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Wonkbook’s Number of the Day: 52 percent. That's the percentage of rulemaking requirements that have been met so far under the Dodd-Frank financial reform law, four years after it was enacted.
Wonkbook’s Chart of the Day: This chart shows that Americans' checking accounts are brimming with cash but that we're afraid to spend it.
Wonkbook's Top 4 Stories: (1) Dodd-Frank at age 4; (2) MH17's policy and economic fallout; (3) not just job growth, but maybe wage growth, too?; and (4) why Australia's carbon-tax repeal matters for the U.S.
1. Top story: At age 4, Dodd-Frank is still a work in progress
Dodd-Frank's rulemaking is still only half-done. "According to law firm Davis Polk, 208 (52%) of the 398 total rulemaking requirements have been met so far. It's an improvement from 2012, when just 31% of the Dodd-Frank rules were in force, but still lacking....In the past year, regulators have made progress in a number of areas, including limiting in-house trading activities through the Volcker Rule, reforming the market for complex financial instruments called swaps, cutting back on the reliance for credit ratings firms and creating new rules for municipal advisers. But it's clear regulators are not exactly moving at lightning speed, at least compared with the timeline set forth by Congress....Out of 280 rulemaking deadlines that have passed, 127 (45%) of them have been missed by regulators." Matt Egan in CNN.
Exhibit A: The SEC. "Regulators still haven't completed key parts, including standards for the mortgage-securities market and tougher regulations for credit-rating firms. Turnover and lost court battles have held back some regulators, notably the Securities and Exchange Commission, which faces more mandates under the 2010 Dodd-Frank financial law than any of the other agencies....Only 44% of the SEC's rules are final or nearly final....That is the smallest percentage among the main financial regulators....The SEC is still working on issues at the heart of the financial crisis, including transparency regulations for the derivatives and asset-backed securities markets and tougher rules for credit-rating firms." Andrew Ackerman and Alan Zibel in The Wall Street Journal.
Poll: Four years later, American still skeptical of Wall Street and favor tougher banking regulation. Benjamin Goad in The Hill.
Has Dodd-Frank made our financial system safer? "Even today, a full four years after...it remains unclear whether this massive set of financial regulations has made our banking system fundamentally more stable. But one thing about the law is certain: It’s gotten the financial industry much more interested in individual investors....Relatively calm financial markets combined with new regulations like higher capital requirements and the so-called Volcker rule have made it harder for Wall Street trading machines to regain their glory. That’s given Main Street financial advisers new prestige." Ian Salisbury in Time Magazine.
House Republicans say Dodd-Frank didn't end too big to fail. "The report claims the process created by the law for regulators to designate certain nonbank financial companies as 'systemically important' amounts to telling investors the government thinks those firms are too big to fail....The nonbank designation process is carried out by the Financial Stability Oversight Council....FSOC defenders also point to the fact that many firms, including insurance companies and asset managers, have fought to avoid being designated as evidence the label isn't an advantage." Victoria McGrane in The Wall Street Journal.
Chart: How risky are the biggest banks? Ryan Tracy in The Wall Street Journal.
CFPB, created by Dodd-Frank, wants public to hear consumers' complaints about banks. "On Wednesday, the bureau proposed allowing consumers to publish online the details of their complaints against lenders and financial service providers. Those narratives would augment the bureau's consumer complaint database, which lists complaints about checking accounts, credit cards, student loans and other financial products. If consumers choose to make their complaints public, the companies involved would then be given a chance to write a public response." Jeff Horwitz in the Associated Press.
Insurers' Dodd-Frank change faces hurdles. "A bill championed by insurers that would give the Federal Reserve more flexibility in regulating large insurance companies like MetLife Inc. and Prudential Financial Inc. passed the Senate unanimously last month. But while the bill has broad support in the House, top Republicans are considering packaging it with other changes to Dodd-Frank, a move that would reduce the likelihood of its passage....If additional provisions are added...it could create a standoff with the Senate, where many Democrats remain resistant to making big changes to the four-year old Dodd-Frank law." Ryan Tracy and Michael R. Crittenden in The Wall Street Journal.
