Archive for the ‘lending’ Category

Obama, Geithner, Summers Plan for “Toxic Assets” May be Toxic Itself

March 27, 2009

 Barack Obama’s economic team is in serious  jeopardy  of getting bogged down as they attempt to extricate America from the “toxic asset,” bad bank and financial crisis.The objective is to get lending going and they centerpiece is trust and confidence.

Obama is banking that his strong poll numbers will translate into the public trust and confidence he’ll need to reform, some say overhaul, and some say radically attack the financial system and Wall Street.

But pollster Frank Luntz and others say although the public approves of Obama himself, they reject some of his policies.

It could just be that Geithener, Larry Summers and Barney Frank are ill suited to carrying the load they are under.  And then again, maybe they created a load that is a load of c**p.

The Geithner, Summers, Obama plan may be too radical, too complex and too elusive to even explain — if and when the details become known….

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“You’re talking about seizing private businesses and you don’t consider that radical?” Manzullo [Rep. Donalsd Manzullo; R-Ill] replied, his voice rising.

Manzullo is trying to get [Treasury Secretry Timothy] Geithner to give details of the plan — that’s where Geithner got stung before — but Geithner doesn’t have them yet.

If the plan were not radical, Manzullo said to Geithner, “you would have answers to some of my questions, such as, what size business would be subject to this?”

From The Washington Post
http://voices.washingtonpost.com/econom
y-watch/2009/03/geithner_new_rules_o
f_the_game.html?hpid=topnews

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

By MARTIN CRUTSINGER, AP Economics Writer

Wall Street wizards

have proved adept at designing complex financial products to sidestep existing regulations. And Vincent Reinhart, former director of monetary affairs at the Federal Reserve, says, “You’re going to see firms try to figure out how to be under the radar.”

For example, private equity investors might try to buy large hedge funds and chop them into funds that would be small enough to operate unregulated, Reinhart said.

Treasury Secretary Timothy Geithner, unveiling the plan Thursday, said the nation’s economic crisis demands bold action.

“We need much stronger standards for openness, transparency and plain commonsense language throughout the financial system,” he told the House Financial Services Committee.

House Financial Services Committee Chairman Barney Frank, D-Mass., ... 
House Financial Services Committee Chairman Barney Frank, D-Mass., concludes a hearing on President Obama’s proposals for an extensive overhaul of financial regulations with Treasury Secretary Timothy Geithner there to defend the plan, on Capitol Hill in Washington, Thursday, March 26, 2009. (AP Photo/J. Scott Applewhite)

Read the rest:
http://news.yahoo.com/s/ap/200903
27/ap_on_go_ca_st_pe/financial_regulation

Related:
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.”

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My Hope Doesn’t Allow Me To Swallow Obama The Way the Media Has…

March 16, 2009

There is just too much on the plate here to swallow.

As Andrew Malcolm wrote in the L.A. Times today:

Listen for more such positive tweaks in coming days. It’s bad. But we’re strong. If we can go to the moon, we can automate all medical records and cover everyone with health insurance and reform the country’s education system and stop foreclosures and expand the war in Afghanistan and create a federal deficit with more zeroes than most civilian calculators contain and then cut the deficit in half by giving 95% of Americans tax cuts and sticking it to a few rich people. And the only thing we have to fear is fear itself.

That and, perhaps, China calling in all its loans at once.

Oh, and cure cancer, solve global warming (if it is the disaster Al Gore claims) and rid ourselves of oil, gas and coal.

Frankly, my dear, I do give a damn.

And I give a damn about working on jobs, banks and the economy first: without fixing the “cisis” we cannot afford to fix the rest of the country and the world…..

And the swallow Obama media can’t be too smart: many of the newspapers that got behind Obama early and without criticism are now going out of business.  Even consevative talk radio guys that haven’t had the impact of the “Obama boost” inthe form of Rahm Emanuael’s orchestrated attacks, like Rush Limbaugh, are failing.

So here is the recipe for future success:

Mitch McConnell and other Republicans need to fight the Obama plan, slow down all non essential legislation, and get people to listen.

