Archive for the ‘Bernanke’ Category

For Obama and Geithner: Action Would Speak Louder Than What We Have Now

March 27, 2009

“People have confidence in Obama and generally want him to succeed,” says Frank Luntz, an experienced pollster. “But they don’t necessarily translate that confidence into his policies or the government.”

Bingo.

Treasury is a confidence black hole.  Why?  Because despite many efforts to point the blame at Wall Street and greedy executives, nobody has said, “The regulaters screwed up.”  Instead we have been told “we inherited this Bush mess and Bush decreased regulations so we need more regulations — we need more government.”

We don’t need more government.  We need better government and more accountability: from the President through Barney Frank and the rest in congress and to Geither and all the other bureaucrats.

Who among us thinks Barney Frank and Christopher Dodd screwed up?  Who has trust and confidence that Barney and Chris and Tiny Tim Turbo Tax and even Obama can get us out of this?

Yesterday it looks like Mr. Geithner actually fired — or at least sent into the penalty box — one of his top deputies.  Now we are getting to the issue.

Scott Polakoff at Treasury’s  Office of Thrift Supervision  is on ice: and Treasury needs to explain why and take responsibility for him and his actions and fast.

Maybe we don’t need to make more rules: maybe we need to enforce the ones we have and enforce accountability.

Recovery will be about trust and confidence.  Without that, investors hold back, businesses don’t hire and workers don’t spend.

A government mea culpa would be a good first step: and continuing this line of “we inherited” is now more than paper thin it is a sign of impotence.

“What we need today is more optimism and more confidence,” Larry Summers said.

“Consumer confidence is slightly up. The market is slightly up,” Biden said.

“We need confidence to make this recovery work,” President Obama said.

Confidence can’t be produced with fairy dust or a magic wand.  We get it the old fashioned way: we earn it.

President Obama has to take dramatic action: not giggle through an appearance on Leno and “60 Minutes” or jabber on an Internet town hall.  That may work with tweens but it is not so good with real adults with real money.

Campaigning is for wannabees.  Those with real responsibility and accountability have to act to be credible and earn trust and confidence.

Now’s the time.

Related:
http://michellemalkin.com/2009/03/27/
the-strange-sacking-of-a-top-treasury-official/

Stumulus: Obama and Congress Sold Us A Lot Of Useless Swampland; Ready To Buy More?

Obama Buys Into Anger, Fear as Political Tool
Obama, Geithner, Summers Plan for “Toxic Assets” May be Toxic Itself

Obama’s public overexposure

Obama Still Thinks After Economy Recovers; Bank, Finance Good Times Can Return?

 Obama’s Economic “Rescue;” “The plan is very, very clever. Maybe too clever.”

 Stimulus: Way Fewer Jobs Than You Thought

 The Great Give Away of Taxpayer Money By Bigger and Bigger Government

 President Tries To Harness Public Anger To Move His Budget

Obama Dead Wrong On Stimulus, Caterpillar Company Jobs, Recovery

Obama Wants To Take Over Companies; Complains Congress Might Take Too Long

March 24, 2009

President Barack Obama says he hopes “it doesn’t take too long” for Congress to approve new authority to oversee financial firms — and even take them over by the Federal Government if they are in economic trouble.

The president made the remark in the Oval office Tuesday afternoon, March 24, 2009.

The administration is pushing the idea of an overarching regulator, such as the Federal Reserve, to have the ability to take over nonbank financial entities whose failure could topple the entire financial system.

Congress has gotten us into trouble recently by rushing through important legislation or hearings.

The congress held no hearing on the president’s stimulus spending measure — with many member saying they didn’t have time to read it.

The stimulus assured AIG that it had the authority to pay bonuses.

Then the House last week rushed to vote a 90% tax on those same bonuses….an idea that could be unconstitutional…. and is certainly questionable….

Most fast legislation is very bad legislation, in our experience….

 Geithner Wants To Seize Troubled Businesses: “By What Authority in the Constitution?”