England's Carney leads the way on 'too big to fail' banks. "Officials led by Mark Carney, the Bank of England governor, are attempting to bridge sharp differences among leading G20 countries as they prepare a landmark set of proposals aimed at tackling the problem of 'too big to fail' banks. Talks under the auspices of the global Financial Stability Board over the summer are approaching a key stage as officials aim to clinch an agreement on bailing in creditors of globally significant, cross-border banks that get into trouble....However, the complexity of the topic and differences between countries’ legal regimes and corporate structures are raising questions over how detailed any framework will be." Sam Fleming, Ben McLannahan and Gina Chon in The Financial Times.
Other financial reads:
The limits of the law on insider trading. James B. Stewart in The New York Times.
Next financial-crisis case: Bank of America. Sheelah Kolhatkar in Bloomberg Businessweek.
Setting up rivals to the IMF and World Bank is easier than running them. The Economist.
Merger rush for offshore tax break bets on U.S. stalemate on inversions. Richard Rubin in Bloomberg.
Detroit seeing upgrades ahead of bankruptcy trial. Corey Williams in the Associated Press.
WALLISON: Four years of damage... "When the Dodd-Frank Wall Street Reform and Consumer Protection Act took effect on July 21, 2010, it immediately caused a sharp partisan division. This staggeringly large legislation — 2,300 pages — passed the House without a single Republican vote and received only three GOP votes in the Senate. Republicans saw the bill as ObamaCare for the financial system, a vast and unnecessary expansion of the regulatory state. Four years later, Dodd-Frank's pernicious effects have shown that the law's critics were, if anything, too kind. Dodd-Frank has already overwhelmed the regulatory system, stifled the financial industry and impaired economic growth." Peter J. Wallison in The Wall Street Journal.
BLOOMBERG VIEW: ...or four years of inaction. "Polling suggests that most Americans think it hasn’t done enough to protect them from a repeat of the 2008 financial crisis....Unfortunately, they’re right. At its core, the Dodd-Frank Act was supposed to work like a three-stage containment system. Better monitoring and limits on risk-taking would make accidents less likely to happen. If financial institutions did get into trouble, added capital would make them more likely to survive. If they nonetheless failed, advance planning and new resolution mechanisms would allow them to do so without bringing down the broader financial system and the economy. Despite all the progress regulators have made, they have yet to complete any level of this fail-safe system." The Editors.
KRUGMAN: So much for that debt crisis? "We don’t have a debt crisis, and never did. Why did everyone important seem to think otherwise? To be fair, there has been some real good news about the long-run fiscal prospect, mainly from health care. But it’s hard to escape the sense that debt panic was promoted because it served a political purpose — that many people were pushing the notion of a debt crisis as a way to attack Social Security and Medicare. And they did immense damage along the way, diverting the nation’s attention from its real problems — crippling unemployment, deteriorating infrastructure and more — for years on end." Paul Krugman in The New York Times.
COWEN: Inequality is not rising globally; it's falling. "Yes, the problem has become more acute within most individual nations, yet income inequality for the world as a whole has been falling for most of the last 20 years. It’s a fact that hasn’t been noted often enough....Of course, no one should use this observation as an excuse to stop helping the less fortunate. But it can help us see that higher income inequality is not always the most relevant problem, even for strict egalitarians. Policies on immigration and free trade, for example, sometimes increase inequality within a nation, yet can make the world a better place and often decrease inequality on the planet as a whole." Tyler Cowen in The New York Times.
ARIAS: Stemming the child-migrant crisis. "One highly cost-effective strategy would be for the United States to bolster the region’s cash-transfer programs, which help families keep their kids in school. For only $62 million, a monthly scholarship program similar to the one I implemented in Costa Rica could be offered for a full year to all 52,000 young people apprehended at the border so far this year. With Obama asking for $3.7 billion in emergency funds to address a tiny fraction of the symptoms of the disease, it is crazy not to consider much smaller investments that could help cure it at the root." Oscar Arias in The Washington Post.
