MacGray Matter   July 19, 2010

FINANCIAL REFORM: Early this week, President Obama will sign the Financial Reform Act passed by the Senate this past week. What does the bill say?  Once again, it is very, very long and rather confusing. One of the main reasons I can’t tell you what it all means is that much of the Act simply directs the Executive Branch to do things, like make regulations. The bill will immediately create a 10-member Financial Stability Oversight Council, a powerful assembly of regulators chaired by the Treasury Secretary to keep watch over the entire financial system. The Obama administration has one year to create a new Bureau of Consumer Financial Protection. The Fed has until April to derive standards to measure the fairness of fees charged by banks to merchants for customers who use debit cards.  Regulators also will have to figure out how to implement new standards for how much capital banks should hold in reserve to protect against losses. The legislation requires rules in 18 months, but the U.S. is also part of international negotiations on what global capital standards should be, and those could move more slowly and affect how quickly the regulations are enacted. As we learn more about this legislation and its implications, we will provide additional information.

EQUITIES LOSE IT ALL ON FRIDAY: On Friday, stocks gave back all of the gains that had been earned during the first four days of the week. This was largely due to the drop in quarterly revenues for some major companies such as GE, Citigroup, and Bank of America. Other economic news for the week included reports indicating the major inflation indices fell in June due to lower prices of energy and food, retail sales were 0.5% lower in June (second consecutive monthly decline), and industrial production slowed in June. For the week, the Dow was down 0.98% (down 3.17% for the year), the S & P 500 was down 1.21% (down 4.50% for the year) and the NASDAQ Composite was down 0.79% (down 3.97% for the year).

POTENTIAL MARKET MOVERS THIS WEEK: It often seems that anything and everything can move the markets on a given day. Here are some events coming up this week that will likely influence what happens with the markets short term movement. Three housing-related reports will be released this week: the NAHB builder confidence survey on Monday, housing starts on Tuesday, and existing home sales on Thursday. Fed Chairman Bernanke will report to the Senate and House on Wednesday and Thursday, and on Friday, the European bank stress test results will be released. Also on Tuesday, the Bureau of Labor Statistics will release the Regional and State Employment and Unemployment report for June. On Thursday, the initial weekly unemployment claims report will be released.

RAILROAD TRAFFIC: According to the Association of American Railroads, traffic in June 2010 was up 10.6% compared to June 2009, but traffic was still 10.2% lower than in June 2008.

NET WORTHS OF PRESIDENTS:  The Atlantic published an article which showed the net worths of all the U.S. Presidents at their peaks in today’s dollars. Here are some of their results:

• George Washington  $525 Million
• John Adams  $19 Million
• Thomas Jefferson $212 Million
• Andrew Jackson $119 Million
• Abraham Lincoln Less than $1 Million
• Ulysses Grant Less than $1 Million
• Theodore Roosevelt $125 Million
• Franklin D. Roosevelt $60 Million
• John F. Kennedy $1 Billion
• Ronald Reagan 13 Million
• Bill Clinton $38 Million
• George W. Bush $20 Million
• Barack Obama $5 Million

MORE AFRAID OF RUNNING OUT OF MONEY THAN DYING: Allianz Life Insurance Company surveyed 3,200 Americans. They found that sixty-one percent of Americans between the ages of 44 to 75 admit they fear the prospect of running out of their accumulated assets during retirement more than they fear death.

OLD POWERS OF ATTORNEY AND HIPAA: The Health Insurance Portability and Accountability Act (HIPAA) was passed in 1996. The privacy rules under HIPAA became effective in April 2003, and health care providers must comply. Essentially, the HIPAA privacy rules provide that health care providers must take steps to prevent the unauthorized dissemination of “Protected Health Information” (PHI). The penalties to health care providers for non-compliance with the HIPAA privacy rules are severe. As a result, health care providers are very concerned that they might transmit PHI and incur severe penalties. Consequently, Health Care Powers of Attorney will be carefully scrutinized by health care providers, and health care providers will need assurances that providing PHI to a Health Care Representative will not violate HIPAA. Given the penalties at stake, the health care provider may likely err on the side of caution and not provide any PHI to a Health Care Representative unless the Health Care Power of Attorney specifically states that PHI may be transmitted under the HIPAA privacy rules. Therefore, all Health Care Powers of Attorney should be updated to specifically empower Health Care Representatives to receive PHI in accordance with HIPAA. This power should be clearly stated so that any health care provider reviewing the power will feel secure that the transmission of the PHI to the Health Care Representative will not be a violation of the privacy rules of HIPAA. While all Health Care Powers of Attorney should be scrutinized to see if they contain provisions regarding HIPAA and PHI, it is unlikely that any Health Care Powers of Attorney executed in 2001 or earlier will contain such provisions since the final HIPAA privacy regulations were not published until December of 2000.

Have a great week!

Doug MacGray

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