Thursday, March 31, 2016


Following yesterday's decision freeing MetLife from their systemically important status, General Electric today asked the Federal Reserve to remove them from the same status give the halving of its once-powerful GE Capital financial arm.  Don't hold your breath.  Big Danny and his button men don't like this kind of cheek from the Scrotties out there that he finds better placed under his thumb.  This is a fight that will not end easily although I suspect that GE has its arguments well in-place to see it through.  They waited for and will be undoubtedly be aided by the MetLife decision and encouraged by the notion that there are some out there in the real world who are becomming a bit tired of dictatorial nature of this administration in the apparent avoidance and ignoring of all administrative niceties when ruling over organizations supposedly under its purview.  The consequences of such action is also apparently attracted attention.  It was reported that on of the arguments put forward by MetLife was that the cost of compliance with the governments demands was less than the fines collected by various governments in suits brought against financial institutions.  You will all of course remember that this precise argument was made months ago in this column where it was pointed out that the  almost $100 billion extorted from financial institution was of course a direct reduction of primary capital not to mention shareholders' interest.  Way to make the financial sector more secure, guys.  And by the by, what were the bonuses paid to the AGs for that little rip-off?

But the government remains undeterred.  Crazy Lizzy was at it again in her little sub-committee howling at the heads of insurance companies for their actions in advising clients as to matters relating to personal investments.  Lizzy is pushing for--and may well get--legislation imposing a fiduciary test on such activities which is a game changer in many respects.

I have no great love for what are essentially salesmen of financial products peddling sometimes sophisticated products to mom and pop that often are not

a.  the right products for the individuals, or
b.  a proprietary product that produce the highest return to the company...not to mention the highest commissions to said salesmen.

But, there are fixes that can be made without resorting to Lizzy's sell-out to the plaintiff  Bar which, in effect, is precisely the definition of her solution.  I find it hard to reconcile that on one hand the folks in D.C. proclaim that their aim is to reduce the risk inherent to financial institutions whilst on the other, they sponsor actions that will do precisely the opposite.  A fiduciary risk is a nightmare given the vast number of individuals who would fall into this category.  One can bet that any investment that doesn't perform in the manner expected--for whatever reason--will be the subject of a law suit--probably a class action one at that--by the well-known overseer of corporate morality, the firm of Sue Grabbit & Run.  Such is the way of our system today.....

On a more standard note, markets were awaiting tomorrow's job report with the indications being that there will be another good number.  One hopes so but I can't but notice that there appear to be dissenting views about on the real status of the economy...the Bond market for instance.  Yield on the 10 year fell to 1.77% today.  One would think that with the optimism recently being expressed as to the state of the economy, as direct result of which, if correct, would be higher inflation, yields would be going up, right?  Nope.  It wasn't too long ago the the 10 years stood well-north of 2.30%.  So why the drop and who's right?  If things are really going as well as some claim, there's going to be a lot of un-smiley faces among bond buyers..and a few more ticked off pensioners.  I wonder if Crazy Lizzy would hold the Fed or the Treasury to a fiduciary standard?  Boy wouldn't that be a law suit!

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