Puts and Calls: The business of politics

Tom Karol Occasional Political Commentator
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Financial Reform Bill – House and Senate conferees will formally meet on Thursday to work on the compromise language between the financial reform bill passed by each.  But POLITICO reports that work on final language is already well under way, with ferocious lobbying and electoral politics both playing a role in the process.  They report that players on all sides of the contentious debate over the biggest piece of financial regulatory reform since the Great Depression are fully engaged in a fierce final round of lobbying and negotiation before a final bill is sent to President Obama, which is expected by the end of the month.  Republican conferees are scheduled to meet on Tuesday to coordinate their plans to revise the bills. One senior Democratic conferee has other problems to consider as, Sen. Lincoln (D-Ark) enlists the support of former president Clinton to help in her tight battle in a primary run-off.  Senator Lincoln is the author of controversial language that could force Wall Street banks to spin off lucrative derivatives trading operations, and the prospects of that provision remaining will demand on Tuesdays run-off.

The Most Interested Businesses in Financial Reform – According to the Wall Street Journal, retailers, auto dealers, big banks, attorneys general and derivatives traders are among those sitting anxiously as Congress enters the final stretch of its financial-regulation revamp. The widest gaps may affect people far from Wall Street, as auto dealers are lobbying hard to be excluded from oversight by a proposed consumer-finance regulator, retailers want relief from what they say are punitive fees charged by credit-card companies, and non-financial companies are fighting for more flexibility in using derivatives.
Countrywide to pay $108 million in fines – Countrywide will pay $108 million to settle federal accusations of overcharging and deceiving borrowers before the financial crisis. Bank of America acquired Countrywide in 2008, which was at the time the top servicer of mortgages, with a portfolio in excess of $1 trillion. The firm had expanded deep into the market for subprime and nontraditional mortgages at the heart of the housing market collapse. The FTC alleged that Countrywide ordered property inspections and other services that charged borrowers heavy fees as part of a way to drive profit to the mortgage giant. The $108 million will be used to reimburse overcharged borrowers. Three senior former Countrywide executives remain defendants in an SEC civil fraud lawsuit which alleges that the officers hid the deteriorating prospects of Countrywide, and conducted insider trading by entering a systematic stock selling plan in late 2006, knowing that the mortgage lender’s prospects would worsen. If the FTC and the SEC are presently able to handle such matters, one wonders about the real need for further regulatory powers, including the proposed consumer protection agency in the financial reform bill.

Goldman Sachs – The Gift to Financial Reform that Keeps on Giving – As if the successful pillorying of Goldman Sachs by the SEC and the Senate as the poster child for financial reform was not enough, the Financial Crisis Inquiry Commission has again raised the specter of Goldman on the eve of the financial reform conference. That bipartisan commission investigating the U.S. financial crisis said Monday it issued a subpoena to Goldman Sachs Group Inc. for failing to provide information in a timely manner.  The FCIC said in a release that Goldman Sachs has failed to respond to a request for documents and interviews, and that “Failure to comply with a Commission request is viewed with the utmost seriousness, as the Commission will not be deterred from gettingdesired information.” A spokesman for Goldman said the firm has “been and continues to be committed to providing the FCIC with the information they have requested.”
General Motors Ventures, LLC – General Motors said Friday it has established General Motors Ventures, LLC, a subsidiary designed to help the company identify and develop technologies in the automotive/transportation sector. General Motors Ventures has been funded with an initial investment of $100 million, and is currently exploring equity investments in a number of auto-related technologies and business models, the company said. GM has shown progress, reporting income of $865 million for the first three months of the year and generated $1 billion in cash. GM also said that domestic sales of its four continuing brands jumped 32% in May. There have been no reports of the sources of that $100 million initial investment, or the position of Treasury on the venture.

Major Stock Indexes Close – June 7, 2010, 5:00 pm
% Change
DJIA* -1.16
Nasdaq* -2.04
S&P 500* -1.35
DJ Total Stock Market* -1.53
Russell 2000* -2.44
Global Dow* -2.01
Japan: Nikkei Average* -3.84
Stoxx Europe 50* -0.56
UK: FTSE 100* -1.11

Treasurys Price Change
2-Year Note 1/32
10-Year Note 17/32

Crude Oil -0.35
Gold, Aug 1.1
DJ Industrials 2
S&P 500 1.5