Analysis: Teleprompter telegraphs Obama caution

Analysis: Teleprompter telegraphs Obama caution
Mar 24 10:07 PM US/Eastern
By RON FOURNIER
Associated Press Writer

WASHINGTON (AP) – What kind of politician brings a teleprompter to a news conference?A careful one.

President Barack Obama took no chances in his second prime-time news conference, reading a prepared statement in which he took both sides of the AIG bonus brouhaha and asked an anxious nation for its patience.

“There are no quick fixes,” he said, “and there are no silver bullets.”

It’s an interesting dichotomy: Obama came before the nation to sell one of the most expensive and politically risky agendas ever offered by a U.S. president, but his language was heavy with caution. A hard-willed plan given a soft sell.

Served up opportunities to lead with his heart, Obama was cerebral. Cool and calming in a time of white-hot public anger.

“You know, there was a lot of outrage and finger-pointing last week, and much of it is understandable,” Obama said of the bonus issue in his opening remarks. “I’m as angry as anybody about those bonuses that went to some of the very same individuals who brought our financial system to its knees.”

“Bankers and executives on Wall Street need to realize that enriching themselves on the taxpayers’ dime is inexcusable, that the days of outsized rewards and reckless speculation that puts us all at risk have to be over,” the president told reporters and the nation.

But he didn’t look angry. Nor did he sound much like a pitchfork-wielding populist.

“At the same time, the rest of us can’t afford to demonize every investor or entrepreneur who seeks to make a profit. That drive is what has always fueled our prosperity, and it is what will ultimately get these banks lending and our economy moving once more,” he said.

It was a carefully modulated statement, and Obama—relying on a familiar crutch—read it off a flat-screen monitor perched at the back of the East Room.

The teleprompter was no help during the question-and-answer session (reporters don’t signal their intentions), but Obama was no less careful during that give and take.

Asked why people should trust government with the regulatory authority to take over failing financial companies such as troubled insurer American International Group Inc., Obama passed on the chance to demonize Washington.

“Keep in mind, it is precisely because of the lack of this authority that the AIG situation has gotten worse,” Obama said. He then gave a scholarly explanation of how the proposal would work.

Pressed again, Obama cited the Federal Deposit Insurance Corporation’s handling of the IndyMac Bank as an example of government properly using its authority.

The government did something right? That’s news to most Americans.

Still, it’s hard to criticize Obama’s communication skills or tactics. Polls show that while the public has turned against Washington and Wall Street, the president’s ratings remain steady.

He has aggressively delivered his cautious message—through town halls, talk shows, travel and, yes, prime-time news conferences. His message: Stick with me and my $3.6 trillion budget.

“This is a big ocean liner, it’s not a speedboat. It doesn’t turn around immediately,” he said Tuesday night. “But we’re in a better, better place because of the decisions that we made.”

Calm. Cool. Careful.

One of the few times he summoned raw emotion came after a reporter demanded to know why it took him so long to express outrage over the AIG executive bonuses.

“It took a couple of days because I like to know what I’m talking about before I speak.”

Even better, he likes to have it up on the teleprompter.

___

EDITOR’S NOTE: Ron Fournier is the Washington bureau chief for The Associated Press.
Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Obama Seeks Expanded Power to Seize Firms

Obama Seeks Expanded Power to Seize Firms

March 24th, 2009

By Binyamin Appelbaum, Washington Post

Obama wants to seize non banking firms

Obama wants to seize non banking firms

The Obama administration is considering asking Congress to give the Treasury secretary unprecedented powers to initiate the seizure of non-bank financial companies, such as large insurers, investment firms and hedge funds, whose collapse would damage the broader economy, according to an administration document.

The government at present has the authority to seize only banks.

Giving the Treasury secretary authority over a broader range of companies would mark a significant shift from the existing model of financial regulation, which relies on independent agencies that are shielded from the political process. The Treasury secretary, a member of the president’s Cabinet, would exercise the new powers in consultation with the White House, the Federal Reserve and other regulators, according to the document.

The administration plans to send legislation to Capitol Hill this week. Sources cautioned that the details, including the Treasury’s role, are still in flux.

