Tag Archives: Obama

President Obama entering the fray

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More of the blind leading the blind. The one thing they all agree on, at great expense to global well being, is the budget deficits are all too large and the need for shared sacrifice and all that.

No chance for anything constructive to come out of any of this.

And these masters of their money machines don’t even know how to inflate, as they all desperately try to inflate with their versions of quantitative easing, which, functionally, is just another demand draining tax.

*DJ Merkel, Obama Discussed How To Boost EFSF Firepower Without ECB
*DJ Obama To Merkel: We Are Totally Invested In Your Success – Source
*DJ Geithner, Schaeuble May Meet To Discuss IMF Role In Euro Crisis -Source

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WSJ- Boehner pulls out of debt talks….

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As previously discussed, the President is no longer involved, and if Congress does get a bill to his desk he’ll sign it.

Grand Bargain Talks Collapse

By Carol E Lee and Janet Hook

July 22 (WSJ) — A high-stakes effort by President Barack Obama and House Speaker John Boehner to hatch a landmark deficit reduction deal collapsed in anger Friday, sending Washington into a weekend of negotiations over how the world’s top financial power can make good on its debt obligations.

In a letter to his colleagues, Mr. Boehner said he called off talks with the president. He informed Mr. Obama Friday night he planned to start negotiations with the Senate to seek what would likely be a smaller deal.

“In the end we couldn’t connect. Not because of different personalities, but because of different visions for our country,” Mr. Boehner wrote in the letter. Later, at a press conference, Mr. Boehner accused the president of “moving the goal post.”

Mr. Obama, visibly frustrated in his own news conference before Mr. Boehner’s, was critical of the GOP. He summoned Congressional leaders back to the White House Saturday morning where “they have to explain to me how it is we are going to avoid default.”

The president also sounded less optimistic than he has in recent weeks that congressional leaders could strike a deal that would avoid a government default. He said he has consulted with Treasury Secretary Tim Geithner about the consequences of default.

Mr. Boehner said talks broke down because Mr. Obama came back at the last minute and asked for $400 billion in additional revenues on top of the $800 billion he thought they had agreed to. “Dealing with this White House is like dealing with a bowl of Jell-O,” Mr. Boehner said.

Senior White House officials said Mr. Obama called Mr. Boehner Thursday and sought more revenues, saying they were needed to win Democratic votes. They said the president was willing to negotiate the matter. Mr. Obama followed up with two more phone calls to the speaker, the White House said, and they weren’t returned until Friday evening when Mr. Boehner called to say the talks were off.

The demise of the grand bargain, the latest twist in Washington’s months-long search for an agreement to raise the debt ceiling, left the next steps uncertain. Congressional aides say the outlines of a deal must be clear by Monday if Congress is to approve a deal that would prevent the U.S. government from defaulting Aug. 2.

Treasury Department officials say that without more borrowing authority by that date, the government will run out of cash to pay all its bills, including Social Security benefits, military pensions and payments to contractors.

Several smaller options have been discussed that would cut the deficit between $1 trillion and $2.5 trillion. Changes to big government programs and the tax code won’t likely be tackled. That could solve the debt-ceiling problem, but create a new one if credit-rating firms think the agreement doesn’t justify their triple-A ratings on U.S. debt.

A debt downgrade, while not as serious as a default, could send interests rates higher and cause investors to panic. Mr. Obama raised that prospect Friday night in making the case for a larger deal.

“If we can’t come up with a serious plan for actual deficit and debt reduction, and all we’re doing is extending the debt ceiling for another six, seven, eight months, then the probabilities of downgrading U.S. credit are increased, and that will be an additional cloud over the economy and make it more difficult for us and more difficult for businesses to create jobs that the American people so desperately need,” Mr. Obama said.

Mr. Obama also said as leaders work through the weekend, they should keep in mind that the stock markets will be opening Monday.

The debt ceiling whiplash, with lawmakers lurching from one proposal to the next, has put financial markets on edge. Bond investors still appear to believe a deal will be inked, but others are bracing for volatile markets if the weekend’s negotiations don’t produce results.

