Jump to content
DC Message Boards
Guest Grant in Alexandria

America Everything is Going To Be Alright

Recommended Posts

Guest Grant in Alexandria

The real truth is the stock market and housing market are falling down to their real values. Now is the time you really can make great money. Don't waste it on unnecessary items.

 

President Obama,

You need to do away with the Capital Gains Tax.

Share this post


Link to post
Share on other sites
The real truth is the stock market and housing market are falling down to their real values. Now is the time you really can make great money. Don't waste it on unnecessary items.

 

President Obama,

You need to do away with the Capital Gains Tax.

 

I would say that is great that the housing market and stock market is going to there real values, except what about all of the hundred of thousands of people who got caught up in the stock and housing market? What about the people who got caught up in unscrupulous mortgage companies who promised one thing and gave something else?

Share this post


Link to post
Share on other sites
Guest V

There isn't enough currency in the world to rescue the current system. Gold and silver are the only real value in a world full of "worthless paper," in which villains of the financial meltdown created in order to rip off the hard-working masses. Our leaders try to control panic by not accurately stating the unemployment rate. We hear our leaders in the media state the unemployment rate for February was 8.1%

 

http://data.bls.gov/PDQ/servlet/SurveyOutp..._id=LNS14000000

 

Our leaders fail to mention that they discounted the part-time labor force that work less than 35 hours a week and the growing discouraged labor force who have given up looking for a job. The Labor Under Utilization rate for February 2009 was 14.8%

 

http://www.bls.gov/news.release/empsit.t12.htm

Share this post


Link to post
Share on other sites
Guest Ronald Weinland

We are witnessing a growing loss of faith that people have in the economic system, banking, wall street, corporations, unions, investor consultants and so called financial experts, and in the very government they believed would intervene to save them. There is no system, no government, no person, no plan, nor anything or anyone but God who can now save people from what is happening in this world.

Share this post


Link to post
Share on other sites

The one tragic flaw of the Freedom of Speech is that you can use words that effect the masses. My dad used to say "Son, if you look for the bad in the world you will find it. Now, if you look for the good in the world you will find that too. It is up to you to decide where you want to look."

 

I choose to believe that our country is going to be alright. I am working to make sure my family is happy and healthy.

Edited by Luke_Wilbur

Share this post


Link to post
Share on other sites
Guest Human_*

You ARE so wrong there.

The Democrats made a HUGE mistake in dumbing down the economy for their own political gain.

 

Everyone knows that it is credit crunch in the banking system, and the democrats still have NOT addressed it.

 

The democrats can pour 100% of GDP into the economy, and that wont do jack if they don't fix the Banking System FIRST.

 

Like I have said in here before "Economic Security TRUMPS politics".

 

There are companies out there that I know of, that are making money hand over fist, and I WON'T buy stock in their companies because of the democrat’s rhetoric "Again because the democrats are dumbing down the economy, and it's pushing ALL of the stocks down".

---------------------------------------------------------------------------------------------------------------------

We are witnessing a growing loss of faith that people have in the economic system, banking, wall street, corporations, unions, investor consultants and so called financial experts, and in the very government they believed would intervene to save them. There is no system, no government, no person, no plan, nor anything or anyone but God who can now save people from what is happening in this world.

Share this post


Link to post
Share on other sites

I truly believe that improving public confidence is one of the necessary conditions to overcome the present woes. I understand that there are still concerns about capital, asset quality, and credit risk that continue to limit the willingness of many banks to extend credit, notwithstanding the access of these firms to central bank liquidity.

 

I am not going to focus on the bad points of what is happening during this period. They are well understood by many. Rather I want to start focusing on the positive developments.

 

The Obama administration Budget expands lending in underserved neighborhoods by doubling funding for the Community Development Financial Institutions (CDFI) Fund. Through merit-based grant programs, the CDFI Fund helps locally based financial institutions offer small business, consumer and home loans in communities and populations that lack access to affordable credit.

 

The Budget supports: $17.5 billion in guarantees under the Section 7(a) Guaranteed Loan program, an important source of credit for small businesses; $7.5 billion in guaranteed debentures in the Section 504 Guaranteed Loan Program, providing Certified Development Companies financing to support commercial real estate development; $3 billion in authority for the Small Business Investment Company debenture program; and $25 million in Microloan volume, allowing intermediaries to provide small loans and technical assistance to entrepreneurs and other start-up businesses. In addition, the Administration’s Small Business and Community Bank Lending Initiative will expand small business credit availability and affordability by unfreezing the secondary markets for small business loans—as part of the larger plan to revive the flow of credit in the Nation’s economy.

 

New Basic FDIC Deposit Insurance Limits for Common Ownership Types*

Single Accounts (owned by one person) $250,000 per owner

Joint Accounts (two or more persons) $250,000 per co-owner

IRAs and other certain retirement accounts $250,000 per owner

Revocable Trust (ITF/POD) Accounts $250,000 per owner per beneficiary subject to specific limitations and requirements

Corporation/Partnership/Organization Accounts $250,000

Share this post


Link to post
Share on other sites
Guest LAW_*

Warren Buffett remains optimistic about the long term, he told CNBC on Monday. "Everything will be all right," he said. "We do have the greatest economic machine that man has ever created."

 

"What is required is a commander in chief that's looked at like a commander in chief in a time of war," Buffett said, adding that the President needs to restore faith in the financial system, letting American know their money is safe, even in the event of another bank failure.

 

"If you don't trust where you have your money, the world stops," he told CNBC.

 

Buffett said that Americans need to accept that government actions aimed at helping the economy will inevitably help some people who made poor decisions that contributed to the problem in the first place. However, everyone is in the same boat now, he said.

 

"The people that behaved well are no doubt going to find themselves taking care of the people who didn't behave well," he said.

Share this post


Link to post
Share on other sites
Guest Fed Up
Fear created the FDIC in 1933 after the Depression set off a panic that wiped out even healthy banks.

 

"We've been around for 75 years and nobody's ever lost a penny of insured deposits," FDIC head Sheila Bair told Pelley. "…which is why you need to make sure you are below the insured deposit limits."

 

Bair told Pelley the insured deposit limit is $250,000 right now.

 

"When the FDIC comes in and makes depositors whole at a bank that has failed, is that tax money?" Pelley asked.

 

"No. it is money from our reserves which, and we are funded by insurance premiums that are assessed on banks. So, no it's not taxpayer money," Bair explained.

 

http://www.cbsnews.com/stories/2009/03/06/...047_page2.shtml

 

Temporary Changes to FDIC Deposit Insurance Coverage

 

Effective October 3, 2008, the basic limit on federal deposit insurance coverage was temporarily increased from $100,000 to $250,000 per depositor through December 31, 2009. On January 1, 2010, FDIC deposit insurance for all deposit accounts—except for certain retirement accounts—will return to at least $100,000 per depositor. Insurance coverage for certain retirement accounts, which include all IRA deposit accounts, was increased permanently to $250,000 per depositor in 2006.

 

On October 14, 2008, the FDIC announced its temporary Transaction Account Guarantee Program, providing depositors with unlimited coverage for noninterest-bearing transaction accounts if their bank is a participant in the FDIC’s Temporary Liquidity Guarantee Program. Noninterest-bearing checking accounts include Demand Deposit Accounts (DDAs) and any transaction account that has unlimited withdrawals and that cannot earn interest. Also included are low-interest NOW accounts that cannot earn more than 0.5% interest. Interest-bearing accounts include NOW accounts that can earn more than 0.5% interest, other interest-bearing checking accounts, Money Market Deposit Accounts (MMDAs), savings accounts, and Certificates of Deposit (CDs). This program is scheduled to end on December 31, 2009.

