February 12, 2014 11:19 AM
While Sen. Elizabeth Warren may proudly brand herself a populist, in her latest crusade, she is casting her lot with fat cats. Warren wants to bestow banking privileges upon the United States Postal Service (USPS), an organization with executives living high on the hog even as, by Warren’s own admission, its “financial footing” is in doubt.
The USPS pleaded poverty last month as it raised the price of a first-class stamp from 46 to 49 cents and promised that more rate increases are on the way. Yet in 2012, it managed to pay Postmaster General Patrick Donahoe $512,000 in total compensation, according to page 67 of the annual report filed by the Postal Regulatory Commission. And in 2008, then-Postmaster General John E. Potter received more than $800,000 in total compensation and retirement benefits. As The Washington Times noted, “that is more than double the salary for President Obama."
Dozens of other USPS executives also rank among the vaunted “one percent.” According to the Federal Times, “As the U.S. Postal Service was careening toward a record $8.5 billion loss in 2010, it was paying more than three dozen top executives and officers salaries and bonuses exceeding that of Cabinet secretaries.” In fact, in 2012, Rep. Kathy Hochul, D-N.Y., and other House Democrats sponsored legislation to limit USPS executive salaries to those of cabinet secretaries under the president.
The USPS and its defenders respond that this compensation isn’t as high as that of executives at competitors Federal Express and United Parcel Service, and Warren might argue that it’s not as high as the that of the CEOs of the nation’s biggest banks. But it’s certainly higher than the average compensation of the top folks at community banks and credit unions, as well as other lenders that will be hurt if the USPS expands into banking. And it is certainly more that that made by the average taxpayer, who will almost certainly be even further on the hook for the USPS’s woes.
January 28, 2014 11:10 AM
Iain Murray, Vice President for Strategy:
“The fact is: Today’s America is divided between those who work for government and those who don’t. Those who work for government have a job for life, guaranteed retirement and other benefits, and financial security,” said Murray. “Those who don’t, have uncertain prospects. They are at the mercy of an administration that is making their benefits more expensive and restricting their access to credit with more and more regulations. That is the true inequality in President Obama’s America.”
Ryan Young, Fellow:
“Given what reports suggest will appear in the president’s State of the Union address, we need to keep in mind three things. First: A higher minimum wage is not a free lunch, and will force some employers to reduce hours or fire workers. And, second, extending unemployment benefits will keep unemployment unnaturally high,” said Young. “The third thing is: If the president is truly concerned about the poor, he should support policies that would make the poor better off instead of focusing on income inequality. One of these policies could be a deregulatory stimulus that would make it easier to start a business and hire workers.”
January 23, 2014 11:26 AM
General Counsel Sam Kazman explains the case's importance not just for health care, but for the rule of law.
January 1, 2014 7:09 PM
At the beginning of 2014, Detroit may be bankrupt, but they're cheering the five-year-old U.S. auto bailout in Italy. That's because after being the beneficiary of billions in U.S. taxpayer largesse, Fiat, the leading Italian auto company, is going to buy its final stake in Chrysler from that other big bailout recipient, the United Auto Workers (UAW).
"Chrysler's Now Fully an Italian Auto Company," reads the Time magazine online headline. But wait a minute! Wasn't the bailout supposed to be about saving the American auto industry?
As Mark Beatty and wrote in The Daily Caller in November 2012, after presidential candidate Mitt Romney made the controversial claim that Fiat would be expanding production of Chrysler's Jeep in China (a claim that turned out to be correct),
The real outrage arising from the 2009 Chrysler bailout is not that its parent company, Fiat, is planning to build plants in China. It’s that the politicized bankruptcy process limited Chrysler’s growth potential by tying it to an Italian dinosaur in the midst of the European fiscal crisis. The Obama administration literally gave away ownership of one of the Big Three American auto manufacturers to an Italian car maker struggling with labor and productivity issues worse than those that drove Chrysler to near-liquidation.
As we noted in the piece, much of Chrysler’s profits from its overhauled line are going to prop up Fiat’s failing, money-losing Italian business, rather than to expanding production and jobs in the U.S. Moody’s had downgraded Fiat’s credit rating to “junk” even before the Obama administration arranged for it to acquire a Chrysler stake, and in Autumn 2012, Moody’s gave Fiat another downgrade that the Financial Times described as even “further into ‘junk’ territory.”
