Archive for the ‘financial’ Category

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

March 27, 2009

“The parties may elect in respect of two or more Transactions that a net amount will be determined in respect of all amounts payable on the same date in the same currency in respect of such Transactions, regardless of whether such amounts are payable in respect of the same Transaction.”

By Michael Kinsley
The Washington Post

Got that? It’s a sentence, chosen more or less at random, from the most recent (2002) Master Agreement of the International Swap and Derivatives Association. These are the people who brought you the “credit default swap,” the mysterious financial transaction that almost destroyed the world, and might yet do so if the Obama administration’s rescue plan doesn’t work. The Master Agreement is used for credit default swaps the way a standard real estate broker’s lease is used for renting a one-bedroom apartment.

Except that we all know what a one-bedroom apartment is. How many of us know what a credit-default swap is? The media do their best to explain it, often using attractive drawings with arrows showing money going hither and thither. Or sometimes they throw up their hands, as I’m doing, and simply describe them as “exotic financial instruments,” and leave it at that. Part of the hostility that banks and Wall Street now enjoy comes from a popular suspicion that the mystery and complexity are part of the point — that these things are made impossible to explain on purpose, as a way of avoiding scrutiny. “Don’t criticize what you can’t understand,” as the financier Bob Dylan once put it in another context.

One problem with the Obama financial rescue plan is that it is almost as complicated and obscure as the problem it is designed to solve. Treasury Secretary Tim Geithner, testifying yesterday on Capitol Hill, called for greater simplicity in financial regulation. Good luck with that. Here is a sample passage from one of the explanatory documents released by Treasury this week. “Private investors may be given voluntary withdrawal rights at the level of a Private Vehicle, subject to limitations to be agreed with Treasury including that no private investor may have the right to voluntarily withdraw from a Private Vehicle prior to the third anniversary of the first investment by such Private Vehicle.” All this talk of getting into and out of private vehicles may be a sly reference to the car and driver that did in Tom Daschle. Otherwise, who knows?

The government’s most urgent goal is to cleanse the financial system of “toxic assets.” These used to be known as “bad debts” until somebody decided that a more hysterical term was needed to reflect the gravity of the situation. Nobody gives a hoot about bad debts anymore. The government could have just swallowed hard and bought up these toxic assets itself. Then it could have buried them at Yucca Mountain in Nevada, where it has almost completed a $13.5 billion nuclear waste dump, just in time to promise never to use it, at least not for nuclear waste. Unlike nuclear waste, credit default swaps are unlikely to leach into the groundwater. And even if they do, there is no detectable difference between trading in derivatives such as credit default swaps and Nevada’s principal industry anyway. Except that the amounts involved in Nevada-style recreational gambling are much smaller. Oh, and the government doesn’t bail out petty gamblers. Yet.

But the administration decided that it would be more exciting to let private financiers in on the fun. This is an odd echo of what created the mess in the first place. Government-chartered entities such as Fannie Mae and Freddie Mac operated with an implicit government guarantee, whereas firms we all thought were private, like AIG and Citicorp, were deemed “too big to fail.” One way or another, the government got sucked in against its will. It felt it had no choice. The private firms now pondering whether to join the party do have a choice, so they will have to be subsidized.

The plan is very, very clever. Maybe too clever. It depends on convincing smart financiers that there is a killing to be made investing, with government help, in toxic assets. Inevitably, when the dust settles, it will turn out that some private firms and individuals actually have made a killing, which will cause another eruption of populist resentment like the one over the AIG bonuses. Fear of such an eruption, and any retrospective mischief coming out of Congress as a result, is going to make private money harder to entice, which means the subsidies will have to be larger, which means the killings will even be greater.

Read the rest:
http://www.washingtonpost.com/wp-dyn
/content/article/2009/03/26/AR20090
32603113.html?hpid=opinionsbox1

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Obama, Economy: So Much Uncertainty Spins Off More…. Uncertainty

March 25, 2009

Barack Obama seem prepared to chage everything about everything.

Just today he set out to reform the tax code at the IRS.  Since Tim Geithner is busy and was never good at taxes anyway, Paul Volker will head a commission.

But Geithner added uncertainty of his own today saying it was OK by him if China replaced the dollar with something else as a reserve currency.  When the dollar pitched downward, Geithner had to ‘clarify’ his first statement to get markets going again.