 

Eligible entities include FDIC-insured depository institutions, any U.S. bank holding company or financial holding company, and any U.S. savings and loan holding company that either engages only in activities that are permissible for financial holding companies to conduct under section (4)(k) of the Bank Holding Company Act of 1956 (BHCA) or has at least one insured depository institution subsidiary that is the subject of an application that was pending on October 13, 2008, pursuant to section 4©(8) of the BHCA, or any other affiliate of an insured depository institution that the FDIC, after written request and positive recommendation by the appropriate Federal banking agency, designates as an eligible entity.

Share this post


Link to post
Share on other sites
Guest August Havlicek

Permanent Portfolio (PRPFX) is the only investment strategy during these times.

 

Designed to provide growth at low risk, the primary goal of Permanent Portfolio is to preserve and increase the real long-term purchasing power of each shareholder’s investment, regardless of economic climate.

 

To accomplish this goal, the fund employs a time tested investment strategy of categorical diversification. Permanent Portfolio’s investment categories have been chosen and weighted with the goal of providing downside protection in all foreseeable economic conditions. For over 24 years, this strategy has not wavered despite significant market fluctuations.

 

The six investment categories and main investments for Permanent Portfolio include:

 

GOLD: Bullion and coins held in major banks and with accredited commodity exchange depositories. Gold is expected to profit from inflation, especially runaway inflation.

 

SILVER: Bullion and coins held in the same form as gold. Silver is expected to profit from inflation or a soft landing, and possibly gain during runaway inflation.

 

SWISS FRANC ASSETS: Current and call accounts at Swiss and non-Swiss banks, and Swiss government bonds. The Swiss franc is expected to profit from inflation, especially runaway inflation.

 

STOCKS OF U.S. AND FOREIGN REAL ESTATE AND NATURAL RESOURCE COMPANIES: Stocks of companies whose assets should allow them to appreciate or depreciate in much the same manner as real estate and natural resources. These stocks are much more liquid than real estate and natural resources. They are expected to profit from continued inflation.

 

AGGRESSIVE GROWTH STOCKS: Common stocks and stock warrants that tend to move further, in either direction, than the general stock market. Such stocks are intended to allow Permanent Portfolio to have a stake in any extended bull stock market but to do so with a limited risk to the overall Portfolio. Because all the Portfolio’s stocks are purchased for cash, without the use of margin, they can never lose more than is invested in them no matter what the future brings. And they are in a position to potentially profit dramatically if prosperity continues. They may hold much of their purchasing power during runaway inflation.

 

U.S. TREASURY BILLS, BONDS & OTHER DOLLAR ASSETS: Short-term securities (one year or less to maturity) issued or guaranteed by the U.S. government or its agencies. These investments provide liquidity and stability, and their yields tend to match the rate of inflation closely. Long-term bonds (as long as 30 years to maturity) that may profit greatly if a deflation or soft landing caused interest rates to drop from today’s levels to the level of 2% to 3% that normally has prevailed during non-inflationary periods. Because a deflation would cause widespread defaults on lower-grade bonds, only long-term bonds issued or guaranteed by the U.S. government or its agencies are held by the Portfolio.

 

uestions about PRPFX should be directed to:

 

Permanent Portfolio Family of Funds, Inc.

600 Montgomery Street, 27th Floor

San Francisco, California 94111-2702

 

(800) 531-5142

Share this post


Link to post
Share on other sites
Guest LAW_*

The Market liked what they heard today from the FEDERAL RESERVE CHAIRMAN.

 

Dow 6,926.49 +379.44 (5.80%)

S&P 500 719.60 +43.07 (6.37%)

Nasdaq 1,358.28 +89.64 (7.07%)

10y bond 3.00% +0.06 (2.04%)

 

 

Chairman Ben S. Bernanke

At the Council on Foreign Relations, Washington, D.C.

March 10, 2009

 

Financial Reform to Address Systemic Risk

 

The world is suffering through the worst financial crisis since the 1930s, a crisis that has precipitated a sharp downturn in the global economy. Its fundamental causes remain in dispute. In my view, however, it is impossible to understand this crisis without reference to the global imbalances in trade and capital flows that began in the latter half of the 1990s. In the simplest terms, these imbalances reflected a chronic lack of saving relative to investment in the United States and some other industrial countries, combined with an extraordinary increase in saving relative to investment in many emerging market nations. The increase in excess saving in the emerging world resulted in turn from factors such as rapid economic growth in high-saving East Asian economies accompanied, outside of China, by reduced investment rates; large buildups in foreign exchange reserves in a number of emerging markets; and substantial increases in revenues received by exporters of oil and other commodities. Like water seeking its level, saving flowed from where it was abundant to where it was deficient, with the result that the United States and some other advanced countries experienced large capital inflows for more than a decade, even as real long-term interest rates remained low.

 

The global imbalances were the joint responsibility of the United States and our trading partners, and although the topic was a perennial one at international conferences, we collectively did not do enough to reduce those imbalances. However, the responsibility to use the resulting capital inflows effectively fell primarily on the receiving countries, particularly the United States. The details of the story are complex, but, broadly speaking, the risk-management systems of the private sector and government oversight of the financial sector in the United States and some other industrial countries failed to ensure that the inrush of capital was prudently invested, a failure that has led to a powerful reversal in investor sentiment and a seizing up of credit markets. In certain respects, our experience parallels that of some emerging-market countries in the 1990s, whose financial sectors and regulatory regimes likewise proved inadequate for efficiently investing large inflows of saving from abroad. When those failures became evident, investors lost confidence and crises ensued. A clear and highly consequential difference, however, is that the crises of the 1990s were regional, whereas the current crisis has become global.1

 

In the near term, governments around the world must continue to take forceful and, when appropriate, coordinated actions to restore financial market functioning and the flow of credit. I have spoken on a number of occasions about the steps that the U.S. government, and particularly the Federal Reserve, is taking along these lines.2 Until we stabilize the financial system, a sustainable economic recovery will remain out of reach. In particular, the continued viability of systemically important financial institutions is vital to this effort. In that regard, the Federal Reserve, other federal regulators, and the Treasury Department have stated that they will take any necessary and appropriate steps to ensure that our banking institutions have the capital and liquidity necessary to function well in even a severe economic downturn. Moreover, we have reiterated the U.S. government's determination to ensure that systemically important financial institutions continue to be able to meet their commitments.

 

At the same time that we are addressing such immediate challenges, it is not too soon for policymakers to begin thinking about the reforms to the financial architecture, broadly conceived, that could help prevent a similar crisis from developing in the future. We must have a strategy that regulates the financial system as a whole, in a holistic way, not just its individual components. In particular, strong and effective regulation and supervision of banking institutions, although necessary for reducing systemic risk, are not sufficient by themselves to achieve this aim.

 

Today, I would like to talk about four key elements of such a strategy. First, we must address the problem of financial institutions that are deemed too big--or perhaps too interconnected--to fail. Second, we must strengthen what I will call the financial infrastructure--the systems, rules, and conventions that govern trading, payment, clearing, and settlement in financial markets--to ensure that it will perform well under stress. Third, we should review regulatory policies and accounting rules to ensure that they do not induce excessive procyclicality--that is, do not overly magnify the ups and downs in the financial system and the economy. Finally, we should consider whether the creation of an authority specifically charged with monitoring and addressing systemic risks would help protect the system from financial crises like the one we are currently experiencing. My discussion today will focus on the principles that should guide regulatory reform, leaving aside important questions concerning how the current regulatory structure might be reworked to reduce balkanization and overlap and increase effectiveness. I also will not say much about the international dimensions of the issue but will take as self-evident that, in light of the global nature of financial institutions and markets, the reform of financial regulation and supervision should be coordinated internationally to the greatest extent possible.

 

Too Big to Fail

In a crisis, the authorities have strong incentives to prevent the failure of a large, highly interconnected financial firm, because of the risks such a failure would pose to the financial system and the broader economy. However, the belief of market participants that a particular firm is considered too big to fail has many undesirable effects. For instance, it reduces market discipline and encourages excessive risk-taking by the firm. It also provides an artificial incentive for firms to grow, in order to be perceived as too big to fail. And it creates an unlevel playing field with smaller firms, which may not be regarded as having implicit government support. Moreover, government rescues of too-big-to-fail firms can be costly to taxpayers, as we have seen recently. Indeed, in the present crisis, the too-big-to-fail issue has emerged as an enormous problem.

