Posts tagged ‘Banking’

05/09/2012

Obama Inherited the Great Recession

The way many Republicans and right-wingers talk about the American economy, one might think the Great Recession of 2008 was somehow single-handedly caused by President Obama, but in case we have forgotten, the crash occurred under the watch of President George W. Bush, and when he vacated the White House in Jan. 2009, he left behind several major economic problems.

OBAMA NOT TO BLAME: While Gov. Romney repeatedly said during the Republican debates, he did not blame Obama for the Great Recession, he dishonesty suggested Obama’s policies were somehow responsible for making it deeper, and causing it to go on longer than it should have.

WHAT WOULD ROMNEY HAVE DONE? But what would Romney have done if he had been President in Jan. 2009? What if he had inherited the Great Recession?

HOUSING CRISIS: The housing market had collapsed, as the value of millions upon millions of homes, all across the country, had dropped to roughly half their previous values. Many suddenly realized they owed far more on their mortgages than their homes were worth. Their residences were considered “underwater.” As the Fed used Monetary Policy to keep lending interest rates low, Obama instituted a homeowners program to allow refinancing at lower rates. If Romney would have been President, he would have taken no action to get private homeowners out from their underwater status. It is just wrong to suggest millions of homes could have recovered from their depressed values in just 4 years.

BANKING MELTDOWN: Banks and some insurance companies were collapsing as the Bush Administration, followed by Obama, did everything they could to shore them up with government bailout loans. While it is now easy to say we should have just let them go bankrupt, the ripple effect of a free market free-fall would have been catastrophic. A hands-off policy would have triggered another Great Depression, with major economic failures in all economic sectors, bringing record levels of unemployment.

AUTO BANKRUPTCY: The recession caused General Motors and Chrysler to lose so many sales, they faced bankruptcy, and no private bank was able to lend them any money. The only option was a federal bailout loan, but Romney repeatedly opposed any financial help whatsoever for the beleaguered auto industry. If he had been President, these major industrial employers would have gone bankrupt, and the ripple effect would have killed thousands upon thousands of additional jobs at component part factories throughout the industrial Midwest. Once again, inaction would have turned the Great Recession into another Great Depression.

WALL STREET CRASH: Obama inherited a stock market that had crashed, and a Wall Street trading system that was dealing in unregulated derivatives, contributing greatly to the problem. While Democrats took action by passing the Dodd-Frank bill to eliminate financial abuses, the Republicans held firm to a hands-off business as usual approach. What would Romney have done?

HIGH UNEMPLOYMENT: When Obama took office, the level of unemployment was literally sky-rocking by the hour. Obama did what any reasonable President would have done, by signing a job stimulus bill, designed to help people get back to work. While the federal government used Keynesian economics through deficit spending to prime the pump, Republican Governors in nearly 30 states did exactly the opposite, which was counterproductive, by laying off people, and making the recession worse.

A pure capitalist total free market response to the Great Recession would have triggered a Great Depression. The history of the 1929 Stock Market crash, and the subsequent four years of inaction under President Hoover, proved that point. Governments must do what they can to help the nation out of a deep recession, and it appears Obama did as good a job as any President could have.

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12/08/2011

Romney’s Economy: For Rich Insiders

Former Mass. Gov. Mitt Romney, often called a Republican front-runner, should not, on issues regarding the economy, receive the vote of most Americans, because: 1) his tax policies would favor rich individuals and corporations; 2) his Free Trade policies would kill more manufacturing and U.S. jobs; 3) his promise to eliminate Public Broadcasting would reduce the flow of reliable and objective information; 4) his financial policies would save only the big banks and Wall Street; 5) his housing policies would do nothing for underwater homeowners; 6) his energy plans would ignore wind and solar, but would promote oil, gas, and nuclear special interests; and 7) his health insurance mandate idea will yield private insurance windfalls at the expense of taxpayers.

TAXES: While Romney said he wants to repeal tax breaks, he would in fact give more of them to the rich, by eliminating taxes on dividends, interest, and capital gains. He also wants to lower the corporate income tax rate from 35% to 25%. He appeared willing to tax the poor, when he said everyone should pay, regardless of income, though he did oppose Cain’s 9% national sales tax, which would have hurt the poor the most. Although Romney favors an expanded military role abroad, he opposes raising revenue to pay for it, because he thinks more taxes would only kill jobs. While he has said he wants to cut spending, he would run up even more debt, by staying in our unfunded War in Afghanistan. Although he said we should not pass massive debt on to the next generation, he was not sincere, since he will not stop wasting money on foreign military entanglements.

TRADE: Although Romney promised to issue an Executive Order identifying China as a currency manipulator, because they let the prices of their goods fall below market levels, and he pledged to sue them in the Dispute Resolution Body (DSB) of the World Trade Organization, to win the right to selectively impose tariffs, he has no intention of turning back the clock on Free Trade, or the WTO policies that have led to the death of many U.S. industries.

