Archive for the ‘Buffett’ Category

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: Here’s Why Geithner Has To Go: Credibility, Confidence, Competance

March 18, 2009

When reporters start asking “What did he know and when did he know it?” about a presidential appointee: the drimbeat has started.

The simple answer to the question, “When did Geithner know about the AIG bonuses?” is: last year.

“How the Obama administration was caught flat-footed by this controversy dates back to last Fall, when the New York Federal Reserve Bank — then run by Geithner — stepped in to give AIG a high-interest loan for $85 billion to help prevent the company from going under — which Lehman Brothers was doing at the time. As part of the deal, AIG CEO Robert Willumstad was replaced by the new CEO, Liddy,” wrote Jake Tapper of ABC News.

If Geithner didn’t know that his organization didn’t put any limits on AIG bonuses last year and he just shoveled them money without strings: shame on him.

And shame on Obama.  And shame on the Senate that confirmed Turbo Tax Tim.

Geithner: AIG must return bonus money

CBS news said the “White House is in full damage control mode.”

House Minority Whip Eric Cantor (R-VA) said the administration is in “disarray.” 

What few have said about Geithner is easy to see: he would be a handy blame guy for Obama and his Administration.

The AIG mess is not as much about corporate greed as the Administration and the liberal media want people to believe.  It is also about the ineptitude of government.  Turning around the belief that the top Obama people don’t know what they are doing could be resolved at least somewhat by sacking Geithner….

This is now about credibility, confidence, and competance. Without those things; investors won’t flood back into the markets, house buying will be depressed and the overal economic stimulus of buyers buying will not reboud as all of us would like.

The president himself has told us that confidence is the key to recovery.

And leaders like Warren Buffett have urged the president to take dramatic action — like making the economy the number one priority as if  we were in a war….

Well the presidnet is in a war now: a war of credibility, confidence, and competance.

And since Obama has repeatedly said he has no intention of backing away from his agressive spending ways and wants to move his agenda ahead with gusto (saying just yesterday, “I didn’t come here to pass on our problems to the next president or the next generation. I came here to solve them. “): Geithern and the AIG mess stands in the way of the president’s spending agenda and the speed he needs to execute that.

So executing Geithner makes a lot of sense.  It makes the only sense.

Making AIG repay millions after thy got billions may be dramatic to some.  But making the key responsible government representative accounable by firing him would be a necessary step in regaining the president’s own reputation for credibility, confidence, and competance.

Related:
 AIG Bonus Money Is Not The Problem: Government Is The Problem

Obama: Fire Geithner

Jake Tapper:
http://blogs.abcnews.com/politicalp
unch/2009/03/obama-adminis-1.html

CNN:
http://edition.cnn.com/2009/POLI
TICS/03/18/aig.bonuses/index.html

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By LAURIE KELLMAN, Associated Press Writer

If not distancing itself from Treasury Secretary Timothy Geithner, the White House is placing firmly on his shoulders responsibility for how the government handled the $165 million in bonuses paid to about 400 executives and traders at American International Group Inc.

“Secretary Geithner last week engaged with the CEO of AIG to communicate what we thought were outrageous and unacceptable bonuses,” White House spokesman Robert Gibbs said Tuesday.

Then he volunteered the answer to a question being asked all over Washington: Did Geithner still enjoy President Barack Obama‘s confidence, given the whopping bonuses the failed insurance giant paid Friday after receiving taxpayer bailout money?

“The president has complete confidence” in Geithner, Gibbs said.
.

Is Obama satisfied that Geithner informed him of the impending bonus payments in a timely fashion?

“Yes, the president is satisfied,” Gibbs replied.

Those, of course, are statements that wouldn’t need to be made if Geithner’s status were clear. Not just a president’s confidence, but his “complete confidence” can be a well-worn political signal that the subject should start circulating a resume.

