PDA

View Full Version : Obama likes to "slam" things, it seems like.



Kein Haar
22nd April 10, 12:05 PM
http://finance.yahoo.com/news/Obama-slams-Wall-Street-ways-apf-2073525978.html?x=0&sec=topStories&pos=main&asset=&ccode=


Obama slams Wall Street ways while asking support
Obama ratchets up pressure for financial overhaul, urges lawmakers to give him a bill quickly


Buzz up! 13 Print..
President Barack Obama arrives at JFK International Airport in New York, Thursday, Apr. 22,2010, on his way to deliver a major economic speech at Cooper Union in Manhattan (AP Photo/David Karp)
Darlene Superville and Tom Raum, Associated Press Writers, On Thursday April 22, 2010, 12:01 pm
NEW YORK (AP) -- President Barack Obama rebuked Wall Street for risky practices Thursday even as he sought its leaders' help for "updated, commonsense" regulations to head off any new financial crisis.

"Ultimately there is no dividing line between Main Street and Wall Street. We rise or we fall together as one nation. So I urge you to join me," Obama said in a high-stakes speech near the nation's financial hub.

The president acknowledged differences of opinion over how to best protect bailout-weary taxpayers but denounced criticism from some Republicans who claim a Democratic-sponsored bill headed for Senate action would encourage rather than discourage future bailouts of huge banks.

"That may make for a good sound bite, but it's not factually accurate," Obama said. He said the overhaul legislation would "put a stop to taxpayer-funded bailouts."

Obama's speech came at a delicate time in negotiations over the Senate measure, which could be debated next week. The House has passed its own version of financial overhaul legislation. Obama did not say which one he favored but told an audience that included dozens of financial leaders "both bills represent significant improvement on the flawed rules we have in place today."

He portrayed his appearance at Cooper Union college, in lower Manhattan, as a reprise of a campaign speech he gave at the same location in March 2008 to offer an agenda for financial regulatory reform.

"Since I last spoke here two years ago, our country has been through a terrible trial," he said, pointing to the loss of more than 8 million jobs, the losing of "countless small businesses," trillions of dollars in lost savings and people forced to put off retirement or postpone college.

"I take no satisfaction in noting that my comments have largely been borne out by the events that followed," Obama said.

Obama said that today, the economy is recovering in what he called "the fastest turnaround in growth in nearly three decades."

"But we have more work to do. Until this progress is felt not just on Wall Street but Main Street we cannot be satisfied," he added.

Taking his argument for stronger oversight of the financial industry to the city where the economic meltdown began, Obama said it was "essential that we learn the lessons of this crisis, so we don't doom ourselves to repeat it. And make no mistake, that is exactly what will happen if we allow this moment to pass."

Obama's speech was an effort to ramp up pressure on Congress for legislation imposing new financial regulations.

He also used it to take the financial industry to task. "A free market was never meant to be a free license to take whatever you can get, however you can get it," Obama said. "That is what happened too often in the years leading up to the crisis. Some on Wall Street forgot that behind every dollar traded or leveraged, there is a family looking to buy a house, pay for an education, open a business or save for retirement. What happens here has real consequences across our country."

He called on the financial leaders to tone down what he called "furious efforts" by an army of lobbyists to derail or water down the legislation. "I am sure that many of those lobbyists work for some of you," he said.

The speech was given in a hall where Abraham Lincoln in February 1860 spelled out his position on freedom and slavery ahead of the presidential campaign that year. It also came just six days after the Securities and Exchange Commission's fraud case against the huge investment bank Goldman Sachs.

Obama has denied any White House involvement in the timing of the SEC case, but the charges have emboldened Democrats in their criticism of Republicans who oppose the administration's overhaul proposal -- even though measures in the proposal may not have stopped the transactions involved in the Goldman case.

The sweeping regulation proposal represents the broadest attempt to overhaul the U.S. financial system since the 1930s, and aims to prevent another crisis. Democrats are preparing to bring the Senate version of the bill up for debate, but solid GOP opposition has complicated the effort. Senate negotiators say they had made progress toward a compromise bill that could command support from both sides.

