2012 August FIRE Policy News

The August issue of FIRE Policy News reports financial institutions that do proprietary trading are coming under fire for high-profile losses that critics say could put taxpayers at risk. Implementation of the Dodd-Frank measure’s “Volcker Rule,” scheduled to take effect in July, has been delayed. The Heritage Foundation’s David John notes, “If fully implemented, the Volcker Rule is ... likely to backfire and to end up making the financial system riskier than it would have been without it.”

Also in this issue:

• Commercial mortgage-backed securities have hit a record high delinquency rate, according to Trepp, LLC, a provider of information, analytics, and technology to the CMBS commercial real estate and banking markets. The delinquency rate for U.S. commercial real estate loans in CMBS jumped 24 basis points in May to 10.04 percent, breaking through the 10 percent threshold for the first time ever.

• Some economists on both sides of the Atlantic are advocating currency devaluations as a way to juice national economies. The reasoning is that lower-valued currencies will boost exports because exports will cost less in other nations. But this lower price is not the result of manufacturing efficiencies, but of a subsidy--a transfer of wealth--from some in the exporting country to the foreign purchaser of the goods. With each successive monetary expansion, wealth is funneled to the exporter, his or her employees, and others who get the money early in the expansion phase. All others are harmed.

• Kansas has enacted tax reforms that have one troubling aspect: They appear to favor pass-through businesses over C Corporations, which could prompt C Corporations to reorganize as pass-throughs merely for the tax advantages.

• New York State accounted for the biggest migration exodus of any state in the nation between 2000 and 2010, with 3.4 million residents leaving over that period, according to the Tax Foundation. In that decade 2.1 million people moved into the state, so net out-migration amounted to 1.3 million, representing a loss of $45.6 billion in income.