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Lok Sabha passes banking bill, companies bill (Updated on 19-12-12 at 6.10 AM)

December 19, 2012, 6:38 amApril 11, 2022 0 1977

The Lok Sabha today passed the Banking Bill and the Companies Bill.

The Baking Bill was passed after the government gave in to the BJP’s demand to drop the controversial forward contract bill from the amendment, paving the way for issuance of new licenses and consolidation in the sector.

Regarding the Companies Bill the government said the aim is to protect interest of employees and small investors while encouraging firms to undertake social welfare voluntarily instead of imposing that through “inspector raj”.

Replying to a debate before the bill was passed by a voice vote, Corporate Affairs Minister Sachin Pilot said through this new legislation, the government intends to make India an attractive and safe investment destination.

He said special courts would be set up for speedy trials, as an assurance to investors that cases will not linger on.

“The new clause (on forward trading) will not be pressed. We will debate the rest of the Bill,” Finance Minister P Chidambaram, Finance Minister, told the Lok Sabha when discussions commenced on the Banking Bill. The introduction of this clause was opposed as it did not form part of the Banking Laws (amendment) Bill 2011 that was referred to the Standing Committee on Finance.

The bill aims to draw foreign investment to the banking sector by increasing shareholders’ voting rights to 26 percent from the existing 10 percent. This is expected to lead to consolidation in the industry, as it will increase investor interest in private banks. Secondly, it will also encourage foreign banks to expand in India by buying stakes in local banks, as they would have greater operational control over their management.

While defending the case for the bill, Chidambaram also said India needs world-class large banks, thereby making the case for consolidation and expansion even stronger.

Chidambaram also said the government plans to infuse Rs 1500 crore into public sector banks to ensure expansion. He said that at least 6,000 new branches will be opened and around 84,000 people will be recruited for the same.

“We have to infuse capital in the banks so that they can lend. The funds will be infused by bonus shares and rights issue,” he said.

Post the passage of the bill, the Reserve Bank of India can get moving on issuing new banking licenses to private banks. The process for inviting application for setting up new banks could start as early as January 2013.

India’s banks are in need of funds to expand operations and meet enhanced capital requirements under Basel-3 norms.

RBI had formulated the draft rules for the issue of new bank licenses to private banks in 2011, but held back on their implementation, urging the government to first get the banking bill approved by Parliament because it said it needed more powers.

However, the minimum capital requirement and guidelines for setting up new banks are still not known. Only those entities that the RBI deems fit and proper will be allowed to set up shop in India. Sources, however, told CNBC-TV18 that preference will be given to non-banking financial corporations as applicants for new licenses.

The proposed law will also give the RBI the power to inspect the books of banks’ associate companies.

Meanwhile, Chidambaram also said that the much-awaited insurance bill and land acquisition bill will not come up during the Winter Session of Parliament. The two have been deferred till the Budget Session.

Further, clarifying on the Banking Bill, Chidambaram said the Competition Commission clause in the Banking Bill has been modified which allows the Reserve Bank of India to remain the banking regulator, while the Competition Commission of India (CCI) would regulate mergers and acquisitions. The Finance Minister, however, clarified that the banking sector is not outside the CCI’s purview.

The Banking Laws (Amendment) Bill, 2011 will now be taken up for discussion in the Rajya Sabha, the upper house of parliament.

FICCI chief Naina Lal Kidwai welcomed the move and said the government has given a very important signalling by passing the bill as bigger banks are essential for more competition in the banking sector. “There will be many takers for new licenses. Banking is a sector that can attract private equity,” she said.

The End of the World – What, Me Worry? (December 21, 2012)

December 10, 2012, 10:55 pmApril 11, 2022 2 2415

The world will not end on December 21, 2012 or anytime soon. I think the Mayan calendar indicates the end of a very long-term cycle that has a gradual impact upon the world, just as other long-term cycles make significant but gradual changes. Increases and decreases in solar output (a long-term cycle) may create ice ages or droughts that slowly and gradually change the world.

I’m also not worried about the other “end of the world” that we continuously hear about – The Fiscal Cliff. That topic has been worked to death. But the important information is simple:

Politicians brought the United States into our current fiscal mess, with the help of The Federal Reserve and bankers.
We have entrusted politicians to solve the problem. Really? The same political elite who created the problems will solve them? And what is your current belief structure regarding the Easter Bunny and the Tooth Fairy?
We have way too much debt and far too much government spending. The supposed plan is to increase debt forever and without end (sounds like a prayer) and to marginally decrease the rate of increase in spending – and call it a spending cut. If I call a donkey a mosquito, is it really a mosquito, or just a renamed donkey? If I have a debt and spending problem and my plan is to continue spending excessively, should I expect my problem to persist or disappear? If I have a serious drinking problem, should I expect to cure it with vodka?
So, the world is not going to end on December 21 or January 1. More of the same will beget more of the same.