Then need to set down principles the way Newt did in the “Contract with America” and they need to stick to them the way Ron Silver did even when Hollywood wouldn’t hire him.

It’s the economy, stupid.

Principles, sticking to principles and getting the word out will work.  It worked before.

Despite Global Economy Downturn, China Still Lending

March 8, 2009

Optimistic official comments from China’s annual legislative meeting are highlighting the country’s differences with major Western economies caught in the worsening financial crisis.

By Andrew Batson
The Wall Street Journal
.
China’s economy hasn’t turned the corner into recovery — housing sales, construction and manufacturing continue to contract, and the worst is almost certainly still to come for exporters hammered by downturns in U.S. and European demand, with February trade figures next week expected to show a sharp decline.

But while financial systems sag in many countries, Chinese banks — state-run, stodgy and opaque though they may be — continue to pump money through the economy. Along with flush household savings and solid corporate balance sheets, that is sparing China from the liquidity crunch and credit collapse savaging other nations.

“The effect of this financial crisis on China is different than its effect on Western developed countries,” Zhang Ping, the head of China’s economic planning agency, said at a news conference on Friday. “For us the biggest impact has been on the real economy, while in the West there has been a major impact on the financial system.”

“It’s just one crisis, not two” for China, said Ben Simpfendorfer, an economist for Royal Bank of Scotland. Because they don’t have to restructure their financial system, he said, Chinese authorities can focus on re-accelerating economic growth with measures like the 4 trillion yuan ($585 billion) investment plan the government announced in November.

Read the rest:
http://online.wsj.com/article/SB1
23631015766548975.html

World Bank Says Global Economy Will Shrink in ’09

March 8, 2009

The economic crisis that started with junk mortgages in the United States is causing havoc for poorer countries around the world, not only stifling their growth but choking off their access to credit as well, the World Bank said on Sunday.

By Edmund Andrews
The New York times

In a bleaker assessment than those of most private forecasters, the World Bank also predicted that the global economy would shrink in 2009 for the first time since World War II. The bank did not provide a specific estimate, but bank officials said its economists would be publishing one in the next several weeks.

Until now, even extremely pessimistic forecasters have predicted that the global economy would eke out a tiny expansion but had warned that even a growth rate of 5 percent in China would be a disastrous slowdown, given the enormous pressure there to create jobs for its rural population.

The World Bank also warned that global trade would shrink for the first time since 1982, and that the decline would be the biggest since the 1930s.

The report, released on Sunday, was prepared for a meeting next week of finance ministers from the 20 industrialized and large developing countries. It warned that the financial disruptions are all but certain to overwhelm the ability of institutions like itself and the International Monetary Fund to provide a buffer.

The bank, which provides low-cost lending for economic development projects in poorer countries, pleaded for wealthy governments to create a “vulnerability fund” and set aside a fraction of what they spend on stimulating their own economies for assisting other countries.

“This global crisis needs a global solution and preventing an economic catastrophe in developing countries is important for global efforts to overcome this crisis,” said Robert B. Zoellick, the World Bank’s president. “We need investments in safety nets, infrastructure, and small and medium size companies to create jobs and to avoid social and political unrest.”

The bank said that developing countries, many of which had been growing rapidly in recent years, are being devastated by plunging exports, falling commodity prices, declining foreign investment and vanishing credit.

Read the rest:
http://www.nytimes.com/2009/03/
09/business/09bank.html?_r=1&hp

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Vietnam beomes more poor:
http://ph.news.yahoo.com/afp/20090308/tbs-
finance-economy-vietnam-poverty-a179076.html

Related:
Stimulus Too Late, Wasteful, Reckless; Toxic Assets and Banks Still Unaddressed

NYT Interviews Obama; No Economic Recovery This Year

 NYT: After March 6 Economic News, “2009 is Probably a Lost Cause”

Obama, Socialism, Fear, Lack of Confidence: Tanking Stocks, Skyrocketing Debt, Recovery Doomed This Year

March 7, 2009
This has the feel of a full scale assault on capitalism….