“If I were, particularly, a foreign holder of U.S. debt, I’d be asking myself, ‘Who is running that country,'” said John Fath, managing partner for BTG Pactual, a Brazil-based investment bank. “This is like riding on a motorcycle and going right in front of an 18-wheeler. Are they out of their minds?”

Messrs. Obama and Boehner had incentives to push for more. They were thinking in part about their legacies, while many of their followers were focused on sticking to what they saw as their parties’ basic principles. Mr. Obama may have been willing to accept changes to programs such as Medicare, and Mr. Boehner may have countenanced tax-revenue increases.

Liberal groups Friday called Mr. Obama’s re-election campaign and Democratic congressional offices attacking the grand bargain. Justin Ruben, executive director of MoveOn.org, said it would “betray the core Democratic commitment to the middle class.”

Senior Republican aides said disagreements over taxes and changes to entitlement programs became too large to overcome.

Rep. Steve LaTourette (R., Ohio), a close friend of Mr. Boehner’s, said after an afternoon meeting of the GOP caucus: “The speaker was the most melancholy I’ve ever seen him. He’s always been a tremendous optimist. He feels he’s getting nowhere fast.”

Messrs. Obama and Boehner were discussing a deal that would set the stage for $2.7 trillion in spending cuts over 10 years and $800 billion in revenues generated through the tax code—a figure Mr. Obama suggested increasing to $1.2 billion, both sides agree. The plan would have included some of the spending cuts up front, while deferring other cuts and a tax overhaul until later.

Senior White House officials said the first part of the package, which would have immediately become law, also included an extension of unemployment insurance and the payroll tax break for employees.

A hurdle that emerged Thursday was the mechanism that would ensure Congress made good on its promise. Republicans wanted the so-called trigger to be elimination of the individual mandate in Mr. Obama’s health-care law, people familiar with the matter said. The White House refused to include that as a trigger, but said Mr. Obama would consider other options.

A smaller deal cut between congressional leaders would be a poor political outcome for both parties. The cuts likely wouldn’t be deep enough to satisfy conservatives, but would be big enough to irk liberals, and neither could claim credit for putting the U.S. on a path to long-term fiscal stability.

Senior Republican aides said they don’t know what shape a deal will ultimately take, but they said they need to present House members with an agreement by Monday to have time to pass legislation in both chambers by Aug. 2.

House Republicans will not back down from their demand for dollar–for–dollar spending cuts accompanying the debt limit increase. They have increasingly discussed a short-term debt increase, accompanied by the $1.5 trillion in spending cuts identified by budget negotiators. House Majority Leader Eric Cantor (R.,Va.) said the GOP would offer such a plan for avoiding default “in the coming days.”

“America will pay its bills and meet its obligations, and in coming days we will offer a path forward that meets the president’s request for a debt-limit increase, manages down the debt and achieves serious spending cuts,” Mr. Cantor said.

Getting a substantial deal matters as much for financial markets as the political fate of the nation’s leaders. Standard & Poor’s has said it could lower its AAA rating on U.S. government debt if it believes any deficit-reduction agreement is inadequate or the triggers put in place aren’t credible. A lower rating would boost borrowing costs for the government, businesses and households, possibly harming the recovery and roiling financial markets.

“What we mean by credible is something that we think people are actually going to do,” David T. Beers, managing director of sovereign and public finance ratings, said in a recent interview.

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more from Geithner and Obama

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Geithner: Tight Lending Threatens US Recovery

Dec. 22 (Reuters) —U.S. Treasury Secretary Timothy Geithner expressed confidence on Tuesday that the U.S. economy was on a solid recovery path, but said tight lending practices by banks still pose a risk.

He said the Treasury “will do what is necessary” to prevent another severe downturn. “We cannot afford to let the country live again with a risk that we’re going to have another series of events like we had last year,” Geithner said.

So how about a payroll tax holiday, revenue sharing for the states, and funding an $8/hr job for anyone willing and able to work? Maybe this is why:

On December 16, Mr. Obama told a television audience that if his “health care bill” doesn’t pass, “the federal government will go bankrupt” and that “health care costs are going to consume the entire federal budget.”

Someone needs to remind them how, operationally, the federal government actually does spend and lend:

(PELLEY) Is that tax money that the Fed is spending?

