Articles

Fratto: Reich is Wrong: Shrinking Banks Won’t Fix LIBOR

By Tony Fratto, (202) 822-1205, tfratto@hamiltonps.com

A cottage industry is developing where whatever occurs at a large bank, luddites emerge with calls to shrink banks as a magic solution to any challenge. The latest salvo comes from former Clinton Administration Labor Secretary, Robert Reich, who yesterday wrote “More evidence we must break up the big banks.”

Reich cites the unfolding LIBOR investigations as reason for a new break-‘em-up charge, that we ought to be “unflagging and unflinching in our demand that Glass-Steagall be reinstituted and the biggest banks be broken up.”

While Dr. Reich correctly points out that the alleged fixing of LIBOR rates is a violation of public trust, he never bothers to explain just what exactly the size of any bank or Glass-Steagall repeal has to do with the issue, nor how breaking up banks would fix the problem.

That’s because there is no connection, and despite his provocative headline he brings forth not a single shred of evidence as to what any of this has to do with bank size.

Among the …

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Time Has Run Out

View cheat sheet here.

By Patrick Sims, (202) 822-1205, psims@hamiltonps.com

Time has run out for the President to get the unemployment rate below 8 percent by Election Day. The U.S. economy added just 80,000 jobs in June, and the labor force participation rate held steady at 63.8 percent. While there are four more jobs reports before the November election, based on our internal model, if the participation rate holds steady over the remaining period, the economy will need to add 219,000 jobs per month for the unemployment rate to fall below 8 percent by Election Day.

To see such a large increase in job growth is highly unlikely, as the economic anxieties that surround the second half of 2012 continue to add to employer uncertainty over whether to fund investments. Expect private sector payroll additions to remain relatively low as we move into the election season.

Additionally, the government sector continues to shed jobs as municipalities feel the ongoing sting from lower tax revenues. Although the 4,000 government jobs lost in June were …

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June Jobs Day Fact Sheet

Here is the June Jobs Day Fact Sheet.

Click to enlarge/Right-Click to Save

View Patrick Sims’ Client Note “Time Has Run Out” here.…

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The Day After: The meaning of the Supreme Court’s surprising health care decision

By Rustin Silverstein, 202-822-1205, rsilverstein@hamiltonps.com

The Decision: The Chief Justice shocks the world

For all of the prognostications and punditry, no one predicted the precise outcome of the Supreme Court’s decision of the health care reform act — formally known as the Patient Protection and Affordable Care Act and referred to by its detractors and, more recently, the President’s reelection campaign, as “Obamacare.”

Surprisingly, it was the conservative Chief Justice, John Roberts — not the Court’s usual swing vote, Justice Anthony Kennedy — who joined the four more liberal justices in upholding the constitutionality of the act and the individual mandate at its core.

The mere survival of the law shocked both its supporters and opponents who assumed that it would be repealed following its hostile reception by the Court’s conservative wing during oral arguments in March.

Even more surprising, though, was how the Chief Justice reached his decision.

Like his conservative colleagues – Justices Anthony Kennedy, Antonin Scalia, Clarence Thomas, and Samuel Alito — Chief Justice Roberts concluded that the Constitution’s Commerce Clause did …

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VIDEO: Rustin Silverstein on Washington Business Report – Dimon in the rough

Rustin Silverstein on the Jamie Dimon hearing:

I think what [Jamie Dimon] did most successfully came before the hearing.  He did the hard work that a lot of executives—particularly Wall Street executives—don’t do.  He cultivated relationships in Washington with policymakers and he made himself accessible to the public and the press in a way that many executives don’t.

He had a reservoir of goodwill by the time he got [to the hearing].  I think people were already inclined to think better of him than they would have of some of his colleagues on Wall Street.  At the hearing itself, he came out of the box apologizing, expressing responsibility for what went wrong and determination to see that it didn’t happen again.

Most people are willing to move on.  They don’t want to relieve what happened four years ago.  They don’t quite understand the complexity of what’s going on in financial institutions—I think we may have learned this week that Jamie Dimon still may not have fully understood.  I think most people are concerned about their …

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Dimon in the rough: Wall Street’s reputational problem – National Law Journal

Article published here.

By Rustin Silverstein, 202-822-1205, rsilverstein@hamiltonps.com

It is safe to assume that Jamie Dimon, the chief executive officer of JPMorgan Chase, was not looking forward to his June 13 appearance before the Senate Banking Committee, where he testified about his firm’s recent $3 billion-plus trading loss.

What likely made the public inquisition even more galling to Dimon and his peers in the financial services industry was that it seemed so unnecessary. As Bloomberg Businessweek reported on Monday, Dimon’s Wall Street colleagues viewed the hearing, in addition to the five federal probes spawned by the JPMorgan loss, as an overreaction to a relatively minor, private loss.

“Occasional losses are inevitable,” Blackstone Group CEO Stephen Schwarzman told Bloomberg, “Publicly excoriating JPMorgan serves no purpose except to reduce people’s confidence in the financial system.”

Indeed, the market has already punished JPMorgan with a 17 percent decline in its share price since the announcement of the loss, a $27 billion loss in market value.

Why then did Dimon have to submit to a potentially humiliating …

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Long Hot Summer Ahead

By Matt McDonald, (202) 822-1205, mmcdonald@hamiltonps.com

Read our Jobs Day cheat sheet here.

The U.S. economy added just 69,000 jobs in May, continuing a downward trend since winter that is leaving the strength of the job market in serious doubt.

The worst part about this jobs report is that it was the last chance for a decent report before the full consequence of the slow-moving European implosion really starts to influence the global and U.S. economies.  Between the bad economic news in the U.S. this week and the terrible global economic headlines, businesses are going to be taking a very hard look at hiring plans for the foreseeable future.  Markets have already started to react negatively in response to the weak jobs numbers and the disappointing GDP figures released earlier in the week.

This month’s report was not completely without redeeming qualities.  The labor force participation rate went up, contributing to the rise in unemployment.  Also, the Household survey showed stronger job growth (after two negative months).  But the terrible headlines in the …

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May Jobs Day Fact Sheet

Here is our Jobs Day Fact Sheet for May:

Click to enlarge

Read Matt McDonald’s client note “Long Hot Summer Ahead” here.…

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Another Spring Slump for Jobs

By Matt McDonald, (202) 822-1205, mmcdonald@hamiltonps.com

Another winter of hope, another spring of disappointment. With just 115,000 new jobs, and a drop in the unemployment rate driven entirely by people leaving the workforce (the household survey actually showed job losses for the second month in a row), the April jobs number disappointed even low expectations. After multiple years of spring slumps and constant revising up of previous months, it bears discussion of whether the seasonal adjustments done by BLS need to be updated.

See the details here with our cheat sheet.

Regardless of the statistics, the political implications are interesting.  If trends continue, the White House will likely be able to point to an unemployment rate below 8 percent by Election Day. Consider this: over the past year, labor force participation has dropped by 0.6 percent, the equivalent of about 1.4 million people dropping out of the workforce (or not entering in the first place).  If that trend were to continue, we’d need just 64,000 jobs per month to break 8 percent by Election …

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April Jobs Day Fact Sheet

Here is our Jobs Day Fact Sheet for April:

                                   Click to enlarge/Right click to save

Read Matt McDonald’s client note “Another Spring Slump for Jobs” here.…

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