It’s been almost a year since the “Velma Moment”. On September 20, 2010, President Obama appeared at a CNBC town hall meeting in Washington. One of the audience members, Velma Hart, posed a question to the President, which was emblematic of the plight experienced by many 2008 Obama supporters. Peggy Noonan had some fun with the event in her article, “The Enraged vs. The Exhausted” which characterized the 2010 elections as a battle between those two emotional factions. The “Velma Moment” exposed Obama’s political vulnerability as an aloof leader, lacking the ability to emotionally connect with his supporters:
The president looked relieved when she stood. Perhaps he thought she might lob a sympathetic question that would allow him to hit a reply out of the park. Instead, and in the nicest possible way, Velma Hart lobbed a hand grenade.
“I’m a mother. I’m a wife. I’m an American veteran, and I’m one of your middle-class Americans. And quite frankly I’m exhausted. I’m exhausted of defending you, defending your administration, defending the mantle of change that I voted for, and deeply disappointed with where we are.” She said, “The financial recession has taken an enormous toll on my family.” She said, “My husband and I have joked for years that we thought we were well beyond the hot-dogs-and-beans era of our lives. But, quite frankly, it is starting to knock on our door and ring true that that might be where we are headed.”
The President experienced another “Velma Moment” on Monday. This time, it was Maureen Dowd who had some fun describing the confrontation:
After assuring Obama that she was a supporter, an Iowa mother named Emily asked the president at a town hall at the Seed Savers Exchange in Decorah what had gone wrong.
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“So when you ran for office you built a tremendous amount of trust with the American people, that you seemed like someone who wouldn’t move the bar on us,” she said. “And it seems, especially in the last year, as if your negotiating tactics have sort of cut away at that trust by compromising some key principles that we believed in, like repealing the tax cut, not fighting harder for single-payer. Even Social Security and Medicare seemed on the line when we were dealing with the debt ceiling. So I’m just curious, moving forward, what prevents you from taking a harder negotiating stance, being that it seems that the Republicans are taking a really hard stance?”
President Obama can no longer blame the Republicans and Fox News for his poor approval ratings. He has become his own worst enemy. As for what Obama has been doing wrong – the title of Andrew Malcolm’s recent piece for the Los Angeles Times summed it up quite well: “On Day 938 of his presidency, Obama says he’ll have a jobs plan in a month or so”.
Lydia Saad of the Gallup Organization provided this report on the President’s most recent approval ratings:
A new low of 26% of Americans approve of President Barack Obama’s handling of the economy, down 11 percentage points since Gallup last measured it in mid-May and well below his previous low of 35% in November 2010.
Obama earns similarly low approval for his handling of the federal budget deficit (24%) and creating jobs (29%).
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President Obama’s approval rating has dwindled in recent weeks to the point that it is barely hugging the 40% line. Three months earlier, it approached or exceeded 50%.
The voters have finally caught on to the fact that Barack Obama’s foremost mission is to serve as a tool for Wall Street. In Monday’s edition of The Washington Post, Zachary Goldfarb gave us a peek at Obama’s latest gift to the banksters: a plan to provide a government guarantee of mortgage backed securities:
President Obama has directed a small team of advisers to develop a proposal that would keep the government playing a major role in the nation’s mortgage market, extending a federal loan subsidy for most home buyers, according to people familiar with the matter.
The administration’s reaction to curiosity about the plan was a tip-off that the whole thing stinks. Mr. Goldfarb’s article included the official White House retort, which was based on the contention that the controversial proposal is just one of three options outlined earlier this year in an administration white paper concerning reform of the housing finance system:
“It is simply false that there has been a decision to move forward with any particular option,” said Matt Vogel, a White House spokesman. “All three options remain under active consideration and we are deepening our analysis around how each would potentially be implemented. No recommendation has been made to the president by his economic advisers.”
And if you believe that, you might be interested in buying some real estate located in . . .