Obama “Strongly Approve” Number from 42% to 36% in Last 60 Days; Geithner 24% Or Less

See Michelle:
http://michellemalkin.com/2009/03/24/the-sen
ate-shows-a-little-sense-confiscatory-republica
ns-show-no-shame/

Related:
http://www.frugal-cafe.com/public_html/frugal-
blog/frugal-cafe-blogzone/2009/03/21/wait-ha
ste-made-the-mess-sen-kyl-blocks-aig-punish
ment-bill-to-allow-level-headed-review/

US President Barack Obama (R) speaks with Australian Prime Minister ... 
US President Barack Obama (R) speaks with Australian Prime Minister Kevin Rudd in the Oval Office of the White House in Washington, DC. Obama said Tuesday he hoped to partner with Rudd for “years to come” after forging a “meeting of the minds” in their first White House talks.  During this meeting, Obama told reporters, he hopes “it doesn’t take too long” for Congress to approve new authority to oversee financial firms .(AFP/Jim Watson)

Obama Wants Confidence To Revive the Economy: But Hasn’t Earned Any

March 24, 2009

Am I supposed to have confidence when the president praches “You can have everything: health care and the rest.  Just let me give your kids this debt.”

Seems counter-intuitive….

Am I supposed to trust Turbo Tax Geithner?  YIKES.

Hillary, Rahm Emanuel, Robert Gibbs?

Am I supposed to trust the House of Representatives and Nancy Pelosi?

Pelosi is telling  illegal immigrats the law enforcers are anti-America.

Should I trust the Senate?  Chris Dodd has amnesia and a retirement spot in Ireland, thanks to his government “service.”

I feel like a farm animal who just got “serviced” by one of the bulls…

Has Dodd given back the AIG donations to his campaign —  after he wanted AIG bonuses repaid?

Senator Judd Gregg deadpanned today, “Americans started a revolution because a far off king abused his tax authority….”

HA!  A bit of hope from the Senate!

In the Senate, the buck really has to stop now for conservatives…..

Read Michelle Malkin:
http://michellemalkin.com/2009/03/24
/the-senate-shows-a-little-sense-confi
scatory-republicans-show-no-shame/

********************

With the braying of 328 yahoos — members of the House of Representatives who voted for retroactive and punitive use of the tax code to confiscate the legal earnings of a small, unpopular group — still reverberating, the Obama administration yesterday invited private-sector investors to become business partners with the capricious and increasingly anti-constitutional government. This latest plan to unfreeze the financial system came almost half a year after Congress shoveled $700 billion into the Troubled Assets Relief Program, $325 billion of which has been spent without purchasing any toxic assets.

By George F. Will

TARP funds have, however, semi-purchased, among many other things, two automobile companies (and, last week, some of their parts suppliers), which must amaze Sweden. That unlikely tutor of America regarding capitalist common sense has said, through a Cabinet minister, that the ailing Saab automobile company is on its own: “The Swedish state is not prepared to own car factories.”
.
Another embarrassing auditor of American misgovernment is China, whose premier has rightly noted the unsustainable trajectory of America’s high-consumption, low-savings economy. He has also decorously but clearly expressed sensible fears that his country’s $1 trillion-plus of dollar-denominated assets might be devalued by America choosing, as banana republics have done, to use inflation for partial repudiation of improvidently incurred debts.

From Mexico, America is receiving needed instruction about fundamental rights and the rule of law. A leading Democrat trying to abolish the right of workers to secret ballots in unionization elections is California’s Rep. George Miller who, with 15 other Democrats, in 2001 admonished Mexico: “The secret ballot is absolutely necessary in order to ensure that workers are not intimidated into voting for a union they might not otherwise choose.” Last year, Mexico’s highest court unanimously affirmed for Mexicans the right that Democrats want to strip from Americans.

Congress, with the approval of a president who has waxed censorious about his predecessor’s imperious unilateralism in dealing with other nations, has shredded the North American Free Trade Agreement. Congress used the omnibus spending bill to abolish a program that was created as part of a protracted U.S. stall regarding compliance with its obligation to allow Mexican long-haul trucks on U.S. roads. The program, testing the safety of Mexican trucking, became an embarrassment because it found Mexican trucking at least as safe as U.S. trucking. Mexico has resorted to protectionism — tariffs on many U.S. goods — in retaliation for Democrats’ protection of the Teamsters union.

NAFTA, like all treaties, is the “supreme law of the land.” So says the Constitution. It is, however, a cobweb constraint on a Congress that, ignoring the document’s unambiguous stipulations that the House shall be composed of members chosen “by the people of the several states,” is voting to pretend that the District of Columbia is a state. Hence it supposedly can have a Democratic member of the House and, down the descending road, two Democratic senators. Congress rationalizes this anti-constitutional willfulness by citing the Constitution’s language that each house shall be the judge of the “qualifications” of its members and that Congress can “exercise exclusive legislation” over the District. What, then, prevents Congress from giving House and Senate seats to Yellowstone National Park, over which Congress exercises exclusive legislation? Only Congress’s capacity for embarrassment. So, not much.

