Opinion

The Great Debate

Massad: Taking the reins on derivative reforms

The Senate Agriculture Committee met Tuesday to approve the nomination of Tim Massad as chairman of the Commodity Futures Trading Commission, even as the agency fumbles over the definition of a “swap.”

When Massad testified at Senate hearings last month, he stated flatly that speculation can affect prices. Then, he hedged. “There are many, many factors that affect prices,” Massad added, “and sometimes it’s difficult to measure what the impact is of any particular factor.”

While he pledged to pass limits on the number of contracts that commodities speculators can hold, this hazy testimony reflects how little is really known about how the new CFTC chairman, if confirmed, will shape the derivatives market.

Massad’s hedging also reveals how difficult it is to pass reform. Of course, any official following in former Chairman Gary Gensler’s footsteps would seem restrained and even-keeled. Gensler seemed to delight in ramming through rules that made bankers cringe.

When compared to Gensler, Massad seems even more tepid. As a partner in the corporate finance group of Cravath, Swaine and Moore, Massad’s appointment has also raised questions about his ability to impose tough regulations. Other revolving-door public servants have also been suspected of continued private-sector loyalty.

from Breakingviews:

Rob Cox: Crazy valuations not only sign of bubble

By Rob Cox
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Crazy valuations – even after a recent dip – are not the only signal that parts of the U.S. stock market, particularly internet companies, are in bubble territory. The willingness of investors in hot initial public offerings to accept second-class stock and governance that favors insiders suggests an imbalance between providers of capital and its consumers. Add head-scratching market caps based on contorted metrics, and this risks storing up trouble when the inevitable headwinds arrive.

The best description of the stock being hawked in this way is “coattails equity.” It offers little beyond a chance to tag along with entrepreneurs from Wall Street, Silicon Valley and China. Buyers of shares in IPOs such as those of Box, GrubHub, Moelis & Co, Virtu Financial and Weibo – and probably $100 billion-plus giant Alibaba – must give up rights that have traditionally accompanied the ownership of common shares, like a representative voice in corporate decisions.

Revising Obama’s ‘deporter in chief’ policy

In response to angry complaints from the Latino community about the administration’s deportation policies, President Barack Obama ordered a review in March “to see how to conduct enforcement more humanely.” At the same time, however, White House officials said the administration would neither suspend deportations nor expand the opportunities to stay for illegal immigrants who came to the United States as children.

That will not mollify his critics. Nor should it.

In a February speech, Obama had spoken movingly and from personal experience about the damage done to black and Latino young men by the loss of a father and the appallingly high number of fatherless homes.  Yet a month earlier, immigration officials had deported Josue Noe Sandoval-Perez. He “had been in the country for 16 years,” according to the New York Times,had no criminal record, paid taxes and was the primary breadwinner for his children – one an American citizen, the other [son] an immigrant who is here legally.”

In Obama’s five years in office, his administration has deported nearly 2 million undocumented immigrants, largely Latinos — reaching a new high of nearly 420,000 in fiscal year 2012. It took President George W. Bush his entire two terms to deport as many people as Obama has in five.

Cuba’s uneasy Internet connection

Last week, an Associated Press article, “US Secretly Created ‘Cuban Twitter’ to Stir Unrest,” sparked an uproar. The U.S. Agency for International Development had funded a Cuban version of Twitter called ZunZuneo , the AP reported, that attracted more than 40,000 users before ending in 2012, according to the story.

Commentators have derided the program as boneheaded, dangerously absurd and disrespectful to Cubans. Analysts have discussed its pros and cons. The White House maintains that the program was not “covert.” USAID contests aspects of the AP story.

The article, however, is a propaganda windfall for the Cuban government, which tends to label bloggers critical of it as U.S.-funded mercenaries. Cuba’s media has been having a field day, running gleeful headlines like “ZunZuneo: the Sound of Subversion.”

Opening the political money chutes

The headline about a new Supreme Court opinion rarely tells the whole story.  Rather, the detailed reasoning of the ruling often reveals whether a decision is a blockbuster or a dud.

When the court writes broadly, it can eventually remake entire industries, government practices or areas of the law. Lawyers and lower courts scrutinize an opinion’s every line and footnote, pouring over the legal reasoning and noting subtle changes from the court’s earlier decisions in the same area.

