Since 2008, Monetary Policy Has Cost American Savers about $4 Trillion by Alex J. Pollock

Since 2008, Monetary Policy Has Cost American Savers about $4 Trillion by Alex J. Pollock

My long-time friend, Alex Pollock, Senior Fellow at the Mises Institute, has just published a significant article on the very substantial, hidden costs to society of the Federal Reserve’s monetary policies over the past decade or so. I encourage you to read the article. Alex’s bio follows.

Alex J. Pollock is a Senior Fellow at the Mises Institute. Previously he served as the Principal Deputy Director of the Office of Financial Research in the U.S. Treasury Department (2019-2021), Distinguished Senior Fellow at the R Street Institute (2015-2019 and 2021), Resident Fellow at the American Enterprise Institute (2004-2015), and President and CEO, Federal Home Loan Bank of Chicago (1991-2004). He is the author of Finance and Philosophy—Why We’re Always Surprised (2018) and Boom and Bust: Financial Cycles and Human Prosperity (2011), as well as numerous articles and Congressional testimony. Pollock is a graduate of Williams College, the University of Chicago, and Princeton University.

With inflation running at over 6 percent and interest rates on savings near zero, the Federal Reserve is delivering a negative 6 percent real (inflation-adjusted) return on trillions of dollars in savings. This is effectively expropriating American savers’ nest eggs at the rate of 6 percent a year. It is not only a problem in 2021, however, but an ongoing monetary policy problem of long standing. The Fed has been delivering negative real returns on savings for more than a decade. It should be discussing with the legislature what it thinks about this outcome and its impacts on savers.

The effects of central bank monetary actions pervade society and transfer wealth among various groups of people—a political action. Monetary policies can cause consumer price inflations, like we now have, and asset price inflations, like those we have in equities, bonds, houses, and cryptocurrencies. They can feed bubbles, which turn into busts. They can by negative real yields push savers into equities, junk bonds, houses, and cryptocurrencies, temporarily inflating prices further while substantially increasing risk. They can take money away from conservative savers to subsidize leveraged speculators, thus encouraging speculation. They can transfer wealth from the people to the government by the inflation tax. They can punish thrift, prudence, and self-reliance.

Savings are essential to long-term economic progress and to personal and family financial well-being and responsibility. However, the Federal Reserve’s policies, and those of the government in general, have subsidized and emphasized the expansion of debt, and unfortunately appear to have forgotten savings. The original theorists of the savings and loan movement, to their credit, were clear that first you had “savings,” to make possible the “loans.” Our current unbalanced policy could be described, instead of “savings and loans,” as “loans and loans.”

As one immediate step, Congress should require the Federal Reserve to provide a formal savers impact analysis as a regular part of its Humphrey-Hawkins reports on monetary policy and targets. This savers impact analysis should quantify, discuss, and project for the future the effects of the Fed’s policies on savings and savers, so that these effects can be explicitly and fairly considered along with the other relevant factors. The critical questions include: What impact is Fed monetary policy having on savers? Who is affected? How will the Fed’s plans for monetary policy affect savings and savers going forward?

Consumer price inflation year over year as of October 2021 is running, as we are painfully aware, at 6.2 percent. For the ten months of 2021 year-to-date, the pace is even worse than that—an annualized inflation rate of 7.5 percent.

Facing that inflation, what yields are savers of all kinds, but notably including retired people and savers of modest means, getting on their savings? Basically nothing. According to the Federal Deposit Insurance Corporation’s October 18, 2021, national interest rate report, the national average interest rate on savings account was a trivial 0.06 percent. On money market deposit accounts, it was 0.08 percent; on three-month certificates of deposit, 0.06 percent; on six-month CDs, 0.09 percent; on six-month Treasury bills, 0.05 percent; and if you committed your money out to five years, a majestic CD rate of 0.27 percent.

I estimate, as shown in the table below, that monetary policy since 2008 has cost American savers about $4 trillion. The table assumes savers can invest in six-month Treasury bills, then subtracts from their average interest rate the matching inflation rate, giving the real interest rate to the savers. This is on average quite negative for these years. I calculate the amount of savings effectively expropriated by negative real rates. Then I compare the actual real interest rates to an estimate of the normal real interest rate for each year, based on the fifty-year average of real rates from 1958 to 2007. This gives us the gap the Federal Reserve has created between the actual real rates over the years since 2008 and what would have been historically normal rates. This gap is multiplied by household savings, which shows us by arithmetic the total gap in dollars.

To repeat the answer: a $4 trillion hit to savers.

The Federal Reserve through a regular savers impact analysis should be having substantive discussions with Congress about how its monetary policy is affecting savings, what the resulting real returns to savers are, who the resulting winners and losers are, what the alternatives are, and how its plans will impact savers going forward.

After thirteen years with on average negative real returns to conservative savings, it is time to require the Federal Reserve to address its impact on savers.

Remarks by FDIC Chairman Jelena McWilliams at Money 20/20

Remarks by FDIC Chairman Jelena McWilliams at Money 20/20

FDIC Chairman Jelena McWilliams has a fascinating life story and has certainly lived the American Dream. She has given a good deal of thought to governance issues facing bank regulators generally and the FDIC specifically. If you are wondering about the future of crypto currencies in the US and global economies, please read the latest thoughts on the subject from Chairman McWilliams.

Today, I will discuss my regulatory approach, and why it is critical for regulators to be open to innovation.

Before I do so, I will share a personal story that has shaped my world view, including my regulatory approach. Thirty years ago, I immigrated to the United States by myself with $500 in my pocket, a small sum that my parents had borrowed. Within six months of my arrival in the United States, the country I was born in – Yugoslavia – and the airline that brought me here – PanAm – ceased to exist.

Now, if you come to the United States as an 18-year old with $500, it is hard to survive. I sold cars and Cutco knives, I cleaned houses, and I worked the closing shift at Blockbuster.

Along the way, I tried desperately to help my family in Yugoslavia as the country grappled with a civil war, international sanctions and the second-longest period of hyperinflation in world history. Hyperinflation in the former Yugoslavia peaked in January of 1994 at a monthly rate of 313 million percent, or more than 2 percent per hour. I took on extra cleaning jobs in order to send $20 to my parents in Yugoslavia from time to time.

Now, sending money 30 years ago was complicated. I would take one of my photographs (and for those of you too young to remember – photographs used to be printed), tape $20 to the back of it, tape the photo inside a birthday card, put that card in an envelope and mail it. One in four mailings would reach my parents; the other three times, the postal workers would take it. Sometimes, my parents received the card and the picture – with tape removed and $20 missing.

I would like to think that my story is unique, but it is shared by millions of immigrants who send money home on a daily basis.

