It brings the SEC back under the Freedom of Information (FOIA) Act after the Dodd-Frank financial reg bill provided them with an exemption.

ISSA INTRODUCES THE SEC FREEDOM OF INFORMATION RESTORATION ACT

(c) 2010 States News Service

The following information was released by the House Committee on Oversight & Government Reform:

Rep. Darrell Issa (R-CA), the Ranking Member of the Oversight and Government Reform Committee, today introduced H.R. 5924, the “SEC Freedom of Information Restoration Act” which will repeal section 9291 of the Dodd-Frank Wall Street Reform and Consumer Protection Act that allows the SEC to not “disclose records or information” that are typically subjects of Freedom of Information Act (FOIA) requests.

“Note this as just the latest example of Congress passing and the President signing legislation into law without fully understanding what’s in it,” Issa said. “Either that or the Administration knowingly orchestrated the inclusion of a provision that shields the SEC from the transparency and accountability this reform bill was supposed to represent. Regardless of intent, both Democrats and Republicans alike should agree that we cannot allow this regulatory body that failed to catch Allen Stanford’s fraud and Bernie Madoff’s ponzi scheme to operate in secrecy. Hopefully, we can partner together and swiftly pass legislation I am introducing today to repeal Section 9291 and ensure that the SEC will be held to the highest possible standard of accountability and transparency.”

The SEC Freedom of Information Restoration Act was co-sponsored by House Financial Services Committee Ranking Member Spencer Bachus (R-AL) as well as by Reps. Brian Bilbray (R-CA), Dan Burton (R-IN), Jason Chaffetz (R-UT), John Duncan (R-TN), Jeff Fortenberry (R-NE), Jim Jordan (R-OH), Blaine Luetkemeyer (R-MO), John Mica (R-FL), Patrick McHenry (R-NC), Aaron Schock (R-IL) and Bill Shuster (R-PA).

In this corner, those who care to maintain the incestuous Wall Street-Washington relationship which stifled real regulatory oversight and brought our nation to its knees. In that corner, those who care  for transparency, accountability, and integrity and have had enough of the bulls#&% from regulators who failed our nation miserably and say one thing but do another.

Let’s get rrrrrready to rrrrrrrrumble!!!

LD

Thanks again to the friends of Sense on Cents who brought this story to my attention. Please subscribe to all my work via e-mail, an RSS feed, on Twitter or Facebook. Thanks!!

July 30, 2010 – Inside the New GDP Numbers:

On July 30th the Bureau of Economic Analysis (‘BEA’) released its “advance” estimate of the annualized growth rate of the U.S. Gross Domestic Product (‘GDP’) during the 2nd quarter of 2010. Per their report, the GDP grew during the quarter at an annualized rate of 2.4%, down from 3.7% in the 1st quarter of 2010. Several points from the report merit comment:

► Readers familiar with prior GDP reports will be more surprised by the reported 1st quarter growth as by the new 2nd quarter number (which had been leaked by Mr. Bernanke last week), since only last month the Q1 of 2010 was supposedly growing at a 2.7% rate. Why did the Q1 number suddenly get altered upward by 1%? The BEA quietly revised the 1st quarter inventory adjustment up to a level that represents a 2.64% component within the revised 3.7% figure, with 1st quarter “real final sales of domestic product” now reported to be growing at a modestly improved 1.06% annualized clip, compared to the 0.9% number reported last month. In short, factories were piling on inventory at a substantially higher rate than previously thought, while the “real final sales” remained anemic.

► The 2.4% figure will garner all of the headlines, but the more important “real final sales of domestic product” continues to be weak, growing at a reported 1.3% annualized rate. The real cause for concern is that the reported inventory adjustments dropped from a 2.64% component in the revised 1st quarter to a 1.05% component during the 2nd quarter. If factories have begun to realize that end user demand remains anemic, the inventory adjustments could well go negative soon, pulling the reported total GDP down with it.

