Trump's own Magic Roundabout might just end up in the weeds.
In the iconic TV series, The Magic Roundabout, an old man with a beard rides a tricycle around the garden, making "wheeeee" noises that attract a lot of attention but seem to have little substance. He's the gardener, but his lack of clear purpose means that the garden is, well, let's say, a little unkempt. Fast forward almost 45 years and another Mr McHenry is making noises with, seemingly, worryingly little understanding of what he's talking about. And he's part of the Trump infotainment system that is encouraging the President to make bad policy based on misinformation or, as it's called today, fake news or, even "alternative facts."
THere's lies, damned lies and alternative facts. And then there's the Trump administration's delusions, for example White House Press Secretary Sean Spicer's outlandish claims that "“This was the largest audience ever to witness an inauguration, period, both in person and around the globe," and alleging that media had "intentionally framed their photographs" to make the Trump crowd look smaller. Spicer also provided figures that seem to be at best dubious and at worse deliberately wrong. He said "“We know that 420,000 people used D.C. Metro public transit yesterday, which compares to 317,000 that used it for President Obama's last inaugural." However, the Washington Mass Transit Authority told the Washington Post "570,557 riders used the Metro system between its 4 a.m. opening and its midnight closure on Friday. That number falls short of both President Obama’s 2009 and 2013 inaugurations, which saw 1.1 million trips and 782,000 trips respectively" (as re-reported by The Atlantic). It is reported that Trump's inauguration was seen on TV by more people that Clinton and Obama's SECOND ceremonies, but not their first. But Reagan is the clear winner: in 1981, says Neilson, he got 41.8 million while Trump managed only 30.6. And Obama's inauguration in 2009? 37 million.
Trump said recently "We expect to be cutting a lot out of Dodd-Frank because, frankly, I have so many people, friends of mine, who have nice businesses who can’t borrow money. They just can’t get any money because the banks just won’t let them borrow, because of the rules and regulations in Dodd-Frank.”
It is into these murky waters of false statements that Republican congressman Patrick McHenry is peddling his own special view of financial regulation. McHenry has represented North Carolina's 10th congressional district since 2005 and he is now vice chairman of the Financial Services Committee.
In the last week of January, McHenry "suggested that the US should pull out of international bodies such as the Financial Stability Board (FSB) and the Basel committee that agrees standards for banks’ capital and supervision." His reasoning? the US has been "unfairly penalised" by the "secretive" groups.
The USA has been in the driving seat for much international reform. While its leviathan banks such as Citi have struggled to recover from the global financial crisis, its nimbler smaller banks have capitalised (haha) on the misfortunes of others, helped in no small measure by some foreign banks being continually targeted by US regulators and prosecutors while US banks have been largely left to their own devices. Capital adequacy achieved? We'll take a slug of that, seems to be part of the USA's reasoning.
The Financial Stability Board is, frankly, a bit pointless: it should be subsumed within the Bank of International Settlements proper. There are too many bodies doing the same or similar things in all areas of financial sector regulation, all too often quoting each other as corroboration for their views. But that is not what McHenry says.
Where McHenry is bordering on the silly is that he wants to undermine the capital requirements that financial services businesses have to meet. There were many causes of the global financial crisis, most notably Alan Greenspan's total lack of grip on the reality that was unfolding long before Lehmann Brothers collapsed. But the one that was most easily agreed upon was that the banks held insufficient reserves to survive even relatively small shocks. McHenry thinks that capital controls have acted to the detriment of the USA's banking system. He should look at the history of US banking: it's littered with failures that arose out of under-capitalisation, especially when a run started.
On 31 January this year, McHenry wrote to Janet Yellen, the Governor of the Federal Reserve (technically, she's the chairman of the board of governors of the Federal Reserve System). In that letter he said "it is incumbent upon all regulators to support the US economy and scrutinise international agreements that are killing American jobs. Accordingly, the Federal Reserve must cease all attempts to negotiate binding standards burdening American business until President Trump has had an opportunity to nominate and appoint officials that prioritise American's best interests."
Of course, McHenry can't fire Yellen. But clearly, if she does her job, he plans to try to make that happen. Earlier in the letter he wrote "it appears that the Federal Reserve continues negotiating international regulatory standards for financial institutions among global beureaucrats in foreign lands without transparency, accountability or the authority to do so. This is unacceptable."
McHenry's letter demonstrates a failure to grasp even the most basic of aspects of what the Fed is for. It is bordering on the delusional to suggest that the Fed does not have the authority to negotiate international standards: it is the USA's lead agency for financial regulation. McHenry might not like it, but it has full authority created in legislation. And he cannot simply over-ride legislation with a rant in a letter.
Furthermore, the bodies he mentions have no power or authority. They are hot air balloons into which the USA is a frequent and often very large contributor. They produce sets of rules, like club rules, only when every member (albeit with bribery and strong-arming as standard operating procedure) agrees. Then and only then do the balloons fly. No one makes the USA do anything; quite the reverse in fact, as witness its role at the Financial Action Task Force.
The negotiations are as open as they can be: no one keeps any secrets about the proposals (although the bribery and strong-arming are usually not disclosed publicly) and all those affected, namely the financial institutions, not only have (albeit second-row) seats at the table but have processes by which they make their needs and objections plain.
Someone, somewhere, is feeding McHenry and Trump some false information. Or they are making it up as they go along.
Soon, they are likely to find themselves in the weeds.
https://www.youtube.com/watch?... (Not Mr McHenry, but the vacuous Twits make us giggle)