THE ECONOMIST: America's lost oomph. "Thoughtful politicians have produced schemes for radical change in almost all of these areas, but their plans — like so much else — have fallen victim to America’s polarised politics. The Republicans stand in the way of loosening immigration rules, while Democrats fear that supply-side reforms are a plot to hurt the average Joe. Both sides hoover up cash from special interests keen to keep anticompetitive regulations in place. Barack Obama, the least business-friendly president for decades, has devoted far too little attention to the problem. So the odds rise that America’s economy will continue to lumber along at an underwhelming pace, and Americans will have no one to blame but their leaders." The Economist.
LACHMAN: Europe's bad bank problem. "In her recent Congressional testimony Janet Yellen intimated that US interest rates could be raised earlier than expected should the US economic recovery be stronger than anticipated. She also acknowledged that there were pockets of froth in some sectors of the US equity and credit markets. What she did not mention, however, was how frothy are European credit markets and how those markets might be impacted by a rise in US interest rates. This might have been a serious omission on her part considering the impact that a renewal of the European sovereign debt crisis is likely to have on the US and global economic outlook." Desmond Lachman in AEIdeas.
JAUHAR: Busy doctors, wasteful spending. "Even though physicians’ salaries account for a relatively small fraction of health care costs, physicians’ decisions may affect upward of 80 percent of total health spending. We order tests, prescribe drugs, hospitalize patients and — one of the costliest decisions a doctor can make today — call specialists for help....Health care costs must be contained, but cutting payments to doctors is a self-defeating strategy. Policy makers need to focus on the drivers of waste. And one of the most potent is when doctors reflexively call other doctors for help." Sandeep Jauhar in The New York Times.
James Garner interlude: In remembrance of the late actor, a look at some of his best roles.
2. The policy and economic implications of the Malaysia Airlines disaster
For Obama, tragedy may open up possibilities in Ukraine. "For months, President Obama has spoken about the limits facing the United States in shaping the outcome of some of the world’s most deadly and divisive conflicts, from Syria and Iraq to the dispute between the Ukrainian authorities and pro-Russian separatists. On Friday...he spoke instead about possibilities....Obama said Thursday’s tragedy might persuade European allies and other nations to push more forcefully for an end to the conflict in Ukraine. This week, Europe chose to adopt only modest new economic sanctions against Russia even as the United States ratcheted up the pressure." Juliet Eilperin in The Washington Post.
Explainer: What the U.S. can do now to punish Russia. David Francis in The Fiscal Times.
Interview: Former NATO Supreme Allied Commander James Stavridis on whether NATO should respond. NPR.
The crash will make it harder for businesses to argue against sanctions. "The Malaysia Airlines (MAS) disaster came a day after the U.S. and 28-nation European Union announced tougher sanctions on Russia....The penalties were unveiled after objections to further limits were raised in recent weeks by top business groups....Should the U.S. and EU add to their sanctions, it 'may weigh further on Russian equities and could revive fears of a tit-for-tat exchange of trade measures that could undermine the increasingly fragile economic recovery in the euro-zone.'" Brian Wingfield and Margaret Talev in Bloomberg.
But the EU is still divided. "Europe lags behind the six rounds of US sanctions, both in breadth and severity. Some differences have narrowed and pro-sanctions leaders such as British premier David Cameron see resistance from Paris and Berlin fading. But Europe remains far from united on whether to target Mr Putin’s inner circle, ensnare Russian energy groups, and move to some form of arms embargo.These differences will probably come to the fore on Tuesday, when EU foreign ministers meet for the first time since the crash, armed with a recently enhanced legal mandate that allows them to target a broader range of individuals and companies." Alex Barker, Hugh Carnegy, Jim Pickard and Chris Bryant in The Financial Times.
Russia's economy was already hurting. The plane crash won't help. "There probably won't be a sudden drop (or jump), experts said, but the week's news only increased a general feeling of unease that may show itself in the global economy....While markets tend to shrug off isolated events like the Malaysia crash, this might be different....Many fear that the incident will call more attention the the situation in Russia and further U.S. sanctions on the country. This may push the already slow Russian economy into a recession, which could impact trade with its European neighbors and even China, one of its largest trading partners. Russia's markets were hardest hit following news of the MH17 incident." Kathleen Caulderwood in International Business Times.
