MANN: Canada has some of the strictest banking rules in the world. While hundreds of banks failed in the U.S. during the recession, this country hasn't seen a single major bank failure - not one. In fact, banks here are posting record profits. There's also no mortgage crisis in Canada. And while U.S. politicians feud over government spending, Mendelson says political parties on this side of the border have done the hard work of balancing budgets.I would attribute it mainly to resource extraction. I've heard whispers of a housing bubble in Canada, but so far, the banking system has held up well. If their loan quality is better than the U.S. because of better regulation, I would like to see this emphasized in the United States. I guess I'm not ready to go out and say that Canada has everything right, because I think the Chinese basic material boom may be allowing some Canadian bankers to be swimming naked, as Warren Buffett says, and when the tide goes out, we might find out who they are. Hopefully, I am wrong, and Canada would be an excellent model for reworking the U.S. regulatory system.
MENDELSON: The last decade has been one of Canada paying down debt, while it's been one of the United States ratcheting up debt. And so that creates much more flexibility for Canada to invest and make choices when a recession arises.
MANN: It's a huge turnabout for a country that in the 1990s was an economic basket case. In those days, the Canadian dollar was so weak that it was known as the northern peso. Now, Canada's dollar trades on par with American greenbacks and economic growth here is a third higher than in the U.S. Unemployment remained relatively low during the recession and people who do lose their jobs in Canada can expect to be out of work for half as long, compared with jobless workers in the U.S. Economists credit Canada's prosperity to a wide range of factors, including the rapid expansion of the country's oil industry and a very different approach to immigration.
Monday, December 12, 2011
Why Is Canada Thriving During The Recession?
Morning Edition Sunday looks at Canada's stability during the Great Recession:
Rehypothecation and MF Global
Calculated Risk has a post on what rehypothecation is, and includes this:
The NYT has more on MF Global and the CFTC:
Bruce Krasting adds: The Fed, MFG and Reg. TDodd-Frank should be replaced with much more stringent regulations, and the CFTC should be given some real teeth to enforce real futures trading regulations. I can't believe what MF Global did might be legal, and would love to see a number of people, including Jon Corzine prosecuted. Unfortunately, it sounds like MF Global was able to use customer accounts to back up their leveraged bets, and creditors were legally able to seize the customers' accounts as collateral. This shows how corrupt the New York and London financial centers are, as are the hedge funds and investment banks who do their grifting there. The world would be a better place if the United States and UK had regulated markets like Canada, not the criminal enterprises we actually have.
I think there is sufficient evidence today to conclude that Re-Hypothecation is at the root of the customer losses at MFG. ... Let me add one additional bit of info.If MF Global moved their US client assets to their UK subsidiary, and then followed the UK rules on rehypothecated assets - the client money is gone and nothing illegal happened. That would be the worst possible outcome.
The Canadian customers of MFG got their money back within 10 days of the MFG bankruptcy. The accounts that have lost money are either USA or UK based. In Canada, re-hypothecation is not permitted. I got these comments from a Canadian MFG account holder:
The trustee where segregated MF Global Canada customers' funds were held was RBC Dominion Securities. I don't think any of these funds ever left the trustee in Canada. Likelihood is if they left, the Canadian government would have made the parent Royal Bank of Canada eat up the losses and make full restitution.
The NYT has more on MF Global and the CFTC:
I had always assumed it was impossible and that strict internal controls existed at all brokerage firms so that firm officials couldn’t tap segregated customer funds even if they were willing to break the law. Thanks to MF Global, it’s now apparent that isn’t necessarily true. “If people are determined to misuse customer funds, they will misuse them,” said Ananda Radhakrishnan, the director of the division of clearing and risk at the Commodities Futures Trading Commission. That’s because the commodities and securities industry is mostly self-regulating, and self-regulation ultimately depends on the integrity of the regulated. Broker-dealers — securities firms that execute trades of stocks, bonds and other assets for customers — are overseen by the S.E.C., while futures commission merchants, which trade commodities, derivatives and futures, are regulated by the C.F.T.C. Like most large brokerage firms, MF Global was both a broker-dealer and a futures commission merchant, though its primary business was commodities futures trading.Ah, self-regulation-that'll work out. I know what the Republican solution to this is-even less regulation.
