Tuesday, March 13, 2018

HEIDI FISKE | China in Mexico

Xi Jinping Casts a Ballot
Over the weekend, the final step in Xi Jinping’s grab for life-long power in China was completed when the National People’s Congress voted 2,959 to 2 (there were three abstentions) to abolish term limits for his job as president.

Xi also heads the military and the Communist Party.

As China ramps up its presence in Latin America, this authoritarian spirit could become a problem for Mexico, especially if it opts to depend on Chinese infrastructure projects.

Does this sound unlikely? Well, consider this: http://bit.ly/2Dm48Cf.

TRUMP | Changes His Mind about Gun Safety

Today we learn the president has met with the NRA and has changed his mind about plans to make schools safe from guns. http://nyti.ms/2HriweM

Our president is behaving like the monarch in The Little Prince. 

He orders people to do something. Then, if there is any problem from His Base, he changes his mind and orders people to do the opposite.
"It is contrary to etiquette to yawn in the presence of a king," the monarch said to the little prince. "I forbid you to do so."
"I can't help it. I can't stop myself," replied the little prince, thoroughly embarrassed. "I have come on a long journey, and I have had no sleep . . ."
"Ah, then," the king said. "I order you to yawn.” http://bit.ly/2pbbHGV
Luckily, this is not a monarchy. 

Thursday, March 8, 2018

TECH JOBS | Is Tech an Ally or Threat to Wall Street? (A Dialogue)

Tech Jobs vs. Wall Street Jobs (The American Banker, One Year Ago, March 16, 2017)
One year ago the American Banker displayed the chart at left, suggesting that tech jobs were in competition with many Wall Street jobs.  

Greg David recently in his Crain's blog expressed appreciation for the growth of tech jobs in New York City, as a diversification of highly paid employment within NYC. 

The following unedited (except for formatting) dialogue on this topic between Edward Greenberg, an attorney in New York City, and me were posted as comments on the Crain's blog and are re-posted here by permission of Mr. Greenberg. 

An underlying question is whether tech jobs are substitutes for Wall Street jobs, as indicated in the chart above, or are complementary.

Will more use of technology in the financial sector
  • Strengthen Wall Street? 
  • Hollow out its employment base?
  • Permit financial jobs to migrate to other cities?
Edward C. Greenberg 
Response to Greg David, March 1, 2018

Very nice news but for context – there are 80,000 (2/3 of NYC's) such "defined" jobs in Los Angeles, a city with less than 1/2 the population of NYC. The population of the LA metro area is 13.5 million and NYC's is 20.3 million.

LA is not considered a "tech hub" like Northern Ca or even Boston. So while the number of tech jobs in NYC sounds like, and is in fact, good news, it is being employed by our politicos for their own PR purposes. By NOT comparing these figures to other major cities the figures become distorted and not indicative of anything that our politicos can take credit for.

Forbes does not list NYC in its top 10 cities for tech job growth. It does list cities like San Diego, Raleigh, Nashville (metro area) and Jacksonville, FL (where there has been a 72.4% increase in tech jobs from 2001 to 2017.

Every new job in NYC is good news but other cities are doing better in attracting these type businesses and jobs. If NYC "rests on its fake laurels" it will continue to fall behind other cities in attracting these jobs.

The author is spot on regarding the amorphous "definitions" employed to define tech sector and "eco-system" jobs. A coffee shop across the street from Google HQ which serves Google employees is clearly part of the tech "eco-system".

John Tepper Marlin
Response to Edward C. GreenbergMarch 1, 2018.

I agree that understanding the significance of the tech sector in New York City requires comparing New York with other cities. The New York City Comptroller's Office did this in 1999, just before the way the job numbers are aggregated was changed.

In addition, the idea that Wall Street should be pitted against the tech sector as a source of jobs misses a big part of the story, which is Wall Street's need for tech support and tech's dependence on Wall Street

An MIT Professor solemnly told me 20 years ago that New York City could never catch up with Boston as a source of startups servicing financial institutions. MIT was developing “aggregators” that would, he said, soon be collecting financial information from individuals and assembling them in one place, across platforms. That process is taking longer than he predicted.

Meanwhile, New York City financial technology jobs have been growing because Wall Street wants these vendors close by. Those high-frequency traders have to be nanoseconds from their platforms.

Wall Street and NYC tech workers stand or fall together. NYC's preeminence in the financial world of the next decade depends on both.

The 1999 NYC Comptroller's report on the growth of tech jobs 
noted the difference between counting tech occupations and tech-oriented companies. The data-counting problems are too great to opt for one or the other. The problem is with the aggregation process. We depend on the BLS for data, and the BLS makes it hard to count payroll local jobs by claiming that disclosing information would allow researchers to get down to the company level and discover proprietary information.

It is sad for that reason that BLS moved many research functions out of New York City to Boston (and Philadelphia). NYC's 1911 Triangle Fire gave rise to the Labor Department and New York City was one of the earliest research centers on job data. Senator Ted Kennedy was reportedly active in promoting the move of BLS staff positions moved from New York to Boston.

A good understanding of how financial and technology jobs interface is important to New York City. It is also important to the country. We need more and better research on what is happening to jobs in the intersection between finance and technology.

Edward C. Greenberg 

Response to John Tepper MarlinMarch 1, 2018

Agreed – with one key addition.

Lots of traditional Wall St, banking and financial service jobs moved from NYC to NJ, FL, S. Dakota and Utah. The concept of "geographic proximity" is rapidly becoming an anachronism. The notion that an NYC company would have "back office personnel" 500-1,500 miles from Gotham was unthinkable 25 years ago. Today it is the norm.

The Internet did not come into meaningful public use until the 1980's; computer driven trading came in about the same time. Pick up a WSJ, NYT, Forbes, Fortune or The Economist from the era. Try to find one that remotely predicts the manners of business and locations of major insurers, banks and stock trading which would exist in 2018.

Geography as a factor will soon be entirely irrelevant. Gothamites still don't believe the number of companies and jobs in these sectors moving to or already located in FL, TX and various other flyover states most of which New Yorkers have never set foot in. Did your buddy use the term "near shoring" in 1999? Betcha a beer he didn't.

John Tepper Marlin 
Response to Edward C. Greenberg, March 7, 2018

Yes, geography is less relevant than it used to be. But no, geography will never be irrelevant, even to technology. The way in which it is relevant is changing.

One of the strengths of the United States is that we have many strong population centers that are highly interconnected. New York City's greatest strength has been its ability to lead the country in finance and communications. This in turn pulled in many corporate HQs.

Financial institutions have always used every means of communication they could. Before the telegraph, they used carrier pigeons as well as horseback couriers.

Today, I'm not in New York City (I'm away from the nasty Northeastern weather) but I feel as much in touch as if I owned a huge flock of carrier pigeons or a large staff of messengers operating on routes dotted by inns with stables.

I still rely heavily on face-to-face meetings – especially when it comes to meeting new people. Personal contact may actually be more likely to mislead than seeing what someone writes, but some part of us wants to see people talk.