But what does worry me are the actions that we, the supposedly most intelligent species on the planet, have made over the past several hundred years. Actions have consequences. Consider these actions:

Creation of Fractional Reserve Banking: This allows bankers to create money “from thin air” and loan it to businesses, individuals, and governments and collect the interest on that created money. The result is that debt increases, additional interest must be paid, and the financial services portion of the economy increases at the expense of the manufacturing economy. The paper shufflers won, and the manufacturers of useful and valuable products lost.

Creation of Central Banks: Central banks, not the free market, currently control the money supply and interest rates, enable politicians to spend excessively and government to expand more rapidly than the productive economy. Consequently, the economy becomes overburdened with debt, interest payments, and government regulations. What could go wrong?

Corporate control over the government and regulatory process: If a business owns many politicians, it can purchase the legislation and regulation it desires. The US tax code is an estimated 70,000 pages of legislation and regulations, as purchased by wealthy and powerful special interests. Intelligent action or payoff action?

Demonetization of gold and the use of unbacked paper money: When paper money is not backed by gold (silver, oil, etc.), then the total quantity of money in circulation can increase almost without limit. Hence, the purchasing value of the money decreases and prices rise. Consumer price inflation is guaranteed.

Politicians, bureaucrats, and bankers control markets and make decisions that should be left to free markets. Another writer likened that process to handing a Stradivarius to a gorilla. Freer markets do a better job of managing the economy, money supply, interest rates, prices, and production. How do we know? Ask the survivors of the hyperinflations in the last century.

The world will not end on December 21, 2012 or anytime soon. I think the Mayan calendar indicates the end of a very long-term cycle that has a gradual impact upon the world, just as other long-term cycles make significant but gradual changes. Increases and decreases in solar output (a long-term cycle) may create ice ages or droughts that slowly and gradually change the world.

I’m also not worried about the other “end of the world” that we continuously hear about – The Fiscal Cliff. That topic has been worked to death. But the important information is simple:

Politicians brought the United States into our current fiscal mess, with the help of The Federal Reserve and bankers.
We have entrusted politicians to solve the problem. Really? The same political elite who created the problems will solve them? And what is your current belief structure regarding the Easter Bunny and the Tooth Fairy?
We have way too much debt and far too much government spending. The supposed plan is to increase debt forever and without end (sounds like a prayer) and to marginally decrease the rate of increase in spending – and call it a spending cut. If I call a donkey a mosquito, is it really a mosquito, or just a renamed donkey? If I have a debt and spending problem and my plan is to continue spending excessively, should I expect my problem to persist or disappear? If I have a serious drinking problem, should I expect to cure it with vodka?
So, the world is not going to end on December 21 or January 1. More of the same will beget more of the same.

But what does worry me are the actions that we, the supposedly most intelligent species on the planet, have made over the past several hundred years. Actions have consequences. Consider these actions:

Creation of Fractional Reserve Banking: This allows bankers to create money “from thin air” and loan it to businesses, individuals, and governments and collect the interest on that created money. The result is that debt increases, additional interest must be paid, and the financial services portion of the economy increases at the expense of the manufacturing economy. The paper shufflers won, and the manufacturers of useful and valuable products lost.

Creation of Central Banks: Central banks, not the free market, currently control the money supply and interest rates, enable politicians to spend excessively and government to expand more rapidly than the productive economy. Consequently, the economy becomes overburdened with debt, interest payments, and government regulations. What could go wrong?

Corporate control over the government and regulatory process: If a business owns many politicians, it can purchase the legislation and regulation it desires. The US tax code is an estimated 70,000 pages of legislation and regulations, as purchased by wealthy and powerful special interests. Intelligent action or payoff action?

Demonetization of gold and the use of unbacked paper money: When paper money is not backed by gold (silver, oil, etc.), then the total quantity of money in circulation can increase almost without limit. Hence, the purchasing value of the money decreases and prices rise. Consumer price inflation is guaranteed.