Read the rest:
http://news.yahoo.com/s/ap/2009031
8/ap_on_go_ca_st_pe/whither_geith
ner_analysis

The president may not have what it takes

March 11, 2009

Obama still has the approval of the people, but the establishment is beginning to mumble that the president may not have what it takes.

by Howard Fineman
Newsweek

Surfer that he is, President Obama should know a riptide when he’s in one. The center usually is the safest, most productive place in politics, but perhaps not now, not in a once-in-a-century economic crisis.

Swimming in the middle, he’s denounced as a socialist by conservatives, criticized as a polite accommodationist by government-is-the-answer liberals, and increasingly, dismissed as being in over his head by technocrats.

Luckily for Obama, the public still likes and trusts him, at least judging by the latest polls, including NEWSWEEK‘s. But, in ways both large and small, what’s left of the American establishment is taking his measure and, with surprising swiftness, they are finding him lacking.

They have some reasons to be concerned. I trace them to a central trait of the president’s character: he’s not really an in-your-face guy. By recent standards—and that includes Bill Clinton as well as George Bush—Obama for the most part is seeking to govern from the left, looking to solidify and rely on his own party more than woo Republicans. And yet he is by temperament judicious, even judicial. He’d have made a fine judge. But we don’t need a judge. We need a blunt-spoken coach.

Obama may be mistaking motion for progress, calling signals for a game plan. A busy, industrious overachiever, he likes to check off boxes on a long to-do list. A genial, amenable guy, he likes to appeal to every constituency, or at least not write off any. A beau ideal of Harvard Law, he can’t wait to tackle extra-credit answers on the exam.

But there is only one question on this great test of American fate: can he lead us away from plunging into another Depression?

If the establishment still has power, it is a three-sided force, churning from inside the Beltway, from Manhattan-based media and ….

Read the rest:
http://www.newsweek.com/id/1
88565/output/print

Related:
All The President’s Men: Where’s The Congressional Oversight?

Economic Situation Demads Nation, Politics With War Mindset

China Provoked Obama; Now Works To Smooth Situation: Why?

Losing Terror War? Al Qaeda, Afghanistan, Iran

Obama Policy On Gitmo, Taliban, Afghanistan, Intel: As Stupid as It Gets

Buffett: Obama not at war; has toxic message machine on economy

No Leadership: It’ll Take More Than Money to Fix This Crisis

Buffett: Obama not at war; has toxic message machine on economy

March 10, 2009

 I was going to mention to …. that you’ve heard this comment recently from some Democrats recently that a `crisis is a terrible thing to waste.’ …. Now, just rephrase that and since it’s, in my view, it’s an economic war, and–I don’t think anybody on December 7th would have said a `war is a terrible thing to waste, and therefore we’re going to try and ram through a whole bunch of things and–but we expect to–expect the other party to unite behind us on the–on the big problem.’ It’s just a mistake, I think, when you’ve got one overriding objective, to try and muddle it up with a bunch of other things…..if you’re in a war, and we really are on an economic war, there’s a obligation to the majority to behave in ways that don’t go around inflaming the minority. If on December 8th when–maybe it’s December 7th, when Roosevelt convened Congress to have a vote on the war, he didn’t say, `I’m throwing in about 10 of my pet projects,’ and you didn’t have congress people putting on 8,000 earmarks onto the declaration of war in 1941.

See:
http://www.swamppolitics.com/news/politi
cs/blog/2009/03/buffett_hits_obama_co
ngress_on.html

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When billionaire investor Warren Buffett says President Barack Obama’s economic message is muddled and undermining public confidence, it’s worth listening.

Halfway through his first 100 days in office, ace communicator Obama has struggled to find the right tone in talking about the economy, twinning bleak warnings with optimism about the future.

By Steve Holland
Reuters

 An outside view of the New York Stock Exchange on Wall street. ...

On the campaign trail, Obama said a president must be able to do more than one thing at a time, and his White House has been doing that.

