Scott Brown - Rube

TEA Party favorite Scott Brown provided the deciding vote to end debate on the Senate Wall Street reform bill, thus allowing its passage.  So much for the folks who put him in office.  The current stock market plunge may be the key indicator of how well conceived and well received these new financial regulations will be.  We're in for a new era of crony capitalism.

Yesterday the Senate, including three Republicans, voted to shut off debate on the bill. This all but ensures that ill-conceived financial regulations will become law.

The only good thing to come from this spectacle is that it shows the business community and American voters that the Democratic Party—despite the moderate face of the Obama presidential campaign—has not outgrown their New Deal mentality. Democrats are still the party of government and the special interests that cling to it.

The root of the financial crisis was, and still is, in government housing policies.  Yet there is nothing in bill that addresses the issue, nor is there anything to discourage more and more losses by Fannie Mae and Freddie Mac that will require more and more taxpayer bailouts.

Thank you so much, Scott Brown.  Brown sought to carve out exemptions for Massachusetts financial companies, and so he was open to a deal in which he was one of three Republicans to vote in favor of ending debate.

Mr. Brown was concerned that companies such as State Street Corp., Fidelity Investments, and Massachusetts Mutual Life Insurance Co., because of the large amount of assets they manage, could face restrictions similar to the curbs placed on big Wall Street banks.

Sen. Brown wanted assurances from someone that his concerns would be addressed before the bill became law.

On Wednesday night, House Financial Services Committee Chairman Barney Frank (D., Mass.) was on the elliptical machine at the House of Representatives gym when Mr. Brown called.

"'Can you assure me you are going to fight for this?"' Mr. Brown asked Mr. Frank, according to Mr. Frank. "I said 'Sure."'

Nice job, Scotty.  You got a promise in exchange for your vote.  But will he respect you in the morning?

Comments

[Bob Smith]

Does the revised bill still contain the private equity provisions? Those provisions will absolutely destroy private equity in the US should they become law.

[Tom Bowler]

Does this answer your question?

Derivatives are not the only battleground for bankers’ last-ditch attempt to curtail the wave of new rules about to crash on Wall Street. The so-called “Volcker rule” – the ban on proprietary trading and investments in in-house hedge funds and private equity funds proposed by the former Federal Reserve chairman Paul Volcker – is still a bugbear for banks.

Most financial groups say proprietary trading – bets with their own capital – accounts for a small portion of profits, but many would find it painful to give up returns from investments in real estate, hedge funds and private equity.

The proposed imposition of a “fiduciary duty” – a legal requirement for banks to do the best for clients – is also bitterly opposed. Banks such as Goldman say it is impossible for marketmakers to have a fiduciary duty to both sides of a deal.

[Bob Smith]

That's undesirable, but not it. The provisions I'm thinking of are the ones raising the minimum income for accredited investors from $200k to ~$500k, or minimum assets from $1 mil to $2.7 mil, and would further raise these numbers for inflation. Estimates I've seen say that would wipe out ~75% of the accredited investor base. Further provisions would remove Reg D 506's exemption from state securities law and require minimum 120 day hold periods for new companies. As you can imagine, this would utterly eviscerate the private securities markets. I presume pushing this money into the clutches of Wall Street as a new source of profit for them is the entire point of the exercise.

[Tom Bowler]

Based on what I've read about Rule 506 of Regulation D, private equities are stocks that are not registered with the SEC and because of they are unregistered they may not be traded on the secondary market. Since these securities aren't traded on an exchange, what kind of market are we talking about?