No, Obama Didn't Kill Too Big To Fail

President Barack Obama came into office promising to curb some of the Wall Street excesses that led to the recession and trillions of dollars in taxpayer-backed bailouts.

But Obama's 2010 reform of financial regulations, known as Dodd-Frank, wasn't enough to satisfy everyone, including Sen. Sherrod Brown (D-Ohio) and Sen. David Vitter (R-La.). They said Obama's changes didn't go far enough to end the perception that giant banks such as JPMorgan Chase were too big to be allowed to fail.

The senators in 2013 pushed what they saw as a solution to the too-big-to-fail problem, but lost to Obama and the banks. Massive financial institutions remained too big and too risky, they said, and still posed an outsized threat to the U.S. economy.

On Wednesday, the idea behind the senators' failed bill got a big boost from the Federal Deposit Insurance Corp. and the Federal Reserve, which jointly announced that seven of the nation’s eight giant banks had failed to convince at least one of the regulators that the companies could enter bankruptcy without endangering the U.S. financial system.

The regulators were basically saying banks such as Wells Fargo and Bank of America remain too big to fail.

“The goal to end too big to fail and protect the American taxpayer by ending bailouts remains just that: only a goal,” said Thomas Hoenig, vice chairman of the FDIC.

The Obama administration, after having spent years claiming that no bank remains too big to fail, now finds itself facing calls to support additional restrictions on America’s banking behemoths -- and the possibility that, once again, Obama and his lieutenants could be fighting on the side of big banks against proposals meant to shrink them.

“For Wall Street reform to work, regulators and members of Congress must continue to focus on reining in the largest and riskiest Wall Street institutions,” Brown warned on Wednesday.

Three years ago this month, Brown tried to do just that.

His proposal with Vitter, dubbed the “Terminating Bailouts for Taxpayer Fairness Act,” effectively imposed a tax on big banks for borrowing from financial markets to fuel their growth. It almost certainly would have forced companies such as JPMorgan Chase and Citigroup to break themselves into smaller units to avoid the proposal’s tough restrictions.

Some financial regulators supported the bill on the grounds that big banks that borrow excessively in order to make loans and buy securities present too much risk to the financial system. Those banks were so big that if they ever neared failure, taxpayers would have to give them bailouts, those regulators believed.

But the Obama administration and big banks were vehemently opposed. Administration officials were adamant that Dodd-Frank, which the White House called “Wall Street reform,” had forever killed too big to fail. “One of the main reasons the president put so much of his personal effort into passing Wall Street reform was to end too big to fail,” then-Obama adviser Gene Sperling said in March 2013.

To undermine Brown and Vitter, administration officials and big bank representatives launched separate campaigns to convince a skeptical public that the problem of too big to fail had already been solved.

Treasury Department officials repeatedly claimed Dodd-Frank, because of its restrictions on taxpayer-funded bailouts, ended too big to fail “as a matter of law.” And if doubts lingered by year’s end, Treasury Secretary Jack Lew suggested in a July 2013 speech that the administration was prepared to take additional actions.

Instead, Lew took a victory lap that December after Brown and Vitter’s bill died in the Senate, never receiving a vote.

Big banks that fought against the Senate proposal now face the possibility of having to contend with the very restrictions that Brown and Vitter included in their legislation. 

“Today's announcement should remind us of the central role that the big banks played in the last crisis -- and it is a giant, flashing sign warning us about the central role they will play in the next crisis unless both Congress and our regulators show some backbone … and demand real changes at these banks,” said Sen. Elizabeth Warren (D-Mass.). “Our top regulators warned us about the danger of the biggest banks -- and we would be foolish to ignore their warnings.”

JPMorgan, BofA, Wells Fargo, State Street, and Bank of New York Mellon have until October to convince federal regulators that they could file for bankruptcy (should they near failure) without endangering the broader financial system. If they again are unsuccessful in making the case that they're not too big to fail, regulators can impose tougher requirements, such as restricting activities in certain financial markets, or forcing them to fund more of their loans and securities with equity from shareholders, rather than borrowed money.

Goldman Sachs failed to persuade the FDIC it could safely file for bankruptcy, and Morgan Stanley failed to convince the Fed. But because the two regulators didn’t jointly make that determination, Goldman and Morgan dodged the potential clampdown that the other five banks now face. Citigroup effectively passed regulators’ test, though its so-called resolution plan, or “living will,” had some shortcomings.

Citi’s success should give other banks some comfort that they, too, could meet regulators’ expectations. The banks said they're committed to addressing regulators' concerns.

