Category: Regulation

The flood insurance debate returns. Here’s what to expect

Mary Pat Campbell

Link: https://www.eenews.net/stories/1063731009

Excerpt:

The most comprehensive proposal being floated so far is one from House Financial Services Chairwoman Maxine Waters (D-Calif.).

That discussion draft would extend the program for an additional five years and limit the government’s ability to raise the price of flood insurance amid growing concerns about affordability (E&E Daily, April 14). Current authorization for the National Flood Insurance Program (NFIP) is set to expire in five months.

….

Jerry Theodorou, director of the finance, insurance and trade program at the R Street Institute, said subsidies mask the real costs of building and living in flood-prone areas and that the Peters-Barr bill would ensure that policyholders aren’t “undercharged.”

Theodorou said the Waters bill instead would kick the can down the road, and he criticized the measure for seeking to cancel the program’s historic $20.5 billion debt.

Author(s): Hannah Northey

Publication Date: 27 April 2021

Publication Site: E&E News

Insuring Another Disaster

Mary Pat Campbell
Insuring Another Disaster

Excerpt:

Leave it to California lawmakers, however, to cast aside thousands of years of complex commercial history in a misguided attempt to fix an admittedly legitimate insurance problem. Thanks to Proposition 103, a 1988 ballot measure, California already has a distorted insurance market that gives the insurance commissioner czar-like powers to approve rate increases and impose rate decreases.

Because of that law, insurers have a tough time adjusting rates to manage their risks. It’s a long, cumbersome, and antagonistic government process to adjust rates. Their other lever for ensuring solvency is to reduce their underwriting risks by, say, not writing fire-insurance policies to homeowners who live in high fire-risk areas or car insurance policies to drivers with multiple DUIs.

….

Instead, California Assemblymember Marc Levine, D-Marin County, has introduced Assembly Bill 1522, which would prohibit insurers from canceling insurance policies solely because a home or business is located in a high-risk wildfire area. It epitomizes California’s economically illiterate edict approach.

Author(s): Steven Greenhut

Publication Date: 29 April 2021

Publication Site: The American Spectator

Third withdrawal of 10: How will the mechanism for pensioners for annuities work?

Mary Pat Campbell

Link: https://www.t13.cl/noticia/negocios/rentas-vitalicias-como-funcionara-retiro-dineros-como-solicitar-afp-tercer-retir-10-28-04-21

[auto-translated by Google]

[this relates to people in Chile being allowed to taking fairly large withdrawals from their official retirement savings]

Excerpt:

This Monday, the application process will begin through digital platforms within the framework of the new 10% third withdrawal law.

As detailed by the Undersecretary of Social Welfare, Pedro Pizarro, the process will begin 100% online during the first two weeks of May, both for AFP users and for the nearly 700 thousand pensioners through the life annuity modality , who for the first time may request a cash advance.

In view of this process, the Financial Market Commission is preparing an instruction manual to regulate the unprecedented withdrawal of savings in the form of life annuities, which – they assure – will be published shortly (In this same note we will update the news of said instruction )

Publication Date: 2 May 2021

Publication Site: T13 in Chile

GameStop Frenzy, Archegos Meltdown May Prompt New SEC Rules, Chairman Says

Mary Pat Campbell

Link: https://www.wsj.com/articles/sec-studying-whether-new-rules-are-needed-for-apps-that-gamify-trading-chairman-says-11620239971

Excerpt:

In testimony prepared for the House Financial Services Committee, Securities and Exchange Commission Chairman Gary Gensler says brokerages that “gamify” trading — by using appealing visual graphics to reward a user’s decision to trade, for instance — may encourage frequent trading that results in worse outcomes for investors. Some Democratic lawmakers have blamed gamification for the boom in individual trading that helped drive the rise in GameStop shares.

Mr. Gensler, who will appear before lawmakers on Thursday, also said the SEC would study regulatory changes in response to the March blowup of Archegos Capital Management, an unregulated family-investment vehicle of hedge-fund veteran Bill Hwang whose leverage-fueled bets led to more than $10 billion in losses at major global banks.