What is changing since 1999 is that many businesses have learned how to reduce the need for continuous face-to-face contact. Work at home, control from a remote location, and conference calling are all functioning more widely and reliably than they first did.

The natural duopoly of newspapers and bankers, and their centralization in financial centers (my great-grandfather edited Holland's then-greatest newspaper in Amsterdam, founded on family links among bankers and newspapers), survived the introduction of the telegraph and the radio. It has also survived the creation of the Internet.

We have seen recent stories about Silicon Valley's entrepreneurs seeking new locations because of high costs and inefficiencies, and the growth of new tech centers in the Midwest.

This decentralization is a good thing for the United States, even if it creates challenges for New York City. Instant reporting and high-frequency and program-driven trading is vulnerable to cyber-malfunctions, accidents or cyberattacks. After 9/11, companies built huge physical back-office locations in readiness for a need to move. It made sense to decentralize.

Geography is still relevant because cyberspace still depends on interruptible physical computers and power generation.

Edward C. Greenberg 

Response to John Tepper Marlin, March 7, 2018

You make some excellent points but if history teaches us anything it is that centers of power and commerce change for good or ill and many become irrelevant or disappear entirely.

Nobody predicted the Detroit of 2008 in 1960 or 1970. The notion that Pittsburgh would not be a steel producer by the late 20th century was predicted by no one in the years after the war. There was no mention of the Internet in any business or general circulation publication in 1960. Buffalo and Newark have 1/2 the populations today that they had in 1960. Who predicted 30 years ago that Jacksonville, Fl, Utah, S. Dakota and other places would be centers of banking, finance, insurance and credit transactions?

The ten most populous American Cities in 1960 were:

1 New York, New York 7,781,984.
2 Chicago, Illinois 3,550,404.
3 Los Angeles, California 2,479,015.
4 Philadelphia, Pennsylvania 2,002,512.
5 Detroit, Michigan 1,670,144.
6 Houston, Texas 938,219.
7 Baltimore, Maryland 929,024.
8 Cleveland, Ohio 876,050.
9 Washington, District of Columbia 783,956.
10 St. Louis 750,000.

Nobody predicted that by 2010 the above list would morph into:
1 New York City, New York 8,175,133.
2 Los Angeles, California 3,792,621.
3 Chicago, Illinois 2,695,598.
4 Houston, Texas 2,099,451.
5 Philadelphia, Pennsylvania 1,526,006.
6 Phoenix, Arizona 1,445,632.
7 San Antonio, Texas 1,327,407.
8 San Diego, California 1,307,402.
9 Dallas, Texas 1,197,816.
10 San Jose, California 945,942.

Cleveland, Baltimore, Detroit, St. Louis “disappeared". Jacksonville, Fl had a population of 201,000 in 1960 and 907,000 in 2017. Not even the town fathers saw that coming and as a result the city has been on a years-long road building project to handle the daily commuters.

Predictions of future development of population movements and industries in the US have been historically wrong. No expert, urban planner, or politician foresaw the dominance of e commerce, the existence of Facebook, Apple, Amazon or the abundance of indigenous oil/natural gas during the gas crisis of the 1970s. The Dec. 3, 1973, cover of Time Magazine, "The Big Freeze", featured a lengthy scientific article about the earth's temperature decreasing and the coming of a new ice age. This expert prediction came before the catalytic converter was required for autos, which were spewing exhaust 5 times dirtier than current cars which burn cleaner fuels. Trucks were then burning dirty diesel, and there was extensive burning of coal to generate electricity.

What odds do you think you would have received by making a bet in 1970 that in 2018, the fastest-growing states in America would be in order: Idaho, NV, Utah, Washington, FL, AZ, TX, CO, Oregon and S. Carolina (10th). Six of those states are clearly not in the sunbelt.

So, I understand your well-made points but society and business moves so fast in the 21st century that the day when geography plays little to no role in most (not all) business is already upon us. One need only visit or do business with companies in places like Miami, San Diego any major TX city and a few dozen others to see how fast NYC is becoming old by comparison. If NYC's mass transit system continues to disintegrate and employ equipment nearly 100 years old, businesses and residents will accelerate the on going trend to depart. Daily 2-hour commutes have become unnecessary and unacceptable to workers, entrepreneurs and others who have options to avoid the cost and misery of driving, buses, trains and/or subways.

The number of businesses, artisans and professionals who have left NYC and have benefited economically stands as daily proof that while in the real estate business location is everything, in the business and artistic worlds.... not so much anymore.

Wednesday, March 7, 2018

NAZIS ELECTED | Germany Votes in Führer, 85 Years Ago

Elections to the Reischstag, by party, 1928-1933. In 1929 the Nazis won only 
12 seats in the Reichstag. The worldwide crash in stock market prices and
high unemployment drove seats up to 108 in 1930, 230 in 1932 and 288 in 
March 1933.  Later in 1933, all parties other than the Nazis were banned.
March 5, 2018 — This date in 1933 (a Sunday then, a Monday this year) was the day after FDR took the reins as President of the United States.

It was also, chillingly, the day German voters elected 288 Nazi Party members to the Weimar Republic's parliament, the Reischstag.

Nazi Party leader Adolf Hitler had been appointed Reich Chancellor by German President Paul von Hindenburg, the formal head of the German Government since 1925. An aristocrat (the "von" prefix signifies in Germany that someone has the title of, at least, Baron), von Hindenburg did not think much of upstart Adolf Hitler. However, he was at his wit's end dealing with Hitler's appeal to a totally demoralized German people. Hindenburg hoped to establish control over the Nazis by bringing Hitler into his tent.

Hitler swiftly trashed the tent...

He laid out his 1933 campaign early in the year, in a radio Appeal to the German People on February 1, which he reportedly wrote mostly himself:
  • He accused the Weimar coalition that ruled the country under the Social Democrats since Nov. 9, 1918, of generating 14 years of "Marxist" rule.
  • He said that unless the German People reacted against this "Bolshevism", there would be anarchy. 
  • Finally, he said that Germany's fate was in the hands of Almighty God and the German voters.
Hitler's Appeal seems contemporary in the buttons he pressed. His Appeal includes these sentiments:
    Our inheritance [from the Weimar Republic] is appalling. The task before us is the most difficult facing German statesmen in living memory. But we all have unbounded confidence, for we believe in our nation and in its eternal values. Farmers, workers, and the middle class must unite to contribute the bricks with which to build the new Reich. The National [Nazi] Government will regard as its first and supreme task to restore to the German people unity of mind and will. It will preserve and defend the foundations on which the strength of our nation rests. It will take under its firm protection Christianity as the basis of our morality, and the family as the nucleus of our nation and our state. Standing above estates and classes, it will bring back to our people the consciousness of its racial and political unity and the obligations arising therefrom. It wishes to base the education of German youth on respect for our great past and pride in our old traditions. It will therefore declare merciless war on spiritual, political and cultural nihilism. Germany must not and will not sink into Communist anarchy. [Bold face added.]
Hitler pays his (last) respects to democracy, 1933.