 

In the midst of this crisis, given the highly fragile state of financial markets and the global economy, government assistance to avoid the failures of major financial institutions has been necessary to avoid a further serious destabilization of the financial system, and our commitment to avoiding such a failure remains firm. Looking to the future, however, it is imperative that policymakers address this issue by better supervising systemically critical firms to prevent excessive risk-taking and by strengthening the resilience of the financial system to minimize the consequences when a large firm must be unwound.

 

Achieving more effective supervision of large and complex financial firms will require a number of actions. First, supervisors need to move vigorously--as we are already doing--to address the weaknesses at major financial institutions in capital adequacy, liquidity management, and risk management that have been revealed by the crisis. In particular, policymakers must insist that the large financial firms that they supervise be capable of monitoring and managing their risks in a timely manner and on an enterprise-wide basis. In that regard, the Federal Reserve has been looking carefully at risk-management practices at systemically important institutions to identify best practices, assess firms' performance, and require improvement where deficiencies are identified.3 Any firm whose failure would pose a systemic risk must receive especially close supervisory oversight of its risk-taking, risk management, and financial condition, and be held to high capital and liquidity standards.4 In light of the global reach and diversified operations of many large financial firms, international supervisors of banks, securities firms, and other financial institutions must collaborate and cooperate on these efforts.

 

Second, we must ensure a robust framework--both in law and practice--for consolidated supervision of all systemically important financial firms organized as holding companies. The consolidated supervisors must have clear authority to monitor and address safety and soundness concerns in all parts of the organization, not just the holding company. Broad-based application of the principle of consolidated supervision would also serve to eliminate gaps in oversight that would otherwise allow risk-taking to migrate from more-regulated to less-regulated sectors.

 

Third, looking beyond the current crisis, the United States also needs improved tools to allow the orderly resolution of a systemically important nonbank financial firm, including a mechanism to cover the costs of the resolution. In most cases, federal bankruptcy laws provide an appropriate framework for the resolution of nonbank financial institutions. However, this framework does not sufficiently protect the public's strong interest in ensuring the orderly resolution of nondepository financial institutions when a failure would pose substantial systemic risks. Improved resolution procedures for these firms would help reduce the too-big-to-fail problem by narrowing the range of circumstances that might be expected to prompt government intervention to keep the firm operating.

 

Developing appropriate resolution procedures for potentially systemic financial firms, including bank holding companies, is a complex and challenging task. Models do exist, though, including the process currently in place under the Federal Deposit Insurance Act (FDIA) for dealing with failing insured depository institutions and the framework established for Fannie Mae and Freddie Mac under the Housing and Economic Recovery Act of 2008. Both models allow a government agency to take control of a failing institution's operations and management, act as conservator or receiver for the institution, and establish a "bridge" institution to facilitate an orderly sale or liquidation of the firm. The authority to "bridge" a failing institution through a receivership to a new entity reduces the potential for market disruption while limiting moral hazard and mitigating any adverse impact of government intervention on market discipline.

 

The new resolution regime would need to be carefully crafted. For example, clear guidelines must define which firms could be subject to the alternative regime and the process for invoking that regime, analogous perhaps to the procedures for invoking the so-called systemic risk exception under the FDIA. In addition, given the global operations of many large and complex financial firms and the complex regulatory structures under which they operate, any new regime must be structured to work as seamlessly as possible with other domestic or foreign insolvency regimes that might apply to one or more parts of the consolidated organization.

 

Strengthening the Financial Infrastructure

The first element of my proposed reform agenda covers systemically important institutions considered individually. The second element focuses on interactions among firms as mediated by what I have called the financial infrastructure, or the financial plumbing if you will: the institutions that support trading, payments, clearing, and settlement. Here the aim should be not only to help make the financial system as a whole better able to withstand future shocks, but also to mitigate moral hazard and the problem of too big to fail by reducing the range of circumstances in which systemic stability concerns might prompt government intervention. I'll give several examples.

 

Since September 2005, the Federal Reserve Bank of New York has been leading a major joint initiative by the public and private sectors to improve arrangements for clearing and settling credit default swaps (CDS) and other over-the-counter (OTC) derivatives. As a result, the accuracy and timeliness of trade information has improved significantly. However, the infrastructure for managing these derivatives is still not as efficient or transparent as that for more mature instruments. The Federal Reserve Bank of New York, in conjunction with other domestic and foreign supervisors, will continue to work toward establishing increasingly stringent targets and performance standards for market participants. To help alleviate counterparty credit concerns, regulators are also encouraging the development of well-regulated and prudently managed central clearing counterparties for OTC trades.5 Just last week, we approved the application for membership in the Federal Reserve System of ICE Trust, a trust company that proposes to operate as a central counterparty and clearinghouse for CDS transactions.

 

The Federal Reserve and other authorities also are focusing on enhancing the resilience of the triparty repurchase agreement (repo) market, in which the primary dealers and other major banks and broker-dealers obtain very large amounts of secured financing from money market mutual funds and other short-term, risk-averse sources of funding. For some time, market participants have been working to develop a contingency plan for handling a loss of confidence in either of the two clearing banks that facilitate the settlement of triparty repos. Recent experience demonstrates the need for additional measures to enhance the resilience of these markets, particularly as large borrowers have experienced acute stress. The Federal Reserve's Primary Dealer Credit Facility, launched in the wake of the Bear Stearns collapse and expanded in the aftermath of the Lehman Brothers bankruptcy, has stabilized this critical market, and market confidence has been maintained. However, this program was adopted under our emergency powers to address unusual and exigent circumstances. Therefore, more-permanent reforms are needed. For example, it may be worthwhile considering the costs and benefits of a central clearing system for this market, given the magnitude of exposures generated and the vital importance of the market to both dealers and investors.

 

More broadly, both the operational performance of key payment and settlement systems and their ability to manage counterparty and market risks in both normal and stressed environments are critical to the stability of the broader financial system. Currently, the Federal Reserve relies on a patchwork of authorities, largely derived from our role as a banking supervisor, as well as on moral suasion to help ensure that critical payment and settlement systems have the necessary procedures and controls in place to manage their risks. By contrast, many major central banks around the world have an explicit statutory basis for their oversight of these systems. Given how important robust payment and settlement systems are to financial stability, a good case can be made for granting the Federal Reserve explicit oversight authority for systemically important payment and settlement systems.

 

Another issue that warrants attention is the potential fragility of the money market mutual fund sector. Last fall, as a result of losses on Lehman Brothers commercial paper, a prominent money market mutual fund "broke the buck"--that is, was unable to maintain a net asset value of $1 per share. Over subsequent days, fearful investors withdrew more than $250 billion from prime money market mutual funds. The magnitude of these withdrawals decreased only after the Treasury announced a guarantee program for money market mutual fund investors and the Federal Reserve established a new lending program to support liquidity in the asset-backed commercial paper market.

 

In light of the importance of money market mutual funds--and, in particular, the crucial role they play in the commercial paper market, a key source of funding for many businesses--policymakers should consider how to increase the resiliency of those funds that are susceptible to runs. One approach would be to impose tighter restrictions on the instruments in which money market mutual funds can invest, potentially requiring shorter maturities and increased liquidity. A second approach would be to develop a limited system of insurance for money market mutual funds that seek to maintain a stable net asset value. For either of these approaches or others, it would be important to consider the implications not only for the money market mutual fund industry itself, but also for the distribution of liquidity and risk in the financial system as a whole.

 

Procyclicality in the Regulatory System

It seems obvious that regulatory and supervisory policies should not themselves put unjustified pressure on financial institutions or inappropriately inhibit lending during economic downturns. However, there is some evidence that capital standards, accounting rules, and other regulations have made the financial sector excessively procyclical--that is, they lead financial institutions to ease credit in booms and tighten credit in downturns more than is justified by changes in the creditworthiness of borrowers, thereby intensifying cyclical changes.