The legislation would create a mechanism for liquidating large, interconnected financial firms that are so big that their sudden collapse could shake the economy. At the height of the crisis in 2008, the Bush administration and the Federal Reserve provided billions of taxpayer dollars to prop up the giant insurer American International Group Inc., several banks and various financial institutions considered too big to fail. The moves were highly unpopular with voters.

The bills also, for the first time, would impose oversight on the market for derivatives -- complicated financial instruments whose value is derived from the value of other investments. The measures also would create a council to detect threats to the broader financial system and establish a consumer protection agency to police consumers' dealings with banks and other financial institutions.

Republicans contend that Democratic plans to create a $50 billion fund, paid for by the industry, to help unwind failing institutions would encourage Wall Street banks to take risks and to expect future bailouts. Democrats say the fund would lead to bankruptcy, not rescue. The administration does not support the fund and would not object to its being removed from the bill.

The Senate Agriculture Committee on Wednesday approved a bill by its chairwoman, Sen. Blanche Lincoln, D-Ark., to limit banks' ability to trade derivatives and to make such transactions more open. Lincoln's proposal is more sweeping than those offered by the Obama administration and the House, but it is expected to become part of the Senate financial overhaul bill.

At the same time, Senate Banking Committee Chairman Chris Dodd, D-Conn., and Sen. Richard Shelby of Alabama, the panel's top Republican, have been trying to negotiate a compromise measure that could win GOP support.

Democrats have accused Senate Republican leader Mitch McConnell of Kentucky of aiding efforts by the financial industry and others to fend off the attempt to impose tighter regulation.

McConnell has raised concerns about the bill. But he also has said the measure can be fixed and he has pushed for the bipartisan talks to continue.

"Both sides have expressed a willingness to make the changes needed to ensure without any doubt that this bill won't put taxpayers on the hook for future bailouts of Wall Street banks," McConnell said.

New York Mayor Michael Bloomberg -- who has expressed reservations to the overhaul legislation -- was in the audience of approximately 700 financial industry leaders, consumer advocates, presidential advisers, local officials, students, faculty and others for Obama's speech.

Simpler solution?

Let sick corporations DIE. GM, Citigroup, AIG, etc.

I wanted to see someone beat Mike Tyson, but instead of just giving him Buster Douglas, I had the bright idea of just patching up Marvis Frazier and having him fight Mike again....and hoping for the best. I'd even tell him: "Even though I expect you to fight better this time, I'm also going to handicap Mike so it's much harder for you to lose and we don't have to keep giving you repeated chances to beat him."

http://www.youtube.com/watch?v=oyxCZ-mzy28

How can anyone disagree with this? Marvis Frazier is General Motors. He plain sucks.

You don't like welfare? This is a great solution.

Don't like corporations? This is a great solution.

No welfare, death to sick businesses.

Maybe there was something special about the banks who didn't need a bail-out. Maybe they were healthy. Maybe they earned the right to broader market share upon the death of their competitors.

Plus, market corrections are kinda cool. I've made more money in the past two years than I ever have (started such gambling in 2001).

HappyOldGuy
22nd April 10, 12:23 PM
Your solution does nothing to solve the problem. Unless you make the people who make up the corporation die too (which I'm willing to discuss). A corporation isn't a real thing. It's a way that we agree to limit the risk an individual takes on when they engage in commerce because we feel that the moral hazard of limiting their risk is worth it for the added economic growth that encouraging the risk provides. Your solution just encourages people to form throwaway corporations as shells to shield themselves from liability. When you talk about a GM, that can work. Because forming a GM in the first place is a massive undertaking with big costs and risks. But forming a hedge fund is a filing fee and a couple of computers.

It's a basic theorem of capitalism that markets make good decisions when they have good information. The main problem we had in this last crisis is that the transactions that brought us down were intentionally made too complex to follow, which hid the extreme risk from the investors. They were being told that these derivatives were safe investments by the people who's job it was to rate the risks, and then having bought those securities, banks and others were allowed to treat them as highly safe investments when determining their assets that they could borrow against etc. That's why a couple of the good ideas that obama has are to force all securities to be traded on an open exchange, and to take steps to protect the ratings agencies from the security issuers. The key is transparency.