The power of innovation

Today, moving money is a few clicks away on a smart phone. And remittances are not the only place where innovation has transformed people’s lives and expanded access to credit. Not too long ago, you had to dress up and take stacks of paper to the bank to apply for a mortgage. Today, you can get quotes from multiple lenders while wearing pajamas in the comfort of your own home.

Innovation has not only made financial markets more efficient, it has democratized finance. Financial innovation has increased access to products and services, lowered their cost, and expanded the pool of creditworthy consumers.

Regulating Innovation

If you were a kid growing up on the wrong side of the Iron Curtain in the 1970s, you quickly realized that “Bazooka” was a superior chewing gum, Levis 501’s were the best jeans ever, and that anyone who could afford Converse Chuck Taylor’s was wearing a pair. American inventions transformed the world with the first mass-produced automobile, the first commercial flight, the first personal computer, the first cellphone, and many more.

Now that I have had the privilege of being in the United States for 30 years and am in charge of a venerable federal regulatory agency, I ask myself daily: what is the proper role of government in enabling innovation? What are the consequences of getting it wrong? How do we ensure that the United States remains the place where ideas become concepts and those concepts become the products and services that improve people’s lives?

The 20th Century was America’s century. Whether the 21st Century is America’s century depends on many factors, including whether our regulatory framework promotes or inhibits innovation.

This is especially important as regulators grapple with how to approach blockchain technology and digital assets. “Two [regulatory] roads [seem] to diverge in a yellow wood:”

1. Prohibit banks from engaging in this activity, which means it will inevitably develop in non-banks; or

2. Regulate it appropriately and set forth clear regulatory expectations for banks.

This is not the first time that regulators are trying to fit new technologies into the existing legal framework. I was in law school in the late 1990s, taking classes on how the existing intellectual property legal regime would address the internet. It was not easy then, as it is not easy now, to figure out how to create a regulatory framework for something that is out of the ordinary. Slowly but surely, U.S. policymakers developed a series of laws, regulations, and legal principles that allowed the internet to survive, grow, and change everything. They did not cut the Gordian Knot, but slowly unraveled it. Had they not done so, your cell phones would still be just phones and your document exchange would involve a fax machine.

More recently, the United States has been a leader in the development of machine learning, artificial intelligence, and other cutting edge technologies. But other countries, often not saddled with legacy systems such as ours, are moving forward at a breathtaking pace. In China, for example, the value of mobile payment transactions is greater than the worldwide value of Visa and Mastercard transactions combined.7 In Kenya, 70 percent of adults have used mobile money, even if only 55 percent have a traditional bank account.8 The United States can simply no longer take for granted that we will be at the forefront of technological advancement. We should not take for granted American exceptionalism, it has to be earned.

Crypto Assets

Which brings me to crypto assets. As a regulator, my job is not to make predictions about the future of crypto assets. My job is to provide clear rules of the road – to allow innovation to flourish, while mitigating risks. If we fail to do this, we risk stifling innovation and forfeiting America’s leadership in developing world-changing technologies.

Over the past several months, the FDIC has been engaged with the Federal Reserve and the Office of the Comptroller of the Currency in what some have called a “crypto sprint.” Through this process, the agencies are coordinating policies for how and under what circumstances banks can engage in activities involving crypto assets.

My objective is to provide clear guidance to the public on how our existing rules and policies apply to crypto assets, what types of activities are permissible for banks to engage in, and what supervisory expectations we have for banks that do engage in such activities. We plan to issue a series of policy statements in the coming months.

Over the past couple of years, we have seen a dramatic increase in the use of stablecoins, primarily to facilitate converting crypto-assets into fiat currency. But stablecoins have several other potential uses. Several firms, including existing stablecoin issuers, are actively exploring the potential for stablecoins to serve as a mechanism for retail payments. We have also seen banks establish limited payment networks for commercial customers to transfer funds using tokens in near-real time.

Stablecoins can offer many potential benefits . . . a faster, cheaper, more efficient mechanism for making payments than legacy systems . . . “programmable” payments that happens automatically based on the occurrence of a specified event, which could lead to better management of debt repayment.

Alongside these benefits, stablecoins also present certain risks, specifically if one or more were to become a dominant form of payment in the United States or globally. This could lead to substantial sums of money migrating out of insured banks with significant ramifications for credit creation, financial stability, and bank funding.

In order to realize the potential benefits stablecoins have to offer, while accounting for potential risks, stablecoins should be subject to well-tailored government oversight. That oversight should rest on the foundation that stablecoins issued from outside the banking sector are truly backed 1:1 by safe, highly liquid assets.

If issuers purport to have reserves available on demand to satisfy withdrawal requests, regulators should have authority to ensure the funds are there, specifically if such issuers are large enough that a stablecoin “run” could result in financial instability. There are other potential risks we must be cognizant of, such as ensuring operational resilience and preventing money laundering. Establishing clear regulatory expectations will be paramount to give this market an opportunity to grow and mature in a responsible manner.

Conclusion

I assumed the chairmanship of the FDIC with a firm belief that the role of government in our society is to promote, not inhibit, growth and innovation. Every day I try to exercise humility by telling myself that regulators should not assume we know where the market is going, or that we can fully appreciate the potential that lies beneath.

We must be cognizant that our American values, culture, and influence face increasing competition from abroad, including from regulatory systems that focus intently on promoting technological innovation and taking the mantle from the United States.

Regulators should be agile and open to risk mitigation for new technologies . . . and not throw out the baby with the bathwater. That proverbial baby, with proper care, may just grow up to be a responsible, productive, and, perhaps, brilliant adult.

BankThink Modernize regulation or risk an ’80s-style economic crisis by Thomas P. Vartanian published by American Banker

BankThink Modernize regulation or risk an ’80s-style economic crisis by Thomas P. Vartanian published by American Banker

[Tom Vartanian, a long time friend who has incredible experience in the financial services world, wrote the article below on the urgent need for the US to reorganize and refocus financial regulation in the US. This subject has been talked about for over 50 years but nothing of consequence has been done about it. I urge you to read Tom’s latest article and urge members of Congress and the Administration to pay attention to these issues before we fall into another major and avoidable financial calamity, resulting in Congress enacting even more costly and mostly ineffective regulations. Bill Isaac, Former Chairman, FDIC]

The post office’s recent announcement that it was entering the banking business is a stark reminder of how we seem to have forgotten the causes of the second worst economic decade in the country’s history — the 1980s. Forty years later, we are about to recreate the events that caused it.

