorgan Chase & Co. in 2012.

Regulators are trying to put this right. The CFTC has a team working on how to make sense of all its data. The Financial Stability Board, a forum set up by the Group of 20 developed and developing nations, is considering a global hub to put back together the derivatives data that regulators have pulled apart. This necessary integration won’t be possible, though, unless individual regulators make unprecedented efforts to coordinate their work, harmonize their rules and gather information in compatible formats.

Governments ought to make this work a priority. The Feb. 22-23 meeting of Group of 20 finance ministers and central-bank governors in Sydney would be a good place to start. And the first step is to acknowledge that the current state of affairs is unacceptable.

Which institutions dominate the derivatives markets with an approximate 95% market share? Goldman Sachs, JP Morgan, Bank of America, Wells Fargo, and Citigroup.

These banks should not be in a position to hold our markets, our economy, and ultimately our nation hostage.

Break up these banks.

I call for that reform and many others in my recently released book, In Bed with Wall Street: The Conspiracy Crippling Our Global Economy.

Larry Doyle

Please order a hard copy or Kindle version of my book, In Bed with Wall Street: The Conspiracy Crippling Our Global Economy.

For those reading this via a syndicated outlet or receiving it via e-mail or another delivery, please visit the blog to comment on this piece of ‘sense on cents.’

Please subscribe to all my work via e-mail. 

The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

Raising the Minimum Wage: Not the Answer

Raising the minimum wage is another hot button issue that will serve to incite strong reactions on both ends of the political spectrum, but fails to address core structural issues in our nation.

Who is not supportive of helping people rise out of poverty and try to earn a reasonable wage?

While some political pundits might like to rewrite basic economic principles, ultimately a raising of the minimum wage serves to re-slice our nation’s economic pie rather than grow it. Some individuals will benefit by earning more, but others in the same economic strata will suffer by losing their jobs altogether.

To think that there will not be a loss of jobs when the price of labor goes up is akin to defying some basic rules of science.

Net net, I would maintain that a raising of the minimum wage falls into the realm of not being a meaningful positive or negative for our overall economic well-being but merely another form of redistribution economics practiced by the current administration.

Who is more served by raising the minimum wage? Those engaged in political expediency looking to score political points. Regrettably, all too much of our time and focus these days revolve around this lowest of common denominators.

So let’s dispense with the minimum wage band-aid and put forth some hard-hitting proposals that, in my opinion, would help grow our economic pie. Who might have to give some ground in doing so? Those engaged in feeding at the Washington trough for personal benefit while failing to advance our national interests.

With little regard for the takers in the crowd, in lieu of merely pushing paper (as the raising of the minimum wage is likely to do), I propose the following as vehicles for helping people advance:

1. Increase educational choice via supporting well-run charter schools and student vouchers. Education is ultimately the only real path out of poverty. Tell the teachers’ unions to fall in line.

2. Public work over welfare. People should not want to remain on a form of public welfare because it is the economic feasible thing to do. There comes a sense of self-respect connected to work. This should be promoted. Getting another job is always easier when one has a job in the first place.

3. I firmly believe the two parent family is the best ‘social program’ in the history of our nation. Provide tax incentives that support marriage.

4. Let’s not overlook the fact that corporate cronyism serves the interests of the few at the expense of the masses. To that end, let’s engage in the following: meaningful tax reform including an increase in the tax rate connected to carried interest; a closing of loopholes that promote the hoarding of cash in offshore accounts; an end to the political payoffs that allow many corporations (if not industries) to abuse the public interest while paying little meaningful tax in the first place.

What are the needed ingredients to undertake these initiatives?

Leadership and love of nation.

Whatever happened to those virtues?

I can hear the cynics in the crowd say that these initiatives could never happen. I would ask who was the last political leader we had that put forth all of these topics on one political agenda and was willing to go to the mat in doing so? I know of nobody. Why? Because the party leaders dominate and they serve at the behest of those milking the system — not those who really want to serve our collective national interest.

Do you disagree?

Larry Doyle

Please order a hard copy or Kindle version of my book, In Bed with Wall Street: The Conspiracy Crippling Our Global Economy.

