How Barack Obama can get at least some of his credibility back
When a president speaks, the world listens. That is why Barack Obama’s credibility matters.
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+Bob DeMarco is a citizen journalist and twenty year Wall Street veteran.
Showing posts with label barack obama. Show all posts
Showing posts with label barack obama. Show all posts
Thursday, November 21, 2013
The man who used to walk on water
When a president speaks, the world listens. That is why Barack Obama’s credibility matters.
+Bob DeMarco is a citizen journalist and twenty year Wall Street veteran.
Monday, February 23, 2009
Stress Test for Banks the Best Medicine
There are growing doubts about banks and there can be little doubt we are on the edge of a "run on banks". Bank of America and Citigroup are at the top of the lists. I have to admit, I have an account at both banks--yikes.
As doubt and angst grows , the Obama administration is announcing that a review of 20 major banks is forthcoming. This review of banks is often known as a stress test. Stress testing has a lot of people worried. They reason that stress testing will likely scare the heck out of investors. If Nouriel Roubini is right this will leave no choice but to nationalize. Roubini, who coined the term Zombie bank, has been saying for sometime that the banks are broke. I don't think there is much doubt that if all assets were marked to the market this would prove to be true.
One problem with pricing toxic assets and distressed assets in banks is that no one knows the real price. The system is basically frozen with little trading taking place. Sooner or later, something has to to give.
Toxic assets, nationalization, Zombie bank, these are all terms that are hanging over banks like a tornado cloud just waiting to touch down.
What do I think? Let's get it all out in the open. Obama is taking heat from the likes of Bill Clinton for being too pessimistic. I think the American public is very pessimistic. Markets don't go up when investors are uncertain or pessimistic. The only way out of this trap is to bring it all up on to the table and let us take a look at this ugly situation.
My guess is that once the true extent of the problem is known it will be quickly discounted in the stock market. Once that occurs we can go about solving that problems instead of letting the problems hang out their like an impending guillotine over our heads.
The market is going down until it fully discounts the economic problems we are facing. For me, the sooner it happens the better. I am starting to feel very bullish long term on stocks (still very bearish short term). But, I learned a long time ago that you make a lot better returns in the stock market when times are certain, rather than uncertain. Who wants to stand in front of a roaring freight train--not me.
I get the feeling that President Obama is going to let it all hang out. I bet he will receive lots of criticism from people suffering from Rick Santelli syndrome--better know as the "ignorance is bliss syndrome". Many are going to attack President Obama for telling too much. Well I think he said he intends to make things transparent. It is time for us to get our heads out of the sand and get back to doing the kinds of things that made America great. Get out the spoon--we all need a great big dose of Castor oil.
U.S. bank stress tests to show capital needs: source
By David Lawder
WASHINGTON (Reuters) - Financial regulators will soon launch a series of "stress tests" to determine which of the largest U.S. banks should get bigger capital cushions in case of a deeper recession, a person familiar with Obama administration plans said on Saturday.
The person, speaking on condition of anonymity, said if institutions were found to need additional capital, financial authorities would provide them with an "extra cushion of support."
Banks are expected to receive additional information about the tests in the coming week from regulators.
The largest U.S. banks are "well capitalized" for current conditions, the source said, but the Obama administration wants to ensure they can withstand a more severe economic climate and play an important role in helping restart the flow of credit.
Initial plans for the stress tests were announced on February 10 as part of Treasury Secretary Timothy Geithner's bank stabilization plan, but the source on Saturday for the first time linked the tests to additional government support for large banks. That person did not specify what form any extra capital cushion may take.
Little is known about the form of the stress tests, but the person described them as "consistent, forward looking and conservative."
The Obama administration tried on Friday to ease market fears the government was poised to nationalize some large banks that are struggling with losses and a lack of confidence, notably Citigroup and Bank of America.
Bank shares fell sharply, with Citigroup plunging 22 percent to below the $2 fee of a typical automated teller machine, or ATM, and Bank of America trading around the $4 level.
White House spokesman Robert Gibbs said on Friday, "This administration continues to strongly believe that a privately held banking system is the correct way to go."
That was quickly echoed by a statement from the U.S. Treasury.
INVESTORS LOSE CONFIDENCE
Citigroup and Bank of America have each received $45 billion in government capital in recent months and guarantees against losses on portfolios of illiquid mortgage assets -- aid that now exceeds their market value.
With investors losing confidence in the sector as recessionary losses on real estate and commercial loans mount, analysts say the government may have to do more to prop up the largest banks.
But rather than opting for a sweeping takeover, the government may act more incrementally, demanding a little more control every time Bank of America or Citigroup seeks more capital, analysts said.