Some investors and pundits blame Obama for the market’s dismal performance. He inherited a mess, but his rhetoric isn’t helping.
.
Obama’s Radicalism Is Killing the Stock Market

NYT: After March 6 Economic News, “2009 is Probably a Lost Cause”

Tom Petruno, Market Beat
Los Angeles Times
March 7, 2009
The stock market is supposed to be a bet on the future.

The market’s verdict so far this year: There is no future.

The continuing meltdown in share prices, the worst since the Great Depression, now has become Exhibit A in the political battle between the Obama administration and its harshest critics.

Conservative pundits including Rush Limbaugh and CNBC-TV’s Larry Kudlow assert that the president is waging war against capitalism itself, with his tax-hike proposals, social programs and banker-bashing rhetoric. That has sent disillusioned investors fleeing, they contend.

Well, something has. After diving 38% last year, share prices are down 24% just since Jan. 1, as measured by the Standard & Poor’s index of 500 big-name issues.

Despite a slight uptick on Friday, stocks plummeted 7% this week alone.

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

The decline from the market’s peak in October 2007 now is 56.3% — the steepest drop since the plunge of 1938 to 1942, when no less than the future of democracy was at stake.

“I think everybody is afraid of Obama,” said Todd Leone, a veteran stock trader at Cowen & Co. in New York. “They’re afraid he’s a socialist.”

Yes, the S-word.

Others say the market is more upset with the administration’s failure to stabilize the ravaged banking system — a Herculean task that Wall Street had hoped would be the first major challenge the White House tackled.

“Every time Obama talks about something like healthcare, the market’s reaction is — ‘No, the banking crisis!’ ” said Jeffrey Schappe, investment chief at BB&T Asset Management in Raleigh, N.C.

Treasury Secretary Timothy F. Geithner still hasn’t provided specifics on his plan to get rotting loans off the balance sheets of major banks, a step seen as crucial to jump-starting new lending.

For his part, the president this week advised investors to look beyond what he called “day-to-day gyrations” in share prices.

He then ventured into territory where few other presidents have gone. Perhaps taking a cue from fellow Democrat Warren E. Buffett, Obama offered an opinion on whether stocks were bargains.

“What you’re now seeing is profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal, if you’ve got a long-term perspective on it,” he said Tuesday.

He didn’t get the lingo right, assuming he meant to say “price-to-earnings ratios,” a measure of stock prices relative to earnings per share. That flub caused snickering among market pros.

Read the rest:
http://www.latimes.com/business/la-
fi-petruno7-2009mar07,0,869176.column

Related:
 Can Democracy Fail With Obama’s Socialist Help?

George W. Obama?

Related:
 Venezuela’s Chavez Urges Obama, U.S. Down Socialist Path

Obama’s Radicalism Is Killing the Stock Market

NYT: After March 6 Economic News, “2009 is Probably a Lost Cause”

Obama’s First Weeks: Economic Disaster, Socialist Agenda,

Obama’s Radicalism Is Killing the Stock Market

March 6, 2009

It’s hard not to see the continued sell-off on Wall Street and the growing fear on Main Street as a product, at least in part, of the realization that our new president’s policies are designed to radically re-engineer the market-based U.S. economy, not just mitigate the recession and financial crisis.

By Michael Boskin
The Wall Street Journal
.
The illusion that Barack Obama will lead from the economic center has quickly come to an end. Instead of combining the best policies of past Democratic presidents — John Kennedy on taxes, Bill Clinton on welfare reform and a balanced budget, for instance — President Obama is returning to Jimmy Carter’s higher taxes and Mr. Clinton’s draconian defense drawdown.

[Commentary]
Martin Kozlowski

Mr. Obama’s $3.6 trillion budget blueprint, by his own admission, redefines the role of government in our economy and society. The budget more than doubles the national debt held by the public, adding more to the debt than all previous presidents — from George Washington to George W. Bush — combined. It reduces defense spending to a level not sustained since the dangerous days before World War II, while increasing nondefense spending (relative to GDP) to the highest level in U.S. history. And it would raise taxes to historically high levels (again, relative to GDP). And all of this before addressing the impending explosion in Social Security and Medicare costs.

