Morning Report: Donald Trump makes a subtle but important change to financial regulation 2/9/17

Posted on February 9, 2017 by Brent Nyitray

Vital Statistics:

Last Change
S&P Futures 2295.3 2.3
Eurostoxx Index 363.7 0.9
Oil (WTI) 52.8 0.6
US dollar index 90.7 -0.1
10 Year Govt Bond Yield 2.36%
Current Coupon Fannie Mae TBA 102.1
Current Coupon Ginnie Mae TBA 103.2
30 Year Fixed Rate Mortgage 4.13

Stocks are up marginally on no real news. Bonds and MBS are down small.

Initial Jobless Claims came in at 234k last week, which is the lowest number since November. Note that the last time initial jobless claims were this low, the Vietnam War was being fought. When you adjust for population growth, we are at record levels. Note that Census has been revising downward its previous estimates for population, as the net immigration numbers have turned out to be lower than initially thought.

Here is the chart for initial jobless claims:

initial-jobless-claims-fred

And now initial jobless claims divided by population (in .000s). Record low.

initial-jobless-claims-divided-by-population

We have some Fed-speak today with James Bullard this morning and Charles Evans in the afternoon. Probably won’t be market moving, but be aware.

The latest trend in banking? People-less branches. You walk in and deal with someone via videoconference. “This is the beginning of the end of the American bank branch,” said Peter Fitzgerald, a former U.S. senator from Illinois, lifelong banker and founder of Chain Bridge Bank in McLean, Va. “Bank branches are dead. They were killed by the iPhone. It’s like the horseshoe when the automobile came along.” Indeed, the iPhone is changing mortgage banking as well, as the Millennial Generation prefers to not interact with humans.

Once of the changes Donald Trump is making to financial regulation is subtle, but important. Typically regulators have to conduct a cost-benefit analysis of new regulations, in order to determine whether the proposed regulations do more harm than good. That requirement was largely ignored by the Obama administration. He is bringing that requirement back, which would require the government to take into account things like restrictions in credit, lost GDP from less lending, and the impact on consumers and financial choice. In fact, a study from Goldman found that low income borrowers and small businesses bore the greatest cost of financial regulation.

While regulation is couched in terms (and intention) to be about public protection, in practice it often acts as a barrier to entry which restricts competition rather than it is something that benefits the public. In fact, restricted credit is only of the big things that is an issue in housing construction. Big publicly-traded homebuilders can borrow all the money they want in the bond market at exceptionally low rates, while smaller builders (who are banked by the smaller guys) cannot borrow because the smaller banks are hamstrung by the regulators. Remember, we haven’t had a 1.5 million year in housing starts (which was normalcy from the sixties until the crisis) since 2006.

Filed under: Economy, Morning Report |

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56 Responses

  1. jnc4p, on February 9, 2017 at 9:32 am said:

    Worth a read:

    “This philosopher predicted Trump’s rise in 1998 — and he has another warning for the left
    Why Richard Rorty’s critique of the left is as relevant as ever.
    Updated by Sean Illing
    Feb 9, 2017, 9:40am EST”

    http://www.vox.com/policy-and-politics/2017/2/9/14543938/richard-rorty-liberalism-vietnam-donald-trump-obama

    Liked by 1 person

    Reply
    • Brent Nyitray, on February 9, 2017 at 9:51 am said:

      IMO, Trump is going to be such a disaster that the GOP will underperform in 2018 and we will see a D sweep in 2020…

      Like

      Reply
      • jnc4p, on February 9, 2017 at 10:33 am said:

        Related:

        “Is the Anti-Trump ‘Resistance’ the New Tea Party?

        Eight years ago, a new president took office who scared the living daylights out of thousands of people who’d never been politically active before. Sound familiar?

        Molly Ball 4:50 AM ET”

        https://www.theatlantic.com/politics/archive/2017/02/resistance-tea-party/516105/

        Like

        Reply
        • ScottC, on February 9, 2017 at 11:33 am said:

          Was the Tea Party really a reaction to Obama? My sense is that it was actually a reaction to what was seen as ineffectual R’s who had been complicit in the steady leftward drift of the nation’s politics.

          Liked by 1 person

        • jnc4p, on February 9, 2017 at 11:52 am said:

          I’d say it was a reaction to the bailouts.

          Liked by 1 person

        • ScottC, on February 9, 2017 at 11:58 am said:

          jnc:

          I’d say it was a reaction to the bailouts.

