November 12, 2009
When I started this blog in April of 2008, my focus was on that year’s political campaigns and the exciting Presidential primary season. At the time, I expressed my concern that the most prominent centrist in the race, John McCain, would continue pandering to the televangelist lobby after winning the nomination, when those efforts were no longer necessary. He unfortunately followed that strategy and went on to say dumb things about the most pressing issue facing America in decades: the economy. During the Presidential campaign of Bill Clinton, James Carville was credited with writing this statement on a sign in front of Clinton’s campaign headquarters in Little Rock: “It’s the economy, stupid!” That phrase quickly became the mantra of most politicians until the attacks of September 11, 2001 revealed that our efforts at national security were inadequate. Since that time, we have over-compensated in that area. Nevertheless, with the demise of Rudy Giuliani’s political career, the American public is not as jumpy about terrorism as it had been — despite the suspicious connections of the deranged psychiatrist at Fort Hood. As the recent editorials by Steve Chapman of the Chicago Tribune and Vincent Carroll of The Denver Post demonstrate, the cerebral bat guano necessary to get the public fired-up for a vindictive rampage just isn’t there anymore.
President Obama’s failure to abide by the Carville maxim appears to be costing him points in the latest approval ratings. The fact that the new President has surrounded himself with the same characters who helped create the financial crisis, has become a subject of criticism by commentators from across the political spectrum. Since Obama’s Presidential campaign received nearly one million dollars in contributions from Goldman Sachs, he should have known we’d be watching. CNBC’s Charlie Gasparino was recently interviewed by Aaron Task. During that discussion, Gasparino explained that Jamie Dimon (the CEO of JP Morgan Chase and director of the New York Federal Reserve) has managed to dissuade the new President from paying serious attention to Paul Volcker (chairman of the Economic Recovery Advisory Board) whose ideas for financial reform would prove inconvenient for those “too big to fail” financial institutions. As long as JP Morgan’s “Dimon Dog” and Lloyd Bankfiend of Goldman Sachs have such firm control over the puppet strings of “Turbo” Tim Geithner, Larry Summers and Ben Bernanke, why pay attention to Paul Volcker? The voting public (as well as most politicians) can’t understand most of these economic problems, anyway. I seriously doubt that many of our elected officials could explain the difference between a credit default swap and a wife swap.
Once again, Dan Gerstein of Forbes.com has directed a water cannon of common sense on the malaise blaze that has been fueled by a plague of ignorance. In his latest piece, Gerstein tossed aside that tattered, obsolete handbook referred to as “conventional wisdom” to take a hard look at the reality facing all incumbent, national politicians:
It’s the stupidity about the economy in Washington and on Wall Street that’s driving most voters berserk. Indeed, the financial system is still out of whack and tens of millions of people are (or fear they soon could be) out of work, yet every day our political and economic leaders say and do knuckleheaded things that show they are unfailingly and imperviously out of touch with those realities.
Gerstein’s short essay is essential reading for a quick understanding of how and why America can’t seem to solve many of its pressing problems these days. Gerstein has identified the responsible culprits as three groups: the Democrats, the Republicans and the big banks — describing them as the “axis of cluelessness”:
We have gone long past “they don’t get it” territory. It’s now unavoidably clear that they won’t get it — and we won’t get the responsible leadership and honest capitalism we want–until (as I have suggested before) we demand it.
Surprisingly, public awareness concerning the root cause of both the financial crisis and our ongoing economic predicament has escalated to a startling degree in recent weeks. This past spring, if you wanted to find out about the nefarious activities transpiring at Goldman Sachs, you had to be familiar with Zero Hedge or GoldmanSachs666.com. Today, you need look no further than Maureen Dowd’s column or the most recent episode of Saturday Night Live. Everyone knows what the problem is. Gordon Gekko’s 1987 proclamation that “greed is good” has not only become an acceptable fact of life, it has infected our laws and the opinions rendered by our highest courts. We are now living with the consequences.
Fortunately, there are plenty of people in the American financial sector who are concerned about the well-being of our society. A recent study by David Weild and Edward Kim (Capital Markets Advisors at Grant Thornton LLP) entitled “A wake-up call for America” has revealed the tragic consequences resulting from the fact that the United States, when compared with other developed countries, has fallen seriously behind in the number of companies listed on our stock exchanges. Here’s some of what they had to say:
The United States has been engaged in a longstanding experiment to cut commission and trading costs. What is lacking in this process is the understanding that higher transaction costs actually subsidized services that supported investors. Lower transaction costs have ushered in the age of “Casino Capitalism” by accommodating trading interests and enabling the growth of day traders and high-frequency trading.