AUTO: Romney said the government should not have loaned money to GM or Chrysler, even though the act successfully saved thousands of American jobs. He would have let them go bankrupt.

JOBS: When Romney was asked to explain why people were laid off from the companies he acquired, he had little to say. He was however clear about his desire to fight unions, and his criticism of the National Labor Relations Board, for taking action against big business. He called corporate profits good, as he believes they trigger new hiring. He called Wall Street protesters people engaged in: “dangerous class warfare.”

FIRST AMENDMENT: While little harm would be done if Romney succeeded in abolishing the Endowment for the Arts, his desire to eliminate Public Broadcasting is a serious threat to the free flow of information, and an affront to those who respect the First Amendment. Those who routinely follow the PBS News Hour and BBC America, searching for reliable news from objective sources, find his desire a real threat to democracy, since we need PBS and the BBC to be informed citizens. As to faith, he correctly said the Founders appreciated the Freedom of Religion, and wrote a Constitution that respected all beliefs.

BANK CRISIS: While Romney said Fed chair Bernanke pumped too much money in the economy, he would not remove Fed power to do so, as he does not want Congress in charge of the currency. He defended President Bush for taking action to keep the banks open, adding we must prevent another contagion. When asked what he would do if the economies of the entire world were collapsing, he promised to take action.

HOUSING: Romney said the housing crisis was caused by Fannie Mae and Freddie Mac, as they gave loans to people who could not afford them. He said slowing down the foreclosure process, buying up troubled homes, or giving a couple thousand towards the purchase of a new home, won’t solve the problem. He predicted home prices will not return, until the free market works.

ENERGY: Romney suggested developing our own oil, gas, and nuclear energy, to achieve energy independence. He said little about putting a new emphasis on solar, wind, or clean energy.

HEALTH CARE: Romney has been the greatest lobbyist the health insurance industry has ever had. He said a problem arose in his state, where 8% of the people had no health insurance, and they sought emergency room care, which shifted costs to taxpayers. He argued everyone has a personal obligation to buy health insurance, an idea he said he got from Newt Gingrich. He enacted a personal mandate and forced everyone to purchase coverage from private carriers. Although subsidies were provided for those who could not afford it, the Mass. plan did not create a more efficient government-run health care plan, like the single-payer system used in Canada. As to the U.S., Romney said Americans were not and are not satisfied with the status quo, because premiums are out of control. Many of Romney’s critics called the new National Health Care law signed by Obama, basically the same as Romney’s state plan. Romney tried, but failed miserably to convince them they were different. He argued the Mass plan was for one state, while the President’s, one-size-fits-all plan was for the entire nation. He argued Obama’s plan raises taxes and spends trillions. He promised a repeal of what has been called Obamacare, claiming we could save 95 billion a year. In a contradictory statement, he offered only to give the states waivers, so they could opt out. He also took both sides of the individual mandate issue, by first saying everyone should buy insurance, but then by arguing mandates are unconstitutional. In the event Obama’s law is repealed, or declared unconstitutional, the question arose as to what to do next. He acknowledged health care costs are disconnected from patient awareness, and people need to have a stake in the cost of health care. He accused the government of having too heavy a role. He advocated co-insurance for patients, but sounded like he did not realize most Americans already had that. Romney said he would turn Medicaid and Medicare over to the states and let them run health care.

SOCIAL SECURITY: Romney called the Social Security retirement program essential, and said it must be saved, not abolished. He called the use of trust fund money for other purposes criminal, and agreed to make the system sound. As to the unfunded prescription drug program, started by President George W. Bush, Romney would not repeal it.

IMMIGRATION: Romney wants no amnesty for illegal immigrants, a fence with agents to secure it, and an elimination of the magnet caused by states that give tuition breaks, and employers who hire illegal aliens. He would implement the federal E-Verify program. He said 4.5 million want to come here legally. He would admit those with degrees in math or science.

10/12/2011

Republican Debate New Hamp (10-11-11)

The Republican candidates met in New Hampshire on Oct. 11, 2011 to debate economic issues.

INTERNATIONAL TRADE: Romney said we have been run over by China for 20 years, and he would issue an Executive Order identifying them as a currency manipulator, and then prosecute them in the WTO.  He did not want a trade war, but did not want to let them use us either. Huntsman worried if we apply penalties, we will get the same in return, because we also manipulate our currency, and a trade war would hurt our agricultural exporters.

EURO CRISIS: Gingrich said the Greek economy should not be using the Euro-Zone Currency. Ron Paul uncovered the Federal Reserve sent 5 billion overseas to bail out foreign banks.

DEFENSE SPENDING: Romney will not cut defense spending.

