Fed consolidating financial regulators

Coming Monday from the Federal government, according to anonymous “leaks” from inside the SEC.

http://www.latimes.com/business/la-fi-treasury29mar29,1,6243265.story

Overhaul of U.S. financial regulatory system proposed

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Shawn Thew / EPA

ARCHITECT: The plan, devised after a year of study by Treasury Secretary Henry M. Paulson Jr., would includes short-, intermediate- and long-term changes in the regulatory structure.

A plan to be unveiled Monday would give the Fed new power and fold oversight authority now shared by many agencies into three.

By Maura Reynolds, Los Angeles Times Staff Writer
March 29, 2008

WASHINGTON — The Bush administration is proposing a sweeping overhaul of the nation’s financial regulatory system, combining what is now an alphabet soup of government agencies into three streamlined regulators.

The proposal is the result of a year of study by Treasury Secretary Henry M. Paulson Jr. and has the support of the president, according to Treasury officials who spoke on condition of anonymity Friday.

Under the administration’s plan, which will be released in detail Monday, the Federal Reserve would get expanded power to promote stability in financial markets.

The Securities and Exchange Commission and a handful of other federal agencies — all formed in the Great Depression or earlier — would be restructured and have their responsibilities redefined.

Seems simpler should be better, though I suppose the details will really indicate whether this is good for the consumer or good for the industry, or both.

Paul

Even in Vegas?

http://online.wsj.com/article/SB120675186936073477.html?mod=hpp_us_whats_news

Vegas Site Is Up for Sale As Casino Plan Goes Awry

By Tamara Audi

One of the biggest projects planned for the Las Vegas Strip appears to be falling apart.

The site of what was supposed to be the tallest tower in Las Vegas, and among the tallest in the U.S. at 1,064 feet, is now for sale. Las Vegas developers and Wall Street securities analysts assume the proposed $5 billion project, which was scheduled to open in 2011, is dead.

Last year, Australian gambling company Crown Ltd. and Texas developer Christopher Milam teamed with private-equity firm York Capital Management LLC to build a casino complex and 5,000-room hotel on the Strip.

Enough said.

Paul

Some things to watch for in Pasadena

Don’t let these decisions go by without weighing in:

Capital Improvement Budget: This determines what gets done to municipal buildings, streets, parks, etc. Council, through the Finance Committee, will start considering what projects to pay for any which ones to put on the back burner sometime in April. If you’ve got a street that needs paving, a park that needs equipment or a public building that requires upgrading, let the council know. This usually is considered and passed a month and half before the operating budget.

Operating Budget: The Council, through its Finance Committee, should begin examining the operating budget sometime in May. This determines where the Council thinks it’s important to spend money as well as what work will be started in the next fiscal year.

Land Use Element of the General Plan: Council and staff are expected to begin discussing revising how Pasadena’s land is allocated for development. Look for opportunities to provide input and help shape the built environment in Pasadena beginning sometime in late spring or early summer.

City Manager Selection: The City Council has engaged a consultant, held its one public meeting and is moving forward in choosing the person to lead the city bureaucracy. Look for chances to provide input. Watch to see if the City Council articulates a process that incorporates meaningful input from the community and provides a process that promotes confidence in the selected candidate.

Open Space Advisory Committee: A small group appointed by the Council will make recommendations on how much open space Pasadena needs, where it should be and what it will cost. Remember, money spent on open space, even money spent on studying open space, is money not spent elsewhere.

Housing Element: Under the gun from Sacramento, the City is revising the Housing Element of the General  Plan. The state requires the City do this on a state-determined timetable. Would be better if it were to happen along with the Land Use considerations, but Sacramento won’t wait. Separating the discussion means housing interests of all types will shape the policy while others aren’t even aware it’s happening. Government types promise revisions are possible when Land Use is considered. The best bet is to have input now AND later.

More as other items become apparent.

Paul

Maybe I should put my money in wieners

http://online.wsj.com/article/SB120673297868272437.html?mod=home_we_banner_left

America’s Top Dog

From Los Angeles to Boston, a nationwide search for the nation’s best hot dog.

By RAYMOND SOKOLOV
March 29, 2008; Page W1

A small boy in a green stadium has a yellow mouth. He has just finished his first ballpark hot dog at a Detroit Tigers game in 1948. He is very happy, but this is only the beginning. In the ensuing decades, he has consumed thousands more hot dogs, grilled and steamed, with or without relish, at funky stands, in backyards on Memorial Day and at a few glamorous restaurants literally putting on the dog.

