Author Topic: The U.S. Elections: The Future of Financial Regulation and the Impact on Financial Institutions  (Read 1305 times)

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Online mountaineer

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Mr. M and I attended an investment seminar yesterday sponsored by a local bank. One of the guest speakers was Nathan Dean from Bloomberg  Intelligence and he spoke on the impact of the election on financial regulation. I will attempt to summarize his talk.

1) The election and Dodd-Frank: 70.3 percent of the rules under Dodd-Frank have been finalized. 20.5 percent of the rules are still waiting to be proposed. Various agencies are involved in this, including the SEC, bank regulators, CFTC and others. What impact would a President HRC or DJT have on this process and other regulation?

2) HRC: Her website has info on her positions in this area. She supports “too big to fail.” She says we need new regulations to break up big banks and calls for a risk fee tied to a bank’s debt, which no one else has proposed. The “big banks” she claims she’d go after include Wells Fargo, Morgan Stanley, State Street, Goldman Sachs. (He didn't say anything about how HRC really is in the bag for these entities and has received zillions of dollars from them).

She would bring back the Volcker Rule. (defined as a federal regulation that prohibits banks from conducting certain investment activities with their own accounts, and limits their ownership of and relationship with hedge funds and private equity funds, also called covered funds. The Volcker Rule’s purpose is to prevent banks from making certain types of speculative investments that contributed to the 2008 financial crisis. Investopedia).

She wants to bring back the “swaps push out provision.” She supports a high frequency trading (HFT) tax; wants a tax on excessive cancellations. Not sure what all this means, but he said most of this stuff would have a slim chance of coming to fruition, as there’s no congressional support for most of it. Her plan to get tough on shadow banking wouldn’t require Congress, he said, so it’s more likely to be implemented if she’s elected. She would give the Financial Stability Oversight Council more regulatory reporting power.

HRC will “move to the left,” he said, with enforcement. She would require investment firms to admit guilt as a condition of any settlement agreements they entered into with the SEC. She would increase prosecutions and penalties for individual and firm misconduct.

3) DJT: No published plan, so this fellow based his comments on Trump’s past comments. He wants to repeal Dodd-Frank as a job-killer. DJT has said he supports the return of Glass Steagall. The GOP put a line in its platform to this effect, but just as a sop to the left.

DJT would support a regulatory moratorium on new legislation. While HRC wants new rules right out of the gate, DJT would stop them on day one. He supports small bank relief. Those would have a decent chance of implementation.
If Trump is elected, congressional Republicans are more likely to favor high capital requirements or tweaks of Dodd-Frank rather than a return of Glass-Steagall. A recent G-S bill, co-sponsored by McCain and Warren, attracted the support only of progressive lawmakers.

4) Congress: Regarding help for small banks, Dean discussed the CHOICE Act, currently pending in Congress. It would require a 10 percent leverage rate to buy out of Dodd-Frank. It would have a decent chance of implementation under DJT. It will come up in 2017. Won’t pass the Senate as written but there is bipartisan support for the 10 percent leverage ratio. Dean says Senate currently held by GOP at 54-46; he predicts 52-48 after election. Others predict 50-50, which means nothing would get done about financial regulation.

He expects Speaker Ryan to push for comprehensive tax reform in 2017.

5) Regulatory Agencies: Election has big implications, as new president replaces many people, e.g., Treasury Secretary. Other bigwigs’ terms are due to expire in 2017- 2018 anyway, so new president appoints replacements, e.g., Janet Yellin 2018.
Looking at the polls, especially the Real Clear Politics data, he says it looks like HRC has enough electoral votes to win.

I hope this is of some interest to you, especially those with more knowledge and understanding than I of the financial markets.

Mr. Dean invited people to follow him on Twitter @NathanDeanDC to see what other analysis he provides.
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Online mountaineer

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Would it have helped had I given this an inflammatory title?
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Offline Weird Tolkienish Figure

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Would it have helped had I given this an inflammatory title?


I read it. Most people here only respond to emotional-based inflammatory titles. No deep thinkers unfortunately.
I am not a conservative.

Offline EC

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I read it. Can't really comment, since the only things I know about financial markets is:

They exist.
Some people make money on them.
I am not one of those people.

 :shrug:
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Online mountaineer

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I'll admit to not knowing the intricacies of investing, banking and economics. They just are not subjects I've studied in depth.

We're invited to these seminars each year and I learn a lot, but also have to look up a few of the references. What the fellow was talking about certainly is something most people aren't thinking about when they cast their vote. Selection of Supreme Court justices, national security - year, we all know the impact of the election on those issues. But bank regulation and the head of the Federal Reserve? Puts most of us to sleep, but they certainly are important considerations.
« Last Edit: October 22, 2016, 09:53:22 AM by mountaineer »
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Offline EC

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@massadvj  @kartographer  @DCPatriot

Comments? You guys know more about this sort of stuff.
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Offline massadvj

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Comments? You guys know more about this sort of stuff.

I expect more bank regulation and global financial manipulation no matter what.  Near-zero interest in the USA and below-zero interest elsewhere, combined with massive deficits and subsequent monetization of that debt throughout the world, is not something that lends itself to any government being able to deregulate.  Quite the contrary.  The banks and regulators will continue their choke hold on the global economy, else every pension in the world would be in jeopardy.

There really is no escape at this point except by massive disruption through hyper-inflation or collapse of the system.  The only question is when.  Probably not in a year.  But 20 years?  50?  No one knows.  When it happens, it will happen in one big momentous event, similar to 2008.

I see a scenario where the financial markets collapse, and in order to "save" them the government confiscates all pensions and folds them into Social Security.  That will be done in a single day, and most of the pensioners will have already lost so much of their wealth at that point, they will be "grateful" for the government intrusion, begging congress to act. 

All of this is beyond the control of the POTUS, as it was George W. Bush.  Whoever is president at the time it happens will lose popularity and have to sell it.  But the people who pull the levers (central bankers and treasuries) will ultimately control the world economy, as they have with progressively more intrusion since WWI.

The only difference between us and Venezuela is public confidence in our system, which is irrationally positive right now.

My advice is to make sure you have hoarded one year's income in gold and silver, plus own your home mortgage-free.  If you have that, you cannot really be harmed by anything.
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Online mountaineer

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The other speaker at the seminar was an equity strategist who discussed the stock market and what to expect. She said she's still bullish but cautious. She doesn't expect the next recession before 1-3 years, and it should be mild.

She observed that China's growth rate is slowing down, as evidenced by a reduction in energy consumption there.

She said the Fed is "dying to raise interest rates" and probably will do so in December 2016. Historically, while they raise rates too much, she said, it takes a year for the economy to feel the effects of a rate hike.

What should we worry about? Inflation might get worse (right now, 0 - 2%). Longterm, debit will be up, taxes will go up, productivity will go down.

As for the election, she said if the S&P 500 is up in the three months leading to the election, the incumbent party wins.
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Offline rodamala

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She said she's still bullish but cautious. She doesn't expect the next recession before 1-3 years, and it should be mild.


That statement discounts pretty much everything she is saying.  The insinuation is that there is a "next" recession, but asides from a phoney baloney stock market rise after essentially 2 downturns, there is no rebound from THE LAST RECESSION.

Any GDP "growth" is a simple matter of government spending expansion, which NEVER CONTRACTS.

Face it, we are on the 8th year of the 0bama "Summer Recovery".  Until businesses start making REAL things here, it's all virtual wealth creation.

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