The Great Depression in Listings was caused by a confluence of technological, legislative and regulatory events — termed The Great Delisting Machine — that started in 1996, before the 1997 peak year for U.S. listings. We believe cost cutting advocates have gone overboard in a misguided attempt to benefit investors. The result — investors, issuers and the economy have all been harmed.
The Grant Thornton study illustrates how and why “as many as 22 million” jobs have been lost since 1997, not to mention the destruction of retirement savings, forcing many people to come out of retirement and back to work. Beyond that, smaller companies have found it more difficult to survive and business loans have become harder to obtain.
Aside from all the bad news, the report does offer solutions to this crisis:
The solutions offered will help get the U.S. back on track by creating high-quality jobs, driving economic growth, improving U.S. competitiveness, increasing the tax base, and decreasing the U.S. budget deficit — all while not costing the U.S. taxpayer a dime.
These solutions are easily adopted since they:
- create new capital markets options while preserving current options,
- expand choice for consumers and issuers,
- preserve SEC oversight and disclosure, including Sarbanes-Oxley, in the public market solution, and
- reserve private market participation only to “qualified” investors, thus protecting those investors that need protection.
These solutions would refocus a significant portion of Wall Street on rebuilding the U.S. economy.
The Grant Thornton website also has a page containing links to the appropriate legislators and a prepared message you can send, urging those legislators to take action to resolve this crisis.
Now is your chance to do something that can help address the many problems with our economy and our financial system. The people at Grant Thornton were thoughtful enough to facilitate your participation in the resolution of this crisis. Let the officials in Washington know what their bosses — the people — expect from them.
Damage Control
December 17, 2009
Matt Taibbi hit another grand slam with his recent Rolling Stone article: “Obama’s Big Sellout”. It was another classic work in his unique style. The ugly truth it drove home was that Barack Obama used a “bait and switch” tactic in his Presidential campaign: promising to reform Wall Street — until the day after he got elected — at which time he immediately jumped into bed with the culprits of the financial crisis. The reaction of the Obama apologists to the Rolling Stone piece involved the usual tactic of attacking the messenger (in this case: Taibbi himself). It didn’t work. The best way to see how this played out should begin with a reading of Taibbi’s retort to a critique appearing in The American Prospect — a feeble attempt to demonstrate that Taibbi got his facts wrong. A neutral judge, Felix Salmon of Reuters, then stepped in and ruled in favor of Taibbi. The online responses to Felix Salmon’s essay are a great read. At the Open Left website, David Sirota upbraided Taibbi’s critics, who spanned the political spectrum — many of whom expressed condescension at the “naïve” decision of an outside-the-beltway reporter to expose the breach of a campaign promise:
Matt Taibbi’s article immediately forced the White House into a damage control mode. Another softball interview was immediately set up with Steve Croft of 60 Minutes, wherein Obama attempted to redeem his false image as an adversary of the Wall Street investment banks. The President took advantage of that opportunity to present himself as an antagonist of those he described as “fat cats”. On the following day, Obama held a meeting in the White House cabinet room with some banking representatives who found the event important enough to attend. Immediately afterward, Charlie Gasparino revealed the backstory behind Obama’s meeting with the bankers. After informing us that the administration provided the bankers with Obama’s “talking points” in advance of the meeting, Gasparino disclosed this:
Many commentators were quick to point out that by the time Obama started talking tough about “fat cats”, he had already given them all they wanted by allowing them to pay back their TARP loans on an expedited basis. As Henry Blodget explained for The Business Insider:
At The Washington Post, Steven Pearlstein bemoaned the fact that the TARP beneficiaries had been “let off their leash”. Pearlstein expressed concern that this move created the potential for more problems in the future:
The administration’s damage control effort turned out to be worthless. With his centerpiece healthcare reform effort floundering in the Senate, Obama the President is appearing to be significantly less effective than Obama the candidate. The President’s critics have been quick to pounce. George Will noted that Obama has “seen his job approval vary inversely with his ubiquity”. The New York Post’s Michael Goodwin alleged that Obama “doesn’t look like he cares that big chunks of the country, left, right and center, are giving up on him.” However, the best analysis of the confidence crisis afflicting the Obama Presidency came from Dan Gerstein of Forbes.com. Gerstein observed that the new Preisdent’s leadership style was to blame — something Gerstein described as “the Reverse Roosevelt: Talk boldly and carry a toothpick.” While debunking the administration’s claim that it had lost the leverage it had over Wall Street with the TARP paybacks, Gerstein argued that such an excuse “doesn’t pass the laugh test” because the banking industry is the most regulated industry in the country. The task Obama faces is to cultivate a leadership style that will be useful in confronting the challenges he undertook when he assumed office:
It appears as though we are back to the themes of “hope” and “change”. This time we’re hoping that Obama will change.