To be fair, specific parts of the president’s budget are admirable and deserve support: increased means-testing in agriculture and medical payments; permanent indexing of the alternative minimum tax and other tax reductions; recognizing the need for further financial rescue and likely losses thereon; and bringing spending into the budget that was previously in supplemental appropriations, such as funding for the wars in Iraq and Afghanistan.

The specific problems, however, far outweigh the positives. First are the quite optimistic forecasts, despite the higher taxes and government micromanagement that will harm the economy. The budget projects a much shallower recession and stronger recovery than private forecasters or the nonpartisan Congressional Budget Office are projecting. It implies a vast amount of additional spending and higher taxes, above and beyond even these record levels. For example, it calls for a down payment on universal health care, with the additional “resources” needed “TBD” (to be determined).

Mr. Obama has bravely said he will deal with the projected deficits in Medicare and Social Security. While reform of these programs is vital, the president has shown little interest in reining in the growth of real spending per beneficiary, and he has rejected increasing the retirement age. Instead, he’s proposed additional taxes on earnings above the current payroll tax cap of $106,800 — a bad policy that would raise marginal tax rates still further and barely dent the long-run deficit.

Increasing the top tax rates on earnings to 39.6% and on capital gains and dividends to 20% will reduce incentives for our most productive citizens and small businesses to work, save and invest — with effective rates higher still because of restrictions on itemized deductions and raising the Social Security cap. As every economics student learns, high marginal rates distort economic decisions, the damage from which rises with the square of the rates (doubling the rates quadruples the harm). The president claims he is only hitting 2% of the population, but many more will at some point be in these brackets.

As for energy policy, the president’s cap-and-trade plan for CO2 would ensnare a vast network of covered sources, opening up countless opportunities for political manipulation, bureaucracy, or worse. It would likely exacerbate volatility in energy prices, as permit prices soar in booms and collapse in busts. The European emissions trading system has been a dismal failure. A direct, transparent carbon tax would be far better.

Read the rest:
http://online.wsj.com/article
/SB123629969453946717.html

 

Related:
NYT: After March 6 Economic News, “2009 is Probably a Lost Cause”

Obama’s First Weeks: Economic Disaster, Socialist Agenda, Congressional Pork, Limbaugh Attacked, and “We Won”

Debt:
http://deadenders.wordpress.com/2009/0
3/07/cbs-show-us-how-its-done/


http://nobamablog.wordpress.com/2009/
03/06/deception-at-core-of-obama-plans/

How Banks Are Worsening the Foreclosure Crisis

February 13, 2009

The bad mortgages that got the current financial crisis started have produced a terrifying wave of home foreclosures. Unless the foreclosure surge eases, even the most extravagant federal stimulus spending won’t spur an economic recovery.

Business Week

The Obama Administration is expected within the next few weeks to announce an initiative of $50 billion or more to help strapped homeowners. But with 1 million residences having fallen into foreclosure since 2006, and an additional 5.9 million expected over the next four years, the Obama plan — whatever its details — can’t possibly do the job by itself. Lenders and investors will have to acknowledge huge losses and figure out how to keep recession-wracked borrowers making at least some monthly payments.

So far the industry hasn’t shown that kind of foresight. One reason foreclosures are so rampant is that banks and their advocates in Washington have delayed, diluted, and obstructed attempts to address the problem. Industry lobbyists are still at it today, working overtime to whittle down legislation backed by President Obama that would give bankruptcy courts the authority to shrink mortgage debt. Lobbyists say they will fight to restrict the types of loans the bankruptcy proposal covers and new powers granted to judges.