          Yes, that makes more sense.

          Liked by 1 person

        • markinaustin, on February 9, 2017 at 12:22 pm said:

          I’d say it was a reaction to the bailouts.

          I thought that, too.

          Liked by 1 person

        • jnc4p, on February 9, 2017 at 12:35 pm said:

          Still a great piece:

          “Our research shows that the growth of self-identified conservatives began in the fall of 2008 with the Wall Street bailout, well before Mr. Obama embarked on his recovery and spending program. The public watched the elite and leaders of both parties rush to the rescue. The government saved irresponsible executives who bankrupted their own companies, hurt many people and threatened the welfare of the country. When Mr. Obama championed the bailout of the auto companies and allowed senior executives at bailed-out companies to take bonuses, voters concluded that he was part of the operating elite consensus. If you owned a small business that was in trouble or a home or pension that lost much of its value, you were on your own. As people across the country told me, the average citizen doesn’t “get money for free.” Their conclusion: Government works for the irresponsible, not the responsible.”

          http://www.nytimes.com/2011/07/31/opinion/sunday/tuning-out-the-democrats.html

          Liked by 1 person

        • ScottC, on February 9, 2017 at 12:38 pm said:

          As people across the country told me, the average citizen doesn’t “get money for free.”

          Neither did the bailout recipients. That particular lie still rankles.

          Like

        • Brent Nyitray, on February 9, 2017 at 12:35 pm said:

          IMO, Santelli’s rant was about the government potentially letting people out of trades or underwater loans.

          Liked by 1 person

  2. markinaustin, on February 9, 2017 at 9:41 am said:

    I am going to beat a dead horse here.

    The commentariat at PL is generally awful, save for JNC, KW, any other present company, and links-from-shrink. I read the post, on occasion, but seldom the comments.

    I don’t want to read them here. I don’t care how much time you guys who go there waste over there, but stop wasting our time here with it.

    That’s why we started this blog, isn’t it?

    I am looking here for exactly what we do best – which is to argue alternative opinions with interesting links.

    PL commentary is not an interesting link or copy/paste.

    Liked by 1 person

    Reply
    • Kevin S. Willis, on February 10, 2017 at 5:52 pm said:

      I’ve done that in the past. My apologies. Normally, I share it because it seems reflective of on-the-ground urban liberal thinking. Or urban lefty progressive thinking. But I will avoid doing such in the future!

      Like

      Reply
  3. Let the mutherfuker burn!, on February 9, 2017 at 10:17 am said:

    Sessions was just sworn in, time to first lynching?

    Liked by 1 person

    Reply
  5. jnc4p, on February 9, 2017 at 11:52 am said:

    Either the Republicans are still blindly digging themselves a hole here, or they think that Warren is the candidate that they most want to run against in 2020 and are actively trying to raise her profile even more than it already is.

    “Lindsey Graham: Floor action to silence Warren ‘long overdue’
    By Max Greenwood
    02/08/17 06:48 PM EST ”

    http://thehill.com/blogs/blog-briefing-room/news/318607-lindsey-graham-long-overdue-to-silence-elizabeth-warren-during

    I’d remind them how well it turned out for the Democrats rooting for Trump to be the Republican nominee.

    Related:

    “A Conversation with Elizabeth Warren, Who Refuses to Be Silenced

    A sit-down in the bowels of the U.S Capitol.
    By Charles P. Pierce
    Feb 9, 2017”

    http://www.esquire.com/news-politics/politics/a53017/elizabeth-warren-silencing-reaction/

    Liked by 1 person

    Reply
    • ScottC, on February 9, 2017 at 2:16 pm said:

      McWing:

      Pretty ironic coming from Rolling Stone.

      Indeed.

      The whole theme is ridiculous. Trump has not introduced some new measure of lying to Washington. He’s just more direct and less shameless about it. Although I am not sure he is less shameless than Taibbi himself:

      Facts are the closest thing we have to a national religion. In America, where sex-tapers become royalty and monster trucks massively outdraw Shakespeare, even advertisers aren’t supposed to just lie. The truth is the last thing here that isn’t openly for sale. This is why so many people responded to Conway not as if she’d said something stupid – we’re used to that from our politicians – but more as though she’d said something irreligious.

      [Chortle.] Pull the other one, Matt.

