Powell's Mouth

March 22, 2023 at 8:09 pm

Stocks were up after the Federal Reserve issued its statement Wednesday at 2 p.m. announcing a decision to raise its interest rate target by .25 of a percentage point; the markets only sank after the Federal Reserve chairman, Jerome Powell, started talking at the press conference he gave starting at 2:30 p.m. Maybe pay more attention to what the Federal Reserve did and said in its unanimously approved statement than to Powell's spin? Or maybe Powell should skip the press conference next time.

I went for a walk afterward and saw a neighbor unloading a bag of golf clubs from the trunk of his car. It reminded me of the 3-6-3 rule of banking back in the pre-deregulation days—take depositors' money at 3 percent, lend it out at 6 percent, and be at the tee at 3 p.m. Those days are over, and I wouldn't want them back, but the idea of going golfing instead of hanging on every word from Powell has a certain wisdom to it, especially for long-term investors.

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Pervasive Bearishness Looks To Be Unwarranted

March 20, 2023 at 2:05 pm

"Pervasive Bearishness Looks To Be Unwarranted" is the headline over my latest New York Sun column, which went up online Sunday night. Check it out if you are interested in the banks, interest rates, and the U.S. stock market.

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Up, Up, and Away

March 19, 2023 at 10:02 am

"If you're ever tempted to imagine that another four-year term of Joe Biden would be okay, look up," I write in a recent column. Please check out the full column at the Las Vegas Review-Journal ("Up, up and away"), Newsmax ("4 More Years of Biden? Everything Will Be Up, Except Prosperity"), and the New York Sun ("Lulled by Biden? Look Up.").

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Section 606 of New York State Banking Law

March 14, 2023 at 8:19 am

"Where does New York State get the power to seize Signature Bank?" I ask in a New York Sun column. "Why would anyone invest in a New York bank knowing that regulators could move in and take it away?" Please read the column.

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Lawrence White on Silicon Valley Bank

March 13, 2023 at 10:18 am

Sunday, as I was preparing to write about the Silicon Valley Bank situation, I sent an email to Professor Lawrence H. White of George Mason University, who really knows this stuff. I invited him to respond to some of the points made by Bill Ackman, who was arguing for a government rescue of depositors.

White very generously sent along some slides he uses in his undergraduate course on money and banking; they are embedded below. White also responded to Ackman's argument that understanding a bank's riskiness or safety was too much to ask of depositors. "Nobody is asking households with insured deposits to shop around for a safe bank," White wrote. "With deposits insured up to $250,000, the current system is only asking people with uninsured deposits, like corporations with payrolls to meet, to hire a professional money manager who can evaluate the safety of banks versus other places to park large sums of cash. That doesn't seem unrealistic."

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Barney Frank's Bank Tanks

March 12, 2023 at 8:31 pm

Until very recently, a director of Signature Bank, which the New York State Department of Financial Services closed today, was Barney Frank, the former congressman from Massachusetts who is the "Frank" of the Dodd-Frank banking reform law. Frank, who is 82 years old, earned $303,267 in compensation in 2022 from the bank for his work as a director, according to the 2023 proxy statement. He earned $398,940 in 2021, and $158,020 in 2020, and $365,850 in 2019, and $413,750 in 2018, and $409,200 in 2017, and $393,750 in 2016, and $26,000 in 2015. For some of the time, he was on the risk committee. That is a total of $2,468,777. Perhaps he had some of it in Signature Bank stock that is now worth much less than it was before. Or perhaps he got out just in time. Either way, it is something for the former chairman of the House Financial Services Committee and the sponsor of the Dodd-Frank Act to have been paid nearly two and a half million dollars to serve as an "independent" director of a bank that has now been closed by the government.

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Silicon Valley Bank

March 12, 2023 at 12:07 pm

What should the government do about Silicon Valley Bank?

The answers fall into two general categories: "rescue" and "let the market work."

The "rescue" argument was laid out by Bill Ackman in a Saturday morning tweet. Basically, he says, the government stepping in to fully protect depositors over and above the $250,000 FDIC limit would prevent contagion. Failure to act along those lines will result in additional bank failures as depositors at other mid-sized banks move their money out of those banks and into money market funds, Treasuries, or presumably too-big-too-fail institutions like Citi or JPMorgan Chase. Ackman argues that asking depositors to assess bank safety is unrealistic: "I am a pretty sophisticated financial analyst and I find most banks to be a black box."