Author(s): Dave Michaels, Alexander Osipovich

Publication Date: 5 May 2021

Publication Site: Wall Street Journal

Testimonies for full accrual based accounting during GASB public hearings

Mary Pat Campbell

Description:

This video contains 15 testimonies before the Governmental Accounting Standards Board (GASB) in March and April of 2021 by citizens, elected officials, think tank leaders, and more. All of whom argued against GASB’s proposals to continue cash-basis-like accounting for governmental funds statements. Cash-basis accounting supports bad government budgeting practices like counting borrowing proceeds as revenue, and underfunding pension funding requirements, in order to “balance budgets.” On the other hand, full accrual accounting shows expenses as they are incurred, especially when a government makes a promise to pay in the future.

Publication Date: 6 May 2021

Publication Site: Truth in Accounting channel at YouTube

Warren Buffett Defends Berkshire’s Moves Over Pandemic Year

Mary Pat Campbell

Link: https://www.wsj.com/articles/warren-buffett-set-to-discuss-pandemic-markets-at-berkshires-annual-meeting-11619887342?reflink=desktopwebshare_twitter

Excerpt:

Warren Buffett defended Berkshire Hathaway Inc.’s investments over the past year, while saving his harshest comments for some of the hottest investment vehicles at the company’s annual meeting.

Speaking onstage from Los Angeles, Mr. Buffett, Berkshire’s chairman and chief executive, and his business partner, Charlie Munger, took questions for roughly four hours. The two men said some special-purpose acquisition companies, day traders and private-equity funds that have driven valuations in both private and public companies to record levels were more gamblers than investors.

“I don’t mind the poor fish that gamble,” Mr. Munger said Saturday. “I don’t like the professionals that take the suckers.”

“It’s a moral failing. It’s not just stupid, it’s shameful,” he said of SPACs.

Author(s): Jenna Telesca, Geoffrey Rogow

Publication Date: 1 May 2021

Publication Site: Wall Street Journal

Cuomo Aides Spent Months Hiding Nursing Home Death Toll

Mary Pat Campbell

Link: https://www.nytimes.com/2021/04/28/nyregion/cuomo-aides-nursing-home-deaths.html?smid=tw-share

Excerpt:

Aides to the New York governor, Andrew M. Cuomo, repeatedly prevented state health officials from releasing the number of nursing home deaths in the pandemic.

The effort by Gov. Andrew M. Cuomo’s office to obscure the pandemic death toll in New York nursing homes was far greater than previously known, with aides repeatedly overruling state health officials over a span of at least five months, according to interviews and newly unearthed documents.

Mr. Cuomo’s most senior aides engaged in a sustained effort to prevent the state’s own health officials, including the commissioner, Howard Zucker, from releasing the true death toll to the public or sharing it with state lawmakers, these interviews and documents showed.

A scientific paper, which incorporated the data, was never published. An audit of the numbers by a top Cuomo aide was finished months before it became publicly known. Two letters, drafted by the Health Department and meant for state legislators, were never sent.

….

The Cuomo administration’s handling of nursing home death data now is the subject of a federal investigation, one of at least four overlapping inquiries into the governor and his administration. As of this month, more than 15,500 nursing home residents with Covid-19 have died.

Author(s): Goodman, J David; Mckinley, Jesse; Hakim, Danny.

Publication Date: 28 April 2021

Publication Site: New York Times

SEC to Review Disclosure Rules in Wake of Archegos, GameStop: Report

Mary Pat Campbell

Link: https://www.fundfire.com/c/3147224/396504/review_disclosure_rules_wake_archegos_gamestop_report

Excerpt:

The Securities and Exchange Commission is considering a tightening of disclosure requirements for investment firms following the collapse of Archegos Capital Management and the GameStop trading frenzy, people familiar with the matter tell Bloomberg.

Officials at the SEC, now being led by Gary Gensler, who was confirmed as chairman of the regulator last week, want to increase transparency of the derivative trading that led to the implosion of Archegos, Bill Hwang’s family office, the people say.

Lawmakers have also heaped pressure on the agency as they seek more transparency about who is shorting stocks following the GameStop debacle.

Author(s): Kathleen Laverty

Publication Date: 22 April 2021

Publication Site: fundFire

California Judiciary Committee Gives Blistering Assessment of CalPERS’ Fiduciary Duty Failings in Analysis of Fraud-Friendly Private Debt Secrecy Bill

Mary Pat Campbell
California Judiciary Committee Gives Blistering Assessment of CalPERS’ Fiduciary Duty Failings in Analysis of Fraud-Friendly Private Debt Secrecy Bill

Graphic:

Excerpt:

Let’s look at other reasons why allowing CalPERS to make secret loans is a terrible idea.