For those reading this via a syndicated outlet or receiving it via e-mail or another delivery, please visit the blog to comment on this piece of ‘sense on cents.’

Please subscribe to all my work via e-mail. 

The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

J. Weil: Wall St. Arbitration ‘Plenty Rigged’

Bill Cohan, Susan Antilla, Gretchen Morgenson.

Although these individuals are not the only financial journalists whom I hold in high regard, they are certainly among the very few.

Who else is in their company? Bloomberg’s Jonathan Weil, who just the other day wielded a very sharp pen in addressing the arbitration process on Wall Street, or what I define as ‘the kangaroo court.’

Truth be told, the folks at FINRA who oversee Wall Street arbitration seem to be getting a little weary of being used as a punching bag and have made some tweaks to the system. Weil is not impressed.

He hits back hard in writing, Feeling Ripped Off? Don’t Rely On The Street’s Arbitrators:

Here’s some good news for anyone who ever gets ripped off by a securities broker. Wall Street’s self-policing body has decided to make its mandatory-arbitration system a little less rigged. The bad news? It still will be plenty rigged.

So-called public arbitration panels no longer could include people who used to work for brokerage firms, under a new proposal by the Financial Industry Regulatory Authority. Finra’s rules now say former stockbrokers, securities lawyers and others can serve on such panels after they have been out of the industry for five years. The rule change will go to the Securities and Exchange Commission for approval.

Finra has two classifications of arbitrators: non-public and public. Non-public arbitrators have experience in the securities industry. Public arbitrators aren’t required to have any industry knowledge. Investors get a choice of having claims heard by one kind or the other. They choose all-public panels in most cases, although that’s a misnomer because the hearings in this shadow-court system are conducted in private.

The tweak would be an improvement — who could be against having neutral arbitrators? — but only at the margins. The fundamental problem is that industry-sponsored arbitration is a racket. Customers have no choice but to sign away their right to sue in court if they want to open a brokerage account. (Lots of other industries get away with this too, from mobile-phone service providers to credit-card companies.)

The arbitrators are picked from a list compiled by Finra, which is financed by and functions as an arm of the securities industry. Arbitrators are independent contractors who serve at Finra’s discretion. Payments to claimants are notoriously low. Arbitrators’ rulings often include no explanation of why they decided the way they did.

If the arbitration system had been designed by fleeced investors and their attorneys, it probably would be biased against the securities industry. Not surprisingly, Finra’s system is designed to favor the industry it represents.

Back in 2005, Massachusetts Secretary of the Commonwealth William Galvin explained how things work while testifying before Congress about the securities arbitration process, back when Finra was known as the National Association of Securities Dealers. One example he offered was of a man he knew named John J. Mark.

“Mark was an arbitrator with the Commonwealth of Massachusetts for many years, and an adjunct professor at Harvard and Boston University,” Galvin said in his written remarks. “As far as I know he’s a man of impeccable credentials. And yet he was dropped from the NASD’s pool of arbitrators. Why? As he told a meeting of state securities regulators last summer, (and I quote): `The word on the street is if you rule against the (brokerage) houses, you will be removed from the list.’”

That perception has stuck through the years. Bloomberg View columnist William Cohan wrote an article in 2012 describing how Finra “seemingly out of nowhere fired three arbitrators in the months after a May 2011 case in which they awarded $520,000 to the estate” of a deceased Merrill Lynch customer. One after another, the arbitrators received “black spot” letters from Finra, removing them from its roster. Finra said at the time that the removals weren’t related to complaints by Merrill. As Cohan wrote, Finra’s explanations rang hollow. Two weeks after his column ran the three arbitrators were reinstated. (Sometimes shaming works.)

This is the reputation that Finra has created for itself, notwithstanding its claims that its arbitrators are neutral, qualified, fair and impartial. Here’s how the securities industry could help fix that: Stop requiring its customers to give up their right to a day in court as a condition of doing business.

I fully concur. Those commenting on Mr. Weil’s article would seem to as well.

What is the best way of dealing with Wall Street arbitration? Navigate accordingly with every precaution so you do not have to enter into it in the first place.

Larry Doyle

Please order a hard copy or Kindle version of my book, In Bed with Wall Street: The Conspiracy Crippling Our Global Economy.