“No financial company should be considered too big to fail,” said John Dearie, acting chief of the Financial Services Forum, a Washington trade group that represents chief executives of the nation’s largest financial institutions. “It is in the best interest of the industry that all large institutions have credible resolutions plans.”

Otherwise, the White House may once again have to come to the industry’s rescue.

“These regulatory assessments add yet more weight to the case for aggressive action to realize the promise made in the Dodd-Frank Act that ‘too big to fail’ will be ended,” the advocacy group Americans for Financial Reform said.

Deutsche Bank Won't Expand In North Carolina Because Of Anti-LGBT Law

Add Deutsche Bank to the list of corporations putting pressure on North Carolina politicians to back away from encouraging LGBT discrimination.

The bank announced on Tuesday that it's freezing its plans to add 250 jobs at its software development center in Cary, North Carolina, as a result of the anti-LGBT law the state legislature passed in late March.

"We take our commitment to building inclusive work environments seriously," Deutsche Bank's co-CEO John Cryan said in a statement.

The German bank currently has about 900 employees at its office in Cary. It doesn't plan to move the jobs already located there, but says it won't include North Carolina in its expansion plans through 2017, as it had originally announced back in September.

Deutsche Bank joins PayPal in an economic strike of the state as a result of the law, which strips LGBT people of existing protections against discrimination, and prevents them from being a protected class in future anti-discrimination laws. PayPal has announced it will not go through with a plan to build a 400-employee operations center in the state as a result of the law. 

Tesla Proclaims This The Week Electric Cars Went Mainstream

We may have reached a tipping point.

After a frenzied week watching orders for its Model 3 soar, Tesla declared Thursday that electric cars have gone mainstream.

The electric car manufacturer has received more than 325,000 pre-orders for its first affordably priced sedan. At an average cost of $42,000 apiece after various options are priced in, that comes to nearly $14 billion in sales.

Tesla claimed that eye-popping total makes this "the single biggest one-week launch of any product ever."

"Most importantly," the company added, "we are all taking a huge step towards a better future by accelerating the transition to sustainable transportation."

"We want to thank everyone who has shown their faith in Tesla and the mission of electric vehicles. We would write more, but we need to get back to increasing our Model 3 production plans!"

Tesla CEO Elon Musk had offered a similar thought on Twitter last Friday, just after the Model 3 was released, when orders stood at around 200,000.

Definitely going to need to rethink production planning...

— Elon Musk (@elonmusk) April 1, 2016

For perspective on just how much of a production increase that may be, Autoblog notes that Tesla delivered a total of just 50,000 vehicles in 2015.

“The pent-up demand is something that surprised me," DBL Partners Managing Director Nancy Pfund, whose venture capital firm invested in Tesla a decade ago, told The Huffington Post on Monday. "I knew it was big, but I had no idea how much of a market we were tapping into with the Model 3.”

Clean Energy Is Worth Trillions, John Kerry Says

NEW YORK -- Clean energy is the biggest economic opportunity the world has ever seen, Secretary of State John Kerry said Tuesday.

Compared to the initial phase of the tech revolution, he added, clean energy offers far bigger rewards -- with a value of many trillions of dollars and billions of potential customers.

But money aside, there's a human cost to ignoring issues like rising sea levels, the harm to human health from burning coal, and disruptions to food and water supplies, Kerry told the audience at Bloomberg’s New Energy Finance conference.

“Unless we harness the power of the sun, the wind and the oceans, the consequences will be devastating,” he said.

In introductory remarks for the annual gathering, which draws attendees like the energy and mining ministers of Argentina and Chile, former New York Mayor Michael Bloomberg stressed the importance of business investment in addressing climate change. "The single biggest reason the Paris [climate change] conference was successful was economics,” he said.

Renewable energy is a far better investment than fossil fuels, in both financial and social terms, both men said. The record $330 billion global investment in renewable energy last year makes it clear that “the world is already moving straight to the low-carbon world we need,” Kerry said. “The only question is will we get there fast enough.”

Citing the many issues tied to a changing climate, Kerry said that “what can seem like the cheapest energy in the short-term actually has insurmountable cost in the long-term.” To address this, Kerry called for government policy to account for the true costs of burning fossil fuels. While he did not directly propose a single policy to achieve this, he pointed to his own past support for a market to trade carbon, and to the Obama administration's regulations to reduce pollution from power plants.

Kerry singled out politicians who deny that climate change is real for particular ridicule. The science on the issue is clear, and each of the last three decades has set a new record for the hottest 10 years on record.

"You’d think that people in positions of public responsibility would understand it.," he said. “Politics -- sheer politics -- keeps them from admitting it.”

