Finreg and the markets.

[cowboy]

Anybody know what's in this thing? I'm really concerned that it will drive speculators away from some of the more thinly traded commodities markets and make them go away altogether.

Hopefully not, but this bill smells bad. A reporter told me yesterday that it will take years to muddle through it and figure it out. This means higher transaction costs and tons more work for attorneys and accountants. I'd like to hear from BYU'71 and Viking, along with the anybody else as to what you think the effects will be.

[landpoke]

Anybody know what's in this thing? I'm really concerned that it will drive speculators away from some of the more thinly traded commodities markets and make them go away altogether.

Hopefully not, but this bill smells bad. A reporter told me yesterday that it will take years to muddle through it and figure it out. This means higher transaction costs and tons more work for attorneys and accountants. I'd like to hear from BYU'71 and Viking, along with the anybody else as to what you think the effects will be.

Hopefully it opens the market to cheaper, Chinese beef. I'm sick of all these welfare ranchers living off the government tit and then gouging honest, hard working Americans.

[creekster]

Hopefully it opens the market to cheaper, Chinese beef. I'm sick of all these welfare ranchers living off the government tit and then gouging honest, hard working Americans.

teat. They are living off the teat. Where'd you grow up, Manhattan?

[landpoke]

teat. They are living off the teat. Where'd you grow up, Manhattan?

One of the many bi-products of my porn addiction.

[creekster]

One of the many bi-products of my porn addiction.

I would be very worried if it was a tri-product.

[landpoke]

I would be very worried if it was a tri-product.

No, see there's this one genre of porn where you have women who go both...ah never mind. If you have to explain the joke it wasn't good in the first place.

[landpoke]

Then again, maybe I'm underestimating the devil monkey. I saw this deal with two girls, a dude and a donkey once. One, two, three.

[Moliere]

Anybody know what's in this thing? I'm really concerned that it will drive speculators away from some of the more thinly traded commodities markets and make them go away altogether.

Hopefully not, but this bill smells bad. A reporter told me yesterday that it will take years to muddle through it and figure it out. This means higher transaction costs and tons more work for attorneys and accountants. I'd like to hear from BYU'71 and Viking, along with the anybody else as to what you think the effects will be.

Ever since they dropped from the bill a lot of the things that would have affected me in my job, I haven't followed this much. Here is a quick write up from the JOA, which gives a high level overview.

http://www.journalofaccountancy.com/Web/20103115.htm

IMO, it sets up a bunch of committees and gives power to certain groups but it doesn't really do anything to address the crisis. If these new committees don't see financial issues coming then we'll just end up in the same place we did in 2008.

One interesting thing here is that they dropped the SOX 404 regulations for very small public companies. While I don't disagree with this, it is funny that in a regulation reform bill they actually permenantly lessen the regulations on some companies.

EDIT - I also decided to copy/paste and email I got from the AICPA about the bill. This has more information (the above link had info more for accountants) but is also at a higher level:

The President is expected to sign the financial regulatory reform bill, Wall Street Reform and Consumer Protection Act, HR 4173, on Thursday, July 22nd after it passed in the Senate on July 15, 2010, and in the House on June 30, 2010. It will be effective law on the day after it is signed. The AICPA is developing a whitepaper to be released in the coming weeks for use in your business. In the meantime, I want to alert you to topics included in the reform such as:

>>> Broad economic oversight and Consumer Financial Services Protection:

- Creates a Financial Stability Oversight Council
- Creates government authority to close and liquidate large failing financial firms
- Creates Consumer Financial Protection Bureau within the Federal Reserve to prevent abuse
- Creates Orderly Liquidation Authority
- Requires submission of corporate plan of liquidation

>>> Corporate Governance and Attestation:

