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Dodd Bill Cloture; Inflation News; New Fears of Euro Contagion: Advisor Briefing for the Week of May 17, 2010

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The markets will likely be moved by an expected Senate vote this week on the Dodd financial services reform bill; Summit Business Media sources suggest there will be a cloture vote on May 17–the Senate convenes at 2:00 PM that day–followed by release of the “managers’ amendment” the same day or Tuesday. May 18. A vote is likely on the bill, S.3217, Restoring American Financial Stability Act of 2010, according to Congress Daily, because two other key bills must be passed before Memorial Day–a supplemental spending bill and a tax-extender package.

In two recent speeches, President Obama raised the issue of reform and the economy. In a speech in Buffalo on May 13, Obama spoke of the importance of small businesses to the economy–”government can’t create jobs,” he said, “but it can create the conditions for small businesses to grow and thrive and hire more workers”–and also discussed prospects for tax simplification.

In his weekly radio address on May 15, Obama spoke admiringly of community banks and how financial services reform will benefit those institutions and consumers: “What reform will do is help level the playing field by making sure all our lenders–not just community banks–are subject to tough oversight.”

A post called The 10 Most Wanted Lobbyist Loopholes on Financial Reform” by Dan Pfeiffer, the White House Communications Director, on May 4 predicting how the “lobbyists” would attempt to shanghai the financial services reform bill is worth a revisit, though there’s no mention of the fiduciary issue.

As the euro fell May 14 to its lowest level since the markets and economic crisis of 2008-2009, there are new fears that the Greek debt contagion will spread to banks throughout Europe. In an interview in Der Spiegel on May 15, the head of the European Central Bank, Jean-Claude Trichet, warned that European markets remained fragile despite the nearly $1 trillion loan package that EU finance ministers wrought last week with the help of the IMF, saying “These big and highly leveraged institutions are a major issue to be addressed at the global level,” and that “We are now experiencing severe tensions.”

As for economic reports, May 17 brings the Housing Market Index, May 18 brings housing starts and the producer price index. Two releases on May 19 concern inflation: the Consumer Price Index is released in the morning, while minutes of the Fed Open Market Committee are released in the afternoon.

Fed Vice Chairman Donald Kohn gave an interesting address on May 13 on the Fed’s policy actions during the financial crisis and the lessons it has learned to avert future crises.

Back in Congress there are two hearings of interest on May 20: The Senate Banking, Housing, and Urban Affairs Subcommittee on Securities, Insurance and Investment holds hearings, featuring Mary Schapiro, on the “causes and lessons of the May 6th market plunge,” while at the same time and day, the Senate Finance Committtee’s Subcommittee on Energy, Natural Resources, and Infrastructure holds hearings on clean technology manufacturing competitiveness, focusing on the role of tax incentives.

There are three primary elections on Tuesday that will affect the makeup of the 112th Congress. In Pennsylvania, Senator Arlen Spector–who last ran, and was elected as, a Republican–faces an uphill battle to get the Democratic nomination. In Arkansas, Senator Blanche Lincoln, chairman of the Senate Agriculture Committee. who recently came to prominence for her role in the bank derivatives regulatory squabble, faces her own primary battle. Finally, there is a primary election in Kentucky to pick the Republican candidate to succeed Senator Jim Bunning, who is retiring after two terms. In a comprehensive May 17 article, The New York Timesdescribes the candidates and their positions, and what the results may show about the state of the American body politic.

Finally on Friday, May 21, Mark Kurland, a former executive at New Castle Funds, hedge-fund complex, faces sentencing after he pleaded guilty last January to one count of conspiracy and one count of securities fraud in the Galleon Group insider trading case.


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