Bernie Sanders rants and raves about the supposed need to go back to Glass-Steagall, the law that used to separate investment from commercial banking, and Sen. Elizabeth Warren agrees with him. And now so does… the Republican platform. [Bloomberg, WSJ, The Street (“Republican Finance Platform Designed To Pick Off Sanders Voters from Clinton”)] Do they realize that, according to many economists and financial experts on the left as well as most of the free-market types, the absence of the law had basically nothing to do with the bubble and crash of 2008? That crash arose from other financial misadventures, notably in the mortgage area. More: Iain Murray, Mark Calabria/Cato in 2012.
- The Department of Justice cuts a settlement deal with Bank of America under which the bank agrees to give millions to liberal groups [Sean Higgins/Washington Examiner, Federalist Society blog rounding up criticisms]
- Seizures under bank structuring law have hit small business owners who deposited cash in under-$10,000 amounts because their insurance policies wouldn’t cover cash-on-hand holdings above that amount [Ali Meyer/Free Beacon, earlier and generally]
- “It is hereby enacted that Smith wins his lawsuit” statutes and the Bank Markazi (Iran funds) case [Michael Greve, Liberty and Law]
- Second Circuit panel throws out $1.2 billion verdict against B of A over Countrywide mortgage lending, saying government didn’t prove fraud [Daniel Fisher, more]
- “The crowdfunding catch: government regulations” [Thaya Brook Knight, Newsweek/Cato]
- Too left-wing to get tenure at Harvard Law in era of the Crits. Now, to banks, “he’s judge and jury and everything else.” [Wall Street Journal profile of Fed governor Daniel Tarullo]
Following the 2008 crash, government enforcement action extracted $110 billion from lenders and other players over a variety of alleged sins relating to the rise and collapse of the mortgage bubble. Where did it go? Governments held on to a lot of it, a lot went to the government-sponsored Fannie and Freddie mortgage enterprises, favored “housing-related community groups” got some, some went to homeowners with mortgage struggles or to new low-interest loans. In New York, money is going to rebuild the Tappan Zee bridge and “the annual state fair is using bank-settlement money to build a new horse barn and stables.” But no one has kept track of where a lot of the money went, there being no overall effort to account for it. [Christina Rexrode and Emily Glazer, WSJ]
- Bernie Sanders still rants and raves about Glass-Steagall Act. Who will break the news to him? [Catherine Rampell/WaPo, P.M. Carpenter (Krugman, Pearlstein in accord with Rampell), earlier] “Hillary Clinton vows to go ‘well beyond’ Dodd-Frank” [Housing Wire via Kevin Funnell]
- “In the past, ‘financial institutions were unwilling, for relationship reasons, to litigate against each other…That has changed dramatically.'” [Daniel Fisher quoting New York attorney Brian Fraser]
- “Government Thinks You’re Too Dumb To Try Crowdfunding” [Ben Weingarten, The Federalist]
- “If every bank behaved like Abacus, the financial crisis wouldn’t have occurred.” So guess which bank got prosecuted [Jiayang Fan, The New Yorker back in October]
- Billions in free money for consumers, just by regulating credit card fees! Sorry, it’s not that simple [Todd Zywicki]
- “The war against cash”: government vs. the cash economy [Daniel Mitchell, Cato, first and second post]
- New IRS authority to secure revocation of passports should give pause to everyone concerned about American liberty [Investors Business Daily]
- “But the questions of fairness are real and seem to be bolstered by the S.E.C.’s win/loss record in its home court versus its performance in district courts.” [Gretchen Morgenson, New York Times, earlier here, etc.]
- With Greece as with subprime crisis, same regulators who messed up credit markets will probably ask for and get more power [Arnold Kling]
- “In fact an AIG-and-taxpayer bailout of Wall Street firms engineered by government officials and Wall Street professionals with deep and ignored conflicts of interest” [Lawrence Cunningham, National Interest via Bainbridge]
- CSR by way of SEC? “Disclosure Rules Are the Wrong Way to Push Social Change” [Thaya Knight, American Banker/Cato]
- “Supreme Court Blasts Maryland Taxman’s Double-Dipping” [Elizabeth BeShears, Heartland on this year’s Supreme Court decision in Comptroller v. Wynne, I’m quoted]
- Dodd-Frank: “Are State Regulators A Source of Systemic Risk?” [Mark Calabria, Cato]
- Feds’ latest round of mega-settlements against banks prompts usual demands to jail execs. Is it really that simple? [Scott Greenfield]
Hmmm, this doesn’t match the received account [Fernando Ferreira, Joseph Gyourko, “A New Look at the U.S. Foreclosure Crisis: Panel Data Evidence of Prime and Subprime Borrowers from 1997 to 2012”, National Bureau of Economic Research (NBER) Working Paper No. 21261, just out]:
Utilizing new panel micro data on the ownership sequences of all types of borrowers from 1997-2012 leads to a reinterpretation of the U.S. foreclosure crisis as more of a prime, rather than a subprime, borrower issue. Moreover, traditional mortgage default factors associated with the economic cycle, such as negative equity, completely account for the foreclosure propensity of prime borrowers relative to all-cash owners, and for three-quarters of the analogous subprime gap. Housing traits, race, initial income, and speculators did not play a meaningful role, and initial leverage only accounts for a small variation in outcomes of prime and subprime borrowers.
