Category: Law
U.S. government regulations for virtual currencies
Here is part of one summary:
The major boon from the document for Bitcoin is this: users get off lightly. In fact, FINCEN does not intend to touch mere users of virtual currency at all; the document states, “a user who obtains convertible virtual currency and uses it to purchase real or virtual goods or services is not an MSB under FinCEN’s regulations. Such activity, in and of itself, does not fit within the definition of “money transmission services” and therefore is not subject to FinCEN’s registration, reporting, and recordkeeping regulations for MSBs.” The document also offers protection from “prepaid access” laws that regulate gift cards and the like, saying that “a person’s acceptance and/or transmission of convertible virtual currency cannot be characterized as providing or selling prepaid access because prepaid access is limited to real currencies.” Finally, even exchanges are safe from “foreign exchange” regulation, the set of rules governing businesses that offer exchange between two or more national currencies.
The regulations are here, and the pointer is from Jeff Garzik. On the topic, there is a very good short essay by Eli Dourado.
Sylvia Nasar is suing Columbia
A tenured professor at Columbia’s Graduate School of Journalism and co-director of that school’s business program filed a lawsuit on Tuesday accusing the university of misdirecting $4.5 million in funds over the last decade.
The professor, Sylvia Nasar, who is the John S. and James L. Knight professor of business journalism at Columbia and the author of the book “A Beautiful Mind,” which inspired the movie of the same name, charges in the suit that the university mishandled funds from a $1.5 million endowment provided by the Knight Foundation to improve the school’s teaching of business journalism.
The full story is here, but here is a bit more:
Terms of the agreement called for Columbia to pay the professorship’s salary on its own, and use foundation funds for additional salary and benefits, like research…
In 2000, the university hired Ms. Nasar…According to the lawsuit she was given a base salary, which the university paid for out of Knight Foundation funds, and was asked to pay most of her additional expenses out of her own pocket.
Ms. Nasar said in the suit that over time she spent $174,000 of her own money for research and other expenses. She is asking for punitive damages.
Ms. Nasar said in an interview that in September 2010 she had received an e-mail from the university listing more than $70,000 in what she described as “phantom I.T. charges” — expenses attributed to her that she says she never incurred.
Data on the sequester and defense
From Sober Look, here is an index of defense stocks plotted against the S&P 500:
Of course you can read this as simply suggesting that the sequester, or parts of it, will soon be reversed, and/or some parts of the sequester were not that fearful in the first place. There is more here.
A short history of bank deposit levies
In July 1992 Italy’s Socialist Prime Minister Giuliano Amato imposed a one-off levy on bank accounts. It was a mere 0.6% in comparison with Cyprus’s scheme, and it still left a lasting scar on the country’s financial psyche. In 1936 Norway experimented with a bank deposit tax, but it caused an exodus of cash from the country. There are also some Latin American examples (Brazil in 1992, Argentina at the turn of the millennium) but most were combined with capital controls, and were last-ditch efforts to rescue the financial system when all else had already been tried.
That is from Edmund Conway, here is more. From Carola Binder, here is a history of capital levies in fiscal crises, and via Google here is what Hungary did in 1920.
A few Cyprus questions
Week-to-week, holiday-adjusted, how much will Cyprus gdp go down? Is it the case, as it seems so far, that the small (and large) depositors take a whack and the senior credit holders are spared? Does that set a precedent for future bail-ins?
How much nicer will the other EU countries be to Merkel now? To her face? Behind her back? How many more votes does she win in September?
What counts as “good news” or “bad news” coming out of Cyprus? Let’s say things go badly. That could cause market panic and contagion and of course misery among the Cypriots (and Russian oligarchs). Depositors might pull out of Greek and Spanish banks to a much greater extent.
Alternatively, let’s say the economic transition from the “Cyprus deposit tax” is relatively smooth and orderly. Will not some other countries start wondering whether their transition out of the euro also would be relatively smooth and orderly? Keep in mind that, as it stands, Cyprus is suffering deflationary effects, bank closure costs, capital controls, yet without getting the redenomination benefits and independent monetary policy benefits of leaving the euro. If that appears “OK” (do note however that Cyprus is spared the burden of creating a new currency), won’t the notion that leaving the euro is practical after all start to spread? Which could cause bigger bank runs than if the Cypriot transition goes badly?
Can good news end up being bad news? Or vice versa? What would Jeff Ely say? What would Garo Yepremian say?
Addendum: There is much more of interest here. And a good critique from Schumpeter here.
The author calls it “Irony corner”
…the destination of choice for Russian money looking to escape into an EU jurisdiction is now apparently Latvia
There is much more, which is an excellent overall survey of the Cyprus situation. Here two additional sentences of interest:
If the infliction of losses on small depositors has a purpose, it’s probably to reassure the Russians that they are not being discriminated against. Yes, I may have thrown up a little in my mouth typing that.
There is, by the way, a local bank holiday Monday, although on Twitter I already am seeing reports of queues forming in front of banks in Cyprus and the “drying up” of ATMs.
File under: “No longer too small to fail.”
The Cyprus surprise
Announced Friday night of course:
Final details being inked on
#Cyprus bailout as we speak. Most significant measure: 9.9% levy on bank deposits over €100,000, says source.
That is from Peter Siegel. (Addendum: and here is more information.) I believe that is not the full deal (do depositors get some kind of equity claim?) and there is more information to come. Elsewhere, all four games were drawn in the Candidates Match for the right to play against Anand for the world chess championship. It will be interesting to see who makes the next move.
p.s. I don’t like to give investment advice (other than “diversify” and “buy and hold”), but if you have any deposits in Cyprus banks, I would recommend asking yourself whether you are sure that this is the final haircut or step one in a series.
