Why Doesn't Jack Lew Support the New Glass-Steagall Act?
You'd think that in the wake of the Great Collapse of 2008, reviving the Glass-Steagall Act would be a no-brainer.
As it happens, there are quite a few powerful members of government who oppose it, including Treasury Secretary Jack Lew, who seems to be pushing Dodd-Frank and the Volcker Rule a little too hard as the only regulation that's needed to keep the banks from making bad bets in toxic derivatives again.
But a little history lesson will show why his plan won't work.
In the wake of the Great Collapse of 2008, it was clear that we needed legislation that tightly regulates the big banks and their investments while encouraging economic growth.
U.S. Unemployment: Three Million Jobs in America are Waiting to be Filled
There is another side to the U.S. unemployment problem: Believe it or not, there are three million jobs going unfilled.
Employers can't seem to find the right match for more than 200,000 manufacturing jobs alone.
The transportation, utilities and trades sectors have almost half a million jobs open, waiting for the right applicant.
These positions are for vocational or skilled workers, who are in short supply.
The Fed Is Crushing Corporate Investment
U.S. and global companies may be sitting atop piles of cash as the stock market hovers near all-time highs, but total capital expenditures likely will fall over the next two years.
Reductions in capital expenditure in heavy spending commodity sectors, such as energy and mining, will drive down inflation-adjusted spending by 2 percent in 2013 and 5 percent in 2014, according to Standard and Poor's.
Capital expenditures, the money used by businesses to purchase or upgrade physical assets, are one of four ways that companies typically spend profits.
Despite stocks soaring over the last few months, mixed feelings over the global economic recovery, falling commodity prices, and profit margin pressures are holding back company spending on much-needed project development for future growth, according to the ratings agency.
Here's How Much Higher Mortgage Rates Will Raise Your Monthly Payments
Where will higher mortgage rates raise monthly mortgage payments most?
These three charts from the real estate site Zillow.com depict how higher mortgage rates will affect monthly mortgage payments in different markets throughout the United States.
The charts are based on the percentage of income homeowners spend on their monthly payments, with a pre-housing bubble baseline of 20% of median household income.
The first chart shows how much more expensive than historical norms monthly payments will become in six of the priciest metropolitan areas when mortgage rates climb to 5%, assuming homes appreciate in line with Zillow projections.
Monthly payments in the San Jose metro area will increase the most (22% over the baseline) followed by Los Angeles (19%), San Diego (14%), San Francisco (11%), Portland, OR (7%) and Denver (1%).
Death Tax Woes: Don't Make the Same Mistake Tony Soprano Did
We were all shocked by the sudden, untimely death of James Gandolfini. Gandolfini was an immensely gifted actor who changed the face of television entertainment in the role of Anthony "Tony" Soprano, a deeply troubled gangster-in-therapy, who had to balance obligations to his family… and his Family.
By all accounts, James Gandolfini was generous and kind to family and friends alike. It has been reported that he left a large legacy, in excess of $70 million, to be divided between them. His net worth is an estimate, and his asset inventory hasn't yet been disclosed, but he did alright for a middle class kid from North Jersey.
Sadly, however, his nearest and dearest won't see anywhere near the full amount he left behind.
It turns out that James Gandolfini was generous – to a fault. His wish was that his legacy, in the form of real estate and other assets in the United States and Italy, be distributed in large chunks, the largest in a trust for his 13-year old son, Michael and 8-month old daughter, Liliana. His widow, Deborah Lin, is set to receive 20% of his estate. The will stipulates that the shares to be doled out after taxes.
Why Companies Aren't Hiring Now
The stock market was rattled on Tuesday by underperforming manufacturing data.
The Richmond Federal Reserve Index, which measures manufacturing performance in the upper Southeast and mid-Atlantic regions, fell to -11 in July, down from a 7 in June. This signals a significant drop in new orders and shipments.
This comes just a week after the Philadelphia Federal Reserve Index reached a two-year high, which had rallied the market. Such a drastic swing in confidence in the manufacturing sector suggests that uncertainty will stretch into the late summer.