BANKING: If the economies of the entire world were collapsing, Romney would take action. He said we need to prevent a contagion from affecting U.S. banks. President Bush had to take action to keep all banks from closing. Santorum opposed the bailout of the Wall Street banks, and the creation of the Troubled Asset Relief Program (TARP), which Romney, Huntsman, Perry, and Cain supported. Bachmann said the banks cannot grow, because they are being required to comply with new rules. Cain thought the Wall Street protesters should target the government.

FEDERAL RESERVE: Gingrich said the fix has been in since the Bush Administration. Newt said Paulsen, Bernanke, and Geithner are not smart, and he would fire Bernanke and Geithner over the crisis. He singled out Bernanke for spending billions bailing out one group, over another. He said it is wrong for one man to have that kind of secret power. He wants all Fed documents released, so we can better prepare for the next crisis. Romney would also discharge Bernanke. Cain had no objection to a Fed audit. Paul called the Fed the engine of inflation and the source of recessions.

INTEREST RATES: Paul said Greenspan kept interest rates too low for too long. Easy credit caused a bubble and then it burst and now we need a correction. We should not have someone at the Fed deciding what interest rates should be, or how much money we should have. We should go back to the gold standard, Paul said. Because the Fed is setting artificially low interest rates, Bachmann blamed the financial meltdown on the government.

HOUSING: We built too many houses, Paul said, and then the Wall Street speculators got bailed out, but the Middle Class lost homes. Freddie Mac and Fannie Mae caused overbuilding and distortions, and the government must get out of housing. Bachmann said the government pushed housing goals, as Freddie and Fannie put mortgages in a difficult place. Gingrich said the easy ability to buy homes is where we went wrong the last decade. He blamed the Countryside deal on the lobbyists for Freddie Mac.

JOBS: Romney said funds should not have been used to bail out GM and Chrysler. The NLRB should not be telling Boeing it cannot build in a non-union state. He said we borrowed 800 billion for a job stimulus, but didn’t see any jobs. Huntsman would regain our industrial base by lowering taxes and lessening regulations. Santorum said we are uncompetitive, and must reduce corporate taxes from 35% to zero on those who invest in plant and equipment in this country. Perry wants our manufacturing back.

ENERGY: Perry would repeal regulations that interfere with the energy industry. He would put 1.2 million people to work in the industry, so the U.S. can become energy independent. It was wrong, he said, for Obama to invest in Solyndra, a solar energy firm. When asked about doing the same in Texas, he said his legislature had oversight and created 54,000 jobs. Santorum would drill in Pennsylvania, saying it is a gas capital.

HEALTH CARE: Romney said Americans are not satisfied with the status quo. Although he would repeal Obamacare, he asked, what are we going to replace it with? In Mass, he dealt with the 8% who were uninsured. He said Perry has one million uninsured kids in Texas, while Mass has less than 1%. Romney said Obama’s plan raises taxes and spends trillions. Huntsman wants a health care solution that works in the market. He warned the IRS is already gearing up with 19,500 employees to administer the insurance mandate. Santorum would repeal Obamacare, but not by waivers. He would repeal the taxes and spending for it, so the insurance mandate would have no teeth.

MEDICARE: Gingrich was asked: Are the last two years of life under Medicare wasteful spending? He did not want death panels. Bachmann warned Part B for hospitals will be broke in nine years. She thinks Obama would push people out of Medicare into Obamacare, and 15 political appointees will make major decisions for 300 million Americans. Perry says Medicare needs to be block-granted to the states.

BUDGET & DEBT: Cain wants revenues to equal spending. Perry would propose a Balanced Budget Amendment, because we raise taxes, but never get spending reductions. Paul said the debt is a burden on the economy. Bachmann opposed increases in the Debt Ceiling, because she did not want to give Obama another 2.4 trillion. We spend 40% more than we take in, she said, and cut backs on spending would be only part of the answer. Romney said we cannot have more tax revenues, because that would kill jobs.

TAXES: Romney would not raise taxes. We don’t need Cain’s 999 tax plan, said Perry. The last thing Bachmann would do is let Congress impose a national sales tax, a suggested by Cain. Santorum said Cain’s plan would not pass, because no one supports a national sales tax. Huntsman would not do Cain’s tax plan, but instead something doable, like eliminating loopholes and deductions for individuals, as recommended by the bipartisan Simpson-Bowles Commission. Huntsman would also phase out corporate welfare and subsidies. He said he had a flat tax in Utah.