Ukraine may feel the bite if Russia halts trade. "Ukraine, already facing recession, may see its economy shrinking by as much as 2 percentage points more should Russia halt trade as a conflict widens between the two ex-Soviet partners, Premier Arseniy Yatsenyuk said." Ryan Chilcote and Daryna Krasnolutska in Bloomberg.
Sanctions could lead Russia to throw a wrench in Iran talks. "Putin promised to retaliate against the United States for new sanctions targeting his friends and business associates, as well as large Russian defense, energy, and financial firms. On Thursday, Putin called President Obama to alert him a civilian jetliner had crashed over Eastern Ukraine....Putin’s next call was to none other than the President of Iran, Hassan Rouhani....U.S. officials, lawmakers, and experts, have been watching and waiting for Putin to use the Iran negotiations as a way to mess with Obama ever since the tit-for-tat sanctions began in March." Josh Rogin in The Daily Beast.
Will U.S. sanctions against Russia's Rosneft work? "The Russian state-owned oil company Rosneft, one of the main targets of the latest U.S. economic sanctions, has taken steps during the past year that have shored up its debt-laden balance sheet and could make it easier for the company to withstand the new U.S. restrictions....However, even if Rosneft’s steps buy it time, the new U.S. sanctions will probably eat away at the company’s finances. The sanctions — which bar loans of more than 90 days duration to Rosneft, Novatek and two banks, including one tied to the gas monopoly Gazprom — will still hurt the Russian oil giant." Steven Mufson in The Washington Post.
Total liability in the crash could hit as high as $1 billion. "Even more nebulous is who will end up paying what is owed. For Malaysia Airlines to absolve itself of any financial responsibility beyond the initial payout mandated as part of the Montreal Convention, the carrier will have to prove that it was not only following international airspace protocol but also that it did everything in its power to protect its passengers....It would be Allianz, Malaysia Airlines’ reinsurer, that is ultimately required to pay unless investigators determine who fired the missile that shot Flight 17 out of the air, or Russia or Ukraine assumes responsibility. In either of those scenarios, Allianz probably would pursue a right of subrogation, which means it would pay Malaysia Airlines for its liabilities, and the country responsible would be sued for those expenses." Roberto A. Ferdman in The Washington Post.
Airlines are changing their Ukraine routes in response to the disaster... "Eastern Ukraine’s airspace was shut down Friday by the European Organization for the Safety of Air Navigation while the U.S. Federal Aviation Administration, or FAA, extended its advisory to avoid routes above Ukraine. Malaysia Airlines, which is facing its second major aviation disaster of the year, said Friday that all its Europe-bound flights will now take alternate routes, following Flight MH17's crash Thursday, which killed all 298 people on board. Most global airlines, including cash-strapped Malaysia Airlines, typically use the shortest flying routes between destinations to save on fuel and time." Sneha Shankar in International Business Times.
....but it's likely to spark broader aviation-risk reviews, too. "Today, airlines and government authorities in many nations are likely scouring their route maps for other potential flight risks, those places where ground conflicts could harm people passing anonymously six miles or more above. What seemed safe earlier this week may get a fresh look....The U.S. and civil aviation authorities in other nations already have notices and security procedures for traversing places such as Yemen, Iraq, and Syria. The FAA requires notice for any U.S. carrier that wants to fly over Iraq or Yemen. Many other destinations also have FAA restrictions." Justin Bachman in Bloomberg Businessweek.
Chart: MH17 is still operating, but it's avoiding Ukraine. Christopher Ingraham in The Washington Post.
The conflict is keeping Boeing experts away from crash site. "As the manufacturer of the Malaysian Airlines 777 jet that crashed...Boeing Co. (BA) would typically be among the first parties to send in experts to help figure out what happened. This time, at least for now, they’re staying home....In normal aviation accidents, representatives of airlines, manufacturers and government agencies quickly assemble a team of experts to secure the crash scene, study the wreckage, and retrieve and analyze the flight recorders. While dealing with armed rebels and looters isn’t unprecedented, investigators are limited if they can’t get to a crash site at all." Andrea Rothman and Alan Levin in Bloomberg.