That 1933 election was the last that West Germans were given a choice to vote for until 1949, and it was the last free election in a united Germany until 1990.

The March 1933 election made the Nazis not only the largest party, but a party large enough  to prevail comfortably over any likely coalition. With a popular vote of just 33 percent of the German voters, because of the German voting mechanism the Nazi Party gained 44.5 percent of the votes in the Reichstag.

This was a huge leap. Hitler's Nazi Party had previously gotten nowhere, with less than 3 percent of the German electorate before the Crash of 1929 (see table above). Between 1928 and 1930, the Nazi Party grew from the ninth-largest party to the second-largest, with 18 percent of the vote in the Reichstag. 

Support of the Nazis in the Reichstag more than doubled between 1930 and March 1933, and became the largest party. The reason was a series of financial disasters that became global with the Wall Street Crash of October 1929. The disasters crushed the  German economy. The Weimar Government seemed powerless to do anything about it. When the cost of rampant speculation in the 1920s is evaluated by history, the rise of Hitler, the Holocaust and the Second World War should be put on the negative side of the ledger sheet.

Nazi "Ballot", 1938 edition. Vote "YES"
[Ja] for Hitler, or "No" [Nein] for 
Trouble. [Vote No, and we will find you.]
To gain absolute power after the March 5 election, Hitler engineered the Enabling Act on March 23, 1933. This made Hitler dictator of Germany, subject only to the approval of President von Hindenburg. Approval of the Reichstag became unnecessary.

Within months, Hitler banned all the opposition parties. By November 1933, the Reichstag was nothing but an echo chamber for Hitler.

That left only von Hindenburg in the way of Hitler's becoming emperor. In July 1934, von Hindenberg was 86 years old and dying of lung cancer. On August 1, Hitler's cabinet passed the "Law Concerning the Highest State Office of the Reich," which stipulated that upon the death of von Hindenburg, the offices of president and chancellor would be merged. Hitler would then be accountable to no one, becoming Führer und Reichskanzler des deutschen Volkes.

In 1922 Hitler's anti-Semitism was
dismissed as "not so genuine or violent".
With this Cabinet decision in his pocket, Hitler flew to Neudeck, to the bedside of von Hindenburg. 

Conveniently, the President died the next day. Hitler was dictator.

That was the end of democracy in Germany until the Bundestag was formed in West Germany after the war. Democracy for all of Germany did not return until reunification in 1990.

In the United States, meanwhile, FDR took office and quickly turned around the financial panic with the round-the-clock help of his Republican Treasury Secretary, William H. Woodin, the railcar titan. U.S. financial markets were restored to stability, and the economic downturn was immediately reversed.

But it was too late. The dim view in Europe of American democracy and capitalism since the Crash would take years to adjust. Desperate German voters were an easy mark for Nazi demagogues, who dealt with demonstrators with violence. In the wake of the Panic and Depression, a mad hater had taken control of Germany. FDR and other world leaders would have to confront this for the rest of his presidency.

Hitler's assumption of sole power had been unexpected. In the United States, on November 21, 1922, The New York Times reported that Hitler's anti-Semitic propaganda was just 
"a bait to catch masses of followers and keep them aroused, enthusiastic and in line[...]"
See the full story above.

The New York Times story refers to the "Hitler organization" as a violation of the  military clauses of the Versailles Treaty, and refers to "its predecessor" — the Orgesch. The Orgesch was named after a forgotten forerunner of Hitler, Georg Escherich (1870-1941). 

Escherish was a forester and politician with the Bavarian People's Party, which had 18 members elected to the Reichstag on the last ballot in March 1933 (see table at top). Since 1919 he headed the Bavarian Einwohnerwehren, the anti-communist home guard groups. In 1920 Escherich organized his supporters into the Orgesch (from "Organization Escherich"), an anti-Semitic paramilitary group, which violated the Versailles Treaty limit on the size of the German army to 100,000 troops referred to in the NY Times clip. The Orgesch established links with the Heimwehr in Austria, an early harbinger of the Anschluss. 

On the orders of the Allies in 1921, as part of wider moves against private armies that had sprouted up in Germany since the Armistice, the Orgesch was disarmed and disbandedBut as one devil was killed, seven new ones rose to take its place. The militias of the right, such as the Sturmabteilung and the Stahlhelm, Bund der Frontsoldaten, grew in size until they were disbanded in 1933 in favor of Adolf Hitler's personal bodyguard, the super-sadistic Schutzstaffel or S.S.

The Nazi gangs were much harder to disband than those of the Orgesch. It's too bad that The New York Times writer did not foresee that.

Two years ago, Timothy Egan in his  Op-Ed, "The Beast Is Us," suggested why everyone who is concerned about keeping American democracy should remember March 5, 1933 — the day one-third of Germans voted and elected a dictator bent on a world war, enough voters to end contested elections while Germany took the world into war.

Christopher R. Browning, Professor Emeritus at the University of North Carolina at Chapel Hill, reviewed a 998-page book by Volker Ullrich in the April 20. 2017 issue of The New York Review of Books (10, 12, 14). The book, Hitler: Ascent 1889-1939 (Knopf), shows how Hitler rose out of a weak democracy to become Germany's Führer. 

While noting differences between Germany then and the United States recently, Browning also notes disturbing similarities between the end of the Weimar era in Germany and the election of Donald Trump as President in 2016-2017. He concludes:
Weimar parliamentary government had been supplanted by presidentially appointed chancellors ruling through the emergency decree powers of an antidemocratic president [Paul von Hindenburg] since 1930. In 1933 Hitler simply used this post-democratic stopgap system to install a totalitarian dictatorship with incredible speed and without serious opposition. If we can still effectively protect American democracy from dictatorship, then certainly one lesson from the study of the demise of Weimar and the ascent of Hitler is how important it is to do it early. (My emphasis.)
Check out this Time Line on Hitler's ascendancy to power to see how how Germany democracy eroded over many years.

Tuesday, March 6, 2018

HEIDI FISKE | Mexico – A Vector for Chinese Aggression? (Post 2 of 2)

President Enrique Peña Nieto of Mexico (L) and
President Xi Jinping of China, September 2017.
This is Part 2 of a two-part guest post by Heidi S. Fiske. The first post is here

Aggression by a foreign power, using a Latin American base, brought America to the verge of nuclear war in 1962.

The Cuban Missile Crisis

Seared into the memory of all who lived through it, 56 years ago the United States came within a hair’s breadth of nuclear war with Russia. It was so close, in fact, that, on October 27, 1962, then Secretary of Defense Robert McNamara declared: “This may be the last Saturday I ever see.”

It began on October 14, 1962, when a US plane spotted a Soviet missile being assembled on the island of Cuba. President Kennedy convened a very small team to consider what to do. Invade? Bomb? 

