Category Archives: regulation

Rakoff Was Both Right and Victorious

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Recall Federal District Judge Jed Rakoff’s decision a while ago rejecting an SEC-Citibank settlement, in which Citibank agreed to pay an enormous vigfine to the SEC in return for the latter’s desisting from harassinghectoring the former any further.  Rakoff’s heartburn concerned the lack of statement by either party of guilt or innocence by Citibank—Citi would simply pay the protectionfine and the SEC would stop its threats.

Now there’s an update to the SEC side of this.

The Securities and Exchange Commission intends to make companies and individuals admit wrongdoing as a condition of settling civil charges in certain cases, or be forced to fight the charges in court, the agency’s Chairman Mary Jo White said Tuesday.

Is this a direct result of Rakoff’s rudeness in holding out for actual culpability before a fine gets assessed?  Maybe, but not directly.  This change didn’t occur until after a review of the overall situation initiated by SEC Chairman Mary Jo White when she took over last spring.

It does, though, come after Rakoff’s argument that the ability to avoid admitting liability allows companies to treat settlements as just a “cost of doing business.”  He didn’t argue this explicitly, but I do: it also allows government agencies to extort money and other…concessions…from businesses and individuals with whom those agencies have a disagreement of any sort.  Sort of like the IRS and the DoJ do.

“Victorious” may be too strong, but this clearly is a step in the right direction.

In Which The Swiss Government Votes for National Sovereignty

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Switzerland’s lower house of Parliament voted 123-63 against the measure [to let Swiss banks otherwise violate Swiss banking laws to give up data demanded by the US], which would have enabled many of the Alpine nation’s banks to sidestep the Swiss banking secrecy laws and start handing information to the US Department of Justice about any past help they may have given to Americans hiding undeclared wealth in Swiss accounts.

Those lawmakers were worried about, among other things,

the heavy-handedness of the US effort to have them sign off on legislation that might have exposed the country’s banks and bank employees to legal hazards.  Lawmakers had also raised concerns about the lack of detail in the plan regarding potential fines for banks that would have opted to participate.

Peter Kunz, Professor of Business Law at the University of Bern, disagreed:

This is the major problem.  Swiss banks, and banks in general, need some certainty in their business—and right now no one really knows what’s going to happen.

I disagree with the good professor.  To the extent there is uncertainty, it’s in the Swiss government’s behavior.  With this rejection, Swiss banks remain free to obey Swiss law without fear of retaliation, which would not have been possible under the proposed law.  That law would have subjected Swiss banks to the vagaries of American law.

This may be more coming down the pike.

Senior officials from Germany, France, Japan and the European Commission have expressed deep concern to Federal Reserve Chairman Ben Bernanke about the Fed’s proposed new regulatory regime for foreign banks under Section 165 of the Dodd-Frank Act.

This is what concerns them:

the Fed proposes to require over two dozen foreign banks to move their U.S. broker-dealer and other nonbranch operations under separately capitalized, intermediate holding companies that would be subject to U.S. bank capital requirements, liquidity buffers and single counterparty credit limits.

…

For purposes of complying with the Fed’s higher capital requirements under Section 165, U.S. bank holding companies would be allowed to take account of their global consolidated operations. Foreign bank-owned IHCs would not—which means that capital held at the foreign bank parent level would not be available to support U.S. operations. This would tilt the competitive playing field against foreign bank-owned broker-dealers, and it is a glaring violation of long-standing principles of equal national treatment.

Sovereignty—what a concept.

A Tax YGTBSM

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Senator Orrin Hatch (R, UT), in a Wall Street Journal op-ed last Friday, had this tidbit while writing more generally about the IRS.

Look at the Earned Income Tax Credit.  Whether you like this refundable credit or not, the Treasury Department’s inspector general for tax administration reported in April that improper payments account for 21% to 25% of total EITC payments in 2012.  Take the percentage of improper EITC payments and apply it to the approximate $1 trillion we’ll spend on ObamaCare premium credits in the decade beginning 2014.

And on funding for a program the IRS is supposed to administer, he added this:

already soaring budget for the [Obamacare] premium subsidies….

I’ve asked Secretary of the Treasury Jack Lew and Secretary of Health and Human Services Kathleen Sebelius to explain the massive jump in costs for premium subsidies.  The projected figure for subsidy expenditures has gone from nearly $16 billion in the president’s 2012 budget up to nearly $22 billion in his 2014 budget.

The IRS is not capable of handling its own business.  How is going to be able to handle any other business?

It Doesn’t Get Much More Naked Than This

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Recall Connecticut’s recently passed extensive gun ban law, a bill passed in the emotional aftermath of the Newtown shootings.  Essentially, it banned firearms the State’s government has defined as “assault” weapons.

Last Monday, the legislature “tweaked” that bill to “clear up confusion;” Governor Dannel Malloy (D) is expected to sign it.  One of the tweaks cleared up confusion surrounding the legal possession of these weapons that had been on order before the original legislation was signed into law but not received until after enactment.  Such firearms can now be legally possessed.

It’s another tweak that’s of interest here, though: this one expanded the list of those who can legally acquire these “assault” weapons, now that the gun ban law has been enacted:

  • sworn and certified officers at the department of motor vehicles
  • the chief state’s attorney office
  • the department of energy and environmental protection
  • some constables with police certification

Additionally, the tweak

  • exempts [the above] officers from the certificate requirement for long gun ownership
  • allows them to [retain their “assault”] weapons and large capacity magazines after their service ends by registering them.

Notice that: the citizenry are being denied the ability to possess weapons adequate for their own purposes (an inalienable right and a right acknowledged by the 2nd Amendment), but a broadened list of government officials is granted the ability to possess “assault” weapons.

State Senator Joe Markley (R) is on the right track, but he was a lone voice in the Connecticut wilderness:

I think if we acknowledge that we are putting law enforcement officers at risk by limiting their ability to defend themselves [thus, the allowed expansion of weapons possessions], I think we have to acknowledge that we’re putting homeowners at risk by limiting their ability to defend themselves.

Now why would a government seek to disarm the citizenry while expanding its own arsenal?

Hmm….

Some Just Can’t Be Helped

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California is on the verge of a new gold rush. Expanded hydraulic fracturing—or “fracking”—at the Monterey Shale formation is sparking estimates that 15 billion barrels of oil could be accessed, along with millions of jobs and huge contributions to the domestic energy supply.

Even the state’s green-friendly Democratic governor, Jerry Brown, says “the potential is extraordinary.”

But standing in the way is a flurry of anti-fracking bills.  At last count, 10 were on the table, all introduced by Democrats seeking tighter controls over the controversial technology.

Never mind that there’s nothing controversial about fracking, except in the minds of “journalists” looking to peddle their stories and in the minds of “environmentalists” who would rather trash our economy—and so our environment—than do anything serious vis-à-vis our environment, or our economy.

Indeed, as Tupper Hull, Vice President of Strategic Communications with the Western States Petroleum Association notes,

Why would you want to curtail energy production, with a technology that has proved to be safe, and (deny) the folks in the regions of the state where those benefits are going to accrue?  That just doesn’t make any sense[.]

Aside from the general stupidity of this, my concern is that when California goes bust, they’ll come a-runnin’, demanding help, trying to con the Federal government into bailing them out.  With the tax dollars paid by the citizens of functionally bankrupt Illinois, paid by the citizens of nearly bankrupt New York, paid by the citizens of fiscally responsible Texas, paid by the citizens of….