Most recently, he — or I should say, I, since I am that former boy with the mustard-smeared mouth — crisscrossed America searching for the best hot dog in the land. And now, on the eve of another baseball season, with another frank-filled Memorial Day soon to come, here is my report. There were superb contenders for the hot dog title in Los Angeles, New York, and especially Chicago. But it was in a parking lot in Boston that I found the hot dog in its highest form, the wiener with the wow factor, the frank of franks.

I deployed an admittedly personal set of standards in choosing the country’s outstanding dogs. Basically, I was looking for excellent traditional hot dogs in excellent buns in establishments full of character and local color. I shunned almost all high-end, chef-centered establishments as well as ballparks, because places that have foie gras on the menu and mass-service major-league arenas clash with the true spirit of the great hot dog stand.

True hot dog stands are not chic, nor do they operate as part of a chain. They are one-offs, mom-and-pop spots. And, most important of all, their success stands or falls on their classic hot dogs. Sure, some of my favorite places also served excellent bratwursts or other estimable sausages, but the center of their menus was always a basic hot dog in a bun.

How many hot dogs would it take to secure my retirement years? I know the things never deteriorate, so who knows.

Paul

WSJ- watch out, even utilities are hurt in this market

http://online.wsj.com/article/SB120675033481973411.html?mod=home_we_banner_left 

Water’s Slippery Seduction

Investors Flood Sector
Amid Economic Falloff,
Limited Opportunities

By CAROLYN CUI and ANN DAVIS
March 29, 2008

Water may be the world’s most critical commodity. But it has been a tough market for many investors to tap profitably lately.

Since last summer, a flood of investment vehicles have hit the market, seeking to capitalize on the rising global need for clean water. But many of these investments have proved disappointing in the past few months, just as Wall Street has piled into the sector. For one, water-oriented stocks — from big conglomerates like General Electric Co. to water utilities to equipment suppliers like Mueller Water Products Inc. — also are exposed to broader economic problems, including the housing slowdown.

 Even the reliable old stand-bys aren’t holding up in the current housing/financing crisis.  Gold anyone?

Paul

Pasadena’s budget process (the Cliff Notes version)

Inquiring minds want to know: How does Pasadena put a half-billion dollar budget together?

Here’s how it was done previously (in relatively general terms):

About January of any given year, the City Manager asks Department Heads to begin compiling budget requests for the next fiscal year. Most or their requests follow what was budgeted the year prior, though most departments ask for enhancements to add services or perform additional tasks.

The City Manager and Finance Director go over the requests and determine the anticipated revenue for the upcoming year.That is usually based on anticipated revenues from the state and federal government, as well as property tax, utility transfers, sales tax revenues, fees and charges. Ideally, that revenue projection is cross-referenced with City Council and City priorities as the basis for the City Manager’s recommended operating budget.

That budget is then presented to the City Council, generally sometime in late April or early May. The Council refers te proposed budget to the Finance Committee which then holds joint public hearings on the budget. Those are, usually, held throughout May and most of June. There is a hearing where the City Manager and Finance Director present an overview, which includes revenue and expense projections, reserve requirements and expenditures already committed. The Finance Committee then hold public hearings where the budget is examined department by department. As those hearings are held, committee and council members who are present express their concerns, opinions and talk about what they would like to see reflected in the budget. Once all the departmental hearings are completed, the City Manager and Finance Director return to the committee with a list of those items that were asked to be considered in the budget, along with cost estimates for those. The Finance Committee then discusses and comes to agreement on what the final budget should look like. That then goes to the City Council where it is considered by the full council during one or more public hearings. The council makes it’s changes and then approves the budget at a public hearing.

That’s the simple process. It is complicated by moneys and expenditures that are limited to certain funds either by revenue source or expected work product.

Also, the Council has complete discretion over General Fund expenditures but is limited by federal, state or other requirements on how about 2/3 of the entire budget can be spent. So, of the $500,000,000 or so in the entire operating budget, only about $180,000,000 is able to be directed as the Council determines. Of that, the vast majority is committed to expenditures that support public safety, especially salaries for police and firefighters. After all is said and done, there is not a lot of money to be allocated as the City Council chooses, unless the choice is to forgo expenditures in one place to support activities in another area.

As an analogy, the General Fund money may be fungible and able to be spent at will, but it would be as if one were to make a decision to not pay the rent so one could buy a car. The decision can be made, and one has the power to do it, but the consequences aren’t necessarily positive and the decision is not necessarily a good one to make. As budgets get leaner, that Hobson’s Choice faces the City Council as it balances what it would like to fund with what it is able to fund. As budgets get leaner, relations among Council members often get more and more strained, as a result.