Despite resistance -- the Supreme Court put the Obama’s administration’s signature climate regulation on hold in February -- Kerry was optimistic that because it made clear economic sense, progress towards a low-carbon world would not be derailed by any single lawsuit or election.

Even Tesla Fanatics Are Shocked By Model 3 Preorders

Elon Musk reveled this weekend in the tidal wave of preorders Tesla Motors received for the company's first affordable car, the Model 3, which debuted March 31.

By Saturday night, the electric automaker pulled in an eye-popping 276,000 orders for the $35,000 vehicle, each with a $1,000 deposit, the billionaire chief executive said on Twitter. That's more than double what the company expected. 

276k Model 3 orders by end of Sat

— Elon Musk (@elonmusk) April 3, 2016

Even two of electric carmaker's keenest observers -- one an early investor, the other a high-ranking analyst fixated on the future of transportation -- were wowed by the numbers.

"We were all surprised to sell a quarter of a million cars in two days," DBL Partners Managing Director Nancy Pfund, whose venture firm invested in Tesla a decade ago, told The Huffington Post at the Bloomberg New Energy Finance Summit in New York on Monday. "The pent-up demand is something that surprised me. I knew it was big, but I had no idea how much of a market we were tapping into with the Model 3."

When she first invested in the electric automaker 10 years ago, the company's only offering was the super-fast, super-expensive Roadster, and electric cars in general seemed dead-on-arrival.

"People were telling us Tesla is for rich people," Pfund said. "I mean, we didn't sit around a conference table 10 years ago and say, 'Let's make a car for the wealthy.' It's like the early cellphone or iPhone, these things are expensive at first."

The reaction to the Model 3 could ripple throughout the auto industry.

"That legitimately surprised us," Colin McKerracher, the lead advanced transportation analyst at Bloomberg New Energy Finance, told HuffPost in an interview. "I don't think you want to ignore that. I don't think you want to say that's just a flash in the pan."

Handout . / Reuters

The Tesla Model 3.

Rather, McKerracher said traditional automakers are now scrambling to develop competitors to Tesla's roster of sleek, well-designed electric vehicles. 

"I wouldn't underestimate Tesla's ability to pull other automakers along," he said.

One big difference is that the Nissan LEAF and Chevrolet's Bolt and Volt -- the Model 3's chief rivals -- simply haven't had the same hype as a Tesla.

"If you build a badass product, people will buy it on its own merits," Salim Morsy, senior analyst at Bloomberg New Energy Finance, told HuffPost.

But people need to know about it, he added. 

"For the Bolt, Volt and Leaf, the marketing was abysmal," Morsy said. 

Musk is nothing if not a good hype man. 

FDA Sued Over Approval Of Genetically Engineered Salmon

• Plaintiffs argue the federal agency overstepped its authority in approving the genetically modified fish.
• Produced by AquaBounty Technologies, the salmon are engineered to grow twice as fast as wild species.
• Critics worry engineered salmon could prove disastrous for wild salmon populations.

Nearly a dozen fishing and environmental groups have filed suit against the Food and Drug Administration in an effort to block its recent approval of genetically modified salmon.

The plaintiffs, represented by the Center for Food Safety and Earthjustice, argue that by green-lighting the first-ever genetically altered animal slated for human consumption, the FDA violated the law and ignored potential risks to wild salmon populations, the environment and fishing communities.

"That's one of the major risks here, is the escape of these fish into the wild," George Kimbrell, senior attorney for Center for Food Safety, told The Huffington Post. "It could be a final blow to our already imperiled salmon stocks."

Produced by Massachusetts-based company AquaBounty Technologies, the AquAdvantage Salmon is an Atlantic salmon engineered with genes from a Pacific Chinook salmon and a deep water ocean eelpout to grow twice as fast as its conventional counterpart.

Handout / Reuters

An AquAdvantage Salmon is pictured in this undated photo provided by AquaBounty Technologies.

The 64-page lawsuit, filed in U.S. District Court for the Northern District of California, challenges whether the FDA has authority to regulate genetically modified animals as "animal drugs" under the 1938 Federal Food, Drug and Cosmetic Act. It also argues the agency failed to protect the environment and consult wildlife agencies in its review process, as required by federal law, CFS said in a release. 

"I think it's important to note that FDA has gone ahead with this approval over the objections of over 2 million Americans in the comment period," Kimbrell told HuffPost.

In its approval announcement in November, the FDA said it determined "food from AquAdvantage Salmon is as safe to eat and as nutritious as food from other non-GE Atlantic salmon and that there are no biologically relevant differences in the nutritional profile of AquAdvantage Salmon compared to that of other farm-raised Atlantic salmon."