For those reading this via a syndicated outlet or receiving it via e-mail or another delivery, please visit the blog to comment on this piece of ‘sense on cents.’

Please subscribe to all my work via e-mail. 

The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

Mr. Old Man Winter

There was a time when I loved days like this.

The prospect of making $10 to 15 dollars or so after shoveling out various neighbors’ driveways and walkways was energizing. After that, constructing a snow fort from the mountain of snow left from the city snowplow made for great fun with boyhood friends. Those days were 40 years ago.

With Mister Old Man Winter roaring along the east coast once again, the only word I have to say to him now is . . . “Uncle!”

Be safe and warm as you navigate accordingly.

Larry Doyle

Please order a hard copy or Kindle version of my book, In Bed with Wall Street: The Conspiracy Crippling Our Global Economy.

For those reading this via a syndicated outlet or receiving it via e-mail or another delivery, please visit the blog to comment on this piece of ‘sense on cents.’

Please subscribe to all my work via e-mail. 

The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

SEC Commissioner Stein: We Must Better Understand FINRA

Who oversees the private, Wall Street funded police detail, aka FINRA, that I have long maintained operates as little more than meter maids?

The SEC, that’s who.

Or at least the SEC is supposed to regulate and oversee FINRA. Whether the SEC effectively oversees an organization which on its face appears to be loaded with conflicts of interest — if not much worse — is the stuff on which books are written.

As a strident critic of both the self-regulator and the self-regulatory model, I have long called for FINRA’s doors and windows to be opened so America can really learn what goes on within this organization and its relationships with the very banks on Wall Street that fund it. Who seems to be joining my call for a serious review of FINRA? 

None other than a recently appointed SEC commissioner Kara Stein who in the midst of a talk just last week had this to say:

And we must better understand and clarify the role of the FINRA, which has taken on more and more regulatory functions.  In recent years, through private contracts, FINRA has come to run many critical market surveillance functions, from monitoring for insider trading, to looking for cross-market manipulations.  While this may be one way to deal with increasing market complexity, it arguably has also created new challenges: including how to effectively oversee a very important, but private regulator.

We need to be thinking about the interactions between FINRA and its customers, other market participants, the Commission, and regulators and participants in related markets.

This public statement is long overdue and if it is not a de facto admission that the SEC has failed to properly oversee FINRA, I do not know what is.

Are you listening Mary Schapiro?

The key questions now are: what will the SEC do and what will they share with the American public on this front? Let’s give Commissioner Stein some assistance and tell her to air the dirty laundry within FINRA in the following fashion:

1. Call for FINRA to undergo an independent outside audit.

2. Call for FINRA to be accountable under the Freedom of Information Act.

3. Call for FINRA to not be afforded the privilege of absolute immunity. I mean, absolute immunity without total transparency is little more than a license to steal, don’t you think?

4. Call for FINRA to release all the information, financial and otherwise, pertaining to the merger between the NASD and the regulatory arm of the NYSE to form the self-regulator.

That’s a start, Commissioner.

No softball around here. After you get the information and answers to points 1-4 above so that you can “better understand and clarify the role of the FINRA,” can we count on you to share all of what you learned with the American public? FINRA does answer to you, right ? And you and your colleagues at the SEC do answer to us, the American public, don’t you?

Or you are supposed to, right?

Transparency is still the great and only disinfectant. Especially when it comes to the backroom where those overseeing the meter maids may be cozying up to the heavyweight firms on Wall Street that provide the bulk of the funding for FINRA.

Navigate accordingly.

Larry Doyle

Please order a copy of my book, In Bed with Wall Street: The Conspiracy Crippling Our Global Economy.

For those reading this via a syndicated outlet or receiving it via e-mail or another delivery, please visit the blog to comment on this piece of ‘sense on cents.’

Please subscribe to all my work via e-mail. 

The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

Better Markets v DOJ in re: $13 Billion JPM Fine, A Question of Trust

$13 billion is a lot of money even by Wall Street standards.

But is the $13 billion fine imposed on JP Morgan by the Department of Justice an appropriate penalty for the array of transgressions involved? In order to answer that question, one needs to rely on the inputs reviewed and the process utilized by the Department of Justice which meted out this justice.