(BERNANKE) It’s not tax money. The banks have– accounts with the Fed, much the same way that you have an account in a commercial bank. So, to lend to a bank, we simply use the computer to mark up the size of the account that they have with the Fed.


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Latest on Obama and Chrysler

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Not to bore you with this, but it’s a no win situation in that if the secured creditors lose, the entire credit structure becomes uncertain, and if the secured creditors win, the deal breaks down and Obama, an all star law graduate, loses credibility and political power as the deal falls apart and Chrysler folds unless there is additional public funding.

And with GM next, there’s no telling what might happen to both the automakers and the entire supply chain and distribution network.

Chrysler Non-TARP Lenders Object to Auction Plan

by Christopher Scinta and Tiffany Kary

May 4 (Bloomberg) — A group of Chrysler LLC’s secured lenders is seeking to block the bankrupt company’s plan to sell its business at auction this month, arguing that the U.S. government is violating federal law to preserve the automaker.

The group, calling itself Chrysler’s non-TARP lenders, in reference to the Troubled Assets Relief Program, seeks to block the proposed sale to an alliance led by Fiat SpA, as well as a request by the U.S. automaker for approval of a $4.5 billion Treasury loan to finance the reorganization.

Secured lenders that agreed to the Fiat deal, including JPMorgan Chase & Co.,Citigroup Inc. and Goldman Sachs Group Inc., had conflicts of interest because they had also accepted TARP funds, the group said.

The process is “tainted” because it was dominated by the government, the lenders argued in papers filed today in U.S. Bankruptcy Court in Manhattan. The group also said the short period of time given to evaluate the sale was improper and the hearing on bid procedures that began today should be delayed. The judge delayed the hearing until 2:30 p.m. tomorrow, ordering the members of the lender group to reveal their identities.

‘Improperly Attempts’

The sale “improperly attempts to extinguish their property rights without their comment,” attorneys for the objecting lenders wrote in court papers.

“The sale motion should be denied because it seeks approval of a sale that cannot be approved under the bankruptcy code,” they argued. “The court should not permit a patently illegal sales process to go forward.”

Chrysler’s planned alliance with Turin, Italy-based Fiat, would create the world’s sixth-largest carmaker. Chrysler, based in Auburn Hills, Michigan, wasn’t able to pursue the merger outside bankruptcy because of opposition by the objecting lenders.

Under bankruptcy law, offers for bankrupt companies or their assets are generally subject to the possibility of higher bids at a court-supervised auction.

The Fiat offer, to be made from an as-yet unnamed entity formed by the Italian automaker, Chrysler employees and other parties, will be the lead bid in an auction, which is typically required for assets sold in bankruptcy. Chrysler is asking U.S. Bankruptcy Judge Arthur Gonzalez to approve bidding rules for an auction that would require creditor objections to the sale be submitted by May 11, followed by a May 15 deadline for competing bids. The bankrupt company seeks a May 21 hearing to approve the winning bid, according to the court filing.

Listed Assets

Chrysler, in its April 30 filings, listed assets of $39.3 billion and liabilities of $55.2 billion, making it the fifth-largest bankruptcy in U.S. history, according to data compiled by Bloomberg News.

Chrysler’s proposed sale favors junior creditors over senior creditors and would improperly channel the proceeds to specific creditor groups, the objecting lender group said in the court filing.
In court today, Thomas Lauria, a lawyer for the secured lender group, said some of its members have received death threats. In response to the judge’s demand that the members of his group be revealed, Lauria said the identities of more lenders would be revealed “promptly.”


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Chrysler related comments

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The point remains that the job of the executive branch is to enforce the laws as enacted by Congress.

This is not a time of war, Chrysler is not a national security or strategic issue, nor is the US automobile industry.

In fact, Chrysler was already largely a foreign entity, and even GM is now probably larger overseas than in the US, and the national origin of its shareholders are of no consequence.

This has turned into a simple, unwarranted, unnecessary, and counterproductive show of force between the President and a few lesser Wall St. players.

In the absence of supporting law, the administration, driven by anger, instead used all its bully powers to avoid a Chrysler bankruptcy (for reasons not yet fully disclosed) and, in this instance, lost that (minor?) battle.

The separation of power between executive, legislative, and judicial branches and the rule of law bent but did not yet break.

