Posts Tagged Politics
WILL DONALD TRUMP AND TREASURY SECRETARY STEVE MNUCHIN PROCLAIM THE NEW 21st CENTURY GLASS-STEAGALL ACT, BUT ONLY METAPHORICALLY?
The Banking Act of 1933, commonly referred to as the Glass-Steagall Act, ushered in various reforms, to assist the Nation’s Recovery from The Great Depression. “Glass”, which was part of (new) President Franklin D. Roosevelt’s “New Deal”, broke-up the Banking Industry, and created Federal Deposit Insurance. It was made permanent in 1945.
Prior to “Glass”, companies could engage in both commercial and investment banking, which meant that risky securities actions might jeopardize clients’ deposits, and there wasn’t any deposit insurance either. In the mid-1980s, however, many of the banking restrictions were lifted, and mostly larger banks transformed themselves into Financial Services Supermarkets. Also, making “banking” even more precarious: the number of products and financial institutions, has frown considerably since the 1930s.
In October of 2008, President George W. Bush bestowed many billions of dollars on the largest banks, in order to enhance liquidity within the banking system. Unfortunately, that action was interpreted, by many, as conveying an explicit Federal Government Guarantee of what became to be called the “Too Big to Fail” banks. That general assumption merely led to an even higher concentration of financial business, on the few, but same, largest—or Too Big to Fail Banks. Thus, the solution worsened the problem!
Following The Great Recession (4Q07-to-1Q09), President Barack Obama signed the Dodd-Frank Act into Law, in July 2010. Dodd-Frank reined-in the banks, required required high equity capital standards, and was intended to separate the investment risks from consumer deposits. The GOP, however, has sought to repeal Dodd-Frank ever since!
Treasury Secretary Steven Mnuchin, who is Donald Trump’s lead-man on banking laws, has been suggesting that he might propose a “21st century version of Glass-Steagall”. Donald Trump has also been saying the same thing! Today, Senator Elizabeth Warren called Secretary Mnuchin to task, at a Senate Finance Committee Hearing, as linked from CNBC-TV. She noticed that he had been avoiding the question of whether, or not, the Trump Regime would break-up the banks.
Finally, Secretary Mnuchin realized that he had to answer the question, and his response was still quite convoluted: “it’s a complex issue”; “not a good thing”. and finally “NO!” He stammered when she asked him how they could be considering a “21st century version of Glass-Steagall—a law which specifically broke-up the banks—with one that would not.” Mr. Mnuchin suggested that he would bring a team from the Treasury Department to brief the Senator’s Staff.
Secretary Mnuchin seemed to be avoiding answers from most of the Senators on the Committee—especially the Democrats—as he offered to provide briefings, similar to those offered Senator Warren, to a number of other Senators. Surely, the Secretary of the Treasury should be expected to appear before the primary Senate Committee, which regulates his office—and be totally prepared! And it should be obvious to most Americans that, so soon after the 2008 Banking Crisis, that the status of the Banking Laws would be Question Number One, Two and Three!
NOW MIGHT NOT BE THE TIME TO SELL, IN THE STOCK MARKET, UNLESS YOU KNOW SOMETHING THAT WALL STREET DOESN’T!
Today, the Dow Jones Industrial Average dropped by 1.79%; but, it’s still up 4.27% above the 2016 close. Similarly, the S & P 500 closed down 1.82%, and is still up by 5.28% for the year. And NASDAQ, which lost the most, some 2.57% today, is still up by 11.57% on the year.
It’s important to remember that the financial markets never go straight up, or straight down. There appears to have been talk around the markets lately, that some degree of “correction” (a sell-off) was necessary to calm the volatility. So, perhaps the political angst provided just the spark to settle the market! If there is any volatility in the early U. S. market trading on Thursday, it will probably be a combination of Sellers, who weren’t paying attention on Wednesday, and Buyers looking to pick-up a few potential bargains.
Jeremy Siegel, Economics Professor at the University of Pennsylvania, literally wrote the book about “Stocks for the Long Run”, is a perennial stock market Bull. Today, he said, in an interview on CNBC-TV: “If Donald Trump resigned tomorrow I think the Dow would go up 1,000 points,” Professor Siegel’s stated rational is that the market has been rallying on the Republican Agenda, and not the Trump Agenda.
I wouldn’t try to project how the stock or bond market would adjust to such a situation, especially when we don’t know how ugly it might get. Also, if Donald Trump were to be ousted, the degree to which the Trump Republican Party continues to remain comfortable with him at the helm, might reveal whether or not it will continue to maintain it majority—or even its relevance to the average American.
