Federal court rules the structure of the Consumer Financial Protection Bureau (CFPB) is unconstitutional

“All government bureaucracies should be accountable to hardworking taxpayers”

October 11,2016
the staff of the Ridgewood blog

Ridgewood NJ, Financial Services Committee Chairman Jeb Hensarling (R-TX) released the following statement on today’s federal court ruling that the structure of the Consumer Financial Protection Bureau (CFPB) is unconstitutional:

“This is a good day for democracy, economic freedom, due process and the Constitution. The second highest court in the land has vindicated what House Republicans have said all along, that the CFPB’s structure is unconstitutional.

“By design the CFPB is arguably the most powerful and least accountable Washington bureaucracy in American history, and it shows. The Bureau has infringed on the economic freedoms of consumers, limited their financial choices, increased their costs, and failed to hold managers accountable for widespread discrimination and abuse of its own employees. This must change. The CFPB has an important mission. Properly designed and led, it is capable of great good. But the Bureau’s bizarre and defective structure allows it to evade the time-tested checks and balances that are necessary to hold it or any other government bureaucracy accountable. Our Constitution requires these checks and balances to protect our God-given liberties from government abuse. It is astonishing that the Democrats who voted for the Dodd-Frank Act so casually disregarded their constitutional obligations to the American people. It’s also astonishing that President Obama illegally bypassed the Senate by appointing Richard Cordray to serve as the Bureau’s Director. It is time to restore the rule of law and Constitutional governance to this nation. While I welcome today’s decision, it’s absurd that a judicial opinion was necessary.

“The Financial CHOICE Act, approved by our committee last month, solves the constitutional defect identified by the court today. The Financial CHOICE Act replaces the current unaccountable single director with a bipartisan, five-member commission – which is how virtually every independent regulatory agency, including those responsible for consumer and investor protection, currently operates.

“Republican efforts in the Financial CHOICE Act to reform the Bureau are and have always been grounded in the fundamental belief that all government bureaucracies should be accountable to hardworking taxpayers, especially those bureaucracies like the CFPB that can spend hundreds of millions of dollars each year with no oversight or control from Congress or the executive branch; employ an army federal employees; and have a direct impact on the personal finances of virtually every American citizen.”

http://theridgewoodblog.net/federal-court-rules-the-structure-of-the-consumer-financial-protection-bureau-cfpb-is-unconstitutional/

A sign of things to come : Massive layoffs of government workers in Puerto Rico

A sign of things to come : Massive layoffs of government workers in Puerto Rico

Facing a deficit of $3.2 billion ,the island paradise of Puerto Rico announced that it would lay off 16,000 public employees on top of the 2,500 layoffs enacted earlier this year. The unemployment rate already a staggering 16% will be pushed further to 17% .While the layoffs looks to save the government $2 billion , despite howling protests from most of the islands major unions.

Puerto Rico know more as a tourist destination, and for its sandy white beaches and beautiful women is a case study and a warning on what happens when a population becomes all too dependent on subsidized government employment. In the past four decades, the commonwealth's government became the island's largest employer. The payroll represented 70 percent of the government's budget.

While other “Latino” cultures have long prided themselfs on strong family ties and entrepreneurs the island of Puerto Rico with its generous tax benefits and union pay packages have long favored government work .Perhaps we maybe seeing a historic change taking place. First because there is simply no money left and raising taxes looks to have reached the point like in many other places of diminishing returns ,while Uncle Sam is clearly taped out and second maybe perhaps because the “Latino” culture with its strong family ties lends itself more to ownership and the entrepreneur lifestyle.

As a frequent visitor to the island I have often noticed what seems to be enormous opportunities for the self employed and risk takers ,yet given the generous benefits of living on the island there is little or no incentive. Many businesses on the island are owned by outsiders ,who have long raved on the virtues of living and working in Puerto Rico . Yet except of the tourist trade there is little local involvement in business creation.

With the current strikes taking place protesting the layoffs ,my heart goes out to anyone who has lost their job ,but perhaps the painful process of transforming Puerto Rico into a vibrant entrepreneurial environment is underway. And perhaps the ground work is being done to change the culture and create a more opertunistic and self sufficient Puerto Rico.