Other foreign policy reads:
Lawmaker wants missile countermeasures on civilian aircraft. Thomas Gibbons-Neff in The Washington Post.
DAVIDSON: Disaster shows conflict's global ripples. "In the short term, America should use its resources to reveal the truth about what caused this tragedy and who is to blame....Next, harsher financial sanctions must be levied against Russia. There are signs that the current sanctions, targeted against prominent Russian businesses and individuals, are beginning to exert serious pressure on the Russian government. The latest round...will squeeze Russian banking, energy, and arms markets. Yet the strongest measures have so far been held in reserve as Europeans have been unwilling to risk the strain on their own economies....These nations can no longer opt out." Janine Davidson in USA Today.
Baby interlude: Dog apologizes to baby for stealing her toy.
3. Jobs are increasing, and their wages may be, too
When will wages start going up? "Wage growth in the US has been stuck at about 2 per cent a year, just about keeping up with inflation but well below the levels of up to 3.5 per cent that productivity would suggest. The quarterly Employment Cost index, another widely used measure of wages, has also seen consistently sluggish readings over the past year, cementing the belief that relatively stagnant real wages remain one of the big clouds still lingering over America’s economic recovery. But from the Federal Reserve to the White House to Wall Street, there is a growing debate about when – or if – that might change as job growth accelerates across the US economy." James Politi in The Financial Times.
Jobless rates fell in 22 states last month; two-thirds gained jobs. "State performance in job creation defies political categories. The big winners over the past five years include Republican-dominated red states such as Texas and Democratic-dominated blue ones such as California. Likewise, the laggards include red (Alabama, Arkansas) and blue (New Jersey, New Mexico) states. The Labor Department released job figures for June on Friday, allowing an assessment of how states have done in this economic recovery. Compared to May, 33 states added jobs and 17 lost them last month. The unemployment rate dropped in 22 states from May to June, rose in 14 and stayed the same in 14." Associated Press.
13 states that raised minimum wages this year have higher job growth. "Many business groups argue that raising the minimum wage discourages job growth by increasing the cost of hiring. A Congressional Budget Office report earlier this year lent some support for that view....But the state-by-state hiring data...provides ammunition to those who disagree. Economists who support a higher minimum...acknowledge they don't establish a cause and effect. There are many possible reasons hiring might accelerate in a particular state." Christopher S. Rugaber in the Associated Press.
Chart: 14 states are already beating the best Fed estimates for 2016 U.S. unemployment. Niraj Chokshi in The Washington Post.
Americans are feeling more and more confident about finding better-paying jobs. "A Gallup poll found that 35% of Americans think now is a good time to find a quality job — one with a higher wage. That may not seem like much, but the July reading is the highest since December 2007, the start of the Great Recession, and a little better than the decade average before the recession. Twice since the recovery officially began in June 2009, the figure had dropped to just 8%, most recently in late 2011. The upturn in confidence reflects what could be an important development in the labor market: an improvement in the quality of new jobs." Don Lee in the Los Angeles Times.
Survey points to rising U.S. wage pressures. "The share of U.S. companies raising wages more than doubled in the three months to July from a year ago...suggesting a faster pace of wage growth. The National Association for Business Economics' (NABE) latest business conditions survey found that 43 percent of the 79 economists who participated said their firms had increased wages. That compared to only 19 percent last year....It was the first time since October 2012 that no respondents reported declining wages at their firms. The economists represented a broad spectrum of businesses, including goods-producing, transportation, finance and services industries." Lucia Mutikani in Reuters.
Explainer: 5 things to watch on the economic calendar this week. Kathleen Madigan in The Wall Street Journal.
Other economic reads:
NBA, others aid Obama-backed program for young black, Latino men. Rebecca Ballhaus in The Wall Street Journal.
U.S. consumer sentiment dips in preliminary July reading. Ryan Vlastelica in Reuters.
Music parody interlude: Weird Al teaches you about grammar in "Word Crimes," a parody of "Blurred Lines."