The inability to undertake just such a review is the crux of the lawsuit brought by Better Markets, “a nonprofit, nonpartisan organization that promotes the public interest in financial reform in the domestic and global capital and commodity markets.” 

Better Markets filed a lawsuit in U.S. District Court for the District of Columbia challenging the Justice Department’s authority to unilaterally enter into the unprecedented and historic $13 billion agreement with JP Morgan Chase, which was the largest settlement with a single entity in the nation’s history by more than 300%. The November 2013 agreement gave JP Morgan Chase – with no judicial review or approval – blanket civil immunity for years of alleged pervasive, egregious and knowing fraudulent and illegal conduct that contributed to the 2008 financial crash and the worst economy since the Great Depression.

“The Wall Street bailouts were bad enough, but now taxpayers are being forced to accept a secretive backroom deal that may well have been another sweetheart deal. The Justice Department cannot act as prosecutor, jury and judge and extract $13 billion in exchange for blanket civil immunity to the largest, richest, most politically-connected bank on Wall Street. The executive branch does not have this unilateral power because it violates the constitutional requirement of checks and balances,” said Dennis Kelleher, President and CEO of Better Markets, an independent nonprofit organization that promotes the public interest in the financial markets.

“Adding insult to injury, the Department of Justice did all this in an agreement that appears to have been written more to conceal than reveal. For example, it is using the large dollar amount to blind everyone to the reality that they have disclosed no meaningful facts about what JP Morgan Chase did, who did it, who it hurt, how much they profited and how much their clients, customers and others lost. The American people deserve, and the law requires, an independent judicial review to determine whether the settlement is fair and whether it can withstand scrutiny in the light of day,” Mr. Kelleher said.

What is the key question underlying this lawsuit?

Very simply, do we the American public trust the Department of Justice here? While we can rehash a whole slew of bad practices and backdoor bailouts, our justice system relies upon the premise that our public officials will truly act in the public trust and uphold the rule of law in doing so.

The fact that this question of trust is not immediately dismissed is a strong commentary on the state of things in our nation today.

So, I ask you who read this post, “Do you trust the DOJ in the administration of this justice meted out upon JP Morgan?”

Larry Doyle

Please order a copy of my book, In Bed with Wall Street: The Conspiracy Crippling Our Global Economy.

For those reading this via a syndicated outlet or receiving it via e-mail or another delivery, please visit the blog to comment on this piece of ‘sense on cents.’

Please subscribe to all my work via e-mail. 

The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

The Real Employment Situation in America

[image error]The most recent employment report released this past Friday showed an increase in non-farm payrolls of only 113k jobs but a continued decline in the overall rate of unemployed to 6.6%.

While the growth in jobs is not what we would like, the overall rate of unemployment is not bad by historical measures, right?

To steal a phrase from the inimitable radio host Paul Harvey, “And now, the rest of the story.”

Thanks to the regular reader who brought my attention to a recent report released by Boston Federal Reserve president Eric Rosengren addressing the structural problems in our labor markets that reflect the real employment situation in America.  This report, Underutilization in Our Labor Markets highlights the following:

While the narrow measure of unemployment has been improving, the broader measures from the Bureau of Labor Statistics show that over 20 million Americans are currently either unemployed, are marginally attached to the labor force (including “discouraged” workers), or are working part time when they would prefer full-time work.

“For these Americans, it is all too painfully apparent that labor markets remain far from their state prior to the recession,” said Rosengren.  “Using the narrow, widely reported unemployment rate alone could suggest a misleadingly optimistic state of affairs.”

The broader measures of unemployment remain unusually high relative to the narrow (U-3) measure of unemployment, said Rosengren.  In fact, the broader the measure, the further the current reading is from its pre-recession level and from its average from 1994-2007.

Rosengren noted that while his talk focused on data points and measures, “we cannot lose sight of matters of human toll and potential, as well.”

The broadest measure is particularly striking.  It includes people who are available to work full time but have had their hours reduced, or can only secure part time work. “Even at this point in the recovery, the measure is still nearly four and a quarter percentage points or 6.5 million people above the pre-recession average,” (LD’s highlight) said Rosengren.  “The large number of individuals working part time for economic reasons highlights the need for much more improvement in labor markets.”