Around this time, Barron’s put it like this in a headline, “This time, Chrysler could bail out Fiat.” Actually, the Barron’s headline is slightly misleading in one respect — Fiat didn’t contribute much of anything to the Chrysler’s bailout.
December 11, 2013 9:35 AM
On a snowy day in Washington, several federal agencies packed some mean regulatory snowballs that will most likely overshoot their supposed destination of Wall Street and crash-land with a thud on the businesses and investors of Main Street. Rather than postpone the planned vote on Tuesday, when the federal government was officially closed, agencies sheltered themselves from public view and pushed through the rules.
According to USA Today, "CFTC spokesman Steven Adamske said his agency will not hold a public meeting, but commissioners will approve the rules in writing." This lack of transparency on voting on the rule was symptomatic of a series of last-minute changes from the rule the agencies had initially proposed two years ago. The agencies never submitted these changes for public comment, and thus according to a Reuters analysis, may be vulnerable to lawsuits for violation of the Administrative Procedure Act.
Beyond that, nothing good ever comes when the government utilizes an opaque process to force "transparency" on the private sector. For all the supposed "toughness" of the new rule, there is nothing specific that would prevent something like J.P. Morgan's much-despised "London whale" trade.
December 11, 2013 9:00 AM
The government just approved a regulation called the Volcker Rule to curb proprietary trading by banks -- even though such trading did not cause the financial crisis, or lead to massive financial losses by banks and taxpayers the way other, much riskier practices by banks did (like risky mortgage loans, which the Obama administration has pressured banks to once again engage in, in the name of fair lending and affordable housing).
The Wall Street Journal reports:
All five regulatory agencies put to a vote and approved the Volcker rule on Tuesday, ushering in a new era of tough oversight that drills to the core of Wall Street's profitable markets and trading businesses.
The rule will put in place new hurdles for banks that buy and sell securities on behalf of clients, known as market making . . . The Federal Reserve also approved an extension to give banks until July 2015 to comply with the rule.
(The above report is from the Journal's liberal-leaning news staff, not its conservative editorial page, which has questioned the Volcker Rule.)
October 31, 2013 3:31 PM
Former Rep. Mel Watt, D-N.C., failed his procedural confirmation vote today to head the Federal Housing Finance Agency, which oversees the government housing entities Fannie Mae and Freddie Mac. His defeat -- so far -- is a victory not just for fiscal integrity, but for privacy and transparency as well.
As a congressman, Watt egged on the reckless policies of Fannie Mae and Freddie Mac that got us into the mortgage crisis from which the economy is still recovering. But just as bad, he was on the wrong side of both liberals and conservative reformers on two crucial issues. Watt was a co-sponsor and vocal supporter of the Stop Online Piracy Act (SOPA), which collapsed in 2012 after a transpartisan coalition made the public aware of its threat to privacy and innovation. And Watt was the chief Democratic opponent of a bipartisan proposal to audit the Federal Reserve and helped gut the provision from what would become the Dodd-Frank "financial reform" law of 2010.
On Fannie and Freddie, as reporter Charles Johnson detailed at The Daily Caller, Watt "teamed up with Freddie Mac and Fannie Mae [and some banks]to announce Pathways to Homeownership, a pilot initiative designed to give home loans to welfare recipients" with minimal down payments. A press release from Watt said the loans would require “as little as $1,000 of the down payment to come from their own funds."
Then, as Johnson pointed out, "In 2007, a full year after the real estate market peaked and began to plummet under the weight of millions of mortgage defaults, Watt and Frank co-sponsored a bill forcing Fannie and Freddie to meet even higher quotas for affordable lending and investing in an “Affordable Housing Fund” for inner city communities."
