MONEY Millennials

How to Make Money Off Millennials in 2015

People doing "the wave" in a stadium
Doug Pensinger—Getty Images

In 2015, the oldest wave of millennials turns (gulp) 35—a milestone with significant implications for the job market, stocks, and the economy at large.

You hear a lot about the drag that the graying of the baby boomers could have on long-term economic growth. What’s often overlooked, though, is the fact that the U.S. will be golden on another demographic front: The biggest birth year in the bigger-than-boomer millennial generation turns 25 in 2015, while the oldest wave turns 35. These are significant milestones not only for those who get a slice of birthday cake but for the economy at large.

After all, 25 is when one’s career starts to get into full swing. While the unemployment rate for 20- to 24-year-olds is 11%, it’s 6% among 25- to 34-year-olds. For those with college degrees, the rate drops to 5%. Meanwhile, the mid-thirties are “when you hit higher-earning years, are more inclined to get married, and start putting money into the stock and real estate markets,” says Alejandra Grindal, senior international economist for Ned Davis Research. Plus, “productivity growth tends to peak when workers are 30 to 35,” says Rob Arnott, chairman of investment firm Research Affiliates.

Here’s how you can profit from millennial-driven growth.

Favor U.S. stocks. The stock market has tended to take off when the number of workers 35 to 49 has surged. Boomers aging into this bracket, for example, coincided with one of the longest bull markets, from 1982 to 1999.

As a metric, investment pros look at the M/Y ratio, which is “mature” workers (ages 35 to 49) divided by young ones (20 to 34). The U.S. M/Y ratio has been declining since 2000 but will begin rebounding in 2015 and is expected to climb through 2029. “Certainly this improves opportunities here relative to Europe and Japan,” where the ratio is in decline, says Arnott.

Research from Vanguard shows you get almost as much of the diversification benefit of keeping 40% of your stock portfolio overseas by having just 20% abroad. So in 2015, shift to the low end, especially since Europe and Japan may be headed for recession (again).

rescue

Profit off their nesting. Three-quarters of Gen Y-ers surveyed last year by the Demand Institute planned to move in the next five years, many out of their parents’ homes. Capitalize on this trend by buying home-related stocks. Gain exposure via SPDR S&P Homebuilders ETF, which counts Bed Bath & Beyond, Home Depot, and Williams-Sonoma among its top holdings besides homebuilders. The ETF’s stocks trade at about 10% less than consumer stocks in general, owing to the slower-than-hoped real estate rebound.

Shoot for the middle on college. With the bulk of millennials past their undergrad years, college enrollment has been falling since 2011. Many schools are discounting tuition to lure students. If your child is applying, “don’t get your heart set on universities in cities on the coasts,” says Lynn O’Shaughnessy, author of the College Solution blog. Schools in the middle of the country, less in demand, may offer better deals. Also consider smaller mid-tier colleges, adds Robert Massa, former head of admissions at Johns Hopkins.

Illinois Institute of Technology, DePauw University, and Rockhurst University are three Midwest schools on MONEY’s Best Colleges list that recently offered first-year students average grant aid of at least 50% of published tuition, according to government data.

Read next:
5 Ways to Prosper in 2015
Here’s Why 2015 Will Be a Good Year for Stocks
Here’s What to Expect from the Job Market in 2015

 

TIME Economy

#TheBrief: Why Gas Prices Are Falling

The reason you're paying less at the pump

You may have noticed a lower number on your gas station receipts. The average price of gas in the U.S. is now $2.55 per gallon, the lowest it’s been since 2009. We’re told to never question a good thing, but why are these prices falling?

Watch The Brief to find out why you’re spending less than usual at the pump.

MONEY

5 Ways to Prosper in 2015

fortune cookie with money inside
Gregory Reid—Prop Styling by Megumi Emoto

The U.S. shines amid global worries. Here are five strategies for profiting from the economy's relative health in your investing, spending, and saving.

The pace of U.S. growth may be more minivan than Ferrari, but the economy is nonetheless motoring along. Gross domestic product is forecast by the International Monetary Fund to grow 3.1% in 2015. That will put the U.S. ahead of most of its peers, which are facing serious headwinds: Europe may slip into its third recession since the financial crisis, and Japan’s stimulus effort hasn’t revved up its economic engines. China, meanwhile, is trying to maneuver slowing growth into a soft landing.