He decided on an embargo, hoping to keep Russian warheads from reaching the island (fruitlessly, we later learned – the Russians already had 162 tactical and strategic nuclear warheads there). On October 22, a tense American public listened as Kennedy announced the blockade on television, and said that the United States was prepared to use military force to protect its security. After another fevered week of negotiations, the Soviets backed down and removed the missiles.

But let’s consider what our position would be today if a hostile power had major bases in Mexico.

A Weakened United States and a Strong Mexico

Cuba is a small island 90 miles to our south. It was and is poor. We had robust international alliances all over the world. Our national debt was $298 billion, less than 10 percent of our GDP. While the Cold War was expensive, we were not engaged in any hot war. President Kennedy was schooled in history, hard-working and a very bright man with an outstanding cabinet.

By contrast, Mexico is the 15th largest economy in the world. It is smack up against us for 2,000 miles, and has territorial waters that abut ours in the Gulf of Mexico and the Pacific. And we have a different sort of President now, presiding over a cabinet whose divisions and shortcomings are legendary. Our national debt is $20 trillion, 106 percent of GDP – before the new tax reductions and budget take effect.

Thus if we found ourselves facing Chinese aggression via Mexico, we would be weaker than we were in 1962. And China would have far more territory, much closer to us, from which to launch a cyber or military attack.

How likely is it that China might gain a military foothold in Mexico? The camel’s nose is its Belt and Road Initiative (BRI).

Belt and Road

China’s BRI may be the largest international investment project in history. Xi Jinping announced its two parts in the fall of 2013 – the land-based Silk Road Economic Belt (SREB), and the sea-based Maritime Silk Road (MSR). 

The BRI goal is to create infrastructure that connects developing countries. Less than five years old, it already covers more than 68 countries, equivalent to 65 percent of the world's population and 40 percent of global GDP.

This may be a peculiarly Chinese way to seek influence. In On China, Henry Kissinger points to the stunning fact that, for 18 of the past 20 centuries, China had the highest GDP in the world. Its  superb communications and roads linked markets among its vast population and territory. BRI is just such an initiative, this time on the world stage.

Today, add China’s growing pre-eminence in AI and other key technologies to the mix, and its increasing use of authoritarian power to curtail what its citizens can see. “Technology in the service of an authoritarian regime is a very very dangerous thing,” says Robert Kaplan, author of the just-released The Return of Marco Polo’s World, which looks, among other things, at BRI.

While BRI was originally designed to foster economic cooperation with developing countries in Eurasia and Africa, last May it was extended to Latin America. In January 2018, China’s Foreign Minister Wang Yi traveled to the Community of Latin American and Caribbean States (CELAC) Forum in Santiago and formally invited the 33 nations represented there to join forces. CELAC, formed in 2011, does not include the United States or Canada. Pointedly, Chile’s Foreign Minister Heraldo Muñoz used the occasion to say that “This meeting represents a categoric repudiation of protectionism and unilateralism.”

China had already become the most significant new force in Latin America and the Caribbean. At the World Economic Forum in 2017, Angel Melguizo, Chief Economist in the Latin American Unit, OECD Development Centre, noted:
“China has become one of Latin America’s key trading partners. In fact, it is the most important partner for Brazil, Chile and Peru. Trade between China and Latin America has multiplied 22 times since 2000, a stark contrast to Latin American trade with the United States and Europe, which merely doubled in the same time period.” 
The scale of potential BRI projects is indicated by a proposed 19,000-kilometer trans-Pacific fiber-optic internet cable from China to Chile.

Though wary of China’s growing role in this hemisphere, the United States seems strangely insouciant about it, with Trump now exercising what Council on Foreign Relations President Richard Haass wryly dubs “the Withdrawal Doctrine.”

To be sure, US-Mexican ties run deep and broad. There is a long history of friendship, cross-border businesses, and alliances. Many families on both sides of the border, at all socio-economic levels, are bi-national. And we share some important history and cultural roots, especially in the southwest.

But will this be enough to counter a Chinese juggernaut patiently building in Latin America? “Washington,” says Antonio Hsiang, Professor and Director of the Center for Latin American Economy and Trade Studies at Chihlee University of Technology, Taiwan. “is now in danger of damaging its core interests through neglect.”

Looking Down the New Silk Road

BRI is supposedly peaceful in intent. At his talk to the CELAC Forum, Foreign Minister Wang said:
“China will always stay committed to the path of peaceful development and the win-win strategy of opening up, and stands ready to share development dividends with all countries.”
But this is spoken by a top official of the country that is building military bases in territory it does not own, in the South China Sea. How difficult would it be to convert major infrastructure installations in Mexico into bases for spying, cyber attacks or even a hot war against us?

This is the real menace from Mexico. And it means that Trump’s attacks on Mexico are 180 degrees away from what strategic considerations would dictate.

FINANCIAL REGULATION | "Community Bank" Bill, a Trojan Horse?

The following is Update 254 from Dana Chasin and his 20/20 Team, reposted by permission with some small edits:

Washington, D.C., March 6, 2018 – Debate started on the Senate floor today on S. 2155. Is it a rare and shining example of bipartisanship breaking through D.C. gridlock to help community banks? The problem with that view is:

  • The claim that community banks' profit margins are weak today is debatable.
  •  S. 2155’s most significant impact has nothing to do with community banks. [And so the bill in that sense is a Trojan Horse.]

Community Banks – Profitable and Least Regulated 

Community banks reported $6 billion in profits in Fall 2017, a 9.4 percent increase from the year before. Community bank loan balances were up by 7.7 percent over this same period. Loan activity was widely dispersed throughout the community banking population, with 75 percent of community banks increasing their loan balances last year. These strong growth figures hardly paint a picture of an industry that’s drowning in regulatory burden.

Despite this, the community banking lobby has been actively lobbying Congress for regulatory relief for years. Republicans (and now some Democrats) have picked up this banner to argue that Dodd-Frank is crushing community banks.

No one did better in winning exceptions to regulation during the Dodd-Frank negotiating process than the Independent Community Banking Association (ICBA). The Dodd-Frank Act gave community banks regulatory exemptions such as:
  • Flexibility in underwriting when issuing mortgages, allowing community banks to benefit from Qualified Mortgage safe harbor.
  • Complete exemption from enhanced prudential standards including stringent capital rules, the LCR, and stress testing.
  • Less expensive FDIC insurance coverage compared with larger banks.
Through the ICBA, community banks have long insisted that the cost of complying with regulations is too high. This is no more true in the post-Dodd-Frank era as it was prior to its passage. Dodd-Frank is not the problem.

How to Help Community Banks

Local banks are an important part of the small business ecosystem and community banks are four times more likely to operate in rural communities. They are a vital part of the national economy.

According to a GAO report published in February, community banks are mostly concerned about Home Mortgage Disclosure Act (HMDA), Bank Secrecy Act, and TILA-RESPA disclosure regulations.

While S. 2155 does attempt to address some of these concerns (in the case of HMDA requirements, quite controversially), the majority of the bill offers, at best, a bad magic trick for community banks. For instance, banks below $10 billion are exempt from the Volcker Rule which prohibits banking entities from proprietary trading or entering into relationships with equity funds. This is largely an empty gesture – few community banks engage in any of the activities outlawed by the Volcker Rule.