Read More:

Is Obama Creating a BC Bubble?

Is Obama Creating a BC Bubble?

By Paul Shlichta

France…rolled with exceeding smoothness down hill, making paper money and spending it.  -A Tale of Two Cities, Charles Dickens

 

On Wednesday he [Bernanke] announced the Fed will print money to buy U.S. Treasuries in unheard-of amounts – nearly $1.2 trillion.  -Investor’s Business Daily, March 19, 2009

 

Governments can provoke chaos by overextending themselves, in what is in effect a bursting of a bubble. A month ago, we discussed the ramifications of an article by Dagny D’Anconia on the possibility of governments becoming bubbles. Of the three causes of bubble formation–external enthusiasm (A), internal overconfidence (B), and internal looting or watering (C)–governments are particularly susceptible to the last two, as attested by numerous historical examples.

 

In type B collapses, the government extends its activities (e.g. warfare or welfare) beyond its expectable revenues. This tactic is feasible for periods of several years or even decades but will sooner or later cause collapse. In type C bubbles, the government “waters its stock” by creating money and causing inflation.

 

Many of us feared that the recent bailout and stimulus packages would cause a type B bubble. Now, to make matters worse, our government is generating a type C bubble by printing money without backing by anything except additional Treasury bonds. Cumulative deficit estmiates from the Congressional Budget Office, bad as they may be at 9.3 trillion over 10 years, are premised on optimistic economic growth estimates. Many trillions of dollars in new debt instruments will have to be purchased by the Fed, vastlly inflating the money supply. Hyperinflation looms. As one of our readers, Fearless Bear, commented,

 

If the security of last resort is an iffy one, we are in deeper muck than anyone wants to admit.”

 

Nowadays, the success of our Treasury bond sales depends on the good will of China’s Gao Xiqing, who controls over $700,000,000,000 of outstanding US treasury notes and who reportedly is a hard core Chinese Communist who regards America as China’s enemy.

 

Why, then, is Obama pursuing this risky maneuver? We can imagine at least four possibilities, in order of increasing infamy:

 

  • He is too naïve or ignorant to understand what he is risking.
  • He knows but doesn’t care, being interested only in what looks good for the moment.
  • He wants to cause inflation, because inflation favors debtors and the biggest debtor in the United States is the United States. Moreover, inflation leads to devaluation of the dollar, which, as James Lewis recently pointed out, is one of the key objectives of puppet master George Soros.
  • He wants to provoke a crisis of capitalism, as James Simpson has already suggested.

Whatever the reason, the effects could be devastating.

 

These fears are substantiatable by the tracking of bubble indicators. Dagny D’Anconia has recently developed a quantitative detector of type A bubbles. The “D/G” value—the ratio of the Dow Jones average to the price of gold—appears to provide an inflation-corrected index of public enthusiasm vs. fear about our financial future. A D/G plot of the past century clearly shows three major bubble peaks, centered at 1929, 1964, and 2009–the onsets of the great depression, the Carter stagflation, and the Bush-Obama downturn. Other eras of prosperity or depression, due to other causes, are not indicated; for example, the prosperity during the last years of the Reagan administration took place in a D/G trough. For more details, consult her article.


dg-ratio-chart-jpg
                                                               Chart source

It is possible that similar indicators can be formulated for governmental B and C bubbles. A plot the ratio of federal budget deficit to GDP, a parameter that has already been proposed as an index of instability, may predict type B bubbles. Similarly, rises in the ratio of outstanding national debt (or the total money in circulation) to GDP may indicate the formation of type C bubbles.

 

Bubbles can be of mixed structure, wherein the different types of driving force reinforce each other in an evil synergy. It could be argued that our present situation is the result of a mixed AB bubble, caused by a combination of investor euphoria and the Clinton-engendered overextension of mortgages to subprime applicants. Rather than counteracting these causes, Obama is exacerbating the problem by forcing through an overblown federal program deficit and printing additional money, thereby creating a monstrous new BC bubble.

 

However, such analyses are academic; the present case is so obvious that financial commentators here and abroad have already expressed their alarm. We must mobilize immediately to arrest this folly.

