Daily Archives: 01/11/2013

Revolving door


The Wall Street Journal reveals a good way to make money in the new US economy: Work for agencies like the CFTC who get to write huge complex and vague rules for financial companies, with lots of discretion and supervision, then go work for the companies who have to comply with said rules.
A few tidbits from “Hot Commodities: CFTC Staffers” (which is a news story, not an editorial)

Dodd-Frank has prompted strong demand for staffers from the Commodity Futures Trading Commission. The law gave the agency broad new responsibilities to write rules for complex derivatives called swaps that had been largely unregulated. Many rules already are in place, while others will take effect next year. The new swaps rules have swept many more financial firms under the agency’s jurisdiction, boosting demand for even midlevel staffers with just a few years’ experience.

At least nine CFTC employees have decamped since June for firms in finance, law and accounting that are figuring out how to comply with the Dodd-Frank overhaul. Six of the staffers were directly involved in rule making and three were in enforcement.

Take, for instance, Julian Hammar of the CFTC’s general counsel’s office. Mr. Hammar recently left for the law firm Covington & Burling, where he will advise clients on the implementation of Dodd-Frank.
Carl Kennedy, a staffer to Commissioner Scott O’Malia, went to J.P. Morgan, and Adedayo Banwo, a lawyer in the agency’s general counsel’s office, joined Deutsche Bank.
A series of CFTC cases related to alleged rigging of the London interbank offered rate, or Libor, also has given the agency a higher profile, fueling private-sector demand for employees in its enforcement division. At least three people have recently left the division.

PricewaterhouseCoopers had no former CFTC employees on staff two years ago, but the firm has hired three in the past 18 months, including former Enforcement Chief Counsel Phyllis Cela, said Dan Ryan, chairman of the firm’s financial regulatory practice.

“We’ve been working for mostly large banks with respect to helping them prepare for derivatives regulations,” Mr. Ryan said. Ms. Cela advises clients on “what steps they should take now to avoid future enforcement actions,” he said.

At the risk of belaboring the obvious, if rules are clear and simple, you don’t need to hire the people who wrote them, and who have lots of buddies on the inside deciding what they mean, to survive.  And in the regulatory-capture department, good luck to new smaller companies who can’t afford to hire their own personal rule-soothsayer with a good contacts list on his phone.

…critics of the revolving door between Washington and Wall Street say they worry ex-staffers could use their personal connections to pressure the agency into crafting rules favorable to their new employers.

No, you don’t say?

Revolving door
John H. Cochrane
Wed, 02 Jan 2013 21:24:00 GMT

Travel Speed (1800-1930)


Sure, the internet and the information revolution has been fun. But before that there was the communication revolution. And before that, it was transportation:

rates of travel in 1800srates of travel 1830

rates of travel 1857

rates of travel 1930s

(original source: 1932 Atlas of the Historical Geography of the United States, which has a number of other cool historical maps)

Travel Speed (1800-1930)
Fri, 11 Jan 2013 21:03:26 GMT

Lawmakers urge the President to consider any lawful steps to pay the bills


From the NY Times: ‘Any Lawful Steps’ Urged to Avert Default

“In the event that Republicans make good on their threat by failing to act, or by moving unilaterally to pass a debt-limit extension only as part of unbalanced or unreasonable legislation, we believe you must be willing to take any lawful steps to ensure that America does not break its promises and trigger a global economic crisis — without Congressional approval, if necessary,” wrote Senators Harry Reid of Nevada, Richard J. Durbin of Illinois, Charles E. Schumer of New York and Patty Murray of Washington.

Democratic leadership aides said the Senate would probably take up legislation in early February that would allow the president to raise the debt ceiling on his own in set increments, perhaps of $1 trillion. Congress would have the ability to reject the increase, but that would take a two-thirds majority.
That plan was first used at the suggestion of Senator McConnell in 2011 to solve the last debt-ceiling impasse.

I remain confident that the debt ceiling will be raised, and that the US Government will pay the bills.  However “fear” will start slowing the economy soon – just like in 2011 – and the House will receive (and deserves) all of the blame for any damage done to the economy.
I assume the House is looking for a way out, and maybe another McConnell bill is the solution.

Lawmakers urge the President to consider “any lawful steps” to pay the bills
Bill McBride
Sat, 12 Jan 2013 00:55:00 GMT