This is what happens with a President who doesn’t understand the monetary system, and doesn’t understand the US has unlimited ‘financial resources’ to sustain full employment and social equity with or without Chrysler or any other private employer.

Instead, the President sees an inevitable rise in unemployment and the risk of systemic failure should the automobile industry ‘rescue’ fail.

Just as:

  • The errant belief that we need China and others to be able to deficit spend is driving foreign policy ‘concessions.’
  • The errant belief that we can’t ‘go it alone’ with fiscal policy is squandering a golden opportunity to enhance our standard of living.
  • The errant belief that we are economically better off with a balanced federal budget is risking the sustainability of our domestic economy.
  • The errant belief that bank lending is a prerequisite to economic well being is shifting wealth upward away from lower income working people.
  • The errant belief that ‘monetary policy’ can support GDP delays and limits fiscal response.
  • The errant belief that exports are more desirable than domestic consumption depresses our standard of living.
  • The failure to understand the difference between the purchase of financial assets and the purchase of real goods and services continues to prolong our massive output gap and the unrecoverable real losses of high unemployment.
  • All of this can be traced to a world wide failure to recognize the fundamental difference between the gold based monetary systems of the past and today’s non convertible currency regimes.

The Lenders Obama Decided to Blame

by Zachary Kouwe

May 1 (NYT)


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Obama’s Chrysler speech

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First impression: thoroughly depressing at all levels.

Particularly the public purpose aspect.

Less critical but also highly disturbing are issues like:

Looks like a nearly free call for Fiat because Obama believes their technology is critical.

Obama: Bankruptcy is ‘path to Chrysler’s revival’ in new partnership with Fiat

Apr 30 (Delaware Online) — “Fiat is getting its stake in Chrysler for giving the company access to its fuel-efficient technology, a move toward cleaner cars that the Obama administration thinks is critical to Chrysler’s future survival.”

“But Fiat, which the Obama administration hopes can jump start Chrysler with its fuel-efficient and lower-emission technology, could end up the majority stakeholder. Fiat would initially get 20 percent, a share that could rise to 35 percent if certain benchmarks are met.”

“Fiat said Thursday it could get an additional 16 percent by 2016 if Chrysler’s U.S. government loans are fully repaid. The company has committed to building Fiat cars in Chrysler factories, to be sold as Chryslers.”

And if Fiat gets paid for its cars and engines with US subsidy funds maybe no downside at all?

And somehow, and not that I personally care one way or the other, handing over a subsidized Chrysler to Fiat heralds the revival of an American company?

The same Fiat that has failed miserably each time its attempted to enter the American markets, and often over quality and reliability issues is going to save Chrysler?

Somehow Chrysler switching from Mercedes engines to Fiat cars and engines gives it some kind of advantage?

On to the public purpose issues.

Major emphasis on what the company has done for the workers- housed, fed, and clothed them, sent their kids to college, pay their bills.

Same can be said for industries building nuclear weapons, tobacco products, and dangerous toys.

It’s about the output. It’s not like there’s some kind of natural job shortage.

Every worker could have been doing something else for the same compensation.

Public purpose is about opportunity costs under full employment conditions.

Obama also defended this plan not on public purpose, but on the issue of whether there will be losses of ‘taxpayer money’.

He said ‘no company can be supported on an endless stream of taxpayer dollars’.

What about the defense industry, or other institutions of public purpose?

The difference is Chrysler’s output has no public purpose.

Obama says “this is about supporting tens of thousands of jobs”.

Yes, to create output that has no public purpose.

In fact, for years there has been substantial excess capacity in the automobile industry.

And then there was the vicious attack on the legally secured creditors who wouldn’t take less than the face amount of their debt, like those who received tarp money were apparently pressured to do.

Why would anyone even remotely expect or even desire that to happen?

Was there any consideration, for example, to what would happen to credit availability and interest rates for private borrowers if secured lenders expected to have to take discounts if the borrowers got in trouble? There would be no lending as we know it.

Yet the President of the US attempted to coerce these secured lenders to ‘sacrifice’ because unsecured creditors and employees were settling for less? How are those related?

And after a recent speech about how he’s going to help unions, Obama follows up with this:

“Along with the Fiat deal, the UAW ratified a cost-cutting pact Wednesday night.”