      Like

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    • ScottC, on February 9, 2017 at 3:01 pm said:

      Taibbi:

      The Washington Post reported with alarm on this crumbling of the Church of the Fact. As a test, they showed a group of Americans aerial photos of the Trump and Obama inaugurations. An astounding 15 percent of Trump supporters identified the clearly emptier Trump inaugural photo as the one containing a bigger crowd. We’re now such a divided people that we literally see the world differently.

      If Taibbi doesn’t find it troubling that 62.5% of sitting justices on the Supreme Court can discover non-existent things in the Constitution (and I am sure he does not), I’m not sure why he should find it troubling that 15% of Trump supporters can discover non-existent inaugural attendees in a photograph.

      It is not so much that Trump supporters “literally see the world differently” as it is that, like the aforementioned SCOTUS justices, they are simply willing to lie for political reasons. Which, again, is hardly a phenomena unique to the era of Trump.

      Liked by 1 person

      Reply
  9. Let the mutherfuker burn!, on February 9, 2017 at 2:12 pm said:

    Liked by 1 person

    Reply
  10. Brent Nyitray, on February 9, 2017 at 5:46 pm said:

    Officially handed the snow shovel off the youngster. 9 inches and he did a pretty good job…

    Liked by 1 person

    Reply
  11. Brent Nyitray, on February 9, 2017 at 7:40 pm said:

    is this true?

    Like

    Reply
    • ScottC, on February 10, 2017 at 9:44 am said:

      Brent:

      is this true?

      I found this, which shows that in the 10yr period between 1999 and 2008, the 9th’s rulings were either overturned or vacated in 140 out of 175 cases, which is 80%. Only the Federal Circuit was higher, at 83%. FYI, the lowest rate was 55% for the 1st Circuit.

      I guess it makes sense that the rate would be relatively high for all courts, since the Supremes are only going to bother taking up cases where there is a reasonable chance that the lower court will get overturned. One thing I don’t understand though is why the 9th has so many more cases than any other court. In the 10 year period the 9th dispatched with over 114,000 cases, while the next closest, the 5th, was only 85,000 cases. Some districts saw fewer than 20,000 cases. Could it be because people file more cases in the 9th circuit knowing that their chances of getting a whacky ruling are much higher there? I don’t know.

      See the table on page 3.

      Click to access LandslideJan2010_Hofer.authcheckdam.pdf

      Liked by 1 person

      Reply
      • Brent Nyitray, on February 10, 2017 at 10:31 am said:

        Could it be because people file more cases in the 9th circuit knowing that their chances of getting a whacky ruling are much higher there?

        That is my guess. The 9th is the left’s go-to for “sending a message”

        Liked by 1 person

        Reply
      • markinaustin, on February 10, 2017 at 10:39 am said:

        The 9th Circuit has twice the population of any other Circuit, about 20% of the nation’s population. I think it has more federal land, national parks, and national forests than any other Circuit, and the longest coastline. It has river sources going both east and west out of the Sierra Nevada and Rocky Mountains. It should have far more federal litigation than any other Circuit (with the possible exception of the DC Circuit, for special jurisdictional reasons).

        Its reputation for reversals is earned, but is probably not extraordinary, considering volume of cases, and the selectivity of the Supremes.

        Addendum: I think a test favoring Jews from Europe in WW2 would have been government establishing a religious test, as well. Obviously, the government could have taken refugees from Nazi occupation and theoretically most of them would have been Jews. But the federal government can establish a huge variety of tests without making a religious one. When the feds enshrine religion [not sect] as a test or a compulsion the Establishment Clause comes into play.

        Liked by 1 person

        Reply
        • ScottC, on February 10, 2017 at 10:51 am said:

          Mark:

          The 9th Circuit has twice the population of any other Circuit, about 20% of the nation’s population.

          Why don’t they “redistrict” in order to fix that? I would have thought the whole point of having several different appeals courts is so that the burden of hearing cases can be spread out among many of them, but doing it geographically in a way which concentrates the population in just a few of them seems to defeat that purpose.

          Liked by 1 person

        • markinaustin, on February 10, 2017 at 11:08 am said:

          They broke up the Fifth when it got too large – Texas to FL, originally, home based in New Orleans.

          There is pending legislation to break up the 9th, AZ to AK, which is too big geographically. But when they broke up the Fifth, it had two bellweather states so it was easy to make equal populations.

          Even if the 9th were broken in two with CA standing alone there would be a 13% of the national population in one and 7% in the other.