The federal regulators issue and enforce the rules, but day-to-day oversight for securities firms is delegated to the Chicago Board Options Exchange, a for-profit company, and the Financial Industry Regulatory Authority, or Finra, a nonprofit organization financed by the brokerage industry. For commodity dealers, it’s the National Futures Association and the Chicago Mercantile Exchange. They conduct periodic examinations and audits and, in addition, member firms are required to have internal controls and compliance mechanisms to make sure that customer assets remain safely segregated at all times.
First Transatlantic Radio Signal
December 12, 1901:
Guglielmo Marconi receives the first transatlantic radio signal at Signal Hill in St John's, Newfoundland.I find the fact that he is a descendent of John Jameson to be interesting. As for his developments, the phrase, "Standing on the shoulders of giants" seems applicable.
Guglielmo Marconi; 25 April 1874– 20 July 1937) was an Italian inventor, known as the father of long distance radio transmission and for his development of Marconi's law and a radio telegraph system. Marconi is often credited as the inventor of radio, and indeed he shared the 1909 Nobel Prize in Physics with Karl Ferdinand Braun "in recognition of their contributions to the development of wireless telegraphy". Much of Marconi's work in radio transmission was built upon previous experimentation and the commercial exploitation of ideas by others such as Hertz, Maxwell, Faraday, Popov, Lodge, Fessenden, Stone, Bose, and Tesla. As an entrepreneur, businessman, and founder of the The Wireless Telegraph & Signal Company in 1897, Marconi was more successful than any other because of his ability to commercialize radio and its associated equipment.
Marconi was born in Bologna on April 25, 1874, the second son of Giuseppe Marconi, an Italian landowner, and his Irish wife, Annie Jameson, daughter of Andrew Jameson of Daphne Castle in the County Wexford, Ireland and granddaughter of John Jameson, founder of whiskey distillers Jameson & Sons.
The Politics of MF Global
Des Moines Register:
Democrats: "Republicans want to let all traders steal by getting rid of regulations."
For once, I think they are both right.
Republicans hauled Corzine before the House Agriculture Committee this week to grill him about his role in the collapse of MF Global, which he took over after losing his relection bid as New Jersey governor in 2009. “I never intended to break any rules,“ Corzine told the committee.Republicans: "Democrats like Corzine are corrupt."
But Democrats are taking advantage of the MF Global debacle to hit Republicans over their resistance to reforms at the Commodity Futures Trading Committee, which regulates grain and oil futures and other forms of derivatives.
“Some of my friends on the other side of the Capitol seem hell-bent and ready to assign blame for MF Global to the CFTC for what they perceive as failing to do their jobs. Do we blame the police officer the day after our house gets broken into? Of course not,” said Rep. Collin Peterson, the senior Democrat on the House Agriculture Committee.
Peterson conceded that “it is very possible that there is nothing” in the Dodd-Frank reform bill passed in 2010 that would have prevented the MF Global collapse. But that’s no reason to roll back the Dodd-Frank provisions as Republicans are seeking to do, Peterson said.
“Given what happened here we should probably be talking about strengthening Dodd-Frank, not weakening it,” Peterson said. “Three big financial firm bankruptcies over a three year period is not a track record that should be extended.”
Democrats: "Republicans want to let all traders steal by getting rid of regulations."
For once, I think they are both right.
Sunday, December 11, 2011
Statute of Westminster 1931
December 11, 1931:
The British Parliament enacts the Statute of Westminster 1931, establishing legislative equality between the self-governing dominions of the Commonwealth of Australia, the Dominion of Canada, the Irish Free State, Dominion of Newfoundland, the Dominion of New Zealand, and the Union of South Africa. The Statute of Westminster 1931 is an Act of the Parliament of the United Kingdom. Passed on 11 December 1931, the Act established legislative equality for the self-governing dominions of the British Empire with the United Kingdom. The Statute remains domestic law within each of the other Commonwealth realms, to the extent that it has not been implicitly repealed by subsequent laws.From my vantage point in the U.S., I've never understood why Canada, Australia and New Zealand have kept their ties with the U.K., and haven't sent the Queen and her Governor-General packing. It is clear why the Irish cut those ties, but they have a different perspective on the U.K. than the other countries. I am just surprised that none of the other three have done something similar.
