Welcome back! We hope you got some well-deserved rest during August and over the Labor Day weekend. Lots happened during that time that we didn’t want you to miss so here’s some highlights:
Carl Hulse in the New York Times covered a proposal to undermine our democracy by allowing gambling on elections, bizarrely by the CFTC of all places! The article follows opposition letters sent to the CFTC by a group of Senators, Congressman, and numerous other organizations, including Better Markets. The CFTC is expected to make its ruling on this dangerous proposal by September 22. You can find out more about all of that here.
As you’ve all seen, extreme weather events from Florida to Hawaii and virtually everywhere in between are getting bigger, more frequent, and much more costly. But, while there’s lots of focus and headlines on these climate disasters and the growing uninsured/under-insured crisis (i.e., insurance industry bankruptcies, withdrawing from high-risk areas, limiting policies, and dramatically increased premiums), no one is talking about the impact of all that on the banking system even though climate losses are bank assets in the form of collateral for home and business loans. That’s why today’s climate crisis is tomorrow’s banking crisis, as detailed in this report (and as reported on here and here).
A fiduciary duty requires brokers and advisors to put their clients’ best interest first. Crazy that a rule is even required for this, but often brokers and others can put their personal profit maximization above their clients’ best interests when investing their clients’ own hard-earned money! That’s wrong and, thankfully, the highest court Massachusetts just reversed a lower-court judge’s decision that struck down the state’s fiduciary duty rule. The case involves the notorious company, Robinhood, which, no surprise, didn’t want to be required to put their clients’ interests first. That’s why Better Markets filed an amicus curiae brief opposing them and supporting the Massachusetts victory.
The crypto industry has suffered $2 trillion in losses; multiple enforcement actions, bankruptcies, and criminal prosecutions; and dozens of lawsuits for lying, cheating, and stealing. Meanwhile, the principal beneficiaries of the crypto craze are the criminals who use it to facilitate ransomware, money laundering, tax evasion, narco-terrorism/financing outlaw countries, and illegal conduct of all types. We explained that in a comment letters to the SEC, urging it to reject the latest wave of Bitcoin ETF filings.
Bankers, on Wall Street especially, complain endlessly about how bad capital requirements are. Those talking points, however, are baseless, as detailed here. The truth is that well-capitalized banks are good for everyone except Wall Street CEOs whose compensation is based, in large part, on return on equity, which is greatly amplified by leverage, i.e., the lowest amount of capital.
The Federal Deposit Insurance Corporation (FDIC) unveiled its anticipated proposal of long-term debt requirements and resolution plans for so-called domestically systemically important banks. While these are important steps, regulators must do more to strengthen capital requirements and the Federal Reserve’s stress testing program.
Michael Nowak and Gregg Smith, formerly of JPMorgan Chase, were sentenced to prison for spoofing, fraud and attempted market manipulation. From the article: “The prison sentences were intended to ‘send a message’ that market manipulation will be punished, the judge said. ‘I’m trying to deter all forms of financial fraud in the market,’ he said.