Way back in October of 2008, just weeks before the Presidential election, The Economist magazine endorsed Mr. Obama. This endorsement, strangely out of touch with the reality of Obama's background, was based almost entirely upon popular opinion. Now, nearly a year and a half later, the opinions of the financial investment community have changed considerably. Bloomberg is reporting that 77% of investors believe Obama is anti-business and even question his ability to manage the financial crisis.
In a related matter, Obama's chief advisor, the much maligned Tim Geithner, is concerned that Obama's decision to cast trading limits on the banking community and limit the size of banks will be counter productive and is more based on populace appeal (class envy ) than sound economics. In the linked story, it appears that Paul Volker and Larry Summers share some of the same concerns. See the news article here. Geithner, Volker and Summers are the primary financial advisors to Obama - advice he has apparently decided to ignore.
Lawrence White, a professor at New York University's Stern School of Business and a former regulator, said Obama's proposals were "a solution to the wrong problem . . . . . They have this rhetoric that it was proprietary trading that was the problem," White said. "That's wrong."
A Reuters article made this observation : Obama has recently tried to capitalize on populist anger against the big banks, proposing last week a major tax on banks to recoup taxpayer losses related to the bailout.
And there you have it -- class envy versus the banking institutions of the nation. Greed is a major problem but there is no constitutional pathway to the legislative prevention of greed ---- unless, of course, you are a Marxist. It is that simple. "Bad press" and competition are the best mechanisms for the reversal of any "damage" caused by greed, unless that greed is manifest in criminal behavior.
What is happening in the case of the current and proposed presidential solutions is this: Obama continues to move against the private lending practices of the banking industry ("proprietary lending" is the way banks make money off your money) rather than dealing with federal mandates know as "affordable housing" that actually caused the banking crisis.
During the Clinton Administration, there were increasing Congressional demands requiring lenders to develop higher percentages with regard to the volume of high risk [Affordable Housing] loans. By their very nature, these loans bear more risk than loans offered to a more affluent class of individual - you know, people who work 50 or 60 hours a week, have families and are involved in church and/or community affairs. When the high risk mortgage holder walked away from his loan, the bundle of Affordable Housing paper fell in on itself. Trillions of mortgage dollars were wiped out all because the high risk mortgage holder decided to justify the notion of "high risk" and walk away from his (their) financial responsibilities. You might argue, "When you are living on the financial edge and lose your job, what choice do you have but to walk away?" And we respond, "Yes, of course !!" But to force banks to lend to those who live on the edge is poor policy and caused the current crisis. Understand, we are not blaming the high risk home owner who could no longer afford his home. Rather, at the center of the storm was and is the demand of government that the banking industry assume this risk. Incredible. The volume of risk was the straw that broke the bank. Our concern is found in the increasing realization that Obama plans to continue that practice !! Want to know why banks are not lending; why credit is so tough to secure ? Well, we are talking about that reason right now, in this post, in this very paragraph.
That brings us back to the initial report in this post - the investment community questions Obama's very ability to deal with continuing economic issues driving the current recession. Obama is a Pointie Headed intellectual, not an informed economic pragmatist as he would have you believe. "Affordable housing" is a Marxist or Progressive amendment that supplies mortgage equity to those voters (Democrat) who would otherwise be cut out of the "American dream." It is viewed as a critical social aspect to the redistributive foundations of the Progressive Movement. When Obama speaks of "returning the nation's wealth to its rightful owners," this is what he has in mind.
The point of this post is important because it opens the door, just a bit, to the viewing of a critical disagreement within Obama's advisory board as to his agenda. Timothy Geithner is not an ideologue. He is a financial manager. While it has been obvious that he is more than willing to defend the Obama agenda, in the end and behind closed doors, he is concerned and in disagreement over the current Progressive philosophy. It is becoming clear that Obama's ineptness is being recognized by more than his original detractors. -- jds
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