1. Farewell Fannie? Farewell Freddie?
There is a bill before Congress that would eliminate Fannie Mae and Freddie Mac. Under the bill, federally supported mortgage finance would not go away entirely, but it would be replaced by a model more closely resembling the FDIC. The two bankrupt entities would be replaced over the course of 5 years by a new institution to be named Federal Mortgage Insurance Corporation – “Fannie Mac”? “Freddie Mae”? The key difference proposed in the bill is that banks selling mortgages to the new entity would retain “skin in the game.” Banks would continue to hold 10% of the principal of underlying securities they sell. Softening the risk, banks would pay an insurance premium to the Federal Mortgage Insurance Corp. and, like the FDIC, the entity would help cover losses and help stabilize the market. The bill, written by Senators Corker and Warner, appears to have some bi-partisan support and the backing of the administration. If the bill passes, this could well be one of the most important changes resulting from the 2008 financial crisis.
2. Nay on Say
“Say on Pay” was going to give the average shareholder a voice. It was going to force corporations to listen to the little guy. At least that was the thought when lawmakers included the provision in the Dodd-Frank Act. The gist was that shareholders would be asked to vote and approve executive compensation. Investors could object to management pay levels! The only drawback? The vote was non-binding. So despite significant time spent drafting the legislation and the cost of corporate compliance with the provision, nothing about the voting carried any weight. Even shareholder activists have largely ignored the Say on Pay votes. Of companies reporting results, more than 90% have reported shareholder approval of executive compensation, up from 69% last year. This support comes despite the fact that chief executive salaries are up 6.5% this year—to their highest level ever. Regardless of your view on executive compensation, I think everyone can agree that creating more regulation that does nothing more than create a non-binding anything is rather pointless.
The New York Times: In Shareholder Say-on-Pay Votes, More Whispers Than Shouts
3. States Cracking Down on Bitcoin…Did We Not See This Coming?
Regulators in California, Virginia and New York have started sending letters to bitcoin trading companies warning them that they must comply with state money-transmission laws. These laws require that companies moving money have the necessary licenses and report suspicious transfers. Licenses sometime require bonds for millions of dollars. This may prevent smaller companies from entering the market. Federal regulators too are investigating. If the new electronic currency faces many of the same restrictions as dollar transfers—much of the appeal (along with the potential for criminal activity) will likely go away. If bitcoin participants continue using the electronic currency even after they are forced to meet money-laundering regulations there might be hope for the monetary oddity yet.
The Wall Street Journal: States Put Heat on Bitcoin
4. Don’t Mess With the Big Banks, Or Least Not in Chalk
Jeff Olson is a political activist and supporter of the occupy movement. He used to work on the staff of a U.S. Senator. Now he has been charged with 13 acts of vandalism. Olson’s crime? He repeatedly wrote on the sidewalk in front of a number of banks in San Diego, writing “Occupy” slogans such as “stop big banks” and “StopBankBlight.com.” One of the banks claimed that they spent $6000 cleaning up after Olson. The case is on-going but could potentially land him in jail for up to 13 years.
5. Treasury Wants to Prove That the TARP Money Came Back
The U.S. Treasury has released a chart that is meant to reassure the general public that federal funds that were spent as part of the Troubled Asset Relief Program have indeed come back into the U.S. coffers. Take a look at the infographic at the link below. All but $29.6 billion of the $400+billion disbursed have been repaid. Some pundits are critical of some of the accounting methods… but there is something terribly reassuring about charts.
U.S. Department of the Treasury: TARP Tracker from October 2008 to date