(Click on chart for fuller resolution)
► The BEA revised much more than the first quarter of 2010. They revised down 2009, 2008 and 2007 as well. Apparently the “Great Recession” has been worse than our government has previously reported. And the recovery’s brightest moment, Q4 2009, has been revised down from 5.6% to 5.0%. Similarly Q3 2009 dropped from 2.2% to 1.6%. And so on. The bottom of the recession was shifted back one quarter, with Q4 2008 now reported to have contracted at a -6.8% rate, revised down from the previously reported -5.4% rate. Most quarters of 2007, 2008 and 2009 have been revised down substantially, shifting the recession shown in the chart above back in time.

► The new GDP report shows that the current gap between the consumer demand that we measure and the BEA’s reported number continues to grow as factories build their inventories in anticipation of a strong recovery. If factories curb their enthusiasm during the third quarter, the BEA’s “advance” estimate for Q3 2010 might be brutal, just 4 days before the U.S. mid-term election.

► We understand that economists want to ultimately get the numbers right, even if it is three years after the fact. We applaud the BEA for their efforts. But we also understand people who are concerned about quiet governmental revisions to history.

Back to the real world: our Daily Growth Index has dropped to new recent lows, and it is now contracting at a -3.4% rate.

(Click on chart for fuller resolution)
This contraction rate puts the trailing ‘quarter’ nearly into the 5th percentile among all quarters since 1947, meaning that only about 1 in 20 quarters officially recorded by the BEA since then has been worse. Our “Contraction Watch” places this movement into the perspective of the 2006 and 2008 contractions:

(Click on chart for fuller resolution)
The 2010 contraction is now clearly worse than the “Great Recession” was at the same point in their respective time lines. And we don’t see a bottom forming yet.

LD

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1st quarter GDP was revised from its supposed final reading of +2.7% to a newly revised 3.7%!! So the economy was that much stronger in the 1st quarter than previously thought that the 2.4% 2nd quarter reading is actually not all that bad. Again, not so fast. Let’s continue to peel the onion a little further.  

Are economists and government analysts hoping we do not catch the fact that the 4th quarter 2009 GDP report of 5.6% was revised lower to 5%? The GDP report for all of 2009 was revised lower from -2.4% to -2.6%. The GDP report for all of 2008 was revised lower from a flat reading to -.4%.

How do we make sense on cents of all these numbers, and what do we think of the current report? The fact is when all the revisions are totaled, the economy was weaker then and is weaker now than what economists would have projected. Personal consumption specifically is slowing with downward revisions as well.

I am sure critics might say the report is not the contraction projected by Rick Davis of Consumer Metrics Institute, but I would caution people not to be quite so hasty. When so called final GDP reports from just one month prior are adjusted by a factor of close to 40% (the +2.7% to +3.7%), then we need to assume that future reports can and will be subject to similar fluctuations.

Are the powers that be playing with the books and numbers to hit the current targets? Do you trust we are receiving the real figures in a timely and accurate fashion?

I remain suspect. The fact is the economy continues to have ‘walking pneumonia’ and the consumer specifically has the worst case.

LD

Who is the SEC protecting?

LD

Why do I ask? Is America aware that the new Financial Regulatory Reform bill, recently passed by Congress and signed into law by President Obama, will effectively close the doors and shut the blinds at the SEC in terms of people being allowed to gain access to information? Why and how do situations like this happen? Let’s navigate.

Fox News highlighted this travesty yesterday in writing, SEC Says New Financial Regulation Law Exempts It from Public Disclosure:

So much for transparency.

Under a little-noticed provision of the recently passed financial-reform legislation, the Securities andExchange Commission no longer has to comply with virtually all requests for information releases from the public, including those filed under the Freedom of Information Act.

The law, signed last week by President Obama, exempts the SEC from disclosing records or information derived from “surveillance, risk assessments, or other regulatory and oversight activities.” Given that the SEC is a regulatory body, the provision covers almost every action by the agency, lawyers say. Congress and federal agencies can request information, but the public cannot.