To make sure growth here doesn’t stall out, the Fed will likely wait till late 2015 to raise rates, and any increase is expected to be small and gradual. That’s still good news, though. “The U.S. economy is in a position to withstand the beginning of interest rates rising—something our trade partners can’t do yet,” says Chun Wang, senior analyst at the Leuthold Group.

Our relative health should continue to lure global investors to U.S. stocks and bonds. That in turn should support the almighty buck. After rising about 5% against a basket of currencies of our major trade partners this year, the dollar could gain another 5% in 2015, Wang says.

A stronger dollar means cheaper overseas travel and cheaper imports—and the latter should keep inflation from picking up momentum as well.

Here’a five-step action plan for profiting off U.S. versus them.

Move to the middle on bonds. While bonds that mature in less than three years are usually considered the safest, “short-term high-grade bonds could be the most vulnerable in 2015 if the Fed starts raising rates as expected,” says Lisa Black, interim chief in­vestment officer for the TIAA General Account. Because the recovery here has been so much stronger than in the rest of the world, global investors will continue to favor 10-year Treasuries, putting upward pressure on prices and keeping a lid on yields. Thus short-term rates, over which the Fed has more influence, are likely to see a much bigger rise relative to their current level.

If you’ve kept a big chunk of bond money in short-term mutual or exchange-traded funds recently—­either to hedge inflation risk or to get more yield on cash—get back to an intermediate strategy in 2015. MONEY 50 fund Dodge & Cox Income ­DODGE & COX INCOME COM NPV DODIX -0.1439% yields 2.5%, vs. less than 0.8% for Vanguard’s Short-Term Bond Fund.

Bet on cyclical stocks. LPL chief investment strategist Burt White—who forecasts a mid- to high-single-digit return for the U.S. stock market in 2015—­expects to see above-average performance in sectors that do better when consumers and businesses have more money to spend. In particular, he says, industrial and technology stocks should benefit if the strong economy motivates corporations to invest in systems upgrades. He recommends Industrial Select SPDR ETF INDUSTRIAL SELECT SECTOR SPDR ETF XLI 0.9325% , as well as PowerShares QQQ ETF POWERSHARES QQQ NASDAQ 100 QQQ 1.8204% , which tracks the tech-heavy Nasdaq 100.

Eke more out of your cash. In 2014 the average money-market account paid a mere 0.08%, and that yield isn’t likely to grow in any meaningful way in 2015. But don’t just give up on your savings.

Move cash you need accessible—like emergency funds—to an online bank such as MySavingsDirect, which yielded 1.05% re­cently, suggests Ken Tumin of DepositAccounts.com. If you have $25,000-plus to deposit, you can earn 1.25% at UFB Direct. Use the rest of your savings to build a CD ladder. Divide the sum into five buckets and deposit equal amounts in one- to five-year CDs. As each comes due, roll it into a five-year to benefit from rising rates. Based on current yields, you’ll earn an average 1.6%.

Head south. The dollar now buys nearly 8% more euros and 13% more yen than a year ago. That will make travel to Europe and Japan less expensive, but it still won’t be cheap. For great value—and some stunning photos besides—consider Costa Rica, says Anne Banas, editor of SmarterTravel.com.

The dollar is up 7% against the colon in the past year, making the country more of a bargain than it already was. Located in the rainforests of Arenal Volcano National Park on the Pacific Coast, the five-star Tabacon Grand Spa Thermal Resort—one of TripAdvisor’s 2014 winners for luxury—starts at $260 a night, for example. And flights from major U.S. cities can be found for $400.

Expect the unexpected. When stocks were spooked in September by Ebola reaching U.S. shores and increased U.S. airstrikes against ISIS, the S&P 500 fell 7% but European shares sunk 13%. U.S. stocks continued to lead when investors returned to focusing on economic growth.

While it’s impossible to predict what will rattle the markets in 2015, what you can do is take stock of your fortitude. If you persevered and profited from this recent snap back, plan for another in 2015 and bet on U.S. outperformance.

On the other hand, if you panicked and sold stocks, dial back your equity ex­posure by, say, five percentage points if it will keep you hanging on to your allocation in rough seas. Redirect that money to U.S. Treasuries. Jack Ablin, chief in­vestment officer for BMO Private Bank, says that these should benefit from a crisis: “It’s remarkable how Treasuries and the U.S. dollar are the newly appointed safe-­haven vehicles for the world.”