But it is just part of an ever swirling vortex of change, tinkering and tampering that makes businesses and investors shudder.

We’ll provide health care to all, we’ll reform education, we’ll take care of climate change, we’ll do away with gas and oil and coal, we’ll….well it looks like we’ll do everything.  We’ll use embrionic stem cells to cure Alzheimer’s and Parkinson’s and then we’ll cure cancer.

And what will it all cost?  Who cares, really.  It isn’t our money……

Well, people do care like China, the nation that holds most of our debt….

Just today FedEx said it might back off on billions of dollars of aircraft sales planned to go to Boeing.  The reason?  Card check.  FedEx is worried that fast unionization of its work force will dramatically change its bottom line.

The Dow was way up today and then way down.  Why?  In one word?  Uncertainty.

Today on the Dow: uncertainty

“A weaker interest or wider spread in a Treasury deal today could certainly cause some angst,” said Warren Koontz, chief investment officer for large-company value stocks at Loomis Sayles & Co., which manages $106 billion in Boston. “As anxious as the market is after the run we’ve had here, it gives people an excuse to step back.”

Late on Wednesday the Associated press said this about the stock market today: “Trading was extremely erratic….Analysts said weak demand during an auction of government debt stirred up worries about how easily Washington will be able to raise money to fund its economic rescue program. The fear in the market is that the government might not be able to easily raise the hundreds of billions of dollars it needs.”

Anxious, cautious, uncertain, confidence: they are all part of the stew that’s boiling; which might be good and might not.

The economic recession gave us uncertainty enough.  Now the president has himself compounded the problem.

If the United States was an aircrft, Obama has already touched every dial and lever in the cockpit.  And what does that mean?  Only one thing for sure: Uncertainty.  And a lack of confidence.  That’s why businesses are not yet rehiring and people are holding on to their money.

First Obama said we were in a crisis and he was all gloom and doom.  Then he spoke of confidence and Biden even mentioned the “Obama factor” when the markets went up.  Last night he exhibited neither confidence nor gloom; but instead a kind of boredom.

The president is overexposed and not helping.  This is a time to lower uncertainty and emphasize confidence: and do the hard work necessary to move the nation forward.  Enough of the media events, press conferences and fake bipartisanship.  Get to work already.

Primum non nocere

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

The uncertainty that the president has mentioned himself,  just a little, is what militay people call the “unknown unknowns.”  While we have so much economic uncertainty compounded by self imposed uncertainty, we should have some money saved for a rainy day like an new war on terror, a troop deployment to the border with Mexico or some other really far out scenario…..Putin and Hu Jintao like American uncertainty and they aren’t the only ones…..We live in an uncertain world and we have added to the uncertainty since January….

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

FedEx Corp is threatening to cancel the purchase of billions of dollars worth of new Boeing Co cargo planes if Congress passes a law that would make it easier for unions to organize at the package-delivery company, the Wall Street Journal said.

FedEx may cancel plans to buy as many as 30 new Boeing planes should Congress pass a bill that would remove truck drivers, couriers and other employees at FedEx’s Express unit from the jurisdiction of the federal Railway Labor Act of 1926, the paper cited the company spokesman as saying.

In January, FedEx said its express unit exercised options to buy 15 more Boeing 777 freighters, worth $3.75 billion at list prices.

However, the company deferred delivery of some of the planes as the U.S. economy faces a bleak outlook.

FedEx’s actions raise the stakes in an increasingly bitter battle involving chief rival, United Parcel Service Inc, and the Teamsters union, which has been trying for years to organize at FedEx, the Journal said.

FedEx and Boeing could not be immediately reached for comment by Reuters.

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

Bloomberg

Treasury Secretary Timothy Geithner sent the dollar tumbling with comments about China’s ideas for overhauling the global monetary system, only to drive it back up by affirming that it should remain the world’s reserve currency.

Geithner was initially asked at a Council on Foreign Relations event in New York about proposals from People’s Bank of China Governor Zhou Xiaochuan for a new international reserve currency. He said “as I understand his proposal, it’s a proposal designed to increase the use of the IMF’s special drawing rights. And we’re actually quite open to that.”

The dollar slid as much as 1.3 percent against the euro within 10 minutes of news accounts of Geithner’s remarks. The U.S. currency was down 0.6 percent at $1.3553 as of 12:31 p.m. in New York.

Roger Altman, who worked with Geithner as deputy Treasury secretary in the Clinton administration, later asked Geithner whether he wanted to “clarify” his remarks.