In the 1980s and early 1990s, about 3,000 federally insured financial institutions failed; 1,600 of them were banks. The Dow Jones Industrial Average had nearly tripled, short-term interest rates topped 12%, inflation hit double digits, and the price of oil collapsed from a high of $111 to $26 a barrel. But perhaps most disruptive was the shifting ground under bankers’ feet created by competition from the increasing popularity of mutual and money market funds.

Those funds attracted huge amounts of what otherwise would have been insured bank deposits. That was because money market funds were not banks and were not subject to Regulation Q, which limited banks and savings institutions to paying 5.5% on deposits. Consumers naturally flocked to an instrument that was able to pay 12% or more. As a result, the money market fund industry doubled in size in those years, growing from $66 billion to $122 billion, causing massive disintermediation and liquidity crises at banks at a time when the economy was already quite challenging.

At the same time, the Federal Deposit Insurance Corp., the Federal Reserve, the Securities and Exchange Commission, the Federal Home Loan Bank Board, the Office of the Comptroller of the Currency, the Treasury Department and state regulators bickered over brokered deposits, the regulation of funds, bank capital, the chartering of new banks and when and how to close failing institutions. Some of those intramural disputes actually ended up in court, causing further uncertainty in financial markets.

It feels like we are approaching a similar inflection point of competitive chaos. As William M. Isaac, former chairman of the FDIC, and I explained in our American Banker article on July 14, 2021, there is already a substantial economic bubble being driven by government largesse, low interest rates, a ballooning Fed balance sheet, excess liquidity and increasing leverage. And the competitive landscape is also shifting again, threatening to pop that bubble.

The role of money market funds today is being played by technology companies. Armed with great new financial ideas, products and delivery channels, fintechs are rapidly realigning the competitive dynamics in financial markets. Most of these new players are not prudentially regulated and naturally want to avoid such oversight while enjoying the benefits of operating in the financial services market. Banks are beginning to remember what it was like to be disintermediated from their customers in the 1980s.

A new breed of competitor is emerging at every edge of the banking business. Cryptocurrencies and stablecoins of all sizes and shapes have gained a remarkable level of acceptability, reaching $2 trillion in value notwithstanding that they aren’t generally used as money, and many have no intrinsic value or government safety nets to fall back on when the inevitable cracks appear.

But crypto companies are now testing their ability to function as payment mechanisms, accept what banks would call deposits and make loans. Crypto exchanges are acquiring trust charters and a range of fintech companies are seeking to acquire bank charters. If that is to the benefit of consumers, that process is a good one. Yet, more than a decade into this experiment, neither Congress nor the regulators have come to a consensus about whether or how they should be regulated.

And then there is the government itself trying to compete with banks. The Federal Reserve is evaluating the benefits of issuing a central bank digital currency, a product that by the Fed’s own admission is fraught with security challenges and could significantly dislodge banks from their roles as financial intermediaries.

Finally, the post office has just begun to offer paycheck-cashing services at several East Coast locations. In short, the government, or in this case, an entity underwritten by the government, wants to be a low-cost payday lender. This is ironic on many levels, but particularly given the post office’s financial history and recent performance relative to the need in the banking business for stability and durability.

It is not the role of the government to prevent or redirect progress, and it should not be competing with the market if the market can fill the financial needs of the public. And it is not in the public interest for federal and state regulators to once again be squabbling over jurisdiction and facing each other in courts duking it out over the right to regulate and collect assessments from new tech players.

Government’s job is to ensure a safe environment for the private sector to experiment with financial evolution, and then adapt the regulation needed to maintain a safe and sound financial system. That did not happen in the 1980s, and we paid the price then and again in 2008. We will pay the price yet again if the obsolete regulatory structure in place today is not modernized to match the changes in the market being forged by new technologies.

As to the obsolescence of the current regulatory structure, remember that when it was created between 1932 and 1940, banks controlled 95% of the financial services market. There was every reason for prudential regulation to be bank-centric. Today, banks control less than 40% of total deposits and assets under management, suggesting that in rough terms, the government now devotes 100% of its prudential regulatory resources to oversee less than 40% of the financial services market. As we saw in 2008, such a lopsided regulatory approach encourages high levels of financial risk to gravitate toward the unregulated parts of the market, building the potential for systemic risk to hide in plain sight.

Technology is today’s squealing siren warning us that it is time to modernize the financial regulatory structure. Effective financial regulation should be applied functionally based on the financial activities a company engages in rather than whether it is a bank. There must be a level regulatory playing field between banks and every other company that wants a piece of their action. Similarly, financial regulation must incorporate Big Data techniques, artificial intelligence and sophisticated algorithms to function on a real-time basis. Regulation must be more predictive and less reactive. Finally, the regulatory system must be streamlined, consolidating agencies to achieve greater efficiency and effectiveness.

The goal of regulation is not to limit progress. It should be neutral toward technology except to the extent that it needs to adapt as markets change to ensure equal advantages for and obligations on those that impact the security and stability of the economy. Keeping the regulatory apparatus up to date is one of the best ways of avoiding financial crises, something that the U.S. has not been very good at doing in the last 200 years.

Political Disasters in U.S. Housing — The Lessons of History by Alex Pollock & Ed Pinto

Political Disasters in U.S. Housing — The Lessons of History by Alex Pollock & Ed Pinto

My long-time friends, Alex Pollock and Ed Pinto, have devoted their careers to promoting and supporting sound and affordable housing for our nation. Unfortunately, their wisdom and advice have too often fallen on the deaf ears of politicians seeking expedient ways to lure campaign contributions, power and votes. I urge you to take some time to read their latest article below. These issues are enormously important to our nation. By Bill Isaac

As the philosopher George Santayana said, those who cannot remember the past are condemned to repeat it. The U.S. has a history of catastrophic housing finance blunders to remember, but will we? There have been three dramatic failures of government policy in four decades – hardly an enviable track record! The issue is now whether we wish to risk another one by again reducing credit quality through Fannie Mae and Freddie Mac. Unfortunately, it looks like this will probably happen.

Fannie and Freddie remain the dominant companies in American housing finance, in spite of having little capital and being hyper-leveraged. Their assets to equity ratio is 116:1. They are regulated by the U.S. Federal Housing Finance Agency (FHFA), which is also their Conservator and has great power over them.

In June 2021, the U.S. Supreme Court ruled that the FHFA was unconstitutionally structured because its director could only be removed from office for cause. The Court held that the director must be able to be removed from office at any time by the President.

Upon the Court’s decision, President Biden immediately fired the FHFA director, Mark Calabria. This was a pretty clear example of how political U.S. housing finance is.

Calabria had been following a policy of increasing the capital of the GSEs in preparation for privatizing them, and of reducing their risk to the taxpayers; his acting replacement forthwith reversed this course. We are already seeing a sharp change in the regulatory marching orders for Fannie and Freddie – from a future as privatized companies to a future of being used to accumulate the risk of the government’s housing policies, from reducing to increasing the risk to the taxpayers who are on the hook for Fannie and Freddie’s losses.