The Federal Reserve, by long practice rather than law, has been insulated from politics in performing its fundamental function of preserving the currency as a store of value — preventing inflation. Now, however, by undertaking hitherto uncontemplated functions, it has become an appendage of the executive branch. The coming costs, in political manipulation of the money supply, of this forfeiture of independence could be steep.

Jefferson warned that “great innovations should not be forced on slender majorities.” But Democrats, who trace their party’s pedigree to Jefferson, are contemplating using “reconciliation” — a legislative maneuver abused by both parties to severely truncate debate and limit the minority’s right to resist — to impose vast and controversial changes on the 17 percent of the economy that is health care. When the Congressional Budget Office announced that the president’s budget underestimates by $2.3 trillion the likely deficits over the next decade, his budget director, Peter Orszag, said: All long-range budget forecasts are notoriously unreliable — so rely on ours.

This is but a partial list of recent lawlessness, situational constitutionalism and institutional derangement. Such political malfeasance is pertinent to the financial meltdown as the administration, desperately seeking confidence, tries to stabilize the economy by vastly enlarging government’s role in it.

On economic matters, Obama lacks a secretary of Selling It

March 24, 2009
Geithner & Co. may know policy, but they’ve proven less than adept at inspiring the public to accept tough medicine. Their most effective point man is in danger of being overused, one analyst says.
By Peter Nicholas and Peter Wallsten
The Los Angeles Times
March 24, 2009
Reporting from Washington — The first time Treasury Secretary Timothy F. Geithner was sent out as point man to sell the Obama administration’s financial rescue plan, the Dow Jones industrial average plunged 382 points. And Geithner’s subsequent efforts as a center-stage spokesman were less than resounding successes.

On Monday, the administration took a different approach. Geithner largely confined himself to conducting a pen-and-pad-only news conference that excluded TV and effectively reduced the secretary from point man to staff briefer. The Dow soared nearly 500 points.

Read the rest:
http://www.latimes.com/news/nationwo
rld/nation/la-na-obama-econ24-2009m
ar24,0,2138669.story

*****************

In a Congressional hearing today, Bernanke and Geithner are likely to once again call on Congress to enact legislation that would allow the government to safely dismantle a big financial institution, like American International Group Inc., to minimize any damage to the U.S financial system and the broader economy.

http://news.yahoo.com/s/ap/2009032
4/ap_on_bi_ge/bailout_bernanke_geithner

Does Obama Need New Economic Leadership?

March 23, 2009

Perhaps new economic leadership will emerge during this crisis, under our gifted, charismatic president. It seems likely to consist of people who have the kind of experience, judgment and authority Morgan had — possibly a new “trio” made up of the current Fed chairman, Ben Bernanke; Paul Volcker; and Warren Buffett.

By Jean Strouse
The New York Times

IN what may come to be the definitive line about our current economic crisis, Warren Buffett said on the CNBC program “Squawk Box” this month that the United States economy has “fallen off a cliff.”
The most trusted investor in history went on the air to talk, with characteristic candor and humor, about the horrendous truth we pretty much know, possibly in an effort to calm things down and point toward some answers we don’t yet know. He proceeded to give his views on what went wrong (“everybody thought house prices could go nothing but up … so you had $11 trillion of residential mortgage debt built on this theory ”), on people’s paralyzing fear and confusion (“We are in a very, very vicious negative feedback cycle …. I don’t want this to be the last line of the movie”), and on the absolute necessity of fixing the banks and taking clear, decisive action.

A look back at the handling of another financial crisis a full century ago underlines the point about decisive action. You just don’t want to take the wrong decisive action. Markets today are immeasurably more complex, global, fast-moving and regulated (a lot of good that did) than they were a hundred years ago, but the need for strong leadership has not changed.

In early 1906, the banker Jacob Schiff told a group of colleagues that if the United States did not modernize its banking and currency systems, its economy would, in effect, fall off a cliff — that the country would “have such a panic … as will make all previous panics look like child’s play.”

Yet the country failed to reform its financial institutions, and conditions deteriorated steadily over the next 20 months. There was a worldwide credit shortage. The American stock market crashed twice. The young Dow Jones industrial average lost half of its value.

In October 1907, when a panic started among trust companies in New York and terrified depositors lined up to get their money out, Schiff’s dire prediction seemed about to come true. The United States had no Federal Reserve, the Treasury secretary did not have much political authority, and the president, Theodore Roosevelt, was off shooting game in Louisiana.