Major interventions in financial institutions, such as Bear Stearns 11 months ago, American International Group in September and a second-round investment in Citigroup, occurred just after major drops in share prices made it clear they could not raise private capital.
The government "will try to do everything they can before they nationalize banks, but they may ultimately do it," said Lee Delaporte, director of research at Dreman Value Management, which has $10 billion under management.
"The bank stocks are telling you nationalization is going to happen," Delaporte added.
Thus far, the Treasury has put up about $235 billion for banks largely by purchasing only preferred shares to avoid diluting common shareholders. Under Geithner's revamp, those injections could come in the form of shares that could be converted to common equity if necessary.
The lack of detail in Geithner's bank plan, particularly about a $500 billion to $1 trillion public-private fund to soak up toxic assets, has fueled investor concerns that bank takeovers could become an option. Geithner did not specify how much money would be earmarked for bank capital injections under the plan, which mapped out how the second $350 billion of the $700 billion bailout fund would be spent.
Geithner has devoted $50 billion to modify troubled mortgages and $100 billion to support a $1 trillion Federal Reserve asset-backed securities lending facility aimed at unblocking frozen consumer credit markets.
Lawmakers have pressed Geithner on whether and when he will return to seek more funding to shore up the banking system. Geithner told Congress on February 11 that as the "design elements" of his plan were fleshed out, he would have a better handle on the ultimate risks and costs for the program.
(Additional reporting by Dan Wilchins in New York; Editing by Peter Cooney)
As doubt and angst grows , the Obama administration is announcing that a review of 20 major banks is forthcoming. This review of banks is often known as a stress test. Stress testing has a lot of people worried. They reason that stress testing will likely scare the heck out of investors. If Nouriel Roubini is right this will leave no choice but to nationalize. Roubini, who coined the term Zombie bank, has been saying for sometime that the banks are broke. I don't think there is much doubt that if all assets were marked to the market this would prove to be true.
One problem with pricing toxic assets and distressed assets in banks is that no one knows the real price. The system is basically frozen with little trading taking place. Sooner or later, something has to to give.
Toxic assets, nationalization, Zombie bank, these are all terms that are hanging over banks like a tornado cloud just waiting to touch down.
What do I think? Let's get it all out in the open. Obama is taking heat from the likes of Bill Clinton for being too pessimistic. I think the American public is very pessimistic. Markets don't go up when investors are uncertain or pessimistic. The only way out of this trap is to bring it all up on to the table and let us take a look at this ugly situation.
My guess is that once the true extent of the problem is known it will be quickly discounted in the stock market. Once that occurs we can go about solving that problems instead of letting the problems hang out their like an impending guillotine over our heads.
The market is going down until it fully discounts the economic problems we are facing. For me, the sooner it happens the better. I am starting to feel very bullish long term on stocks (still very bearish short term). But, I learned a long time ago that you make a lot better returns in the stock market when times are certain, rather than uncertain. Who wants to stand in front of a roaring freight train--not me.
I get the feeling that President Obama is going to let it all hang out. I bet he will receive lots of criticism from people suffering from Rick Santelli syndrome--better know as the "ignorance is bliss syndrome". Many are going to attack President Obama for telling too much. Well I think he said he intends to make things transparent. It is time for us to get our heads out of the sand and get back to doing the kinds of things that made America great. Get out the spoon--we all need a great big dose of Castor oil.
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By David Lawder
WASHINGTON (Reuters) - Financial regulators will soon launch a series of "stress tests" to determine which of the largest U.S. banks should get bigger capital cushions in case of a deeper recession, a person familiar with Obama administration plans said on Saturday.
The person, speaking on condition of anonymity, said if institutions were found to need additional capital, financial authorities would provide them with an "extra cushion of support."
Banks are expected to receive additional information about the tests in the coming week from regulators.
The largest U.S. banks are "well capitalized" for current conditions, the source said, but the Obama administration wants to ensure they can withstand a more severe economic climate and play an important role in helping restart the flow of credit.
Initial plans for the stress tests were announced on February 10 as part of Treasury Secretary Timothy Geithner's bank stabilization plan, but the source on Saturday for the first time linked the tests to additional government support for large banks. That person did not specify what form any extra capital cushion may take.
Little is known about the form of the stress tests, but the person described them as "consistent, forward looking and conservative."
The Obama administration tried on Friday to ease market fears the government was poised to nationalize some large banks that are struggling with losses and a lack of confidence, notably Citigroup and Bank of America.
Bank shares fell sharply, with Citigroup plunging 22 percent to below the $2 fee of a typical automated teller machine, or ATM, and Bank of America trading around the $4 level.
White House spokesman Robert Gibbs said on Friday, "This administration continues to strongly believe that a privately held banking system is the correct way to go."
That was quickly echoed by a statement from the U.S. Treasury.
