Category Archives: Obama

News Analysis – A Decade of Enormous Deficits May Alter American Politics and Power – NYTimes.com

Mr. Obama has published the 10-year numbers in part, it seems, to make the point that the political gridlock of the past few years, in which most Republicans refuse to talk about tax increases and Democrats refuse to talk about cutting entitlement programs, is unsustainable. His prescription is that the problem has to be made worse, with intense deficit spending to lower the unemployment rate, before the deficits can come down.

Mr. Summers, in an interview on Monday afternoon, said, “The budget recognizes the imperatives of job creation and growth in the short run, and takes significant measures to increase confidence in the medium term.”

He was referring to the freeze on domestic, non-national-security-related spending, the troubled effort to cut health-care costs, and the decision to let expire Bush-era tax cuts for corporations and families earning more than $250,000.

But Mr. Summers said that the long-term projections of deficits were “not sustainable,” and that “through the budget and fiscal commission, the president has sought to provide maximum room for making further adjustments as necessary before any kind of crisis arrives.”

Turning that thought into political action, however, has proven harder and harder for the Washington establishment. Republicans stayed largely silent about the debt during the Bush years. Democrats have described it as a necessary evil during the economic crisis that defined Mr. Obama’s first year. Interest in a long-term solution seems limited. Or, as Isabel V. Sawhill of the Brookings Institution put it Monday on MSNBC, “The problem here is not honesty, but political will.”

via News Analysis – A Decade of Enormous Deficits May Alter American Politics and Power – NYTimes.com.

via News Analysis – A Decade of Enormous Deficits May Alter American Politics and Power – NYTimes.com.

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News Analysis – A Decade of Enormous Deficits May Alter American Politics and Power – NYTimes.com

By President Obama’s own optimistic projections, American deficits will not return to what are widely considered sustainable levels over the next 10 years. In fact, in 2019 and 2020 — years after Mr. Obama has left the political scene, even if he serves two terms — they start rising again sharply, to more than 5 percent of gross domestic product. His budget draws a picture of a nation that like many American homeowners simply cannot get above water.For Mr. Obama and his successors, the effect of those projections is clear: Unless miraculous growth, or miraculous political compromises, creates some unforeseen change over the next decade, there is virtually no room for new domestic initiatives for Mr. Obama or his successors. Beyond that lies the possibility that the United States could begin to suffer the same disease that has afflicted Japan over the past decade. As debt grew more rapidly than income, that country’s influence around the world eroded.

via News Analysis – A Decade of Enormous Deficits May Alter American Politics and Power – NYTimes.com.

via News Analysis – A Decade of Enormous Deficits May Alter American Politics and Power – NYTimes.com.

Obama to Propose New Limits on Banks – WSJ.com

WASHINGTON—President Barack Obama on Thursday is expected to propose new limits on the size and risk taken by the country’s biggest banks, marking the administration’s latest assault on Wall Street in what could mark a return, at least in spirit, to some of the curbs on finance put in place during the Great Depression, according to congressional sources and administration officials.

The past decade saw widespread consolidation among large financial institutions to create huge banking titans. If Congress approves the proposal, the White House plan could permanently impose government constraints on the size and nature of banking.

Mr. Obama’s proposal is expected to include new scale restrictions on the size of the country’s largest financial institutions. The goal would be to deter banks from becoming so large they put the broader economy at risk and to also prevent banks from becoming so large they distort normal competitive forces. It couldn’t be learned what precise limits the White House will endorse, or whether Mr. Obama will spell out the exact limits on Thursday.

Mr. Obama is also expected to endorse, for the first time publicly, measures pushed by former Federal Reserve Chairman Paul Volcker, which would place restrictions on the proprietary trading done by commercial banks, essentially limiting the way banks bet with their own capital. Administration officials say they want to place “firewalls” between different divisions of financial companies to ensure banks don’t indirectly subsidize “speculative” trading through other subsidiaries that hold federally insured deposits.

via Obama to Propose New Limits on Banks – WSJ.com.

via Obama to Propose New Limits on Banks – WSJ.com.