J. Pierpont Morgan, a 70-year-old private banker, quietly took charge of the situation.

In the absence of a central bank, Morgan had for decades been acting as the country’s unofficial lender of last resort, gathering reserves and supplying capital to the markets in periods of crisis. For two harrowing weeks in 1907, with the whole world watching, he operated like a general, deploying three young lieutenants to do leg work and supply him with information, and bringing two other leading bankers, James Stillman of National City Bank and George Baker of the First National Bank, into a senior “trio” to make executive decisions. (First National and National City eventually combined to form what is now Citigroup — are the shades of Baker and Stillman writhing over what has become of their descendant institution?)

The Morgan teams ran “stress tests” on the unregulated trust companies, figuring out which were impossibly overleveraged and should be allowed to fail, and which were basically sound but crippled by the panic. Once they had determined that a trust was essentially healthy, the bankers supplied it with cash, matching their loans dollar-for-dollar with the trust’s collateral assets.

Read the rest:
http://www.nytimes.com/2009
/03/23/opinion/23strouse.htm
l?_r=1&hp

Obama Talks Too Much: Time to Fire Toxic Tim Geithner

March 22, 2009

Step up, Barack!

People are angry; protesting at the homes of AIG executives.  Congress is eager to act and acting: offering to tax bonuses at 90%.  That’s anger and action: maybe not the kind we need but action nonetheless.

 Did ACORN Organize Protests At Homes of AIG Execs?

But what do we have from the “Boy Wonder” Treasury Secretary?  Old ideas on how to handle toxic assets repackaged by the government and for sale.

But this will take another $1 trillion of taxpayers’ money.

Paul Krugman puts down the Geithner plan in stark terms: it’s not new or inventive and won’t work.

Obama, Geithner Toxic Asset Plan is Old Hash That Won’t Work

And Geithner knew about the AIG bonuses way back: he even worked to preserve them.

See: Wall Street Journal:
Geithner Aides Worked With AIG for Months on Bonuses

Yet President Barack Obama talks too much.  An appearance with Leno was no help to him and last night on “60 Minutes” he was asked if he was “punch drunk.”  And he has a speech scheduled on TV for Tuesday night.

(Some guys are just not gifted at the unscripted, Barack.  Ask Joe Biden.)

And we already know what the president has to say:

He’s outraged, he’s confident, Geithner is a good guy, and his budget spending on the environment, health care, energy, education and the rest will ultimately drag the economy out of this hole and balance the budget.

Bull.

Geithner: AIG must return bonus money

Presidents have been wrong before.  The good presidents admit it.

Forget that budget, at least for a week.  Everyone is focused on AIG and Wall Street and eager for action — not more spending.

Sen. Gregg says Obama budget will bankrupt US

Fix the banks, get lending going, and even if you take Geithner’s toxic assets plan don’t take back “Toxic Tim.”

What President Barack Obama needs to do is something foreign to a community organizer, teacher, and professional elected official: he has to take action; shut up and act.

He’s got to restore confidence: as he has said himself.

He’s got to fire Geithner who is in bed with the Wall Street types he cannot fire.

That means he may have to fire Larry Summers too: because he is also in bed with Wall Street and is Geithner’s mentor in chief.

Geithner is expendable: a guy that has helped Wall Street (according to the left) and a guy that wants to throw around even more money (according to the right).  Plus he is widely seen as weak and has a TV and public appearance persona of a worm.

Larger view
Treasury Secretary Timothy Geithner. (Photo by MANDEL NGAN/AFP/Getty Images)

Some have called all this an “incestuous relationship” …. the Geithner-Wall Street-Summers-politics stew.

Geithner and Summers have no clue what people are going through in the real world: and they have worked so far to protect the likes of Bernie Madoff, Wall Street and the AIG world.

By not realizing the public outrage with the AIG caper; Summers cost the president confidence in his inner economic circle.

The ensuing congressional outrage has probably lessened confidence in AIG forever: which will make it harder to sell off the bad parts and the good parts.  AIG made a lot of mistakes but now “we” the nation have destroyed their brand name forever in the bargain.  And the bonuses were protected in the stimulus and geithner made sure they were paid….

And other companies took money after causing economic ruin and will survive unharmed.

Seem fair?  Is this the new America?  No courts required: just hearings and a trial on TV…..

Saturday, protesters went to the rich AIG executives homes to raise awareness and express outrage  – a kind of witch hunt enters your neighborhood.  This is bad business, bad politics, and bad for law and order.

Meanwhile Vice President Joe Biden made fun of Toxic Tim Geithner even while the president is saying he loves the guy.

“Tim Geithner is always there when you need to borrow money. And no questions asked,” Biden said in what was supposed to be a joke.

