While You Were Working - April 4

Lacker drops the mic

Richmond Federal Reserve President Jeffrey Lacker resigned abruptly today. The departure of the often outspoken Lacker centers on the role he played in the leak of confidential Federal Reserve information in 2012. Lacker is not accused of initially providing confidential information to an analyst from Medley Global Advisors. However, Lacker commented on the information when the analyst introduced it into their conversation instead of refusing to comment and/or ending the call. Lacker also failed to report to the Federal Reserve’s Federal Open Markets Committee that the analyst was in possession of leaked information.

Dimon does what Buffett does

If he hasn’t already, Jamie Dimon is very close to snatching the mantle of “Most Covered Annual Letter Writer” from the legendary Warren Buffett. Dimon unveiled his 45-page letter today, which included more than a few highlights:

  • JPMorgan Chase spent $9.6 billion on technology in 2016, including $600 million on fintech.
  • Dimon called for the US mortgage finance market to be reformed; claiming proper changes would result in more than $300 billion a year in new purchased loans. Dimon noted increased securitization stands to play a positive role in such reforms. Dimon added that had the mortgage market been restructured five years ago, more than $1 trillion in additional mortgage loans could have been made.
  • “Coherent” regulation is Dimon’s catch phrase for how post-financial crisis regulatory reforms should be rolled back. No one serious is saying Dodd-Frank should be repealed. They are just using terms like making regulations “coherent” or “right-sized or “common sense”…

What is most interesting about Dimon’s comments on mortgage finance is that five years ago the Federal Reserve was still in the throes of extreme measures like quantitative easing. There was no mortgage market without government intervention. If the government’s role in the mortgage market was so flawed, how come Dimon wasn’t criticizing QE programs and calling for private money to step up to the plate in 2012?

Speaking of “rolling back” or “right-sizing” regulations…

Mike Konczal from the Roosevelt Institute does a deep dive here on how the GOP is aiming to dismantle Dodd-Frank, even if it never repeals it. The arguments Konczal slices and dices jibe with one other thing I have been hearing. It goes something like this: “Everything is fine. Things have been stable for years now. We don’t need these onerous regulations anymore.”

To the people saying that kind of thing, I offer one retort: “I guess you won’t mind if we eliminate the TSA and completely stop screening airplane passengers. After all, we haven’t had any planes flying into buildings in more than 15 years.”

When you put a solution in place to stop bad things from happening and those bad things stop happening, you should probably leave that solution in place.

Of speed and speed bumps

It is pretty amazing what a few short years has done to the debate about market structure. When Michael Lewis’ Flash Boys debuted, the upstarts at IEX were outcasts. The established exchanges talked themselves into circles about how speed didn’t really matter. One exchange exec defended the status quo so poorly that most agree it cost him his job. Fast forward three years and now everyone in mimicking the “speed bump” IEX introduced to revolutionize markets. In fact, the conversation has evolved so much that John Ramsay, IEX's Chief Market Policy Officer, is sounding a wee bit offended by the notion that their exchange is all about the bump.

"The speed bump is just one piece of our market design and it's designed to work with all of the other pieces in tandem.”

The times and speeds they are a changing.

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