FDA spokeswoman Juli Putnamn told HuffPost in an email that as a matter of policy, the federal agency does not comment on pending litigation.

SAUL LOEB via Getty Images

Fresh Atlantic salmon steaks and fillets at Eastern Market in Washington, D.C. in 2013.

The lawsuit is the latest development in an ongoing and heated debate over genetically modified organisms, their safety and whether genetically engineered foods should be labeled. While proponents say the technology allows agricultural farmers to be more efficient, opponents argue they result in heavy pesticide use and transgenic contamination.

In the case of its GE salmon, AquaBounty says the fish grows to market size using 25 percent less feed than any Atlantic salmon on the market today.

But if the engineered fish were to be released into the wild -- a risk AquaBounty says is eliminated by raising them on land and away from the ocean -- critics worry they might outcompete endangered wild salmon for food and introduce new diseases.

“Once they escape, you can’t put these transgenic fish back in the bag," Dune Lankard, a salmon fisherman and the Center for Biological Diversity’s Alaska representative, said in a release. "They’re manufactured to outgrow wild salmon, and if they cross-breed, it could have irreversible impacts on the natural world. This kind of dangerous tinkering could easily morph into a disaster for wild salmon that will be impossible to undo."

Plaintiffs in the case include Pacific Coast Federation of Fishermen’s Associations, Institute for Fisheries Resources, Golden Gate Salmon Association, Friends of Merrymeeting Bay and others.

Gen X Is The Most Screwed Generation When It Comes To Real Estate

It's fashionable to talk about how the housing crisis hurt millennials. But we tend to forget that the slightly older Generation X bore the brunt of the pain -- and continues to bear it.

True, millennials have been shut out of the housing market through a combination of rising rents and high student debt, which keep them from saving enough for a down payment. But most of the current crop of young adults were too young to feel the acute pain of the housing crisis, and their troubles are only one of the many lasting effects of the late 2000s.

Gen Xers, on the other hand, were mostly in their 30s and early 40s when the housing crisis hit -- just old enough to have bought a house. By 2009, many of them found themselves either underwater on their mortgage, or in foreclosure and completely forced out of their home. Gen X was in the wrong place at the wrong time, economically speaking, and in many cases the consequences of that continue. 

Nineteen million of America's current renters used to be homeowners, according to a new report from the Urban Institute. Some of those are older retirees who have sold their homes and downsized, but most aren't. Nearly a quarter of those former owners (4.2 million) lost their homes to foreclosure as a result of the housing crisis. Most of them are now middle-aged and still renting, as you can see in the chart below:

Urban Institute

Laurie Goodman, one of the authors of the study, told The Huffington Post she was surprised at just how many Gen Xers turned out to be in the renting-but-used-to-own category. The housing crisis changed the profile of renters in this country, adding a huge crop of middle-aged people, who in any previous decade would have owned their homes. 

"You always hear about renting just being the preference of the millennials," she said. But her data show that renting has also been forced on many older people over the last 10 years. "You don’t [often] see it quantified how big an impact the housing crisis had on homeownership." 

Gen X is the unlucky group that was just hitting full adulthood in the mid 2000s. The 35-45 age group in the chart above would have been between 27 and 36 back in 2007, which puts them right at the age when people generally begin starting families and buying homes. New homeowners have the most debt and the least equity in their properties. When the crisis came, newer homeowners didn't have years of payments and value appreciation to cushion the blow when home values around the country fell between 10 and 30 percent.  

Imagine you bought a $100,000 home in Phoenix in 2007. You put 10 percent down in order to get a mortgage, and though that $10,000 was most of your savings, you were taught that housing was safe. By the end of 2008, that house was probably worth less than $70,000, and you were stuck in it. Then, say you lost your job in early 2009 and couldn't make your house payments to the bank. You'd lose your original down payment -- that is, all your savings -- and on top of that you would need to look for new rental housing if you wanted a place to live. Eight years later, maybe you've scraped together enough to make a new down payment, but more likely your credit is shot and you're still living in a rental. 

Of the 9 million people who went through a foreclosure between 2003 and 2015, 4.7 million are still renting, according to the report. That, in turn, added more people to the rental market, driving up demand, and prices. That means rents are higher for younger people who are trying to cobble together savings for a down payment, making it harder for them to buy.

It's a vicious cycle that has left a permanent scar on the American housing market, according to Goodman. 

"People will repair their credit over time but the foreclosure crisis is going to leave a lasting effect on the homeownership rate, permanently raising the number of renters," she said.