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The Biz Roundup March 26

Last week: Geithner the Goat. This week: Geithner the Bold. Next week: Geithner Blood-Axe.

The Obama administration wants to force a wide range of large financial institutions to hold more capital as part of a sweeping regulatory overhaul that Tim Geithner, US Treasury secretary, yesterday called the “new rules of the game”. . . .

“The most simple way to frame it is: capital, capital, capital,” said Mr Geithner. “That’s something we have to impose through standards set in regulation.” . . .

Most hedge funds, which have been subject to lighter regulation than larger institutions with a broader client base, would have to register with the Securities and Exchange Commission and provide data on their trades and debt levels to allow regulators to judge whether risks were building in the wider financial system.

Over-the-counter derivatives trading would be subject to more scrutiny and the administration would force trades to go via an approved central clearing house.

(“US reveals sweeping regulatory overhaul,” Financial Times, March 26) You’ve got to give Obama and Geithner this: when they get their game on, they get their game on. It’s such a relief to have a President and an Administration that actually listens to good advice.


In Dante’s Inferno, the usurers keep company with the sodomites.

Several efforts are underway. A “Cardholders Bill of Rights” has been introduced in the House of Representatives by Carolyn Maloney and in the Senate by Charles E. Schumer, both New York Democrats. Schumer, a frequent card issuer critic, said: “Bottom line, families are getting scammed by their credit card companies.”

The bill would clamp down on the card issuers’ ability to retroactively raise interest rates on existing balances and limit a number of other fees. It would make it harder for issuers to charge late fees and over-limit fees. . . .

Even without either bill passing, consumers who can hang on until July 2010 will get some relief, because the Federal Reserve has already approved rules that would eliminate many of these practices. The Schumer/Maloney legislation goes further than the Fed, but the legislators have also argued that consumers shouldn’t have to wait a year for these provisions to take effect. Their bill is written to go into effect three months after passage.

(“Credit cardholder rights and reforms,” Reuters, March 26) It’s Inferno XIII, by the way. Here’s what’s fair in a credit card bill of rights: upper limits on interest charges and late fees, at least thirty days net upon bill issuance, not allowing interest rate charges for lowered credit scores or being late on other bills (but allowing credit card companies to lower credit limits), and reasonable settlements in case of financial distress. What do I mean by the latter? If a credit card holder is in financial distress, credit card companies should be forced to settle on reasonable terms, which consist of the principal and a profitable interest rate, say six or seven percent per year. Many people in trouble on their credit cards have, in fact, paid off the principal two or three times over (at upwards of 24% interest rates with numerous and sundry crippling fees, card users can easily pay double or triple on their principal in just a year or two). These are people who have charged, say $2,000 on their card over five or six years, paid $4,000 during that period in principal, interest, and fees, and still have a $2,500 balance. I say that the $4,000 they’ve paid on the card discharges the $2,000 borrowed on the card. Period. Also, if card balances carry separate interest rates (for instance, cash advances often carry massively inflated interest rates), cardholders should be allow to choose, once the monthly minimum has been paid, the principal balance to pay down (the card company will typically pay down the lower interest payment first). In the absence of a cardholder’s selection, all principal payments should by default retire higher interest principal first. Finally, bankruptcy courts should be allowed the leeway to retire credit card debt in the same way any other debt can be settled by bankruptcy. Sound fair to you?


What happens when the news goes out of business?

New York Times Co. announced plans to cut pay for most employees through the end of the year and to lay off 100 employees, while Washington Post Co. said it is offering buyouts to an undisclosed number of staffers at its flagship newspaper.

(“New York Times Will Cut Salaries; Washington Post to Offer Buyouts,” Wall Street Journal, March 26) Okay, that’s three of the best and most storied newspapers in American history: the New York Times, The Washington Post, and The Boston Globe. Hope you don’t mind a future filled with Bill O’Reilly’s and Matt Drudge’s foaming at the mouth.

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