9-9-9 PLAN: Cain would throw out the entire tax code, including the progressive income tax, the capital gains tax, death taxes, and payroll taxes, and he would replace it with a 9-9-9 plan: 9% corporate business flat tax, 9% federal income tax, and 9% national sales tax. He was asked why Americans would be willing to pay more for bread and milk, under his new 9% national sales tax. He gave an incorrect answer, suggesting ordinary people are now paying 15.3%, when in fact they pay only 7.65%. He tried to suggest they would be save 6%. He thought people would have more for sales taxes, since they would pay less in payroll taxes. Cain also appeared ignorant of how Congress works, when he said he would ask them to require a 2/3rds vote before increasing any of his 999 taxes. He would need a Constitutional Amendment.

08/25/2011

Low Interest Rates: Correct Fed Policy

The Board of Governors of the Federal Reserve correctly used Monetary Policy to try to turn the economy around, by keeping home mortgage interest rates at their lowest level in 40 years.

Congress created the Federal Reserve System with a Central Bank in 1913 to help prevent recessions and other economic downturns from turning into depressions. Since then, all National Banks have joined the system.

The Federal Reserve has the ability to set interest rates for loans to member banks. When the Fed sets low interest rates, members are able to make loans to the public at correspondingly low rates. The availability of cheap money theoretically allows the economy to expand, provided other factors line up correctly.

Low interest rates at the Fed also help the U.S. Government when short-term loans are needed. Since interest on these loans is later turned over to the U.S. Treasury, the Fed basically provides interest-free money to the government. The principal sums borrowed from the Fed are repaid by the government with money raised from publically sold Treasury Bonds. Interest on the bonds is paid by the U.S. Treasury, until the bondholders are satisfied.

The decision by the Fed to keep interest rates low helps the federal government in terms of the annual deficit and national debt, regional banks in allowing them to offer cheap money, and the public, by enabling them to borrow at relatively low rates.

If the Fed now raised interest rates, while the national economy is still struggling to get out of a deep recession, one consequence would be a contraction, and a worsening of the economic crisis. If the Fed imposed higher interest rates, they certainly would not help, and would likely make the housing crisis worse.

Currently, factors other than interest rates are keeping the housing market from expanding. The Fed should continue to keep interest rates low, until measurable improvements are seen in the housing industry, which unfortunately may take the better part of a decade, no matter who occupies the White House or the Congress.

07/25/2011

African Development Is Needed

The African continent, with over 50 nations, needs to eliminate hunger, provide primary education, improve health standards, and develop international trade.

The process of development must start with the Africans themselves. They must establish democratic forms of government, in which representatives are chosen through free and fair elections. They need honest law enforcement officers, who cannot be bribed, and lawyers and judges to protect the rights of the accused. Their import offices, and sea and airport authorities, must be managed fairly. They need building inspectors, and tax collectors, who cannot be corrupted, and competent food inspectors. They must run efficient land title and post offices, and have good city transit systems.

Once the proper infrastructure is in place, the developed nations should then provide teachers to assist in primary education, and in the development of technical skills.

To eliminate hunger, education in food science is the first step. The fishing industry must thrive. Orchards can be planted, so locals have fresh fruit. Dairy farming is needed for milk. Livestock can be raised, using animal feeds. Meat processing and butchering can be taught. Some will need to learn veterinarian science. Crop farming methods must be explained, as to seeds, fertilizers, and irrigation. Grain elevators can be erected. Bakeries can be built. Some will need to learn grocery store management.

To improve health care, training is needed in medicine, nursing, dentistry, pharmacy, eye care, hygiene, and mortuary science. American and European health care professionals should help by training African students in the U.S. and Europe.

The Africans must develop their natural resources, such as oil, so their power plants can run. They need skills in transforming trees into lumber, rubber into tires, and sand and gravel into cement.

They need public utility development, such as electric power. Water and sewer treatment facilities must be built. They must improve waste disposal methods. They need pipelines for water, sewer, and gas. Water-well-drilling techniques must be taught.

The Africans need shipping and transportation, such as modern seaports for ocean-going vessels, and airports with air cargo facilities for intercontinental flights. Rail for freight and passenger trains must be laid. City buses are required for mass transit. Roads must be constructed, and the locals must be taught highway maintenance. They need mechanics for trucks and autos, with people who can fix brakes, mufflers, and transmissions. Tourism can be developed through hotel and resort construction.

Africans need to learn the global methods of money and banking. They must have a supply of trained bookkeepers and accountants.

Technical college training for building construction is needed so they have architects, excavators, carpenters, bricklayers, cabinet-makers, electricians, plumbers, and people to install furnaces, heating ducts, water heaters, and air-conditioning units.

Since communications is now global, they must erect cell phone towers, and cable and Internet lines, and learn laptop computer science, radio and TV broadcasting, and how to write newspapers.

In the retail industry, they must learn to market men’s and women’s cloths, shoes, furniture and bedding, and appliances, such as refrigerators, stoves, microwaves, washing machines, dryers, and electronics, including laptops, TVs, and radios.

Development is not an either or proposition, since all of the things listed above can be worked on simultaneously.