October 21, 2013 3:13 PM
Across the nation, state and local governments in dire financial straits face great difficulty in their efforts to bring their budgets under control. Pensions are one of the biggest drivers of deficits, and therein lies the problem. Many states treat pensions not as a form of compensation, but as a contractual obligation to the employee. As a result, states and cities that have tried to bring pension obligations under control have seen roadblock thrown up in court by government employee unions. As the Manhattan Institute's Steven Malanga explains:
In the private sector, pensions are governed by the federal Employee Retirement Income Security Act. Although a private employer may not cut benefits that a worker has already earned, ERISA allows a business to change the rate at which a worker accrues future benefits.
ERISA, however, doesn’t apply to government employee pensions. Instead, in the states, local laws and court decisions govern how public-worker retirement systems are treated, and in many cases the states depart, sometimes radically, from the standard set by the law.
In many states, that means that pension promises are treated as sacrosanct.
Many legal protections given to public-sector pensions arise from court decisions that treat laws governing public retirement systems as a contract between the state and a worker. That puts pensions under the jurisdiction of the contract clause of the U.S. Constitution, or under state contract law.
In California, a state teetering on the fiscal precipice due in large part to pension liabilities, San Jose Mayor Chuck Reed is leading an effort to amend the Golden State's constitution to give governments there greater flexibility to make changes to employee retirement benefits. Reed faces a tough fight -- Malanga describes his effort as "an uphill campaign" -- but he already deserves plaudits for bringing needed attention to this issue.
October 21, 2013 10:40 AM
Recently, The Washington Post reported that J.P.Morgan will pay $13 billion to settle lawsuits against it by the federal government and two state attorneys general. Judging from the story, the proposed settlement contains provisions that rip off taxpayers and punish the very investors victimized by the misconduct alleged. This is depressing, but perhaps not surprising from an administration that has used past mortgage settlements to rip off innocent mortgage investors, and enrich real estate speculators and irresponsible mortgage borrowers.
In the principal lawsuit that led to this proposed settlement, the government accused the biggest four banks -- including J.P. Morgan Chase -- of selling risky mortgage bonds to the government-sponsored mortgage giants Fannie Mae and Freddie Mac that were worth less than it appeared due to a greater-than-predicted risk that borrowers on those mortgages would default. Defaults on those mortgages later cost Fannie and Freddie money, and when those failing mortgage giants got taken over by the Federal Housing Finance Agency (which became their conservator), the FHFA sued the banks for billions (some of the many billions the federal government spent bailing out Fannie and Freddie, whose own government-backed recklessness contributed both to their own failure, and the larger financial crisis).
Instead of protecting the value of these mortgages -- which the government had a duty to do as conservator for Fannie and Freddie, which owned mortgage bonds backed by those mortgages -- the government does just the opposite in the proposed settlement. The Washington Post reports that the settlement requires J.P. Morgan to make the risky mortgages worth even less still, by reducing the value of those mortgages through mortgage write-downs worth $4 billion.
This "remedy" for J.P. Morgan's conduct is worse than the disease. The government's lawsuit alleged that the big banks ripped off mortgage investors like Fannie and Freddie by overvaluing the mortgages they invested in, mortgages whose value dropped in the mortgage crisis; now, the government is seeking to reduce the value of those mortgages even more.
October 11, 2013 10:52 AM
Cross-posted from Newsbusters.org
“U.S. Government Shutdown Threatening Housing Recovery,” screams the Oct. 2 headline of a shutdown scare screed in Bloomberg BusinessWeek.
Wade into the story, however, and we see that what’s really at hand is a mere delay of processing of mortgages because of some employees furloughed at the Federal Housing Administration.
Furthermore, as the article explains, the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac will remain completely open because ” the government-controlled mortgage aggregators fund operations through fees collected from private lenders”
Actually, it’s unfortunate that the shutdown won’t hit Fannie and Freddie. The GSEs fueled the housing boom and bust that led to the financial crisis we have been living through the past five years, and are on track to fuel another financial crisis. But readers wouldn’t know that from Bloomberg BusinessWeek or other establishment media outlets.
Politicians and the establishment media are weaving an epic tale of the events that froze the markets five years ago this fall and led to massive bailouts of the biggest financial firms. Yet, their retelling of the financial crisis, to use a filmmaking analogy, leaves a lot on the cutting room floor — namely, the role of the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac in fueling the subprime boom.