Read the rest:
http://news.yahoo.com/s/bw/20090213/bs_b
w/0908b4120034085635

A foreclosure sign is posted in front of a townhouse in Herndon, ... 
A foreclosure sign is posted in front of a townhouse in Herndon, Virginia. President Barack Obama’s quest to bridge Washington’s sharp political divides has been dealt another blow with the surprise exit of his commerce secretary pick, Republican Judd Gregg.(AFP/File/Paul J. Richards)

Bank bailout could cost $4 trillion

January 28, 2009

The cost of the bank bailout is likely to be much higher than $700 billion.

While the Obama administration hasn’t asked Congress for more money yet, some experts warn that government spending on support for struggling financial services companies will ultimately reach into the trillions of dollars.

The first half of the controversial $700 billion program to help banks has already been spent — mostly on buying up preferred shares of troubled banks.

By Colin Barr, senior writer
Fortune

Part of the remaining $350 billion may be used to purchase troubled assets from bank balance sheets and place them in what Federal Deposit Insurance Corp. chief Sheila Bair has dubbed an “aggregator bank.”

And while taxpayers will surely recover some of that sum eventually, more money is likely to be needed in order for the bank rescue to work.

“The amount of working capital you’d expect the government to take into this would be around $3 trillion to $4 trillion,” said Simon Johnson, a senior fellow at the Peterson Institute for International Economics and author of its Baseline Scenario financial crisis blog.

Johnson, who until last year was the chief economist at the International Monetary Fund, said that banks will need more rounds of capital from the government because their cushion against losses is too thin. He also said that there is a need to get rid of some of the toxic assets weighing on financial institutions before they can recover.

Read the rest:
http://money.cnn.com/2009/01/27/news
/bigger.bailout.fortune/index.htm?postve
rsion=2009012711

Fed Delivers Gloomy Economic Outlook

January 28, 2009

The Federal Reserve, gave a bleak outlook for the U.S. economy, saying that while it expected a “gradual recovery” to begin later this year, significant risks remain.

“Industrial production, housing starts, and employment have continued to decline steeply, as consumers and businesses have cut back spending,” the Fed said in the statement. “Furthermore, global demand appears to be slowing significantly.”

Fed Chairman Ben Bernanke and his colleagues are battling a three-headed economic monster: crises in housing, credit and financial markets that — taken together — haven’t been seen since the 1930s.

From CNN Business:
http://money.cnn.com/2009/01/28/news/econ
omy/fed_decision/index.htm?postversion=
2009012814

From the Associated Press:
http://news.yahoo.com/s/ap/20090128/
ap_on_bi_ge/fed_interest_rates

Federal Reserve Chairman Ben Bernanke before testifying before ... 
Federal Reserve Chairman Ben Bernanke before testifying before the House Financial Services Committee on Capitol Hill, November 18, 2008.(Molly Riley/Reuters)

New President Obama, Same Economy, Banks and Troubles on Wall Street

January 20, 2009

The dawn of the Obama presidency could not shake Wall Street Tuesday from its dejection over the banking industry’s growing problems. After hearing the new president’s inaugural address, investors continued selling, sending the major indexes down more than 2 percent.

Traders on the floor of the New York Stock Exchange paused at times to watch the inauguration ceremony and Obama’s remarks, but the transition of power cdidn’t erase investors’ concerns about the struggling economy.

Obama said the economic recovery would be difficult and that the nation must chose “hope over fear, unity of purpose over conflict and discord” to overcome the worst economic crisis since the Great Depression.

By STEPHEN BERNARD and TIM PARADIS, AP

Investors are expecting Washington will be a central part of the economic recovery. But the first few minutes of Obama’s term did little to ease their concerns.

“At this stage, markets in general and bank investors specifically are really looking to government as the way out,” said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. “Certainly, of just about all of inaugurations that I can recall today’s event probably has the not only the symbolic importance but really tangible importance to the stock market.”

Investors already nervous about the state of U.S. banking were rattled by the Royal Bank of Scotland‘s forecast that its losses for 2008 could top $41.3 billion, the biggest ever for a British corporation. The British government injected more money into the struggling bank Monday. The government also announced another round of bailouts for the country’s banks.

Read the rest:
http://news.yahoo.com/s/ap/200901
20/ap_on_bi_st_ma_re/wall_street