INVESTORS LOSE CONFIDENCE
Citigroup and Bank of America have each received $45 billion in government capital in recent months and guarantees against losses on portfolios of illiquid mortgage assets -- aid that now exceeds their market value.
With investors losing confidence in the sector as recessionary losses on real estate and commercial loans mount, analysts say the government may have to do more to prop up the largest banks.
But rather than opting for a sweeping takeover, the government may act more incrementally, demanding a little more control every time Bank of America or Citigroup seeks more capital, analysts said.
Major interventions in financial institutions, such as Bear Stearns 11 months ago, American International Group in September and a second-round investment in Citigroup, occurred just after major drops in share prices made it clear they could not raise private capital.
The government "will try to do everything they can before they nationalize banks, but they may ultimately do it," said Lee Delaporte, director of research at Dreman Value Management, which has $10 billion under management.
"The bank stocks are telling you nationalization is going to happen," Delaporte added.
Thus far, the Treasury has put up about $235 billion for banks largely by purchasing only preferred shares to avoid diluting common shareholders. Under Geithner's revamp, those injections could come in the form of shares that could be converted to common equity if necessary.
The lack of detail in Geithner's bank plan, particularly about a $500 billion to $1 trillion public-private fund to soak up toxic assets, has fueled investor concerns that bank takeovers could become an option. Geithner did not specify how much money would be earmarked for bank capital injections under the plan, which mapped out how the second $350 billion of the $700 billion bailout fund would be spent.
Geithner has devoted $50 billion to modify troubled mortgages and $100 billion to support a $1 trillion Federal Reserve asset-backed securities lending facility aimed at unblocking frozen consumer credit markets.
Lawmakers have pressed Geithner on whether and when he will return to seek more funding to shore up the banking system. Geithner told Congress on February 11 that as the "design elements" of his plan were fleshed out, he would have a better handle on the ultimate risks and costs for the program.
(Additional reporting by Dan Wilchins in New York; Editing by Peter Cooney)
Friday, January 23, 2009
Are the Democrats peddling voodoo economics?
Voodoo economics: a slanderous term used by President George H. W. Bush in reference to President Reagan's economic policies known as Reaganomics. Now know as "trickle down economics" by democrats. Bush used the term voodoo economics to categorize Reagan's strategy of extreme supply side economics. One of the early tenants of supply side economics was that that across-the-board cuts in income-tax rates might raise overall tax revenues.
It now appears that the new theory being espoused by the Obama administration is the use of extreme demand side economics. The theory being that each dollar of government spending can increase the nation’s gross domestic product by more than a dollar. In some arguments the multiplier is as high as 1.5 times.
This has me thinking two things. First, if this is true why don't we spend two trillion dollars instead of one trillion? Second, why are savings in such ill repute that no one is saying a single word about savings. The argument being used right now is that savings do not add to demand--in other words if people save then they don't spend. As I look at past bull markets, they are always preceded by savings. Prior to the latest bull market in the U. S. the savings rate soared to 8 percent. More recently, saving rates have dwindled to zero percent and sometimes less than zero.
I don't think it is a crazy to assume that over consumption and creating artificial demand for things like houses and cars is part of our problem. Our current problems are being caused by the use of credit gone wild. Nevertheless, the government is proposing spending over savings, and by the way, they will borrow the money to do it. On the other hand, when people save they have to invest it somewhere--usually in stocks, bonds, or bank CDs. This helps the economy grow and creates jobs because these savings get invested directly into companies or in the form of loans by banks to companies.
The articles by economist for and against the stimulus package are coming out rapid fire. Here are a few that are very thought provoking.
Is Government Spending Too Easy an Answer?
Government Spending Is No Free Lunch
Let's Stimulate Private Risk Taking
Source All American Investor
It now appears that the new theory being espoused by the Obama administration is the use of extreme demand side economics. The theory being that each dollar of government spending can increase the nation’s gross domestic product by more than a dollar. In some arguments the multiplier is as high as 1.5 times.This has me thinking two things. First, if this is true why don't we spend two trillion dollars instead of one trillion? Second, why are savings in such ill repute that no one is saying a single word about savings. The argument being used right now is that savings do not add to demand--in other words if people save then they don't spend. As I look at past bull markets, they are always preceded by savings. Prior to the latest bull market in the U. S. the savings rate soared to 8 percent. More recently, saving rates have dwindled to zero percent and sometimes less than zero.
I don't think it is a crazy to assume that over consumption and creating artificial demand for things like houses and cars is part of our problem. Our current problems are being caused by the use of credit gone wild. Nevertheless, the government is proposing spending over savings, and by the way, they will borrow the money to do it. On the other hand, when people save they have to invest it somewhere--usually in stocks, bonds, or bank CDs. This helps the economy grow and creates jobs because these savings get invested directly into companies or in the form of loans by banks to companies.
