Almost everyone would agree that large banks like JPMorgan and Citigroup should be classified as Sifis — the melodious acronym for systemically important financial institutions, whose failure would produce widespread shocks to the financial system.
To reduce the chances of failure, regulators have imposed a broad array of extra requirements for capital, liquidity and risk controls on these Sifis.
The need for these requirements is less clear for two other categories of financial institutions currently labelled as Sifis: midsize regional banks and large insurance companies. Both types of institutions have been unsuccessful in getting their Sifi label dropped by regulators or legislators.
However, activist hedge funds have taken a more fruitful tack, pushing for structural changes to avoid the label at some midsize banks and large insurers.
Recently, Journalist and Author Dan Kadlec sat down with Sr. Lecturer Bob Pozen to discuss underfunded/unfunded retiree healthcare, its complexities and potential impact on local governments. While the topic is complex, the impact is very clear, as Pozen points out in the latest Twitter chat from MIT Sloan Experts:
Underfunded/unfunded retiree healthcare is a topic that gets little attention in the finance media. All the attention has been paid to pension funds, but retiree healthcare is in worse shape. For example, if a pension fund is only 70 percent funded, it is considered extremely underfunded. And yet retiree healthcare plans are on average only four percent funded.
Under Armour and Alphabet have similar stock structures.
Activist investors are fundamentally changing the investment market. They accumulate enough stock in publicly traded companies to influence who sits on the board, then pressure the management and board to focus on short-term returns at the expense of long-term investment. Facebook’s introduction of non-voting shares last week is a preemptive move to block this sort of intervention.
Currently, Facebook FB-0.21% has a dual-class stock structure, with Class A shares having one vote per share and Class B shares, which its founder Mark Zuckerberg and company insiders own, conferring 10 votes per share. The company intends to issue two Class C shares as a one-time stock dividend, which will grant economic ownership of Facebook, but no voting rights. This structure will preserve founder control, and enables Zuckerberg to liquidate a large portion of his shares to pursue philanthropic interests, yet still retain majority-voting control—without a majority of shares. It also means that, as Zuckerberg put it, “You don’t have to worry about losing your job over a couple of bad quarters or controversial short-term decisions, and that makes it easier to make the decisions you think are correct.” In short, predatory activist investors can’t take control and push him out.
On October 29, China adopted a policy of two children per family, instead of one. This change is, in large part, intended to mitigate the adverse demographic trend plaguing China’s social security system: the rapidly declining ratio of active to retired workers. The ratio is falling from over 6:1 in 2000 to under 2:1 in 2050.
However, the new two-child policy is not likely to have a big impact on the worker-retiree ratio, so China’s retirement system will remain under stress. To sustain social security, China needs to implement other reforms — moving from a local to a national system and expanding the permissible investments for Chinese pensions.
The one-child policy always had exceptions, such as for rural and ethnic communities. These exceptions were broadened in 2013 to cover couples where both were only children. Yet the birth rate did not take off.