Spade: The Real Snake
22nd April 10, 12:39 PM
This thread is now about Marvis Frazier's weak chin and how Smokin' Bert Cooper was REALLY Joe Frazier's son.

EvilSteve
22nd April 10, 01:14 PM
HoG put it well. The other problem with letting sick businesses die is the economic consequences of having that business evaporate. In terms of GM, that's a significant bump in unemployment. In terms of Citi it's even worse because not only is everyone out of work, but now the FDIC is responsible for the deposits of Citi's customers. They won't be able to pay in anything approaching a timely manner, so consumer spending will drop and you'll see a ripple effect through the economy.

Now, if banks and corporations were kept from getting to such gargantuan sizes, then your solution would be not only fair but also pragmatic.

Since that's not going to happen though, increased transparency, exchange trading complex derivatives products rather than OTC and increased fraud regulations will at least help with the financial side of things.

GM- that's another story.

Feryk
22nd April 10, 01:42 PM
Points for the Marvis Frazier reference.

Also, I agree that letting the big corporations die would have been the most efficient way to handle this issue...but it would have sent the US spiraling into a very serious depression. THAT would have taken years to rebuild from.

Instead, you got a recession, followed by a few years of lackluster growth, most probably.

Given those two choices, I do not blame the Fed and the politicos for choosing Option B. It's easy now that most of the danger of economic collapse has passed to second guess the actions taken. They made choices to keep the economy from failure, it worked. You are still here to complain about it.

Kein Haar
22nd April 10, 01:53 PM
STEEV possesses the true insight here.

SRS, though. My concern wasn't addressed.

Obamer acted as if bail-outs were some sort of entitlement. We have to make sure this doesn't happen? Well, part of that is just plain old volition. JUST DON'T DO IT AGAIN....by that I mean, a bail out.

What is the difference between PNC and Citigroup?

One fucked up. The other not so much.

Irrespective of transparency, under the old rules, some were still sicker than others.

HappyOldGuy
22nd April 10, 02:16 PM
STEEV possesses the true insight here.

Can we talk about these gals (http://www.womenboxing.com/daughters.htm) instead?

Kein Haar
22nd April 10, 02:21 PM
mmm...no.

Spade: The Real Snake
22nd April 10, 02:40 PM
STEEV possesses the true insight here.

SRS, though. My concern wasn't addressed.

Obamer acted as if bail-outs were some sort of entitlement. We have to make sure this doesn't happen? Well, part of that is just plain old volition. JUST DON'T DO IT AGAIN....by that I mean, a bail out.

What is the difference between PNC and Citigroup?

One fucked up. The other not so much.

Irrespective of transparency, under the old rules, some were still sicker than others.
Because once citizens are acclimated to paying a higher amount for something, expecting that money is being used to save something, it is easier to keep them paying that amount after the need is over and just send that money on over to something else.

HappyOldGuy
22nd April 10, 02:45 PM
bail out.

What is the difference between PNC and Citigroup?

One fucked up. The other not so much.



Feryk addressed it. One was the domino we stopped at. The other was the one that would have fallen if the first did.

Kein Haar
22nd April 10, 02:58 PM
Like we could possibly know that.

Cullion
22nd April 10, 05:37 PM
I'm giving this another 24 hours before I explain the truth.

WarPhalange
22nd April 10, 07:01 PM
But I can't fondle the truth!!!

Cullion
23rd April 10, 06:53 PM
Your solution does nothing to solve the problem. Unless you make the people who make up the corporation die too (which I'm willing to discuss).

Directors of bankrupted limited liability corporations get barred from acting as directors in the UK for a set time. If they are found to have knowingly traded whilst the company was insolvent, they become personally liable for the corporation's debts. I don't know if that's how it works in the US, I suspect it varies by state.

