The Troubled Asset Relief Program (TARP)
This past week may be an aberration in the past 15 months which have been filled with them. But, I am beginning to think that the Obama Administration and the Congress may need to double the $850 Billion financial relief package they now are crafting and hope it doesn’t take more.
But, if it does, then the Administration should seek it and the Congress should approve it.
Hopefully, going forward no federal financial support will be given to any company/financial institution without a reciprocal equity position for Uncle Sam in that recipient. The federal government, at some point, needs to pay back all of that borrowing and get paid for all of its support.
President Obama is a popular figure and that is all the more reason for him to eschew questionable spending in his stimulus package. Paying off any Democratic constituencies with initiatives that do not bring the hope of near instant leveraging and jobs is not what I would urge the President to do. And, that goes for giving too much to the GOP, too.
As Obama has pointed out in his meetings with the GOP congressional leadership, he won and they lost. So, while they have a seat at the table, it’s a small one.
There are plenty of ways to spend that money that could insure it gets quickly worked into the national economy and working for all of us. (I’ve always liked giving $1000 checks or more to every family/citizen, which only can be cashed for goods and services at stores or other commercial otulets. Those businesses then can get credited with money from the Treasury, when they deposit them at their local bank.)
There is time for larger Pell education grants, federal arts program, and other good ideas, but that time is not now. The more good will (and down the road revenue) which President Obama can generate from pure stimulus spending will provide the basis for attending to these collateral societal needs sooner rather than later.
And please, Congress and Mr. President save us any tagalong “secret union vote” provision. We do not elect our public officials in that manner and there is no compelling or good reason why our union brothers and sisters need “secret votes” to enhance their numbers.
Mr. Blinder, certainly no Fannie Mae or Freddie Mac shill, authored “Six Blunders En Route to a Crisis” in yesterday’s (Jan. 25) New York Times business section. In listing his half dozen reasons why we have experienced this pernicious financial and economic meltdown, try as I might I couldn’t find any reference to Fannie Mae or Freddie Mac, but did see Wall Street mortgage and security originations and lax federal financial regulation prominently noted.
Nobody in the “GSE friends” world (both of them!) should take any joy in Freddie Mac’s financial problems. It was reported this weekend that they may need another $35 Billion in federal financial assistance to cover their losses, to go with the almost $15 Billion which they’ve taken already.
Now, the same could soon happen to Fannie Mae, but I have my doubts, since it long has been the presumption that Freddie’s books, portfolio, and back office were a mess, in comparison to the company in DC.
Yet even Fannie is making adjustments, laying off hundreds and beefing up their “Real Estate Owned (REO) and loss mitigation” efforts, headquartered in Dallas.
The surprising thing to me is that when the dust settles Fannie thinks it still will carry about 5500 employees.
What are they all doing? It’s not a thriving business anymore, so all of those formerly busy folks can’t have a lot to do. I am not advocating adding to the nation’s unemployment roles, but at some point I can’t see where that many people can be gainfully employed doing Fannie’s business, unless they get something else major to do.
To the New Senators and Members Serving on the Banking Committees
Few of you have any idea (no matter what you now think) about the issues you will be called on to shape, bless or kill in the coming year. Yes, you’ll get briefing papers and some staff input, but--with all due respect--you are going to be dealing with buzzwords and phrases for a long item, unless you take the initiative to get smart and fast.
Every single financial interest in own is drooling to come in and meet you and your top legislative assistant(s). Let them and now. But make them give you a “ding-dong school” lecture on what they do, exactly how they do it, and where they fit into the national financial economy. Make sure that you know where and how they work back in your state or congressional district. Your political survival may depend on it.
Of course they will spin and possibly mislead, but by conducting the same exercise with multiple and conflicting interests, you will begin to get a sense of what’s really happening out there.
Use the Congressional Reference Service experts and the Library of Congress resources and make yourself aware. Don’t be afraid to ask lots of questions. There are no “dumb questions,” just questions for which you need and want an answer.
While your congressional Rabbis, committee chairs, and subcommittee chairs, will help, you need to help yourself. And, yes, there are elements in town that would have you less knowledgeable than more.
Question everyone and then find your comfort level, but don’t stop questioning, ever. The interest groups—which can be most helpful--preceded you and will be here when you finally leave. Use them to make yourself a more intelligent advocate for your constituents. Just because they brief you doesn’t mean you owe them your vote or support.
And, despite the different names and apparent functions, every single interest you encounter in the financial institutions world has one thing in common. They all borrow money at one rate (from depositors, policy holders, institutional investors, regional and central banks and other credit facilities) and try and reinvest it at a higher one, holding onto as much of the margin as possible for their profit.
That’s the single most important thing to know about financial service companies and you’ve just learned it!
Why do I feel that the “happiest Democrats in town” are those New York public officials and interests, not to mention the Senate Democratic leadership and the Obama White House, who won’t have to deal with “Senator” Andrew Cuomo?
I just can hear them saying, collectively, “Hello and welcome Senator Gillibrand and thank you Governor Patterson, no matter what your motives. Oh, and Andy, you are a great state Attorney General.”
Cinematic Revelation (to me)
I happened to catch Stanley Kubrick’s “Dr. Stangelove” on TV the other night. That wonderful Cold War black comedy, with the late British comedian Peter Sellers playing multiple roles, had bravado performances by Sterling Hayden and George C, Scott. But, how many realize that the Air Force navigator on the nuclear armed B-52, which doesn’t get recalled and heads alone to bomb “Soviet” targets, is a very young James Earl Jones?