Let's talk today about the cheap cost of buying favorable legislation in the House, and about how bills are titled to deceive us, even when there's no good reason to lie to our faces.
But first, I have to give a giant shout-out to Kevin Wack, the Capitol Hill reporter for the American Banker, which I read every day, and you should, too.
Kevin just made front and center something that I hadn't seen nor heard about and can't find anywhere else in print.
But, it's right up our alley here. So, give Kevin all the credit for this little tale.
Here we go...
Once upon a time, in a Congress full of proud and proper, true, honest, and transparent representatives of the American people, something resembling gangrene found its way into the illustrious body and backbone of some (probably all) of that elite club's members.
The infection, green like the color of money, was most recently seen oozing out of a few House members' back pockets.
Thankfully, the amount of green was small enough such that the civic-minded donor of the little largess wasn't set back much for his patriotism.
Kevin, acting like the brilliant pathologist that he sometimes plays, informs us that the donor was Howard Milstein (along with his wife and some family members), the CEO of Emigrant Bank in New York. And the "largessees" were Republican Rep. Michael Grimm of Staten Island ($2,500), Democratic Rep. Carolyn McCarthy of Long Island ($4,000), Dem. Rep. Gregory Meeks of Queens ($3,000), and Dem. Rep. Carolyn Maloney of Manhattan ($2,000).
What's newsworthy here is not that the gangrene caused the introduction of a bill titled, "A bill to amend the Dodd-Frank Wall Street Reform and Consumer Protection Act to adjust the date on which consolidated assets are determined for purposes of exempting certain instruments of smaller institutions from capital deductions."
It's that today it costs so little to get your own legislation written in Congress.
A few thousand bucks.
The Price of Honor
As an aside, I think that's a harbinger of how bad things really are in the economy. What we would expect to have been an inflationary spiral appears to be suffering from some terribly deflationary effects... How else would the price of honor have come down to such piddling amounts?
Anyway, Kevin's beef is that the bill should more honestly have been titled, "A bill to prevent Emigrant Bank from losing $300 million in Tier 1 capital."
There's nothing really wrong with the bill. Essentially, the Collins Amendment within Dodd-Frank says that as of December 31, 2009, any bank with more than $15 billion in assets can't count trust-preferred securities (don't ask, they're a type of capital) as part of their Tier 1 capital.
Emigrant Bank had more than $15 billion back then, because it prudently borrowed $2.3 billion from the New York Federal Home Loan Bank to shore up itself in the face of the financial crisis. After the crisis passed for Emigrant, it paid the money back. Today its assets are about $10.5 billion.
The bill was written to change the effective date of the Collins Amendment from December 31, 2009, to March 31, 2010 - after Emigrant paid back its loan and had less than $15 billion in assets.
It doesn't really matter to me that, out of 7,307 banks, only Emigrant is benefited by the "Emigrant bill" and gets to count its trust preferred as Tier 1 capital. They shouldn't be punished for being safety conscious when they had to be.
What's problematic is that the bill was paid for, given a less-than-transparent title (really, Kevin's right, why not call it for it really was?), and that its sponsors tried to push it through without any hearing or committee vote.
I'll leave you to ponder what all this means.
For my part, I'm thankful to Kevin, and to Barney Frank, who forced the bill to face the true light of day and didn't allow it to be rammed through under the radar of the press.
Thank God for a few good men still left to muckrake and call the infected animals out into the street to be identified as what they are... the living dead.
Or as they are less affectionately known, (some, okay, probably most, dare I say all?) Members of Congress.
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Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
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