At the very least, had their companies gone bust (in most cases they would've been bought at firesale prices and continued trading before they went bust, likely with a reduced staff), they almost certainly wouldn't be chowing down on fat bonuses this year.


A corporation isn't a real thing. It's a way that we agree to limit the risk an individual takes on when they engage in commerce because we feel that the moral hazard of limiting their risk is worth it for the added economic growth that encouraging the risk provides. Your solution just encourages people to form throwaway corporations as shells to shield themselves from liability.

This depends on the exact nature of the limited liability and company law of the state in question, as mentioned above, but I can absolutely guarantee you that giving a failing company injections of public money engenders a far greater moral hazard.


But forming a hedge fund is a filing fee and a couple of computers.

And raising the investment capital necessary to profit from the often hair-thin shifts in the asset prices they trade after all transaction fees are taken into account. You can't start a hedge fund with $1000 to trade with dude. I can assure you that Microsoft and Apple were started with far less capital (even adjusting for the harshest measure of monetary inflation since the mid 70s) than even the smallest hedge-fund started on Wall Street in the last ten years.



It's a basic theorem of capitalism that markets make good decisions when they have good information. The main problem we had in this last crisis is that the transactions that brought us down were intentionally made too complex to follow, which hid the extreme risk from the investors. They were being told that these derivatives were safe investments by the people who's job it was to rate the risks, and then having bought those securities, banks and others were allowed to treat them as highly safe investments when determining their assets that they could borrow against etc. That's why a couple of the good ideas that obama has are to force all securities to be traded on an open exchange, and to take steps to protect the ratings agencies from the security issuers. The key is transparency.

I agree that sunlight is the best disinfectant, but Obama's shown no interest in shining it where it's really needed. Free-market capitalism is also the best price-discovery mechanism.

He pretends to be deaf when auditing the fed is discussed, he's approved the loosening of accountancy standards and the banning of short-selling in order to prevent the market from accurately pricing bust companies, and he doesn't have the power to prevent trading from occurring outside of his imaginary 'open exchange'. The capital will simply flow to and between less onerous trading environments. Disappear into the Caribbean and Asia, like dew at sunrise.

HappyOldGuy
24th April 10, 12:13 AM
Directors of bankrupted limited liability corporations get barred from acting as directors in the UK for a set time. If they are found to have knowingly traded whilst the company was insolvent, they become personally liable for the corporation's debts. I don't know if that's how it works in the US, I suspect it varies by state.

At the very least, had their companies gone bust (in most cases they would've been bought at firesale prices and continued trading before they went bust, likely with a reduced staff), they almost certainly wouldn't be chowing down on fat bonuses this year.


Beg your pardon? (http://www.theregister.co.uk/2010/04/23/picsel_again/). Company goes bankrupt. Fails to pay employees. Company assets sold to former CEO's for pennies who reopen exact same company sans pesky debts owed to employees and creditors.


He pretends to be deaf when auditing the fed is discussed, he's approved the loosening of accountancy standards and the banning of short-selling in order to prevent the market from accurately pricing bust companies, and he doesn't have the power to prevent trading from occurring outside of his imaginary 'open exchange'. The capital will simply flow to and between less onerous trading environments. Disappear into the Caribbean and Asia, like dew at sunrise.

You need to be specific about the bolded part. The offshore part is a legitimate point, but there is a high risk premium for investments in less stable markets. And countries have the power to fuck with that kind of behavior if they want to, although political will is a seperate question.

Cullion
24th April 10, 08:25 AM
Beg your pardon? (http://www.theregister.co.uk/2010/04/23/picsel_again/). Company goes bankrupt. Fails to pay employees. Company assets sold to former CEO's for pennies who reopen exact same company sans pesky debts owed to employees and creditors.

Yes, that's why they're in court (duh).

Reread the article. That's a trial occurring under US law, in the US regarding an American incorporated entity

P.S. The article also says they paid their UK staff.



You need to be specific about the bolded part.