The articles by economist for and against the stimulus package are coming out rapid fire. Here are a few that are very thought provoking.
Source All American Investor
Saturday, January 10, 2009
How Big-Government Is Obama?
Larry Kudlow's latest take on President-elect Obama's stimulus package.Obama’s economic advisers are bragging to me about their new tax-cut package. They say they’re very pro-growth. And you know what? I acknowledge it. People like Larry Summers, Austan Goolsbee, Christy Romer, and Tim Geithner are no left-wing big-government whackos. They may not be hard-core supply-siders. But in terms of the economics profession, I would call them center-right.
How Big-Government Is Obama?
Tax cuts are now 40 percent of his new stimulus package.
By Larry Kudlow
Obama spoke Thursday at George Mason University about his American Recovery and Reinvestment Plan — a.k.a. the stimulus package. There’s an interesting section that would warm the heart of John Maynard Keynes. It goes like this:
It is true that we cannot depend on government alone to create jobs or long-term growth, but at this particular moment, only government can provide the short-term boost necessary to lift us from a recession this deep and severe.
Well, 28 years ago Ronald Reagan said government was the problem, not the solution. Dealing with a bad recession like this one, the Gipper lowered taxes and domestic spending. Obama on the other hand has offered an $800 billion package, with plenty of infrastructure spending that alleges to create three million jobs.
Nobody really believes infrastructure spending will end the recession or create permanent new jobs. However, it’s interesting just how much the Obama plan has changed since the election. The size has been roughly constant. But the mix of tax cuts and spending increases is now totally different.
Instead of $100 billion worth of tax credits, there are now $300 billion worth of tax cuts. This includes a big new piece for business, more cash-expensing for small-business investment, and a restoration of the five-year tax-loss carry-back, which will especially help banks and homebuilders. It might even result in tax refunds for businesses, and might also allow banks to rid themselves of toxic assets, since the losses will now be spread over many years.
So what we have now is an $800 billion stimulus package with $300 billion of so-called tax cuts which could infer less spending than before — maybe only $500 billion worth.
Obama’s economic advisers are bragging to me about their new tax-cut package. They say they’re very pro-growth. And you know what? I acknowledge it. People like Larry Summers, Austan Goolsbee, Christy Romer, and Tim Geithner are no left-wing big-government whackos. They may not be hard-core supply-siders. But in terms of the economics profession, I would call them center-right.
And they absolutely understand the importance of private business and investment in the job-creating economic-growth process. And I think they’re views are the main reason for the reshaping of the Obama package between the campaign trail and the eve of inauguration.
The problem is that they’re not reducing marginal tax rates on large and small businesses or individuals. Their tax credits will be two-year’s worth, not permanent. There will be no incentive effects to maximize growth. And many of the tax cuts are refundable credits, which really are a form of government spending.
So it’s not a supply-side package. However, I’ve really never met a tax cut I didn’t like. And any tax cut is better than a spending increase since private companies and individuals will at least get the money instead of government.
This is the interesting part of the Obama plan. Somewhere in there the tax cuts will have a small positive economic effect. I would have designed it differently, but then again Team Obama won the election. I guess I could say it could have been worse.
Of course, Team Obama will have to contend with the sticker shock of a $1.2 trillion deficit for 2009, just printed by the Congressional Budget Office. And that’s before the Obama stimulus plan. But I don’t think Republicans really have a leg to stand on with the deficit argument — or for that matter the spending argument.
Yes, Obama is raising the ante, and the new numbers are just about over the edge. But a lot of that new deficit is TARP money that should be scored as investment — not real spending. And in view of all the economic pessimism out there, I doubt if the public is very worried about deficits.
What’s most regrettable is that congressional Republicans have yet to make the alternative case. They haven’t pressed for marginal tax-rate cuts as an option to Obama’s credits. So far, the GOP is me-too. They’ve offered an echo instead of a choice.
Meanwhile, polls now say the public favors Obama’s plan by 55 to 65 percent. His personal approval rating is even higher. And he’s being politically astute by reaching out to Republicans. He has virtually removed partisan rhetoric. Simply put, Obama is in the driver’s seat right now.
Sure, the Democratic Congress may mangle Obama’s plan. They might even repeal the Bush tax cuts this year. So there is considerable uncertainty about the details of the final package. But I must say, a crafty Obama is doing his best top employ his version of the Reagan tax-cut plan. Obama talks big government. But so far his program actually reduces the government-spending share and increases the private tax-cut share.
Very interesting.
— Larry Kudlow, NRO’s Economics Editor, is host of CNBC’s Kudlow & Company and author of the daily web blog, Kudlow’s Money Politic$.
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