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Economic Recovery Remains Vulnerable

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Chairman Ben S. Bernanke

At the Federal Reserve Bank of Kansas City Economic Symposium, Jackson Hole, Wyoming

August 27, 2010

 

The Economic Outlook and Monetary Policy

 

The annual meeting at Jackson Hole always provides a valuable opportunity to reflect on the economic and financial developments of the preceding year, and recently we have had a great deal on which to reflect. A year ago, in my remarks to this conference, I reviewed the response of the global policy community to the financial crisis.1 On the whole, when the eruption of the Panic of 2008 threatened the very foundations of the global economy, the world rose to the challenge, with a remarkable degree of international cooperation, despite very difficult conditions and compressed time frames. And when last we gathered here, there were strong indications that the sharp contraction of the global economy of late 2008 and early 2009 had ended. Most economies were growing again, and international trade was once again expanding.

 

Notwithstanding some important steps forward, however, as we return once again to Jackson Hole I think we would all agree that, for much of the world, the task of economic recovery and repair remains far from complete. In many countries, including the United States and most other advanced industrial nations, growth during the past year has been too slow and joblessness remains too high. Financial conditions are generally much improved, but bank credit remains tight; moreover, much of the work of implementing financial reform lies ahead of us. Managing fiscal deficits and debt is a daunting challenge for many countries, and imbalances in global trade and current accounts remain a persistent problem.

 

This list of concerns makes clear that a return to strong and stable economic growth will require appropriate and effective responses from economic policymakers across a wide spectrum, as well as from leaders in the private sector. Central bankers alone cannot solve the world's economic problems. That said, monetary policy continues to play a prominent role in promoting the economic recovery and will be the focus of my remarks today. I will begin with an update on the economic outlook in the United States and then review the measures that the Federal Open Market Committee (FOMC) has taken to support the economic recovery and maintain price stability. I will conclude by discussing and evaluating some policy options that the FOMC has at its disposal, should further action become necessary.

 

The Economic Outlook

 

As I noted at the outset, when we last gathered here, the deep economic contraction had ended, and we were seeing broad stabilization in global economic activity and the beginnings of a recovery. Concerted government efforts to restore confidence in the financial system, including the aggressive provision of liquidity by central banks, were essential in achieving that outcome. Monetary policies in many countries had been eased aggressively. Fiscal policy--including stimulus packages, expansions of the social safety net, and the countercyclical spending and tax policies known collectively as automatic stabilizers--also helped to arrest the global decline. Once demand began to stabilize, firms gained sufficient confidence to increase production and slow the rapid liquidation of inventories that they had begun during the contraction. Expansionary fiscal policies and a powerful inventory cycle, helped by a recovery in international trade and improved financial conditions, fueled a significant pickup in growth.

 

At best, though, fiscal impetus and the inventory cycle can drive recovery only temporarily. For a sustained expansion to take hold, growth in private final demand--notably, consumer spending and business fixed investment--must ultimately take the lead. On the whole, in the United States, that critical handoff appears to be under way.

 

However, although private final demand, output, and employment have indeed been growing for more than a year, the pace of that growth recently appears somewhat less vigorous than we expected. Notably, since stabilizing in mid-2009, real household spending in the United States has grown in the range of 1 to 2 percent at annual rates, a relatively modest pace. Households' caution is understandable. Importantly, the painfully slow recovery in the labor market has restrained growth in labor income, raised uncertainty about job security and prospects, and damped confidence. Also, although consumer credit shows some signs of thawing, responses to our Senior Loan Officer Opinion Survey on Bank Lending Practices suggest that lending standards to households generally remain tight.

 

The prospects for household spending depend to a significant extent on how the jobs situation evolves. But the pace of spending will also depend on the progress that households make in repairing their financial positions. Among the most notable results to emerge from the recent revision of the U.S. national income data is that, in recent quarters, household saving has been higher than we thought--averaging near 6 percent of disposable income rather than 4 percent, as the earlier data showed. On the one hand, this finding suggests that households, collectively, are even more cautious about the economic outlook and their own prospects than we previously believed. But on the other hand, the upward revision to the saving rate also implies greater progress in the repair of household balance sheets. Stronger balance sheets should in turn allow households to increase their spending more rapidly as credit conditions ease and the overall economy improves.

 

Household finances and attitudes also bear heavily on the housing market, which has generally remained depressed. In particular, home sales dropped sharply following the recent expiration of the homebuyers' tax credit. Going forward, improved affordability--the result of lower house prices and record-low mortgage rates--should boost the demand for housing. However, the overhang of foreclosed-upon and vacant housing and the difficulties of many households in obtaining mortgage financing are likely to continue to weigh on the pace of residential investment for some time yet.

 

In the business sector, real investment in equipment and software rose at an annual rate of more than 20 percent over the first half of the year. Some of these gains no doubt reflected spending that had been deferred during the crisis, including investments to replace or update existing equipment. Consequently, investment in equipment and software will almost certainly increase more slowly over the remainder of this year, though it should continue to advance at a solid pace. In contrast, outside of a few areas such as drilling and mining, business investment in structures has continued to contract, although the rate of contraction appears to be slowing.

 

Although most firms faced problems obtaining credit during the depths of the crisis, over the past year or so a divide has opened between large firms that are able to tap public securities markets and small firms that largely depend on banks. Generally speaking, large firms in good financial condition can obtain credit easily and on favorable terms; moreover, many large firms are holding exceptionally large amounts of cash on their balance sheets. For these firms, willingness to expand--and, in particular, to add permanent employees--depends primarily on expected increases in demand for their products, not on financing costs. Bank-dependent smaller firms, by contrast, have faced significantly greater problems obtaining credit, according to surveys and anecdotes. The Federal Reserve, together with other regulators, has been engaged in significant efforts to improve the credit environment for small businesses. For example, through the provision of specific guidance and extensive examiner training, we are working to help banks strike a good balance between appropriate prudence and reasonable willingness to make loans to creditworthy borrowers. We have also engaged in extensive outreach efforts to banks and small businesses. There is some hopeful news on this front: For the most part, bank lending terms and conditions appear to be stabilizing and are even beginning to ease in some cases, and banks reportedly have become more proactive in seeking out creditworthy borrowers.

 

Incoming data on the labor market have remained disappointing. Private-sector employment has grown only sluggishly, the small decline in the unemployment rate is attributable more to reduced labor force participation than to job creation, and initial claims for unemployment insurance remain high. Firms are reluctant to add permanent employees, citing slow growth of sales and elevated economic and regulatory uncertainty. In lieu of adding permanent workers, some firms have increased labor input by increasing workweeks, offering full-time work to part-time workers, and making extensive use of temporary workers.

 

Besides consumption spending and business fixed investment, net exports are a third source of demand for domestic production. The substantial recovery in international trade is a very positive development for the global economy; for the United States, improving export markets are an important reason that manufacturing has been a leading sector in the recovery. Like others, we were surprised by the sharp deterioration in the U.S. trade balance in the second quarter. However, that deterioration seems to have reflected a number of temporary and special factors. Generally, the arithmetic contribution of net exports to growth in the gross domestic product tends to be much closer to zero, and that is likely to be the case in coming quarters.