That point in bold is the elephant in our nation’s living rooms and kitchens. What are the implications and challenges of this enormous slack in our labor markets? Rosengren asserts:

1. Monetary policy will not effectively address structural problems in labor markets.

2. One potential explanation for persistently low price and wage growth may be that the broader measures of labor markets are signaling a weak labor market.

If monetary policy is not the right approach to address the structurally unemployed then 1. why has the Federal Reserve engaged in the quantitative easing experiment, and 2. what are the other folks in Washington doing to address this enormous drag on our economy and ultimately our nation?

Rosengren concludes that ultimately all the Federal Reserve can do, though, is to keep rates lower for longer:

With too much labor market slack and very low inflation rates, monetary policy should continue to be highly accommodative.

For those who would like to review the 19-page overview and charts connected to Rosengren’s talk I welcome sharing them.

Underutilization in U.S Labor Markets, Eric S. Rosengren, President and CEO Federal Reserve Bank of Boston; February 6, 2014, New College of Florida

So 6.6 — as in the 6.6% rate of unemployment — is not the proper measure to assess the real employment situation in America. What is the right number? 6.5 is the right number, as in the 6.5 million people who are available to work full time but have had their hours reduced or can only find part time work.

“Now you know the rest of the story.”

Navigate accordingly.

Larry Doyle

Please order a copy of my book, In Bed with Wall Street: The Conspiracy Crippling Our Global Economy.

For those reading this via a syndicated outlet or receiving it via e-mail or another delivery, please visit the blog to comment on this piece of ‘sense on cents.’

Please subscribe to all my work via e-mail. 

The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

Senator Warren Indicts Regulators ‘In Bed with Wall Street’

“The question I’m asking is whether or not there’s adequate deterrent to prevent the largest financial institutions in this country from breaking the law,” Sen. Elizabeth Warren (D-Mass.) said at a Senate Banking Committee hearing today. “Right now, if financial institutions can just settle their claims out of court, and get a raise for settling them, then where’s the deterrent?”

Senator Warren pressed regulators about their current enforcement efforts, noting that the “the public has little confidence in regulators’ willingness to seek the kind of penalties that will actually deter future financial crimes.”

With those two statements, Senator Warren (D-MA) indicts the current scandalous practices if not outright corruption that lies at the intersection of Wall Street and Washington and provides the public’s concluding sentiment as detailed in In Bed with Wall Street. The clip runs a mere 6-minutes.

What to do about this? How about we start with the following:

1. Congress should launch a privately run Office of Whistleblower Protection.

2. Wall Street’s private police detail, that is the financial self-regulatory organization FINRA, should no longer have absolute immunity and should be subject to the Freedom of Information Act.

3. Wall Street arbitration should be optional and not mandatory so as to end the kangaroo court.

4. End the self-regulatory oversight of Wall Street.

5. BREAK UP THE ‘TOO BIG TO FAIL’ BANKS!!

Is anybody in favor of the ongoing cronyism and corruption that defines our current system?

Larry Doyle

Please order a copy of my book, In Bed with Wall Street: The Conspiracy Crippling Our Global Economy.

For those reading this via a syndicated outlet or receiving it via e-mail or another delivery, please visit the blog to view the embedded video clip and to comment on this piece of ‘sense on cents.’

Please subscribe to all my work via e-mail. 

The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

Hank Paulson Trusts Neither Wall Street Nor Washington

Do you ever wonder if those who ‘find religion’ late in life so to speak are trying to conveniently cleanse their souls before making their way to the pearly gates?

I think in the case of public officials, it is fair to ask if the ‘cleansing process’ is done for purposes of resurrecting an image or if the individual is truly engaging in a meaningful transformation.

I ask these questions this morning as I see a headline cross the news wire that none other than former Wall Street titan and Washington heavyweight Henry Paulson now trusts neither Wall Street nor Washington.

Is that right? Well ol’ Hank would seem to be having a ‘come to Jesus’ moment here.

This revelation of Hank’s newly found lack of trust in his longstanding compadres on Wall Street and in Washington is the title of an article just released in The Atlantic: Hank Paulson Mastered Wall Street and Washington, and Now He Trusts Neither. The commentary is not available online so I will be running out shortly to pick it up.