4. Why you should care about Australia's carbon-tax repeal
As human actions help dry out Australia, the nation axes its carbon tax. "New model simulations indicate that the long-term decline in winter rainfall over parts of southern Australia...is in part the result of human-caused increases in greenhouse gases and the depletion of the ozone layer, according to research published July 13 in the journal Nature Geoscience. The model projects that winter rainfall will continue to drop this century....Australia’s carbon tax by itself wouldn’t have been enough to help reverse the global climate change behind the country’s drought. But the dismantling of its carbon policy signals a disturbing trend." Maria Gallucci in International Business Times.
Primary source: State of the Climate 2013: The planet is still warming up. National Oceanic and Atmospheric Administration.
The move complicates international climate talks. "Australia’s decision to repeal its levy limiting fossil-fuel pollution makes it the first nation to turn back from a market approach to fighting global warming....The move leaves Australia, the largest polluter per capita among industrial nations, without a system for reducing greenhouse gases as it prepares to host a meeting of the Group of 20 nations....The about-face sets up Abbott for a clash with Europe and the U.S., which asked for climate policy to be on the G-20 agenda. Australia’s participation...is crucial for United Nations-led climate talks aimed at establishing a worldwide emissions-limiting pact by next year." Jason Scott and Mike Anderson in Bloomberg.
How Australia's system could have spread elsewhere — including here. "Australia’s system was of particular interest to other countries ....Beginning next year, Australian businesses were to be able to buy European emissions allowances to use under the Australian program. A full two-way link between the two systems was to be in force by July 2018. This arrangement would have connected Europe’s program, the world’s largest, to what looked likely to be the third-largest. The deal might have served as a pilot for linking other systems emerging around the world, including those in China and California." Michelle Innis, Stanley Reed and Coral Davenport in The New York Times.
U.S. action on carbon taxes to become much harder. "In the United States, environmentalists and their allies in Congress have pushed for a tax on carbon for years, most recently with a bill backed by Rep. Henry Waxman (D-Calif.), Sen. Sheldon Whitehouse (D-R.I.) and others. The idea has faced stiff opposition from Republicans and business interests who decry its costs and question if carbon dioxide from human activity causes climate change. Both sides, though, say that Australia’s reversal will make it harder to pass such a measure here." Timothy Cama in The Hill.
Other energy/environmental reads:
States likely need extensions to complete EPA power-plant emissions plans. Anthony Adragna in Bloomberg BNA.
Obama administration proposes massive restrictions on massive Alaskan mine. Juliet Eilperin in The Washington Post.
'Breaking Bad' interlude: A Walter White bobblehead...in space.
Dear inflation truthers: This is how averages work. Matt O'Brien.
Total liability in Flight 17 crash could climb to $1 billion. Roberto A. Ferdman.
The terrible choices Detroit confronts as it cuts off water to its own residents. Emily Badger.
Americans’ checking accounts are filling with cash, but they’re afraid to spend it. Jonnelle Marte.
Republicans want to control, not end, the Fed. Matt O'Brien.
Cellphone bans haven’t made us better drivers. Emily Badger.
Why one state wants to slow down use of a new hepatitis C cure. Jason Millman.
Name That Data! Christopher Ingraham.
Your chocolate addiction is only going to get more (and more, and more) expensive. Roberto A. Ferdman.
Malaysia Air is still running Flight 17, but it’s avoiding Ukraine. Christopher Ingraham.
A quarter of the world’s most educated people live in the 100 largest cities. Emily Badger.
Stressing about money is making you poor. Jonnelle Marte.
White House says Obama’s LGBT executive order will not provide religious exemption. Zachary A. Goldfarb in The Washington Post.
Reynolds ordered to pay $23 billion verdict in smoking case, but amount likely to be cut. Susannah Nesmith in Bloomberg.
Insurers face new ACA rules to widen insurance networks, prevent surprise bills. Robert Pear in The New York Times.
New college data give fuller picture of graduation rates — and show challenges. Nick Anderson in The Washington Post.
U.S. judge OKs warrant for Google user's emails, stoking privacy debate. Joseph Ax in Reuters.
GM resists expanding victims fund. Danielle Ivory and Rebecca R. Ruiz in The New York Times.
Thousands of felons could have drug sentences lessened. Jerry Markon and Rachel Weiner in The Washington Post.
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