 

Overall, the incoming data suggest that the recovery of output and employment in the United States has slowed in recent months, to a pace somewhat weaker than most FOMC participants projected earlier this year. Much of the unexpected slowing is attributable to the household sector, where consumer spending and the demand for housing have both grown less quickly than was anticipated. Consumer spending may continue to grow relatively slowly in the near term as households focus on repairing their balance sheets. I expect the economy to continue to expand in the second half of this year, albeit at a relatively modest pace.

 

Despite the weaker data seen recently, the preconditions for a pickup in growth in 2011 appear to remain in place. Monetary policy remains very accommodative, and financial conditions have become more supportive of growth, in part because a concerted effort by policymakers in Europe has reduced fears related to sovereign debts and the banking system there. Banks are improving their balance sheets and appear more willing to lend. Consumers are reducing their debt and building savings, returning household wealth-to-income ratios near to longer-term historical norms. Stronger household finances, rising incomes, and some easing of credit conditions will provide the basis for more-rapid growth in household spending next year.

 

Businesses' investment in equipment and software should continue to grow at a healthy pace in the coming year, driven by rising demand for products and services, the continuing need to replace or update existing equipment, strong corporate balance sheets, and the low cost of financing, at least for those firms with access to public capital markets. Rising sales and increased business confidence should also lead firms to expand payrolls. However, investment in structures will likely remain weak. On the fiscal front, state and local governments continue to be under pressure; but with tax receipts showing signs of recovery, their spending should decline less rapidly than it has in the past few years. Federal fiscal stimulus seems set to continue to fade but likely not so quickly as to derail growth in coming quarters.

 

Although output growth should be stronger next year, resource slack and unemployment seem likely to decline only slowly. The prospect of high unemployment for a long period of time remains a central concern of policy. Not only does high unemployment, particularly long-term unemployment, impose heavy costs on the unemployed and their families and on society, but it also poses risks to the sustainability of the recovery itself through its effects on households' incomes and confidence.

 

Maintaining price stability is also a central concern of policy. Recently, inflation has declined to a level that is slightly below that which FOMC participants view as most conducive to a healthy economy in the long run. With inflation expectations reasonably stable and the economy growing, inflation should remain near current readings for some time before rising slowly toward levels more consistent with the Committee's objectives. At this juncture, the risk of either an undesirable rise in inflation or of significant further disinflation seems low. Of course, the Federal Reserve will monitor price developments closely.

 

In the remainder of my remarks I will discuss the policies the Federal Reserve is currently using to support economic recovery and price stability. I will also discuss some additional policy options that we could consider, especially if the economic outlook were to deteriorate further.

 

Federal Reserve Policy

 

In 2008 and 2009, the Federal Reserve, along with policymakers around the world, took extraordinary actions to arrest the financial crisis and help restore normal functioning in key financial markets, a precondition for economic stabilization. To provide further support for the economic recovery while maintaining price stability, the Fed has also taken extraordinary measures to ease monetary and financial conditions.

 

Notably, since December 2008, the FOMC has held its target for the federal funds rate in a range of 0 to 25 basis points. Moreover, since March 2009, the Committee has consistently stated its expectation that economic conditions are likely to warrant exceptionally low policy rates for an extended period. Partially in response to FOMC communications, futures markets quotes suggest that investors are not anticipating significant policy tightening by the Federal Reserve for quite some time. Market expectations for continued accommodative policy have in turn helped reduce interest rates on a range of short- and medium-term financial instruments to quite low levels, indeed not far above the zero lower bound on nominal interest rates in many cases.

 

The FOMC has also acted to improve market functioning and to push longer-term interest rates lower through its large-scale purchases of agency debt, agency mortgage-backed securities (MBS), and longer-term Treasury securities, of which the Federal Reserve currently holds more than $2 trillion. The channels through which the Fed's purchases affect longer-term interest rates and financial conditions more generally have been subject to debate. I see the evidence as most favorable to the view that such purchases work primarily through the so-called portfolio balance channel, which holds that once short-term interest rates have reached zero, the Federal Reserve's purchases of longer-term securities affect financial conditions by changing the quantity and mix of financial assets held by the public. Specifically, the Fed's strategy relies on the presumption that different financial assets are not perfect substitutes in investors' portfolios, so that changes in the net supply of an asset available to investors affect its yield and those of broadly similar assets. Thus, our purchases of Treasury, agency debt, and agency MBS likely both reduced the yields on those securities and also pushed investors into holding other assets with similar characteristics, such as credit risk and duration. For example, some investors who sold MBS to the Fed may have replaced them in their portfolios with longer-term, high-quality corporate bonds, depressing the yields on those assets as well.

The logic of the portfolio balance channel implies that the degree of accommodation delivered by the Federal Reserve's securities purchase program is determined primarily by the quantity and mix of securities the central bank holds or is anticipated to hold at a point in time (the "stock view"), rather than by the current pace of new purchases (the "flow view"). In support of the stock view, the cessation of the Federal Reserve's purchases of agency securities at the end of the first quarter of this year seems to have had only negligible effects on longer-term rates and spreads.

 

The Federal Reserve did not hold the size of its securities portfolio precisely constant after it ended its agency purchase program earlier this year. Instead, consistent with the Committee's goal of ultimately returning the portfolio to one consisting primarily of Treasury securities, we adopted a policy of re-investing maturing Treasuries in similar securities while allowing agency securities to run off as payments of principal were received. To date, we have realized about $140 billion of repayments of principal on our holdings of agency debt and MBS, most of it prior to the end of the purchase program. Continued repayments at this pace, together with the policy of not re-investing the proceeds, were expected to lead to a slight reduction in policy accommodation over time.

 

However, more recently, as the pace of economic growth has slowed somewhat, longer-term interest rates have fallen and mortgage refinancing activity has picked up. Increased refinancing has in turn led the Fed's holding of agency MBS to run off more quickly than previously anticipated. Although mortgage prepayment rates are difficult to predict, under the assumption that mortgage rates remain near current levels, we estimated that an additional $400 billion or so of MBS and agency debt currently in the Fed's portfolio could be repaid by the end of 2011.

 

At their most recent meeting, FOMC participants observed that allowing the Federal Reserve's balance sheet to shrink in this way at a time when the outlook had weakened somewhat was inconsistent with the Committee's intention to provide the monetary accommodation necessary to support the recovery. Moreover, a bad dynamic could come into at play: Any further weakening of the economy that resulted in lower longer-term interest rates and a still-faster pace of mortgage refinancing would likely lead in turn to an even more-rapid runoff of MBS from the Fed's balance sheet. Thus, a weakening of the economy might act indirectly to increase the pace of passive policy tightening--a perverse outcome. In response to these concerns, the FOMC agreed to stabilize the quantity of securities held by the Federal Reserve by re-investing payments of principal on agency securities into longer-term Treasury securities. We decided to reinvest in Treasury securities rather than agency securities because the Federal Reserve already owns a very large share of available agency securities, suggesting that reinvestment in Treasury securities might be more effective in reducing longer-term interest rates and improving financial conditions with less chance of adverse effects on market functioning. Also, as I already noted, reinvestment in Treasury securities is more consistent with the Committee's longer-term objective of a portfolio made up principally of Treasury securities. We do not rule out changing the reinvestment strategy if circumstances warrant, however.