Mergers Incentivized, Costs Increased 

Any marginal gains for community banks will be offset by Title IV’s dismantling of requirements on medium-sized banks, which, paradoxically, could trigger further consolidation in the financial sector. The resulting spike in merger sand acquisitions will reduce in-market competition.

Many Republicans have lamented the original $50 billion SIFI threshold as being arbitrary and, by extension, inappropriate. Even granting the premise does not justify this new legislation. If the number is arbitrary then so is the $250 billion level they are raising it to. However, the change will have clear repercussions as institutions begin swelling their portfolios to raise to the new cap(s). Institutions that have previously floated just below the $50 billion threshold will start to consume community banks without any disincentive.

In a poll conducted by Americans for Financial Reform, 67 percent of people oppose the loosening of banking regulations in S. 2155. Voters have realized that this bill deregulates much bigger banks than the “mom and pop” institutions proponents of the bill like to emphasize. It is evident to 67 percent of voters polled that this bill is not only going to deregulate the same institutions that sent America into a financial crisis, it could also increase the deficit and hurt Americans for years to come.

CBO estimates that enacting the bill would increase federal deficits by $671 million over the 2018-27 period. That deficit increase comes from an increase in direct spending of $233 million and a decrease in revenues of $439 million. Some of that cost and reduction in revenues would be recovered through collections from financial institutions in years after 2027.

CBO also estimates that, assuming appropriation of the necessary amounts, implementing the bill would cost $77 million over the 2018-27 period. Like the tax bill, this act will kick the bill to the grandkids of today’s new voters.

Next Steps

This morning the Senate cloture motion to proceed with debate on S.2155 passed 67-32. The 13 Democratic/Independent cosponsors were joined by four other Democrats:

Senator Debbie Stabenow (MI)
Senator Jeanne Shaheen (NH)
Senator Maggie Hassan (NH)
Senator Bill Nelson (FL)

All in all, 17 Democrats voted in support of the cloture motion. Senate Majority Leader Mitch McConnell will now have to decide whether he will allow an open amendment process to take place. Few expect an open process as it may force some difficult votes onto moderate Democrats. While this is happening, lobbyists are outspending progressives hundreds of dollars to one every day in defense of this bill.

Minority Leader Schumer and the Democratic caucus may be better off with a full tree and a closed amendment process. The next big ticket item to look out for would be the manager’s amendment sponsored by the architect of this bill, Sen. Crapo (R-ID).

Continuing to Watch the Process

See previous post: https://cityeconomist.blogspot.com/2018/03/financial-regulation-s-2155-systemic.html Also "Wall Street on Parade": http://bit.ly/2DeKeJq

Throughout the week, the 20/20 team collects relevant news clips, here: https://goo.gl/forms/7NoJ2CmPTzuSzzVZ2

An archive of past updates is here: https://dc-policyupdate.com/

HEIDI FISKE | Risks Created by Trump's Trashing Mexico (Post 1 of 2)

Mexico's President Enrique Peña Nieto with China's President
Xi Jinping, September 2017.
The following guest post was written for CityEconomist by Heidi S. Fiske.

There is a looming menace from Mexico, but it is none of the ones identified by Trump. The threat is not one of drug dealers, rapists, and murderers flooding across our borders. It is not MS 13. It is not jobs lost to Mexican workers or Mexican factories or Mexican steel.

They are flyspecks compared with the real danger that Trump is creating by his relentless insults, as well as his threats to NAFTA, his proposed tariffs, his cancelling of DACA, and his insistence that Mexico pay for a border wall. And to add insult to injury, he has just announced his plan to send Jared Kushner (who just lost his White House security clearance) to Mexico tomorrow to meet with President Enrique Peña Nieto.

The real menace is the strategic threat to our security that an emboldened China may pose, using an alienated Mexico as its base.

China has recently, sweepingly, broadened its Latin American ties. And just as it has gotten stronger on the world stage and filled some of the vacuum created by Trump’s unilateralism, it has not, as the US hoped, gotten more democratic. On the contrary, it has tightened authoritarian control, flexing new muscle against foreign enterprises on its soil, and forcing western news outlets to limit what Chinese citizens can see. Most strikingly, on February 25, China's Premier Xi Jinping arrogated the power to rule for life by abolishing the two-term limit that had been the law. The National People’s Congress is expected to rubber stamp his decision this week.

Does China as a major force in Mexico sound unlikely? To be sure, it will not happen fast. But a look at the history of aggression from the south, and of China’s recent moves, shows that it is a geopolitical threat of such potential magnitude that we should be vigorously working to counter it now.

“Bad Uncle Sam”

But Trump is doing the opposite, and thereby encouraging Mexico to turn away from the United States, however reluctantly. His insistence that Mexico pay for the wall, for instance, has caused Peña Nieto to cancel two trips to the United States, most recently last month.

And on March 1, career diplomat Roberta Jacobson, our highly respected ambassador to Mexico, announced she would quit in May. As Trump has not even proposed a candidate for Assistant Secretary of State for Western Hemisphere Affairs, her departure leaves us particularly depleted in Latin American diplomacy on the highest levels.

To be sure, Secretary of State Rex Tillerson has recently made a five-country tour of Latin America to try to placate leaders there, but with limited success. “This is a way for Tillerson to say, ‘We’re elevating our voice,’” said Rafael Fernández de Castro, the director of the Center for US-Mexican Studies at the University of California San Diego. But, “this is the ‘bad Uncle Sam’ of the past,” he added. “The horrendous insults to Mexicans, to every single Latin American immigrant, are there. They cannot have it both ways.”

The Trump Shock and Mexican Response

Reportedly much of retiring Ambassador Jacobson’s time has had to be spent smoothing ruffled feathers rather than accomplishing substantive gains in Mexico.

“With his tweets Trump has torn up 20 years of good relations,” said a Mexican friend as we drank afternoon tea in her kitchen a year ago. “It is as if your gentle father suddenly slapped you across the face for no reason. You don’t leave the family but you are certainly wary, and waiting to see what happens next.”

What has happened since is, if anything, worse. Last week I checked in with Warren Hardy, an American who became a Mexican citizen in 1990. Beginners at his Spanish language school in San Miguel de Allende are treated to an hour-long history lesson designed to impress on them that Mexicans are inordinately sensitive to being insulted. Mexicans, he explains, have great pride in their indigenous cultures on the one hand, but have been brutally treated successively by the Aztecs, Spanish and most recently the US on the other. The result is that “the core value of the Mexican people is respect. Mexicans demand respect from each other and particularly from foreigners.  What Mr. Trump has done is strike a blow at the heart of our relationship by calling Mexicans rapists and criminals."

