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 financialpolicy.org (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 financialpolicy.org) 

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)

    

The Future of Monetary Policy

Larry Summers: "this is a nightmare, I got to get some sleep."

 Yep, here we are now, for the most part, our banking system.  This whole fiasco starts with a spark light by Larry Summers under the Clinton Administration but snowballed out of control because the lack of regulations which the regulators them self-were involved that graded the paper.  From here you can't really blame one man, this ended up being an orchestra of greed and manipulation.

From Wikipedia: (a brief timeline, if you will, to how we got here)

Deregulation of derivatives contracts, on July 30, 1998, Deputy Secretary of the Treasury Summers testified before the U.S. Congress that "the parties to these kinds of contract are largely sophisticated financial institutions that would appear to be eminently capable of protecting themselves from fraud and counterparty insolvencies." At the time Summers stated that "to date, there has been no clear evidence of a need for additional regulation of the institutional OTC derivatives market, and we would submit that proponents of such regulation must bear the burden of demonstrating that need."  In 1999 Summers endorsed the Gramm-Leach-Bliley Act which removed the separation between investment and commercial banks, saying "With this bill, the American financial system takes a major step forward towards the 21st Century."

Barack Obama as President in January 2009, Summers was appointed to the post of Director of the National Economic Council.  In this position, Summers emerged as a key economic decision-maker in the Obama administration, where he attracted both praise and criticism.  There had been friction between Summers and former Federal Reserve Chairman Paul Volcker, as Volcker accused Summers of delaying the effort to organize a panel of outside economic advisers, and Summers had cut Volcker out of White House meetings and had not shown interest in collaborating on policy solutions to the economic crisis.  Peter Orszag, another top economic adviser, called Summers "one of the world's most brilliant economists.

In 2013, Summers emerged as one of two leading candidates, along with Janet Yellen, to succeed Ben Bernanke as head of the Federal Reserve System in 2014. The possibility of his nomination created a great deal of controversy with some Senators of both parties declaring opposition.  On September 15, Summers withdrew his name from consideration for the position, writing "I have reluctantly concluded that any possible confirmation process for me would be acrimonious and would not serve the interest of the Federal Reserve, the Administration or, ultimately, the interests of the nation's ongoing economic recovery." (end Wikipedia)

Central banks around the world took extraordinary measures to reboot the global economy.  What are efficient and responsible options for ending monetary stimulus?  

So however you view Larry Summers this man is a closer and on this panel at Davos he really gives George Osborne Chancellor of the Exchequer and Second Lord of the Treasury of the United Kingdom much support in this debate.  Watch Summers face when the narrator rips on Osborn, time stamp starts @ 54:00 to 54:18 also Haruhiko Kuroda is 31st and current Governor of the Bank of Japan taps Summers's shoulder and slips him a note, watch from time stamp 24:00 to 24:35, this man is highly respected in his realm.  Not only that you might understand why he did not take the Fed Chair, the man did not like what happen to the nation and around the world.  Even though the man created this spark that turned into a brush fire, he came back to help.  I really don't know if we had anyone more qualified  in economics than Summers and by his personality, this guy is a rock.  Not all men a created equal, it's quite possible if not already that Summers will be known as the Einstein of the economics of our time.

World Economic Forum