“I’d like to ask one final question, in effect on behalf of the market,” said Altman, founder of Evercore Partners Inc. “Let me ask the question this way. Do you see any change over the foreseeable future in the basic role of the dollar as the world’s key reserve currency?”

‘Strong’ Dollar

Geithner responded by saying that “I think the dollar remains the world’s dominant reserve currency.” In an interview with CNBC broadcast after the event, the Treasury chief said that a “strong dollar” is in “America’s interest.”

In his earlier response, Geithner said an increased use of SDRs should be “rather evolutionary, building on the current architecture, rather than moving us to global monetary union.”

Those remarks don’t indicate Geithner favors moving to a system with the SDR as a reserve currency, strategist Lee Hardman at Bank of Tokyo-Mitsubishi Ltd. wrote in a note.

“That was the big concern amongst the confusion,” London- based Hardman said. “A move to an SDR-linked system away from the dollar would naturally lead to a reduction in the dollar’s share of global reserves.”

Geithner, a former Treasury undersecretary for international affairs and president of the Federal Reserve Bank of New York, which carries out U.S. interventions in currency markets, also said that “we will do what’s necessary to make sure we’re sustaining confidence in our financial markets.”

Bernanke, Obama

Geithner and Fed Chairman Ben S. Bernanke both told lawmakers yesterday that they expected the dollar to remain the most important global currency. President Barack Obama said at a news conference late yesterday that “the dollar is extraordinarily strong” because investors are confident in the ability of the U.S. to lead a worldwide recovery, and also rejected calls for a new global currency.

China is the largest foreign holder of U.S. Treasuries, and Premier Wen Jiabao earlier this month expressed concern about the value of its investment. Central bank governor Zhou this week advocated a “super-sovereign reserve currency” that’s disconnected from any individual nation.

Zhou said, in an essay posted on the PBOC’s Web site, that the IMF’s special drawing rights, a unit of account at the fund used for member countries’ reserves with the IMF, offer “light in the tunnel for the reform of the international monetary system.” He said the SDR has yet to be “put into full play due to limitations on its allocation and the scope of its uses.”

Geithner said in his interview with CNBC that “China is playing a very important stabilizing role in this financial crisis we’re seeing globally.” U.S. officials are “working very, very closely with them. I think they have a lot of confidence in the policies we’re pursuing,” he also said.

See Michelle Malkin:
http://michellemalkin.com/2009/0
3/25/wonderboy-strikes-again/

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

March 22, 2009

“We are on a fast road to financial destruction,” Senator Richard Shelby (R-AL) said today.

Shelby, speaking on “Fox News Sunday,” said Mr. Obama was going to have to scale back his budget in light of the new estimates: “He’s going to have to. We’re on a — on the fast road to financial destruction, and I see a 20 billion — a $20 trillion deficit in the few years to come,” he said.

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

The top Republican on the Senate banking panel says he doesn’t think the treasury secretary can survive in his job without a 180-degree turnaround.

Treasury Secretary Timothy Geithner is on “shaky grounds” these days with Congress and many in the country, according to the Senate Banking Committee’s top Republican.

Sen. Richard Shelby said Sunday he doesn’t think Geithner will last long unless he starts doing a better job.

Shelby, who voted to confirm Geithner, said he has less confidence in the treasury secretary each day — over the AIG bonus mess, solving the nation’s financial troubles and helping turn around the economy.

“I said competence brings confidence to anything. I don’t see a lot of things positively thus far that Timothy Geithner’s been involved in,” Shelby said Sunday on “Fox News Sunday.”

“He’s going to have to do a 180-degree turnaround, I believe, to be a successful treasury secretary,” he said.

But President Barack Obama has faith in Geithner. The president tells CBS’ “60 Minutes” that if Geithner offered to resign, the answer would be, “Sorry buddy, you’ve still got the job.”

While Shelby did not specifically call for Geithner to resign, at least two Republicans — Reps. Connie Mack of Florida and Darrell Issa of California — did.

White House economic adviser Christina Romer said those calls are “silly.”

“I think all of this discussion is — is really silly. Tim Geithner is an excellent secretary of the treasury. He has been dealt an unbelievably difficult hand to deal with. But he’s actually doing a fantastic job,” Romer said on “FOX News Sunday.”