 

By agreeing to keep constant the size of the Federal Reserve's securities portfolio, the Committee avoided an undesirable passive tightening of policy that might otherwise have occurred. The decision also underscored the Committee's intent to maintain accommodative financial conditions as needed to support the recovery. We will continue to monitor economic developments closely and to evaluate whether additional monetary easing would be beneficial. In particular, the Committee is prepared to provide additional monetary accommodation through unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly. The issue at this stage is not whether we have the tools to help support economic activity and guard against disinflation. We do. As I will discuss next, the issue is instead whether, at any given juncture, the benefits of each tool, in terms of additional stimulus, outweigh the associated costs or risks of using the tool.

 

Policy Options for Further Easing

 

Notwithstanding the fact that the policy rate is near its zero lower bound, the Federal Reserve retains a number of tools and strategies for providing additional stimulus. I will focus here on three that have been part of recent staff analyses and discussion at FOMC meetings: (1) conducting additional purchases of longer-term securities, (2) modifying the Committee's communication, and (3) reducing the interest paid on excess reserves. I will also comment on a fourth strategy, proposed by several economists--namely, that the FOMC increase its inflation goals.

 

A first option for providing additional monetary accommodation, if necessary, is to expand the Federal Reserve's holdings of longer-term securities. As I noted earlier, the evidence suggests that the Fed's earlier program of purchases was effective in bringing down term premiums and lowering the costs of borrowing in a number of private credit markets. I regard the program (which was significantly expanded in March 2009) as having made an important contribution to the economic stabilization and recovery that began in the spring of 2009. Likewise, the FOMC's recent decision to stabilize the Federal Reserve's securities holdings should promote financial conditions supportive of recovery.

 

I believe that additional purchases of longer-term securities, should the FOMC choose to undertake them, would be effective in further easing financial conditions. However, the expected benefits of additional stimulus from further expanding the Fed's balance sheet would have to be weighed against potential risks and costs. One risk of further balance sheet expansion arises from the fact that, lacking much experience with this option, we do not have very precise knowledge of the quantitative effect of changes in our holdings on financial conditions. In particular, the impact of securities purchases may depend to some extent on the state of financial markets and the economy; for example, such purchases seem likely to have their largest effects during periods of economic and financial stress, when markets are less liquid and term premiums are unusually high. The possibility that securities purchases would be most effective at times when they are most needed can be viewed as a positive feature of this tool. However, uncertainty about the quantitative effect of securities purchases increases the difficulty of calibrating and communicating policy responses.

Another concern associated with additional securities purchases is that substantial further expansions of the balance sheet could reduce public confidence in the Fed's ability to execute a smooth exit from its accommodative policies at the appropriate time. Even if unjustified, such a reduction in confidence might lead to an undesired increase in inflation expectations. (Of course, if inflation expectations were too low, or even negative, an increase in inflation expectations could become a benefit.) To mitigate this concern, the Federal Reserve has expended considerable effort in developing a suite of tools to ensure that the exit from highly accommodative policies can be smoothly accomplished when appropriate, and FOMC participants have spoken publicly about these tools on numerous occasions. Indeed, by providing maximum clarity to the public about the methods by which the FOMC will exit its highly accommodative policy stance--and thereby helping to anchor inflation expectations--the Committee increases its own flexibility to use securities purchases to provide additional accommodation, should conditions warrant.

 

A second policy option for the FOMC would be to ease financial conditions through its communication, for example, by modifying its post-meeting statement. As I noted, the statement currently reflects the FOMC's anticipation that exceptionally low rates will be warranted "for an extended period," contingent on economic conditions. A step the Committee could consider, if conditions called for it, would be to modify the language in the statement to communicate to investors that it anticipates keeping the target for the federal funds rate low for a longer period than is currently priced in markets. Such a change would presumably lower longer-term rates by an amount related to the revision in policy expectations.

Central banks around the world have used a variety of methods to provide future guidance on rates. For example, in April 2009, the Bank of Canada committed to maintain a low policy rate until a specific time, namely, the end of the second quarter of 2010, conditional on the inflation outlook. Although this approach seemed to work well in Canada, committing to keep the policy rate fixed for a specific period carries the risk that market participants may not fully appreciate that any such commitment must ultimately be conditional on how the economy evolves (as the Bank of Canada was careful to state). An alternative communication strategy is for the central bank to explicitly tie its future actions to specific developments in the economy. For example, in March 2001, the Bank of Japan committed to maintaining its policy rate at zero until Japanese consumer prices stabilized or exhibited a year-on-year increase. A potential drawback of using the FOMC's post-meeting statement to influence market expectations is that, at least without a more comprehensive framework in place, it may be difficult to convey the Committee's policy intentions with sufficient precision and conditionality. The Committee will continue to actively review its communication strategy, with the goal of communicating its outlook and policy intentions as clearly as possible.

 

A third option for further monetary policy easing is to lower the rate of interest that the Fed pays banks on the reserves they hold with the Federal Reserve System. Inside the Fed this rate is known as the IOER rate, the "interest on excess reserves" rate. The IOER rate, currently set at 25 basis points, could be reduced to, say, 10 basis points or even to zero. On the margin, a reduction in the IOER rate would provide banks with an incentive to increase their lending to nonfinancial borrowers or to participants in short-term money markets, reducing short-term interest rates further and possibly leading to some expansion in money and credit aggregates. However, under current circumstances, the effect of reducing the IOER rate on financial conditions in isolation would likely be relatively small. The federal funds rate is currently averaging between 15 and 20 basis points and would almost certainly remain positive after the reduction in the IOER rate. Cutting the IOER rate even to zero would be unlikely therefore to reduce the federal funds rate by more than 10 to 15 basis points. The effect on longer-term rates would probably be even less, although that effect would depend in part on the signal that market participants took from the action about the likely future course of policy. Moreover, such an action could disrupt some key financial markets and institutions. Importantly for the Fed's purposes, a further reduction in very short-term interest rates could lead short-term money markets such as the federal funds market to become much less liquid, as near-zero returns might induce many participants and market-makers to exit. In normal times the Fed relies heavily on a well-functioning federal funds market to implement monetary policy, so we would want to be careful not to do permanent damage to that market.

 

A rather different type of policy option, which has been proposed by a number of economists, would have the Committee increase its medium-term inflation goals above levels consistent with price stability. I see no support for this option on the FOMC. Conceivably, such a step might make sense in a situation in which a prolonged period of deflation had greatly weakened the confidence of the public in the ability of the central bank to achieve price stability, so that drastic measures were required to shift expectations. Also, in such a situation, higher inflation for a time, by compensating for the prior period of deflation, could help return the price level to what was expected by people who signed long-term contracts, such as debt contracts, before the deflation began.