Following the Supreme Court decision, any U.S. President now has direct political control over most of the mortgage finance system, including the nearly $7 trillion in mortgage risk held in the Fannie and Freddie balance sheets.

Although we agree that the Supreme Court’s decision about the FHFA is correct on its constitutional merits, it does aggravate the fundamental problem: that the U.S. has a heavily nationalized and socialized housing finance system.

We turn to the history of the travails and enormously costly mistakes this system has made.

The first time began in 1968. The Department of Housing and Urban Development (HUD) presented a “10-year housing program to eliminate all substandard housing,” but since there were then, like now, very large budget deficits, this program was implemented off-budget.

This was done through the 1968 Housing and Urban Development Act, which had the government insuring subsidized single- and multifamily loans through the Federal Housing Administration and then Fannie Mae funding them. Fannie had been up to then a government agency with its debt on-budget, but to hide it, the 1968 Act converted it to an off-budget entity.

The off-budget Fannie funded the largest expansion of subsidized housing in the nation’s history with up to 40-year fixed rate loans. Just like the savings and loans of the time, it lent very long and borrowed short on a leveraged balance sheet, but its lending at fixed rates for 40 years as it headed into years of sharply rising funding costs eclipsed even the savings and loans’ 30-year fixed rate loans.

By the 1970s, HUD’s program turned into a disaster for cities and their residents, as described in the book Cities Destroyed for Cash: The FHA Scandal at HUD (1973). Detroit, Chicago, Cleveland and many other cities long suffered from the effects of HUD’s scheme. And by the early 1980s Fannie’s loans had accumulated such huge interest rate risk losses that it was effectively insolvent. It was only able to continue in business given its backing by the Treasury.

The second time is the spectacular failure of the savings and loan industry, with a $150 billion taxpayer bailout in 1989. This collapse reflected massive losses from both interest rate risk and credit risk, but the savings and loan industry was in its heyday a darling of American politicians. Its trade association, the U.S. League for Savings, now long gone, was a power in Washington DC. The savings and loans benefitted from many special advantages and from a political regulator, the Federal Home Loan Bank Board (FHLBB), which acted as a cheerleader for the industry and maintained close ties to the housing industry. The FHLBB was abolished in 1989, but the current FHFA is its third-generation successor.

The third time began in 1992. Over the following years, the government forced Fannie and Freddie to reduce their credit standards so as to acquire hundreds of billions of dollars in risky loans under the rubric of affordable housing. The first of many “trillion-dollar commitments” was announced by James Johnson, Fannie’s very politically connected CEO, in March 1994. He vowed to “transform the housing finance system.” He did, but not in the way he intended.

In 1994, HUD trumpeted its National Homeownership Strategy,’ about which President Clinton claimed: “Our home ownership strategy will not cost the taxpayers one extra cent.” A poor prediction indeed! The bailout of Fannie and Freddie alone took $190 billion.

This government policy was pursued until 2008 through HUD’s authority to impose what were called “Affordable Housing Goals” on the GSEs. To meet ever more aggressive HUD goals, Fannie and Freddie had to continually reduce their mortgage credit standards, especially with respect to loan-to value and debt-to-income ratios. Instead of HUD’s strategy advancing homeownership,
The full extent of the catastrophic credit risk expansion that took place has now been documented in a detailed analysis researchers at FHFA and AEI released in May 2021. This is the first “comprehensive account of the changes in mortgage risk that produced the worst foreclosure wave since the Great Depression.” By analyzing over 200 million mortgage originations from 1990 onward, they showed “that mortgage risk had already risen in the 1990s, planting seeds of the financial crisis.” In 2008 Fannie and Freddie were bailed out by the taxpayers and put into conservatorship.

The Congress elected in the wake of the crisis adopted the Dodd-Frank Act of 2010, which reflected the view that insufficient regulation caused the crisis. But the key culprits, Fannie and Freddie, were untouched by the legislation, left with no capital, but still functioning. It had become entirely clear that the US government is effectively the 100 percent guarantor of Fannie and Freddie, with the taxpayers fully on the hook, so the financial markets provide unlimited funds for their operations. Fannie and Freddie continue to operate profitably in their government conservatorship by using the U.S. Treasury’s global credit card. In addition, the Federal Reserve owns more than $2 trillion of their mortgage-backed securities and is still buying them for the central bank balance sheet.

Now the “American Jobs Plan” proposes spending $318 billion to construct and modernize more than two million houses. It is almost certain that the government will use its heightened control over Fannie and Freddie to once again make them the central elements of its housing plans by another weakening of credit standards. Thus, we face the prospect of combining some of the features of HUD’s 1968 subsidized housing debacle, with the housing subsidies of the savings and loan system, with Fannie and Freddie’s disastrous foray into high credit risk lending. It looks like we are once again heading for trouble.

However, the government does not have to follow the flawed policies of previous administrations. If instead, the following four principles were followed, the United States would have robust, successful housing finance system it needs without nationalized mortgage risk:

1. The housing finance market can and should function principally as a private market, not a government-dominated one.

2. We can create a robust housing finance market without depending on a government guarantee by ensuring mortgage credit quality and fostering the accumulation of adequate capital behind housing risk.

3. The federal government should use on-budget, transparent and sustainable programs if it wants to subsidize low-and moderate-income home buyers effectively. Fannie and Freddie have no role here, as the only way they can participate is through reducing their credit standards with the real cost hidden in the form of expanding risk.

4. Fannie and Freddie should be truly privatized, with their hidden subsidies and government-sponsored privileges eliminated over time.

It is certain that none of this will happen in the near term, and indeed the opposite of these principles will probably be followed by the current administration. Nonetheless, the principles define the housing finance strategy that a future, market-oriented Congress and administration should take. In the meantime, all mortgage actors will need to protect themselves against the increased credit risk that Fannie and Freddie, under orders from the FHFA, will be generating.

Fannie Mae and Freddie Mac – What Happened, Why it Happened, and How to Fix It. A simple solution: the Truth. Declare Victory, by Gary E. Hindes. Published by the Delaware Bay Company

Fannie Mae and Freddie Mac – What Happened, Why it Happened, and How to Fix It. A simple solution: the Truth. Declare Victory, by Gary E. Hindes. Published by the Delaware Bay Company

Gary Hindes, Chairman & Managing Member of the Delaware Company, LLC and a significant investor in Fannie Mae and Freddie Mac, wrote a deep and important piece on the conservatorships forced on the housing mortgage giants by the Bush Administration in 2008, and they remain in conservatorship all these years later. Once Britney Spears is released, as expected, from her court-imposed conservatorship, Fannie Mae and Freddie Mac will hold the new record for the longest conservatorships ever. Whether or not there was merit to the Fannie & Freddie conservatorships in the beginning (Hindes believes there was none), it is impossible to argue with a straight face that the government, including the courts, should not have restored them to the marketplace long ago. Please take the time to read Hindes’ paper, as it is a must read.