TIME Ukraine

As Ukraine Truce Holds, Russia Vows Economic Pain

Petro Poroshenko
Ukraine's President Petro Poroshenko walks along the World War I Honour Roll during his visit to the Australian War Memorial in Canberra, Australia, Dec. 12, 2014. Lukas Coch—AP

The Kremlin wants to maintain leverage over its neighbor as a means of keeping it from ever joining NATO

(KIEV, UKRAINE) — Fighting in eastern Ukraine between government troops and Russian-backed separatist forces has ground almost to halt. That should be good news for Ukraine, but Russia looks intent to pile on the economic misery.

In a detailed op-ed piece Monday, Russian Prime Minister Dmitry Medvedev painted a grim forecast of Russian economic blockades ahead as Ukraine embarks on closer integration with Europe.

“The Ukrainian government has made its choice. And even if our neighbors have a poor understanding of the ultimate price they will have to pay, that is their right,” Medvedev said.

Those ominous words came as a renewed truce in east Ukraine called for by President Petro Poroshenko isholding — barring sporadic violations — since it began last week.

More than 4,700 people have been killed since the conflict broke out in mid-April, U.N. rights investigators estimate — and more than a quarter of those deaths came after a cease-fire in September that was routinely ignored.

Ukrainian authorities are hopeful, saying more peace talks are on the horizon.

The intensity of attacks on government-held areas has reduced notably and is now limited to mortar and small arms fire, military spokesman Andriy Lysenko said Monday. Separatists who have often accused government forces of breaking the truce agreed that violence has reduced dramatically.

Changes on the ground appear to reflect shifts on the diplomatic front.

While supporting the separatists, Moscow has said it accepts the rebellious east should remain part of Ukraine. Russian Foreign Minister Sergey Lavrov told the state news agency RIA-Novosti last week that pro-Russian separatists were prepared to re-enter a “common economic, humanitarian and political space” withUkraine.

That position reflects the Kremlin’s desire to maintain leverage over its neighbor as a means of keeping it from ever joining NATO.

Although the separatist leadership in Ukraine’s eastern Donetsk and Luhansk regions publicly deny that they taking orders from Moscow, rebel officials privately concede the Kremlin plays a direct role in their decision-making. Lavrov’s comments suggest an easing of staunch secessionist positions.

A few weeks ago, rebel leaders were vowing to expand the territory under their control. But last week, separatists in Luhansk made a show of withdrawing heavy weaponry from the front line.

The next expected development is a prisoner exchange, which a senior rebel leader in Donetsk, Alexander Khodakovsky, suggested Monday could begin on Dec. 25.

Poroshenko has expressed satisfaction with the reduced carnage.

“I positively assess the cease-fire regime. This has enabled the strengthening of Ukrainian positions and resupply of servicemen on the line of defense,” he said.

But peace on the military front may serve only as prelude to economic hostility.

In his 5,600-word opinion piece Monday in the Moscow-based newspaper Nezavisimaya Gazeta, Medvedev outlined a new “pragmatic” chapter in relations with Ukraine.

“In plain Russian, dealing with Ukraine ‘pragmatically’ means giving it no quarter. Russia’s economicapproach to Ukraine will get tougher,” Dmitry Trenin, who heads the Carnegie Moscow Center, wrote in a Twitter post.

Medvedev wrote that Ukraine has been unhealthily reliant on Moscow for too long; adding that as of last spring, Russian orders from Ukrainian companies were valued at $15 billion, or 8.3 percent of Ukraine’sGross Domestic Product.

“Nobody in Ukraine has explained to us, or themselves, how these orders will be replaced,” he wrote.

Ukraine remains heavily dependent on Russian natural gas and industries in eastern Ukraine are still tightly intertwined with those in western Russia. Ukraine has had to go cap in hand to Russia recently for electricity supplies, as its power plants lack enough coal.

Medvedev also said a closer eye will be paid to Ukrainian citizens traveling to Russia for work — an ominous suggestion that this economic lifeline could be drastically tightened.

Ukrainian officials have put a brave face on those veiled threats.

“Everything that was possible to cut off has already been cut off by Russia,” said Valeriy Chaliy, deputy head of the Ukrainian presidential administration.

He said Ukraine has been pressing hard to diversify the markets for its exports.

“Not all roads lead to Russia,” Chaliy said. “Ukraine has other neighbors with which collaboration is possible without fear of getting stabbed in the back at any moment.”

