May 04 2009
Obama Administration Targets Financial Sector In Midst Of Economic Slowdown
Obama is again demonstrating his naiveté when it comes to leading America. In the midst of one of the worst economic slowdowns since the Great Depression, Obama is taking actions to actually destroy a major segment of our economic engine:
he financial sector will make up a smaller part of the U.S. economy in the future as new regulations clamp down on “massive risk-taking,” President Barack Obama said in an interview published on Saturday.
Obama, whose young administration has spearheaded a raft of reforms in the banking sector as part of efforts to tackle the financial crisis, said the industry’s role in the United States would look different at the end of the current recession.
…
Obama said some of the job-seekers who may normally have gone to the financial sector would shift to other areas of the economy, such as engineering.
“Wall Street will remain a big, important part of our economy, just as it was in the ’70s and the ’80s. It just won’t be half of our economy,” he said.
“We don’t want every single college grad with mathematical aptitude to become a derivatives trader.”
This is the dumbest thing I have ever seen. It is pure fantasy. Day traders are not engineers (I know I am one working for NASA). While I agree we need to reign in profit-mad risk taking where the taxpayers pick up the mess from people lining their pockets at any cost, shrinking this engine of economic activity is about as dumb as they come.
This is pure social engineering. This is the first time Obama has come full out with a socialistic approach that cannot be ignored or hidden. If he is successful, he will cripple this nation for decades. We can fix the excesses without destroying the engine of capitalism.Â
This is what you get with a 3rd grade understanding of the world. Idiocy.
Another thing that is going to hurt is the artificially low interest rates. Nobody is going to want treasury securities if they don’t pay anything. To give a small example: I buy savings bonds at regular intervals to save for education expenses for my kids, as interest from savings bonds is tax-free if used for education expenses. I had been buying series I bonds as they were paying much better rates than what bank CDs were paying. That was until May 1, 2009. All series I bonds purchased between May 1 and October 31 will accrue 0% interest. That’s right … exactly nothing. And because the economy deflated in April, had the minimum rate not been set in law by 0%, the interest rate would have been a NEGATIVE 5%. Needless to say, a bank CD at even 1% is better than 0%.
I won’t be lending Uncle Sam any of my money between now and November 1.
If the government wants people to lend them money, they are going to have to increase the rate they are willing to pay for it. Interest rates this low are not sustainable.
If the economy continues to deflate, we are even a worse situation, but that is a different comment for a different day. I am not seeing anything good coming out of Washington on the economic front.
Today Obama announced a $190 billion tax increase on businesses by outlawing the offshore tax haven loophole.
I don’t like the offshore loophole; but, clearly this will increase the cost of goods in the US and make competition with foreign companies even worse.
Corporations don’t pay taxes….people do. It will come back around to hit the people.
China has also cut off our credit card…..they aren’t interested in buying our debt at the same levels (too risky).
Bad to worse?
What Obama is going to do is force US corporations out of the country. They will simply move their HQ to somewhere else. And he will learn that increasing his take from them will result in losing it all. The US already has the second highest corporate tax rate in the world. Just about anywhere else is looking better than here these days.
With the NYT reporting …
As the Obama administration racks up an unprecedented spending bill for bank bailouts, Detroit rescues, health care overhauls and stimulus plans, the bond market is starting to push up the cost of trillions of dollars in borrowing for the government. Last week, the yield on 10-year Treasury notes rose to its highest level since November, briefly touching 3.17 percent, a sign that investors are demanding larger returns on the masses of United States debt being issued to finance an economic recovery.
What do you think about Buffet’s comments about Obama doing the right things and that the economic Pearl Harbor crisis is now over?
Neo,
They will be walking something of a tightrope. The government is basically demanding a lot of cash. Cash is like any other commodity. When the demand goes up, the price (interest rate) goes up. In other words, if you want people to lend you money and you are competing with other borrowers (corporate bonds, etc) for that cash, you have to increase the amount you are willing to pay for it in order to get people to lend to you rather than to someone else.
BUT (and this is a major but), if interest rates go up so do adjustable rate mortgages. There is already another wave of mortgage defaults set to occur in 2011 when a huge number of mortgages are due to adjust. If interest rates rise, those mortgages will adjust up possibly causing another wave of defaults which will depress the market just when they need it to be recovering.
Additionally, rising US interest rates will also increase the value of the dollar relative to other currencies. This is not a good thing right now as other currencies are already weak in relation to the dollar. When US interest rates go up, people in other countries buy dollars so they can invest in US securities which might at that time be paying better than investments in their own country. Jimmy Carter attempted to get around this problem back in the late 70’s by US treasury securities denominated in Swiss Francs which avoided running the dollar up too high.
They are really walking a tightrope here trying to stay balanced but they can not control the market. It appears that they believe they can. Every single person, committee, or nation in the past that has thought they can control their economy has failed. Without exception, every time.