 

However, such a strategy is inappropriate for the United States in current circumstances. Inflation expectations appear reasonably well-anchored, and both inflation expectations and actual inflation remain within a range consistent with price stability. In this context, raising the inflation objective would likely entail much greater costs than benefits. Inflation would be higher and probably more volatile under such a policy, undermining confidence and the ability of firms and households to make longer-term plans, while squandering the Fed's hard-won inflation credibility. Inflation expectations would also likely become significantly less stable, and risk premiums in asset markets--including inflation risk premiums--would rise. The combination of increased uncertainty for households and businesses, higher risk premiums in financial markets, and the potential for destabilizing movements in commodity and currency markets would likely overwhelm any benefits arising from this strategy.

 

Each of the tools that the FOMC has available to provide further policy accommodation--including longer-term securities asset purchases, changes in communication, and reducing the IOER rate--has benefits and drawbacks, which must be appropriately balanced. Under what conditions would the FOMC make further use of these or related policy tools? At this juncture, the Committee has not agreed on specific criteria or triggers for further action, but I can make two general observations.

 

First, the FOMC will strongly resist deviations from price stability in the downward direction. Falling into deflation is not a significant risk for the United States at this time, but that is true in part because the public understands that the Federal Reserve will be vigilant and proactive in addressing significant further disinflation. It is worthwhile to note that, if deflation risks were to increase, the benefit-cost tradeoffs of some of our policy tools could become significantly more favorable.

 

Second, regardless of the risks of deflation, the FOMC will do all that it can to ensure continuation of the economic recovery. Consistent with our mandate, the Federal Reserve is committed to promoting growth in employment and reducing resource slack more generally. Because a further significant weakening in the economic outlook would likely be associated with further disinflation, in the current environment there is little or no potential conflict between the goals of supporting growth and employment and of maintaining price stability.

 

Conclusion

 

This morning I have reviewed the outlook, the Federal Reserve's response, and its policy options for the future should the recovery falter or inflation decline further.

 

In sum, the pace of recovery in output and employment has slowed somewhat in recent months, in part because of slower-than-expected growth in consumer spending, as well as continued weakness in residential and nonresidential construction. Despite this recent slowing, however, it is reasonable to expect some pickup in growth in 2011 and in subsequent years. Broad financial conditions, including monetary policy, are supportive of growth, and banks appear to have become somewhat more willing to lend. Importantly, households may have made more progress than we had earlier thought in repairing their balance sheets, allowing them more flexibility to increase their spending as conditions improve. And as the expansion strengthens, firms should become more willing to hire. Inflation should remain subdued for some time, with low risks of either a significant increase or decrease from current levels.

 

Although what I have just described is, I believe, the most plausible outcome, macroeconomic projections are inherently uncertain, and the economy remains vulnerable to unexpected developments. The Federal Reserve is already supporting the economic recovery by maintaining an extraordinarily accommodative monetary policy, using multiple tools. Should further action prove necessary, policy options are available to provide additional stimulus. Any deployment of these options requires a careful comparison of benefit and cost. However, the Committee will certainly use its tools as needed to maintain price stability--avoiding excessive inflation or further disinflation--and to promote the continuation of the economic recovery.

 

As I said at the beginning, we have come a long way, but there is still some way to travel. Together with other economic policymakers and the private sector, the Federal Reserve remains committed to playing its part to help the U.S. economy return to sustained, noninflationary growth.

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Guest LAW

Press Briefing by Press Secretary Robert Gibbs, 8/30/2010

James S. Brady Press Briefing Room

 

Q Is the reason the President is not pushing for a bolder move on the economy because he doesn’t believe there is one, or because he doesn’t think he could get it through Congress?

 

MR. GIBBS: Well, Jake, I think you will hear the President -- you heard him today after meeting with his economic team, and you will hear him over the course of the next several weeks outlining a series of ideas, some of which are stuck in Congress and some of which we continue to work through the economic team, that will be targeted measures to continue to spur our recovery and to create an environment in which the private sector is hiring.

 

Q But these are smaller-bore type proposals. These aren’t $787 billion stimulus packages.

 

MR. GIBBS: No, they’re not. But let’s understand -- when you mention small bore -- some of you probably saw this article today -- “Small businesses sit in holding pattern.” “Small businesses have put hiring, supply buying, and real estate expansion on hold as they wait out the vote on a small business aid bill that is stalled in the Senate earlier this summer.” Right?

 

As the President said in the Rose Garden, 60 percent of our job losses have come from small business. Small businesses are waiting for the Senate to act on a bill that would cut their taxes and provide them greater loans and investment opportunities with which to expand.

 

The Republican Party talks a lot about their support for and their helping of small business, and I think the question that the President put toward them today is, if that’s what you support, why are you standing in the way of something that small businesses acknowledge would help with their hiring, with their purchasing, and with their expansion?

 

Q Okay, but the question I asked was, do you think -- does the President think that there should be a bolder move taken beyond a $30 billion small business lending initiative --

 

MR. GIBBS: Well, again, I think --

 

Q -- and there aren’t the votes for it, or he just didn’t think there is such a thing?

 

MR. GIBBS: I think, Jake, I think the President mentioned several ideas today that he believes are important to continue that recovery that we will pursue. I think these will be areas and initiatives that are targeted towards spurring recovery and creating an environment for hiring, not some --

 

Q But does that mean he believes that that is the right approach, or he believes that it’s the only politically possible approach?

 

MR. GIBBS: Well, look, I don't think there’s any -- I think there’s no doubt that there are -- there’s only so much that can be done.

 

Q Not having to do with politics?

 

MR. GIBBS: Not having to do with politics.

 

Q In retrospect, was the stimulus too small?

 

MR. GIBBS: Look, we always -- I think it makes sense to step back just for a second. If you look at -- and I don't think anybody had -- and I think we’d be the first to admit that nobody had, in January of 2009, a sufficient grasp at the sheer depth of what we were facing. I think that's, quite frankly, true for virtually every economist that made predictions. You had -- the chart that I generally show, adding the job losses for the last three recessions up doesn’t get you to the job loss that we’ve seen in this recession alone.

 

It took us a long time to get to this point. We got here not simply because of one thing but because of many things. We’ve seen the housing market collapse. We saw what happened to credit markets. We saw what happened to the stability of our financial system. All of that accumulated after many years into one big pothole that -- the size of which any stimulus was unlikely to fill.

 

I think that for all of the political back-and-forth on the Recovery Act, there should no longer be any doubt -- despite some Capitol Hill nonbelievers -- that what the Recovery Act did was prevent us from sliding even into a deeper recession, with greater economic contraction, with greater job loss, than we have experienced because of it.

 

Q The President again today talked about how on the economy there’s no magic bullet. Is there any frustration at all that he has not been able to convey a more optimistic message to the American people to put them at ease?

 

MR. GIBBS: How so?

 

Q Well, in some of the polls that we’ve had and we’ve also seen from others, Americans still don't feel good about where the economy is going. So is there frustration that no matter what the President says -- he comes out and he talks about putting more pressure on Capitol Hill for his jobs bill for small businesses -- that people still don't feel good about where the economy is going? Is he frustrated by it?