He and his aides have interspliced comments about the economy while launching theme-of-the-day initiatives on healthcare, stem cell research and on Tuesday, education.

Last week the White House spent some time accusing conservative radio talk show host Rush Limbaugh of being leader of the Republican Party.

But Obama, together with Treasury Secretary Timothy Geithner, White House economic guru Lawrence Summers and others have so far failed to explain how they plan to rescue American banks, some of which are teetering on the brink of collapse.

There is talk of “stress tests” for troubled banks, or nationalizing them or letting some fail — but no clear plan.

Buffett, an informal Obama adviser considered a financial seer on Wall Street, told CNBC on Monday the message has to be “very, very clear as to what government will be doing.”

“And I think we’ve had, and it’s the nature of the political process somewhat, but we’ve had muddled messages and the American public does not know. They feel they don’t know what’s going on, and their reaction then is to absolutely pull back,” he said.

At the White House, spokesman Robert Gibbs reacted defensively, saying Obama has only been in office seven weeks and it should be no surprise that “all of the problems that took many years to take hold haven’t necessarily been solved.”

Read the rest:
http://www.reuters.com/article/new
sOne/idUSTRE5294HH20090310

In this May 21, 2008 file photo, U.S. billionaire investor Warren ...
In this May 21, 2008 file photo, U.S. billionaire investor Warren Buffett speaks during a news conference in Madrid. Buffett says the economic turmoil that contributed to a 62 percent profit drop last year at the holding company he controls is certain to continue in 2009, but the revered investor remains optimistic.(AP Photo/Paul White, File)

Office of Management and Budget Director Peter Orszag arrives ...
“Beware of geeks bearing models,” said Warren Buffett; which could be worrisome to people.  Office of Management and Budget Director Peter Orszag arrives to deliver testimony before the House Ways and Means Committee on Capitol Hill in Washington, March 4, 2009.REUTERS/Jonathan Ernst (UNITED STATES)

Warren Buffett says economy fell off a cliff

March 9, 2009

Billionaire Warren Buffett said the economy has “fallen off a cliff” over the past six months and consumers have changed their habits in remarkable ways.

Buffett said Monday during a live appearance on CNBC that current economic turmoil has basically followed the worst-case scenario he envisioned.

By JOSH FUNK, AP Business Writer

In this May 21, 2008 file photo, U.S. billionaire investor Warren ...
In this May 21, 2008 file photo, U.S. billionaire investor Warren Buffett speaks during a news conference in Madrid. Buffett says the economic turmoil that contributed to a 62 percent profit drop last year at the holding company he controls is certain to continue in 2009, but the revered investor remains optimistic.(AP Photo/Paul White, File)

“It’s fallen off a cliff,” Buffett said. “Not only has the economy slowed down a lot, but people have really changed their habits like I haven’t seen.”

Buffett said the changes are reflected in the results of Berkshire Hathaway Inc.’s subsidiaries. He said Berkshire’s jewelry companies have suffered, but more people have been willing to switch to Geico to save money on car insurance.

He predicted that unemployment will likely climb a lot higher before the recession is done, but he also reiterated his optimistic long-term view: “Everything will be all right. We do have the greatest economic machine that’s ever been created.”

Fear and confusion have been driving consumer and investor behavior in recent months, Buffett said.

The nation’s leaders need to clear up the confusion before anyone will become more confident, and he said all 535 members of Congress should stop the partisan bickering about solutions.

Read the rest:
http://news.yahoo.com/s/ap/2009
0309/ap_on_bi_ge/buffett_economy

Office of Management and Budget Director Peter Orszag arrives ...
“Beware of geeks bearing models,” said Warren Buffett; which could be worrisome to people.  Office of Management and Budget Director Peter Orszag arrives to deliver testimony before the House Ways and Means Committee on Capitol Hill in Washington, March 4, 2009.REUTERS/Jonathan Ernst (UNITED STATES)