Can’t have it both ways.

Nor is there any discussion on how the government’s failure to sustain aggregate demand and let car sales fall in half resulted in substantial losses for all the world’s car companies.

And that only the restoration of aggregate demand is what ultimately supports profitability.

Instead, with full authority and the voice of intellectual superiority:

“For too long,” Obama said at the White House, “Chrysler moved too slowly to adapt to the future, designing and building cars that were less popular, less reliable and less fuel efficient than foreign competitors.”

Obama closes by saying he hopes we buy American cars, completely missing another economic fundamental of public purpose- imports are real benefits and exports real costs.

He fails to understand that the flood of net imports has made a major contribution to the American standard of living, to the detriment of the net exporters.

Yes, removing debt and reducing obligations to workers makes a company financially stronger and gives it a competitive advantage.

But done this way it’s also a transfer of nominal wealth previously subject to contract law.

And determining that Government can suspend contract law also has consequences on private investment and risk assessment.

To some degree it’s also a fallacy of composition- if you do it for all the car companies nothing is gained vs each other, and excess capacity persists.

This was a chilling speech on many levels, and does not bode well for the public purpose of our real standard of living.

And perhaps worst of all, the continuous, faulty logic was all delivered with an arrogant voice of authority, confidence, and intellectual and moral superiority.

Scared me into selling my stocks today. Continuing government attacks on shareholders can’t be ruled out. Markets are way off their lows and already seem to know the ‘good news’ of GDP maybe going flat. And I’m getting worried that Obama means what he says regarding ‘fiscal responsibility.’


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Obama for or against unions?

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Didn’t we just hear a speech from our President about the need to strengthen unions?

White House to set GM, Chrysler deadlines: report

Mar 27 (Reuters) — The Obama administration will set a strict deadline for General Motors Corp and Chrysler LLC to reach cost-cutting deals with creditors and their major union even as it extends more aid to the struggling automakers, the New York Times reported on Friday.

The New York Times reported that the White House autos task force was likely to set a deadline of weeks rather than months for GM and Chrysler to reach a deal with creditors and the United Auto Workers. Under the terms of the $17.4 billion in emergency loans approved for the Detroit automakers by the Bush administration in late December, GM and Chrysler need to win concessionary agreements to reduce the amount owed to the United Auto Workers and other creditors. GM and Chrysler have reached agreements in principle to change provisions of their contract with the UAW that would reduce the average hourly cost for production workers, another provision of the loan deal.


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Obama on fiscal limits

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This says it all.

And only days after Bernanke explained how government spends by changing numbers in accounts.

Obama is either ignorant or subversive:

From 60 minutes last night:

Obama on 60 minutes

Mar 22 (CBS) —

KROFT: Is there some limit to the amount of money we can spend?

OBAMA: Yes.

KROFT: Or print trying to solve this crisis?

OBAMA: There is.

KROFT: And are we getting close to it?

OBAMA: The limit is our ability to finance these expenditures through borrowing. And the United States is fortunate that it has the largest, most stable economic and political system around. And so the dollar is still strong because people are still buying treasury bills. They still think that’s the safest investment out there. If we don’t get a handle on this, and also start looking at our long-term deficit projections, at a certain point, people will stop buying those treasury bills.


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Mosler TALF Alternative

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Compare the TALF concept with my proposal:

The Fed can instead offer its member banks credit default insurance to support the Fed’s desire to support the lending it’s trying to support with the TALF.

For example:

The Fed can offer member banks default insurance on any AAA rated securities of newly originated auto loans, for a fee of, for example, 1% of outstanding balances.

Insuring against loss eliminates leverage limits on these securities for the banks.

This can be applied as desired to other financial assets the Fed is attempting to support with the TALF.

The advantages of this over the TALF are hopefully more than obvious.

(Yes, this is similar to what I proposed way back during the mortgage insurer crisis.)

Fed’s TALF Program Meets Resistance Over Foreign Worker Rules

by Scott Lanman and Robert Schmidt

Mar 17 (Bloomberg) — The Federal Reserve’s $1 trillion program to jump-start consumer and business lending is encountering resistance from investment firms over a new law that would make it harder to bring in employees from overseas.