U.S. Vice President Joe Biden spoke by phone with Poroshenko on Monday to discuss “Ukraine’s financial and energy situation and developments in eastern Ukraine,” according to a readout released by Biden’s office.

Biden said the United States remains committed to working with international partners “to ensure thatUkraine will have the macroeconomic support it needs” to implement its reform program.

TIME Economy

What Russia’s Ruble Collapse Means for the World

Russian President Vladimir Putin visits Uzbekistan on Dec. 10, 2014.
Russian President Vladimir Putin visits Uzbekistan on Dec. 10, 2014. Sasha Mordovets—Getty Images

A financial crisis would make the Kremlin more unpredictable, wreck western banks and heap misery on the Russian people

Russia’s ruble is melting down faster than you can say “Vladimir Vladimirovich”. That’s nothing short of disastrous for him–but it ain’t good for you either.

The ruble fell a jaw-dropping 11% against the dollar Monday. Even when seen in the context of the dollar routing all emerging market currencies (Brazil’s real fell 1.2% and South Africa’s rand 1.5%), a move like that is straight out of the Financial Crisis Handbook–completely unsustainable. Russia has seen nothing like it since it defaulted on its domestic debt in 1998.

Given President Vladimir Putin’s status as the West’s new bogeyman, the temptation to rejoice in the abrupt collapse of his regime’s economic clout is acute. Many will want to congratulate themselves at the success of economic sanctions, the aim of which was to punish Putin for his annexation of Ukraine and its covert sponsorship of a civil war there.

They shouldn’t get carried away.

For one thing, it doesn’t make Russian concessions on Ukraine any more likely: the worse the economic pressure, the more the Kremlin’s propaganda will drum home the message that it is the Evil West, denying Russia its holy Crimean birthright, that is to blame. Opinion polls suggest that the vast majority of Russians still accept this version of events.

As such, Ukraine will remain a running sore, infecting both the European economy and, through it, the world’s. Moreover, Ukraine itself is on the verge of a default that will send shock waves through European and global financial markets, amplifying the effect.

A financial crisis in Russia would have much larger negative consequences than a Ukrainian one: western banks (mainly European ones) will have to write off more loans, western companies will have to write off investments. And that’s even if contagion doesn’t spread to other vulnerable emerging markets such as Indonesia or Brazil, both big recipients of western investment.

For the moment, the signs are that Putin is gambling on the oil market turning round, trusting to the legendary endurance of the people while his government keeps the plates spinning as long as it can.

In the meantime, the loyal will be taken care of. Covert bailouts to the country’s biggest banks from the country’s rainy-day fund are already getting more frequent. VTB and Gazprombank, two lenders that are “too-big-to-fail”, have already had their capital levels topped up.

But that is nothing compared to the egregious piece of money-printing that was agreed last week, when the central bank agreed to lend money against 625 billion rubles (still over $10 billion, even after Monday’s mayhem) of bonds freshly printed by Rosneft, the oil company headed by Putin confidant Igor Sechin. The aim is to let Rosneft hoard its export dollars and meet a $10 billion loan repayment later this month (and another $4 billion in February).

The realization that Rosneft, one of the biggest players on the foreign exchange market, would be buying far fewer rubles with its export dollars appears to have been one of the reasons for the ruble’s drop Monday (the failure of the central bank’s half-hearted rate hike and intervention last week also being partly responsible).

If the central bank shows anything like the same generosity to other companies, then the ruble’s debasement will be complete. The central bank now estimates that the economy will shrink 4.5% next year if oil stays at $60/barrel, and that is something that would certainly trigger a wave of corporate defaults.

Unless the ruble bounces back sharply, inflation is heading much, much higher than the 10% the CBR is already forecasting. Specifically, food, which makes up over 30% of Russian disposable income, is going to get more expensive (Russia imports over 40% of its food and has made a rod for its own back by banning relatively cheap produce from the E.U.).

Moreover, since over 80% of retail deposits are now held in rubles, devaluation means that the savings that Putin’s voters have accumulated as they came to trust their own currency over the last 14 years will be devastated. Already Monday, the yield on the 10-year bonds of a government that hasn’t run a deficit in 14 years hit 13%–anything but an expression of trust.

This is a recipe for social instability far greater than the tame, middle-class, metropolitan protests at Putin’s tainted election victory in 2012.