Biden: Give Obama a F*&^%$#ing Break

Christina Romer, head of the White House Council of Economic Advisers, said on “Fox News Sunday,” “Geithner is doing an excellent job.”

Wanna bet?  Nobody believes that.  Geithner’s poll numbers are bad and if he continues in his job it will be Barack Obama’s poll numbers that suffer….even more.

I can predict the headline: Geithner Blow-back On Obama.

Obama “Strongly Approve” Number from 42% to 36% in Last 60 Days; Geithner 24% Or Less

This is like watching a freshman throw up out the window and it all winds up on the prom queen.

Christina Romer
Romer.  Clueless?

This is the Special Olympics White House.

It isn’t even certain anymore that Helicopter Ben Bernanke knows what he is doing.  By injecting even more money into the economy, he is risking inflation and gold is already up and the dollar already down.

People are angry and demanding action.  Obama should give them action.  Like a Roman emperor: now is the time for a very public thumbs down in the Colosseum of the national media.

File:Colosseum in Rome, Italy - April 2007.jpg

Forget the venue.  Forget the words.  Forget the host: I mean even Leno couldn’t save the president from himself, much as he tried.

“60 Minutes,” Leno, campaigning,  basketball, and a speech from the White House will no longer do.

Americans are no longer hungry to see their president talk, wise crack or fill out his brackets.

Act.

Throw Geithner to the lions.

Then develop a real plan of recovery.  Fix the toxic asset problem and get lending going.  It’s late but it’s never too late for this.

Recovery first, then budget.  It is “the economy stupid.”  The “recovery, stupid.”

We are in a culture war and an economic war at the same time.  Geithner offers good news to either side in either war.

He’s  toxic.  And not an asset.

*********************

Visit Michelle Malkin:
http://michellemalkin.com/2009/03/23/
the-david-copperfield-school-of-econ
omic-recovery-pt-ii/

Geithner’s Toxic Asset, Bank Plan Offers Nothing New To A Bad Idea

 Shelby: Geithner Needs “180 Degree Change” To Stay At Treasury

Resistance grows to Obama’s bigger government

*********************

WASHINGTON (AP) – Amid the continuing backlash over AIG bonuses, President Barack Obama is defending his embattled treasury secretary and touting his ambitious $3.6 trillion budget proposal as a boon for ordinary Americans.

And, as early as Monday, the administration is expected to roll out a plan to rid banks of their toxic assets and speed the flow of loans. Some industry officials familiar with the details said they expected the approach would try to remove as much as $1 trillion from banks’ books.

Obama used his weekly radio and Internet address to turn the focus back to his budget proposal, calling it “a firm foundation of investments in energy, education and health care that will lead to a real and lasting prosperity.” He plans a network television interview airing Sunday and a prime-time news conference Tuesday to continue bolstering his case.

The disclosure that American International Group Inc. paid out $165 million in bonuses to employees, including to traders in the financial unit that nearly collapsed the insurer, has dominated the news this week. It has left the Obama administration on the defensive and seeking to refocus attention.

In the interview with CBS’ “60 Minutes,” Obama made clear he was standing behind beleaguered Treasury Secretary Timothy Geithner, who was roundly criticized over the bonus flap and steps to revive the economy.

Obama said that if Geithner offered his resignation, the answer would be, “Sorry buddy, you’ve still got the job.” CBS released excerpts Saturday.

Read the rest:
http://news.yahoo.com/s/ap/200
90322/ap_on_go_pr_wh/obama_economy

From CNN:
http://edition.cnn.com/2009/BUSI
NESS/03/21/global.economy/index.html

Related:
Obama Overexposed
(Talking too much…)

Threat of inflation sky high

Obama’s Katrina Moment Is Here Now

Obama Administration May Not Understand Economy

 Public Outrage Could Devour Obama Presidency

Financial Advice, Recovery, Trumped by Obama, Congress, Media, Polls
(Maybe Axelrod is giving better advice than Summers, Geithner…)

Protesters At Homes Of AIG Execs
.
Obama, Biden Chat Up Economy; Congress Talking “Stimulus II”

Rosy Talk From Obama and Gang is BS

 Biden Off Mic: “Gimme a f*&$#ing break”

From India, wondering why Obama is on Leno:
http://gvk2.wordpress.com/2009/03/
22/obama-at-jay-leno-show/

http://mcauleysworld.wordpress.com/2
009/03/20/aig-bonuses-who-knew-wha
t-when-geitnerobama-dishonesty/