 

For example, capital regulations require that banks' capital ratios meet or exceed fixed minimum standards for the bank to be considered safe and sound by regulators.7 Because banks typically find raising capital to be difficult in economic downturns or periods of financial stress, their best means of boosting their regulatory capital ratios during difficult periods may be to reduce new lending, perhaps more so than is justified by the credit environment. We should review capital regulations to ensure that they are appropriately forward-looking, and that capital is allowed to serve its intended role as a buffer--one built up during good times and drawn down during bad times in a manner consistent with safety and soundness.8 In the area of prudential supervision, we should also ensure that bank examiners appropriately balance the need for caution and the benefits of maintaining profitable lending relationships when evaluating bank loan policies.

 

The ongoing move by those who set accounting standards toward requirements for improved disclosure and greater transparency is a positive development that deserves full support. However, determining appropriate valuation methods for illiquid or idiosyncratic assets can be very difficult, to put it mildly. Similarly, there is considerable uncertainty regarding the appropriate levels of loan loss reserves over the cycle. As a result, further review of accounting standards governing valuation and loss provisioning would be useful, and might result in modifications to the accounting rules that reduce their procyclical effects without compromising the goals of disclosure and transparency. Indeed, work is underway on these issues through the Financial Stability Forum, and the results of that work may prove useful for U.S. policymakers.

 

Another potential source of procyclicality is the system for funding deposit insurance. In recognition of this fact--as well as the weak economic outlook and the current strains on banks and the financial system--the Federal Deposit Insurance Corporation recently announced plans to extend from five years to seven years the period over which it would restore the deposit insurance fund to its minimum required level. This plan, if implemented, should help reduce the costs imposed on banks at a time when capital and lending are already under pressure. Policymakers should consider additional steps to reduce the possible procyclical effects of deposit insurance costs while still ensuring that riskier banks pay higher premiums than safer banks. One possibility would be to raise the level to which the designated reserve ratio may grow in benign economic environments, so that a larger buffer is available to be drawn down when economic conditions worsen and insurance losses are high.

 

Systemic Risk Authority

The policy actions I've discussed would inhibit the buildup of risks within the financial system and improve the resilience of the financial system to adverse shocks. Financial stability, however, could be further enhanced by a more explicitly macroprudential approach to financial regulation and supervision in the United States. Macroprudential policies focus on risks to the financial system as a whole. Such risks may be crosscutting, affecting a number of firms and markets, or they may be concentrated in a few key areas. A macroprudential approach would complement and build on the current regulatory and supervisory structure, in which the primary focus is the safety and soundness of individual institutions and markets.

 

How could macroprudential policies be better integrated into the regulatory and supervisory system? One way would be for the Congress to direct and empower a governmental authority to monitor, assess, and, if necessary, address potential systemic risks within the financial system. The elements of such an authority's mission could include, for example, (1) monitoring large or rapidly increasing exposures--such as to subprime mortgages--across firms and markets, rather than only at the level of individual firms or sectors; (2) assessing the potential for deficiencies in evolving risk-management practices, broad-based increases in financial leverage, or changes in financial markets or products to increase systemic risks; (3) analyzing possible spillovers between financial firms or between firms and markets, such as the mutual exposures of highly interconnected firms; and (4) identifying possible regulatory gaps, including gaps in the protection of consumers and investors, that pose risks for the system as a whole. Two areas of natural focus for a systemic risk authority would be the stability of systemically critical financial institutions and the systemically relevant aspects of the financial infrastructure that I discussed earlier.

 

Introducing a macroprudential approach to regulation would present a number of significant challenges. Most fundamentally, implementing a comprehensive systemic risk program would demand a great deal of the supervisory authority in terms of market and institutional knowledge, analytical sophistication, capacity to process large amounts of disparate information, and supervisory expertise.

Other challenges include defining the range of powers that a systemic risk authority would need to fulfill its mission and then integrating that authority into the currently decentralized system of financial regulation in the United States. On the one hand, it seems clear that any new systemic risk authority should rely on the information, assessments, and supervisory and regulatory programs of existing financial supervisors and regulators whenever possible. This approach would reduce the cost to both the private sector and the public sector and allow the systemic risk authority to leverage the expertise and knowledge of other supervisors. On the other hand, because the goal of any systemic risk authority would be to have a broader view of the financial system, simply relying on existing structures likely would be insufficient.

 

For example, a systemic risk authority would need broad authority to obtain information--through data collection and reports, or when necessary, examinations--from banks and key financial market participants, as well as from nonbank financial institutions that currently may not be subject to regular supervisory reporting requirements. A systemic risk authority likely would also need an appropriately calibrated ability to take measures to address identified systemic risks--in coordination with other supervisors, when possible, or independently, if necessary. The role of a systemic risk authority in setting standards for capital, liquidity, and risk-management practices for the financial sector also would need to be explored, given that these standards have both microprudential and macroprudential implications.

 

In general, much discussion will be needed regarding what can reasonably be expected from a macroprudential regime and how expectations, accountability, and authorities can best be aligned. Important decisions must be made about how the systemic risk regulation function should be structured and located within the government. Several existing agencies have data and expertise relevant to this task, so there are a variety of organizational options. In any structure, however, to ensure accountability, the scope of authorities and responsibilities must be clearly specified

 

Some commentators have proposed that the Federal Reserve take on the role of systemic risk authority; others have expressed concern that adding this responsibility would overburden the central bank. The extent to which this new responsibility might be a good match for the Federal Reserve depends a great deal on precisely how the Congress defines the role and responsibilities of the authority, as well as on how the necessary resources and expertise complement those employed by the Federal Reserve in the pursuit of its long-established core missions.

 

It seems to me that we should keep our minds open on these questions. We have been discussing them a good deal within the Federal Reserve System, and their importance warrants careful consideration by legislators and other policymakers. As a practical matter, however, effectively identifying and addressing systemic risks would seem to require the involvement of the Federal Reserve in some capacity, even if not in the lead role. As the central bank of the United States, the Federal Reserve has long figured prominently in the government's responses to financial crises. Indeed, the Federal Reserve was established by the Congress in 1913 largely as a means of addressing the problem of recurring financial panics. The Federal Reserve plays such a key role in part because it serves as liquidity provider of last resort, a power that has proved critical in financial crises throughout history. In addition, the Federal Reserve has broad expertise derived from its wide range of activities, including its role as umbrella supervisor for bank and financial holding companies and its active monitoring of capital markets in support of its monetary policy and financial stability objectives.

 

Conclusion

In the wake of the ongoing financial crisis, governments have moved quickly to establish a wide range of programs to support financial market functioning and foster credit flows to businesses and households. However, these necessary short-term steps must be accompanied by new policies to limit the incidence and impact of systemic risk. In my remarks today, I have emphasized the need to address the problems posed by firms that are perceived to be too big to fail, the importance of efforts to strengthen the financial infrastructure, the desirability of reducing the procyclical effects of capital regulation and accounting rules, and the potential benefits of taking a more macroprudential approach to the supervision and regulation of financial firms. Some of the policies I propose can be developed and implemented under the existing authority of financial regulators. Indeed, we are in the process of doing just that. In other cases, congressional action will be necessary to create the requisite authority and responsibility.

 

Financial crises will continue to occur, as they have around the world for literally hundreds of years. Even with the sorts of actions I have outlined here today, it is unrealistic to hope that financial crises can be entirely eliminated, especially while maintaining a dynamic and innovative financial system. Nonetheless, these steps should help make crises less frequent and less virulent, and so contribute to a better functioning national and global economy.

Share this post


Link to post
Share on other sites
Guest LAW_*

This article explains why Citigroup was profitable for the first two months of 2009. Things are looking up.