CalPERS and CalSTRS are already major investors in private debt, via private debt funds, so AB 386 is unnecessary. CalPERS is already #16 in the world and CalSTRS, #30. Both giant funds have demonstrated that California’s disclosure laws aren’t an impediment to making this kind of investment. It should not be surprising that no other California public pension fund is supporting this bill.

There’s no good reason to create an internal team to do private debt investing. Plenty of experts have been urging large private equity investors like CalPERS to bring private equity investing in house for years. First, the fees and costs are so eye-popping, at an estimated 7% per year, that cutting that down to say 2% or 3% means that a relatively newbie investor like CalPERS could still fall a bit short compared to industry average gross returns and still come out ahead on a net basis. Second, industry experts also confirm that there are many seasoned, skilled professional who would trade a less pressured life (particularly the costs and stresses that relate to regular fundraising) for less lavish pay.

Author(s): Yves Smith

Publication Date:

Publication Site: naked capitalism

Softer monetary policy increases inequality

Mary Pat Campbell

Link: https://voxeu.org/article/softer-monetary-policy-increases-inequality

Graphic:

Excerpt:

Our first set of results concern the effects of monetary policy on disposable income. We show that softer monetary policy increases disposable income at all income levels, but that the gains are highly heterogeneous and monotonically increasing in the income level. As shown in Figure 1, a decrease in the policy rate of one percentage point raises disposable income by less than 0.5% at the bottom of the income distribution, by around 1.5% at the median income level, and by more than 5% for the top 1% over a two-year horizon.

Author(s): Asger Lau Andersen, Niels Johannesen, Mia Jørgensen, José-Luis Peydró

Publication Date: 19 April 2021

Publication Site: Vox EU

About That Pension Check… A Miscalculation Case With Broader Implications

Mary Pat Campbell

Link: https://www.natlawreview.com/article/about-pension-check-miscalculation-case-broader-implications

Excerpt:

The Ninth Circuit Court of Appeals recently addressed several issues of first impression in Bafford v. Northrop Grumman (9th Cir. April 15, 2021), a lawsuit involving retirees who received vastly overstated pension benefit estimates from the plan’s recordkeeper reminds employers of the importance of careful administration.   The case highlights the need to ensure that electronic recordkeeping systems and tools align with the plan terms.  Participant requests for plan or benefit information using online portals or other electronic means still demand timely and accurate responses as required by ERISA’s disclosure requirements.

…..

On appeal from the district court, the Ninth Circuit agreed that the participants’ ERISA fiduciary claims should have been dismissed, aligning with the First and the Fourth Circuit’s view that a named fiduciary is only liable for a fiduciary breach if they are performing a fiduciary function.  The court said that calculating pension benefits using a pre-set formula is a ministerial function, not a fiduciary function.  So a miscalculation error would not create a breach of fiduciary duty claim.

Author(s): Craig A. Day, Suzanne G. Odom

Publication Date: 25 April 2021

Publication Site: The National Law Review

California Has Seen a Staggering Amount of Unemployment Fraud During the Pandemic

Mary Pat Campbell
California Has Seen a Staggering Amount of Unemployment Fraud During the Pandemic

Excerpt:

After sifting through news myriad stories about California’s ongoing scandal at the Employment Development Department, however, I’m left wondering: Where is Ed Anger when you need him? I’m “pig-biting mad” about the ongoing unemployment mess, as an angry Anger might write. Yet California’s elected officials and a weary public are treating it like any garden-variety bureaucratic failure.

This is one of the most infuriating scandals ever to plague our state. The department, which is responsible for paying out unemployment insurance claims, has been incapable of paying legitimate claims even as it has paid as much as $31 billion in fraudulent ones, often to inmates. Think about those staggering losses. They would be enough to make a dent in any number of the state’s infrastructure, budgetary, and debt-related problems.

The stories are as unbelievable as the Weekly World News‘ latest Elvis sighting. Here’s a desk-pounder from CBS Los Angeles: “A Fresno girl who just celebrated her first birthday is collecting $167 per week in unemployment benefits after a claim was filed on her behalf stating that she was an unemployed actor.”

Author(s): Steven Greenhut

Publication Date: 23 April 2021

Publication Site: Reason