 

MR. GIBBS: No, Dan, because I -- well, look, I think those in America are frustrated. I think those in the West Wing are frustrated. I think people across the country are frustrated, largely, as I mentioned earlier -- and I think this in a way takes into account what the President said in terms of -- there was not one thing to do. This was not like -- there was not one flip -- switched a flip and then the economy would somehow get better overnight. I think as you heard the President discuss, we did not get into this problem and did not get into this crisis in a short period of time; it took a number of years. And it’s going to take a while to get out of that crisis. We have said that from the very beginning.

 

Look, would we want to see the economy expanding more rapidly and hiring taking place at a greater rate than we're seeing now? Absolutely. That does not mean that the President won't continue to focus on how we get to that point.

 

Q Can I follow? Another stimulus out of the question?

MR. GIBBS: Again, I think you’ll hear over the course of the next many days and weeks the President outline what he and the team think are important in terms of targeted initiatives to help spur the recovery and create an environment where the private sector is not simply investing, but also hiring as well.

 

Q The President said yesterday to Brian Williams, “The economy is still growing.” Now, when economists look at the GDP numbers they see 4.9 percent, then 3.7 percent, then 1.6 percent. It’s still growing as compared to zero, in other words?

 

MR. GIBBS: No, no, it’s still growing as compared to negative 5.6 percent, which was I think the number at or around the quarter that the President was elected or came into office. I mean, I think it’s important to understand --

 

Q But in relationship to the three quarters when his policies were not only passed by Congress but in full force or moving into full force, we’ve seen this trajectory downward.

 

MR. GIBBS: No, no, no, no, no. Let’s understand --

 

Q -- in those GDP numbers.

 

MR. GIBBS: Yes, but let’s understand, we didn’t just wake up at 4.9 percent, Major.

 

Q I understand that.

 

MR. GIBBS: No, no, I understand.

 

Q I understand what’s going on since then --

 

MR. GIBBS: Just for context, let’s understand that we got -- we were at -- again, I don’t have the figures for quarter four of 2008, I don’t have them for quarter one of 2009, but we were experiencing an --

 

Q They were lower, I'm sure.

 

MR. GIBBS: Yes, that's a --

 

Q I’m just saying, what accounts for what we’ve seen the last three quarters, the most recent data that’s on the minds of the American public and quite clearly on the minds of the economic team?

 

MR. GIBBS: Well, look, I think we have seen -- one of the things that we discussed -- it was discussed in the economic daily briefing today were some of the signs for why that is happening. I don't think there’s any doubt that you have seen -- first and foremost, you’ve seen, as has happened throughout the world, there were concerns earlier in the summer and late in the spring about where Europe was. Certainly Greece and other countries had -- have had a negative impact on world growth since that time. I think that is certainly -- that has no doubt played a role.

 

Q When the President said last night we anticipated that the recovery was slowing, when did that realization take hold?

 

MR. GIBBS: Well, again, I think if you look back to -- I think you’ve heard the President discuss over the course of the past many months exactly what I just referred to as --

 

Q -- talks about the economy, he sounded much more optimistic than that -- than anticipating that the recovery would slow.

 

MR. GIBBS: Again, Major, I think it’s important -- I'd have to go back and see the first time the President started mentioning what had happened in Europe and Greece as part of his public remarks, but I think there’s no doubt that -- and I don't think anybody would argue with you that certainly from our perspective in here that that didn’t signal that the economy was on a different trajectory.

 

I don't think there’s any doubt, [b]if you look at where we were earlier in the spring and where we were, again, later in the spring and then earlier in the summer, there’s no doubt that the trajectory of the recovery was not headed at the same vector as it was earlier in the spring.[/b]

 

Q Does the President believe it’s likely to continue to go down unless there’s some other ideas that he’s going to put on the table?

 

MR. GIBBS: Well, I think that the President and the team discussed the notion of what needs to happen to ensure that we get out of the -- and lessen the chances for something like that happening.

 

Q How does extending the Bush tax cuts for the middle class fit into that as a matter of timing?

 

MR. GIBBS: Well, look --

 

Q Some economists have said the sooner you declare that, the sooner the Congress does that, the better. Do you agree?

 

MR. GIBBS: The President has discussed -- we're having some technical audio difficulties here at Casa Blanca today. Look, I think the President has mentioned for many, many, many months his commitment to extending beyond their expiration on December 31st, the tax cuts that impact those making less than $250,000 a year as an important signal for our economy.

 

Q Well, when I talk to economists like Mark Zandi, they’ll say the sooner the President says that the better, and that it would have more effect in the national economy than, for example, having the Senate move on this package of small business tax cuts. Does the President believe that that would have a bigger effect?

 

MR. GIBBS: If he did what? If he acknowledged --

 

Q -- extend the Bush tax cuts for the middle class sooner rather than later. Would that have a bigger economic impact, a bigger bang to the buck, than this lending package in the Senate?

 

MR. GIBBS: I will say this, Major. I don't -- while there is not one magic bullet, I also don't think there are -- I don't think the President -- the President certainly doesn’t view extending -- cutting taxes for small business and increasing their ability to borrow and expand competing with middle class tax cuts. I think the President believes -- and I think you heard him say in the remarks today -- quite honestly, we can and should do both; that an important signal to the economy would be for the Senate to pass the small business bill and put it on the President’s desk and let him sign it, as well as it would be important to extend those middle-class tax cuts. I don't think those are necessarily --

 

Q Should that vote happen before the midterm, before Congress recesses for the elections?

 

MR. GIBBS: I think that the President hopes -- well, certainly hopes that the small business bill passes as soon as possible, and believes that it is important to send a signal to extend middle-class tax cuts as soon as we can.

 

Yes, ma’am.

 

Q Given your concern about small businesses and the President’s statement potentially to take whatever action, however small, to help the economy, if that's what we should do, if you extended the Bush tax cuts for the wealthiest, the over $250,000, that would swoop in a bunch of small businesses.

 

MR. GIBBS: Two to three percent.

 

Q Right, which represent two-thirds of the profits that small businesses make, as I understand it.

 

MR. GIBBS: Right. I think you just answered --

 

Q But the chunk of --

 

MR. GIBBS: No, again, two to three --

 

Q -- the economic activity that small businesses --

 

MR. GIBBS: Two to three percent of small businesses are impacted by tax cuts, or by -- would be impacted by tax cuts that stop at those making $250,000 or less. I think it’s important to understand what the tradeoff -- what are the tradeoffs? The tradeoffs are, depending on how long you extend the upper-end tax cuts, they get very expensive -- $30 billion for next year, $700 billion for 10 years.

And then, Savannah, I think the question you ultimately have to ask yourself, if you’re either an economist or an advocate of extending those tax cuts -- because first and foremost, they do, if you’re a Republican in Congress, they do sort of come anathema to what you’ve been talking about, and that is cutting spending. When you’re adding $30 billion to $700 billion on to the deficit, that doesn’t -- this isn’t exactly in line with cost-cutting and budget crunching.

 

Q Does extending any of the tax cuts --

 

MR. GIBBS: And secondly, you have to ask yourself, is the thing that you can do to provide the greatest stimulative effect to our economy extending tax cuts for those that make above $250,000 a year? The CBO looked at, I think, a series of 10 to 12 different ideas for tax cuts and found that the least stimulative thing would be to extend the tax cuts for those that make $250,000 a year -- because, again, if you’re making more than $250,000 -- if you’re a millionaire in this economy, I don't think you’ve hit on vastly hard times.