The Statute is of historical importance because it marked the effective legislative independence of these countries, either immediately or upon ratification. The residual constitutional powers retained by the Westminster parliament have now largely been superseded by subsequent legislation. Its current relevance is that it sets the basis for the continuing relationship between the Commonwealth realms and the Crown.
NASA Photo of the Day
December 5:
A Memorable Aurora Over Norway
Image Credit & Copyright: Ole Christian Salomonsen Explanation: It was one of the most memorable auroras of the season. There was green light, red light, and sometimes a mixture of the two. There were multiple rays, distinct curtains, and even an auroral corona. It took up so much of the sky. In the background were stars too numerous to count, in the foreground a friend trying to image the same sight. The scene was captured with a fisheye lens around and above Tromsø, Norway, last month. With the Sun becoming more active, next year might bring even more spectacular aurora.
Image Credit & Copyright: Ole Christian Salomonsen
What Is The Fallout Over Ryan Braun?
ESPN:
National League MVP Ryan Braun, who last season led the Milwaukee Brewers to their first division title in nearly three decades, has tested positive for a performance-enhancing drug and faces a 50-game suspension if the initial finding is upheld, two sources familiar with the case told "Outside the Lines."Man, that defense sounds a lot like something Floyd Landis might have said. This is just brutal for baseball. One of their fresh faces, who just won the NL MVP, tests positive for steroids, just slightly after they start to gain some credibility that the testing program has prevented stars from cheating (not including Manny Ramirez, who's job is to be the target of hate). For Braun, it delegitimizes his entire season, which was a career year. It opens up the old wounds over player performance, and who's juicing and who's not. How often do the players face testing? How random is the program? Can guys easily game the system? Is anybody clean? This sucks all of the oxygen out of the room in the Hot Stove League. Baseball is back under the microscope, and steroid questions will overshadow every accomplishment on the field in 2012.
Major League Baseball has not announced the positive test because Braun is disputing the result through arbitration.
A spokesman for Braun confirmed the positive test Saturday and issued a statement: "There are highly unusual circumstances surrounding this case which will support Ryan's complete innocence and demonstrate there was absolutely no intentional violation of the program. While Ryan has impeccable character and no previous history, unfortunately, because of the process we have to maintain confidentiality and are not able to discuss it any further, but we are confident he will ultimately be exonerated."
USA Today reported Saturday night that Braun said of the test result: "It's B.S."
The 28-year-old Braun had to provide a urine sample for testing during the playoffs, and he was notified of the positive test sometime in late October -- about a month before he was named the National League's most valuable player.
Group Psychology and Herd Instincts
Rod Dreher reflects on a conversation with a former investment banker:
I had a fascinating conversation this evening at an event. My interlocutor was N., who had left a Wall Street job as a trader to focus on family. N. is a serious Catholic, and told me that working on Wall Street was a constant challenge to one’s faith and to one’s sense of morality. I asked for an explanation. N. said that there was so much money (and therefore power) sloshing around the Street that it was very, very difficult to keep your head on straight, and not to lose perspective.Wasn't The Firm just a dystopian version of this? I read that book almost 20 years ago in college. It isn't too hard to understand how this works. You get comfortable in a certain lifestyle, and your dependence on your income to maintain the status and connections means you can't rock the boat or question your bosses. All social structures work this way, some good, some bad. What keeps people from breaking social mores against adultery or theft? But also, what keeps decent people from standing up against bigotry and racism?
“It’s like a cult, being at the investment banks,” N. said. “You come there straight out of college, and from the beginning you’re rolling in money. The salaries are great, you get to stay in the best hotels when you travel, they take you out to the most amazing bars in Manhattan. One year they hired [A-list movie star/comedian] to perform at a private function for us.”
“It’s so amazing that before long, you don’t want to do anything to upset the status quo,” N. continued. N. said that the herd instinct takes over, and pretty soon everybody is starting to see their purpose in life, both professional and personally, as doing whatever it takes to preserve these privileges. N. dwelled on how shocking it was to observe how much emotions and group psychology — not objective analysis — drove decision-making. Going along to get along. Everybody was making money, N. said, which the cult of Wall Street believes is a sign that its devotees must be doing something right under heaven.
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