 

 

The so-called toxic assets are throwing off enormous cash flows and are dirt cheap at current prices (for example, well-structured AAA’s with a first call on all cash flows and a 35% buffer against losses from subprime mortgage collasteral). Second, spreads are so wide that banks make enormous profits lending. As long as the government allows them to borrow cheaply and avoid deposit runs, most of the banks can make money and rebuild capital in this environment, as Vikrim Pandit claims Citicorp is doing.

 

A great deal of confusion is generated by FAS 157 accounting, a point that the analysts at Tom Brown’s Bankstocks (among others) make again and again. Mark-to-market accounting creates instant insolvency at this point in the cycle.

 

The banks are the beneficiaries of panic, particularly those banks that own the top of the capitl structure (the “toxic” structured securities that skim the first cash flows and assign losses to other bondholders or providers of insurance). Citigroup actually may be one of the more profitable institutions in this environment. Would you rather own a AAA security backed by subprime collateral (or commercial mortgage backed securities), or a portfolio of “prime” consumer and commercial real estate loans? I use the term “prime” advisedly, for what was prime in 2007 may be prime beef on today’s grill. Wells Fargo and Bank of America were prime rather than subprime lenders and have a loan book which must absorb losses directly. Citi’s portfolio, I believe, is more concentrated in structured product with a high degree of loss protection.

 

Citicorp was the most aggressive buyer of asset-backed AAA’s through its Structured Investment Vehicles during 2005-2007, and its need to bring these assets back onto its balance sheet and de-lever at extremely discounted prices explains its mammoth loss during 2008. Now that its capital position is stabilized and it can hold its portfolio, Citigroup may be in a very good position to clip coupons at stupidly wide spread levels.

 

http://blog.atimes.net/?p=708

Share this post


Link to post
Share on other sites
Guest CQ
Warren Buffett remains optimistic about the long term, he told CNBC on Monday. "Everything will be all right," he said. "We do have the greatest economic machine that man has ever created."

 

"What is required is a commander in chief that's looked at like a commander in chief in a time of war," Buffett said, adding that the President needs to restore faith in the financial system, letting American know their money is safe, even in the event of another bank failure.

 

"If you don't trust where you have your money, the world stops," he told CNBC.

 

Buffett said that Americans need to accept that government actions aimed at helping the economy will inevitably help some people who made poor decisions that contributed to the problem in the first place. However, everyone is in the same boat now, he said.

 

"The people that behaved well are no doubt going to find themselves taking care of the people who didn't behave well," he said.

 

Buffett recommends that investors look for companies that deliver outstanding return on capital and produce substantial cash profits. He also suggests that you look for companies with a huge economic moat to protect them from competitors. You can identify companies with moats by looking for strong brands, alongside consistent or improving profit margins and returns on capital.

 

How do you determine the right buy price for shares in such companies? Buffett advises that you wait patiently for opportunities to purchase stocks at a significant discount to their intrinsic values -- as calculated by taking the present value of all future cash flows. Ultimately, he believes that "value will in time always be reflected in market price." When the market finally recognizes the true worth of your undervalued shares, you begin to earn solid returns.

Share this post


Link to post
Share on other sites
Guest National Economic Council

Remarks of Lawrence H. Summers, Director of the National Economic Council

Responding to an Historic Economic Crisis: The Obama Program

Brookings Institution, Washington, DC

March 13, 2009

 

I am glad to be here. This morning I want to describe our understanding of the root of our current economic crisis, talk about the rationale for the Administration’s recovery strategy, and connect our longer-term economic strategy to the central objective of sustained and healthy expansion.

 

Economic downturns historically are of two types. Most of those in post-World War II-America have been a by-product of the Federal Reserve’s efforts to control rising inflation. But an alternative source of recession comes from the spontaneous correction of financial excesses: the bursting of bubbles, de-leveraging in the financial sector, declining asset values, reduced demand, and reduced employment.

 

Unfortunately, our current situation reflects this latter, rarer kind of recession. On a global basis, $50 trillion dollars in global wealth has been erased over the last 18 months. This includes $7 trillion dollars in US stock market wealth which has vanished, and $6 trillion dollars in housing wealth that has been destroyed. Inevitably, this has led to declining demand, with GDP and employment now shrinking at among the most rapid rates since the second World War. 4.4 million jobs have already been lost and the unemployment rate now exceeds 8 percent.

 

Our single most important priority is bringing about economic recovery and ensuring that the next economic expansion, unlike it’s predecessors, is fundamentally sound and not driven by financial excess.

 

This is essential. Without robust and sustained economic expansion, we will not achieve any other national goal. We will not be able to project strength globally or reduce poverty locally. We will not be able to expand access to higher education or affordable health care. We will not be able to raise incomes for middle class families or create opportunities for new small businesses to thrive.

 

And so today, I will explain the rationale behind the President’s recovery program and our strategy for long-term economic growth. Our problems were not made in a day, or a month or a year, and they will not be solved quickly. But there is one enduring lesson in the history of financial crises: they all end.

 

I am confident that with the strong and sound policies the President has put forward and the passage of time, we will restore economic growth and regain financial stability, and find opportunity in this moment of crisis to assure that our future prosperity rests on a sound and sustainable foundation.

 

First, I’d like to describe how best to think about this crisis.

 

One of the most important lessons in any introductory economics course is that markets are self-stabilizing.

 

When there is an excess supply of wheat, its price falls. Farmers grow less and others consume more. The market equilibrates.

 

When the economy slows, interest rates fall. When interest rates fall, more people take advantage of credit, the economy speeds up, and the market equilibrates.

 

This is much of what Adam Smith had in mind when he talked about the “invisible hand.”

 

However, it was a central insight of Keynes’ General Theory that two or three times each century, the self-equilibrating properties of markets break down as stabilizing mechanisms are overwhelmed by vicious cycles. And the right economic metaphor becomes an avalanche rather than a thermostat. That is what we are experiencing right now.

 

Declining asset prices lead to margin calls and de-leveraging, which leads to further declines in prices.

 

Lower asset prices means banks hold less capital. Less capital means less lending. Less lending means lower asset prices.

 

Falling home prices lead to foreclosures, which lead home prices to fall even further.

 

A weakened financial system leads to less borrowing and spending which leads to a weakened economy, which leads to a weakened financial system.

 

Lower incomes lead to less spending, which leads to less employment, which leads to lower incomes.

 

An abundance of greed and an absence of fear on Wall Street led some to make purchases – not based on the real value of assets, but on the faith that there would be another who would pay more for those assets. At the same time, the government turned a blind eye to these practices and their potential consequences for the economy as a whole. This is how a bubble is born. And in these moments, greed begets greed. The bubble grows.

 

Eventually, however, this process stops – and reverses. Prices fall. People sell. Instead of an expectation of new buyers, there is an expectation of new sellers. Greed gives way to fear. And this fear begets fear.

 

This is the paradox at the heart of the financial crisis. In the past few years, we’ve seen too much greed and too little fear; too much spending and not enough saving; too much borrowing and not enough worrying. Today, however, our problem is exactly the opposite.

 

It is this transition from an excess of greed to an excess of fear that President Roosevelt had in mind when he famously observed that the only thing we had to fear was fear itself. It is this transition that has happened in the United States today.

 

What is the task of policy in such an environment?

 

While greed is no virtue, entrepreneurship and the search for opportunity is what we need today. We need a program that breaks these vicious cycles. We need to instill the trust that allows opportunity to overcome fear and enables families and businesses to again imagine a brighter future. And we need to create this confidence without allowing it to lead to unstable complacency.

 

While the economy is falling far short today, perhaps a trillion dollars or more short, we should never lose sight of its potential. We have the most productive workers in the world, the greatest universities and capacity for innovation, an incredible amount of resilience, entrepreneurship, and flexibility, and the most diverse and creative population of any major economy.

 

One striking statistic suggests the magnitude of the opportunity that is before us in restoring our economy to its potential. Earlier this week, the Dow Jones Industrial Average, adjusting for inflation according to the standard Consumer Price Index, was at the same level as it was in 1966, when Brookings scholars Charlie Schultze and Arthur Okun were helping to preside over the American economy.