Bush’s final words were “we have to make clear that (conservatorship) is transitory, because otherwise it looks like nationalization.”
— President Bush to Treasury Secretary Paulson, Thursday, September 4, 2008, in the Oval Office.

In just a week, the conservatorships of Fannie Mae and Freddie Mac will enter their 14th year. The two government-sponsored entities (“GSEs”) are currently tied with Britney Spears for the title of being among the longest known conservatorships in history. But even though they have been, for the past decade, two of the most profitable companies in the world – and even though the government has been repaid over $100 billion more than it advanced during the 2008 financial crisis – it appears Ms. Spears might soon be released from her conservatorship, ceding the dubious title to the GSEs. At this point, her plaintive query to the judge overseeing her case is especially relevant: “I mean, Your Honor, how much longer is this supposed to go on?

The Trump Administration having dropped the ball on the one-yard line, the Biden Administration now must decide what to do about Fannie and Freddie. Should it continue down the recap-and-release path promoted by former FHFA director Mark Calabria? Can it/should it use the two companies to promote its affordable housing goals? Should it do nothing and leave the never-ending conservatorships for a fifth Administration to deal with?

Tim Howard, Fannie Mae’s former vice-chairman and chief financial officer, has a rather bold yet simple solution: “Admit that the de-facto nationalization of Fannie and Freddie in 2008 was unjustified and a mistake, then undo it”.

A bit of history.

During the final months of the Bush Administration, Treasury Secretary Henry Paulson forced Fannie and Freddie into conservatorship. With the private-label mortgage securities market having collapsed, and banks cutting back drastically on lending because of soaring mortgage delinquency rates, the housing market froze up and then saw the worst decline in home values since the Great Depression. The Too-Big-To-Fail banks having basically gone AWOL from the home mortgage market, Paulson was unwilling to leave Fannie and Freddie as “the only game in town” as the financial crisis was unfolding. He also saw in the crisis an opportunity to get control of two companies Treasury had historically opposed and replace them with a “free market” alternative. Perhaps most important, if the government could obtain control, it could use Fannie and Freddie to douse the conflagration then raging in the mortgage markets.1 So after seizing the companies and firing their directors and management, FHFA ordered them to book over $320 billion in temporary or estimated non-cash expenses. These dubious accounting entries were intended to make the companies appear to be insolvent and forced them to draw $187 billion in non-repayable senior preferred stock from Treasury (which carried a 10 percent after-tax annual dividend, thus creating a crushing payment burden of $18.7 billion per year – more than the companies’ combined profits in any year in their histories). It was, indeed, the classic “concrete life preserver”, intended to keep them in conservatorship until Congress could pass legislation replacing them. (Only that never happened.)

After convincing a judge to put 11,000 documents connected with the takeovers under seal (allowing anyone to read them, it argues to this day, would threaten ‘national security’), Treasury and its allies rewrote history to falsely blame Fannie and Freddie for the financial crisis, labeling the $187 billion ($151 billion in book losses plus $36 billion in accumulated dividends paid on the draws from those losses) as a real cost of their “rescue”. In fact, the ‘book’ losses that Paulson imposed upon the companies fully reversed themselves in just 18 months.3 Yet just after they returned to profitability, Treasury and FHFA changed the dividend on Treasury’s senior preferred stock from 10 percent per year to a “net worth sweep” of 100 percent of the companies’ net income in perpetuity. There was never a housing-related business reason for this action. To the contrary, the new-and-improved concrete life preserver prevented Fannie and Freddie from recapitalizing and allowed Treasury to collect $124 billion more than it would have been owed under the original 10 percent dividend obligation. A top White House official admitted contemporaneously that the real purpose of the net worth sweep was to keep the companies from “escaping” conservatorship and to ensure that shareholders would never see a dime of their companies’ profits.

The Howard solution: the truth.

As Mr. Howard puts it, “the Biden administration can fix the widespread misconception that Fannie and Freddie caused the financial crisis and are terribly risky . . . by publicly reversing the misguided and ideologically motivated takeovers of Fannie and Freddie by the Bush administration. It has the facts to back this up. Fannie and Freddie were not the worst sources of mortgage finance going into the crisis; they were by far the best. Readily available data show that going into, during and after the crisis their delinquency and default rates were one-third those of banks, and one-tenth those of subprime lenders and the loans in private-label securities. Nor do the companies need reform; they have been reformed. Compared with before the crisis, they no longer are in the portfolio investment business, and no longer give price discounts to larger lenders (both long-time complaints of their critics). Moreover, because of Dodd-Frank and other reforms, Fannie and Freddie no longer finance the “toxic” products and risk combinations that resulted in half their credit losses during and after the crisis, and today their average charged guaranty fee is more than double what it was in 2007. With half the riskiness and double the guaranty fees, Fannie and Freddie are far more resistant to a stress environment than they were pre-crisis.

Another falsehood put out by the anti-Fannie-and-Freddie crowd (and which the government’s attorneys continue to repeat in court) is that the companies were frozen out of the capital markets and on the verge of collapse during the financial crisis; hence, there was no choice but to step in and save them. Really? How to explain that just three days prior to their seizure, they had managed to sell $5 billion of unsecured debt (rated AA+/AAA-) through an underwriting group led by Wall Street’s top investment banks.7 (Actually, the deal was oversubscribed so it was upped at the last minute to $6 billion.) Were the underwriters, rating services, and buyers all fools? Did none of these people get the memo?8 And what about the fact that just two weeks earlier, FHFA issued a letter confirming that both companies were in full compliance with their capital requirements? How did that happen? (Actually, there’s a story behind it – which I will leave for another day.)

TINA

There is a reason Congress has not been able to replace Fannie and Freddie for going on 14 years: There Is No Alternative. The Biden administration needs to embrace this reality. It would start by admitting what everyone else knows: Fannie and Freddie have paid back the $187 billion they were forced to draw during the crisis, with 10 percent interest (double what the banks which accepted TARP money were charged).10 The administration should deem Treasury’s senior preferred stock to have been repaid in full and should cancel Treasury’s liquidation preference. That the government continues to argue that not only has it not been repaid, but that the GSEs still owe $187 billion is utterly immoral.

