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Welcome to Money Morning - Only the News You Can Profit From.

  • Question of the Week: Readers Respond to Money Morning's Financial Reform Query With U.S. consumers still feeling the sting of the global financial crisis, consumer advocacy groups are claiming that they snagged a win with the financial reform measure approved last month by a joint House-Senate congressional committee.

    The bill next goes to U.S. President Barack Obama, who is expected to sign the measure into law.

    "It's historic legislation," Michael Calhoun, president of the Center for Responsible Lending, told ABC News. "It's a big win for consumers."

  • We Want to Hear From You: How Do You As A Consumer Feel About the Financial Reform Bill? With U.S. consumers still feeling the sting of the global financial crisis, consumer advocacy groups are claiming that they snagged a win with the financial reform measure approved last week by a joint House-Senate congressional committee.

    The bill goes next to President Barack Obama, who is expected to sign the measure into law.

    "It's historic legislation," Michael Calhoun, president of the Center for Responsible Lending, told ABC News. "It's a big win for consumers."

  • Washington Reaches Financial Reform Deal That Packs Lighter Punch Than Wall Street Had Feared The biggest Wall Street regulation overhaul since the Great Depression was approved after 20-hour House-Senate negotiations ended this morning (Friday). The legislation brings a dramatic shift in financial reform, but comes down easier on financial institutions than initially planned.

    The bill, named the Dodd-Frank Act after Sen. Christopher J. Dodd, D-CT, and Rep. Barney Frank, D-MA, brings sweeping reforms to consumer protection, trading restrictions for big banks, and the regulation of financial products.

    "It establishes the greatest consumer financial protections in American history. It prevents financial firms from taking risks that will threaten the economy. And it provides the government with significant new tools to better protect taxpayers from the damage of future financial crises," U.S. Treasury Secretary Timothy F. Geithner said in a statement.

  • Question of the Week: Readers Respond to Money Morning's Market Volatility Query The Dow Jones Industrial Average last week dipped below 10,000 for the first time since February as a month of market volatility and price declines continued. Analysts predicted volatility to continue into June as government exit strategies begin and liquidity dwindles.

    The zooming rebound in U.S. stock prices from their March 9, 2009 bottom - the strongest rebound since the Great Depression - has been stymied by concerns over the Eurozone debt contagion, financial reform, the market flash crash and new political sparks in Korea. Figures show that the bulls are still hanging around - on the sidelines - but the bears have been calling the shots during a month that has seen stock prices fall more than 8%.

    "I think it's a question of pick your poison," Dan Alpert, managing partner at Westwood Capital, told MarketWatch. "The market was poised for a very severe correction and whether it's southern Mediterranean countries or worries about German banks, you can pick your catalyst." Read More...
  • We Want to Hear From You: Is U.S. Offshore Oil Drilling Going to Disappear? News of the Gulf Coast oil spill was only hours old when Money Morning readers first weighed in on the tragedy. The comments and the e-mails haven't stopped since.

    The chief concern: U.S. taxpayers will yet again be stuck with the tab for a problem caused by corporate malfeasance and lax governmental oversight.

    Stricter government regulation could enforce safety shut off valves with remote control operations - a device that could have prevented the current disaster. The hefty $500,000 price tag on the safety control has been a past deterrent, but hard to argue against in the wake of the billion-dollar Gulf spill.

    But...
  • Heavy-Handed Politics Could Boost Bank Reform, Stock Prices and the Economy Defenders of Goldman Sachs Group Inc. (NYSE: GS) say the civil fraud charges the U.S. Securities and Exchange Commission has levied against the investment-banking giant are without foundation, and are politically timed to push President Barack Obama's bank-reform agenda.

    In his Cooper Union speech to Wall Street and the American public yesterday (Thursday), President Obama took pointed aim at opponents of his bank-reform agenda by stating: "Unless your products depend on bilking people, there's little to fear from these reforms."

    Whether or not the timing of the Goldman Sachs fraud case was politically motivated, or whether or not President Obama was referring to Goldman with his "bilking" comment, one thing is for sure: The president and his administration are taking the reform fight to the Street.