 

Q I was just talking about the small businesses. But has the President asked his economic team to come up with new ideas to help the economy, not what we heard today?

 

MR. GIBBS: The President has, throughout the last many months and today, went over different ideas and different proposals, some of which are new, yes.

 

Q Are you planning to -- I've heard you hint at this, that they’re going to roll out some next week --

 

MR. GIBBS: I think you will -- again, I think you’ll hear the President discuss a series of these ideas over the course of the next many weeks.

 

Q And then the last thing, kind of the thing that Jake was asking -- does the President feel that, in terms of dealing with the economy in the way he thinks best, his hands are tied not because of economics but because of politics? Does he think a big second stimulus is advisable but he just recognizes that he can’t get it done?

 

MR. GIBBS: Look, I think the President has asked the team to look at a full series of ideas, all of which he has asked them to ensure have some greater stimulative effect on the economy. Obviously part of the debate that you and I were just talking about was if you’re going to have this debate on the Bush tax cuts, if there are 10 different ideas for using that $30 billion that would go to those making more than $250,000 a year, wouldn’t you want to put that $30 billion in a category that was more stimulative than anything else? I think the answer to that obviously is -- at least from our perspective is yes. It’s not necessarily clear that that’s the same perspective of some on Capitol Hill.

 

Look, I think there are a whole series, Savannah, of considerations. I think the President wants to hear from his economic team and from others on what the best course of action is.

 

Q One other question on something else, the rally that was here over the weekend, just following up on something about that, the theme of it. Does the President think there’s anything about the nation’s honor that needs to be restored?

 

MR. GIBBS: Well, look, Peter, I think I’d point you to what the President said yesterday in the interview that he did, where we live in a rich and beautiful country that -- and I don’t mean rich in terms of wealthy -- rich in terms of diversity of opinion and a Constitution that affords anyone an opportunity to speak out and say and have a rally on what they deem fitting to have a rally on -- that’s the beauty of United States of America.

 

Q But is there anything about the country’s honor that he feels needs to be restored, as the proponents of this rally say?

 

MR. GIBBS: I would say this. I think the President has throughout his campaign and throughout his time in the White House -- to restore responsibility, to restore values that lay an economic foundation for long-term growth, and I doubt that if you polled -- my guess is if you polled everybody, people would say there’s something they’d like to restore about this country -- we would like to restore the American Dream, restore a vibrant middle class, one that’s growing and one that’s able to pass the notion of this American Dream onto their kids.

 

Roger.

 

Q Thank you. In searching for new things to do on the economy, has he talked to Fed Chairman Bernanke at all in the last few days or couple of weeks at all?

 

MR. GIBBS: I do not know the answer to that. I do not believe that’s the case, but I can double-check.

 

Q Okay. And when he said this morning, talked about additional measures, I take it that he’s talking beyond middle-class tax cuts, beyond the tax cut package for small business, beyond the infrastructure for clean energy --

 

MR. GIBBS: Again, and I think what -- the President wants the economic team to look at a whole host of ideas.

 

Q Beyond all those that he mentioned?

 

MR. GIBBS: Beyond -- some beyond that he mentioned in helping to spur our recovery and to create and environment for private sector hiring.

 

Q And we would hear about this, whatever he comes up with, before the election? You said that he wanted to --

 

MR. GIBBS: Again, I think you’ll hear him talk about this over the course of the next many days and week.

 

Q Would he perhaps do a speech to the joint session?

 

MR. GIBBS: I don't think -- I have not heard that talked about.

 

Q A lot of folks have been talking about the first-time homebuyers tax credit sort of propping up the housing market. Is that one of these new measures that he might be considering?

 

MR. GIBBS: Look, obviously, there was -- that was something that was done originally. I don't -- while I have not see, obviously, a final list, that is -- I think bringing that back is not on -- is not as high on the list as many other things are.

 

Q All right. What is the White House reaction to U.S. News & World Report’s Mortimer Zuckerman’s description of the Obama administration as “the most fiscally irresponsible government in U.S. history”? I am curious --

 

MR. GIBBS: You have a boundless curiosity one could say, Lester. Look, I think with any reading of what has happened over the past eight years, I think you can see what decisions were made that got us into the fiscal mess that we’re in. They weren’t the decisions of the Obama administration. You can’t -- Iraq is fitting -- you can’t invade Iraq, you can’t go into Afghanistan for seven and a half or eight years with an endless, open-ended commitment and not have a way of paying for it, you can’t add a prescription drug benefit to Medicare and not pay for it, you can’t have a 10-year tax cut that cost $2 trillion and not pay for it, and expect that somehow the fiscal situation in the country is going to get better.

 

When the previous administration came in, there was a $200 billion or so surplus, and when they left, there was an American Express bill for $1.3 trillion.

 

Q Your last point that it’s basically -- I think your point was that it’s President Bush and the Republican Congress’ fault that we’re on the economic trajectory that we’re on in terms of spending, right?

 

MR. GIBBS: It’s not -- I mean, I think -- again, that is my opinion based on a series of facts of which I just outlined. We did not go from, in January of 2009, a $200 billion surplus to a $1.3 trillion deficit. That happened over the previous eight years.

 

Q Do you expect that that is going to be something that we’ll hear the President expound on in the weeks to come?

 

MR. GIBBS: I think you’ll hear the President begin to -- or continue to discuss that, partly because, quite honestly, if you watch television, you would think that -- and I would say it’s somewhat illuminating to watch John Boehner in the last Roosevelt Room meeting with the President -- they started talking about the fiscal impact of the Bush tax cuts, and Boehner said, “Well, Mr. President, you and I weren’t here for that.” And then Congressman Hoyer said, “No, John, you were here. You -- not only were you here, but you voted for that.”

 

So again, I think there’s a lot of fiscal amnesia that has happened over the past 18 months about the actions of and the votes of those in the previous eight years.

 

Q Thanks, Robert. I have three quick questions. First, does the President have any reaction to renewed calls for Alan Simpson to be removed from the deficit commission, based on an email that he sent to the president of the DOW, comparing America to a --

 

MR. GIBBS: Senator Simpson sent an email that he’s now apologized for. We regret that he sent that email. We don't condone those comments. But Senator Simpson has and will continue to serve on the commission.

 

Q Second question: Yesterday the President said on Beck’s rally, he said, “It’s not surprising that somebody like a Glenn Beck is able to stir up a certain portion of the country. That's been true throughout our history.” What portion of the country is he talking about, and what are the historical touchstones he’s referring to?

 

MR. GIBBS: I did not speak with him about what the meaning behind that statement was.

