Monday, December 15, 2014

113th Congress Stocking Stuffer Merry X-Mas

Bills, bills, bills kinda like ringing Christmas bells, what a festive way to end the year but the hour glass is not only running out of time but money to cover a spread.  You can see why the U.S. 113th Congress is so divided for when it comes time to pass one of these layered cake bills the slice has nothing to do with the cake.  Slick way to get crappy legislation passed and bring on even more drama that if not passed, will have to consider government shutdown.

First a look (from the horse's mouth) at how any of this hits the floor of U.S. government. 

Laws begin as ideas. First, a representative sponsors a bill. The bill is then assigned to a committee for study. If released by the committee, the bill is put on a calendar to be voted on, debated or amended. If the bill passes by a simple majority (218 of 435), the bill moves to the Senate. In the Senate, the bill is assigned to another committee and, if released, debated and voted on. Again, a simple majority (51 of 100) passes the bill. Finally, a conference committee made of House and Senate members works out any differences between the House and Senate versions of the bill. The resulting bill returns to the House and Senate for final approval. The Government Printing Office prints the revised bill in a process called enrolling. The President has 10 days to sign or veto the enrolled bill. (end first a look)

That's our process and works well when an individuals oath to the Republic for which it stands is followed.  Outside of the this is the big picture, influence through large corporations teamed up by an Army of lobbyist.  

Senator Elizabeth Warren (D-MA) talks about provisions tucked into the 2015 federal spending bill that would roll back some of the regulations for big banks under the five-year-old Dodd-Frank law. The spending bill was passed by the House December 11 and cleared by the Senate on December 13.

Senator Elizabeth Warren

The Citi-drafted legislation will benefit five of the largest banks in the country—Citigroup, JPMorgan Chase, Goldman Sachs, Bank of America, and Wells Fargo. These financial institutions control more than 90 percent of the $700 trillion derivatives market. Most of the concern is associated with OTC derivatives and swaps, which can be used for avoidance of taxation, the outflanking prudential regulation of financial markets and the manipulation of accounting rules, credit ratings and financial reports. 

Fr (excellent article, short not even a page and to the point written in 2002) 

Another public interest concern involves transparency. Some derivatives are traded on formal futures and options exchanges which are closely regulated. Other derivatives are traded over-the-counter (OTC) in markets that are almost entirely unregulated. In these non-transparent markets, there is very little information provided by either the private market participants or collected by government regulators. Prices and other trading information in these markets, is not readily available as is the case with futures and options exchanges. Instead, that information is hoarded by each of the market participants. While standard theories of financial markets agree that more transparent markets are more efficient, it requires a public entity to require information be reported and disseminated to the market. (end 

OK, timing is everything and when it comes time for some of these contracts to expire who will be left holding the bag?  One bag for sure is the price of oil ($55 today) and the natives of this over leverage derivative are scrambling.  In a Keiser Report on Dec 13 episode 692 @ 11:44 timestamp Max mentions that for every dollar tied to a barrel of oil, $60,000 in directives are tied to that same barrel and that's just London!  This piece of legislation is yet another warning shot across the bow and even with the backing of the FDIC on the backs of American taxpayers this still won't be enough money.

OCC’s Quarterly Report on Bank Trading and Derivatives Activities First Quarter 2014 (table 2 below is from the pdf on page 27) 

OTC Derivatives Data Sources (this is a huge market)


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