          Circuit map

          Liked by 1 person

        • ScottC, on February 10, 2017 at 11:22 am said:

          Mark:

          Even if the 9th were broken in two with CA standing alone there would be a 13% of the national population in one and 7% in the other.

          With 11 Circuits it would make sense to have roughly 9% of the population in each Circuit. Obviously you couldn’t get too close to that wihtout splitting California between 2 Circuits, but even leaving California as its own Circuit would make a lot more sense than what it is now.

          We can always hope that CA will secede and solve the problem for us. Fingers crossed!

          Liked by 1 person

        • markinaustin, on February 10, 2017 at 11:32 am said:

          Actually, putting CA and HI in a new 12th Circuit is OK, I think. Then house the home of the 9th in Las Vegas, so there would be cheap flights for the lawyers from Tucson to Fairbanks.

          Liked by 1 person

        • ScottC, on February 10, 2017 at 12:29 pm said:

          In this day and age, do we even need physical locations for these Circuits? There is no reason that the judges hearing a particular case need to be in the same (arbitrarily defined) geographic area where the litigant happens to be, is there? We could just combine all Circuit Court judges into a single Appeals court, and have arguments presented via a video to whichever judges have been randomly selected to hear that particular case in whichever locations those judges happen to be located. This way we could avoid the concentration of particularly nutty judges in a single place, thus making the poor people who happen to be stuck in that Circuit especially subject to their nutty rulings.

          Like

        • Let the mutherfuker burn!, on February 10, 2017 at 12:29 pm said:

          So, a non-religious test that functions as a religious test?

          Like

        • markinaustin, on February 11, 2017 at 7:35 am said:

          George [and Scott], better constitutional lawyers than I think that if there is obvious persecution against a minority religion in a refugee source nation you can name the persecuted religion or identify “persecuted minority religions”- in other words, my view of “Establishment” is too strictly textual. So you could be right and the 9th C. could be off base leaving that provision open. I will be interested in the Supremes’ ideas, especially the strict constructionists, if they ever hear this one.

          There is broad agreement that prospective application of an EO like this one would be OK on constitutional grounds, that it is rights of green card holders and rights perfected by issued visas that are at stake here. There might be some statutory issue available for non-refugees, but they would be relatively uninteresting to the public, like most lawsuits.

          I was somewhat surprised the 9th did not narrow the Stay. They did that by reason of the cover provided by burden of proof rules on interlocutory appeals and the failure of the Fed side to be able to point to terrorists who had come among the refugees from the 7 nations previously.

          The Supremes might take an expedited appeal to sever out retrospective rights from prospective fantasy, but they might just send it back for the trial court to develop a full record or refuse to hear it at all, since the issue is temporary and obviously fixable by a pen stroke.

          Another point that interested me and my lawyer friends – why did the Fed lawyers take the untenable position that an EO about immigration is completely non-reviewable by a Court? Some of my friends think they were intentionally blowing the case, and some think Trump insisted they take that position. I lean toward the latter, without any knowledge about why they took that position.

          Like

        • ScottC, on February 11, 2017 at 11:03 am said:

          Mark:

          in other words, my view of “Establishment” is too strictly textual.

          Since the text talks specifically about an establishment of religion, and immigration law, even one that favors or disfavors a specific religion, doesn’t establish any religion at all, it seems to me that a only a non-textual reading of the Constitution could see the establishment clause as relevant to such a law.

          Like

        • markinaustin, on February 11, 2017 at 2:19 pm said:

          Scott, state establishment of religion is and has been simply the state officially favoring a religion or religions for any state specified purpose. In England, “establishment” didn’t mean that one must be Anglican to vote or hold office or obtain a passport, only that the CoE got special treatment, or money, or preferences. That’s what the BoR broke from. It also prohibits the government from unduly preferring religion over non-religion, or non-religion over religion.

          When government favors a religion it is engaging in the process of establishing it. I don’t think anyone in the Federalist Society would see that differently. A lot of stuff has been treated as de minimus, or as free exercise, such as some religious displays on some public property, and prayers at public HS sporting events.

          Classroom prayer in public schools was treated differently because attendance at public school is compulsory and the students are largely minors, so prayers were treated as Establishment, not free exercise, in that context.

          Governmental preference of some religion over others or any religion or non-religion over others for entry into the USA is a bar to someone based on religion and therefore an establishment problem, but one that many legal scholars say could be outweighed in a balancing test in a specific case, such as one of persecuted minority status in the origin nation.

