Tuesday, November 11, 2008
Big Bad Paul
Kinda narrow at the shoulders and broader at the hips, but everyone knew that you give no lip to Big Paul, Big Paul, Big Bad Paul……!
I apologize to songwriter and successful sausage maker Jimmy Dean for ripping off a line from his famous “Big Bad John” lyrics, but Paul Volcker deserves the accolades and more.
If President-elect Obama just will name Paul Volcker to Treasury—even for a year, keeping Larry Summers at the NEC in waiting—I’ll feel vindicated and like a seer for suggesting on November 5 that Obama choose Rahm Emanuel and Paul Volcker for WH CoS and Treasury Secretary, respectively. As competent as Larry Summers and Tim Geithner are, neither has the domestic and international heft of Paul A. Volcker.
His insight and steely resolve to keep interest rates high in the early 1980’s, which successfully squeezed the remaining life out of Post-Vietnam inflation—and ushered in years of U.S. economic expansion and positive growth-- is considered Herculean and heroic by most economists and students of public policy. I worked for the Fed and Volcker in those days and watched as he was excoriated by the nation’s housers and vilified by Congress because he kept interest rates in the high teens.
Volcker would be an exceptional choice for Treasury Secretary.
Just as Paul Volcker gives gravitas and strength to how President Obama will go about achieving the Obama financial priorities, so too does Rahm Emanuel provide the same as the President’s conductor keeping the trains running on time.
I have to laugh at all of these pundits (mostly Republican) who reacted in mock horror to Obama choosing Rahm Emanuel as his White House Chef of Staff.
So what if Emanuel’s buddy, Paul Begala, respectfully describes the new CoS as a “pain, somewhere between a hemorrhoid and a toothache.” Rahm Emanuel has a reputation for hard ball, success and achieving his objectives. A new President facing the mountainous challenges staring Obama in the face needs someone just like that at his side and watching his back. So, he’s the iron fist inside of Obama’s velvet glove. Obama knows warmth and charm, alone, can’t drive policy changes, and major ones at that, in Washington. They call those interests “vested” for a reason.
If you are going to make legislative and policy “omelets,” I can think of few Democrats I’d rather have breaking those eggs than Rahm Emanuel, which was why I touted him last week.
Is anyone besides me upset at the behavior of the Administration and the big banks? The whole drill about giving the banks federal cash infusions was for them to use the cash to “unclog the credit markets,” by making commercial and personal loans, not to pay/boost dividends and take over weaker institutions.
It’s a simple model to implement, if the bank regulators showed some guts.
The banks get additional cash, if the banks agree to make loans--not to “everyone” or the “less credit worthy,” as the bank flacks try and imply--to those individuals who can repay the loans and those businesses seeking to expand and hire more employees.
And, yes, that criteria and performance can be measured by serious financial regulators and, yes, the banks can be held accountable.
Must the nation suffer even more before the large banks—which caused some of the mess—decide to get off their butts and do what they do best and that’s lend money?
When Fannie and Freddie both were given the significant housing goal challenges in the early nineties and some company officials asked if that large a percentage of credit worthy “low, moderate and middle income families, existed out there,” their regulators bluntly told the GSEs to “find them.” The banks should be given the same direction.
Many people are asking some variation of the question, “What does the GOP have to do to make itself relevant and competitive, again?” First the GOP has to stop blaming the media, fate, Palin’s wardrobe or her geographic educational gaps for Obama’s win
The dogs didn’t like your dog food. You lost the election. Your numbers dropped in both the House and Senate and there are still a handful of Senate and House races yet to be decided. The best thing the GOP could do is look critically at the election night tapes from Grant Park in Chicago and the same crowd scenes from John McCain’s Phoenix campaign hotel. There was a lot of happy diversity in Chicago and a bunch of Caucasians in Arizona. I know you R diehards hate to hear this, but the United States no longer is a white nation, politically. At some point the GOP will awake to that fact and truly open its policy doors and invite in blacks and Latinos.
Just adding some more white faces and fair hair, as I saw at the convention in Minneapolis and on the ball room floor in Phoenix, isn’t going to cut it or win future elections. That’s not a cheap shot, just demographic reality.
By actively opening your tent flaps and welcoming in others, your party platform should change and also reflect the needs of those not so well off and headed to the Ivy League, either scholastically or socially.
Your crew on Wall Street ended—for the near term—your “less regulation and more tax cuts for business” political mantra. Plan for that change.
“W” murdered your “less government, less federal spending” party platform planks. Paulson and Treasury, with its nationalization and forced bank equity investment, put “socialism” in a whole new light, especially as it was carried out by a Republican administration,
Oh and although she won her election, drop Rep. Michele Bachman (R-Minn.) as a party spokesperson. Calling for media exposure of “anti-Americanism” in the Congress is wing nutty and loopy enough to resurrect J. Edgar’s cross-dressing ghost.
The Washington Post had a front page story, today, discussing the problems of Fannie (and Freddie) especially since the government/Treasury seems to have reneged on parts of its deal with the former GSEs.
Note: Treasury still hasn’t put a dime into Fannie Mae, but that hasn’t stopped the Paulson mob from demanding that it to do more mortgage finance.
Yet, with rising debt costs due in large measure to Treasury’s policy of not making clear the status of those debt securities (are they backed by the government or not?), Fannie can’t borrow cheaply enough to keep the conventional mortgage market liquid. So, that market will stay turgid.
Congress may want to begin asking questions about the real motives in the GSE “Sunday Smashdown” takeovers, since making the companies more effective clearly hasn’t come to pass and likely wasn’t on the GOP’s real agenda.
The conventional mortgage market just won’t function smoothly without a dedicated mortgage investor, buying product 24-7. from lenders in all communities in the nation.
The Government National Mortgage Association or “Ginnie Mae” does that for FHA and VA government loans. But, until the Treasury takes its boot off the necks of the former GSEs, you won’t have a similar operation in the conventional markets. And, most mortgage observers understand that.
So, I’ll keep saying it to the Congress, “Get ready to create a new “Fannie and Freddie” or take a smart shortcut and figure out how to breathe a little life into the ones you have, before Treasury sucks all of the life form them and you have no options and a rapidly deteriorating conventional mortgage market.
Temporaily, I am putting away my political six guns back, since I assume it wasn’t lost on anyone that two major GSE antagonists (John Sununu and Chris Shays) were defeated last Tuesday and a third “wannabe” (Elizabeth Dole)--who frankly didn’t have the smarts to do anything original on GSEs--also went down. Just call it “mortgage frontier justice.”
Add the retiring Chuck Hagel *R-Neb,) to that list and a lot of GSE animus will leave the Congress this year. When the next Fannie/Freddie issue arises, Senator Shelby (R-Ala,) may have to caucus in a phone booth.