.
http://winteryknight.wordpress.com/20
09/03/22/cbo-budget-adds-48-trill
ion-to-national-debt-china-worried/

Visit Hot Air:
http://hotair.com/archives/2009/03
/22/the-geithner-plan-still-a-contrad
ictory-bag-of-slogans/

In this photo provided by CBS News-60 Minutes, Steve Kroft of ...
Too little too late?  In this photo provided by CBS News-60 Minutes, Steve Kroft of 60 Minutes interviews U.S. President Obama at the Oval Office on Friday, March 20, 2009 in Washington. In an interview with CBS television’s ’60 Minutes,’ Obama said that if Treasury Secretary Timothy Geithner offered his resignation, the answer would be, ‘Sorry buddy, you’ve still got the job.’ (AP Photo/CBS News-60 Minutes, Aaron Tomlinson)

Threat of inflation sky high

March 22, 2009

The Fed’s announcement last week to flood the financial markets with $1.2 trillion in new money stunned many. True, governments often print money as a cheap way to buy off their debt. Governments also find that instead of paying off their debt they can simply reduce the value of the currency so much that earlier debts are not worth anything. But the shear size of the current change to the world’s preeminent currency is unprecedented.

Washington Times
Editorial

More money means that each dollar falls in value and can purchase less than it did previously. Think of it this way: If the number of apples suddenly doubled tomorrow, what would happen to the price of each apple? It would fall. Same with dollars, whether American or Zimbabwean, where the current inflation rate is 230 million percent annually.

The size of this $1.2 trillion increase is breathtaking, and the U.S. monetary base has already more than doubled so far, from $800 billion to $1.7 trillion. One normally needs a microscope to see past yearly changes in the money base, and the current change already jumps off of any chart – look at the one on the right from the St. Louis Federal Reserve Bank showing the blastoff. As the chart illustrates, even before the last infusion of money, we have already seen a huge increase in the money supply (M1) this year.

Devaluating our currency and our debt is a dangerous game. It may cure short-term ills but, in the long run, countries won’t want to hold U.S. government bonds or other investments if they think they risk losing a lot of money this way.

With the Fed’s announcement, the value of the dollar has started dropping precipitously. On March 12 it took $1.27 to buy a Euro. By last Thursday it took about $1.37. It is surprising that the size of the drop hasn’t been even larger.

The Fed seems to think that it is battling what might be a massive deflation and wants to protect against the unemployment that might result from sticky wages and prices. But instead of deflation, these huge increases in the money worry us that the opposite, a hyper-inflation, will be more likely the case and there will be real costs. And while this huge increase in money will undoubtedly be the one thing that the federal government has done that will lower unemployment, it is just the wrong way to lower it.

As Milton Friedman was well known for pointing out, inflation will cause some workers to think some jobs are offering higher real wages than they actually are. The problem is that once these workers realize their mistake – that the slightly higher wages they accepted were eaten up by inflation and did not represent a real increase – they will leave the jobs they took hastily to look for positions offering a real increase, ones they should have pursued all along. It is a solution, but a false one.

There are other bad consequences from this huge increase in the money supply. Interest rates will go up, simply because lenders will have to be compensated for the fact that any money that they get back a year from now will be worth less because of inflation. With the rates up, investments will fall.

However, the interest rate will actually go up by more than the inflation rate because our tax rules don’t adjust taxes on interest rates for inflation. If inflation goes from zero to 10 percent, the interest rate doesn’t simply go from, say, 5 percent to 15 percent – it has to go up by more than that to keep the after-tax return to investors the same. In fact, if someone is paying a 50 percent tax rate, increasing inflation from 0 to 10 percent would require increasing the interest rate to 25 percent to keep even!

This huge increase in the money supply may provide a short gain, but the long term costs are going to be huge. The notion that the Federal Reserve is capable of smoothing out the impact that such a change has on inflation is hubris at its worse. The Fed has a difficult enough job controlling inflation under the best of circumstances, and the Fed has never had to be asked to control this type of increase in the monetary base before.

Public Outrage Could Devour Obama Presidency

March 22, 2009

The president is getting what he asked for, but perhaps not what he had in mind. During the campaign, Barack Obama beckoned Americans to put aside their cynicism about politics and re-engage as active citizens. They are now doing so with red-hot anger. They are outraged by events and forcing their way into congressional affairs and behind closed doors where policy wonks discuss issues with cerebral civility. The president is now trapped between these two realms — the governing elites who decide things and the people who are governed. Which side is he on? If he does not choose wisely, the anger could devour his presidency.