 

Q When you talk about the economic advisors and the President looking at ideas for creating new jobs, targeted measures, is he considering the tax reform option? Because the Chamber of Commerce, Business Roundtable, often say that if you lower corporate tax rates, if you lower capital gains, you can create an environment for --

 

MR. GIBBS: Well, I would say, first and foremost, I mean, well, one, broad-based, broad-scale tax reform is probably not going to happen overnight. But if you’re -- if you have a desire to cut, say, taxes on capital gains as it relates to small business, there’s a bill pending the Senate to do exactly that. If you want to improve the environment as it relates to taxes and small businesses, then you’d walk down to the floor of the Senate and vote yes on the small business lending initiative. You’d have to ask the Republicans and the groups -- groups like the Chamber and NFIB and others where they are and what they’re encouraging senators to do on that.

 

Q But didn’t Senate leaders right before recess agree to -- I think that one of the issues was limiting amendments --

 

MR. GIBBS: Well, again --

 

Q -- Republicans and Democrats --

 

MR. GIBBS: Again, limiting amendments is one thing. What we need is, because what always -- well, what happens now in the Senate is 60 is the new 50, right? So you got to get 60. There aren’t 60 Democrats. And if Republicans believe in cutting taxes for small business, if Republicans believe that small businesses are the engine that drive the economy and create jobs, then the best way to demonstrate that support is to support cutting their taxes and giving them the ability to borrow more money and expand.

Q If all the Republicans want are more amendments, is the President willing to call on the Democratic leadership to allow more amendments on the bill and get it moving?

 

MR. GIBBS: I think that wanting more amendments is what you say when you’re just trying to drag things to a halt, as many in the Senate Republicans have tried to do throughout the year.

 

Q Robert, two questions, unrelated. First one, anything new today on Elizabeth Warren?

 

MR. GIBBS: No, and I don’t expect any announcements at either consumer -- with either consumer or CEA this week.

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Guest Vegas or Bust

http://www.rightsidenews.com/2010083011492/editorial/rsn-pick-of-the-day/republicans-play-into-obamas-hands.html

 

India banned short selling. Their economy is growing, expanding, and over-heating.

China banned short selling. Their economy is growing, over-heating, and expanding.

Australia has a short sale restriction regulation. Their economy is growing, expanding and over-heating.

Germany in mid-May 2010 banned unclothed short selling and just three months later their economy registered a record GDP growth expansion.

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Guest Walter

I agree. Short selling is generally considered un-American as your are betting that the company/economy will fail.

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Guest Ken Harold

Many economists agree that shrewd state management can be better than market forces in getting a our nation back on its feet.

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Guest human

Wait till January 1st. A major tax hike is coming, and it's a big one "921 billion tax hike set to take effect on January 1, 2011".

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Guest human

This is one of the reasons that I got so tired of politics, what the democrats are going to further do before they lose is an Economic Tsunami to the Economy.

 

Once a Law is passed, getting it over turned is a nightmare in and of itself.

 

For the next 5 years I suggest? ALOT OF ASPRIN.

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Guest Jon Dee

The elites will use False Flag attacks, engineer market crashes and deliberately lead us into WW3 to achieve their goal of a one world government and massive population reduction.

 

Check out the evidence and get educated at http://www.thenewalexandrialibrary.com

THE NEW WORLD ORDER MUST BE STOPPED

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Guest USCCB

With millions unemployed and U.S. workers experiencing tragedies such as mining deaths in West Virginia and the oil rig explosion and subsequent oil spill in the Gulf of Mexico, Americans "must seek to protect the life and dignity of each worker in a renewed and robust economy," said Bishop William Murphy of Rockville Centre, New York. Bishop Murphy addressed these issues in the 2010 Labor Day Statement of the United States Conference of Catholic Bishops (USCCB), entitled "A New 'Social Contract' for Today's 'New Things,'" which can be found online in English (www.usccb.org/sdwp/national/labor_day_2010.pdf) and Spanish (www.usccb.org/sdwp/national/labor_day_2010_spanish.pdf).

 

Bishop Murphy, Chairman of the USCCB Committee on Domestic Justice and Human Development, compared the challenges faced by today's workers to the changing society of the Industrial Revolution addressed by Pope Leo XIII in the 1891 encyclical, Rerum Novarum (Of New Things).

 

"America is undergoing a rare economic transformation, shedding jobs and testing safety nets as the nation searches for new ways to govern and grow our economy," said Bishop Murphy. "Workers need a new 'social contract.'" Bishop Murphy said that creating new jobs would require new investments, initiative and creativity in the economy. He also drew on the teachings of Pope Benedict XVI, which call for placing the human person at the center of economic life and emphasize the role of civil society and mediating institutions such as unions in pursing the common good.

 

"Workers need to have a real voice and effective protections in economic life," said Bishop Murphy. "The market, the state, and civil society, unions and employers all have roles to play and they must be exercised in creative and fruitful interrelationships. Private action and public policies that strengthen families and reduce poverty are needed. New jobs with just wages and benefits must be created so that all workers can express their dignity through the dignity of work and are able to fulfill God's call to us all to be co-creators. A new social contract, which begins by honoring work and workers, must be forged that ultimately focuses on the common good of the entire human family."

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Guest human

This is one of the reasons that I got so tired of politics, what the democrats are going to further do before they lose is an Economic Tsunami to the Economy.

 

Wait till January 1st. A major tax hike is coming, and it's a big one "921 billion tax hike set to take effect on January 1, 2011".

 

Once a Law is passed, getting it over turned is a nightmare in and of itself.

 

For the next 5 years I suggest? ALOT OF ASPRIN.

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Guest LAW

The President talks about his fight to make America work for the middle class and make sure hard work is rewarded -- rather than greed and recklessness.

 

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Guest Bling Bling

This is one of the reasons that I got so tired of politics, what the democrats are going to further do before they lose is an Economic Tsunami to the Economy.

 

Wait till January 1st. A major tax hike is coming, and it's a big one "921 billion tax hike set to take effect on January 1, 2011".

 

Once a Law is passed, getting it over turned is a nightmare in and of itself.

 

For the next 5 years I suggest? ALOT OF ASPRIN.

 

Your tired old Republican scare tactics don't work with me. Bad old Bill Clinton with his bad old taxes, added 23.1 million jobs. Bush Jr. gets his tax cuts for the rich to spur the economy and adds piddly 3 million jobs, the worst per year job creation since records were kept. You must be taking something more than aspirin.

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Guest human

Barack Obama and the Democrats are in power, not Bill Clinton.

 

Your game of divide and conquer aint going to work this time, as well as playing the racism card every time things don't go well for your group, and businesses are bad.

 

Your group is inspiring so much confidence out there in the business world that many business people that I know of will not touch this economy.

 

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

 

Your tired old Republican scare tactics don't work with me. Bad old Bill Clinton with his bad old taxes, added 23.1 million jobs. Bush Jr. gets his tax cuts for the rich to spur the economy and adds piddly 3 million jobs, the worst per year job creation since records were kept. You must be taking something more than aspirin.

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Guest Bling Bling

Promoting Hate is the best thing you do. I heard too much Islamic, African American, and Latino racist remarks coming from your party of No this election cycle. You even perpetuate lies about our President's citizenship and religious beliefs that when cornered your party leaders even said is wrong. You can't even take responsibility for putting the country in the mess we are in. You even wanted to apologize to BP for the mess they made. Your group cannot admit that Small Business is hurting.