From Fox News

Related from the New York Times:
http://www.nytimes.com/2009/03
/22/us/politics/22cnd-talkshow
.html?_r=1&hp

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

March 22, 2009

PAUL KRUGMAN BLOGS ON THE TOXIC-ASSET PROGRAM to be announced early this week: “The Geithner plan has now been leaked in detail. It’s exactly the plan that was widely analyzed — and found wanting — a couple of weeks ago. The zombie ideas have won. The Obama administration is now completely wedded to the idea that there’s nothing fundamentally wrong with the financial system — that what we’re facing is the equivalent of a run on an essentially sound bank. … And if we get investors to understand that toxic waste is really, truly worth much more than anyone is willing to pay for it, all our problems will be solved. To this end the plan proposes to create funds in which private investors put in a small amount of their own money, and in return get large, non-recourse loans from the taxpayer, with which to buy bad … assets. This is supposed to lead to fair prices because the funds will engage in competitive bidding.

“But it’s immediately obvious, if you think about it, that these funds will have skewed incentives. In effect, Treasury will be creating — deliberately! — the functional equivalent of Texas S&Ls in the 1980s: financial operations with very little capital but lots of government-guaranteed liabilities. For the private investors, this is an open invitation to play heads I win, tails the taxpayers lose. So sure, these investors will be ready to pay high prices for toxic waste. After all, the stuff might be worth something; and if it isn’t, that’s someone else’s problem. Or to put it another way, Treasury has decided that what we have is nothing but a confidence problem, which it proposes to cure by creating massive moral hazard. This plan will produce big gains for banks that didn’t actually need any help; it will, however, do little to reassure the public about banks that are seriously undercapitalized. And I fear that when the plan fails, as it almost surely will, the administration will have shot its bolt: it won’t be able to come back to Congress for a plan that might actually work. What an awful mess.”

From:
http://www.politico.com/playbook/

Krugman blog: NY Times:
http://krugman.blogs.nytimes.com/?s
cp=2&sq=krugman&st=cse

Related:
Obama Talks Too Much: Time For Action
(Fire Geithner, for one….)

Obama Overexposed

 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

Sen. Sherrod Brown, D- Ohio, pauses in the elevator after arriving on Capitol
Geithner

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/

$50 Trillion in Global Assets “Lost” in 2008

March 9, 2009

The value of global financial assets including stocks, bonds and currencies probably fell by more than $50 trillion in 2008, equivalent to a year of world gross domestic product, according to an Asian Development Bank report.

By Shamim Adam
Bloomberg

Asia excluding Japan probably lost about $9.6 trillion, while the Latin American region saw the value of financial assets drop by about $2.1 trillion, said Claudio Loser, a former International Monetary Fund director and the author of the report that was commissioned by the ADB. The report didn’t give a breakdown of asset declines in other regions.

“The loss of financial wealth is enormous, and the consequences for the economies of the world will unfortunately commensurate,” said Loser, now the Latin American president of strategic advisory firm Centennial Group Inc.. “There are serious economic and political stumbling blocks that may well cause the recovery to be costly and slow to consolidate.”

Some of the world’s biggest financial companies including Lehman Brothers Holdings Inc. and Merrill Lynch & Co. have collapsed as banks and other financial institutions reported almost $1.2 trillion of losses and writedowns since the start of 2007. Global stock markets lost about $28.7 trillion in 2008, and another $6.6 trillion has been wiped from the value of world equities in 2009.

“Poor macroeconomic and regulatory policies allowed the global economy to exceed its capacity to grow and contributed to a buildup in imbalances across asset and commodity markets,” Loser said. “The previous sense of strength and invulnerability is now gone.”

Global Recession

Read the rest:
http://www.bloomberg.com/apps/news?pid=20
601087&sid=aZ1kcJ7y3LDM&refer=worldwide

What does a trillion $ look like?
http://www.pagetutor.com/trillion/index.html

Forbes Pleads For Bank Bailout, “Banks Are the Heart of the Financial System”

February 1, 2009

Steve Forbes said on Sunday that getting American banks lending is much more important than the current economic stimulus bill.

Forbes appeared on “Meet the Press” on NBC with David Gregory.

Forbes said that Japan used eight different stimulus packages in the 1990s and couldn’t solve their economic problems without solving the bank lending dilemma.

“And that’s why they have a high debt and still a stagnant economy,” Forbes said.