Swine Flu and the Bronx is burning......

Geez is this the 1970's or what ,swine flu ? here we go again maybe the Son of Sam will also make a comeback or maybe the Yankees?Next you are going to tell me the Bronx is burning . I am not sure if its a for real alarm but this rehashing stuff from 35 years ago continues to remind me of the Carter Era. So is it real or another excuse or desperate attempt for a massive intervention by the government in the economy ? My bet is the latter so hold on to your piggy bank it just may get raided again.

REPEAT after me ; all Roads lead to Citibank

Once again as I have repeated many times on this blog that in almost every financial crisis since the 1970's all roads lead to Citibank and with the combo or a very oversold market ,some very unexpected positive news from Citi bank and an increase in auto sales in China ,coupled with no major faux pas from the new administration and the market rejoiced . The key here is follow through accompanied with significant volume building !

So here's the good news its in the music ......

So here's the good news ,and yes the good news .The seeds of destruction for the 70's generation and all this big government lunacy are already being sown. Listen carefully ,its in the music . New music is everywhere ,and for the first time in decades new bands ,good bands are breaking onto the scene . The clubs are already being filled with remixed eighties music and like the resurrection of DISCO in the late 90's foretold the end of an era and significant decline in equities and the rebirth of the bigger government is best concept ,The remixed eighties music signifies the raise of the 80's can do generation which will work hard first to undue all that is the 1970's and the 70's generation . And with its belief in itself and a willingness ,is ready and able to remake the world in a more open ,independent free environment limited government view.After all the 80's generation grew up and all knows that the government is the problem !

You don’t have to be a college graduate to figure this one out.

So the worst 2 day sell after a presidential election and still investors wonder why, well folks its simple:

The new administration has talked about higher corporate taxes; higher personal income taxes; higher capital gains taxes; higher taxes on dividends and a government take over of 401k plans. You don’t have to be a college graduate to figure this one out.

Look for the new administrations choices of economic advisors and key fiscal appointees to divine the leadership direction from the campaign rhetoric. No one seems to have any clue how President Obama will govern. Will he as critics claim lean far to the left and sit down with Hugo Chaves or will he embrace the Clinton legacy and push hard toward the center pursuing free trade and welfare reform and perhaps even some tax cuts?

The perception by many is that he is a smooth talking good looking empty suite who will be filled with the ideas of his big money supporters and there proxies. Again critics assert that it’s more likely the views of Weatherman Bill Ayers and his ilk that have the most influence President Obama again the key is his choices of his key economic advisors.

There is also a third possibility which harkens back to the Carter Era when and aggressive congress confronted a weak inexperienced President. President Obama for sure lacks experience but I am not sure this Congress is either smart or shrewd enough to run the show.

The other key issue is energy policy for if the new administration harkens back to a conservation at all cost philosophy instead of a focusing on the discovery and promotion of new resources I fear we will very quickly see the return of vastly higher energy prices due to constrained supply.

Greenspan Sells Out and we go limit down....

No wonder the market continues its sell off even the former FED Chair Allen Greenspan has raised the white or should i say red flag and joined the communist socialist big government party. Oh how the mighty have fallen once a clear voice now humbled by this huge financial crisis. Sometimes I wonder why these guys hold on when it’s clearly time to retire and manage in moment of weakness to decimate an entire lifetime of work.

Given the preponderance of 70’s generation types who operate under the philosophy that governments know better than markets and people its no wonder the market continues to fall and chaos reigns. The Elliot wave suggest this is the final leg of the 5th wave down

The current misconception being propagated is that hands off lazy fair left us with this mess, and big government is here to save us. Unfortunately in the world of Sarbanes Oxley it very hard to argue that there is not enough financial regulation, if the truth be told regulation it seems was applied unevenly with generous dispensations given to political friends and patrons.

Contrary to the current view that the government didn’t do enough in the 1930’s the reality is that it did plenty just not the right thing .In the 1930’s Government activism virtually created and prolonged the great depression, then like now the market was wrung by scandal creating a movement for greater regulation. This led to a very activist government ever searching for more revenue too feed their schemes. Interest rates and Taxes were raised, and world trade was halted with the passage of Smoot Hartley. There were efforts to over regulate everything and with price fixing of commodities were used guarantying shortages.