FROM FREEREPUBLIC, DIFFERENT TOPICS, BUT BOTH GOOD NEWS. WE COULD USE SOME.
Dems don’t fund Obama’s bid to close Gitmo
05/04/2009 11:52:40 AM PDT · by jazusamo · 38+ views
The Washington Times ^ | May 4, 2009 | S. A. Miller
House Democratic leaders Monday dropped President Obama’s request for $81 million to close the Guantanamo Bay prison camp, bowing to strong Republican criticism that the administration lacks a plan to relocate terror suspects detained there. Mr. Obama requested the money as part a spending bill for the wars in Iraq and Afghanistan, but Democratic appropriators left it out of the bill circulated Monday among House Appropriations Committee staffers. Republicans have been criticizing Mr. Obama for rushing to keep his campaign promise to close the prison camp at the U.S. Navy base on Cuba without a plan for what to do…
Non TARP lenders statement concerning Chrysler
05/04/2009 11:51:15 AM PDT · by DOGHEAD · 1 replies · 94+ views
Financial Times ^ | 4/30/2009 | Financial Times
As of last night’s deadline, we were part of a group of approximately 20 relatively small organizations; we represent many of the country’s teachers unions, major pension and retirement plans and school endowments who have invested through us in senior secured loans to Chrysler.
China joins the “Tea Party†“… up until last month they were the number one provider of currency to the United States and now they’re gone.”
Since the Chinese have cut up our credit cards, I wonder if the White House has any sense in that we can not afford this revolution of change that BO is promising? This, to me, seems unprecedented to have the commies telling us how foolish this Keynesian spending has become. The world seems upside down.
The White House reporting that they plan to release Chinese Muslim terrorists inside the US probably isn’t helping matters vis-a-vis China.
Obama doing “the dumbest thing I have ever seen?” Obama indulging in “pure fantasy?” Obama “about as dumb as they come?” Obama engaging in “pure social engineering?”
And…oh, no.. it can’t be…but, yes! It is! “Obama has come full out with a socialistic approach that cannot be ignored or hidden.”
Wait! What the…? “This is what you get with a 3rd grade understanding of the world. Idiocy.”
AJ, this kind of right-wing extremism is what has destroyed any hope of a conservative oppostion…or is it a non-conservative conservative opposition? Well, whatever it is, all I can say is that it’s no wonder Spector deserted.
What hope have we to oppose Obama, if we actually start, you know, opposing Obama? How are we ever going to convince Americans of the destructivess of Obama’s socialist economic policies if we start trying to convince them of the destructiveness of Obama’s socialist economic policies?
Good God, man! Get control of yourself.
AJ,
“While I agree we need to reign in profit-mad risk taking where the taxpayers pick up the mess from people lining their pockets at any cost, shrinking this engine of economic activity is about as dumb as they come.”
How do you reign in the high-risk profit measures without shrinking the financial sector overall percentage of the economy? If the financial sector’s profits got so high because of the high-risk ventures, wouldn’t reigning in those practices necessarily mean that their profits will decrease? Most of the major financial institutions made huge profits over the last decade or more due in part to high risk ventures that paid big rates of return. If we reign in these high risk ventures, which I agree we should, then their profit levels will drop and thereofre their overall percentage of the economy will drop as well.
Before you start declaring Obama’s proposed regulations for the financial sector “pure social engineering” and that they “will cripple this nation for decades,” don’t you want to wait and see what the actual proposed regulations look like? Do you really want to base your opinion off of an interview? In case you haven’t notice, Obama has been quite good to the financial sector given the latest Treasury Department programs – too good in my opinion.
Jeff Z,
That is idiotic. I am not an Obama ally. I am not destroying a coalition of allies by name calling from a stubborn minority. Me raising the alarm bells of Obama’s liberal moves (as oppose to his moves that furthered Bush policies I support) is not the same as Malkin go off mad with rage at centrists (a group of people).
I only have his words to go with right now, and he claims to want to ‘shrink’ the financial sector. Not fix the risk taking, but shrink it.
If he cannot articulate what he means that is not my fault.
Jeff Z,
Being opposed to Obama’s economic idiocy has nothing to do with right or left wing politics. It is purely economic. When we see OUR OWN money being wasted, it makes us angry. When we see the kind of raiding of the treasury that is going on with Obama paying off bigtime those who donated millions to his campaign with OUR money, we have a right to be upset.
This isn’t about politics. This is about corruption and throwing of our money down rat holes. Jeff, did you actually READ the SIGTARP quarterly report? Congress’ own Special Inspector General lambasted Treasury on their lack of accountability, lack of transparency, conflicts of interest, etc.
This isn’t the government’s money to piddle away on their pet projects, this is our money and they have a responsibility to use it wisely. So far they have spent trillions of dollars that is mostly sitting in bank vaults and in the pockets of various executives. Only a minuscule fraction of the “stimulus” money has been put into the economy.