While it is easy to argue that “government has lots of money” it is not always easy to find it, and more difficult to reallocate funding toward new priorities.

Again, that’s the Cliff Notes version of Pasadena’s budget process. I’d advise anyone wanting to have input on the final budget reviewed by the Council to monitor Finance Committee meetings and plan to attend to tell the committee your priorities. Those “special interests” everyone is so wary of will be sure to come out. You should, as well.

At some point, I’ll attempt the Cliff Notes version of Restricted Funds and what determines how much of Pasadena’s money can be spent.

Paul

Change is in the air brokers are breathing

From the L.A. Times:

http://www.latimes.com/news/printedition/front/la-na-wallstdems21mar21,1,2337826.story

CAMPAIGN ‘08

Clinton, Obama are Wall Street darlings

Donations to Democratic campaigns prompt concern that the candidates will go soft on regulation of the financial markets.

By Janet Hook and Dan Morain, Los Angeles Times Staff Writers
March 21, 2008

WASHINGTON — Hillary Rodham Clinton and Barack Obama, who are running for president as economic populists, are benefiting handsomely from Wall Street donations, easily surpassing Republican John McCain in campaign contributions from the troubled financial services sector.

It is part of a broader fundraising shift toward Democrats, compared to past campaigns when Republicans were the favorites of Wall Street.

Some Democrats worry that the influx of money will make their candidates less willing to call for increased regulation of financial markets, which have been in turmoil after a wave of foreclosures on sub-prime mortgages.

These concerned Democrats argue that their candidates, and presumptive Republican nominee McCain, should be willing to push for financial institutions to accept more government regulation — in exchange for likely future bailouts, such as the recent deal the Federal Reserve orchestrated for JPMorgan Chase & Co. to take over Bear Stearns Cos.

“I want to hear Clinton, Obama and McCain talk about a quid pro quo,” said Jared Bernstein, an economist with the Democratic-leaning Economic Policy Institute. “If we don’t hear it, especially from Democrats, it makes sense to ask why not and ask if they are inappropriately cozy with the financial services industry.”

I’m thinking disappointment with the status quo on a lot of fronts contributes to eroding support among finance professionals for the Republicans.

As a lifelong Democrat, I think we’re all underestimating the Republican chances in November. Once McCain comes to his political senses and moves toward the middle he’s going to become a much more formidable candidate.  Were I a McCain consultant, I’d be screaming at him to move to the middle to try to attract those Reagan Democrats, Dixiecrats and independents.  McCain’s wasting time courting the hard-line right who aren’t going to support Clinton or Obama (both liberal demons, I mean Democrats, with a capital LIBERAL) and will come out strong to oppose either of the Democratic candidates, no matter what they think of McCain.  Once his campaign realizes that, he’ll start gaining strength and money.

Of course, a lot will depend on whether voters start seeing the massive amount of money spent on the war as contributing to the economic woes here at home.

And, we haven’t seen any of the real campaign yet.

Paul

L.A. Times confident great depression of 21st century is NOT upon us

http://www.latimes.com/news/printedition/front/la-fi-depression20mar20,1,1097237.story

A new Great Depression? It’s different this time

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The shadow of the ’30s looms over every economic downturn or crisis. But unemployment reached 25% during the Depression; last month it was reported at 4.8%.

Fear is spreading with the financial system in disarray. But the global boom is ongoing, unemployment is low and the government has new tools to address the downturn.

By Michael A. Hiltzik, Los Angeles Times Staff Writer
March 20, 2008

Dysfunctional capital markets, frantic central banks, stressed-out consumers, fear and uncertainty — all are alarming echoes of the global economic cataclysm of the 1930s.

Which raises the inevitable question: Could another Great Depression be lurking over the horizon?

Hordes gather

Before the impending calamity

Bread lines

TV news programs show grainy footage of Depression-era bankers as reporters tick off grim economic statistics. The Federal Reserve invokes powers it hasn’t used since the 1930s. Critics of President Bush’s economic policies are emboldened to use the H-word: “Hoover.”

On the surface, there are disquieting parallels between economic conditions in the early 1930s and those of today. There is the popping of enormous asset bubbles — stocks then, housing now.

And, as in the Great Depression, the financial system is in disarray. It was symbolized back then by the failure of thousands of banks, mostly small, local outfits — 2,300 in 1931 alone.The parallel today is the crippling ofonetime giantssuch as Bear Stearns Cos., Countrywide Financial Corp. and Ameriquest Mortgage Co.

Many economists believe that the U.S. will find it almost impossible to avert a recession, if one has not started already. Housing remains mired in a deep slump,with some analysts projecting that Southern California home values could plunge 40% from their peaks last year.The Commerce Department reported this week that new residential building permits nationwide plummeted 36.5% in February from a year earlier.