But what does an authoritarian leader do in such a situation? Back down or crack down? There is no evidence from this year to suggest Putin has suddenly become the backing-down kind. Repression seems the likelier option. If that doesn’t work, then doubling-down with another foreign policy adventure to distract from domestic problems hardly seems fanciful any more: in the summer, Putin cast doubt on the statehood of neighboring Kazakhstan, which doesn’t have the NATO guarantee that the Baltic States enjoy.

Either way, the consequences are too miserable to contemplate, both for Russia and for the world in general. The only other way out is for Putin to be replaced in a palace coup. That’s a time-honored Russian tradition too, but anyone with memories of 1991 and 1993 will remember how badly they can go.

Barring a rapid turnaround in the oil price, there are only bad and worse outcomes from here on.

This article originally appeared on Fortune.com

TIME Economy

Gas Was Dirt Cheap This Weekend

Gas Prices $2
Tom Merton—Getty Images/OJO Images RF

All 48 states in continental U.S. had average prices below $3

Gas prices fell under $2.oo in 13 states across the U.S. this weekend, sending the nationwide average down to $2.55 per gallon — a low Americans haven’t seen since Oct. 2009.

Oklahoma, Louisiana and Ohio had at least one gas station each with regular gas prices below $1.90 per gallon, CNNMoney reported Monday, citing data from GasBuddy.com. Another ten states had stations with prices below $2.00 per gallon: Alabama, Arizona, Colorado, Indiana, Mississippi, Missouri, Nebraska, New Mexico, Texas and Virginia.

Meanwhile, all 48 states in continental U.S. had statewide average gas prices below $3.

The nationwide decrease in gas prices is due to falling oil prices, as economic downturns and the rise of fuel efficient vehicles slash demand for oil.

[CNNMoney]

MONEY Jobs

Here’s What To Expect From The Job Market in 2015

There should be good news for job seekers in 2015 as the US economy continues to rebound.

TIME Economy

Americans Get Sunnier About the Economy

Ahmad Ali, Ghalzal Ali
Shoppers patronize a Target store just after midnight on Black Friday, Nov. 28, 2014, in South Portland, Maine. Robert F. Bukaty—AP

Economic optimism is at its highest level in almost eight years

Americans’ confidence in the economy is returning after years of doubt and pessimism, with economic output, jobs figures and retail sales in a strong upswing.

The Thomson Reuters/University of Michigan index of consumer sentiment rose to a near eight-year high in December, according to data released on Friday, similar to levels seen in boom years like 1996 and 2004, and the best since January 2007.

The increased optimism is a result of strength in many sectors of the economy. Economists expect a sharp drop in gasoline prices to help boost the economy in the coming months. The federal government forecasts the price of a gallon of gas will drop to $2.60 nationwide next year, compared with $3.37 this year, translating to greater spending rather than savings—particularly for low-income Americans.

Reasons for concern remain, including sluggish wage growth and the plight of the long-term unemployed. The drop in oil prices is also rattling the stock market, with the Dow dropping more than 300 points on Friday.

But the most recent jobs report was promising, with 321,000 jobs added to payrolls around the country in November—the biggest monthly increase in three years—holding the unemployment rate at 5.8%. The U.S. economy grew at an annual rate of 3.9% in the third quarter of 2014, and in the second quarter GDP grew 4.6%.

“Everything is pointing in the right direction for the consumer,” chief U.S. economist at Capital Economics Paul Ashworth said, according to Bloomberg. “We expect a pretty good run for consumption growth in the fourth quarter. It is a big boost for the economy.”

Americans are finally feeling the effects of the improving economy. According to the Reuters poll’s director, Richard Curtin, more consumers had good news than bad news when asked about the economy than in any month since 1984. But the first quarter of 2014 still saw a deep contraction in the economy of 2.6%, partially due to an unusually cold winter in many parts of the country.

The improving sentiment is likely to further boost the economy and could translate into higher worker wages and more consumer purchasing.

TIME Economy

Wealth Gap Widens Between Whites and Minorities

The gap between white and black household wealth is the highest since 1989

The wealth disparity of U.S. households has widened dramatically along racial and ethnic lines during the recovery from the economic recession, according to a new report.

In 2007, at the start of the recession, white households in the U.S. had a net worth 10 times that of black households. But in 2013, white households were 13 times richer, according to the Pew Research Report out Friday. White households were eight times richer than Hispanic households in 2007 but 10 times richer in 2013.

FT_14.12.11_wealthGapRatios

Researchers note that while wealth of non-Hispanic white households increased a small amount between 2010 and 2013—2.4%—the wealth of Hispanic and black households actually fell dramatically, 14% for Hispanic households and 34% for black households.