- Requires procedures for nonbinding annual shareholder vote on executive compensation
- Requires new disclosures on CEO and median employee compensation
- Mandates independent compensation committees and requires new related disclosures
- Requires policies to reclaim compensation based on financial performance subsequently restated
- Authorizes SEC to grant shareholders proxy access to nominate directors
- Requires disclosure in annual proxy on why Board Chairman and CEO positions are separate or combined.
- Expands whistleblower protections and allows rewards for information leading to successful enforcement of securities laws. Provides an exception for any whistleblower who gains information through the performance of an audit of financial statements required under the securities laws.
- Amends Sarbanes-Oxley Act authorizing PCAOB to create a program for registering and inspecting the auditors of non-public broker-dealers, allowing the PCAOB to differentiate among classes of broker-dealers, as appropriate. It further authorizes the PCAOB to share inspection and investigative reports with foreign regulatory authorities.
- Allows only the SEC the ability to sue secondary parties for a securities violation and changes the standard of liability from a "knowing" standard to a "knowing or recklessness" standard. Also calls for the GAO to perform a study on the impact of authorizing a private right of action against any person who aids or abets another person in violation of the securities laws.
- Exempts smaller public companies under $75 million market capitalization from Sarbanes Oxley 404(b) which requires an external auditor's report on management's assertions regarding internal controls for financial reporting.
- SEC will study ways to reduce the compliance burden on public companies between $75 and $250 million capitalization. Management assertions on internal controls over financial reporting from Sarbanes Oxley 404(a) are still required.
- A separate study is to be performed by GAO to evaluate whether issuers that are exempt from 404(b) requirements have fewer or more restatements of published accounting statements than those that are required to comply, how the cost of capital compares for exempt issuers, whether any difference exists in investor confidence in integrity of the financial statements of exempt versus complying issuer.

>>> Consumer Protection

- Exempts customary and usual CPA services from new consumer bureau oversight.
- Requires the GAO to conduct a study on the effectiveness of regulatory oversight of financial planners. The study will make recommendations on how financial planning should be regulated.

>>> Derivative Regulatory Reform:

- Creates greater regulatory oversight of derivatives financial markets. Commodities Futures Trading Commission will regulate swaps and the SEC will regulate security-based swaps. Margin and clearing requirements may not be imposed on end users that only use derivatives to hedge commercial risk.
- Requires clearing of swaps by a CFTC or SEC registered derivatives clearing organization unless exemption applies.

>>> Rating Agency Regulatory Reform:

- Imposes new restrictions and establishes an independent office of the SEC to improve regulation of credit rating agencies.
- Requires establishment and documentation of effective internal control structure of rating methods. SEC must write rules to prevent influence on ratings by sales or marketing concerns
- SEC required to perform a two year study on the feasibility of creating a panel to randomly assign qualified credit rating agencies to issues, instead of the current issuer selection process. After study the new credit rating agency panel will be created unless the SEC objects and develops what it considers a more practicable system.

>>> Investor Protection:

- Requires companies creating asset-backed securities to retain at least five percent of the credit risk.
- Redefines accredited investors, creates inflation adjusted thresholds, and creates new protections for seniors.
- Subjects advisers to hedge funds and other private funds to SEC registration.
- Eliminates the exemption in the Investment Advisers Act for advisers with fewer than 15 clients.
- Advisors with less than $100 million in assets under management will register with states only.

>>> Mortgage Reform and Anti-Predatory Lending:

- Amends Truth I Lending Act making unfair, deceptive credit practices unlawful if collateral is a principal dwelling.
- Requires loan originators to offer loan terms that "reasonably reflect" ability to repay loan.
- Requires escrow accounts for payment of taxes, insurance, and other periodic payments.
- Prohibits issue of subprime mortgages without a written property appraisal
- Sets standards for residential mortgage originators and prohibits steering incentive compensation.
- Requires verification of ability to repay loans.

>>> Deposit Insurance Reform:

- Deposit accounts in banks and credit unions will be insured by FDIC coverage up to $250,000.
- Sets minimum reserve ratio to 1.35 percent of insured deposits. Exempts banks with assets under $10 billion from funding the current shortfall.

>>> Bank Regulatory Reform:

- Speculative trading is prohibited in banks which hold FDIC insured deposits for customers.
- Restricts investment in hedge funds and or private-equity funds to 3% of capital.
- Allows proprietary trades that are not speculative such as hedging commercial risk.
- Imposes new regulatory capital requirements on banks.
- Prohibits mergers or acquisitions which would create a consolidated liability exceeding 10 percent of aggregate consolidated liabilities of all financial companies as of the prior calendar year end.
- Amends Bank Holding Company Act allowing certain credit card loans to eligible small businesses.

[byu71]

I wish I could offer some intelligent insight into what is happening, but I can't. I do know the government has more control. If the government had proven in the past they can place regulators in position to control things that get out of control, I might feel better.