 

While there could be many ways to question this calculation, that the market would be at essentially the same real level as it was in 1966 when there were no PCs, no internet, no flexible manufacturing, no software industry, and when our workforce was half and our net capital stock was a third of what it is today, may be regarded by some as the sale of the century. For policy-makers, it suggests the magnitude of the gains from restoring sustained economic growth.

 

Producing recovery and harnessing these opportunities, however, will depend upon the choices we make now. This is what the President’s program sets out to achieve.

 

Towards this end, the President is committed to an approach that moves aggressively on jobs, credit and housing, thereby attacking the vicious cycles I described earlier at each of their key nodes. In this effort, he has insisted that we all recognize that the risks of over-reaction are dwarfed by the risks of inaction.

 

The first component of the President’s program is direct support for jobs and income to engage the multiplier process in favor of economic expansion. Increases in income lead to financial repair which supports further increases in income. Rising employment will lead to rising spending, which leads to further increases in income and employment.

 

The Recovery and Reinvestment Act is the largest peacetime economic expansion program in the country’s history. It will inject nearly $800 billion into the economy, ¾ of it within the next 18 months. The Council of Economic Advisors’ estimates suggest that the Recovery and Reinvestment Act will save or create 3.5 million jobs. It will at the same time do some of the work that the nation has needed done for a long time—doubling renewable energy capacity in the next 3 years, supporting middle class incomes, modernizing ten thousand schools, and making the largest investment in the spine of our national economy – the nation’s infrastructure – since Dwight Eisenhower’s investment 50 years ago.

 

Already, its impact is being felt by cops and teachers who would have been laid off but whose jobs have been saved—it may retain14,000 teachers in New York alone. It will, for most American workers, be felt in the coming weeks as withholding schedules are adjusted, in continuing unemployment insurance benefits and health benefits for hundreds-of-thousands of workers who already would have done without, and in contracting already underway with respect to tens-of-billions of dollars of infrastructure projects across the country.

 

It is surely too early to gauge the broader economic impact of the President’s program. But it is modestly encouraging that since it began to take shape, consumer spending in the US, which was collapsing during the holiday season, appears, according to a number of indicators, to have stabilized.

 

The second major portion of the President’s strategy is the financial stability plan. It is directed at addressing the vicious cycles associated with de-leveraging and credit contraction. A strong flow of credit is necessary because factories need it to buy equipment, stores need it to stock their shelves, students need it to attend college, consumers need it to buy cars, and businesses need it to meet their payrolls.

 

The approach rests on two pillars: The first is a trillion dollars for financing or purchasing mortgages, student small business loans, and other financial instruments through the TALF (or what is now called the Consumer Business Lending Initiative), the GSEs, and public-private investment facilities that Secretary Geithner will be detailing in the weeks ahead.

 

Reactivating the capital markets is essential to realistic asset valuation, to restarting nonbank lending, and to enabling banks to divest toxic assets when they judge it appropriate.

 

The second pillar of the program is assuring that our banking system is well capitalized and in a position to lend on a substantial scale. The stress tests now underway will enable a realistic assessment of the position of each different institution and appropriate responses in each case to assure their ability to meet their commitments and lend on a substantial scale. And as the President said in his joint address to Congress, “When we learn that a major bank has serious problems, we will hold accountable those responsible, force the necessary adjustments, provide the support to clean up their balance sheets, and assure the continuity of a strong, viable institution that can serve our people and our economy.”

 

As a result of government interventions in the financial markets, key credit spreads are already substantially narrower than they were last fall. There are some indications that the expectations of future actions have been a positive in reducing credit costs in a number of key areas. It is our hope and expectation that further support for capital markets, transparency with respect to the condition of banks, and infusion of capital into the banking system, will create virtuous circles in which stronger markets beget stronger financial institutions, which beget stronger markets, leading ultimately to financial and economic recovery.

 

The third component of the President’s recovery strategy is addressing the housing market. The vicious cycle of rising foreclosures leading to declining home prices, leading to rising foreclosures – must be contained. This problem is at the heart of our economic crisis.

 

Through direct interventions, using the GSE’s to bring down mortgage rates and make possible refinancings for credit-worthy borrowers who have lost their home equity as house prices decline, and through setting standards and providing significant financial subsidies for measures directed at payment relief to prevent foreclosures, we are achieving several objectives.

 

Housing wealth and its contribution to expenditures is being maintained. And critically lower mortgage rates mean more income for consumers, and function like tax cuts in support of consumer spending. Depending on market conditions the administration’s program may save American households more than 150 billion dollars over the next 5 years.

 

Taken together, these steps to support incomes, increase the flow of credit, and normalize housing market conditions address each of the vicious cycles that is leading to decline.

 

With the passage of time, it will permit the re-engagement of the normal processes of economic growth: rising incomes and employment, greater credit flows, increased spending, a stronger US economy and a stronger global economy. They will reinforce crucial dynamics that will also operate to promote recovery.

 

For example, about 14 million new car sales are necessary for replacement and to accommodate rising population growth. Yet car sales are now running at an annual rate of about 9 million. New household formation requires something like 1.7 million new housing units a year and housing starts are now running about 400,000 a year. Once the inventory is worked off, investment will increase. Historical experience suggests that rapid inventory decline such as we have observed in recent months is followed by increased production to rebuild inventories.

 

Of fundamental importance is ensuring that we do not exchange a painful recession for another unsustainable expansion. That would not only be irresponsible – it would be counterproductive. We have seen what happens when we pursue policies that produce short-term, instead of durable and sustainable growth.

 

We have seen housing prices reach unsustainably high levels and credit spreads reach unsustainably low levels in the middle of this decade. And we saw bubbles in technology in the late 1990s.

 

Bubble driven economic growth is problematic because of disruption and dislocation – affecting those who took part in the bubble’s excesses and those who did not. And, it is not entirely healthy even while it lasts. Between 2000 and 2007 – a period of solid aggregate economic growth – the typical working-age household saw their income decline by nearly $2000. The decline in middle-class incomes even as the incomes of the top 1% skyrocketed has a number of causes, but one of them is surely rising asset prices and the fact that financial sector profits exploded to the point to where they represented 40% of all corporate profits in 2006.

 

Confidence today will be enhanced if we put measures in place that assure that the coming expansion will be more sustainable and fair in the distribution of benefits than its predecessor. That is why the President has priorities that go beyond the immediate goal of containing the downturn and promoting recovery.

 

An overhaul of our financial regulatory system is one such priority. In little more than two decades, we’ve witnessed the stock market crash of 1987, the Savings and Loan scandals, the decline of the real estate market, the rapid decline of Asian markets, the collapse of the NASDAQ telecom bubble, Enron, Long Term Capital Management, and today’s crisis. This is roughly one crisis every 2.5 years. We can and must do better.

 

There is room for debate about how regulation should be enhanced, but not about whether we can stay with the status quo. Treasury Secretary Geithner will be laying out the Administration’s approach in some detail in the coming weeks and the President is eager to take this issue up with his fellow leaders at the April G-20 meeting. While the discussion can get pretty technical quickly, some things should be clear:

 

Regulatory agencies should never be placed in competition for the privilege of regulating particular financial institutions.

 

Globally, the United States must lead a leveling-up of regulatory standards, not as has happened all too often in the recent past, trying to win a race to the bottom.

 

No substantially interconnected institution or market on which the system depends should be free from rigorous public scrutiny.

 

Required levels of capital and liquidity must be set with a view toward protecting the system, even in very difficult times.

 

And there must be far more vigorous and serious efforts to discourage improper risk taking through transparency and accountability for errors.

 

An additional requirement for financial stability is that the government’s own finances be stable. When I left Washington eight years ago, people were debating what to do when there was no more federal debt. That is hardly our problem today. I hope that all of those who participate in the debate over this year’s budget, whether they agree or disagree with President Obama’s priorities, will share his commitment to truthful and realistic budgeting and fiscal sustainability to ensure that after recovery, the ratio of the nation’s debt to its income stabilizes.