Quoting Mr. Howard: “Once Treasury’s senior preferred has been deemed repaid and its liquidation preference cancelled, settling the remaining lawsuits should not be difficult. Then, a true risk-based capital standard should enable Fannie and Freddie to raise the capital necessary for their release from conservatorship fairly quickly, since the amount of new equity issued under this standard will be more reasonable, and investors will be more eager to buy it if they believe that as a matter of public policy the Biden administration (actually) wants the companies to succeed.

Déjà vu.

During the savings-and-loan crisis of the 1990s, the government faced dozens of lawsuits for illegally seizing various banks and S&Ls. Known as the Winstar cases, they were presided over by Loren Smith, chief judge of the U. S. Court of Federal Claims. At one point, Judge Smith called all the parties into his courtroom and told them: “It is the obligation of the United States to do right. Every free government can be judged by the degree to which it respects the life, liberty, and property of its citizens. The United States stands tall among the nations because it is a just nation. In the instant cases (however), the United States has not acted in a manner worthy of the great (and) just nation (that) it is. Because the dollars at stake appear to be so large, the government has raised legal and factual arguments that have little or no basis in law, fact or logic.

“While the court can appreciate the concerns of the government’s attorneys to protect the public treasury, and they are honorable people, it must severely criticize the tactics and approach of the government . . . if the arguments put forth here are the strongest the United States can muster against liability, then the government has a moral obligation to seek a fair and equitable settlement from the parties whose contracts were breached. If this cannot be achieved, then the court is here to resolve these cases. However, the court is a tool of last resort. Where the government has violated rights, it should first attempt to do justice without judicial prompting.

The rating services.

In the meantime, where are Fitch, Moody’s and Standard and Poor’s? For going on 14 years, they have gone along with the charade that the GSEs haven’t been nationalized, thus allowing Uncle Sam to keep their $6-trillion-plus of debt off the government’s books. But at some point, they will have to face the reality that we are in what appears to be a never-ending conservatorship. In addition to risking a credit downgrade, adding $6-plus trillion to our national debt will, at the very least, make Congressional negotiations over extending the debt ceiling limit quite interesting.

An appeal to reason.

Our government was never intended to own private, profit-making, companies, nor should it be allowed to do so under the guise of a never-ending conservatorship. If it can step in and take all the equity and profits of a company without any compensation to its shareholders – here, essentially, the two largest expropriations of private property in history – then, as one observer put it a few years ago, we are living “in a Stalinist state”. I do not believe that it can – nor that we are.

The total amount of publicly owned preferred stock in Fannie and Freddie is $33 billion. The combined companies earn that much in a little over a year. The companies have been highly profitable for the past decade and the future looks quite favorable. Yet for the past 13 years, shareholders haven’t seen a penny in dividends, while the value of their shares has been decimated. Meanwhile, having already booked over $115 billion in profit (with another $100+ billion possible from monetizing the government’s warrants to buy 79.9 percent of their common equity for just under $73,000, Fannie and Freddie have turned out to be the best deal for the taxpayer since the Louisiana Purchase.12 Admitting the government has been fully repaid would immediately open the door for capital infusions from the private sector which would allow Fannie and Freddie to operate at little, if any, risk to the taxpayer.

President Biden has pledged to get us out of what he (and many others) call America’s “never-ending wars”. What about “never-ending conservatorships”? Isn’t over $100 billion of profit, 14 years, and three administrations enough?

It’s time for the President to declare victory and finally put an end to this last bit of unfinished business from the 2008 financial crisis.

Gary E. Hindes
September 1, 2021
646-467-5242
gary.hindes@delawarebayllc.com

It’s time for a new, secure internet by Thomas P. Vartanian published by The Hill

It’s time for a new, secure internet by Thomas P. Vartanian published by The Hill

My friend Tom Vartanian, formerly a bank regulator at two different agencies and then a private practitioner for four decades wrote a compelling piece on an extremely timely and important topic about the urgent need to greatly enhance the security of the internet, a subject the US government has ignored for far too long. I urge you to read the article and get involved politically in this issue.

The Solar Winds and Colonial Pipeline hacks are just the tip of the digital doomsday that is brewing. While technology has super-charged the quality and potential of our individual and commercial lives, an increasingly ominous stream of hacks has taken advantage of vulnerable software, applications, systems and networks.

Technology is a lifestyle, but it is first and foremost a business, one in which the breadth of innovation and the speed of getting to market is rewarded more than the insecurity of a product is punished. Because of that, products may be brought to market that are not secure, and then become more vulnerable as technology advances or they are subsequently modified by commercial users seeking competitive advantages. Today, nearly every ounce of data and form of money is stored, invested and transmitted on and through these internet applications, systems and networks. How secure should they be?

Unless the public and private sectors begin to put digital security on an equal footing with digital innovation, we will continue to see increasing damage to critical infrastructures and the quality of our lives. What is the solution? Unfortunately, we are decades down the path of a way of life that is insecure, which will not be easy to rehabilitate. We could mandate government or a private-sector software validation, or institute the use of technologies such as artificial intelligence to police software, networks and systems. But those changes would raise complex physical and political issues, including the role of government and the balance between security and privacy.

Perhaps the answer lies in the development of a new, permissioned secure internet – I2. Access to I2 would be licensed and be subject to a clear set of standards and enforcement mechanisms. Everyone would know how belligerent actions would be classified and what the violators, their country of origin, networks and the pipelines that they use to carry their data should expect to suffer as a response. Little of that exists today, often making a calculable risk-reward ratio for such actions on the internet a non-issue.

Instead, the world has been playing cybersecurity whack-a-mole. In the United States, President Biden’s recent executive order in response to the Colonial Pipeline hack is remarkably similar to the many pronouncements made by Presidents Clinton, Bush, Obama and Trump. Its directive that the government launch a pilot program to effectively provide a “Good Housekeeping Seal of Approval” for securely developed software could be a valuable step forward and requires immediate consideration and implementation, though it does raise the issues noted above.

Cybersecurity awareness was memorialized in President Clinton’s 1996 Executive Order 13010, which identified nine critical national infrastructures. That was followed in 1999 by Presidential Decision Directive 63, which sought to put reliable, interconnected and secure information system infrastructures in place by 2003. That’s right, 2003! Finally, in January 2000, the Clinton White House, which was remarkably prescient about cyber threats, released a 199-page plan for information systems protection warning that the next target would be America’s infrastructure.

Thirty-five days after 9/11, President George W. Bush issued Executive Order 13231 requiring federal agencies responsible for defense and security to protect critical infrastructures. The Bush administration then issued a 76-page report in 2003 creating new bureaucracies to implement some 50 recommendations to prevent cyberattacks against America’s critical infrastructures. Presidential Directives 38 and 54 followed in July 2004 and January 2008, directing federal agencies to secure federal networks and supply chains.