          Like

        • ScottC, on February 11, 2017 at 5:33 pm said:

          Mark:

          When government favors a religion it is engaging in the process of establishing it.

          In the case of our hypothetical immigration law, the government is disfavoring a religion. So I have the same question I have asked before. If this is an instance of “establishing” a religion, which religion has been established? All other religions apart from Islam? If so, does that mean that if we cease disfavoring Islam, we have “established” all religions including Islam?

          Like

        • markinaustin, on February 11, 2017 at 10:44 pm said:

          A religious test for any governmental purpose is an establishment of religion. If there is no religious test there is no establishment. “If so, does that mean that if we cease disfavoring Islam, we have “established” all religions including Islam?” If no religion is favored then no religion is established.

          It is not a question limited to “a religion”. You seem to think that it is a question of “which religion” is established. It isn’t. It is a question as to whether any religion or lack thereof is preferred.

          Addendum: It is thought that the Founders literally meant this to limit Congress’ role wrt religion in another way, as well. That is, a few of the states had established religions or favored religions and Congress could not force the states to change that practice by reason of this clause [“no law respecting…”]. Incorporation of the Establishment Clause into the 14th Amendment did not occur from the Supremes until I was about four years of age.

          I would understand your arguments better if they were ones against incorporation doctrine – an oft stated originalist position. But immigration law is directly from Congress, and thus falls within the original proscription against federal preferences.

          Like

        • ScottC, on February 12, 2017 at 6:46 am said:

          Mark:

          A religious test for any governmental purpose is an establishment of religion.

          I assume that this is how SCOTUS has applied the clause in the past, but I am skeptical that it is what it actually meant to the people who wrote it, especially with regard to potential immigration laws.

          It is not a question limited to “a religion”. You seem to think that it is a question of “which religion” is established. It isn’t. It is a question as to whether any religion or lack thereof is preferred.

          Why, then, didn’t the Founders say “preference” in the 1st A instead of “establishment”?

          An “established religion” actually meant something specific, like the Anglican Church of the UK, i.e. an official state church sponsored and supported by the state. As you point out, at the time of writing the Constitution, many states had their own “established” religions. In some states it was even more than one church. But are there any instances that you know of in which the Founders would have declared an “establishment of religion” existed, but in which no specific religions or churches could be identified as having been “established”?

          I would understand your arguments better if they were ones against incorporation doctrine – an oft stated originalist position. But immigration law is directly from Congress, and thus falls within the original proscription against federal preferences.

          As you know I am very much opposed to the idea of incorporation, but I didn’t raise that here because, as you say, immigration law derives from Congress not the states, and so incorporation is irrelevant.

          Like

        • markinaustin, on February 12, 2017 at 9:25 am said:

          But are there any instances that you know of in which the Founders would have declared an “establishment of religion” existed, but in which no specific religions or churches could be identified as having been “established”?

          Well, there was the debate over whether there could be a religious test for federal office holding which ended with GW’s firmly held position that there could not be one, IIRC. And GW was one who believed that some religion, not necessarily his, and necessarily not a single one, was important for national morality, but he was sure that there could be no religious test for office.

          I am not quite sure that is within the spirit of your question, but it involves a debate in which no particular religion was established, but the clause would be/was meant to prohibit a preference.

          To be fair historically, that clause made it into the body of the Constitution before the First Amendment. But I don’t see the sentiment as severable.

          Like

        • ScottC, on February 12, 2017 at 12:39 pm said:

          Mark:

          To be fair historically, that clause made it into the body of the Constitution before the First Amendment

          Exactly. There is already an explicit prohibition on a religious test for public office, unrelated to the Establishment clause.

          But I don’t see the sentiment as severable.

          I can see how a religious test for public office might be taken as indicator of an attempt to establish a religion, a key factor being, however, that the test is for holding public office, not just a religious test for literally anything. But still, it seems to me that for something to represent an establishment of religion, an actual religion or religions to be established would have to be identifiable. Mere discrimination against a particular religion does not represent an establishment of all other religions.

          Like

        • ScottC, on February 13, 2017 at 7:36 am said:

          mark:

          Not exactly on point to our discussion, but might be of interest.

          http://thefederalist.com/2017/02/13/ninth-circuits-stay-trumps-immigration-order-legal-garbage/#disqus_thread

          Like

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