Small wonder that Mexico’s leaders are looking for new partners. When Trump renewed his threat to scrap NAFTA late last August, slamming Mexico in the process, the very next week Mexican President Enrique Peña Nieto travelled to China to discuss increased trade. While there, he participated with 800 business leaders  in a summit of the BRICS nations (Brazil, Russia, India, China and South Africa), which Mexico might join to cooperate on investment, trade, finance, and the sea.  And the day after that Peña Nieto visited the Alibaba Group, hoping to get more Mexican products onto this China-based leading e-commerce platform.

Could increased trade with China morph into Mexicans being receptive to becoming a base for aggression against the United States? Consider events a century ago.

The Zimmermann Telegram

In January 1917, Germany’s Foreign Office proposed to the Mexican government that, if the US entered World War I against Germany, the Mexicans should fight on the German side, thus making it a two-front war for the US. In return, Germany would recover Arizona, Texas, and New Mexico for Mexico.

The famous Zimmermann Telegram that conveyed this offer was intercepted and decoded by British intelligence, which shared it with America in March of 1917. It backfired mightily on the Germans. So enraged was the American public that President Wilson went before Congress and swiftly won a declaration of war against Germany on April 6, 1917.

As it happened, Mexico turned Germany down, not believing that it could deliver either financially or militarily on its promise, or that Mexico could control the large English-speaking territories it might have re-acquired. But there was fertile ground among Mexicans to accept an offer that promised revenge on the United States, just as there is today. It was not just because the United States had seized almost half of Mexico in the Nineteenth Century. The United States had invaded Mexico in 1914 to protect US business interests during the Mexican revolution, and again in 1916-17 in a vain attempt to punish Pancho Villa for killing Americans in New Mexico.

While this German effort fizzled, 45 years later, a military threat from the south, from Cuba, became very real indeed.

In my next post, following shortly, we examine that threat, how much worse it would be if it were repeated today, and just how China is moving into Latin America.

This is Post 1 of 2. The second post is here:

Monday, March 5, 2018

FINANCIAL REGULATION | S. 2155, Systemic Risk

Here are some negative reviews of S.2155, collected by Sen. Sherrod Brown (D-OH).

The following is Update 253 from Dana Chasin, on S. 2155 and Systemic Risk.
Washington, DC, March 5, 2018 – With S. 2155, the "Economic Growth, Regulatory Relief, and Consumer Protection Act," set to hit the floor tomorrow, attention is now turning to the least discussed and most abstract — and systemically most consequential — part of the bill.

Title IV of S. 2155 is not like the first three titles, which involve benefits provided to a diverse range of stakeholders, with tradeoffs for competing stakeholders. Title IV's Section 401 provisions benefit just 30 out of the nation’s top 40 financial institutions, exclusively and generously.  One of those provisions was the ABA’s chief legislative goal for 2017.   
Section 401 of the Act has a negative  impact on the safety and soundness rules as they apply to the biggest financial firms in the country.

Section 401 Raises the Size Threshold Fivefold

Section 401 of S. 2155 provides for a five-fold increase in the size threshold for firms to be subject to enhanced prudential standards. These standards themselves are then weakened  further in the rest of the Section. 
The ABA-prize centerpiece of the legislation increases the asset threshold for the automatic application of post-crisis safeguards, known as enhanced prudential standards, from $50 billion to $250 billion. 
This change would deregulate 25 of the country’s largest 34 banking institutions. These 25 together hold $3.5 trillion in assets and collected a total of $47 billion in TARP funds after the financial crisis.  

Raising the asset threshold from $50 billion to $250 billion would amount to the largest rollback of Dodd-Frank to date. 
Section 401 gives the Fed discretion to re-apply enhanced prudential standards to financial institutions with total assets between $100 billion and $250 billion, should they pose substantial systemic risk.  Given the option, however, Trump appointees responsible for reapplying standards are likely to err on the side of under-regulation. Fed Governor Randal Quarles, a known opponent of the enhanced prudential regulatory regime under Dodd-Frank, is unlikely to retain many of these standards for institutions with assets under $250 billion.
Worse, it is possible that under the proposed law the Fed will lose discretionary powers to administer enhanced prudential standards even to the largest firms.  S. 2155 would amend Section 165 of Dodd-Frank by changing the word "may" (with regard to the Fed's ability to tailor the application of enhanced prudential standards, based on "risk-related factors") to "shall."  The wording change puts greater pressure on the Fed to weaken its enhanced prudential requirements even for the very largest SIFIs, and would encourage financial institutions to file lawsuits if the Fed decides to put them on the list.

Stress Tests: Deregulation as Data Deprivation
A mandatory system of regular and consistent stress tests is one of the most important policy innovations of the post-crisis era. Stress testing allows for more accurate projections of losses that banks would suffer under adverse financial conditions, which enables bank managers and regulators to determine whether a given bank would remain solvent under severe financial stress. [This was a major part of recovery from the bank panic in 1933.] 