“The banks are like the heart of the financial system,” Forbes said.  “You can have a strong head and strong muscles but without the heart you have nothing.”

Erin Burnett of CNBC said the “New American Economy” will provide a lower standard of living to most Americans.

“And that means likely a lower standard of living.  So you may return to vigorous growth, but likely that debt-fueled expansion, you’re not going to have that.  And that’s a tough message to tell people, your standard of living is going to be lower for a long time.”

David Gregory pointed out a Heritage Foundation release this week that said:  “The combination of current law programs plus the stimulus–and without any additional borrowings for additional financial market interventions or other new spending–suggests at least another $1.6 trillion of new government debt, bringing the total of publicly traded federal debt to $9.9 trillion by the end of 2010…[and] the debt-to-GDP ratio will have reached 67.9 percent for a two-year increase of 23 percentage” points.

Forbes said, “You’ve got to ….  and I hope the Senate will do this, is work more on the tax side; like, say, having the payroll tax for two years.  That lowers the price of hiring people, also….  Payroll tax holiday.  That way people get more money and it’s cheaper to hire labor.  Reduce the capital gains levee for a couple of years, positive things like that.  And then get back–again, the banking system, Japan did not fix their banking system, which is why they stagnated.  We have to fix ours, starting by one of the most boring subjects in the world but devastating banks today, get rid of this mark-to-market accounting, which is destroying banks.”

Read the Meet The Press transcript:
http://www.msnbc.msn.com/id/28964188/

Steve Forbes, Chairman and CEO of Forbes Media, participates ... 
Steve Forbes, Chairman and CEO of Forbes Media, participates in a plenary session the Annual Meeting of the World Economic Forum, WEF, in Davos, Switzerland, Thursday, Jan. 29, 2009.(AP Photo/Keystone, Alessandro Della Bella)

http://www.bigbook.eu/senators-q
uestion-daschles-late-tax-filing

U.S. to broaden dialogue with China

January 28, 2009

Secretary of State Hillary Rodham Clinton on Tuesday signaled a shift in U.S. dealings with China, with the State Department poised to take charge after the Treasury Department’s leading role during the Bush administration’s final years.

By
The Washington Times

Mrs. Clinton said the economy-focused approach to China that was spearheaded by Bush administration Treasury Secretary Henry M. Paulson Jr. must give way to a “broader agenda.”

“We need a comprehensive dialogue with China. The strategic dialogue that was begun in the Bush administration turned into an economic dialogue,” she told reporters in her first briefing at the State Department since taking office last week. “That’s a very important aspect of our relationship with China, but it’s not the only aspect of our relationship.”

She avoided specifics, but issues affecting Sino-U.S. relations traditionally have included human rights, technology transfers, Taiwan, military exchanges and efforts to slow nuclear proliferation and halt fighting in Sudan’s Darfur region.

Read the rest:
http://www.washingtontimes.com/news/2009/ja
n/28/clinton-signals-china-policy-shift-bey
ond-treasury/

Financial Crisis “Far From Over”

January 21, 2009

Our global financial crisis is a long way from over.

If you feel the need to hang a bunch of investment bankers, Wall Street types, lawyers and CEOs, you are likely having a “normal” reaction to reality.

But we still need to get behind the wheel and solve our economic ills.  And, in this commentators mind, a bunch of government spending isn’t the cure (it never has sufficed before).

But there still should be justice for the guilty.  Didn’t Enron’s Key Lay get the electric chair?
.
Get the rope.  Get Clint Eastwood.  Then let’s get Madoff!

But the problems have to be solved.  Bailouts of banks buys the mortgages and other debt that has lost value, little value and nobody will buy.  So the U.S. has to buy this debt.

There are also some 5 million “home owners” that will default on their morgages unless they get relief.

Accused swindler Bernard Madoff exits the Manhattan federal ... 
Accused swindler Bernard Madoff exits the Manhattan federal court house in New York January 14, 2009.(Brendan McDermid/Reuters)

The truth is, there may be some jail time passed out but the real problem is systemic which needs a lot of long-term fixing….