These chickens will come home to roost soon enough. If the economy doesn’t pick up within the next quarter, Obama is going to be up a creek without a paddle. His entire program was built, I believe, on the premise that he could use the “crisis” to elicit trillions in spending, hand it out to his pals, and then the economy would pick itself back up and he could get the credit. But what we are seeing is an economy continuing to tank and the Treasury has been raided. They can’t do another “stimulus” bill because there is no money left. They blew it.
Now it is just a matter of time for it to sink in to the rest of the country that Obama couldn’t find his butt with both hands if he had them in his hip pockets (but he seems to find his way to OUR hip pockets easily enough).
The treasury is raided, the economy is deflating, business is stagnating and when GM closes for the summer, there’s going to be a lot of angry men sitting around with very little else to do.
Economic anger has nothing to do with politics. It is about our homes, our childrens’ educations, and our retirement. It is about our future. We are expected to manage OUR money responsibly, we expect nothing less from our government.
AJ,
“I only have his words to go with right now, and he claims to want to ’shrink’ the financial sector. Not fix the risk taking, but shrink it. If he cannot articulate what he means that is not my fault.”
No, the problem is that you based your opinion on the heading of the article that the journalist chose (Obama says financial sector to shrink), rather than Obama’s actual words. Obama’s statements were clear and consistent with my point above – he is pointing out that if we reign in high risk ventures, which you agree we should, then the financial sector’s profit levels will necessarily drop because this sector made huge returns off these high-risk ventures in the recent past. Here is what Obama actually said (it’s in the same article you attached):
“What I think will change, what I think was an aberration, was a situation where corporate profits in the financial sector were such a heavy part of our overall profitability over the last decade,” he said told the New York Times Magazine. “Part of that has to do with the effects of regulation that will inhibit some of the massive leveraging and the massive risk-taking that had become so common.”
The world went into a recession in large part because consumers borrowed too much and could not pay their debts.
And now the Obama administration is doing the same thing, only more so.
I think that it is insane. It is not about left or right, these policies are dangerous.
If Obama wants to fund all this stuff, he can get the books in order and the economy running again and then if he can find a way to pay for it and people want it..ok. I might not agree with it or like it, but I would accept that.
But this is just crazy and dangerous.
terrye, their answer to everything is more spending. Any problem in the universe can be soled by simply increasing spending. Something a problem? Well, we must not be spending enough on it. We need to increase funding for it! Money is the miracle cure for those people. Planet warming? Cooling? Spend more money! When the only tool you have is a hammer, the whole world looks like your thumb.
But of course they area always ready to spend someone ELSE’s money. They will tell you in a second how you should be willing to sacrifice more, give more to them, let them spend your money because they are better at it than you are.
This isn’t about politics, this is all about us. If we aren’t better off in about 6 months than we were in January, the Democrats are going to get a serious bipartisan wakeup call.
AJ: Of course I’m being idiotic–I’m teasing you, and about as mildly as one can. What I’m trying to point out to you is that if you’re going to oppose Obama, you’re going to use unpleasant terms and start a fight, whether you like it or not. This doesn’t mean that you’re wrong in your critique of certain conservatives, let alone that you’re an Obama supporter. The fact that you could draw such a conclusion after seeing how closely I read you’re article is breathtaking.
Crosspatch: You caught me. I didn’t read the SIGTARP report–again. But I caught you: This is all about politics. This is nothing but politics. Clausewitz referred to war as politics by other means; equally, politics is war by other means. Your assertion that the government has “a responsibility to use it wisely” is quite correct. Guess what? People are irresponsible all the time, when they can get away with it. Not about left and right? You couldn’t be more wrong.
One aspect of my career integrating science, engineering, and technical personnel into interdepartmental teams. One of the most painful parts of the job is watching these people being outmaneuvered by less competent team members, for the reason you’re both displaying here, which is not being able to understand that some people want what they want for reasons that are selfish, stupid, larcenous, self-serving, arrogant, etc. It doesn’t make any sense, because they should be doing what’s right for the team, the company, the project mission, et al…
But guess what? They have other priorities.
Obama and the people around him have no interest in doing what you think is best for the country; they want to do what they think is best for the country. They don’t even use the criteria the rest of us do. Full employment, economic growth, safe cities, social harmony, creative innovation, intellectual accmplishment, et al, yeah, all that stuff would be nice…
But guess what? They have other priorities.
AJ, you don’t think that Obama knows just what he’s saying? Are you serious? Whatever else he is, he knows what words mean. And Crosspatch, if you want to know what those words really mean, you’d better read some leftist political theory pronto. Better yet, read The Federalist Papers or The Library of Anerica’s “Debate on the Constitution.” They’re the best instruction manuals. What we’re seeing now is the dawn of an old era, but I don’t think it will last very long, just more than long enough to do a lot of unnnecessary and pointless damage.
Jeff,
Sorry, let me get this fish hook out of my mouth – please continue.
he knows what words mean
Ok .. explain this ..
I wonder how he spells “potatoe”