The positives yes they do exist are more than you think, inflation remains benign, the FED has stated buying commercial paper from qualified companies reinvigorating that market and perhaps saving consumer money markets,banks are beginning to merge clearing out the dead wood, the FED is buying up bad debt, interest rates are declining ,the dollar is strengthening and municipals bonds are firming up and once again looking to be the haven of widows and orphans.

The 4 most dangerous lines in the English Language:

The 4 most dangerous lines in the English Language:

1) I'M FORM THE GOVERMENT I AM HERE TO HELP
2) NO MONEY DOWN
3) ITS DIFFERENT THIS TIME
4) THE CHECK IS IN THE MAIL

So is Wall Street broken? : Part 2 the unwinding of Glass Siegel

So is Wall Street broken?

Recent events have seen the unwinding of the Glass Siegel Act and the reemergence of a pre Glass Siegel banking structure where Investment and Commercial Banking are once again under one roof. I don’t understand the argument that deregulation and the move away from Glass Siegel restrictions was the cause of the current financial crisis. If anything the clinging to the obsolete notion of Glass Siegel premeditated the demise of many of today’s financial institutions. Glass Siegel only worked because investment banks were run primarily as partnerships and the risk to your own capital put constraints on leverage and speculation. The demise of the old partnership style investment bank lead to spending of the publics money has led too more leverage and more risk taken. After all Europe had no Glass Siegel and their banks ,and investment houses have faired much better than their American counter parts in the current environment. The joint structure of investment banking and commercial banking together makes capital far cheaper than the highly leveraged investment banking model, but I suspect less profitable. It’s rather strange to be criticizing the demise of Glass Siegel while the current solutions all involve undoing all the separations between commercial and investment banking.

This cleansing process signals the end of the Bear Market that has engulfed US Equity markets since March of 2000. Firms that are not accountable and transparent will be put down. While the free market seems to be taking the hit for poor judgment and a lack of oversight. This should come as no surprise given the very people looking to expand government power by trying to clean up this mess are the very people that created this mess to begin with. Let’s all face it, its not like all the rules were not already on the books such as Sarbanes Oxley but apparently large political donors were granted exemptions.

Is Wall Street Broken Part One : Put some clothes on those “Naked Shorts”

The shorts got hammered by government edict banning shorting financials. These types of moves have historically only given markets a short term boosts followed by prolonged periods of decline. The 1930 showed markets don’t respond well to irrational government interference and these actions often have the unintended consequences of lessening confidence.

Shorting is as necessary for the proper functioning of markets as going long. By banning shorting you are once again simply rewarding more bad corporate and regulatory behavior. I do think however the ability to do “naked shorts” should be significantly curtailed except for market makers and floor brokers who need to use this activity to insure orderly markets. The reason ‘naked shorts” should be eliminated is the simply logic that the action of shorting a stock you have not borrowed seems to alter the capital structure of the target company, making shorting a self fulfilling prophecy.

In order to restore confidence in US equity markets US regulators should 1) restore the “uptick rule” 2) eliminate “naked shorts” and 3) Immediately restore market players ability to legitimately short any and all equities.

let the kids Dance !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

So Mayor Mike says its OK to dance in NYC again and as the word spread that the repressive dance ban in the city was about to end the market responded with a bit of a dance of its own ! Putting together back to back wins for investors. While some licked their wounds from the recent market turmoil other expressed optimism that toilet paper will continue to have strong sales in the current market environment.

Crowds filled the down town underground club scene and an excitement in the air that seemed to spill out and into the streets and perhaps into the hearts and heads of investors . Perhaps this is a sign of things to come and perhaps that the next generation that is waiting in the wings with new ideas and a solve the problem get it done attitude unlike the down trodden 70’s generation is starting to feel its own.

Perhaps we have reached the depths of financial and sub prime despair and banks have finally told us what is really on their minds and on their balance sheets . Better yet perhaps the solutions will be reached despite the best intentions of the political class and the worlds largest economy will once again create jobs by getting back into the energy business.

So look for more volatility till the end of the summer in to the middle of October . October 21 or so should see some kind of direction set and the playing of both sides of the fence the short and long should come to the end .