Category Archives: Wall Street

Progressives and Tea Partiers, Unite

I’ve already noted how bizarre the 2016 contest could be in terms of foreign/defense policy in that we might have a serious GOP candidate (Rand Paul) running to the left of the Dems.  Already there’s talk of neo-cons like Robert Kagan supporting Hillary.

But we might also see some strange turns in domestic policy as well.  A lot of attention is being paid to Hillary’s attitude toward, and relationship with, Wall Street, particularly compared to Elizabeth Warren.  However Hillary runs, you can be sure she’d govern as a friend of Wall Street, as she and Bill have consistently been.

We may well see a “populist” GOP candidate or two in the primary running to the left of Hillary on domestic policy.

What I find especially interesting is the conviction that populist rhetoric should be encouraged among Republicans, combined with a certainty that it would be the kiss of death for the Dems to nominate that “scary” Elizabeth Warren.  Candidates are judged not on the content of their character, but on the red or blue color of their party.

While I know that Warren would be turned into George McGovern, the truth is that if Tea Party voters could listen to her in a “blind taste test” setting, a lot of them would feel that she understands their frustration and speaks for them.  While she’d be painted as anti-capitalist, the more subtle truth is that she is against crony capitalism, and so is the Tea Party.

Both parties represent crony capitalism, and that’s something the Progressive wing of the Democratic party and the Tea Party wing of the GOP agree on.  The Dems are for the rich and the poor, the Republicans are for the rich, but really nobody is for the middle class.  That’s why they have to woo middle-class voters and get us wee wee’d up about issues like abortion and immigration and climate change.

All the 2016 candidates will talk about the middle class, but those most likely to mean it either won’t get nominated or would get painted as a hippie Commie freak in the general.

I don’t know who our next president will be, but I’m certain he or she will be someone Wall Street won’t have to worry its pretty little head about.

Obama Can End the “Carried Interest” Loophole Without Congress

Wow, you really do learn something new every day.

I really, really hate the “carried interest” loophole that lets the ordinary income of hedge fund and private equity guys get taxed at the lower rate for capital gains.  Right now the top rate for ordinary income is 39%, and only 20% for capital gains, so we’re talking real money.  The top 25 hedge fund managers made more than $24 billion in 2013.

I always thought that Congress gaveth that loophole and Congress would have to taketh it away.

But nooooo!  As David Lebedoff writes at Slate*, the IRS issued a ruling in 1993, before hedge funds existed, that was intended to apply to real estate investments.   Congress never voted on it.  When hedge funds arrived on the scene, the IRS applied this ruling to them.  But President Obama could — right now, today, before his bedtime in Europe! — tell the IRS to stop doing that.

Looking for a real IRS scandal?  This is it.

* “Why Doesn’t Obama End the Hedge Fund Tax Break?”

Quote of the Day

“The darkest secret in the big money world of the Republican coastal elite is that the most palatable alternative to a nominee such as Sen. Ted Cruz of Texas or Sen. Rand Paul of Kentucky would be [Hillary] Clinton, a familiar face on Wall Street following her tenure as a New York senator with relatively moderate views on taxation and financial regulation.”

If Hillary in the WH is good for the Hamptons oceanfront crowd, why would those of us in the Holiday Inn crowd want her?  Bill Clinton’s deregulation policies bear as much blame for the financial meltdown as do Bush 43’s.

Something To Think About

From “What If Zimmerman Had Been Indigent,” Matthew Yglesias, Slate:

“What if George Zimmerman had been poor?  What if his legal case hadn’t attracted national attention and raised over $300,000?

“What if Zimmerman, like most criminal defendants in the United States, was relying on a public defender with little emotional or financial investment in winning the case and no resources with which to pursue a robust defense even if he’s been inclined to do so.  Wouldn’t that defender have told Zimmerman that the smart way to avoid a second-degree murder sentence was to plead guilty to manslaughter and work out terms of incarceration that would be less onerous than what he’d end up with if he fought and lost?

“Proof beyond a reasonable doubt is a very difficult evidentiary burden to meet if the state is facing off against a competent, well-financed, and highly motivated defense team.  But all these people sitting in America’s prisons…aren’t losing at trial.  Instead 97 percent of federal cases and 94 percent of  state ones end in plea bargains.  People ask me sometimes why nobody’s gone to jail for crimes related to the financial crisis.  It’s a complicated question, but  obviously part of the answer is that you’re not going to resolve a criminal fraud case against a multi-millionaire by railroading him into a plea agreement.”

Jobs, Jobs, Jobs

Good news on jobs, not just in the April numbers, but also in the revisions to prior months.

165,000 new jobs were created in April, plus March jobs were revised from 88,000 to 138,000, and February jobs were revised from 268,000 to 332,000.

The unemployment rate has dipped to 7.5%, the lowest in four years.

The Dow reacted by hitting 15,000 for the first time.

The New Sheriff of Wall Street

President Obama has made an excellent choice to head the SEC — Mary Jo White.

She is a former federal prosecutor who was the first woman to head the U. S. Attorney’s Office in Manhattan, a really coveted and prestigious job.  Outside of government, she has been a defense lawyer for white-collar criminals, so she knows how their schemes are structured and disguised.

Very smart, very tough, very dedicated.

The buzz is that Obama chose a woman, given that he’s been getting heat for so many male appointments, but to me the important thing is that he picked someone who is really sharp and capable.  My first thought on seeing the news wasn’t “Oh, great, he picked a woman,” but “Oh, great, she’s going to kick some Wall Street ass.”

Maybe We Should Abolish the Fed…

Just kidding!  But they really did miss the Great Recession.

From “Most Fed Officials Saw Economy Weathering Subprime Crisis,” Craig Torres, Bloomberg:

“Federal Reserve officials in August 2007 saw the beginnings of the crisis in subprime mortgages and concluded that the U. S. economy would be able to withstand it, even as some Fed members warned that it could trigger a downturn, transcripts from their 2007 meetings show.

“‘Well-capitalized banks and opportunistic investors will come in and fill the gap, restoring credit flows to non-financial businesses and to the vast majority of households that can service their debts,’ Donald Kohn, then vice chairman of the board, said in Aug. 2007….

“The transcripts show the committee’s slow grasp of the enormity of contagion that was to spread throughout global markets as a result of billions of dollars in low-quality housing assets that had been securitized into bonds and sold to banks and investors worldwide.  Several FOMC participants such as then-San Francisco Fed President Janet Yellen sounded alarms in the first half of 2007.  Still, the FOMC…showed reluctance to alter policy until August.

“‘The odds are that the market will stabilize,’ [Ben] Bernanke told the committee in Aug. 2007….

“[O]n June 27028, Yellen said the biggest risk to economic growth was housing, which she called the ‘600-pound gorilla in the room.'”  Emphasis added.

It turns out that housing was more like an entire wildlife preserve filled with gorillas…