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Speaker McCarthy, Trump Push "Parents' Rights"

March 9, 2023 at 9:22 am

The speaker of the House, Kevin McCarthy, and a candidate for president, Donald Trump, are both making a big push on "parents' rights." I have a report on this over at Education Next under the headline "Speaker McCarthy, Trump Push 'Parents' Rights.'" The subheadline is "A right to direct election of school principals? To twice-a-year parent-teacher conferences?" If you are interested, please check out the full article by clicking the hyperlinked headline.

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More Religious Participation, Fewer Deaths of Despair

February 28, 2023 at 8:44 pm

The Economist has a pretty good writeup of a recent National Bureau of Economic Research working paper. Economist headline: "Places with high religious participation have fewer deaths of despair." Lots of good figures to go with it, too. The paper is by scholars at Notre Dame, Wellesley, and The Ohio State University.

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Tax-Cutting Governor Maura Healey

February 28, 2023 at 8:34 am

The new governor of Massachusetts, Maura Healey, a Democrat, unveiled her budget plan this week and it includes some welcome tax relief. From the press release:

To drive Massachusetts' economic competitiveness, the package proposes reforms to two taxes in which the state is currently an outlier. It would reduce the short-term capital gains tax from 12 percent to 5 percent. Wisconsin and South Carolina are currently the only two other states that tax short-term capital gains at a higher rate than long-term capital gains, as Massachusetts currently does. This reform would have a gross revenue impact of $117 million in FY24, but would be budget-neutral due to excess capital gains not being used to support FY24 spending.

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Energy Department, FBI Back Lab-Leak Theory

February 26, 2023 at 2:11 pm

The Energy Department and the FBI both support the lab-leak theory of the origin of the Covid-19 virus, the Wall Street Journal reports in a scoop.

As I wrote last year: "The Chinese Communist Party clearly doesn't want the information out there....the Democrats generally seem content to leave it at blaming it on President Trump."

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Buffett Berkshire Hathaway Annual Letter for 2022

February 26, 2023 at 1:48 pm

Warren Buffett released his annual shareholder letter for Berkshire Hathaway this weekend. It's shorter and less ambitious than it has been in past years, perhaps because Buffett, at age 92, is slowing down a bit. It's worth a look nonetheless for at least two policy-relevant pieces.

The first is a discussion of stock buybacks, which the New York Times Company has an editorial position in favor of making illegal even as the Times Company is engaged in buying back its own stock. In his State of the Union address, President Biden proposed to quadruple the tax on stock buybacks, a tax that didn't even exist until Biden and Democrats in Congress imposed it.

Here is how Buffett puts it:

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Maimonides Salaries

February 26, 2023 at 9:16 am

A New York Times news article about Maimonides Medical Center in Brooklyn reports that the hospital's chief executive, Ken Gibbs, "earned $3.2 million in 2020...Mr. Gibbs' 2020 earnings included a one-time payout; he earned $1.8 million in 2021 and 2022, the hospital said." The same article includes a reference to "Dr. Jacob Shani, the chairman of the hospital's heart and vascular center and its highest paid employee, with an annual salary of $3.5 million in 2020."

The same article reports that the hospital has "weak finances," including "a $145 million operational deficit in 2021." It says "Maimonides is a safety-net hospital that mostly treats people with Medicare or Medicaid."

It's an interesting business where a money-losing, nonprofit government contractor can pay out compensation at those levels.

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Tom Donahue, Morris Amitay

February 22, 2023 at 8:03 am

Two Democrats who helped win the Cold War and support an active, pro-freedom American foreign policy, Tom Donahue and Morris Amitay, are the subject of my column this week. It appears in the New York Sun under the headline, "Celebrating Two Heroes of the Cold War Who Freed Millions from Communism."

I didn't mention it in the column, but I came to know both these men while serving as the Washington correspondent of the Forward from 1995 to 1997. They were both extremely gracious and generous with their time and help, which is noteworthy given they were both senior figures at the time and I was a young journalist new to Washington and to the labor and foreign policy beats.

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New York Times Stock Buyback

February 9, 2023 at 10:18 am

A news article in today's New York Times reports, "The Times announced on Wednesday that its board had approved a new $250 million Class A share repurchase program. The board approved a separate $150 million in stock buybacks last February. So far, the company has repurchased $112 million in shares."

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