This is why it is fair to call last week’s Supreme Court ruling in the campaign finance case McCutcheon v. Federal Election Commission a blockbuster case. In McCutcheon, the court struck down limits on the total amount that an individual could give to federal candidates, parties and certain political committees in an election cycle.

Stress and the Citi

Markets are still absorbing the Federal Reserve’s surprising smack-down of Citigroup. Under its chief executive officer, Michael Corbat, Citi had greatly strengthened its capital base — indeed, it had one of the best capital ratios of all the big banks — and had proposed modest dividend increases and stock buybacks.  Instead, City was the only big American bank that failed its review.

The Fed announcement, perhaps harking back to the Alan Greenspan tradition, was gnomic, to say the least. The Citi bombshell was buried in a few lines in both the press release and the much longer official statement.

While acknowledging Citi’s stronger capital position, the Fed stated that the rejection was based on “qualitative” weaknesses, including the bank’s “[in]ability to develop scenarios … that adequately reflect and stress its full range of business activities and exposures.” The bank will eventually be handed a detailed bill of particulars, perhaps in a week or so.

Afghan elections redefine U.S. role

On Saturday, Afghans will go to the polls to elect a new president, marking a critical turning point in Afghanistan’s history and our role in the country.

This election comes at an important time in U.S.-Afghan relations, which have been hindered by the erratic and often insulting behavior of President Hamid Karzai. The outcome will present an opportunity for the United States to redefine our relationship with Afghanistan in a way that addresses our shared security concerns and the long-term stability and viability of the country.

Make no mistake, the democratic transition to a new president would not be possible without the last 12 years of sacrifices made by the United States. The Afghan people and Americans owe a profound debt of gratitude to our armed forces, diplomats and U.S. Agency for International Development workers who helped transform Afghanistan from a failed state to fledgling democracy.

Roberts Court: Easier to donate, harder to vote

Chief Justice John Roberts’ first sentence of his majority opinion in McCutcheon v. Federal Elections Commission, striking down important limits on campaign contributions, declares “There is no right more basic in our democracy than the right to participate in electing our political leaders.”

A look at the Roberts Court’s record, however, shows that this may not be its guiding principle.

Through a series of rulings, the court’s conservative majority’s rulings have instead made it easier for big-money donors to influence elections — while making it harder for many Americans to use the only political influence they have: their vote.

Afghanistan votes on its future

The coverage on the impending Afghan presidential elections has been filled with death and chaos — the tragic shooting at the Serena hotel where an international election monitor was killed, the shocking attack on the Afghan Election Commission’s headquarters, the killing of a provincial council candidate and the news that several international monitoring groups are pulling out.

These tragedies, however, shift the focus from the major news in Afghanistan this week: Election fever has gripped the nation. I hear from Afghans as well as many foreigners now working in Afghanistan that the excitement about the coming April 5 presidential election is palpable and encouraging.

If this election goes relatively smoothly, it will mark the first democratic handover of power in Afghan history. Potential large-scale fraud and violence will be substantial obstacles to overcome, but there are also some positive signs. Voters, observers and security personnel are gearing up with a mixture of enthusiasm and trepidation.

McCutcheon: Should the rich speak louder?

On Wednesday, the Supreme Court handed down its most important decision on campaign finance reform since Citizens United. The decision, McCutcheon v. Federal Election Commission, seemed to divide along familiar ideological lines, with Chief Justice John Roberts writing the majority opinion for five conservatives and Justice Stephen Breyer, writing the dissent for the four liberals.

What really divided the court, however, wasn’t partisan politics pitting Republicans against Democrats but two conflicting views of the First Amendment. Which view you embrace depends on whether you see the McCutcheon decision as a principled triumph for unpopular speech or a First Amendment disaster that will ensure that a handful of the richest Americans can use their vast resources to drown out the voices of everyone else.

The First Amendment view embraced by Roberts and his conservative colleagues is rooted in individual liberty. There’s no right in our democracy more fundamental, Roberts began, than the First Amendment safeguards for “an individual’s right to participate in the public debate through political expression and political association.”

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