Federal Budget Deal Reached; Volcker Rule Finalized; Job Openings Up

Congress passed a modest budget deal on Tuesday. The "Volcker Rule" was also publicized that day, forbidding banks from trading on their own account rather than customers'. And job openings increased in October by 42 million month over month.

Congress, which served as a drag on the economy in 2013 with its uncertainty-generating behavior, took a small step toward more consistent policymaking in 2014 – it is an election year, after all – by passing a modest budget deal on Tuesday. But a deal is a deal, and those have been hard to come by in recent years, especially in matters of the federal budget.

The gist of the agreement, which was announced jointly by Republican leaders in the House and Democratic leaders in the Senate – is to set domestic and military spending at $1.012 trillion for fiscal 2014, considerably more than the sequestration-mandated $967 billion. The measure restores about a third of the cuts under sequestration, and allows agencies to reallocate the cuts they still face, instead of forcing them to be across-the-board.

The proposal doesn’t close any tax loopholes, raise taxes outright (though some fees will go up), or extend long-term unemployment insurance. It does, however, seem to mean there won’t be a government shutdown next year. Congressional prognosticators are predicting that the deal will have enough support among both parties – though hardly unanimous support – to pass.

Volcker Rule Finalized

The “Volcker Rule” was also promulgated on Tuesday. Totaling than a 1,000 pages and representing the work of regulators for more than two years, they were mandated by Dodd-Frank. The thrust of the new regulations is an attempt to ban the risky, multibillion-dollar trading bets that the nation’s largest banks undertook with such gusto in the 2000s, and which in no small measure helped bring about the recession.

Named after former Federal Reserve chairman Paul Volcker, the regs prohibit banks from trading on their own account rather than on behalf of their customers. Investments in the likes of private equity funds and hedge funds, for example. (A recent notorious example was the loss of about $6 billion by JPMorgan Chase & Co. by one of their traders, nicknamed the London Whale.) The largest banks have, to some degree, already taken steps to get out of those kinds of bets in anticipation of the new rules.

The rule will come into force in April, with banks given another year to fully comply. The financial industry is expected to put up some resistance to the rules, especially concerning the exact definition of trading on one’s own account, since when the bets pay off, they’re quite profitable. Court cases in the coming years are expected to more precisely define what a bank can and cannot get away with when it comes to high-finance gambling.

Job Openings See Uptick 

The Bureau of Labor Statistics reported on Tuesday that job openings increased in October to 3.925 million from 3.883 million in September. The number of job openings – an indirect measure of the health of the employment market — is up 7.7 percent year over year compared to October 2012, the highest level since early 2008.

Wall Street experienced a modest down day on Tuesday, with the Dow Jones Industrial Average off 52.4 points, or 0.33 percent. The S&P 500 and the Nasdaq lost 0.32 percent and 0.2 percent, respectively.