That argument comes despite the President saying that one of the cornerstones of the sweeping new legislation was more transparent financial markets. Indeed, in touting the new law, Obama specifically said it would “increase transparency in financial dealings.”

The SEC cited the new law Tuesday in a FOIA action brought by FOX Business Network. Steven Mintz, founding partner of law firm Mintz & Gold LLC in New York, lamented what he described as “the backroom deal that was cut between Congress and the SEC to keep the  SEC’s failures secret. The only losers here are the American public.”

First off, if I am David Kotz, I would feel totally neutered by this development and I would immediately start looking for another job.

In regard to Mary Schapiro, my reference to her looking for employment is made in jest but the reason I make it is because I recall the seemingly very gratuitous comments she made in support of transparency and disclosure during her testimony provided to the Financial Crisis Inquiry Commission this past January.

After reading Ms. Schapiro’s testimony that day, I wrote “Mary Schapiro and Mark McGwire” and highlighted:

Schapiro makes reference to the SEC approximately 110 times in her opening statement. She references the NASD (FINRA) once, and that being a comment regarding the ‘uptick rule’ in 1994.

What about your past, Mary? You present yourself as a fan of greater transparency and disclosure. You reference disclosure or the need for greater disclosure approximately 25 times in your statement. You reference transparency or the need for greater transparency approximately 15 times in your statement.

Was Mary just paying the American public lip service? Was Obama doing the same? Were those in Congress also pandering to the American public? Has Wall Street just shut the door? American investors should be very concerned with this development.

Do you trust Wall Street? Do you trust our financial regulators to be able to properly oversee the financial industry? Why do I ask? For the very simple reason that none other than Harry Markopolos highlighted that the one real lesson more than any other that he learned throughout his ten plus year ordeal chasing down the Madoff scam was, “Don’t Trust the Government.”

While Wall Street will maintain that the SEC needs this new rule in place if it wants to collect information from the financial industry, for whom does the SEC work? Let’s listen to what others have to say:

“It allows the SEC to block the public’s access to virtually all SEC records,” said Gary Aguirre, a former SEC staff attorney-turned-whistleblower who had accused the agency of thwarting an investigation into hedge fund Pequot Asset Management in 2005. “It permits the SEC to promulgate its own rules and regulations regarding the disclosure of records without getting the approval of the Office of Management and Budget, which typically applies to all federal agencies.”

Aguirre used FOIA requests in his own lawsuit against the SEC, which the SEC settled this year by paying him $755,000. Aguirre, who was fired in September 2005, argued that supervisors at the SEC stymied an investigation of Pequot – a charge that prompted an investigation by the Senate Judiciary and Finance committees.

“It is hard to imagine how the bill could be more counterproductive,” Aguirre added.

Freedom of information is a core principle to truly good governance and a civil society. My initial gut instinct tells me that the industry and the SEC are aware that there are other frauds buried in the system, or there are other angles to the Madoff and Stanford scams, and the industry and regulators want to keep them buried.

If this regulation is allowed to stand, I believe it is a clear indication that the Wall Street-Washington incestuous relationship is alive and well, and truly getting stronger.

Without transparency, there can be no real accountability. Without accountability, there can be no real integrity.

What happened to our country? America deserves so much better.

LD

Thanks to the friends of Sense on Cents who brought this story to my attention. Please subscribe to all my work via e-mail, an RSS feed, on Twitter or Facebook. Thanks you.

Let’s learn more about former Bell, CA city manager Robert Rizzo. The Orange County Register recently ran a little expose on Mr. Rizzo, Check Out Home of $800,000-a-Year City Manager:

Robert Rizzo, the city manager of Bell, is taking a lot of heat after the Los Angeles Times reported he’s pulling down a whopping $787,637 a year — apparently the highest paycheck for a city manager in California.

The Bell City Council is reported to be seeking his ouster, according to the newspaper. (LD’s edit: He did resign!!) The L.A. District Attorney’s office is looking into the hefty salary.