More: Daniel Fisher.
- Skull and crossbones to follow: San Francisco pols decree health warnings on soft drink, Frappuccino billboards [Steve Chapman]
- Judge criticizes feds’ punitive handling of AIG rescue as unlawful, but says no damages are owed to Hank Greenberg [Bloomberg, Thaya Knight/Cato, Gideon Kanner who predicted outcome, W$J]
- Congress resisting Obama/HUD scheme to force communities to build low-income housing [Jonathan Nelson/Economics21, Marc Thiessen, Affirmatively Furthering Fair Housing or AFFH]
- California, following New York, proposes 50 hours of mandatory pro bono work for prospective lawyers [John McGinnis]
- Five part Renee Lettow Lerner series on historical role and present-day decay of juries [Volokh Conspiracy, introduction, parts one, two, three, four, five] Related: Mike Rappaport and follow-up on Seventh Amendment, Liberty and Law.
- Latest Scotland drunk-driving blood threshold: Drivers “warned that having ‘no alcohol at all’ is the only way to ensure they stay within the limit” [Independent via Christopher Snowdon]
- How not to argue for bail reform: Scott Greenfield vs. NYT op-ed writer [Simple Justice]
- SEC regs suppress small business capital formation and that’s a shame [Commissioner Daniel Gallagher via Bainbridge]
- Federally sponsored gripe site for financial institutions not likely to end well [Hester Peirce and Vera Soliman, Mercatus via Kevin Funnell]
- Alleged terror payments “routed through” sued bank also went through major New York banks, which shouldn’t be surprising [Fisher]
- Did mid-level managers in securitized mortgage finance know they were in a housing bubble but cynically go ahead? Evidence against [Cheng et al., American Economic Review via MR]
- Shareholder litigation: “New ‘loser pays’ standard could curb abusive lawsuits” [Examiner editorial] Delaware take note: corporate by-law changes that cut off fee-seeking opportunism deserve acclaim [Keith Paul Bishop via Bainbridge]
- NYT was hot on “Goldman Sachs manipulated aluminum market” allegations but judge wasn’t [Reuters, July 2013 NYT]
- CFPB might shrug off discrimination and retaliation charges, but many of the firms it regulates could not afford to [Hans Bader]
WSJ editorial this morning: “We hold no brief for Citi, which has been rescued three times by the feds…. [But] good luck finding a justification for [the $7 billion figure] in the settlement agreement. The number seems to have been pulled out of thin air since it’s unrelated to Citi’s mortgage-securities market share or any other metric we can see beyond having media impact.
“This week’s settlement includes $4 billion for the Treasury, roughly $500 million for the states and FDIC, and $2.5 billion for mortgage borrowers. That last category has become a fixture of recent government mortgage settlements, even though the premise of this case involves harm done to bond investors, not mortgage borrowers.” More: Bloomberg. And the settlement directs Citigroup to hire former Eric Holder associate Thomas Perrilli, now at Jenner & Block, for a monitorship that is likely to prove an extremely lucrative plum [Reynolds Holding, Alison Frankel] Also: Ira Stoll.
- Payday lenders sue federal agencies over Operation Choke Point [Bloomberg News, Business Journals, earlier; more, Funnell]
- Speaking of those lenders: “California Supreme Court to review ‘rent-a-tribe’ arrangement for payday lenders” [CL&P, more]
- “If someone starts trying to blame the Global Financial Crisis on ‘de-regulation’, you can stop reading…” [Lorenzo via Arnold Kling]
- Can we just admit that the feds’ real target in the Credit Suisse case was the bank’s customers? [ABA Journal]
- Maryland does not approve of Bitcoin [my Free State Notes via Kevin Funnell]
- Behind Halliburton v. Erica P. John Fund, SCOTUS’s big case on securities class actions, two lawprofs are jousting [Alison Frankel, Reuters, and there’s a Cato connection; earlier]
- For expats, FATCA raises “prospect of being discriminated against as an American for all things financial” [Peter Spiro/OJ; Sophia Yan, Money] More renounce U.S. citizenship [Yahoo] A Canada-based FATCA resource [Isaac Brock Society] Earlier here, etc.