NOTE: Welcome to my readers from Austria and the Netherlands.
Donald Trump spoke today, in Washington, D. C., at a memorial service for police officers, who were killed in the line-of-duty. As usual, I personally didn’t care much for Trump’s style; because, however well-intentioned his words might have been, they did not correlate with any plan to understand it.
In amongst his rhetoric, Donald Trump always seems to have an “Us-versus-Them” scenario in mind, especially when it comes to the Black-White relations on our nation’s streets, which is generally were police officers are killed. Additionally, he always seems to side with the police officers, in any confrontation ,without considering the possibility that, perhaps in some cases, the officer might have acted without provocation.
I have several relatives, as well as friends, who are either active or retired from law enforcement. And, I sincerely believe that most in their profession are dedicated men and women, and they are deeply committed to serving and safeguarding the public. But, I believe that Donald Trump should work toward understanding the situation, including all possible causes, and only then can he work toward solving the long standing problem.
Donald Trump, and his Attorney General Jeff Sessions; however, seem to be escalating the street crime problem, rather than diffusing it. The whole “Black Lives Matter” movement reflects the evils of Racism, which had never been settled—400 years since Black Africans were first forcibly brought to America, and sold into Slavery.
For instance, many of the incidents of police officers shooting Black Men have stemmed from the police harassing the Black Men, rather than just giving them a ticket or a warning, as they generally would to a White Man. AG Sessions further raised the level of distrust last week, when he announced that he was asking the Courts to hand-down the harshest sentences possible, even for non-violent crimes. WHY?
Part of the racial distrust, which is at the heart of the heightened street crime, is due to the fact that many more Blacks and Latinos are in prison, than Whites. Also, minorities often get harsher sentences for the same crimes. A rational person might conclude that the Trump Regime intends to make the problem worse, rather than better. Is that how Donald Trump might chose to remember those officers who were killed in the line-of-duty?
NOTE: Please consider me a rational person.
Last January, I compared the current disastrous situation with Mexico, which Donald Trump created, when he announced his candidacy in June of 2015. Mr. Trump always seems to need objects, which he can later blame for his own mistakes or inadequacies. In fact, ever since Trump’s irrational attacks on Mexico began, the possible reaction could present a much clearer and more dangerous situation.
In October of 1962, President John F. Kennedy averted the Soviet Union’s installation of Inter-Continental Ballistic Missiles in Cuba, by establishing a blockade of U. S. naval ships around the island nation. Allowing ICBMs, just 90 miles from our shares, would have been courting a similarly dangerous situation, between the two nuclear superpowers. Luckily, Soviet Premier Nikita Khrushchev “blinked”, and the ships returned to Russia.
Given Trump’s raucous attacks over the past two years, current Mexican President Enrique Pena Nieto, who had previously been lagging in popularity, has dropped even farther in the polls. The Mexican economy has stagnated, partially due to a halt in corporate investments until Donald Trump decides, for sure, what the status of NAFTA will be! Keep in mind, as well, that Russia and now China, have b been building trading relationships throughout South America, and Mexico might be of interest to them.
Ironically, as America tries to determine whether there was any possible Russian involvement in our Election, last November, Donald Trump has apparently contributed toward a probable Presidential turn-over in Mexico. If Donald would have considered the facts—only 5.6 million undocumented Mexicans were in the U. S. in 2016, as compared to 6.4 million in 2009, according to a new Pew Research Report—we wouldn’t be in this situation.
Senior Andres Manuel Lopez Obrador, the leftist former Mayor of Mexico City, appears favored to win the Presidential Election on July 1. Andres Oppenheimer writes that, when he interviewed Lopez Obrador, two years ago for the Miami Herald, he sounded exactly like Communist Hugo Chavez, the deceased former President of Venezuela. Lopez Obrador further places the blame, for the current deadly riots in Venezuela, on the political opponents of current President, Nicolas Maduro.
U. S. Secretary of State Rex Tillerson’s comment, earlier this week, announced that the Trump Regime would no longer insist that countries we deal with, must abide by our values. Those would include Democracy and Human Rights. In that case, Donald Trump; might develop a closer relationship with Mexico, if the favored Lopez Obrador, who might have Communist tendencies. is elected President. Of course, Donald might then have to accept the ramifications—of having either China or Russia, literally on our doorstep!
As I write this, it is already early Sunday morning in France, on the day of the Final Round of the French Presidential Election. The candidates from the two major parties have been eliminated, and the 2017 Presidential Election will choose between: Marion Anne “Marine” Le Pen, of Ultra-Right “Le Front National”, against Emmanuel (Jean-Michel Frederic) Macron of the Centrist “En Marche!” Party.