Post-stress capital levels have increased substantially since the crisis, demonstrating the positive overall impact of mandatory stress testing on the health of the financial system. Last year, 33 of the nation’s largest 34 banks passed CCAR stress tests — an indicator that these institutions are better able to withstand crisis conditions.
However, the bill would make the current system of stress testing more complicated, fragmented, and potentially much less effective. Broken down by asset holdings, we can see these potential effects as follows:
  • $50 billion to $100 billion in assets: Banking institutions in this asset class would no longer be subject to Fed-run stress testing.
  • $100 billion to $250 billion in assets: 18 months after the enactment of this legislation, banking institutions in this asset class would no longer be subject to annual Fed-run stress tests.  A substitute test would simulate performance only under an adverse economic scenario, meaning these banks would no longer undergo stress testing that measures baseline and extremely adverse economic scenarios, and would likely be tested less frequently. As with other enhanced prudential standards, S. 2155 grants the Fed additional authority to exempt banks in this asset class from stress testings before the 18 month review period. 
  • Banks with $250 billion or more in assets: 18 months after the enactment of this legislation, banking institutions with at least $250 billion in asset size will no longer be subject to Fed-run stress testing that measures adverse economic conditions. These banks will only undergo stress testing that measures performance under baseline and extremely adverse economic conditions.
Liquidity Coverage Ratio
The Liquidity Coverage Ratio (LCR) directs financial institutions to hold a certain amount of High Quality Liquid Assets (HQLA), relative to their net outflows.  This ensures that SIFIs are able to cover losses in the event of a market shock without defaulting or contributing to a crash.  As with all “enhanced prudential standards,” this bill would allow the Fed to relieve banks with less than $250 billion in total assets from the constraints of the LCR — a uniquely excessive deregulatory measure. 
The Fed has already “tailored” the LCR for banks between $50 and $250 billion in asset size by adopting what is known as the modified LCR (mLCR). This means that the Fed has already decided that these institutions should have different regulations and apply them appropriately. The Fed is also currently considering changing the mLCR for these institutions on a sliding scale with new ratios. Codifying that they “shall” consider each institution individually and quintupling the asset threshold will either be irrelevant or, given the current and incoming crop of regulators, extremely dangerous.
Living Wills: Unwarranted, Unwanted Relief 
As with the other enhanced prudential standards, S. 2155 would mean that:
  • Banks with total assets between $50 and $100 billion would be immediately exempt from the requirement to submit annual living wills.
  • Banks between $100 and $250 billion would be subject to the Fed’s discretionary oversight, pending an 18-month review period.  The extent to which the Fed would require these firms to continue resolution plan submissions is unclear.  Chairman Powell has been broadly supportive of living wills and the other pillars of Dodd-Frank, but others at the Fed, including the new Vice Chair for Supervision Randal Quarles, have been less supportive in the past.  
In his remarks before the Senate Banking Committee on Thursday, Chairman Powell remarked that the financial system is much healthier now than it was in 2007-08, and specifically cited living wills as having contributed to this stability.  
The banking industry is generally supportive of the provision. In December, JPMorgan Chase Chairman and CEO Jamie Dimon expressed his belief that living wills were “good for industry.” It is widely acknowledged that the very process of preparing these submissions, under an explicit mandate of the law, actually helps banking institutions’ management to gain a better enterprise-wide view of their businesses.
There is also begrudging Republican acceptance for living wills.  Resolution planning prepares firms for potential liquidation, and makes it less likely that they will have to go through the FDIC’s Orderly Liquidation Authority (OLA).  Many Republicans claim this special resolution alternative distorts the market by circumventing the bankruptcy process, and this mistrust of OLA tempers their distaste for living wills. Despite this broad acceptance of the importance of resolution planning, S. 2155 would mean that many the nation’s largest banks would no longer be required to submit these plans.
Missing the Forest for the Trees
Just a decade after the largest financial crisis in nearly a century, S. 2155 seeks to deregulate some of the most systemically important banking institutions in the country.  The bill’s creators set out to bring regulatory relief to community banks which they claim are overburdened by onerous compliance costs. While the bill does bring some modest relief to these small banks, the most impactful section of the bill is focused on reducing burdens on much larger banks that have registered record profits in recent years.
A cloture vote on S. 2155 is scheduled in the Senate tomorrow.  That procedural measure is expected to pass easily.  And then comes the floor debate and possibly amendments, but possibly with an agreement among the bill’s supporters to lock arms as was done in a Senate Banking markup that saw no amendments adopted.  The floor speeches may be more interesting.  
*DB USA Corporation and Santander USA Inc are Intermediate Holding Companies of foreign-based banking institutions.
See also:
and "Wall Street on Parade": http://bit.ly/2DeKeJq.

Tuesday, February 27, 2018

MAKE AR-15s HARDER TO BUY | Refuse Credit

Q. How do you stop an elephant from charging?
A. Take away his credit card!
An old joke is now... a new idea.
Nearly 48,000 UltraViolet members have signed a petition demanding credit-card companies block sale of assault weapons through their credit card.

The card companies are feeling the pressure. Last week, after the shooting at Marjory Stoneman Douglas High School, the NRA-branded Visa card was dropped by the First National Bank of Omaha citing "customer feedback."1
  • Seth Eisen, Mastercard Vice President of Communications: 914-249-3153
  • Nathaniel Sillin, Visa Senior Director of Public Affairs: 415-805-4892
PayPal and ApplePay have already blocked the use of their service to buy any guns. And we know credit card companies can do it too–they recently blocked users from buying Bitcoin using their cards.2
Speak in your own words, but consider the following talking points:
  • Hi my name is __[name]_____ and I'm calling from __[city or state]________. I am a Visa or Mastercard [cardholder, merchant...]
  • I'm calling to urge your company to stop helping arm mass shooters by blocking the purchase of assault weapons through your credit cards.
  • Assault weapons like the AR-15 were used to kill 17 people in Parkland, 58 in Las Vegas, 49 in Orlando, and 27 in Newtown including children as young as 6, and so many more.
  • You can block the sale of Bitcoin. Now block the weapons of mass murderers.

2. How Banks Could Control Gun Sales if Washington Won’t, New York Times, February 19, 2018

Saturday, February 24, 2018

MARJORY STONEMAN DOUGLAS | Wellesley Savior of the Everglades

Marjory Stoneman Douglas
We know that 17 were killed, of many more victims, from random murders by an angry student with an AR-15.

It happened at the Stoneman Douglas High School in Parkland, Florida. Few people outside Florida know anything about Marjory Stoneman Douglas. More people should. Perhaps Stoneman Douglas the person is inspiring Stoneman Douglas the students.

Marjorie Stoneman was born in Minneapolis on April 7, 1890 and died in 1998, 108 years old. She was a great writer who cared deeply about votes for women and the environment. She is best known for saving from development what is now the Everglades National Park.

She was a top student at Wellesley College and was elected the Class Orator, not the last Wellesley student to be selected (alas, Stoneman was not able to be there) to speak at the Wellesley Commencement and go on to great things. I have great admiration for Wellesley, having seen how well they and the Baldwin School educated my wife Alice Tepper Marlin. (We celebrate our 47th wedding anniversary in September.)

It was a great moment when former Wellesley President Diana Chapman Walsh in her 1993 inaugural speech cited the work of Marjorie Stoneman Douglas and in the next paragraph cited the work of Alice Tepper Marlin!

Stoneman Douglas began her postgraduate days with a short marriage to an older man who, alas, turned out to be a con artist. She recovered by joining her father at the Miami Herald, working first as a society reporter, then an editorial writer, becoming increasingly engaged in her profession. Despite the pain he caused her, she retained the name of her ex-husband to the end of her life.

After working for the newspaper for some years, she started writing articles on the civil rights of women and others who were not allowed to vote, and on conservation issues. She won a wide readership and published hundreds of short stories. It was the era of The Masses and hard-hitting writing was in vogue. She was less a feminist than an activist. She said: "I'd like to hear less talk about men and women and more talk about citizens."

She helped preserve the Everglades against efforts to drain this swamp in favor of development, by writing in 1947 the book The Everglades: River of Grass, which had an impact similar to that of Rachel Carson's later book (Silent Spring, 1962) on the overuse of DDT. Stoneman Douglas was called "Grande Dame of the Everglades" and was pilloried by developers.

The book that saved
 the Everglades.

She prevailed over the developers, not for the last time. The same year her book on the subject was published, 1947, Everglades National Park was created. The National Park Service ever since has been her friend.

In the 1950s, however, the U.S. Army Corps of Engineers became her enemy. The Corps was working with developers to drain swampland upriver from the Everglades. She argued persistently that the Everglades was at the end of a long-tailed system. The Park depended on a flow of water from Lake Okeechobee, and that in turn depended on the Kissimmee River's continuing to feed the lake.

