Showing posts with label financial reform. Show all posts

Busy Work: Financial Reform Targets Conflict Minerals


We heard all last summer (and after) that "we" needed to pass the financial reform act to restore balance to the financial markets, to reign in out of control bankers, and to protect consumers. So, why are Target and Wal-Mart having to report whether they are using tungsten mined in the Congo?

Top U.S. retailers including Wal-Mart Stores Inc. and Target Corp. are battling to limit a new federal law that could force them to report whether their store-brand goods contain minerals from war-torn Central Africa.

The requirement, part of the Dodd-Frank financial law passed in July, aims to pressure companies to spurn so-called conflict minerals—tin, tantalum, tungsten or gold from parts of the Democratic Republic of Congo or neighboring countries.

Income from those minerals is blamed for fueling violence that has claimed millions of lives in eastern Congo, which a senior United Nations official recently branded the world's rape capital.

Under the new law, public companies using any of the four minerals from Central Africa must report what steps they have taken to verify the minerals weren't taxed or controlled by rebel groups. Products that don't contain minerals that benefited such groups can bear the label "DRC conflict free." Companies that fail to verify their sources can still sell their products, but could face embarrassment.

A broad array of U.S. companies, including makers of medical devices, cellphones, airplanes and machine tools, will be affected by the requirement because the minerals are in the products they manufacture.

Less clear is the status of retailers, such as Wal-Mart and Target, who carry private-label goods. The Securities and Exchange Commission has the power to decide who is considered a manufacturer under the law, and so must comply with it.

Granted I am conservative which means I'm dumm and support "deregulation" but what the hell do conflict minerals have to do with financial reform? The answer, I believe, is nothing. But, we had yet another 1,000+ page "I haven't read the bill" piece of legislation passed by meddling liberals who would believe every NGO with a fax machine and a modem before they believe multi-billion dollar American retailers. Also, how is this not yet another chain around American manufacturing? Are there other countries out there passing this sort of legislation? No. They are buying the natural resources they need to innovate and grow their economies. When I see this sort of thing, it gives the lie to the Dems' claims that they are "pro-business."


Good Points


A lot of good points being made across the Blogosphere today:

Republicans ecstatic over the anti-Obamacare results in Missouri should temper their enthusiasm, since the status quo was and remains unsustainable. Repeal will not be enough. If Americans want to "keep" their current health care, they need to accept that they will have to actually pay for it. (Cafe Hayek)

Just because someone is a left-wing historian with an axe to grind, doesn't mean their research lacks merit. US involvement in the Korean Peninsula during the Cold War has actually inspired some useful historical writing from progressive types, as the "official" record has been hopelessly white washed. (Marginal Revolution)

The Obama Administration's approach to the "Birther" issue - mockery, combined with deliberate opaqueness that only encourages further "questions" - has had the opposite of its intended effect. The number of people who aren't sure whether Obama was born in the US is at 58%, at least in one poll. (Legal Insurrection)

In the wake of the Crash of '08, the US needs to do more than pass regulatory "reform," or build up balance sheets. Its regulators, finance pros, and ratings agencies need to rebuild their tattered reputations, or see themselves replaced by foreign competitors more willing to make bearish (i.e. rational) calls on US financials. (Ampontan)

American media outlets may be more numerous than ever, but they keep failing to report the same stories; namely that New Age/Leftist ideas and philosophies can be just as destructive and anti-human as anything you could point to on the Right. (The Macho Response)

Liberals like Paul Krugman claim to hate deflation because it creates a "downward spiral" that is hard to get out of. The truth is they hate the benefits of deflation: debt becomes more expensive, savings increase, and private capital formation encourages self-determination. So much easier if liberals could just artificially goose the economy with "stimulus" and zero per cent interest rates, and then inflate away all of the debt that their schemes generate. (Market Ticker)

If you are in New York City and want to talk to beautiful women, you need a Vespa and some blue shoes. At least that's what you need this summer. (The Sartorialist)

