US Policy Changes Vol.21 (Deregulation Vol.3 – Finance; Infrastructure)

Here are articles on financial reforms and infrastructure investment. Excerpts are on our own.

Is Steve Mnuchin Just Another Wall Street Banker? (11/30/2016) | @ThoBishop @MisesBlog
… He also entertained the idea of following the lead of other countries in possibly issuing 50–100 year bonds government bonds. As Dr. Joseph Salerno wrote recently on the subject of Austria’s 70-year bond:
The creation of [long-term bonds] enables the political elite to covertly and repeatedly plunder and impoverish productive savers, capitalists, entrepreneurs and workers, while avoiding the need to incur the wrath of the productive class by raising taxes.
… Though he started his career on Wall Street, his most recent banking experience came when he and other investors acquired subprime lender IndyMac which was re-branded as OneWest. Though the California-based bank had its own bad headlines for controversial foreclosure practices, his experience in the regional banking sector does give him a perspective from outside the world of Too Big to Fail banks. Since Dodd-Frank has increased the market share of players like Goldman and JP Morgan Chase, at the expense of community and regional bankers, perhaps his time with OneWest will keep him more focused on…
…the Volker Rule, which banned banks from proprietary trading. Since it can be difficult for government regulators to figure out what bank activity is reasonable and speculative, the rule has been criticized for requiring bureaucrats to become mind-readers. … Since Glass Steagall would explicitly put a barrier between deposit and investment banking, it would eliminate the uncertainty caused by the Volker Rule while protecting taxpayers from bailing out FDIC-insured banks from the sort of reckless lending…

How Trump Can Bring Outside-the-Box Thinking to Bear on the Fed (12/9/2016) | @TenthAmendment
… Fed officials worry the Trump presidency represents a unique threat to the Fed’s closely guarded “independence.” Sound money proponents, meanwhile, are hopeful that some long overdue reforms of the monetary system could begin to take shape.
The first item on the new president’s Fed agenda will be to appoint two members to the Board of Governors. The seven-seat Board currently has two vacancies that can be filled immediately. …
… Mnuchin, a Goldman Sachs alumnus, and Ross, a billionaire investor, have benefited from the easy money policies of Yellen and her predecessors. The values of financial assets get artificially propped up by the Fed’s injections of stimulus into the financial system. …
… The incoming president’s job is to represent the interests of ordinary Americans. Trump ran a populist campaign that drew heavy support from the South and from “flyover country.” These regions have historically been under-represented in the media, in government, and in the financial system.
Northeast elites continue to wield outsized power. That certainly holds true within the Federal Reserve itself. Since 1996, 80% of Fed governors have come from the East Coast, according to an analysis by Yale Law & Policy Review. Worse, nearly all ascribe to the Keynesian interventionist school of economics of inflation, debt, and government stimulus. …
… Senator Rand Paul and Representative Thomas Massie will try to push the Federal Reserve Transparency Act through Congress for President Trump’s signature. …
… Alabama Republican Senator Richard Shelby proposes a commission to overhaul the structure of the Federal Reserve.
Congress could also move to limit the Fed’s authority over interest rates by imposing a rules-based formula. The so-called Taylor Rule…
One advocate of this approach is Trump economic adviser Stephen Moore. …
…”dual mandate”… While other central banks are tasked with the single objective of price stability, the Fed also has the job of pursuing “maximum employment,”…
It wasn’t always this way. In 1977…
… But the political reality is that a Republican administration that rode into power on a platform of bringing back jobs won’t want to see any potential tools for promoting job growth eliminated on its watch.
… Allison has indicated he’d also consider serving as the next Fed chairman. As an opponent of central planning and a proponent of free-market economics and gold, he would bring the sort of “outside the box” perspective needed to reform the Fed. …

Fed’s Kaplan backs rate hike but says Fed will keep an eye on Trump’s policies (11/30/2016) | @elizabethgurdus @CNBC
… Kaplan told reporters he had been “comfortable” with a rate hike at policy meetings in both September and early November. “My view has not changed. I believe we are at the point where we ought to be removing some amount of accommodation in the near future,” he said.
Earlier on Wednesday, he said: “I would advocate that we take further action” to raise rates next year. …