It turns out that Rizzo lives in Huntington Beach. I couldn’t resist the question: What’s his house like?

Check it out. What do you think?  I was expecting something more lavish. Overlooking  the ocean or the harbor, perhaps. Or both.

Rizzo’s home  isn’t on the market, but Zillow “Zestimates’” it at $883,500 — pretty close to the clutch annual salary. The tax assessor valued the house at $903,000 last year, according to public records.
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By the way, Rizzo, 56, was arrested on suspicion of drunk driving near his house in March. A neighbor called police after Rizzo crashed into a mailbox.

“He is accused of being so stumbling drunk, the officer had to stop administering the field sobriety test,” said Susan Kang Schroeder, the Orange County District Attorney’s chief of staff.

She said Rizzo’s blood alcohol level was at .28, which is three and a half times the legal limit.

He pleaded not guilty and is awaiting trial on drunken driving charges.

But back to real estate: There’s another home on the street not too far from him that’s on the market right now with an asking price of $1,100,000.

I think it still has a mailbox.

Is it safe to assume that Rizzo was the highest paid city manager in the nation? Who knows in these days of municipal malfeasance. In regard to Mr. Rizzo’s job, “nice work, if you can get it!!”

You can’t make this stuff up, beyond that I will reserve comment.

LD

Simple business principle, correct? A basic, fundamental business tenet, right?

Well if the money it ‘takes’ is used to pay inordinate fines and penalties resulting from management’s willingness to jeopardize reputation and principle in pursuit of profit, what does that say about the business enterprise itself?

Will the $550 million fine recently imposed on Goldman Sachs fundamentally change the manner in which Goldman engages clients and operates its business? I have chuckled more than a few times upon reading that Goldman’s mortgage employees involved in the structuring, trading, and sales of the securities at the center of this entire debacle will have to undergo continuing education type classes. These classes are truly nothing more than a ‘check the box’ perfunctory exercise. Honestly, I would love to be a fly on the wall during these classes as I am sure some of the material covered and accompanying discussions would provide real comedic fodder.

The Financial Times addresses this topic in writing Slapped Wrist and Back to Business for Goldman:

…the penalty levied on Goldman, equivalent to a couple of weeks’ profits, is unlikely to have a deterrent effect on the rest of the financial industry.

Robert Khuzami, the SEC’s enforcement chief, called it “a stark lesson to Wall Street firms that no product is too complex, and no investor too sophisticated, to avoid a heavy price”. But the reality is that most banks would gladly give up less than a month’s profits to get rid of the regulators. As one banker told me last week: “It’s just the cost of doing business.”

After the most devastating crisis in generations, taxpayers and investors had the right to expect more than this business-as-usual kind of justice.

The cost of doing business? That is how the industry views this fine on Goldman Sachs? If so, I guess I could have entitled this commentary “If you’re not cheating, then you’re not really trying.”

Goldman Sachs continues to have a serious issue with its reputation. I highlighted this very point on CNBC last March (video clip here) and I reiterate it again today.