There's no scandal quite like a Republican bikini scandal. Apparently, the Left thinks this will kick off some sort of hypocrisy buzz. What they don't realize is that Republican bikini scandals remind people that the hot women are all on the right side of the aisle. (The Other McCain)


While we can all put on an appropriately glum face on the anniversary on Hiroshima, it's worthy of comment that civilian battlefield deaths among our allies, including one battle that took place on American soil, have been forgotten despite their exceeding the toll from the atomic bomb. (The Belmont Club)





A National Conversation: Fannie and Freddie Reform


Over at the Financial Times,Gillian Tett* bemoans the glaring absence of Fannie Mae/Freddie Mac reform from the recently enacted FinReg reform, and calls for a wide-ranging debate on the future of those entities. Not right now, babe, we have to finish our national conversation on race first:

So far this year, this GSE issue has attracted scant political attention. Indeed – and astonishingly – the 2,300 page financial reform bill that President Barack Obama signed this week barely mentions these institutions at all.

But back in 2008 the US government effectively nationalised Fannie and Freddie, under the fig leaf of a “conservatorship” scheme. And it has now used some $145bn of taxpayers’ money to prop them up, more than was spent on direct injections into the US banks or car sector.

Worse still, that bill will almost certainly rise further in the coming years. After all, the volume of outstanding mortgages backed by Fannie and Freddie now stands at $5,500bn, around half the mortgage market. GSE entities have acquired private-label mortgage bonds too. In theory, this is limited to top quality loans. In practice, though, there is almost certainly plenty of rot there too.

Thus (guess)timates about the size of the future taxpayer bill now range from $390bn (the Congressional Budget Office) to almost a trillion dollars (from some private sector economists.) It makes the woes of Spanish savings banks seem almost tame.

So is there any chance of seeing a proper “stress test” on this exposure? Or exit strategy? Don’t bet on that soon. These days, the GSEs are the only thing keeping the US mortgage and housing sector afloat, because private sector securitisation has effectively collapsed: last year, for example, nine out of 10 mortgages were underwritten by Fannie and Freddie. And, unsurprisingly, the Obama administration does not want to upset that apple cart by implementing radical reform. Nor does it want to undermine the value of mortgage-backed bonds, given how many of these the Federal Reserve itself now holds.

I can appreciate Tett's concern, but the last thing we need right this second is a concerted effort to "reform" GSE's while Democrats still have overwhelming majorities in Congress. All we would get out of that would be a continuation of the status quo: GSE's underwriting 90% of the mortgage market and backstopped by billions in tax-payer dollars. Plus, the process to getting to that level of reform would undoubtedly include enough racial demagoguery to finance the NAACP's next couple years' worth of operating funds.

Still, the GSE's are a problem hiding in plain sight. Despite years of crisis, most Americans continue to be blissfully unaware of the massive liabilities they are taking on for the sake of Fannie & Freddie. That's because news about these ostensibly private companies is largely relegated to the business section, and all bad news about them is relegated to the classic Friday-Night-News-Dump or, in a pinch, Christmas Eve. Yayy! Transparency!

Democrats don't like to talk about this because the GSE's are the easiest way for them to operate an off-the-books national housing policy with little oversight, and plenty of financial upside for their executives/operatives, with all of the losses borne by the tax payers.

Republicans don't like to talk about this because they are idiots. I mean, how else to explain their unwillingness to go after such a large, obvious target? And, even if they did, we know how it would go down: lots of acturial speeches from Charles Grassley, lots of harrumphing press conferences from Richard Shelby, lots of calls for Susan Collins to "do the right thing," etc. Republicans would never do something as gauche as, say, subpoena Rahm Emmanuel to ask him about his service as a member of the board of Freddie Mac during the time it engaged in accounting fraud...or ask Maxine Waters about her service as a member of the board for an LA bank that was deep into the subprime loan market...or ask the many members of the Congressional Hispanic Caucus who pushed their constituents into subprime, all underwritten by the GSE's. I could go on.

Reform of Fannie and Freddie can only happen after political war, and it is a war the Right can win, but only if it is fought like one.

*whose Fools' Gold is one of the best books you can read about derivatives and their effects in the Crash of '08.


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