President Obama issued Presidential Policy Directive 20, Executive Order 13636 and Presidential Policy Directive 21 in 2012 and 2013 to facilitate the construction of better defense systems and strengthen the security and resilience of critical infrastructures. The job of securing 16 critical infrastructures was delegated to about two-dozen federal agencies. In 2017, President Trump issued Executive Order 13800, once again directing a gaggle of federal agencies to identify capabilities that agencies could employ to support the cybersecurity efforts of critical infrastructures.

There you have it. It has all been said and resaid many times, with the government deploying two-dozen agencies to share responsibility for lofty goals that have not sufficiently changed conditions on the ground. We find ourselves in 2021 faced with no option other than to use digital technologies that we understand may be hacked by persistent adversaries. And the problem only grows larger each day as systemic vulnerabilities are added faster than solutions can be developed. Averting our eyes will not deter the digital Armageddon that is out there.

We have not devoted enough resources to allow the experts to address what is the most severe problem we face as a country and a world. As a result, it is entirely possible that tomorrow morning, everyday events that we take for granted may be interrupted as power grids go dark, ATMs stop dispensing money, moving vehicles are hacked, financial markets disappear and water systems stop working. The problem will only be amplified by new technologies such as quantum computing.

The country and its digital systems and networks rely to a large extent on the neutralizing effects of mutually assured destruction. It worked with nuclear proliferation. But in cyberspace, it becomes more ineffective each day as technology gets faster, cheaper and more available to rogue nations, criminal cartels, terrorists and fanatics that are not a part of the family of nations. Anyone concerned about the future of cyberspace should carefully review the 182-page report and its 75 recommendations issued by the Cyberspace Solarium Commission in March 2020. It artfully and carefully illustrates the national security threat that cyberspace poses.

Today, we are left with the next best security alternative: ensuring that after a computer, network or system is destroyed, its functionality is rebuilt and restored as quickly as possible. This seems like a preemptive admission of defeat. Imagine if that were the approach used by the U.S. military.

– – – – – – –

Thomas P. Vartanian, formerly a bank regulator at two different federal agencies and then a private practitioner for four decades, is the executive director and professor of law at George Mason University’s Antonin Scalia Law School’s Program on Financial Regulation & Technology. He is the author of “200 Years of American Financial Panics.”

This article was originally published by The Hill

Will the real financial bubble please stand up? By Thomas P. Vartanian, published by The Hill

Will the real financial bubble please stand up? By Thomas P. Vartanian, published by The Hill

My longtime friend, Thomas P. Vartanian, formerly a bank regulator at two different federal agencies and then a private practitioner for four decades, is the executive director and professor of law at George Mason University’s Antonin Scalia Law School’s Program on Financial Regulation & Technology. He is the author of “200 Years of American Financial Panics,” which will be published in May 2021.

As Congress begins to reconcile the different versions of financial stimulus passed by the House and Senate to relieve the devastation of the COVID-19 pandemic, we can only hope that someone brings a rigorous sense of financial reality to the table. There is a lot at stake beyond the immediacy of the devastating effects of the pandemic. Congress may once again be paving the path to the next financial crisis.

Financial collapses typically follow the creation of economic bubbles, so it is useful to understand when bubbles are forming. Most bubbles are characterized by too much credit chasing overvalued assets. Many financial bubbles often masquerade for some time as strong economic growth, shedding their disguises only when it is too late to stop them from bursting. Just like the contestants in the popular 1960’s TV game show “To Tell the Truth,” which climaxed when the real baseball player or plumber was asked to stand up and surprise the audience, many bubbles are quite accomplished at fooling even the most sophisticated viewers.

While there are undoubtedly Americans in distress from the pandemic, a short-term fix should be made with full knowledge of the longer-term economic issues that the country faces. As the effects of the pandemic appear to be retreating, the firehose approach to economic assistance should be jettisoned and replaced with targeted assistance. The more pork and unnecessary subsidies that Congress includes, the closer we get to our next financial panic given the context we find ourselves in.

What is that context? Take the bubble that no one seems to ever worry about — the national debt. It sits today at $28 trillion and is growing by the minute. Over the last quarter century, it has continuously been nurtured by Congresses and White Houses that seem to believe that there are no restraints on the country’s borrowing and spending power. That has necessitated an endless series of governmental actions that have distorted markets, which then of course requires further attention and adjustment as markets evolve, leading to even further market distortions.

Since interest rates hit 21 percent in the early 1980s, the Federal Reserve has taken increasing control of the economy, managing it through ups and downs. During the panic of 2008, the Fed rescued a reeling economy by purchasing, among other things, Treasury notes and mortgage-backed securities, ballooning its balance sheet from a meager $870 billion in 2007 to an eye-popping $4.5 trillion in 2014.

Even before the Fed could shed itself of that portfolio and return markets to “normality,” the pandemic of 2020 and the relief efforts enacted by Congress compelled it to increase its portfolio to a whopping $7.6 trillion. It is not clear how long it will take the Fed to unwind its current holdings, if it happens at all. This combination of relentless spending and borrowing has maneuvered the economy into a position that requires constant realignment by the government to avoid new catastrophic economic events.

Exhibit A is how desperately the country needs low interest rates. It is not that it is stimulative to have low interest rates. The country needs rates to be low to avoid even greater financial distress. According to Jimmy Chang, the insightful chief investment officer at Rockefeller Capital Management, a 1 percent uptick in the general level of interest rates would increase America’s annual interest payments on its outstanding debt by about $280 billion, which is 54 percent higher than its interest outlays in 2020, more than 5 percent of the federal government’s total spending in a typical year (pre-pandemic levels) and 40 percent more than the Pentagon’s annual budget for the Navy. Consider what would happen to the U.S. economy if rates climbed to a 6-8 percent level, which traditionally would not have been considered abnormal.

But this is only the tip of the economic iceberg. The United States continues to borrow and print money at a furious rate. The money supply represented by checking deposits, cash and other financial figures is up an unprecedented 26 percent on a year-over-year basis. That means that about a quarter of all money in the U.S has been created in the last year.

This is not a sustainable course of action. The longer-term effects, which may include inflation, deflation, increases in interest rates, increased unemployment and devaluation of the dollar, will all trigger further governmental intervention and adjustments, which will lead to the need for yet further action. While I am not suggesting that the government should not be acting to avoid financial calamities, there is a limit to what it should do. It has acted to bail out markets in every financial crisis since the 1980s, conditioning them to expect soft landings. But not everyone has received a soft landing.