Page Printed from: http://www.americanthinker.com/2009/03/is_obama_creating_a_bc_bubble.html at March 24, 2009 – 01:45:58 PM EDT

Tax code escalates as Dems’ tool

Tax code escalates as Dems’ tool

For the Obama administration and its Democratic allies in Congress, the power to tax is increasingly becoming the power to get their way on policy matters big and small.

Corrected: From reforming the nation’s health care system to helping victims of Wall Street fraud mastermind Bernard Madoff, the White House and Congress have turned to the tax code to push their policy priorities. With Congress gearing up to tackle President Obama’s proposed $3.6 trillion budget for fiscal 2010, the tax battles are certain to intensify.

Using the tax code to push a presidential agenda is nothing new. But with a budget that proposes expensive and far-reaching reforms in health care, energy and education, Mr. Obama has taken the tactic to a new level.

See related story: Obama cool to high tax on bonuses

“Speaking very broadly, it’s pretty common,” said J.D. Foster, a tax policy analyst at the conservative Heritage Foundation. “The tax code, from bow to stern, is full of policies that are proposed by the president and congressmen that are intended to manipulate the economy or social structures and social behavior.”

What is unusual about Mr. Obama’s agenda, he said, is that “he is trying to redesign our nation in such broad strokes, covering so many areas at once.”

Robert Greenstein, executive director of the liberal Center on Budget and Policy Priorities, praised the thrust of the Obama budget.

“All the tax increases either affect only people earning more than $250,000 or close tax loopholes that should not have been there in the first place,” he said, adding that the Obama budget would peel back the $120,000 average tax cut on those making more than $1 million, while the “vast majority” of small-business owners would benefit from the president’s health care reform.

The administration looked to the tax code when trying to help victims of Madoff’s Ponzi scheme. The 20-year fraud, uncovered in December, took in charities, hedge funds, universities and celebrities. The personal savings of many small investors were wiped out.

The Internal Revenue Service announced last week that the tax agency had issued two rulings intended to soften the losses for the thousands of individual and institutional investors taken in by financial scams, such as the $64 billion scheme operated by Madoff.

The new guidelines clarify rules letting victims of Ponzi schemes claim “investment theft losses” on their tax returns, allowing for greater deductions than could be claimed under other types of capital losses.

Congressional Democrats turned to the tax code again for a quick fix in the furor surrounding bonuses paid to executives of insurance giant American International Group Inc. The bonuses were paid after the company had accepted more than $170 billion in taxpayer aid to avoid bankruptcy.

The House of Representatives, after just a couple of hours of debate, passed a bill Thursday to tax 90 percent of the bonuses granted to top earners at AIG and any other company that received more than $5 billion in taxpayer bailout funds. The Senate may take up its own confiscatory tax bill targeting AIG as early as this week.

“By any measure, you are disgraced professional losers,” Rep. Earl Pomeroy, North Dakota Democrat, said during the brief House debate. “And by the way, give us our money back.”

Mr. Obama has not said whether he would sign the measure if it reaches his desk.

“What he has said is that he’s going to look at any legislation. And I’m sure he will do that,” Christina Romer, chairman of the White House Council of Economic Advisers, said on “Fox News Sunday.”

Jared Bernstein, economic adviser to Vice President Joseph R. Biden Jr., called the bill “a dangerous way to go.”

“I think the president would be concerned that this bill may have some problems in going too far – the House bill may go too far in terms of some – some legal issues, constitutional validity, using the tax code to surgically punish a small group,” he said Sunday on ABC’s “This Week.”

But the resort to highly targeted taxes – even against such an unpopular target as AIG – has left others uneasy. “People have to understand that using the tax code for punishment is a horrible, disastrous precedent,” said Rep. John Campbell, California Republican.

“It’s ‘everybody grab the pitchforks,’ ” said Sen. Judd Gregg, New Hampshire Republican and one of several lawmakers who warned that the AIG tax increase was unconstitutional.

As the administration searches for money to fund its biggest campaign promises, Mr. Obama has backed away from some proposed tax increases in the face of popular opposition.