The Russian cyber-prints seem to be all over the French Election, as was the case in the U. S., Germany and perhaps elsewhere in Europe. Unlike Donald Trump, however, who sent his “Special Advisors” to meet with the Russians, Madam Le Pen made a personal visit to President Vladimir Putin, and even had her photograph taken with him. So, why does Russia care about the French Election?
President Putin seems to have two major problems with the Atlantic Alliance, which includes: Canada; the U. S; and Europe. Following the implosion of he Soviet Union, some of it’s former Soviet satellites either claimed independence, or joined NATO and/or the European Union. Additionally, when Russia annexed Crimea, and began interfering in Eastern Ukraine, the Alliance toughened its economic sanctions on Russia.
The sanctions have greatly hindered Russia’s trade: either for importing goods that its economy needs; or selling its exports—primarily oil and gas—to acquire necessary dollars, or other reserve currencies. The Russian economy, which had never diversified much beyond the energy sector, was further devastated when the price of oil—its major cash source—was cut in half, on local markets, from the $90 per barrel three years ago.
Although Monsieur Macron appears favored to win; as we saw in the U. S. Election, strange things can happen. If Marine Le Pen were to become President, and her avowed Referendum to leave the E. U. were successful, that would mean that two of the three major economies—and largest nations—would be gone.
Also, a FRexit would be even worse than Britain leaving, since breaking-up the 19 member Euro, the common currency, would cause even more of an upheaval—both for France and the E. U. At that point, losing 30% of the trade pact’s GDP—between France and U. K., would certainly cause the relevance of the E. U. to come into question. And then, nations that leave, as they look for trading options, might begin to cozy-up to Russia and, thus, reduce the impact of the economic sanctions.
NOTE: Just a few days after Donald’s Inauguration, I described the basics of what might have been Trump’s expected Tax Plan in a blog post. Three months later, it’s still quite vague!
Although Trump prefers to label it as Tax Reform, yesterday’s big presentation was nothing but a vague suggestion of a Tax Give-Away, mostly to corporations and the top two percent of taxpayers. The stock market displayed its ecstasy by closing down a bit lower, and perhaps wondering if they had seen this movie before. Whatever might come of his Tax Plan, the corporate interests, who truly would benefit from a 57% tax-cut (from 35% to 15%) know that it still must get through Congress, and that is saying something!
Donald Trump will reach Day 100 on Saturday, after which pundits will begIn to slice-and-dice his accomplishments, most of which are quite minimal. That’s why he has been rushing to make big announcements, even if they are still in the early stages, and not thought-out. For instance: his visit to the Treasury Department, a couple of days ago, was nothing but a charade, signing an “Executive Order”, which directed Secretary Steve Mnuchin to do what he is already doing. And then today, Health Care is back in the news, as was an unnecessary briefing on North Korea, for the Senate, at the White House!
Over the past 22 months, Trump has vowed to reform the IRS Tax Code, and he complains that the Corporate Rate is too high. Donald, few companies actually pay the top rate of 35%. In fact, approximately ten percent pay no tax at all! For comparison, the Average “Effective Tax Rate” (after credits and deductions), that U. S. corporations pay is 27.7%, while the average for OECD (industrialized corporations) is 27.1%. So, the actual difference isn’t really much to complain about!
The really big question is how does the Trump Regime expects to pay for these give-aways—tax cuts to corporations; a one-time Tax Holiday for companies to repatriate earnings held overseas; tax cuts for the very wealthy taxpayers; and the elimination of the Estate Tax, which only about 6,000 families pay. And by the way, none of these tax cuts would boost the economy or have much of an effect on job creation!
There is one other give-away, which is not boasted about, perhaps because it tells of a personal special interest group; but, it would certainly appeal to Donald Trump’s billionaire buddies. Many very wealthy people file their taxes as Individuals, which would mean the 35% maximum personal rate. They are, for instance; doctors; lawyers; hedge funds; real estate developers; etc. Donald’s Plan proposes the establishment of some sort of tax vehicle, which would enable such taxpayers to file as corporations—at the 15%.rate!
Parsing the Plan, as presented, I can assume a best-efforts guesstimate, that this Trump Tax Reform Plan might reduce the Treasury Department’s Tax Revenue by, let’ say, $4 Trillion over the next decade, or $400 Billion annually. So, how does the Treasury recoup that huge loss? MAGIC!
