Category Archive 'Financial Industry'

12 Oct 2011

Wall Street In Steep Decline

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The left is protesting Wall Street while Barack Obama continues to whip up popular resentment of the US financial industry, but the massive regulation of that industry effectuated by Sarbanes-Oxley and Dodd-Frank are already making sure that liberals are not going to have the world center of finance capitalism based conveniently in Lower Manhattan when they feel like kicking it around some more.

As the Wall Street Journal reported yesterday, Wall Street is in serious decline. Jobs are evaporating.

New York City’s securities industry could lose nearly 10,000 jobs by the end of 2012, New York state’s comptroller predicted, a painful blow to the area’s economy and government budgets.

New York City’s securities industry could lose nearly 10,000 jobs by the end of 2012, New York state’s comptroller predicted, a painful blow to the area’s economy and government budgets, Aaron Lucchetti reports on Markets Hub. Banks in the New York area are also poised to shed jobs. Photo: AP.

In a report set to be released Tuesday, Comptroller Thomas P. DiNapoli also said bonuses are likely to shrink this year, reflecting lower profits on Wall Street.

Since January 2008, the securities industry in New York has seen 22,000 jobs evaporate. If Mr. DiNapoli’s prediction of 10,000 more jobs losses between August 2011 and year-end 2012 comes true, that would represent a decline of 17%. About 4,100 jobs have been eliminated since April, and deeper cuts are widely seen as inevitable given a recent flurry of corporate expense-trimming announcements.

There is a 1:1 relationship between recent federal regulations and Wall Street’s decline. Disgruntled lesbian rockers who think that capitalism has not been properly compensating them will soon have to go demonstrate in London and Abu Dhabi.

29 Apr 2010

The Dodd Bill: HuffPo Gets It Right

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Frank Luntz debunks the democrats’ supposed financial “reform” at Huffington Post of all places. This editorial would fit just fine on any conservative blog site.

The New York Times’ headline said it all: “Off Wall St., Worries About Financial Bill”. The Democrats in Washington may think it’s a slam dunk, but the rest of America doesn’t agree.

Look, those who are on the side of significant financial reform are fighting on the side of the angels — and with broad public support. We are fed up with Wall Street abuses and arrogance that makes life for the rest of us on Main Street more difficult. Let’s hold people and businesses more accountable and responsible for what they do and how they do it.

But that doesn’t suddenly equate to support for the legislation now being considered by the Senate. In exactly the same way that the public wanted healthcare reform, just not Obama’s healthcare reform, they want something done to punish the perpetrators of the financial meltdown, but not at the expense of their own checking accounts — or American economic freedom.

The dirty secret of the Senate financial reform bill is that some of its biggest supporters work on Wall Street. Recipients of taxpayer bailout money have no concerns about the bill — in fact, the CEOs of Citi and Goldman Sachs have publicly endorsed it, and several of the other big banks have expressed support. It keeps the “too big to fail” guarantees in place for another generation of financial services companies.

But here’s where it gets really interesting. The Democrats supporting the current legislation have assured an anxious electorate that whatever funds are used to create whatever regulatory scheme created will come from the banks, not the taxpayers. Let me emphasize that so that even casual readers will catch it: the Democrats promise that you won’t pay for their legislation, banks will.

Really?

Since when have corporations ever paid taxes, fees or penalties? Employees end up paying in the form of lower salaries and benefits. Customers end up paying in the form of higher costs.

And in this case, every account holder will be forced to pay higher fees on their checking account and savings account. That’s you, my friendly reader. Can you say “checkbook tax”? I can, and I think lots of candidates will be saying it come November. Is that what you really want to do to your constituents, Senator Lincoln? Is that what you really want to explain on the campaign trail, Senator Bennett?

But it goes deeper than just taxation and regulation. Wall Street can pass it all onto consumers. Main Street cannot. And that’s because Wall Street firms have all those pesky well-connected, nicely dressed lobbyists to ensure that whatever is passed strengthens their hand at the expense of the little guy.