Then, like now, stock prices were highly volatile. The S&P 500 index, which fell more than 56% from 1928 through 1940, nevertheless recorded four up years in that span, including a 46.5% gain in 1933.

The shadow of the ’30s looms over every economic downturn or crisis, no matter how modest. Pundits were quick to invoke the Depression as a cautionary model during the stock market crash of 1987, the bailout of the giant hedge fund Long-Term Capital Management in 1998 and the dot-com meltdown of 2000 and 2001.

But there are vast differences between the 1930s and today. U.S. unemployment reached 25% during the Depression; last month it was reported at 4.8%. The international industrial economy was a shambles in the ’30s. Today it is coming off a global boom.

I’m hoping the Times is right and we have learned from previous experience and won’t be repeating history.

Paul

L.A. Times and others report fed waking up, taking action

http://www.latimes.com/business/la-fi-invest19mar19,0,4949711.story

Rate cut aims to push fearful investors to take risks

The Fed’s intent is to coax money from low-yielding accounts back into stocks.

By Tom Petruno and David Colker, Los Angeles Times Staff Writers
March 19, 2008

With its latest steep interest rate cut, the nation’s central bank is trying again to prod skittish investors and lenders out of their protective crouch.

As the housing market has crumbled and stock prices have slumped, many individuals and institutions have been hoarding trillions of dollars in safe, short-term accounts such as money market mutual funds and bank savings certificates.

But the Federal Reserve just made those accounts far less attractive. By cutting its benchmark short-term rate to 2.25% from 3%, the Fed ensured that many cautious savers soon will be earning less than 2% — the lowest since 2005.

With a fluctuating market that seems to reflect every whim and rumor, are the more frugal among us going to risk our money in the market, even if safer investments are yielding smaller returns?

http://www.latimes.com/business/la-fi-markets19mar19,1,5486658.story 

Dow soars 420 points on Fed rate cut

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Tim Boyle / Bloomberg News

Traders and clerks, including Frank Vitacco, center, signal orders in the Eurodollar Options pit at the Chicago Mercantile Exchange in Chicago, Illinois, U.S., moments after a Federal Open Market Committee (FOMC) interest rate announcement on Tuesday, March 18, 2008.

Investors also are heartened by better-than-expected profit reports from Lehman Bros. and Goldman Sachs.

By Walter Hamilton, Los Angeles Times Staff Writer
March 19, 2008

NEW YORK — The up-and-down stock market had a huge up day Tuesday, with the Dow Jones industrial average leaping more than 400 points even though the Federal Reserve cut its key interest rate less than many had expected.

The market was also pushed up by profit reports from Lehman Bros. Holdings and Goldman Sachs Group that convinced investors that no other Wall Street firms were facing the type of meltdown that felled Bear Stearns over the weekend.

“What we saw with Lehman and Goldman is that this bleak outlook is not really as bleak as people think,” said David Kotok, head of Cumberland Advisors in Vineland, N.J. “The expectation was slaughter, and instead you got positive reports from both firms.”

The Dow surged 420.41 points, or 3.5%, to 12,392.66. The Standard & Poor’s 500 index powered up 54.14 points, or 4.2%, to 1,330.74, and the Nasdaq composite advanced 91.25 points, or 4.2%, to 2,268.26.It is encouraging to see that the fed is taking action and the market reacting positively.

Paul

Everyone’s nervous (again)

TODAY’S MARKETS By PETER A. MCKAY

 http://online.wsj.com/article/SB120574725784241355.html?mod=special_coverage

Stocks Tilt Lower Amid Drama;
Financials Skid After Bear Deal

March 17, 2008 12:29 p.m.

Stocks continued to slide downward Monday, as the fire sale of Bear Stearns and further emergency measures by the Federal Reserve to ease the strain in money markets kept acute downward pressure on financial stocks.

Futures-market activity had set the stage for a steep plunge in equity markets once the opening bell rang on Monday, and stocks did open sharply lower, with the Dow Jones Industrial Average posting a loss of more than 160 points on its intraday low, a sour follow-up to Friday’s 194-point drop.

Selling pressure dissipated somewhat by mid-morning, but stocks were tipping lower again around midday. The Dow recently traded 111.70 points down, off 0.9%, at 11839.39. The Standard & Poor’s 500 fell by 1.8%, or 22.64 points, to 1265.50, led by a 4.3% decline in its financial sector. The Nasdaq Composite Index slid 1.9%, or 41.61 points, to 2170.88.