I would imagine Hank is well aware of the general lack of trust held by the American public toward the two greatest bases of power in our nation and would like to join the crowd. What do you think the chances are that in the midst of this article I will find details regarding ol’ Hank’s influence, involvement, or knowledge in the following situations:

1. relaxing the net capital standards on Wall Street that allowed Goldman Sachs and all the other investment banks to triple their leverage. That development was certainly one of the key factors in bringing down our markets and global economy.

2. his pressure and influence from early on to allow Wall Street’s self-regulatory entities at the NASD and the regulatory arm of the NYSE to merge and form FINRA.

3. the revolving door that looks all too similar to an EZ-pass between his former firm Goldman Sachs and an array of offices in and around Washington DC.

4. Goldman Sachs being paid 100 cents on the dollar by US Treasury for the firm’s exposure to AIG.

5. former Goldman colleague Stephen Friedman’s blatant insider trading violation when as chairman of the New York Fed he purchased not an insignificant amount of Goldman stock after having learned of some very sensitive inside information.

If Hank is looking for a little absolution in an attempt to burnish his image, then he has to come totally clean. Cleanliness may be next to godliness but truth is also next to transparency.

I will let you know what I learn.

If anybody has read the article yet, please share your thoughts and insights.

Navigate accordingly.

Larry Doyle

Please order a copy of my book, In Bed with Wall Street: The Conspiracy Crippling Our Global Economy.

For those reading this via a syndicated outlet or receiving it via e-mail or another delivery, please visit the blog to comment on this piece of ‘sense on cents.’

Please subscribe to all my work via e-mail. 

The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

The Effect of the Obamacare Tax

[image error]The release of the Congressional Budget Office report yesterday on the effects of Obamacare has not surprisingly set off a firestorm in respective political camps and among their media friends.

Let’s dispense with the heavy clanging noise connected to this topic that is resonating throughout our land and take a more measured approach in assessing the impact of the tax connected to Obamacare.

First and foremost, although many do not like associating the term “tax” in discussing Obamacare, let’s not forget that none other than Chief Justice Roberts told us that is exactly what it is in handing down his ruling upholding Obamacare.

Without being overly simplistic, whenever taxes are imposed behaviors change. To think otherwise is naive. 

Those upon whom taxes are imposed, be they individuals or companies, will typically look to offset the effect of the increased cost by compensating elsewhere. Individuals will typically decrease their spending on discretionary items. Companies will typically look to decrease their costs in any number of areas but the most likely being the costs connected to personnel. Those costs would be in terms of lessened hours worked, lessened overall headcount, or a combination of the two. This typically will lead to a slower overall rate of growth and output for a company and in turn the economy as a whole.

For those who are the beneficiaries of a tax imposed elsewhere, the question begs whether they will utilize the benefits they receive to augment their current level of productivity so as to offset the decline in productivity elsewhere in the economy. Not that this reality could not play out but the immediate questions beg if, where, when, and why it has played out in this fashion elsewhere.

I would maintain that the answers to these questions are not hard and fast one way or the other as either of our political camps may care to promote. This said, I personally believe there is more evidence supporting the case that increased taxes have a negative effect on the overall economy that is not meaningfully offset by an increased level of productivity elsewhere. What do I expect we will see, though, when both taxes and benefits are increased as is and will happen with Obamacare?

I certainly expect that we will see people on both ends of the spectrum trying to beat the system. That is, companies will see where and how they might be able to get around the increased taxes and regulations. This means more business likely taking place under the table or in a black market.  On the other side of the coin, I would also expect that we will see more individuals trying to figure out how they can receive benefits that otherwise should not accrue to them.

Who is left in the middle to get increasingly squeezed? Those purchasing insurance through the individual marketplace with no place to hide.

Those with personal insights please share them.

Navigate accordingly.

Larry Doyle

Please order a copy of my book, In Bed with Wall Street: The Conspiracy Crippling Our Global Economy.

For those reading this via a syndicated outlet or receiving it via e-mail or another delivery, please visit the blog to comment on this piece of ‘sense on cents.’

Please subscribe to all my work via e-mail. 

The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.