I jumped the gun last week. “Thanks to Dodd-Frank, the Financial Reform bill,” I wrote, “your broker now has – for the first time in history – a personal fiduciary responsibility to act in your best interest.”
Don Culp: “Brokers DO NOT currently have fiduciary responsibility under Dodd-Frank. The issue has been pushed off to the SEC to study and receive comment on over the next six months.”
☞ Don’s right. But this is a high priority for S.E.C. Chair Mary Shapiro, so – despite the delay – it is highly likely to get done. Likewise, the second piece of this – that brokerage firms will no longer be able to force aggrieved customers into binding arbitration (in which, as I suggested, the firms have an inherent advantage). That, too, goes to the S.E.C., which Dodd-Frank gives the authority but not the mandate to fix.
Jim Busek: “Morrie’s passing reminds me of one of my all-time favorite Esquire cartoons: An obvious American tourist – Hawaiian shirt, pot belly, camera around his neck – is in some sort of Mideast bazaar. The illustration shows him leaned into a kiosk, clutching the native vendor by the neck shouting: ‘Cheese Doodles! Cheese Doodles! For God’s sake man, don’t you know what Cheese Doodles are?’ ”
GLDD, our dredging company, issued a strong earnings report yesterday but was cautious looking forward (“we think it is prudent to moderate expectations for the second half versus the first six months”) and the stock dropped more than 10% at one point, largely recovering in after-hours trading. There is very little flash in dredging, but something kind of inexorable about sedimentation.
SECRETARY GEITHNER ON THE ECONOMY
It’s a sober assessment, but upbeat. In part:
New York Times
August 3, 2010
By Timothy F. Geithner
The devastation wrought by the great recession is still all too real for millions of Americans who lost their jobs, businesses and homes. The scars of the crisis are fresh, and every new economic report brings another wave of anxiety. That uncertainty is understandable, but a review of recent data on the American economy shows that we are on a path back to growth.
. . . last week’s data on economic growth show that large parts of the private sector continue to strengthen. Business investment and consumption — the two keys to private demand — are getting stronger, better than last year and better than last quarter. Uncertainty is still inhibiting investment, but business capital spending increased at a solid annual rate of about 17 percent.
. . . As the economists Ken Rogoff and Carmen Reinhart have written, recoveries that follow financial crises are typically a hard climb. That is reality. The process of repair means economic growth will come slower than we would like. But despite these challenges, there is good news to report:
• Exports are booming because American companies are very competitive and lead the world in many high-tech industries.
• Private job growth has returned — not as fast as we would like, but at an earlier stage of this recovery than in the last two recoveries. Manufacturing has generated 136,000 new jobs in the past six months.
• Businesses have repaired their balance sheets and are now in a strong financial position to reinvest and grow.
• American families are saving more, paying down their debt and borrowing more responsibly. This has been a necessary adjustment because the borrow-and-spend path we were on wasn’t sustainable.
• The auto industry is coming back, and the Big Three — Chrysler, Ford and General Motors — are now leaner, generating profits despite lower annual sales.
• Major banks, forced by the stress tests to raise capital and open their books, are stronger and more competitive. Now, as businesses expand again, our banks are better positioned to finance growth.
• The government’s investment in banks has already earned more than $20 billion in profits for taxpayers, and the TARP program will be out of business earlier than expected — and costing nearly a quarter of a trillion dollars less than projected last year.
We all understand and appreciate that these signs of strength in parts of the economy are cold comfort to those Americans still looking for work and to those industries, like construction, hit hardest by the crisis. But these economic measures, nonetheless, do represent an encouraging turnaround from the frightening future we faced just 18 months ago.
. . . According to a report released last week by Alan Blinder and Mark Zandi, advisers to President Bill Clinton and Senator John McCain, respectively, the combined actions since the fall of 2007 of the Federal Reserve, the White House and Congress helped save 8.5 million jobs and increased gross domestic product by 6.5 percent relative to what would have happened had we done nothing. The study showed that government action delivered a powerful bang for the buck, and that the bank rescue on its own will turn a profit for taxpayers.
. . . There are urgent tasks to be undertaken to reinforce the recovery, and Congress should move now to help small business, to assist states in keeping teachers in the classroom, to increase investments in public infrastructure, to promote clean energy and to increase exports. And while making smart, targeted investments in our future, we must also cut the deficit over the next few years and make sure that America once again lives within its means.
These are considerable challenges, but we are in a much stronger position to face them today than when President Obama took office. By taking aggressive action to fix the financial system, reduce growth in health care costs and improve education, we have put the American economy on a firmer foundation for future growth.
And as the president said last week, no one should bet against the American worker, American business and American ingenuity.
We suffered a terrible blow, but we are coming back.
Quote of the Day
When it comes to banking and money, the four most dangerous words in the world are, 'This time, it's different.'~Allan Sloan, Newsweek, March 13, 1995, on repeal of Glass-Steagall
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