Juggling Dynamite

Senator Brown (D) articulates the rationale and provisions of the Too-Big-To-Fail Act which he co-authored with Senator Vitter (R) Here is a direct link.

Where the Dodd-Frank Act falters under the weight of complexity and tinkering at the edges of reform, the Brown Vitter Act achieves a powerful mix of substance and simplicity. The legislation has also been able to accomplish the seemingly impossible: finding unanimous support across a bipartisan Senate.

“By removing competitive advantages megabanks have over smaller and regional community bankers, the bill is a straightforward support of industry competition. That appeals to libertarians and consumer advocates alike.

Splitting the bank lobby: Perhaps the most significant development has been among the banking lobby itself. Before Brown-Vitter TBTF, the industry responded to all proposed regulatory reform legislation in lockstep. The new proposal splits the industry cleanly in half, with the megabanks on one side and everyone else on the other.

The broad strokes of the TBFA Act:

●Mandates a flat 15 percent capital requirement for any institution with more than $500 billion in assets

●Does not rely on ratings agency grades

●Removes off-balance-sheet assets and liabilities as different classes — they are treated as if they are on the balance sheet

●Requires derivatives positions to be included in a bank’s consolidated assets

●Requires that the capital cushion a bank holds be liquid

See: Can two senators end “Too big to fail?”

Jon Stewart — the new Voice of America in China? Here is a direct video report link.

Its another Groovy Tuesday so no doubt rigged steroid injected stock prices will leap higher today. And Jamie Dimon just won the confidence vote from a majority of JP Morgan shareholders to stay on in the limitless privilege and unfair advantage of his dual role as CEO and Chairman. Same old, same old. So many elites with free reign to take freely. So few are focused on the state of the real economy.

“Traders don’t care”, “the market doesn’t care”, yes, yes, I know. The conventional wisdom will only care when stock prices collapse once more like the homes in a tornado ravaged suburb. Given that S&P earnings growth has been flat now for more than 20 months since September 2011 and forward earnings estimates have been plunging since January the only thing that is actually rising today is the appetite for market participants to pay more and more for less and less value. Goldman Sachs, that bastion of fiduciary financial advice, just upped its year end target for the S&P to 1750 and 2100 by 2015 at which point the S&P would be trading at valuations approaching the 2000 tech wreck peak as opposed to “just” the 2007 credit bubble peak that US stocks have reclaimed over the past 6 months. Next stop: to infinity and beyond. Central banks have finally managed to abolish the business cycle and banish bear markets forever more.  It only took them 100 years of repeated financial booms and blowups to get in charge of the free-market system.  Awesome.  Long live unlimited leverage!

This chart of economic bell weather, heavy equipment maker Caterpillar’s machine sales reflects the business cycle trend of the global economy and corporate revenues which have been declining now since 2010. Paying more and more, for less and less is the most well worn path to financial loss ever charted. It may be hard to stand aside and wait for the inevitable collapse to run its course once more, but playing along in such treacherous conditions is positively reckless.