In spring last year the Democrats led a push to have the standards for the valuation of assets and reporting of assets loosened.

http://www.msnbc.msn.com/id/30009922/ns/business-stocks_and_economy/page/2/


The offshore part is a legitimate point, but there is a high risk premium for investments in less stable markets.

You don't have to be investing in a less stable market, you just trade the securities outside of US jurisdiction. The difference here is between 'investing in a sandwich chain in Thailand' and 'investing in a US sandwich chain that has it's head office and lists it's stock in Bermuda'.



And countries have the power to fuck with that kind of behavior if they want to, although political will is a seperate question.

Liberals tend to massively overestimate their government's ability to thwart markets (as opposed to just trashing their own economy by turning it into an onerous trading environment full of unintended consequences and ever more byzantine labyrinths of red-tape and bureacracy).

The short explanation here is that it's easy to pit countries in competition against one another.

HappyOldGuy
24th April 10, 12:06 PM
Yes, that's why they're in court (duh).

Reread the article. That's a trial occurring under US law, in the US regarding an American incorporated entity

P.S. The article also says they paid their UK staff.

You claimed that companies in the UK couldn't just shut down and reincorporate the next day. That is exactly what those guys did, and they bought out the assets of the previous company for a pittance. The way the fucked over their US employees is a side issue for this discussion.

I agree with you on the mark to market issue, but you were making it sound like a lot broader than it was instead of an emergency measure intended to stabilize banks.

Investments in your carribean havens are considered stable to the extent that the players are rooted in countries with real economies and banking laws. And to that extent, the behavior of those players can be regulated. One key bit of sunshine that was being shaded in the derivatives meltdown was the role of these banks in under regulated countries. But if it hadn't been US banks fronting them, they would never have sold as anything but junk bets.

Again, there are pieces of the legislation I like, and pieces I don't. But the new rules forcing open trades are pure unadulterated win.

Cullion
24th April 10, 02:23 PM
You claimed that companies in the UK couldn't just shut down and reincorporate the next day.
That is exactly what those guys did

No what I said was that a company can't be bankrupted without the directors facing sanctions in the UK. They didn't have debts in the UK, they paid their UK staff.

The court case wasn't about any company in the UK. They were doing it in the US, they just happened to live in the UK. To construe this story as saying what you think it does about UK company law is completely incorrect.

And as a general principle, you mustn't forget that something being illegal doesn't mean it won't happen, it just means that people go to court after the fact.



I agree with you on the mark to market issue, but you were making it sound like a lot broader than it was instead of an emergency measure intended to stabilize banks.

That's my point. If certain connected private businesses are going down, Obama isn't about openness at all. 'Transparency' for him in this context seems to mean 'as long as there's no bad news'.



Investments in your carribean havens are considered stable to the extent that the players are rooted in countries with real economies and banking laws. And to that extent, the behavior of those players can be regulated.

It would be extremely hard to do. Ownership of the US or UK company never has to change. It could always be 51% owned by HappyOldGuy Omnicorp. (which has it's head office in Cullionovia). Shares in HOG Omnicorp, however, could be traded outside of any US or UK regulation. In fact, HOG Omnicorp could be nothing more than a financial instrument whose ownership traded as an identical proxy for the real company it owned a chunk of. As a non-US company not traded on a US exchange, it doesn't have to follow these reporting procedures for trades in its securities taking place on the Cullionovia bourse.



One key bit of sunshine that was being shaded in the derivatives meltdown was the role of these banks in under regulated countries. But if it hadn't been US banks fronting them, they would never have sold as anything but junk bets.

See above, the banking system is far more sophisticated than you give it credit for.



Again, there are pieces of the legislation I like, and pieces I don't. But the new rules forcing open trades are pure unadulterated win.

It just won't work the way you think it will.

HappyOldGuy
24th April 10, 02:35 PM
It just won't work the way you think it will.

Yes it will, because I'm not playing in a world of absolutes. I'm playing in a world of cost/benefit. The new rules will not make it impossible to have off market trades. But they won't be able to compete with the on market trades because the on market trades will be safer investments and less expensive because you won't need to hire accountants and lawyers to obscure the details.