Headlines from London January 21, 2009:

“Banking Crisis May Last a Decade”

“Only Two London-Listed Banks By End of 2009”
…the government is now the largest, or only, shareholder in Lloyds/HBOS, RBS and Northern Rock and it seems highly likely that HSBC and Standard Chartered will be the only UK-quoted bank shares by the end of 2009.
http://www.telegraph.co.uk/finance/personalfinance/inv
esting/shares/4298704/Fundamentalist-View-There-wil
l-be-only-two-London-listed-banks-left-by-the-end-of-2009.html

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By Philip Johnston
Telegraph (London)

Before the internet age, it was a rite of passage, a feeling that you had finally grown up and were considered responsible and trustworthy. As children, many of us might have had savings accounts or a few pounds in a building society deposited by an ageing aunt.

But to get one’s first cheque book was something special. Mine had the words National Westminster Bank written on the front, an imprimatur that could hardly have sounded more rock solid and British to the core, a guarantee of probity and quiet competence.

In those days, banks were forbidding places; there were no open plan offices. A visit to the bank manager, especially for an impecunious student trying to explain a £20 overdraft, was a terrifying experience conducted in a sternly avuncular manner from behind a large desk.

We are right to ben angry with the bankers

Fred Goodwin, former chief executive, Royal Bank of Scotland Photo: REUTERS

We all knew that such a world had disappeared. But it was none the less astonishing to wake on Monday morning to discover that the Royal Bank of Scotland – my bank, or at least the NatWest bit of it – had posted the biggest loss in British corporate history.

Nor did it take long for the shock to give way to fury. Charles Dickens captured the feeling well after the collapse of Merdle’s bank in Little Dorrit: “The air was laden with a heavy muttering of the name of Merdle, coupled with every form of execration.”

Well, there were a few execrations in my own household and doubtless in many others across the country. Both curses and questions. How could this have happened?

How is it possible to rack up a loss of £28 billion and yet be worth just £8 billion?

What happened to the RBS share of the £37 billion shelled out by taxpayers last October to recapitalise the banking system? What possessed the executives of RBS to buy a Dutch financial institution for way over the odds even as the Northern Rock fiasco was unfolding?

Beyond the sheer incredulity, there is anger that the people responsible have cushioned themselves financially against the privations that their recklessness will induce in millions of others.

The people at the top may lose their jobs, but they have already paid themselves so much in bonuses and struck such lucrative pension deals that they can retire in luxury while the rest of us face penury.

Extraordinarily, the vast bonuses were paid for what at the time was hailed as success but now turns out to be abject failure. Do they get returned, along with the knighthoods and gongs?

For those of us who did not know what a derivative was until a few months ago and had only a vague idea that Sir Fred Goodwin was “something in the City”, these are revelatory times.

It was evident from the steady flow of letters offering to lend money and urging us to take out new credit cards (all of which went into the bin in our house) that the banks were on a credit binge and that many people were being tempted to join in.

But surely, we all thought, they must know what they are doing. Even the near-collapse of Northern Rock after the first run on a bank since the mid-19th century, seemed like an isolated example of a badly run institution that had been led to the edge by incompetent and foolhardy executives and had to be rescued by the Government.

At the time, some cynical observers suggested that if it had been Southern Rock based in Guildford, it would have been allowed to go to the wall. But it was a big employer and an iconic institution in Labour’s north-east heartland, so it had to be saved. But at least it was one-off, wasn’t it? The other banks could not possibly be in the same leaky boat.

The discovery that they were sinking too has been more than a shock; it has been a betrayal. Their recklessness has bordered on the criminal. One figure from the Bank of England’s financial stability report last October exemplifies the enormity of their folly. In 2000, the amount of money held on deposit in British banks and the amount they were lending was roughly comparable.

Last year, they were lending £700 billion more than they were receiving. This was the mother of all bubbles, yet the bank bosses kept inflating it, egged on by the Government, the Bank of England, the so-called regulators and, let’s be frank, by those of us who borrowed way beyond our means.

In its report, the Bank said: “The seeds of this boom can be traced back to the development of financial and trade imbalances among the major economies over the past decade. Increased borrowing in a number of developed countries was in part financed with inflows of foreign capital, leading to greater integration in international capital markets. Benign economic conditions helped anchor expectations of continued stability. This, along with rising asset prices and low global real interest rates, boosted the demand for and supply of credit in a number of developed economies.

It added: “Over time, banks took on progressively more credit risk by lending to, for example, households with high loan to income ratios, leveraged buy-out firms and, in the United States, to the sub-prime sector.”

Read the rest:
http://www.telegraph.co.uk/finance/financetop
ics/financialcrisis/4301285/We-have-every-ri
ght-to-be-angry-with-the-bankers.html