Zachary Goldfarb explained the plan:
Fannie, Freddie or other successor firms would charge a fee to mortgage lenders and banks and use the money to create an insurance pool to cover losses on mortgage securities caused by defaults on the underlying loans. The government would be the last line of defense in case of another housing market meltdown, using taxpayer money to cover losses only if the insurance pool ran dry.
The Washington Post report inspired economist Dean Baker to expose the ugly truth about this scheme:
It would be difficult to find an economic rationale for this policy other than subsidizing the financial industry. The government can and does directly subsidize the purchase of homes through the mortgage interest deduction. This can be made more generous and better targeted toward low and moderate income families by capping it and converting it into a tax credit (e.g. all homeowners can deduct 15 percent of the interest paid on mortgages of $300,000 or less from their taxes).
There is no obvious reason to have an additional subsidy through the system of mortgage finance. Analysis by Mark Zandi showed that the subsidy provided by a government guarantee would largely translate into higher home prices. This would leave monthly mortgage payments virtually unaffected. The diversion of capital from elsewhere in the economy would mean slower economic growth and would kill jobs for auto workers, steel workers and other workers in the manufacturing sector.
For these reasons, if President Obama was really against big government and job killing measures, he would oppose this new scheme to subsidize mortgage securitization. On the other hand, if the goal is to ensure high profits and big salaries for top executives in the financial sector, then a government subsidy for mortgage securitization is good policy.
Frustration with the inevitability that the 2012 Presidential Election will ultimately become a choice between two corporatists has inspired a movement to encourage a Democratic Primary challenge to Obama. The organization – StopHoping.org – is based on this simple objective:
The majority of U.S. citizens favor protecting Social Security, Medicare, and Medicaid; taxing the rich; cutting military spending; and protecting the environment. We don’t have a candidate . . . yet. Potential candidates supported on this site will be notified and encouraged to run.
I hope they succeed!
Trouble Ahead
I find it very amusing that we are being bombarded with so many absurd election year “talking points” and none of them concern the risk of a 2012 economic recession. The entire world seems in denial about a global problem which is about to hit everyone over the head. I’m reminded of the odd brainstorming session in September of 2008, when Presidential candidates Obama and McCain were seated at the same table with a number of econ-honchos, all of whom were scratching their heads in confusion about the financial crisis. Something similar is about to happen again. You might expect our leaders to be smart enough to avoid being blindsided by an adverse economic situation – again – but this is not a perfect world. It’s not even a mediocre world.
After two rounds of quantitative easing, the Kool-Aid drinkers are sipping away, in anticipation of the “2012 bull market”. Even the usually-bearish Doug Kass recently enumerated ten reasons why he expects the stock market to rally “in the near term”. I was more impressed by the reaction posted by a commenter – identified as “Skateman” at the Pragmatic Capitalism blog. Kass’ reason #4 is particularly questionable:
Skateman’s reaction to Kass’ reason #4 makes more sense:
Of particular importance was this recent posting by Mike Shedlock (a/k/a Mish), wherein he emphasized that “without a doubt Europe is already in recession.” After presenting his readers with the most recent data supporting his claim, Mish concluded with these thoughts:
Back on October 8, Jeff Sommer wrote an article for The New York Times, discussing the Economic Cycle Research Institute’s forecast of another recession:
Mr. Achuthan’s outlook was echoed by economist John Hussman of the Hussman Funds, who pointed out in his latest Weekly Market Comment that investors have been too easily influenced by recent positive economic data such as payroll reports and Purchasing Managers Indices:
At the annual strategy seminar held by Société Générale, their head of strategy – Albert Edwards – attracted quite a bit of attention with his grim prognostications. The Economist summarized his remarks this way:
Larry Elliott of The Guardian focused on what Albert Edwards had to say about China and he provided more detail concerning Edwards’ remarks about the United States:
So there you have it. The handwriting is on the wall. Ignore it at your peril.