By William Greider
The Washington Post

The immediate impetus is the latest outrage from the financial sector. AIG, the failed insurance giant on government life support, proceeded to hand out $165 million in employee bonuses. Because Washington has pumped $170 billion into this zombie corporation, people quickly grasped that AIG was redistributing their tax money. On March 13, the White House sent out Larry Summers, the president’s economic adviser, to explain things. Government has no choice, Summers said, because this is a government of laws and we must honor contracts. On Monday, the president scrapped that line, hoping to dodge the outrage.

Something fundamental has been altered in American politics. Encouraged by Obama’s message of hope, agitated by darkening economic prospects, many people have thrown off sullen passivity and are trying to reclaim their role as citizens. This disturbs the routines of Washington but has great potential for restoring a functioning democracy. Timely intervention by the people could save the country from some truly bad ideas now circulating in Washington and on Wall Street. Ideas that could lead to the creation of a corporate state, legitimized by government and financed by everyone else. Once people understand the concept, expect a lot more outrage.

Read the rest:
http://www.washingtonpost.com/wp-dyn/conte
nt/article/2009/03/19/AR2009031902511.ht
ml?hpid=opinionsbox1

Read the rest:
Financial Advice, Recovery, Trumped by Obama, Congress, Media, Polls

Protesters At Homes Of AIG Execs

Wall Street Journal: “Geithner Incapacitated;” President Voices Support

Government To Have Bigger Role in All American Lives; Obama Seeks to Increase Oversight of Executive Pay

Dodd Caper, House Vote on 90% Tax, Highlights Founders Hopes; Modern Reality

Financial Advice, Recovery, Trumped by Obama, Congress, Media, Polls

March 21, 2009

Last week when news came that AIG was paying huge bonuses to employees even after the federal bailout, the president’s two top financial advisors knew what to tell the president.

“Pay the bonuses.  We can’t void a contract.”

That advice came from Larry Summers and Treasury Secretary Tim Geithner: Obama’s top economic advisors.

“Summers is the head dog.  He’s Geithner’s mentor.  Geithner is the protoge.  I don’t know how Obama fires one and keeps the other,” a top man in New York financial circles told us.

So maybe that is why Obama has not yet fired Geithner.

Obama Talks Too Much: Time For Action
(Time to Fire Geithner and Summers Too?)

US President Barack Obama, seen here on January 29, 2009, sits ... 
US President Barack Obama, seen here on January 29, 2009, sits alongside Treasury Secretary Timothy Geithner.  Obama has to get his face out of the same photo with Geithner’s face….

And maybe that is why the stimulus contained a provision to allow the AIG bonuses: Geithner and Summers made sure it was put in.

Dodd would know but hasn’t named names.

Heck: Dodd has a house in Ireland to make his retirement happy and secure.

With the nation in what the president has called a financial “crisis” and even a “catastrophe,” Obama is moving away from his top financial advisors at least on some issues, and sticking close to the advice of White House Chief of Staff Rahm Emanuel and policy advisor David Axelrod.

“Those guys know politics.  They are listening to the Hill and watching the media and the polls.  That’s driving Obama’s policy right now,” a top political analyst told us.

Last year, while still a senator, Obama voted for the bailout for AIG….

Meanwhile, Ben Bernanke is taking heat from media folks.

Bernanke released  more money into the nation’s money supply this week and the price of gold went up while the value of the dollar dropped…..

****************

Dodd under fire in his home state:

Dodd’s decision to move his family to Iowa to campaign for a doomed bid for president, his initial refusal to release documents of his two controversial mortgages with Countrywide, criticism of how he financed a vacation cottage in Ireland, and now his involvement as Senate Banking Committee chairman in the bill that ultimately protected bonuses for executives at insurance giant AIG have all taken their toll.

Read it all:
http://news.yahoo.com/s/ap/2009
0321/ap_on_re_us/aig_outrage_dodd_3

Related:
Wall Street Journal: “Geithner Incapacitated;” President Voices Support

Government To Have Bigger Role in All American Lives; Obama Seeks to Increase Oversight of Executive Pay
Bankers Press Case Against Punitive Tax 

Obama, Geithner, Congress Squandering Confidence Needed For Recovery

Bonus backlash hits Wall Street

American Democracy With Checks and Balances is Broken; Media, Congress Failing

Obama’s Radicalism Is Killing the Stock Market

 Obama Spending, Tax Plans Likely Out The Window As CBO Predicts Much More Debt

Obama: Why Are We Saving Geithner and His Incestuous Relationship With Wall Street?

Finance, one of America’s great industries, being destroyed by Congress during crisis?