Lawmakers inserted rules into last month’s stimulus legislation that prevent firms from replacing fired U.S. workers with foreign employees if they get funds under rescue programs.

Hedge funds, insurers and companies considering joining the plan may balk at hurdles involved in bringing in foreign talent.

The central bank has already delayed introduction of the Term Asset-Backed Securities Loan Facility, or TALF, which was first announced in November and originally scheduled to start last month. A further postponement or a limit to the number of investors participating would hamper the goal of thawing the market for securities backed by consumer and business loans.

“We need to be a little careful about how much we micromanage these financial institutions,” said Clay Lowery, a former assistant Treasury secretary, who is now a managing director of the Glover Park Group in Washington.

The securities industry’s main trade group alerted members to the issue on March 13, six days before the rescheduled start of the TALF.

Companies that apply for a visa on behalf of a foreign worker can’t dismiss employees in similar positions 90 days before and 90 days after requesting the visa, and have to prove they attempted to recruit a U.S. worker first.

Visa Burden

The Fed is working with the Homeland Security Department’s U.S. Citizenship and Immigration Services to provide guidance on the issue.

The law applies the restrictions to any recipient of funds under section 13 of the Federal Reserve Act. The TALF and most other Fed lending programs were authorized under that section.

The visa provision adds a burden to what participants already expected to be a slow start to the TALF, which is aimed at reviving the market for securities backed by auto, education, credit-card and small-business loans.

Fed Chairman Ben S. Bernanke and Treasury Secretary Timothy Geithner are counting on investors such as hedge funds to use cheap Fed loans to buy the securities, helping lenders lower rates and loosen other terms on new loans to consumers and businesses. The Treasury is funding 10 percent of the TALF loans from the $700 billion financial-rescue fund.

The New York Fed, which is administering the TALF, starts accepting applications for loans through the program today at 10 a.m. Originally the Fed planned a two-hour window for applications, then announced March 13 that the period would be extended until 5 p.m. on March 19, saying participants requested more time to complete documentation.


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Obama on quality of US securities

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Obama Says Investors Can Be Fully Confident in US

by Kim Chipman and Alan Bjerga

Mar 14 (Bloomberg) — President Barack Obama said investors can have “absolute confidence” in Treasury bills as he sought to assuage China’s concern about the safety of its holdings of U.S. debt.

“Not just the Chinese government, but every investor can have absolute confidence in the soundness of investments in the U.S.,” Obama said today at a press conference in Washington after meeting Brazilian President Luiz Inacio Lula da Silva.

Sounds a lot like all the other CEOs just before they defaulted.

This is embarrassing. Maybe some day we will have a president who can give the right answer-

The US government makes payment in dollars by crediting accounts at its Federal Reserve Bank.

This process is not inherently constrained by revenues.

The notion of solvency is inapplicable.

Chinese Premier Wen Jiabao, whose country is the single largest overseas owner of U.S. government debt, said two days ago that he was “worried” about holdings of Treasuries and wanted assurances that the investment is safe.

Take him to the Fed and show him how the debits and credits work.

The U.S. is counting on overseas purchases of its debt to finance Obama’s $787 billion package intended to help pull the world’s biggest economy out of a recession.

Federal spending is in no case inherently revenue constrained.

This kind of unanswered rhetoric perpetuates the myths that diminish our real standard of living.

Obama noted today that investment flows into the U.S. are rising. Total net purchases of long-term equities, notes and bonds increased to $34.8 billion in December, compared with net selling of $25.6 billion in November, according to a Treasury Department report last month.

This has nothing to do with solvency. Maybe some day we’ll get a president who understands that.

“I think it’s a recognition that the stability not only of our economic system but also our political system is extraordinary,” Obama said.

The main reason foreign governments accumulate USD financial assets is to keep their own real wages and standard of living down to drive exports to the US.

That’s a ‘good thing’ for us that Obama also doesn’t understand.

He said the private sector has helped make the country the world’s “most dynamic economy.”

OK, whatever ‘dynamic’ means in this context.

Lula, who presides over the world’s 10th-biggest economy, said he’s concerned that investor “flight” toward the relative safety of U.S. securities will mean there’s less money to invest in emerging economies.

He’s just ignorant about how the monetary system works.


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