To help expand her influence, in 1970 she formed the Friends of the Everglades. She lobbied for her viewpoint as head of the organization. How good was she? In his introduction to her 1987 autobiography, Voice of the River, John Rothchild shows how good. He describes her appearance in 1973 at a public meeting in mosquito-haunted Everglades City:
Mrs. Douglas was half the size of her fellow speakers and she wore huge dark glasses, which along with the huge floppy hat made her look like Scarlett O'Hara as played by Igor Stravinsky. . . . She reminded us all of our responsibility to nature . . .  Her voice had the sobering effect of a one-room schoolmarm's. The tone itself seemed to tame the rowdiest of the local stone crabbers, plus the developers, and the lawyers on both sides. I wonder if it didn't also intimidate the mosquitoes. . . . The request for a Corps of Engineers permit was eventually turned down. This was no surprise to those of us who'd heard her speak.
Stoneman Douglas won again, protecting what she had created, the Everglades National Park. Her book went into a revised edition in 1987, the same year that her biography appeared. Her many awards included the Presidential Medal of Freedom. When she died, the British newspaper The Independent summed up her life:
In the history of the American environmental movement, there have been few more remarkable figures.
Postscript: Stoneman Douglas reportedly donated her Medal of Freedom to her alma mater, Wellesley College.

Tuesday, February 6, 2018

LONG ISLAND | Jobs Grow Just 0.4%

December 2017 Job Growth, Nassau-Suffolk – 0.4%.
Source: BLS (bls.gov), Feb. 6, 2018.

February 6, 2018 – If JOBS-JOBS-JOBS is the standard, the first year of the new Administration in Washington, D.C. has failed Long Island.

Nassau-Suffolk added only 4,900 nonfarm payroll jobs from December 2017 to December 2018, according to data released today by the BLS.

The growth rate of 0.4 percent is one-third of NY State's rate of job growth for the period, and less than half the rate of job growth in the entire tristate New York metro area. It is less than one-sixth of the growth rate in the other major area component outside the core New York City metro area, i.e., Dutchess and Putnam counties.

So what has the Republican Congressman representing Long Island's Eastern Half been doing about bringing jobs to Long Island? His latest post on the topic on his official website was during his last campaign year, 2016.

(For a general summary of Zeldin's political positions, go hereHe rode in on the howdahs of the Tea Party Republicans. His votes and public statements peg him as a "libertarian conservative", an oxymoron since conservatives are anti-libertarian on social policies.

Zeldin thinks that Suffolk County, which depends on clean water and air for its tourism and leisure-living businesses, and was clobbered by the Meltdown of 2008, needs less environmental and financial regulation.

That doesn't seem to have worked so well for Suffolk County.

His New Idea in 2016 was...

  • Make It Easier to Pollute and Rip Off Financial Customers by allowing Congress to block regulation of the environment and financial fiduciaries. 
  • Make Environmental and Financial Regulation Harder for the Executive Branch to implement!
Read below, in its entirety, Zeldin's proposal in March 2016 for creating jobs on Long Island.

March 15, 2016  
Press Release 
Op-ed Written by Congressman Lee Zeldin (NY-01)
During my first 14 months in Congress, I have constantly heard from business owners on Long Island sharing stories about how various examples of bureaucratic red tape out of Washington has made it increasingly difficult to create more good paying, private sector jobs. The Department of Labor “Fiduciary Rule,” the EPA’s effort to put the motorsports and custom car industry out of business, and the attempt of federal regulators to impose overzealous Dodd-Frank regulations on auto lenders are just three of many new federal agency regulations that harm the business climate on Long Island and throughout our nation. As each new rule is passed, we are reminded of why it is so important for Congress to pass the Regulations for the Executive in Need of Scrutiny (REINS) Act (H.R. 427).
Under the REINS Act, every major rule or regulation with an economic effect of $100 million or more annually would be required to be specifically approved by the House and Senate, in addition to the President, before the rule takes effect. This legislation is about smart policy and balance of power. Here are three brief examples of why the REINS Act is so important:
Example #1: Many Long Islanders, when seeking something as critical as life insurance or retirement savings advice, want to go to a trusted broker who is a part of their local community. Planning for retirement and managing a family’s investment portfolio to save for college or buy a new home is an essential piece of the American dream. The Department of Labor, through its “fiduciary rule,” is shutting down that dream by overregulating independent financial advisors and life insurance brokers out of business. By imposing regulations and fees meant for larger, multi-billion dollar Wall Street firms, the one-size-fits all approach proposed by federal regulators would kill an industry that is run by small entrepreneurs and built on personal relationships. By the Labor Department’s own admission, in 2010, those individuals who did not seek or have access to investment advice suffered over $100 billion in financial losses through investment mistakes, which could have easily been avoided with the appropriate level of consultation. Saving for retirement is of crucial importance to American families and access to professional financial advice should not be hindered by an unnecessary regulation put in place by unelected agency bureaucrats creating rules that carry the force of law.
Example #2: The Clean Air Act has been a resounding success and in Congress I have been an outspoken advocate for clean air and clean water on Long Island [???]. The EPA is attempting to go around Congress, ignoring the Constitution by creating new interpretations of this law, which would hurt small and medium sized businesses. Current rules proposed by the EPA would effectively shut down the motorsports and car modification industry by imposing the same level of regulations meant for power plants and other major industries. By banning certain modifications made to cars and motorcycles, and applying these misguided regulations retroactively, hobbyists, who have invested countless time and money into their cars, would suddenly be in violation of a set of federal regulations that were never vetted by their representatives in Congress. Small and medium sized businesses on Long Island, like American Racing Headers, that supply specialty automotive parts to customers nationwide, are already seeing a reduction in business as a direct result of the threats surrounding these new rules. 
Example #3: The indirect auto loan market just surpassed $1 trillion, making it one of the most essential, and competitive financial markets in our economy. In a misguided change of policy, based on flawed statistics, the Consumer Financial Protection Bureau (CFPB) is attempting to shut down transparency in the auto lending market by mandating new standards that they falsely believe will increase fairness in the market. Consumers on Long Island should not be cut off from needed credit due to arbitrary government regulations. A transparent and competitive auto lending market means consumers will get the best rates, but bureaucrats in Washington want to impose strict Dodd Frank financial regulations meant for Wall Street that would shut down the indirect auto loan market so essential to main street Long Island. 
What has always made America so great has been the opportunity to succeed through hard work and dedication, but unfortunately today, economic opportunity is being stripped away with oppressive taxes and burdensome red tape on America’s businesses. President Obama’s first seven years have brought forth 468 regulations deemed “economically significant rules”, and that’s with just under a year still to go. (CEI) The Fiduciary Rule, the attack on the motorsports industry by the EPA, and the CFPB’s attempted overregulation of auto-lending, are just three of the rules that have made it harder for business owners to succeed in today’s economy.
To address this issue, I proudly voted for the REINS Act when it passed the House last year, as well as other essential pieces of legislation to shut-down job killing red tape. This critical legislation would give Congress more oversight over the most broad and harmful regulations being implemented by federal agencies. Allowing the executive branch to implement major regulations, without Congressional oversight or input, will only further hurt the ability of our job creators to expand and create more good paying jobs. Americans should demand that Congress take the REINS to help grow our economy.  [End of Zeldin Op-Ed]

If this is the best that Zeldin can come up with to create jobs on Long Island, no wonder jobs have grown only 0.4% during the year. Long Island needs better ideas.