Donald Trump and Secretary Mnuchin claim that, by lowering taxes on the wealthy, the economy would grow and that would, in turn, increase tax receipts. Since Ronald Reagan first proposed the “Trickle-Down” Theory, ing 1980, it has never been successfully demonstrated in the real world. The divergence, both in Income and Wealth, however, ,has increased substantially, in America ever since. Why would anyone expect the result be different this rime?
How many times are we going to hear Donald Trump boast about “Gonna-Do’s”, that aren’t on any sort of rational horizon: Health Care; Tax Reform; Infrastructure; Immigration Reform’ Trade Reform; The Wall, etc? At the same time, he acts like Congress and the American People are supposed to kiss his Royal Derriere. No, Donald, you’re no longer a Candidate, you must play by the Constitutional Rules, and we get to keep score!
NOTE #2: Nobel Laureate Paul Krugman described the Trump Tax Plan, in his NY Times column, with the following analogy to a “Twilight Zone” episode, about a six year-old child, with exceptional powers.
DONALD, YOU CLAIMED THAT BAD NEGOTIATORS HAD WORKED ON TRADE, IRAN’S NUCLEAR AGREEMENT, CLIMATE CHANGE. SHOW US WHAT “THE WORLD’S GREATEST” CAN DO!
Throughout his Presidential Campaign, Donald Trump complained about: the Trans-Pacific Partnership; adverse trade agreements with Mexico and China; the six-nation nuclear agreement with Iran and, of course, any of President Barack Obama’s accomplishments! He often tied the two points together: we negotiated bad deals, because we have bad negotiators.
But, can’t Mr. Trump see that he now has the best possible negotiating team, and the Negotiator-in-Chief is personally available to turn things around! Surely the (presumed) Author of “The Art of the Deal” can bring all of his super negotiating skills to bear. Keep in mind, that if we do leave the TPP—a trade pact, which consolidates the fastest-growing region on earth under one “roof”—we will be offering our seat to China. And, President Xi Jinping will be quite pleased to replace us, and assume our leadership position,
The nuclear agreement with Iran, which was thought to be only a couple of months away from having The Bomb, has truly accomplished its very important purpose! Tehran shipped both 95% of its plutonium and its centrifuges out of the country, in June of 2014, when the negotiations began. So, Israeli Prime Minister Benjamin Netanyahu’s worst nightmare—a nuclear-armed Iran—has not come to pass. Psst: Israel has had an entire nuclear arsenal itself, for decades!
And lastly, remember that New World Order that Trump has been dissing—off and on—whenever it suits his purpose? That’s the UN, NATO, the IMF, World Bank, the WTO, etc. Guess what? Those organizations, established after World War II, have: enhanced the global economic recovery: promoted world peace; and further led to a better functioning world.
As Donald Trump must surely know, the best time to drive that hard bargain is when you are in a position of relative strength! America did not suffer the double whammy, of both The Great Depression and a Major War being fought on U. S. Soil, during the 1930s and 40s. Yes, we fought in the War, lost a lot of good men, and drained our National Treasury. In the end, however, we were in much better shape then either the vanquished, or even the other victors.
America must retain a leadership position when aid, assistance and leadership are needed to: reverse global climate change; provide financial, medical and manpower assistance in combating medical pandemics; and we must remain in the forefront in responding to natural disasters. Helping people in times of distress, helps prevent future wars!
Following any military confrontations, we must act benevolently, if we win, and be thankful if we lose. Outrageous reparation payments should never be assessed on the vanquished. The harsh treatment forced on Germany, by the Allies after World War I, merely laid the groundwork for an even deadlier World War II, just 20 years later. After World War II, however, America instituted the Marshall Plan, by providing $13 billion ($130 billion in 2015 dollars) to help re-build European economies.
Donald Trump should re-consider some of his misguided ideas, and the harsh rhetoric that he has been using to attack a number of global and regional institutions. As long as the U. S. still maintains a level of stature, Mr. Trump should reflect on another Republican President, Theodore Roosevelt, who was often associated with the phrase: “Speak softly, but carry a big stick!”
NOTE: If anyone wonders why I was so easy, on Donald Trump, in writing this post, just read the prior post, where I had questioned whether anyone would want his hands on the key that launches the nukes. In past posts, I have used every name in the book, in referring to Donald Trump.
I took a somewhat different approach this time. Donald says the negotiators on the deals that he wants to replace–mostly everything–were really awful. But now, with His Team, led by him as the Negotiator-in-Chief, I say: Go for it! Donald, it’s time to “Put-up, or Shut-up!”