LD

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•    83 percent of all U.S. stocks are in the hands of 1 percent of the people.
•    61 percent of Americans “always or usually” live paycheck to paycheck, which was up from 49 percent in 2008 and 43 percent in 2007.
•    66 percent of the income growth between 2001 and 2007 went to the top 1% of all Americans.
•    36 percent of Americans say that they don’t contribute anything to retirement savings.
•    A staggering 43 percent of Americans have less than $10,000 saved up for retirement.
•    24 percent of American workers say that they have postponed their planned retirement age in the past year.
•    Over 1.4 million Americans filed for personal bankruptcy in 2009, which represented a 32 percent increase over 2008.
•    Only the top 5 percent of U.S. households have earned enough additional income to match the rise in housing costs since 1975.
•    For the first time in U.S. history, banks own a greater share of residential housing net worth in the United States than all individual Americans put together.
•    In 1950, the ratio of the average executive’s paycheck to the average worker’s paycheck was about 30 to 1. Since the year 2000, that ratio has exploded to between 300 to 500 to one.
•    As of 2007, the bottom 80 percent of American households held about 7% of the liquid financial assets.
•    The bottom 50 percent of income earners in the United States now collectively own less than 1 percent of the nation’s wealth.
•    Average Wall Street bonuses for 2009 were up 17 percent when compared with 2008.
•    In the United States, the average federal worker now earns 60% MORE than the average worker in the private sector.
•    The top 1 percent of U.S. households own nearly twice as much of America’s corporate wealth as they did just 15 years ago.
•    In America today, the average time needed to find a job has risen to a record 35.2 weeks.
•    More than 40 percent of Americans who actually are employed are now working in service jobs, which are often very low paying.
•  for the first time in U.S. history, more than 40 million Americans are on food stamps, and the U.S. Department of Agriculture projects that number will go up to 43 million Americans in 2011.
•    This is what American workers now must compete against: in China a garment worker makes approximately 86 cents an hour and in Cambodia a garment worker makes approximately 22 cents an hour.
•    Approximately 21 percent of all children in the United States are living below the poverty line in 2010 – the highest rate in 20 years.
•    Despite the financial crisis, the number of millionaires in the United States rose a whopping 16 percent to 7.8 million in 2009.
•    The top 10 percent of Americans now earn around 50 percent of our national income.

Sense on Cents comments:

1. Our national prosperity will not be sustained in which the very few control the vast majority of the wealth.

2. Is it any surprise why major corporations buy political and regulatory cover? The money spent on lobbying has obviously paid huge dividends.

3. Are those in lower income categories there because of the business practices of those in upper incomes? In my opinion, if we promote that reality (which many in our nation are wont to do), then I think we have lost our future. There remain real opportunities along with new avenues of growth in our nation. The spirit of competitiveness and drive, which has made our nation great in the past, is of paramount importance to drive our nation into the future. What is needed to spark that drive and competitiveness? An insatiable appetite for skills and education supported by the care and love of a strong family.

4. I strongly believe America needs to learn to live within, if not below, its means. Saving early and saving often needs to become a way of life. Allowing the savings to compound is the best path to wealth creation.

I am respectful of those with differences of opinion, but I believe this principle of thrift along with undying motivation, solid education, and strong love are the Sense on Cents keys for long term success.

I also recommend frequent visits to Sense on Cents!

LD

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Has our economy hit a soft patch? Is it declining? Are we rebounding from a recent downturn? Might we experience a real double dip?

The initial reading of 2nd quarter GDP is due this Friday. To say that it is highly anticipated would be a huge understatement. Consensus expectations for 2nd quarter GDP are running between +2.5% and +3%. Recall that the final 1st quarter report registered a +2.7% reading.

A Sense on Cents favorite has a decidedly different view of 2nd quarter economic activity and the subsequent GDP.

Rick Davis of Consumer Metrics Institute has not been bashful in projecting 2nd quarter GDP of -1.5% (with 3rd quarter GDP of -2%) based on his real-time analysis of discretionary consumer internet related purchases. This disparity of a full 4% between Rick’s 2nd quarter outlook and most economists is enormous. That said, Rick’s work has been remarkably accurate and consistent in projecting GDP a full 17-18 weeks prior to its release. What does Rick’s work show lately?

Are you sitting down? The picture is not pretty. The double dip and accompanying economic decline are getting steeper. Let’s navigate.

July 26, 2010 – Daily Growth Index Surpasses 3% Contraction Rate:

Since last week our Daily Growth Index has weakened further, surpassing a year-over-year contraction rate of 3%. This daily measurement of on-line consumer demand for discretionary durable goods has now dropped to the lowest level it has recorded since late November 2008:

Our Daily Growth Index reflects the strength of consumer demand over the trailing 91-day ‘quarter’, weighted according to the contribution that goods involved in on-line transactions make to the GDP (per the BEA’s NIPA tables). It is designed to serve as a proxy for a ‘real-time’ GDP, and it slipped into net contraction on January 15th, 2010. To put this decline in perspective we offer the following observations:

► The current contraction in consumer demand for discretionary durable goods has now extended for more than 6 months.