The data comes at a pivotal time for the Obama administration. For the eleventh time in his presidency (by ABC News' count), Obama announced that he will pivot back to the economy in an effort to create jobs, with a strong emphasis on U.S. manufacturing.
Even though the New York Stock Exchange (NYSE) recently touched all-time highs, American companies are reluctant to hire, particularly with greater uncertainty on the horizon. Perhaps if the President wishes to create new jobs, the administration should address the primary reasons why companies are not hiring in ways that would reflect strong economic growth, as the markets falsely reflect.
Here are five reasons why companies are not hiring right now.
Eight New Cities on the Verge of Bankruptcy
Detroit is the largest municipal default in the history of the US.
The city owes $9.2 billion in pensions, $1.9 billion to creditors and is $18.5 billion in debt.
The city's infrastructure is collapsing. Almost half of its streetlights are not working and aren't being repaired.
The average time for Detroit police to respond to an emergency is just under an hour. Crime has spiked. Many in the city have resorted to carrying firearms for their personal protection.
The city bankruptcy epidemic is likely to spread around the country, resulting from years of overspending on wages and pensions in order to keep public employee unions happy and city politicians re-elected.
We take a look at 8 U.S. cities on the verge of bankruptcy:
Glass-Steagall Act 2013: When Financial Regulation is the Best Thing Ever
Unlikely political bedfellows Senators Elizabeth Warren (D-MA) and John McCain (R-AZ) have put their voices together to call for a 21st century version of the Glass-Steagall Act, also known as the Banking Act of 1933.
This proposed regulation will rebuild the "wall" between investment banking and commercial banking, and prohibit large banks from taking speculative steps – bets, really – with depositors' assets.
There will still be a place for the big bad boys of banking to bet, to make the moves that make big money, but it will not be your money – or mortgage, or 401(k), or IRA – that they will play with.
According to Senator Warren, until Glass-Steagall was passed in 1933, American banks reeled drunkenly through cycles of rapid expansion and collapse about every 15 years since the late 18th century.
Glass-Steagall, though, threw up a brick wall around investment banking and commercial banking. Among other things, it prevented banks from making big bets with customer deposits.
He Said What?: Highlights from the Bernanke Testimony to Congress
If you wanted a clear picture of Federal Reserve strategy from the Ben Bernanke testimony to Congress this week, you were disappointed.
This week's Bernanke testimony highlighted the mixed signals Bernanke has been sending to markets – part of the reason Money Morning Chief Investment Strategist Keith Fitz-Gerald has said Bernanke is engaging in "monetary drunk driving" and is "jerking the wheel back and forth all over the road."
That's why two Bens showed up at his final Humphrey-Hawkins appearance before Congress: Accommodative Ben and Tightening Ben.
Bernanke said the $85 billion a month bond purchase plan would be slowed later this year if the U.S. economy stayed on its present course.
But he also told Congress the Fed was not backing away from its very easy monetary policy. He said "a highly accommodative monetary policy will remain appropriate for the foreseeable future."
New Glass-Steagall Act Key to Ending Too Big to Fail
Last week, four senators that include Elizabeth Warren (D-Mass.) and John McCain (R-Ariz.) introduced a bill to reinstate the Glass-Steagall Act.
The 21st Century Glass-Steagall Act, as it's called, would bring back many of the provisions of the former law and strengthen language to limit financial speculation by the big banks, reduce risk, and attempt to end "Too Big to Fail" once and for all.
The original legislation, called The Banking Act of 1933 but commonly referred to as Glass-Steagall, was partly repealed by Congress in 1999 and signed into law by President Bill Clinton. But by the time Glass-Steagall was repealed, the law had already been watered down and full of loopholes that left the U.S. economy highly vulnerable to a financial crisis.
Many economists believe that the partial repeal of this law was responsible for the recent financial crisis.
But the reintroduction of a Glass-Steagall law would do one critical thing that should provide comfort to any American.
It would make it impossible for the Big Banks to access FDIC-insured savings and deposits, and then speculate with ordinary Americans' money. In addition, it would aim to end Too Big to Fail and reduce the size of the mega-banks, in essence break them up.