For Cuomo, AIG, Financial Crisis Is His Political Moment

 Did Obama White House Fuel AIG Bonus Mess To Enact Tougher Rules With Public Support, “Outrage”?

Government To Have Bigger Role in All American Lives; Obama Seeks to Increase Oversight of Executive Pay

March 21, 2009

The Obama administration will call for increased oversight of executive pay at all banks, Wall Street firms and possibly other companies as part of a sweeping plan to overhaul financial regulation, government officials said.

By STEPHEN LABATON
The New York Times
.
The outlines of the plan are expected to be unveiled this week in preparation for President Obama’s first foreign summit meeting in early April.

Increasing oversight of executive pay has been under consideration for some time, but the decision was made in recent days as public fury over bonuses has spilled into the regulatory effort.

Related:
Financial Advice, Recovery, Trumped by Obama, Congress, Media, Polls 

Wall Street Journal: “Geithner Incapacitated;” President Voices Support

The officials said that the administration was still debating the details of its plan, including how broadly it should be applied and how far it could range beyond simple reporting requirements. Depending on the outcome of the discussions, the administration could seek to put the changes into effect through regulations rather than through legislation.

One proposal could impose greater requirements on the boards of companies to tie executive compensation more closely to corporate performance and to take other steps to assure that outsize bonuses are not paid before meeting financial goals.

The new rules will cover all financial institutions, including those not now covered by any pay rules because they are not receiving federal bailout money. Officials say the rules could also be applied more broadly to publicly traded companies, which already report about some executive pay practices to the Securities and Exchange Commission. Last month, as part of the stimulus package, Congress barred top executives at large banks getting rescue money from receiving bonuses exceeding one-third of their annual pay.

Beyond the pay rules, officials said the regulatory plan is expected to call for a broad new role for the Federal Reserve to oversee large companies, including major hedge funds, whose problems could pose risks to the entire financial system.

It will propose that many kinds of derivatives and other exotic financial instruments that contributed to the crisis be traded on exchanges or through clearinghouses so they are more transparent and can be more tightly regulated. And to protect consumers, it will call for federal standards for mortgage lenders beyond what the Federal Reserve adopted last year, as well as more aggressive enforcement of the mortgage rules.

The plan is being put together in advance of the meeting of the Group of 20 industrialized and developing nations in London, an annual event that is expected to be dominated by the global financial crisis and discussions about better oversight of large financial companies whose problems could threaten to undermine international markets.

An important part of the plan still under debate is how to regulate the shadow banking system that Wall Street firms use to package and trade mortgage-backed securities, the so-called toxic assets held by many banks and blamed for the credit crisis.

Officials said the plan would also call for increasing the levels of capital that financial institutions need to hold to absorb possible losses. But in a sign of the fragility of the economic system officials said the administration would emphasize that those heightened standards should not be imposed now because they could discourage more lending. Rather, they would be put in place after the economy began to rebound.

“The argument some are making is that they don’t want to be stepping on the gas pedal and the brake at the same time,” said Morris Goldstein, a senior fellow at the Peterson Institute for International Economics and a former top official at the International Monetary Fund.

Administration officials are also debating how tightly to supervise hedge funds. A broad consensus has emerged among regulators and administration officials that hedge funds must be registered and more closely monitored, probably by the Securities and Exchange Commission. But officials have not decided how much the funds will have to disclose about their investments and trading practices.

A central aspect of the plan, which has already been announced by the administration, would give the government greater authority to take over and resolve problems at large, troubled companies that are not now regulated by Washington, like insurance companies and hedge funds.

Read the rest:
http://www.nytimes.com/2009/0
3/22/us/politics/22regulate.htm
l?_r=1&hp

NYT:
http://www.nytimes.com/

Bankers Press Case Against Punitive Tax 

Obama, Geithner, Congress Squandering Confidence Needed For Recovery

Bonus backlash hits Wall Street

American Democracy With Checks and Balances is Broken; Media, Congress Failing

Obama’s Radicalism Is Killing the Stock Market

 Obama Spending, Tax Plans Likely Out The Window As CBO Predicts Much More Debt

Obama: Why Are We Saving Geithner and His Incestuous Relationship With Wall Street?

Finance, one of America’s great industries, being destroyed by Congress during crisis?

For Cuomo, AIG, Financial Crisis Is His Political Moment

 Did Obama White House Fuel AIG Bonus Mess To Enact Tougher Rules With Public Support, “Outrage”?

Michelle Malkin:
http://michellemalkin.com/2009/0
3/21/liveblogging-the-lexington
-ky-tea-party/