How many private stock markets are there?

Cullion
24th April 10, 02:47 PM
I think you're underestimating the cost of regulatory red tape and reporting requirements and overestimating the risk premium and legal fees required to trade stock in a holding company registered in a lower-tax country with less onerous reporting requirements.

By 'private' stock markets, do you mean markets not regulated by the US Federal government or the SEC ? Thousands. It's a big planet. You don't even have to trade stock on an exchange, they're just a common convenience.

JohnnyCache
24th April 10, 04:49 PM
The "just let them die" crowd doesn't seem to get or care that that policy does NOT punish CEOs and brokers - they live off savings until they hustle up a new corner. It punishes workers. They are the ones that are devastated by the industrial pause while personnel and equipment and patents and raw materials all shift ownership. GM goes out of business, pretty soon all that "stuff" is gonna shift into the hands of others that will fill the market, but the reorganization period punishes the working class, not the capitalist class, doubly so as the oligarchs in charge of institutional money aren't brand associated with their products in the eyes of the spending public whatsoever, unless they are the founder of Wendy's.

It is a fine CONCEPT though, to punish the "Brand" responsible for the difficulties.

I think if we get reasonable social programs in place for people so that it doesn't ruin their medical, professional, and private lives when their corporate overlords make non-transparent, life-reaming decisions with the average worker's retirement and employment, sure, then we can let sick corporations "just die."

In the meantime I guess we can loan them money to survive on while re-organizing, and if they care about their image and stock, they pay it back as fast as they can, which seems to be working.

Kein Haar
24th April 10, 05:03 PM
So Impalas are just supposed to go on sucking?

Or should a term of a bail-out be: "Hey, once this over, those Impalas can't suck anymore! Got it?"

Cullion
24th April 10, 05:22 PM
The "just let them die" crowd doesn't seem to get or care that that policy does NOT punish CEOs and brokers - they live off savings until they hustle up a new corner.

At least they aren't getting to pay themselves bonuses from public funds.



It punishes workers.

So does the burden on public funds required to keep zombie businesses running.



They are the ones that are devastated by the industrial pause while personnel and equipment and patents and raw materials all shift ownership.
GM goes out of business, pretty soon all that "stuff" is gonna shift into the hands of others that will fill the market, but the reorganization period punishes the working class

That's not a reason to necessarily prop up the dying company. The problem you describe could be ameliorated with more generous unemployment insurance and re-training assistance. Considering the amounts of money that have been thrown around, there's every chance that a very careful and considerate safety net for those displaced workers may well have cost you less.



, not the capitalist class, doubly so as the oligarchs in charge of institutional money aren't brand associated with their products in the eyes of the spending public whatsoever, unless they are the founder of Wendy's.

It is a fine CONCEPT though, to punish the "Brand" responsible for the difficulties.

This isn't about dispensing justice to brands, it's about understanding the dangers of giving dying corporations handouts from the public till. That has to be paid for by other workers and businesses you know. Think about how it's hurting them.



I think if we get reasonable social programs in place for people so that it doesn't ruin their medical, professional, and private lives when their corporate overlords make non-transparent, life-reaming decisions with the average worker's retirement and employment, sure, then we can let sick corporations "just die."

Sick businesses go under all the time in the US. Small businesses are still most of your economy. People get understandably nervous when a 'name' goes down, but in strictly mathematical terms the reasoning you're employing is hurting the little people more, in the long term. Even looking at the banking sector, have you watched how many regional and local banks are still going bust in the US? It's extraordinary.

Essentially whilst your heart is certainly in the right place, your head is being misdirected by what gets the big ticket media coverage and political attention. And that's really not about what's good for Joe Public. Your public treasury is being looted by a particularly nasty type of capitalist and liberals are helping them do it without meaning to.



In the meantime I guess we can loan them money to survive on while re-organizing, and if they care about their image and stock, they pay it back as fast as they can, which seems to be working.

US unemployment and bankruptcy figures say no. A range of financial instruments have inflated valuations again though. That's because most of the bailout money is simply slopping around between financial institutions.