 

If growth in the coming years is not to be driven by asset price inflation-induced consumption, other engines of growth must be identified. These forms of growth should be sustainable and shared by the majority of American households.

 

Stronger exports are one sound foundation for sustainable expansion. That is why along with strengthening financial regulation, the President will be working on the global growth strategy at the G20. Priorities will include spurring demand around the world and assuring the adequacy of funding for emerging markets.

 

These are issues both for global recovery - at a time when 2009 is likely to be the first year of negative global growth since the Second World War - and for a healthy, less debt-dependent US expansion.

 

But moving away from foreign debt-financed growth is only one component of ensuring a healthy expansion. An additional component is addressing our healthcare system. It is no accident that the period of the most rapidly rising wages for middle income families was the 1990s when healthcare cost inflation was relatively well controlled. Our ability to produce competitively in the United States will be enhanced if we contain healthcare costs. I have heard it said that GM’s largest supplier is not a parts company or a tire company, but Blue Cross Blue Shield.

 

Containing healthcare costs help keep the economy sustainable and so does improving quality and access. A study I helped sponsor while at Harvard demonstrated that less than 1 in 4 Americans with hypertension had it under control. This means huge costs for treating strokes down the road as well as children who will never know their grandparents. By investing in healthcare now, we can make our economy, as well as our people, healthier. We will also increase confidence in the ultimate stability of the nation’s finances.

 

An equally important engine of recovery can be investment in reducing our energy vulnerability and our contribution to climate change. That is why the Recovery and Reinvestment Act provided for doubling renewable energy and weatherizing 75 percent of federal buildings. It is also why the President’s budget points toward strong action to implement a market-based cap-and-trade system, after the economy recovers, beginning in 2012.

 

Let’s be realistic. Sooner or later we will have to reduce our dependence on foreign energy and contain our carbon emissions. As Federal Reserve Chairman Ben Bernanke’s doctoral thesis demonstrated 30 years ago, unresolved uncertainty can be a major inhibitor of investment. If energy prices will trend higher, you invest one way; if energy prices will be lower, you invest a different way. But if you don’t know what prices will do, often you do not invest at all. That is why we must move forward as rapidly as possible to reduce uncertainty and carefully create a new cap-and-trade regime.

 

There is another benefit as well. As many enlightened business leaders have recognized, the confident expectation that pricing policy will discourage carbon use in the future will spur a whole range of green investments in the present, when our economy can benefit from all the investment it can get. And in the long run, we believe this will create millions of new jobs. And the evidence is clear: we can choose to lead these industries, with all the commensurate economic and political and environmental benefits, or we can choose to lose out on these jobs and these opportunities.

 

Finally, while America’s education system may not be directly implicated in the current economic crisis, it is surely the case that improving it is essential to the long-run growth of the economy and to ensuring that this growth is shared, lifting up more families who get the opportunities afforded by a better education and expanded access to college.

 

I’ve spoken in the language of economists and economic policy – budgets and prices, capitalization and interest rates. That is because I believe there is no substitute for careful analysis in setting economic policy. But as we debate these abstractions, we must always keep in mind that our economic policies affect real lives – and economic problems cause real pain.

 

The decisions we make will determine whether children will look to their parents with pride when they come home from work – or fear that their home will be lost. Whether families will experience the prosperity this nation is capable of producing, or the disruption and dislocation that too many have found instead.

 

President Obama inherited an economy in crisis. This is not a crisis we sought – nor is it one we created. But it is one, under the President’s leadership, that we have answered. The Obama Administration is embarking on what I believe is the boldest economic program to promote recovery and expansion in two generations. No one can know just when its positive effects will be fully felt. No one can predict when this crisis will be resolved. But in resolution, I am confident there is enormous opportunity for both Americans and for the United States of America. We can and we will emerge more prosperous, stronger, wiser, and better prepared for the future.

Share this post


Link to post
Share on other sites
Guest Sam I Am

If Americans are given the choice, they will do the right thing. Americans are the best in the world when we collectively agree on something that we want to get behind. Americans are finally realizing that there's a connection to our lives outside of our little bubbles. People like you and I need come up with ideas we think are better, and with the right combination of skills, we will bring it to market and they will work. You just have to believe in the American Dream.

Share this post


Link to post
Share on other sites
Guest Bill Harold

Very true. I would add that you should surround yourself with individuals who thrive on crises, who like to grab hold of things and do something, who have a primal impatience to get their hands around a problem and shake it around until a golden solution presents itself.

Share this post


Link to post
Share on other sites
Guest LaRouche PAC

On March 7, Lyndon LaRouche issued a declaration of war against the British Empire and its Wall Street assets, who have laid siege to the Obama White House and are fully committed to the destruction of the United States as a Republic. This multi-front attack against the Presidency is aimed, first and foremost, at preventing the President from adopting Franklin Roosevelt type policies to deal with the current financial breakdown crisis, specifically a bankruptcy reorganization of the entire City of London-dominated system.

 

The current assault, LaRouche said, is a reincarnation of the overtly pro-Mussolini and pro-Hitler American Liberty League of the 1930s, which did everything in its power to destroy FDR, including putsch attempts. It is now being steered, inside the United States itself, by a Wall Street and London-bankrolled rightwing apparatus, led by the American Enterprise Institute, the Heritage Foundation, the Cato Institute, and key individuals like Newt Gingrich, Rush Limbaugh, and Rupert Murdoch, as well as anti-FDR propagandists such as Amity Shlaes and Jim Powell.

 

``We are going to be relentless in pointing out, that all of the people who are lined up against the President, today, from Wall Street and related environs, are actually fascists, in the tradition of the Mussolini-loving and Hitler-loving Liberty League of the 1930s,'' LaRouche said.

 

Unfortunately, the U.S. population, including most Congresmen and institutional representatives, ``don't know what the defense of the nation is any more. They've been involved in so many fake wars, they don't know what a real one is! And we're in a real war, to save the United States from this kind of subversion, which is coming out of London.... We are going to defend the Presidency, and we're going to make everybody very miserable, who doesn't agree with us that this Presidency is going to be defended.''

 

A source close to the Administration recently commented that Wall Street is running a ``berserker'' propaganda campaign, branding President Obama as a ``radical Rooseveltian, who is killing the banks''. In the House, Minority Leader John Boehner demanded, in response to the release of the first Obama Administration budget proposals, which are admittedly terribly flawed, that the President impose a ``spending freeze so we can get our budget in order''. According to our sources, on their way out the door, George Bush and Dick Cheney spent the entire White House budget for 2009, to make sure that the new Administration would be faced with impossible obstacles.

 

Another front in the assault has been opened up by ostensibly Democratic Party circles, such as those of George Soros, who continue to put countless amounts of money into the campaign to legalize drugs in the United States, and to simultaneously end the ``war'' on drug traficking and the drug cartels, being waged by Attorney General Holder. This Soros-led offensive was fully endorsed by the London Economist, in its March 7-13 cover-story, calling for drug legalization as ``the least bad policy''.

 

In addition, British Prime Minister Gordon Brown and former Prime Minister Tony Blair were both in Washington last week, to throw their weight behind the assault on the Presidency. Gordon Brown's efforts to win President Obama over to London's agenda of massive bailout, hyperinflation, and Schachtian austerity at the G-20 summit, failed miserably.

 

However, Tony Blair was apparently more successful in his closed-door session on Capitol Hill, where he pressured Congressmen and corporate CEOs, to focus attention on the ``green agenda'' of climate change and global warming, rather than dealing with the financial crisis through bankruptcy reorganization and regulation.

Share this post


Link to post
Share on other sites
Guest Think Global

G-20 includes two-thirds of world’s population

 

The G-20 represents about 90 percent of global gross national product, 80 percent of world trade (including trade within the European Union) as well as two-thirds of the world's population.