Regardless of what side you’re on, the financial reform bill is special interest heaven — a bill written by lobbyists, for lobbyists, and will probably be implemented by lobbyists. The Dodd bill has carve-outs right from the get-go. Real estate agents, title companies, the Farm Credit system, even Fannie Mae and Freddie Mae are exempt from its onerous and costly provisions. And for everyone else, it’s been a special interest feeding frenzy.

More than 130 companies have publicly hired lobbyists seeking their own loophole. Mars Candy wants to continue to use derivatives to hedge against price hikes in sugar and chocolate, so they’ve hired a lobbyist. Harley Davidson wants to protect dealer financing of their bikes, so they’ve hired a lobbyist. And eBay wants to not harm its subsidiary, PayPal, so they’ve hired … well … a team of lobbyists.

But most average Americans — the ones who bailed Wall Street out in the first place — cannot afford lobbyists, and won’t be exempted from the legislation.

There’s a reason why American trust in government is at an all-time low. Voters believe legislation like this is passed not for the public interest, but for special interests. And that is certainly the case with the Dodd bill.

17 Dec 2008

How to Punish Bernie Madoff

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Holman W. Jenkins Jr. swats away the predictable outcry for more regulation, and observes that when one finds oneself with a problem involving lemons, one should simply make lemonade.

Where was the SEC? Such is the plaint lofted in the wake of the Bernie Madoff scandal.

Huh?

When has the Securities and Exchange Commission ever found a fraud except by reading about it in the newspapers? …

What makes the Madoff story interesting, though not evidence of systematic failure of the regulatory or legal system, is that Mr. Madoff and some of his clients had dealt on a basis of trust for more than a generation. True Ponzi schemes, in which early investors are paid a “return” out of funds deposited by later investors, tend to falter at the first market downturn. Waning investor enthusiasm dries up new funds required to pay off earlier investors. The scheme collapses.

In all likelihood, Mr. Madoff was not running a pure Ponzi scheme, but had real assets. He was operating a blind pool, in which investors had no real idea what they owned or how it was performing, relying on Mr. Madoff who reported metronomic returns, brooked no nosiness into his methods, and seemed always willing to pay off investors who wanted to withdraw their money.

He may have been casual from the start about what money he used to pay withdrawals. It is almost inconceivable, though, that he could have built a true Ponzi scheme to a height of $50 billion, in which there were never any real assets, just his superhuman 40-year juggling act to ensure new investors were recruited as needed to provide funds to meet withdrawal requests from earlier investors.

If so, he is a genius who should immediately be put in charge of the Social Security and Medicare trust funds.

26 May 2008

“Dubai, Mumbai, Shanghai or Goodbye”

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ArabianBusiness.com boasts that Dubai is in the process of replacing London and New York as world capital of the financial industry.

Dubai is picking up the mantle of the financial capital of the world, as global banking sectors London and New York continue to fade on the back of the global credit crises.

The new mantra in New York and London is “Dubai, Mumbai, Shanghai or goodbye”, as job losses mount in both cities while opportunities in the east continue to rise.

Lehman Brothers on Tuesday became the latest investment bank moving one of its most senior positions to the UAE. Philip Lynch, the bank’s co-head of equities for Europe and the Middle East, will be relocating to Dubai after serving more than two decades in London.

The US investment bank, which has axed over 6,000 staff in the last nine months, said the move was aimed at serving the growing needs of clients in the Gulf region and the wider Middle East.

Lynch will find himself in good company. Barclays last month dispatched Roger Jenkins, one of London’s highest-paid bankers, to the emirate as chairman of investment banking and investment management.

Earlier in May Citigroup, which has so far cut 1,500 jobs because of the global credit crisis, announced it would send Alberto Verme, co-head of global investment banking from London to Dubai. …

The relocation of roles from London and New York to Dubai, and to a lesser extent Mumbai and Shanghai, reflects the reshaping of global opportunities for investment banks.

With a surge in oil revenue, rapidly rising infrastructure needs, and the emergence of sovereign wealth funds at the head of M&A activity, the Middle East and Asia have become crucial for global investment banks looking to remain profitable.


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