Politicians, bureaucrats, and bankers control markets and make decisions that should be left to free markets. Another writer likened that process to handing a Stradivarius to a gorilla. Freer markets do a better job of managing the economy, money supply, interest rates, prices, and production. How do we know? Ask the survivors of the hyperinflations in the last century.

Automation (Robots) Coming to China

December 7, 2012, 10:33 amApril 11, 2022 0 2730

Automation and technology have wrecked havoc on labor markets the past 10-20 years, especially those in the developed West. Yes there are exceptions such as Canada and Australia who have resource rich environments (i.e. North Dakota) but for most economies these massive shifts have changed the landscape fundamentally, and will continue to do so. On the other hand, China has been the largest beneficiary of the shift in globalization but thus far has had little incentive for automation due to (relatively) low labor costs. But that has been changing of late with wage pressure rising – so now automation appears to be coming to China as well. Of course the balancing act of keeping enough work for hundreds of millions versus remaining competitive in cost structure is going to be one tough act for that country. But more broadly speaking it points to continued pressure globally on labor.

And More…

Some eclectic Thanks giving Day reads to express your gratitude

November 22, 2012, 10:22 pmJune 27, 2023 0 2148

Some eclectic Thanks giving Day reads to express your gratitude:

• Five economic trends to be thankful for (Washington Post)
• Be Thankful for blog posts like this one: The facts of investing life (Monevator)
• Joe Weisenthal is really thankful for Bill McBride of Calculated Risk (Business Insider)
• Be thankful you understand Why Technical Analysis Matters (All Star Charts)
• Refinancing? Be thankful for this: Fed Still Trying to Push Down Rates (WSJ)
• Be thankful Jack Welch is Retired! Jack Welch Is An Even Bigger Dick Than You Previously Believed (BusinessWeek)
• Be thankful for Lord Skidelsky and Carry On: Inequality is Killing Capitalism (Project Syndicate)
• BE THANKFUL YOU DONT OWN ANY HP: Marc Andreessen was biggest proponent for Autonomy acquisition on HP’s board members (Breaking Views)
• I’m thankful for NSFW: Marco Rubio’s Rap Preferences: A Lyrical Analysis (NSFW Corp)
• Be thankful you live during a time when technology rocks: Software That Shows What Your Shiny New iPad Can Do (NYT)

10 Tops Stories for Stock Market 22-11-2012

November 22, 2012, 8:59 pmApril 11, 2022 0 2291

• Birinyi: Sixth Myths About the Stock Market (MarketBeat)
• 10 things stores won’t say about Black Friday (MarketWatch) see also Bionic Mannequins Spy on Shoppers to Boost Luxury Sales (Bloomberg)
• HP’s Accounting Claims Are Seen as Cover for Bad Deals (Bloomberg) see also H-P Says It Was Duped, Takes $8.8 Billion Charge (WSJ)
• The Making Of A Great Contraction With A Liquidity Trap and A Jobless Recovery (The National Bureau of Economic Research)
• Wall Street Kept Winning on Mortgages Upending Homeowners (Bloomberg) see also Mortgage Settlement Monitor “Progress” Report Gooses Numbers to Hide Lack of Real Relief to Homeowners (Naked Capitalism)
• Apple and the Desire for Control (Bits)
• Todays WTF Headline: Republican-Heavy Counties Eat Up Most Food-Stamp Growth (Bloomberg) see also The Confederacy of Takers (Washington Post)
• You Can’t Say That on the Internet (NYT)
• Modern wheat a “perfect, chronic poison,” doctor says (CBS News)
• After Obama, Christie Wants a G.O.P. Hug (NYT) see also Conservative Republicans fight back after Romney loss (Washington Post)

Fiscal 2009 to Fiscal 2012

November 22, 2012, 1:21 amNovember 22, 2012 0 2123

Wow, this is a rather surprising data point: “From fiscal 2009 to fiscal 2012, the deficit shrank 3.1 percentage points, from 10.1% to 7.0% of GDP.”

It is even more surprising when you consider its source is the usually conservative Investors’ Business Daily! Here is a longer excerpt:

Believe it or not, the federal deficit has fallen faster over the past three years than it has in any such stretch since demobilization from World War II.
In fact, outside of that post-WWII era, the only time the deficit has fallen faster was when the economy relapsed in 1937, turning the Great Depression into a decade-long affair.
If U.S. history offers any guide, we are already testing the speed limits of a fiscal consolidation that doesn’t risk backfiring. That’s why the best way to address the fiscal cliff likely is to postpone it.