Trying To Do Something About The Economic Disaster
Readers suggested a topic on financial reform and the economy. “Welcome to Obama-World. Businesses must drastically cut their number of employees due to increased taxes, charges, regulation, fees, etc. Have you read the financial reform legislation? It dramatically hinders the ability of banks to hedge risk and efficiently take advantage of changing market situations. In case you take the position, screw the banks, please note that all fees and charges are being passed down to the borrowers, chilling new American investment.”
“Have you read the new definitions of interest and increased costs being placed into loan agreements recently, especially by Wells Fargo, Citi and BoA, which does just that expressly? This is true even in the 100 million plus range where the borrowers have bargaining power and are represented by competent counsel. Not all regulation is bad, but inefficient regulation targeted to please the angry masses who don’t understand finance is horrible.”
A reply, “Lots of good ammo there why the big banks have to go:
1) They banks dump their risk off on the unsuspecting.
2) They take advantage of changing market situations to the detriment of other investors.
3) They’re passing on fees and charges to the borrowers; can’t cut back on the bonuses after all.
4) They’re so powerful that even large borrowers have to bend over.
Thanks for the ammo!”
Another said, “Knowledgeable people who are against Obama blame him for trying to do something about the economic disaster, because it’s hopeless, not for causing it. Let’s just say I have reason to know all about the financial reform legislation. And it didn’t go far enough.”
One added this, “The problem with the big banks I do think, is that they have given influence money to our elected officials. The guy in the White House is one of the largest recipients. It just cannot end well.”
A reply, “Ultimately, off-shoring of jobs and on-shoring of cheap international labor has come home to roost. I have said for years, who do these companies think is going to buy their products when no one has a decent job any more?”
This was added, “Bingo!!!! It has nothing to do with regulations, and everything to do with Americans having decent, stable, well-paying jobs that enable them to go out and buy all the products at higher prices…which enable companies to higher/keep workers at decent wages, which enable the workers to go out and buy things, which enable the companies to keep paying their workers, which enables the workers to…”
To which was said, “Respectfully, you are wrong. Demand and output is ever so slowly increasing at the manufacturing level.”
“But the number of jobs to fuel manufacturing today are less than the number needed in 2000 - when productive output was 30% less than today ! (cheaper machine tools, software, and lean manufacturing principals). - Oh, and a better ability to use them. And only manufacturing’s higher paid jobs will feed a proper housing recovery.”
From Dow Jones Newswire. “U.S. Treasury Secretary Timothy Geithner defended the Obama administration’s regulatory policies Friday, saying in a television interview that concerns they are harming job growth are unfounded. Geithner noted that the financial system was ‘messed up’ and ‘we had to reform it’ with the Dodd-Frank financial overhaul. But implementation of the 2010 law is ‘not having a meaningful effect’ on reducing jobs nor hamstringing the economy, he stressed.”
“‘If you look at the access to credit for the vast bulk of the American economy, availability of credit is much, much higher today than it was before Dodd Frank bill passed,’ he said.”
“Geithner also dismissed concerns expressed recently by J.P. Morgan Chase Chief Executive Jamie Dimon that new banking regulations would lead to a decline in lending.”
From Reuters. “Bemoaning a rise in ’short-termism,’ departing Federal Deposit Insurance Corp Chairman Sheila Bair urged fellow regulators to resist pressure to ease capital requirements and new rules on systemically important financial institutions. Bair, in her final speech as FDIC chief, said short-term thinking among bankers and lawmakers was fueling calls to roll back some provisions of the Dodd-Frank financial reform law enacted last year.”
“Bair said that the FDIC and the Federal Reserve must fully implement Dodd-Frank authorities that allow them to seize and shut down failing large financial institutions. ‘The FDIC and the Federal Reserve are going to need to stick to their guns and insist that these companies simplify their structure, if necessary, to ensure that they can be resolved without a bailout in some future crisis,’ said Bair, who leaves office on July 8.”
“She said the focus on near-term profits that led to excessive risk-taking in the run-up to the 2007-09 financial crisis is now resurfacing in complaints by bankers about higher capital requirements. ‘This is a terrific example of the sort of static, short-term thinking that got us into this mess in the first place,’ Bair said at the National Press Club.”
“Bair rejected the idea that financial regulators are to blame for the slow U.S. recovery and broader economic problems. She said most Dodd-Frank rules had not been finalized yet but would stabilize the financial sector for the next downturn. ‘What the financial regulators are doing supports a healthy, vibrant, sustainable economy, not the other way round,’ she said in response to questions after her speech.”