Obama Calls for New Tax on Banks – NYTimes.com

Flanked by his economic advisers at the White House, Mr. Obama used some of his harshest language to date against the resurgent financial industry.“We’re already hearing a hue and cry from Wall Street suggesting that this proposed fee is not only unwelcome but unfair, that by some twisted logic it is more appropriate for the American people to bear the cost of the bailout rather than the industry that benefited from it, even though these executives are out there giving themselves huge bonuses.”Mr. Obama continued, “What I say to these executives is this: Instead of sending a phalanx of lobbyists to fight this proposal or employing an army of lawyers and accountants to help evade the fee, I suggest you might want to consider simply meeting your responsibilities.”

via Obama Calls for New Tax on Banks – NYTimes.com.

via Obama Calls for New Tax on Banks – NYTimes.com.

Mortgage Modifications Are Seen as Adding to Housing Woes – NYTimes.com

Since President Obama announced the program in February, it has lowered mortgage payments on a trial basis for hundreds of thousands of people but has largely failed to provide permanent relief. Critics increasingly argue that the program, Making Home Affordable, has raised false hopes among people who simply cannot afford their homes.

As a result, desperate homeowners have sent payments to banks in often-futile efforts to keep their homes, which some see as wasting dollars they could have saved in preparation for moving to cheaper rental residences. Some borrowers have seen their credit tarnished while falsely assuming that loan modifications involved no negative reports to credit agencies.

Some experts argue the program has impeded economic recovery by delaying a wrenching yet cleansing process through which borrowers give up unaffordable homes and banks fully reckon with their disastrous bets on real estate, enabling money to flow more freely through the financial system.

“The choice we appear to be making is trying to modify our way out of this, which has the effect of lengthening the crisis,” said Kevin Katari, managing member of Watershed Asset Management, a San Francisco-based hedge fund. “We have simply slowed the foreclosure pipeline, with people staying in houses they are ultimately not going to be able to afford anyway.”

via Mortgage Modifications Are Seen as Adding to Housing Woes – NYTimes.com.

via Mortgage Modifications Are Seen as Adding to Housing Woes – NYTimes.com.

Robert Reichs Blog: The Great Disconnect Between Stocks and Jobs

The result, overall, is an asset-based recovery, not a Main Street recovery. Yes, the economy is growing again, but the surge in productivity is a mirage. Worker output per hour is skyrocketing because companies are generating almost as much output with fewer workers and fewer hours. The Fed, meanwhile, has become an enabler to all this, making it as cheap as possible for companies to axe their employees. Money costs so little these days it’s easy to substitute capital for labor. It’s also easy to buy up foreign assets with cheap American money. And it’s now blissfully easy for Wall Street to borrow money almost free and buy all sorts of interests in foreign assets, especially commodities. Thats why were seeing the prices of foreign commodities and other assets go through the roof. At the same time, the Treasury continues to be fixated on keeping banks afloat. The Administrations mortgage mitigation efforts are lagging. Small businesses are starved of credit. The White House has announced a “jobs summit,” which is better than nothing but not nearly as good as pushiing immediately for a larger stimulus, a new jobs tax credit, and a WPA-style jobs program. The Fed and the Teasury have, in effect, placed a huge bet on a recovery driven by asset prices. That’s a bad bet. The great disconnect between the stock market and jobs is pushing stock prices way out of line with the real economy. This isnt sustainable.

via Robert Reichs Blog: The Great Disconnect Between Stocks and Jobs.

via Robert Reichs Blog: The Great Disconnect Between Stocks and Jobs.

Regulators Resist Volcker Wandering Warning of Too-Big-to-Fail – Bloomberg.com

Dec. 15 (Bloomberg) — Paul A. Volcker visited nine cities in five countries in the past eight weeks to warn that bankers and regulators “have not come anywhere close to responding with necessary vigor” to the worst economic crisis in 70 years.

“There is a lot of evidence that financial weaknesses brought us to the brink of a great depression,” Volcker, 82, said Dec. 8. at a conference in West Sussex, England. He told executives there that the changes they’ve proposed are “like a dimple.”

Two years after the start of the deepest recession since the 1930s, no U.S. or European authority has put in force a single measure that would transform the financial system, based on data compiled by Bloomberg. No rule- or law-making body is actively considering the automatic dismantling of banks that Volcker told Congress are sheltered by access to an implicit safety net.

There’s little evidence that policy makers are heeding Volcker, the former chairman of the U.S. Federal Reserve.

via Regulators Resist Volcker Wandering Warning of Too-Big-to-Fail – Bloomberg.com.

via Regulators Resist Volcker Wandering Warning of Too-Big-to-Fail – Bloomberg.com.