The administration hastily dropped a proposal to require some disabled veterans to pay for medical treatments through their private insurance companies, heeding a chorus of outrage from veterans groups and Capitol Hill lawmakers who said the idea was immoral, unconscionable and un-American.

The White House scrapped the plan after meeting with a contingent of veterans and military advocacy groups last week.

Conservative critics say one of the most far-reaching tax changes in Mr. Obama’s budget involves greatly expanding the practice of giving tax refunds to low-income people who owe no taxes – “refundable tax credits.”

“Obama’s basic ethos that he ran on was that he wanted to spread the wealth, to take money from people that he perceived to have too much money and give it to people he perceived did not have enough money,” said Ryan Ellis, tax policy director at Americans for Tax Reform, which pushes for lower taxes. “He’s very consciously using refundable credits a lot in order to give money to people that aren’t taxpayers, which is a big deal.”

The difference between a tax credit and a refundable tax credit is that a normal tax credit reduces liability down to zero. For example, if the refundable credit is $500 and a taxpayer owes $300, the taxpayer receives a $200 check from the government.

Mr. Obama “wants to take existing credits in the code, bulk them up, and them make them refundable,” Mr. Ellis said. “This is the way he’s spreading the wealth, doing his social engineering.”

• David M. Dickson contributed to this report

Obama Seeks Expanded Power to Seize Firms

U.S. Seeks Expanded Power to Seize Firms
Goal Is to Limit Risk to Broader Economy

By Binyamin Appelbaum and David Cho
Washington Post Staff Writers
Tuesday, March 24, 2009; A01

 

The Obama administration is considering asking Congress to give the Treasury secretary unprecedented powers to initiate the seizure of non-bank financial companies, such as large insurers, investment firms and hedge funds, whose collapse would damage the broader economy, according to an administration document.

The government at present has the authority to seize only banks.

Giving the Treasury secretary authority over a broader range of companies would mark a significant shift from the existing model of financial regulation, which relies on independent agencies that are shielded from the political process. The Treasury secretary, a member of the president’s Cabinet, would exercise the new powers in consultation with the White House, the Federal Reserve and other regulators, according to the document.

The administration plans to send legislation to Capitol Hill this week. Sources cautioned that the details, including the Treasury’s role, are still in flux.

Treasury Secretary Timothy F. Geithner is set to argue for the new powers at a hearing today on Capitol Hill about the furor over bonuses paid to executives at American International Group, which the government has propped up with about $180 billion in federal aid. Administration officials have said that the proposed authority would have allowed them to seize AIG last fall and wind down its operations at less cost to taxpayers.

The administration’s proposal contains two pieces. First, it would empower a government agency to take on the new role of systemic risk regulator with broad oversight of any and all financial firms whose failure could disrupt the broader economy. The Federal Reserve is widely considered to be the leading candidate for this assignment. But some critics warn that this could conflict with the Fed’s other responsibilities, particularly its control over monetary policy.

The government also would assume the authority to seize such firms if they totter toward failure.

Besides seizing a company outright, the document states, the Treasury Secretary could use a range of tools to prevent its collapse, such as guaranteeing losses, buying assets or taking a partial ownership stake. Such authority also would allow the government to break contracts, such as the agreements to pay $165 million in bonuses to employees of AIG’s most troubled unit.

The Treasury secretary could act only after consulting with the president and getting a recommendation from two-thirds of the Federal Reserve Board, according to the plan.

Geithner plans to lay out the administration’s broader strategy for overhauling financial regulation at another hearing on Thursday.

The authority to seize non-bank financial firms has emerged as a priority for the administration after the failure of investment house Lehman Brothers, which was not a traditional bank, and the troubled rescue of AIG.

“We’re very late in doing this, but we’ve got to move quickly to try and do this because, again, it’s a necessary thing for any government to have a broader range of tools for dealing with these kinds of things, so you can protect the economy from the kind of risks posed by institutions that get to the point where they’re systemic,” Geithner said last night at a forum held by the Wall Street Journal.

The powers would parallel the government’s existing authority over banks, which are exercised by banking regulatory agencies in conjunction with the Federal Deposit Insurance Corp. Geithner has cited that structure as the model for the government’s plans.

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