    At stake in this fight is the future of our capital markets, the health of the U.S. economy and the direction of the U.S. stock market.

    To see how the Obama bank-reform push could perpetuate the bull market, please read on...

  • JPMorgan Posts Big Gains but Financial Reform Threatens Profitability JPMorgan Chase & Co. (NYSE: JPM) posted a 55% rise in first-quarter net income led by fixed-income trading and investment banking. But to ensure its profits remain in tact, the bank continues to fight against proposed financial reform.

    JPMorgan, the second-largest U.S. bank by assets, beat analysts' estimates with net income of $3.33 billion, or 74 cents a share. Estimates averaged 64 cents a share.

    Investment banking brought in $2.47 billion, 74% of total net income. The area is usually a strong contributor to profits, kicking in 57% in the previous quarter and 75% in the first quarter of 2009.

    JPMorgan claims the results are a strong indication of global financial economic improvement.

  • It's Time For "Banks" to Stop High-Risk Trading When members of the Senate Banking Committee recently asked Paul A. Volcker how regulators would identify banks engaged in excessive, high-risk trading, the former U.S. Federal Reserve chairman quipped: "It's like pornography - you know it when you see it."

    Volcker wants to make it illegal for banks to engage in such high-risk activities as "proprietary trading" - when an institution trades for its own accounts, as opposed to making trades for customer accounts. But as Volcker's comment illustrates, the proposal - known as "Volcker's Rule" - the whole concept of high-risk trading is pretty hazy and hard to define.

    Just as hazy is the definition of what now constitutes a bank.

    Long gone are the elegant subtleties of form and finesse that once defined the bank. In recent years, the entire concept has been cheapened by the vulgar obviousness of grossly enhanced compensation schemes.

    No company better embodies this transformation than Goldman Sachs.

    To find out why high-risk trading should be banned, read on...

  • Goldman's Earnings Call Overshadowed by Obama's Glass-Steagall Revival Goldman Sachs Group Inc. (NYSE: GS) yesterday (Thursday) reported blowout fourth-quarter earnings after dramatically reducing compensation. However, that earnings call was overshadowed by U.S. President Barack Obama's announcement that he will effectively restore some provisions of the Depression-era Glass-Steagall Act.

    Obama's plan would prohibit banks from running proprietary trading operations solely for their own profit and sponsoring hedge funds and private equity funds. It also proposes expanding a 10% market-share cap on deposits to include other liabilities such as non-deposit funding to restrict growth and consolidation.

    "While the financial system is far stronger today than it was one year ago, it's still operating under the same rules that led to its near collapse," Obama said at the White House. "Never again will the American taxpayer be held hostage by a bank that is too big to fail."

    However, many analysts believe the new regulations will have an adverse effect.

  • Why You Should Mark January 13 on Your Calendar Next Wednesday, Jan. 13, won't be just another hump day. It's a key date for regulators in both the United States and Europe who are preparing to launch the largest overhaul of global financial regulation since The Great Depression.

    On that day, at least two seminal events are scheduled to take place:

    • The U.S. Congress' Financial Crisis Inquiry Commission (FCIC) - the ten-member commission appointed with goal of investigating the causes of the financial crisis - will begin its first public hearing.
    • And the European Parliament will hold a confirmation hearing for Michel Barnier - the French politician who has been appointed to oversee the regulation of the European Union's (EU) financial services sector.
    Both of these events will have significant implications on the global financial reform that is set to go into effect this year. Read More...
  • Is Timothy Geithner A Roadblock to Regulatory Reform? Financial disclosure forms revealed last week that some of U.S. Treasury Secretary Timothy F. Geithner’s closest aides earned millions of dollars a year working for top Wall Street firms. That finding alone would not likely be enough to cast doubt over Geithner’s ability to take the lead in reforming the financial system. But this isn’t […] Read More...
  • Wall Street Back to Business as Obama's Regulatory Overhaul Loses Momentum It was more than a year ago – Sept. 14, 2008 – that Lehman Bros. Holding Co. (OTC: LEHMQ) finally collapsed under the weight of its own bad investments. But since then, little progress has been made on financial regulatory reform, and many of the large investment banks that received billions of dollars in government […] Read More...