However, there were regulators in place and Bernie Madoof happened. Fannie Mae and Freddie Mac happened. Regulators are people and often not the smartest light bulbs that shine. They get bought off or get rolled by politicians catering to constituents. Think of the great protector of the people, Chuck Schumer. Who are his biggest constituents, the Wall Streeters in New York.

If I read anything enlightening over the next while, I will let you know.

[mUUser]

SEC Chairman claim it will need to hire 800 additional staff members to maintain this monstrosity. Turns out its another government jobs bill and little else.

[Uncle Ted]

What I don't get is President Obama stated before signing this bill:

“There will be no more taxpayer-funded bailouts. Period.”

is why did we have taxpayer-funded bailouts in the first place? Why couldn't we let some companies fail like GM?

Also, this bill doesn't seem to do much for private sector jobs:

Within minutes of the bill signing, several Wall Street groups were leveling criticism at the new regulations, reflecting Mr. Obama’s increasingly fractious relations with corporate America.

The Business Roundtable complained in a statement that the law “takes our country in the wrong direction” and may discourage investment and job growth, echoing concerns made by the United States Chamber of Commerce and other business organizations.

So we will follow up this bill with another stimulus to unemployment:

Only last week Vice President Joe Biden was hailing the stimulus for "saving or creating" three million jobs. This week the White House says we need even more stimulus, in the form of jobless checks, to make up for the jobs his original spending stimulus didn't create.

[il Padrino Ute]

What I don't get is President Obama stated before signing this bill:



is why did we have taxpayer-funded bailouts in the first place? Why couldn't we let some companies fail like GM?

Also, this bill doesn't seem to do much for private sector jobs:



So we will follow up this bill with another stimulus to unemployment:

I wonder how much damage Obama and the Dems in the House and Senate have to cause to the economy before the country realizes that he is an incompetent buffoon who is hell-bent on bringing down this country to a third world level.

[Moliere]

After thinking about this over the night, I've come to the conclusion that the lack of specificity in discussion of the finreg act is due to the fact that there is a lack of specificity in the bill. It creates new regulatory bodies and gives them very broad and somewhat undefined roles. For instance, the new regulatory body is supposed to monitor and act on any type of security/derivative that could pose a threat to the economy. It can also take over and wind down a company that is possibly going to fail.

I see two problems here. First, the lack of specificity is why people are saying they don't know what the results of this bill will be because the extent of the powers of these new regulatory bodies will most likely be defined in the courts, which worries me.

Second, there is a lack of independence between the government regulators and the government programs that caused at least part of the housing collapse. Do we really expect that if this regulatory oversight body was in place over the past decade that it would have told Congress that forcing banks to engage in subprime lending is a bad idea and then Congress would have backed off? I highly doubt it and I highly doubt this bill will do much for economic stability.

[byu71]

I see two problems here. First, the lack of specificity is why people are saying they don't know what the results of this bill will be because the extent of the powers of these new regulatory bodies will most likely be defined in the courts, which worries me.

The confusion out there is stifling investors and corporations. There is always confusion and the oft used term, markets climb a wall of worry. The problem for me is do I have enough confidence that American corporate executives will be able to figure out what the heck the government is doing and then function accordingly. My outlook is that they always have been able to, so why should this be any different. However, for me, as long as I think the dems. have the ability to push through all their government programs, I will wait on the sidelines as there is no need to jump in until the dust settles.

Corporations are sitting on a lot of cash. I would say a prudent investor is probably sitting on 25-40% cash even if it earns nothing. Why, because we have a crap shoot going on right now.

I am not saying this isn't a great time to go all in, but it is so confusing out there right now, who has the nuts to do that, so capital sits on the sidelines.

Our people have sent out an e-mail telling us Tuesday there will be a conference call that will "attempt" to explain the new bill. That is reassuing. The bill has been passed and instead of knowing what it means, our best and brightest are trying to figure out what it means.

How do you even begin to guess what the government beaurocrats are going to do with such an ambiguous document. They have flexibility to interpret what their instructions are. That should scare the heck out of anyone.

[cowboy]

I'm really concerned about its effects on commodities. There was a good article in the WSJ the other day talking about possible ramifications for farmers, and I've been fretting ever since. I also wonder if forward contracts will be considered derivatives and fall under the regulation umbrella. That would be a disaster.