Notwithstanding these and other troubling trends, our leaders seem to be tone deaf to financial realities. Ten financial panics in the last two centuries are proof of that. There will be clear consequences, and perhaps none more likely than the U.S. economy and dollar being surpassed by China as its economy continues to grow and as it surpasses the rest of the world in investments in technology and rare earth metals.

Consider the recent canary in this cave. Some U.S. corporations seem to be hedging their bets against future collapses of the U.S. economy or dollar. Why else would companies such as Tesla and MicroStrategy move billions in Treasury funds into cryptocurrencies that have no intrinsic value? Is it the hype described by Chang as the “Tinker Bell Effect,” or is it that Bitcoin is becoming more trusted than the dollar?

As Congress decides how much to provide in additional relief to Americans, an estimated $1 trillion of the $4 trillion already appropriated has not been spent. But it is difficult to stop the music and actually identify what has been spoken for and what has not been spent.

Those who have been devastated by the impact of COVID-19 should be helped. But using a firehose to distribute that relief will result in more financial pain down the road.

Congress Must Ensure Election Integrity By Senator Rick Scott

Congress Must Ensure Election Integrity By Senator Rick Scott

[The horrid election season we just went through in America is by far the worst I have witnessed in my 50 plus years as a voter. Before I say another word, let me be clear about what I am not saying. I’m not saying that Joe Biden should not be President of the United States or that Donald Trump should be. And I’m not saying Democrats should not control the Senate and Republicans should. I am saying, as strongly as possible, that our electoral system is badly broken and our great democracy cannot continue to make our nation the envy of the world unless we come together very soon to make essential repairs so that we can believe that nearly all votes were honestly tendered and counted. I came across an article in Newsweek written by Senator Rick Scott on this very subject and want to pass it along to you.]

After the despicable acts of violence in our Capitol building, it is hard to imagine a worse moment to undermine hopes for political stability in our nation. Democrats, big tech and the media are doing exactly that, however, despite president-elect Biden’s call for unity. They are tarring the 74 million Americans who cast votes for Donald Trump as insurrectionists and silencing legitimate dissent. They are also pretending that Republicans who want to repair our broken election system incited the unforgivable violence in the people’s house on January 6th.

Unlike Democrats who justified the violence and rioting this summer by explaining that “a riot is the voice of the unheard,” Republicans in Washington and around the country expressed near-universal condemnation of the violence and mayhem at Capitol Hill—and they did so without hesitation. Several rioters and a police officer were killed. Dozens of law enforcement officers were beaten and injured. The lives of Democratic and Republican elected leaders were threatened. The shining symbol of American unity, the Capitol building where both parties come together to govern, was desecrated. It was a sad day for all Americans, not just those of us who work there.

Yet Democrats have decided to salt the ground on which they pledge to grow political stability. Though we should respect their resolve to prevent political violence, they are not stopping with that goal.

Big tech, the news media and the Democratic Party have come together to de-platform not just violent voices, but 10 million Parler users. They’ve kicked Republicans who called for stability out of the tech-monopolized public square, while providing a platform for Iran’s Ayatollah to spew anti-Semitism and hate. They’ve proposed adding two Republican U.S. senators to the no-fly list, as if they were terrorists. They are campaigning to get peaceful Americans who disagree with them fired. They propose to impeach the departing president—not to remove him from office, since he is already leaving, but to keep him around and in the news. They want America to stay divided. After all, Biden’s campaign was about Donald Trump, not the Democrats’ own agenda. They are even mobilizing corporate America to withdraw its support of Republicans who are working to stop socialism and ensure that our broken election process regains respect.

Partially due to the Covid-19 pandemic, much of our country rushed without preparation to universal mail-in voting last year. In the process, we blew away some long-standing laws, procedures and constitutional requirements that guarantee fair elections. The thrown-together process in Pennsylvania, for example, may have violated the state constitution. Since the 19th century, that constitution has required all votes to be cast in person, with narrowly defined exceptions. Nevertheless, for 2020, the Pennsylvania legislature voted to allow no-excuse mail-in ballots.

That same state extended election day voting deadlines, creating a two-tiered voting system where some citizens had opportunities to vote not enjoyed by others. The Democratic state auditor general concluded he was unable to confidently ensure that the system used to determine who could vote was secure. Democrats seem to have forgotten that the U.S. Supreme Court also said there was a “strong likelihood” that Pennsylvania’s actions violated the Constitution of the United States.

In elections past, when Democrats have objected to the presidential electoral process, they’ve been lauded as heroes safeguarding the right to vote, not insurrectionists subverting it. My vote objecting to Pennsylvania’s process wasn’t about the 2020 election. It would not have changed the outcome. My vote was about elections to come, in 2022, 2024 and beyond, and seeing that they are conducted fairly. We have to repair the mess at the polls in 2020 if we are to restore Americans’ trust in our elections process. How can either the House or Senate fix our electoral problems unless we are willing to examine them?

That is why I introduced an important piece of legislation last September, the VOTER Act, which would address systemic problems in voting systems across the country and rebuild trust in our electoral process. Over the last few months, I’ve made some changes to the bill and will be re-filing it shortly. The VOTER Act mandates Voter ID in every state, institutes measures to ensure timely results, including allowing every state to begin processing absentee ballots before Election Day, and creates uniform national standards for voting by mail.

De-platforming Republicans, censoring dissent, intimidating GOP supporters and promoting the myth that Republicans supported the violence in the Capitol is corrosive and dishonest. Suppressing speech is fundamentally un-American. It undermines the institutions we need at this critical moment to lend stability to the Republican Party and our country. When the party that controls both the legislative and executive branches abuses its power, it is more than a destabilizing influence on our political system. It is authoritarianism masquerading as the force that will keep America safe.

What President-elect Biden can do to fix outdated financial system by Thomas P. Vartanian published by American Banker

What President-elect Biden can do to fix outdated financial system by Thomas P. Vartanian published by American Banker

[My friend, Tom Vartanian, who served in government during the Reagan Administration, wrote the article that follows to suggest steps the Biden Administration should consider taking to update and improve the regulation of financial services in the U.S. The article, published by the American Banker, is well worth reading.]

Dear President-Elect Biden:

Your administration stands at an unprecedented financial crossroads. The course you choose will impact the pocketbook of every American for decades to come.

Four years ago, I wrote a similar letter to President-Elect Trump, calling on him to address the exponential regulatory costs since the 2010 Dodd-Frank Act. But a lot has changed since, and your administration faces a whole new set of challenges.

Some will tell you that sound financial regulation is just a matter of rolling back the regulatory policies of the last four years, and writing more and harsher rules. Nothing could be farther from reality.

Financial services in America will only thrive if you appreciate that new delivery systems and new financial products require an overhaul of our obsolete concepts of oversight. Four critical economic and financial challenges lay before you.

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