 

The G-20 comprises Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, and the United States of America, plus the European Union, represented by the rotating Council presidency and the European Central Bank. The Managing Director of the International Monetary Fund and the President of the World Bank, plus the chairs of the International Monetary and Financial Committee and Development Committee of the IMF and World Bank, also participate in G-20 meetings.

 

The finance ministers and central bank governors from the Group of Twenty (G-20) said they were determined to revive growth around the world. “Our key priority now is to restore lending by tackling, where needed, problems in the financial system head on, through continued liquidity support, bank recapitalization, and dealing with impaired assets, through a common framework,” a statement at the conclusion of a two-day meeting said.

 

They agreed to ensure that all systemically important financial institutions, markets, and financial instruments are subject to appropriate regulation and oversight, and that hedge funds or their managers are registered and disclose appropriate information to assess the risk they pose.

 

The communiqué called on the IMF to assess the actions taken by governments so far to restore world growth and advise on what still needed to be done to combat the crisis, which erupted in the U.S. subprime market in mid-2007. Governments around the world have announced stimulus measures and cut interest rates to counter the recession.

 

U.S. Treasury Secretary Tim Geithner said the G-20 supported a U.S. proposal for a substantial increase in emergency IMF resources through a major enlargement of the New Arrangements to Borrow and expansion of its membership. "The object of the exercise is to strengthen the IMF and its ability to do more," said South African Finance Minister Trevor Manuel.

 

So far the IMF has lent some $55 billion to countries around the world caught up in the crisis. IMF Managing Director Dominique Strauss-Kahn has been pressing for a at least a doubling of IMF resources to $500 billion as a precaution in case the crisis worsens and more countries need to access money from the Fund. With trade plummeting and capital flows drying up, Strauss-Kahn has said that the world has entered a period of below zero growth, in a phase that he has dubbed the “Great Recession.”

 

The G-20 said they wanted to ensure that multilateral development banks have the capital they need, beginning with a substantial capital increase for the Asian Development Bank, and put it to best use to help the world's poorest.

 

The S&P 500 index rallied 11 per cent to 756.55 points, recovering from a 12-year low of 676.53 on March 9.

Share this post


Link to post
Share on other sites
Guest A Friend of Dusty
The real truth is the stock market and housing market are falling down to their real values. Now is the time you really can make great money. Don't waste it on unnecessary items.

 

President Obama,

You need to do away with the Capital Gains Tax.

 

Your message has been heard ;)

 

This is America's story -- a place where we believe all things are possible; where we are limited only by our willingness to take a chance and work hard to achieve our dreams." The President emphasized what has already been done through the Recovery Act: raising the guarantees on SBA loans to 90 percent, eliminating costly fees for borrowers and lenders, and a series of tax cuts for small businesses and tax incentives to encourage investments in small businesses. He noted further that in his budget, he proposes permanently reducing to zero the capital gains tax for investments in small or startup businesses, as well as instituting tax credits for health care as part of his broader health reform effort.

 

http://www.whitehouse.gov/blog/09/03/16/He...or-AIG-bonuses/

Share this post


Link to post
Share on other sites
Guest Foreign Trader
Buffett recommends that investors look for companies that deliver outstanding return on capital and produce substantial cash profits. He also suggests that you look for companies with a huge economic moat to protect them from competitors. You can identify companies with moats by looking for strong brands, alongside consistent or improving profit margins and returns on capital.

 

How do you determine the right buy price for shares in such companies? Buffett advises that you wait patiently for opportunities to purchase stocks at a significant discount to their intrinsic values -- as calculated by taking the present value of all future cash flows. Ultimately, he believes that "value will in time always be reflected in market price." When the market finally recognizes the true worth of your undervalued shares, you begin to earn solid returns.

 

Good topic. I see a change in the market overall. There is more of an orientation to run simultaneous shorts and longs in the same stock than at any time that I can remember.

Share this post


Link to post
Share on other sites
Guest Think Global

I noticed this story on the Reuters wire. There is definitely something good happenning.

 

HONG KONG, March 13 - Japan's Nikkei average jumped more than 5 percent and led Asian stocks higher on Friday, propelled by growing investor confidence that large U.S. banks will survive without government takeovers and may even profit.

 

The Swiss franc fell to a near three-month low against the euro before recovering, after its biggest ever one-day drop against the single currency on Thursday on news the Swiss National Bank sold francs to halt deflation.

 

The move left some analysts wondering if it was the first shot in a currency war for trade competitiveness.

 

Citigroup Inc told Reuters the bank does not need any more emergency cash from Washington and expects to stay private, while Bank of America said it was profitable in January and February, easing fears about further instability in the banking industry and sparking a rush back into equities.

 

"The economic situation seems to be better than what people were saying at the beginning of the year -- a view that has come about now that it seems that U.S. banks' earnings may not be atrocious," said Masaru Hamasaki, senior strategist at Toyota Asset Management in Tokyo.

 

Yet for every piece of news that improved investor confidence, there was another that left questions about the sustainability of the market rebound.

 

For example, Wall Street chalked up its best three-day run since November after Standard & Poor's raised its outlook on General Electric Co's credit ratings to stable from negative, though it stripped the company of its "AAA" status.

 

On the other hand, Berkshire Hathaway, billionaire investor Warren Buffet's conglomerate, lost its AAA rating and has a negative outlook from Fitch Ratings.

 

Tokyo's Nikkei climbed 5.2 percent, and posted its biggest weekly gain of the year. Shares of Japan's top bank Mitsubishi UFJ Financial Group climbed 5.8 percent.

 

The MSCI index of Asia Pacific stocks outside Japan rose 3.6 percent, maintaining this week's up trend and hitting its highest level in about three weeks. The materials, energy and financial sectors were the biggest boosts.

 

Bank stocks were also the prime movers behind the 4.4 percent rise in Hong Kong's Hang Seng index. HSBC rose 5.7 percent, as investors bought back the beaten down shares after an $18 billion rights issue.

 

Key indexes in Singapore and India rose 5.6 and 5.3 percent, respectively, while Australia and Taiwan rose 3.4 and 3 percent, respectively.

 

But China stocks edged down 0.2 percent as investors fretted about mixed economic data and the likelihood of weak corporate earnings for the first quarter.

 

South Korea's main stock index also fell 0.2 percent, with losses by banks and crude refiners weighing on the index.

 

Comments from Bank of America, Citigroup and JPMorgan this week have put downward pressure on the most widely watched gauge of market volatility, the Chicago Board Options Exchange's volatility index, or the VIX.

 

The index closed just above its 200-day moving average on Thursday, and has not closed below it since September 2008.

Share this post


Link to post
Share on other sites
Guest Enron

The Oracle of Omaha made some bad decisions last year. Especially with ConocoPhillips and General Re insurance operations.

 

Buffet has stated that the "investment world has gone from underpricing risk to overpricing it," which he said is reflected by investor appetite for Treasury bonds. Future historians will comment on the Internet bubble of the 1990s and the housing bubble of the early 2000s, he said, but "the U.S. Treasury-bond bubble of late 2008 may be regarded as almost equally extraordinary."

Share this post


Link to post
Share on other sites
Guest Human_*

After Barack obama dumb down the economy the way HE DID "Just to push his agenda through".

 

I'm still waiting for Regulation that will keep us from going through this AGAIN, and President Obama Has still NOT addressed this as well.

 

Barack Obama didn't even have the sense enough to hold an Economic Summit with Economists, and forensic accountants on how to best approach this on top of it all "For a Smart guy? He sure IS making alot of DUMB decisions”.

 

Having the most expensive inauguration in History,LAVISH White House parties that are NOT related to National, International Business, as well as Public Relations as it applies to the said above, DOES NOT inspire me in ANY WAY SHAPE OR FORM.

Share this post


Link to post
Share on other sites
Guest
You are commenting as a guest. If you have an account, please sign in.
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoticons maximum are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

×