Talk Back

   By Suzanne Barlyn
   A DOW JONES NEWSWIRES COLUMN

NEW YORK (Dow Jones)–It’s getting trickier for federal lawmakers to oppose a fiduciary standard that would protect the retail investor, especially when their sympathy now extends to the institutional investor.

Recent legislative proposals would establish a fiduciary duty for brokers who advise certain institutional investors, mainly states, municipalities and public pension funds. That is, those brokers would have to act in these investors’ best interests.

The initiatives stem from the recent Goldman Sachs mortgage derivatives case and the company’s insistence that it did not need to take the side of “sophisticated institutional investors” to whom it sold risky products. Civil fraud charges were filed last month against Goldman Sachs Group Inc. (GS) by the Securities and Exchange Commission and high-profile hearings by a Senate panel put the company’s executives in an unpleasant spotlight.

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These are the personal views of Anthony Accetta, a former assistant U.S. Attorney in New York:

In the classic three-card Monte game, the hustler puts out three cards in plain sight, shows the victim one of the cards with a quick swipe and a wink, and then slips the cards in and out, ’round and ’round, in a blurring whirl of activity, until the target card is lost forever. The hustler makes his living by knowing the victim will never find the real card.

The Senate Permanent Subcommittee on Investigations, led by Sen. Carl Levin (D-Mich.), is in the process of sending the mortgage fraud card ’round and ’round.

The Senate Subcommittee has defined the Goldman Sachs card as being whether Goldman “bet against its customers” and made money by selling securities backed by bad mortgages short in its own portfolio, while selling the same securities on the open market without disclosing its bet that the securities would decrease in value. What the Senate is leaving out, however, is how did they know the securities and the mortgages backing them would be bad? That’s the wild card being shuffled right under the public’s collective nose, and the question that is not being asked.

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These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Stocks are tumbling, as investors realize President Obama is simply not offering policies that will fix the U.S. and global economies.

Each week more than 450,000 Americans apply for new unemployment benefits, and 17% of adults can’t find a full time job or have quit looking for work altogether.

Since Massachusetts voters sent Democrats a vote of no confidence, President Obama has been doubling down on bigger government and class warfare as the road to prosperity.

Meanwhile, the two biggest problems that block economic recovery go unaddressed-most businesses lack enough customers and access to bank credit to create jobs. Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

President Obama’s budget and deficit projections don’t reveal the sick state of U.S. finances, casting serious doubt on the safety of U.S. bonds.

Obama plans significant initiatives in health care, the environment, education, and jobs creation. Yet, the private sector, which must be taxed to finance government, is likely to grow slowly, resulting in too much federal borrowing.

To create jobs, businesses need customers and capital; without those they can’t sell what new employees make or buy equipment workers need.

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These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

President Obama announced he wants to prohibit banks from forming hedge funds, private equity funds and trading securities on their own accounts, and he wants to limit the size of banks and financial institutions generally.

Hedge funds, private equity funds and proprietary securities trading did not cause the banks to get into trouble, and the size of banks did not cause the credit crisis.

Banks, small and large, failed or required bailouts because of poorly considered loans, and the kinds of engineered products that were created from those loans by non-bank entities.

Collateralized debt obligations and swaps created and marketed by non-bank financial institutions, such as Lehman Brothers and Goldman Sachs, compounded the errors of foolish bankers. Later, Goldman Sachs and other financial institutions became banks to access inexpensive credit from the Federal Reserve, but those decisions could be reversed if bank holding companies are not permitted to trade on their own accounts.

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These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Scott Brown’s Massachusetts victory serves notice that Americans don’t want big government policies championed by liberal Democrats.

It is not a mandate for Republican tax cuts and deregulation. Rather, from health care to the economy, Democrats should stop accusing critics of deceiving the public and ask what voters would embrace.

To cover the uninsured, Americans would support reforms that made Medicaid and similar programs less expensive and lowered health insurance premiums for the middle class.

Real reform would reduce drug and administrative costs to those in other advanced countries, like Germany or Holland, and end waste imposed by malpractice suits those countries don’t endure.

Reform should not impose higher taxes but rather lower costs–the president should apply that yardstick, not budget neutrality.

Regarding unemployment, the $789 billion stimulus package will not deliver the 4 million jobs promised. Fanciful dreams of creating million jobs in green industries are just that–fanciful dreams.

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These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Goldman Sachs, J.P. Morgan and other big Wall Street banks are awarding multi-million dollar bonuses to the same financiers who pushed the nation to the brink of financial ruin.

President Barack Obama voices outrage but fails to stem the abuse.

Wall Street leaders argue those bonuses were earned, much like jewel thieves refer to a big heist snatched from an impenetrable safe.

Wall Street has kept its mischief legal by salting the pockets of politicians running for Congress and president, and by making certain that key policy makers at the Treasury Department and the Federal Reserve are faithful Goldman Sachs alumni. Continue reading…