► The day to day level of the year-over-year contraction is now worse than a similar reading of the ‘Great Recession’ of 2008 was after 6 months.

► The amount of damage done to an economy by an economic slowdown can by quantified by multiplying the event’s average rate of contraction times the duration of the event. By that measure the 2010 contraction has now inflicted 43% as much pain on the economy during its first 6 months as the ‘Great Recession’ did during the first 6 months of that slowdown.

► Although this contraction has not yet reached the extreme contraction rates that were seen during 2008, after 6 months it has not yet formed a bottom. Furthermore, it is now likely to last longer than the 2008 event.

► In an even broader perspective, the current level of the Daily Growth Index over the trailing 91-day ‘quarter’ would put it among the lowest 6% of all calendar quarters of GDP growth since 1947. Only roughly 1 in 17 quarters of GDP activity have been worse.

► The duration of the current contraction event is becoming a real problem. Our trailing 183-day ‘two consecutive quarters’ growth index has dropped into the 5th percentile among similar two consecutive quarters of GDP ‘growth’ since 1947. This means that the trailing 6 months have been statistically worse than the trailing 3 months — less than one in twenty 6-month spans have been worse since the BEA began keeping quarterly records.

Rick’s work and his methodology do not waver. There is no fudging. There are no smoke and mirrors. There are no seasonal adjustments.

Who knows what the BEA might report on Friday and who knows how the market will react? Until proven wrong over a protracted period — and Rick has a fabulous 4-year track record – Sense on Cents is staying on the Consumer Metrics Institute horse.

Navigate accordingly.

LD

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Did you inadvertently hit your keyboard and Sense on Cents is now being delivered in German?  No, don’t worry about that. Although I have always had a strong interest in the German language and history, my language skills have faded over the years. That said, I think readers should be able to figure out the key German word in my title. (I hope my grammar is correct!!)

In light of the European Bank Stress Tests released on Friday, I am compelled to highlight the fact that for a number of German banks there was “No Transparency with These Tests.” How so? The Financial Times reports, Germany Accused of Reneging on Bank Tests:

European regulators have accused Germany and its banks of reneging on a deal to publish full details of sovereign debt holdings, as part of the four-month-long stress test exercise of the country’s banking sector.

In an interview with the Financial Times, Arnoud Vossen, secretary-general of the Committee of European Banking Supervisors, the pan-European banks regulator, said: “We agreed with all supervisory authorities and with the banks in the exercise that there would be a bank-by-bank disclosure of sovereign risks.”

On Friday, CEBS published the results of its stress test exercise, showing seven of the 91 banks tested across the 27 countries of the European Union failed to achieve a tier one capital ratio of 6 per cent once their balance sheets were exposed to a series of macroeconomic scenarios for 2010 and 2011.

The tests – designed to restore nervous markets’ faith in European banks, shaken by the near-default of Greece this year – were supposed to be accompanied by full disclosure of each bank’s sovereign debt holdings.

But six of the 14 German banks tested – Deutsche Bank, Postbank, Hypo Real Estate, mutual groups DZ and WGZ, and Landesbank Berlin – did not publish the expected detailed breakdown of sovereign debt holdings, although Postbank disclosed some information on Sunday. Every other European bank, bar Greece’s ATEbank, which failed the test, complied with the disclosure requirement.

Analysts said the German banks’ non-compliance would fuel suspicion they had something to hide, and risked further undermining faith in the whole stress test exercise, already criticised for its benign scenarios.

Are we supposed to blindly trust these German banks at this critical point in navigating the economic landscape? Are you kidding me? No! True sense on cents compels us to trust, BUT verify. Without transparency, can there be real truth and integrity in the process AND the results? Nein!!

LD

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