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With Big Banks, 'If You Ain't Cheating, You Ain't Trying'

July 10, 2015 in Economics

By Mark A. Calabria

Mark A. Calabria

With the recent admission of criminal guilt by five major banks in fixing foreign exchange rates, Attorney General Loretta Lynch recorded some progress in how law enforcers respond to Wall Street misconduct. JPMorgan, Citigroup, RBS, Barclays and UBS admit they conspired to violate the Sherman Antitrust Act in fixing foreign exchange rates. These judicial actions accord with legal procedure. A federal court and judge will rule on them. They are not backroom deals dressed up in the term “deferred prosecution agreement” (DPA), which has been the unfortunate norm until now. Ideally, the Department of Justice (DOJ) will no longer use these DPAs.

Even with Lynch’s judicial progress, however, she can hardly claim that she has proven that no bank is “too big to jail.” These banks are not in “jail” in any sense of the word. Business continues, even at their foreign exchange desks. The collective $6 billion in criminal and regulatory fines meted out against the five banks are paid by shareholders, not the responsible bankers or their supervisors. And worse, the message remains: Cheating pays and otherwise honest bankers must either cheat to compete, or lose. As one of the foreign exchange traders encouraged a fellow conspirator, “If you ain’t cheating, you ain’t trying.”

As for progress, let us hope that these foreign exchange criminal pleas signal the burial of the DPA.

Until now, the DOJ settled fraud claims against major U.S. banks with DPAs. The misconduct included the mortgage fraud associated with the financial crash and recession that left millions without their jobs, homes and life savings. A DPA is a private agreement between the DOJ and the bank in which the government describes the criminal activity, exacts a fine and then agrees not to bring this case to court for a period of time, such as five years.

Why such a light touch? Why a DPA?

The real reason may be that the DOJ reckoned that a DPA is a better bet. After all, in such major cases against a giant bank, government attorneys will square off against a phalanx of high-powered, high-paid bank lawyers, many of whom were recently their bosses at the DOJ. The case will take tie up time, money and personnel. And at the end, the DOJ may well lose. A DPA is much easier. The bankers themselves conduct much of the investigation. Then, the DOJ can stage a press conference. It may not be …read more

Source: OP-EDS

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The ACA Is Dead — Long Live Obamacare

July 10, 2015 in Economics

By Michael F. Cannon

Michael F. Cannon

Obamacare supporters are mistaken if they think the Supreme Court’s King v. Burwell ruling settles the issue. Even in defeat, King threatens Obamacare’s survival, because it exposes Obamacare as an illegitimate law.

Say what you will about the Affordable Care Act. Democrats passed it in haste. In desperation. Without knowing what was in it. With no bipartisan support. By one vote. In the dead of night. Over public opposition. Using lies. With disdain for “the stupidity of the American voter.” Still, barring some constitutional defect, the ACA as enacted was the law of the land.

Yet President Obama and the Supreme Court now have amended the ACA to the point where it has been transformed into something no Congress ever enacted — indeed that no Congress ever had the votes to enact. The executive and the judiciary have effectively repealed the ACA and replaced it with “Obamacare,” which enjoys no such legitimacy.

Having been rewritten over and over by the president and the Supreme Court rather than Congress, Obamacare cannot claim to be a legitimate law.”

Before the ink was dry on the Affordable Care Act, President Obama began amending it in dozens of ways that only Congress is authorized to do. Simply usurping Congress’ legislative powers would have been bad enough. But Obama’s changes were designed to prevent Congress from legislating.

The ACA immediately threw members of Congress out of their health plans, effectively cutting their pay by $10,000. Obamacare, in contrast, gives Congress a special exemption that lets them keep their health plans and slips $10,000 per year into the pockets of lawmakers, without the constitutional hassles of an act of Congress and an intervening election.

The ACA required many employers to buy more robust health plans six months after enactment. Obamacare, on the other hand, offered waivers to politically connected employers and union plans, lest they lobby Congress for relief.

The ACA requires large employers to buy coverage for their workers beginning in 2014. Obamacare, on the other hand, delays that mandate by up to two years, lest a backlash give rise to legislation. (Even Obamacare’s supporters had trouble stomaching that one.)

The ACA threw millions out of their health plans in 2014. But Obamacare allows people to keep the very health plans Congress outlawed. Obama even threatened to veto bipartisan legislation that would have done the same thing, but legally.

Congress forgot to appropriate $135 billion for cost-sharing …read more

Source: OP-EDS