Other racial and ethnic minorities were not broken out for analysis in the data compiled by Pew.

TIME financial regulation

Why It Matters That Congress Just Swapped The Bank Swap Rule

US-ECONOMY-FINANCE-BANKING-BOFA
NICHOLAS KAMM—AFP/Getty Images

A controversial change to the Dodd-Frank financial reforms trades more risk for taxpayers to get more profits for banks and their corporate clients

Banks may be officially allowed to get back in the casino business again soon.

Hidden as a rider in the $1.1 trillion continuing resolution omnibus bill—the hulking “Cromnibus”—that passed the U.S. House last night are a few, measly pages that pack a whole lot of punch. They repeal what’s known as the Lincoln Amendment in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.

The Lincoln Amendment, which you’ll also see referred to in other articles as “Section 716″ or the “the swaps push-out rule,” was, if not Dodd-Frank’s heart and soul, than at least one of its vital organs. It says, basically, that banks can make risky bets on behalf of paying clients, but if they screw up and get into trouble like they did in 2008, then taxpayers aren’t responsible for bailing them out.

It did that by requiring that banks set up two big buckets: one that was backed by taxpayers (FDIC-insured), and one that was not. The idea was that banks would keep all of their normal, plain-vanilla banking activities in the FDIC-insured bucket, and then “push out” swaps and other risky contracts, like exotic, customized, and non-cleared derivatives, into the other bucket. (Swaps are contracts that allow banks to hedge their risks or speculate on everything from interest rates to currency prices. Credit default swaps contributed to blowing up the economy in 2008. Warren Buffet once called these sorts of derivatives “financial weapons of mass destruction.”)

If the Cromnibus passes the Senate in the form that it passed the House last night, the Lincoln Amendment will be officially repealed. Dead. Kaput. Gonzo. The swap casino will again operate with the tacit backing of taxpayers. If markets go haywire, as they did in the last financial crises, taxpayers may again find themselves forced with a choice between bailing out the casino owners and a systemic financial collapse.

The Bipartisan Policy Center, which is generally in favor of financial regulation, says people shouldn’t overreact to that news. It released a statement yesterday saying, in essence, “Relax, we still have the Volcker rule,” a reference to a different provision of Dodd-Frank that bans banks from using taxpayer-backed accounts to make their own bets on the future movement of markets.

But as the folks at the Roosevelt Institute point out, that argument doesn’t really make sense. It’s like saying that because you’re wearing a t-shirt, you don’t need a sweater. It’s true that the Lincoln Amendment and the Volcker rule overlap in some ways, but their coverage is different.

The heart of the Volcker rule is all about proprietary trading, which is when banks trade for their own profits and not on behalf of their customers. It’s similar to the Lincoln Amendment in that it doesn’t specifically outlaw anything; it says that banks can proprietary trade all they want, but if they get into trouble, taxpayers aren’t bailing them out. Lots of people in the financial world think that the Volcker rule is the most important part of Dodd-Frank, but it doesn’t cover everything.

The Volcker rule, for example, doesn’t apply to all risky financial products, like exotic and uncleared credit default swaps. That’s where other regulations, including the Lincoln Amendment, took up some of the slack. Unlike the Volcker rule, the Lincoln Amendment did apply to exotic and uncleared credit default swaps, and required that banks “push out” swaps into a bucket that was not backed by the taxpayers.

The best argument for not freaking out about the repeal of the Lincoln Amendment is that it wasn’t nearly as strong as its drafters intended it to be. The final version had loopholes the size of Montana. For example, while the Lincoln Amendment was intended to lasso all risky instruments, by the time all was said and done, it really only applied to about 5% of the derivatives activity of banks like Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo, according to a 2012 Fitch report.

In other words, the banks are in the casino business whether or not the Lincoln Amendment is repealed. But liberal Democrats, including Senators Sherrod Brown of Ohio and Elizabeth Warren of Massachusetts as well as a handful of conservative Republicans, like Rep. Walter Jones of North Carolina, say 5% of protection is better than none at all. They oppose the Cromnibus so long as that rider is in it.

House Republicans, for their part, say eliminating the Lincoln Amendment would streamline regulation, boost the economy, and “protect farmers and other commodity producers from having to put down excessive collateral to get a loan,” according to a summary statement. The bill is expected to pass the Senate, rider and all.

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