Mnuchin and Bove Tell FBN that the Fed Should End Fannie, Freddie Conservatorship ASAP (12/8/2016) | @_InvestorsUnite @valuewalk
…government-sponsored enterprises (GSEs)…
… “They’re [Fannie and Freddie] acknowledging that they’re going to have negative capital and that’s going to create a crisis,” he said. “Second, they’ve gone back to the policies that Cuomo and Clinton had in place, which put them into trouble in the first place. They’re buying mortgages for down payments of only 3% down. They’re putting money into trust funds which are basically being used to fund subprime mortgages,” he said. …

Trump’s Treasury Secretary Pick is a Lucky Man. Very Lucky. (12/1/2016) | @eisingerj @ProPublica

Trump Picks Former Goldman Banker Steven Mnuchin As Treasury Secretary (11/30/2016) | @tylerusesoap @zerohedge

Bond Vigilantes Stir As Trump Team Hints At “Infrastructure Bank” (11/17/2016) | @tylerusesoap @zerohedge
…a “very big focus is regulatory changes, looking at the creation of an infrastructure bank to fund infrastructure investments” which to Wall Street was pure poetry, as it heard just two words: “more debt”, and thus greater probability of future QE.
… They released a plan in October advocating the provision of as much as $140 billion in tax credits to support $1 trillion in infrastructure investment, which would offset the credits through tax revenue from the projects’ labor wages and business profits.
…while the wrapper which Trump’s stimulus takes is irrelevant, whether infrastructure bank, tax credits, or direct investment, the real question is just how much more debt will this fiscal boost end up adding to America’s already $20 trillion in total debt. …
…we may find ourselves in an entirely new regime: one where the bond vigilantes take on not the Fed, but the president.“ Here is BV’s subsequent take:
One week of falling Treasury prices does not a bear market make. But if Donald Trump intends to flex the fiscal lever, bond market vigilantes could return with a vengeance, making it increasingly expensive for him to do so.

Fed Up Friday: Trump’s US Treasurer Pick Mnuchin Wants to Slash Taxes (12/2/2016) | @SchiffGold

Trump’s Treasury pick will have unprecedented power over Wall Street and the economy (11/30/2016) | @Ostaley @qz
…if Trump successfully establishes a new infrastructure bank to fund the improvements… that could be located within the Treasury Department, adding to Mnuchin’s influence.
… In 2010, under the Dodd-Frank financial reform act, they clarified the central bank’s procedures for responding to crisis situations and required that the secretary of the Treasury approve emergency loans. …
FSOC… …chaired by the Treasury secretary. …has the power to determine whether banks and institutions like hedge funds or insurance companies are “systemically important,” and if they are, to bring them under federal oversight. …
…depends on how well they get along with the president,” says @andrewtlevin @dartmouth…
…Matthew Weatherly-White @TheCAPROCKGroup…

Donald Trump’s curious Goldman Sachs connections (w Video; 11/30/2016) | @mattmegan5 @CNNMoney
… Wall Street certainly believes that Trump will be a friend. Since Trump’s election, big bank stocks are skyrocketing on hopes that Trump will dial back or even kill the Dodd-Frank financial reform regime. …

Trump’s Treasury and Commerce picks tepid on Fed’s Janet Yellen (11/30/2016) | @Matt_Belvedere @CNBC

Trump Shows Deregulatory Hand by Meeting With Former Cato Chief (11/28/2016) | @ryan_rainey @morningconsult
… Nominating Hensarling or Allison instead of Mnuchin would be a risky move because their aggressive approach to deregulation could conflict with Trump’s other priorities in immigration or health care. Trump has indicated financial deregulation is more of a second-tier issue that could be tackled after the first 100 days of his administration.
“Having a very aggressive Treasury secretary is not necessarily what you want when your priorities lay elsewhere,” said @BrandonBarford @beaconpa…

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