2013 December FIRE Policy News

Issue Date: 
December, 2013
Newspaper PDF: 

The December issue of FIRE (Finance, Insurance, and Real Estate) Policy News reports on a lawsuit filed by the owners of Schott’s Market, a family grocery store, and the Institute for Justice. In January 2013 the store owners discovered the federal government had seized their entire checking account without warning, even though they had done nothing wrong. Institute for Justice attorneys note, “With civil forfeiture, your property is guilty until you prove it innocent.”

Also in this issue:

  • After much back and forth, JPMorgan Chase agreed in November to pay $13 billion to settle federal charges that it sold “mortgage-backed securities” without properly informing buyers of their highly risky nature. The bank did not admit wrongdoing in agreeing to settle.
  • China’s official press agency in October called for ending the U.S. dollar as the world’s reserve currency. In an English-language editorial, the Xinhua news agency said the world should consider a new reserve currency “that is to be created to replace the dominant U.S. dollar, so that the international community could permanently stay away from the spillover of the intensifying domestic political turmoil in the United States.”
  • Michigan legislators are considering reforming the state’s automobile insurance laws in order to save drivers money while still providing robust coverage. Currently, ill-conceived state mandates cause Michigan drivers to pay among the highest insurance costs in the nation for the coverage they receive.
  • Twitter is using JOBS Act provisions for its own initial public offering, as revealed by the recent filing of its first IPO documents. And investors are better off for it, as companies such as Twitter going public at earlier stages of growth will mean greater opportunity for ordinary shareholders to grow wealthy with them. Going public at an earlier stage lessens the chance an IPO will face a Facebook-type fiasco.
  • Proponents of taxes on financial transactions claim some short-term traders harm the markets with their rapid buying and selling, primarily by increasing volatility. But such a tax would harm beneficial market participants such as arbitrageurs, who play a vital function of providing liquidity by weaving together interrelated markets worldwide. Many studies have concluded these types of taxes do not reduce volatility and in some cases end up increasing it.
  • Financial professionals are well aware the ongoing implementation of the Dodd-Frank Act will likely cause changes to the market structure, including in the futures markets. The damage may be kept tolerable, however, because historically U.S. futures trading has responded well to constant adversity, manmade or otherwise, through innovation.

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