*With Charity for All*
I am a fan of this book. The author is Ken Stern and the subtitle is Why Charities are Failing and a Better Way to Give, with emphasis on the former I would say. Here is one excerpt:
The CBO study and other reporting on the practices of charitable hospitals did in fact spur reforms efforts, including a proposal in Congress to require a minimum uncompensated care rate of 5 percent in return for tax-exempt status. All the major proposals, however, have been beaten back, with reform advocates having to settle for greater public reporting obligations for charitable hospitals on the theory that greater transparency would ratchet up pressure for change. It hasn’t worked. A 2012 nationwide study found continuing low levels of uncompensated care, only 1.51 percent on average, a number less than half the profit margins for the same group of hospitals.
Thwarted body part markets in everything
The Chicago-based nonprofit faces “the same challenge any business would have, whether I’m selling Hostess Twinkies or cadavers,” says Stephen Burnett, a professor of management and strategy at Northwestern University’s Kellogg School of Management.
To stay ahead, the association wants to supply body parts to the FBI and launch new products, including its own plastinated bodies, says Mr. Dudek, 62, executive vice president since 2005. He draws on his entrepreneurial experience as a co-owner of an MRI center in the south suburbs, which he sold to join the association.
Originally known as the Demonstrator’s Society, the association has not changed its business plan since its founding in 1918. Bodies are donated, embalmed and transferred to institutions such as med schools, where dissection remains a rite of passage.
Reasons for donations vary. Some gifts are part of estate planning, while others are made by relatives who cannot afford funerals.
By law, bodies cannot be sold, although groups like the association can be paid for processing. Member med schools pay about $1,300 per cadaver; nonmembers pay $2,300.
Nationwide, there’s a shortage of cadavers, in part because of the rise in organ donation. Cadavers without their organs are not suitable for medical education, Mr. Dudek notes. The association needs about 425 bodies a year for its members but missed that mark in 2009 and has barely met it in three of the last six years.
And yet globalization and government may come to the rescue:
The Middle East, where the culture discourages body donations, could be a new market. Schools in Lebanon and Saudi Arabia have recently expressed interest, he says. Law enforcement agencies also are prospects. Anatomical Gift is close to signing a contract to supply the FBI’s K-9 unit, which uses body parts to train dogs to find crime victims, he says. Limbs cost $570, plus $335 for HIV and hepatitis testing, since they are not embalmed, Mr. Dudek says. An FBI spokeswoman declines to comment.
There is more here, and for the pointer I thank G. Patrick Lynch.
InTrade has closed down
Their somewhat mysterious announcement, which refers to financial irregularities, can be read here.
Canada projection of the day
In Toronto, 63 percent of the population will be foreign born by 2031…In Vancouver, the foreign-born population will be 59 percent.
That is from the quite interesting The Big Shift: The Seismic Change in Canadian Politics, Business, and Culture and What it Means for Our Future, by Darrell Bricker and John Ibbitson. If you are into the “how should the Republican Party reinvent itself?” question, this book is a must-read. That’s not so much my thing, but it’s also a fascinating introduction to the new ethnic politics in Canada and why so many Canadian immigrants have seen fit to vote for the conservatives.
Dept. of unintended consequences
…local residents and city officials developed a plan to force convicted sex offenders to leave their neighborhood: open a tiny park.
Parents here, where state law prohibits registered sex offenders from living within 2,000 feet of a school or a public park, are not the only ones seizing on this approach. From the metropolis of Miami to the small town of Sapulpa, Okla., communities are building pocket parks, sometimes so small that they have barely enough room for a swing set, to drive out sex offenders. One playground installation company in Houston has even advertised its services to homeowners associations as an option for keeping sex offenders away.
In many cities sex offenders are finding it hard to live anywhere at all, or they cluster in a few park-less neighborhoods. The article is, as they say, interesting throughout.
Sentences of interest
IBM is also working to program Watson so that it can pass the U.S. Medical Licensing Examination.
Here is more.
Coasean markets in everything?
A consortium of Central Texas businesses and communities has floated a novel solution to the tug of war over Colorado River water: Pay downriver rice farmers not to farm rice.
Members of the Central Texas Water Coalition are asking the Lower Colorado River Authority to pay rice farmers at least $100 million not to farm rice in perpetuity. They figure that’s cheaper than the cost of a proposed downriver reservoir, whose costs the LCRA estimates at $206 million.
The full story is here, and for the pointer I thank Bill, a marginally loyal MR reader.
The privatization of law enforcement in Melbourne and the restriction of entry
THE new sex industry police unit – created by the Baillieu government one year ago in a bid to crack down on crime in the sex industry – is hamstrung by lack of resources and has not charged any illegal brothel operators since its inception.
The unit has managed to shut down one illegal parlour but is not directly policing them – instead focusing its enforcement and monitoring activities on licensed brothels.
Frustrated licensees of legal brothels have resorted to vigilante action, sending spies into illegal parlours. They have given police statutory declarations swearing they received sexual services at five illegal brothels around Melbourne – all of them close to police or politicians’ offices, including Premier Ted Baillieu’s office in Camberwell.
Police are also understood to have been provided last year with a further list of 62 premises suspected of providing illegal sex – all of which are believed to be still operating.
Here is more, and for the pointer I thank David H.