 

Your phony Tea Party Express has divided and manipulated the True Tea Party to regain power. Even these people were led to believe Universal Healthcare was evil. You will divide Americans with your false patriotism and religious ideals. You are not the party of the People. You are the party of Big Corporations. Since you have the Supreme Court in your pockets you are able to now hide the big election donors. We know that outside the cities your party owns the airwaves. We also know that you are starting false viral rumors through the email, Facebook, Twitter, and Youtube.

 

If you win this election cycle, people will learn real fast that your false promises led to an even greater disaster. I pray that voters will see through your lies.

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Guest human

I understand you BlingBling, Fannie, Freddie, ginnie, Housing and how your group played with that and the list goes on. Taxes to high heaven beginning January.

 

I'm glad to see you and your group are still using the discrimination card. Though the problem that your group "African American Community" is going to have in discriminating against Latinos/Latinas is that I can ARM my group with information, and you can't. :)

 

Unions hurting the economy and knowing it, yet still doing it because it's in there best interest.

 

I don't need to type about the affects that your group is having on business, the unemployment numbers speaks volumes.

 

Facebook, Youtube, Twitter is like the aol of the internet. Your side is on there, my side is on there. Your group has wished the death of Republicans, but I'm sure that you don't mind that.

 

The wars in Iraq and Afghanistan and how your group played it to encourage our enemies.

 

Then you got the Nuclear Issues, and how your group made the case for it "Jesus Christ!”

 

Your group pushing drugs on kids.

 

You and your group view folks as a percentage to be played.

 

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

Promoting Hate is the best thing you do. I heard too much Islamic, African American, and Latino racist remarks coming from your party of No this election cycle. You even perpetuate lies about our President's citizenship and religious beliefs that when cornered your party leaders even said is wrong. You can't even take responsibility for putting the country in the mess we are in. You even wanted to apologize to BP for the mess they made. Your group cannot admit that Small Business is hurting.

 

Your phony Tea Party Express has divided and manipulated the True Tea Party to regain power. Even these people were led to believe Universal Healthcare was evil. You will divide Americans with your false patriotism and religious ideals. You are not the party of the People. You are the party of Big Corporations. Since you have the Supreme Court in your pockets you are able to now hide the big election donors. We know that outside the cities your party owns the airwaves. We also know that you are starting false viral rumors through the email, Facebook, Twitter, and Youtube.

 

If you win this election cycle, people will learn real fast that your false promises led to an even greater disaster. I pray that voters will see through your lies.

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Guest human

IN anycase folks, do not believe me, blingbling, or law. Just google it.

 

"921 billion tax hike set to take effect on January 1, 2011, and remember, that is just for starters. There is alot more on the way by law".

 

Google all of it.

 

[ Look folks I am not in politics any more. Honest!!!

I don't need it, I got contacts, and not just in this country either. ;) ]

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Guest ALWAYSRED

The Tax Foundation has released a report showing how the expiration of the Bush-era tax cuts would affect the average middle-income family in each state and congressional district. The report looks at the average family in the middle 20 percent of the income spectrum and compares their 2011 federal income tax liability if all the tax cuts expire to their tax bill if all the tax cuts are extended.

 

Nationally, the typical middle-income family, which has a median income of $63,366, would see its federal income tax burden increase by $1,540 if the Bush-era tax cuts expire.

 

Tax Foundation Fiscal Fact, No. 238, "Effect of Expiration of Bush-Era Tax Cuts on Average Middle-Income Family, By State and Congressional District," is available online at http://www.taxfoundation.org/news/show/26581.html.

 

"The impact of the expiration or extension of the Bush-era tax cuts on families varies according to myriad factors such as income level, sources of income, marital status, number of children and housing status," Tax Foundation President Scott Hodge said. "Family circumstances differ significantly across geographic regions as well."

 

For example, the more children a family has, the more its taxes will increase because the child tax credit will drop from $1,000 per dependent child to $500. Married families will be affected differently than single families due to the so-called marriage penalty provisions that are scheduled to return if the tax cuts are not extended.

 

The average-middle income family in Alaska, which has a median income of $79,541, would pay nearly $2,000 more in federal income taxes in 2011 if the tax cuts expire. By contrast, the typical family in West Virginia, with a median income of $49,082, would pay about $1,300 more. The differences are great among the hundreds of congressional districts as well.

 

To see how the expiration of the Bush-era tax cuts would affect a specific taxpayer, visit the Tax Foundation's interactive calculator at www.MyTaxBurden.org, which allows taxpayers to compare their 2011 federal income tax liabilities under three scenarios: if all the tax cuts expire completely at the end of this year, if they're all extended into 2011 or made permanent, and if President Obama's budget is adopted, which includes a combination of expirations and extensions.

 

For more information about the Bush-era tax cuts, visit the Tax Foundation's FAQ page, available online at http://www.taxfoundation.org/publications/show/26135.html.

 

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

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Guest LAW

Statement by

Ben S. Bernanke

Chairman

Board of Governors of the Federal Reserve System

before the

Financial Crisis Inquiry Commission

 

Triggers of the Crisis

 

In midsummer 2007, events unfolded that would engender a sea change in money market conditions, triggered by fears of subprime losses that had been growing during the first half of the year. To choose one of several possible key dates, on July 30, 2007, IKB, a medium-sized German bank, announced that in order to meet its obligations, it would be receiving extraordinary support from its government-owned parent and an association of German banks. IKB's problem was that its Rhineland off-balance-sheet vehicle was no longer able to roll over the asset-backed commercial paper (ABCP) it had been issuing in U.S. markets to fund its large portfolio of asset-backed securities. Although none of the securities in the Rhineland portfolio was in default and only some were subprime-related, commercial paper investors had become concerned about IKB's ability to meet its obligations in the event that the securities Rhineland held were downgraded.

 

Around the same time, other vehicles similar to that of Rhineland were also finding funding roll overs to be more costly and difficult to arrange. These difficulties intensified over subsequent weeks, as investors around the world pulled back funding; indeed, outstanding U.S. ABCP plummeted almost $200 billion in August. The economist Gary Gorton has likened this pullback to a traditional bank run: Lenders in the commercial paper market and other short-term money markets, like depositors in a bank, place the highest value on safety and liquidity. Should the safety of their investments come into question, it is easier and safer to withdraw funds--"run on the bank" --than to invest time and resources to evaluate in detail whether their investment is, in fact, safe. Although subprime mortgages composed only a small part of the portfolios of most structured credit vehicles, cautious lenders pulled back even from those that likely had no exposure to subprime mortgages. The resulting funding pressure was in turn transmitted to major banks that had sponsored or provided funding guarantees to vehicles. Short-term funding in the interbank market became more difficult and costly. Over subsequent quarters, instability in global money markets worsened and posed an increasingly serious threat to the functioning of a range of financial markets and institutions, which in sum constricted the flow of lending to non financial borrowers. Ultimately, the disruptions to a range of financial markets and institutions proved far more damaging than the subprime losses themselves.

 

Although subprime mortgage losses were the most prominent trigger of the crisis, they were by no means the only one. Another, less well-known triggering event was a "sudden stop" in June 2007 in syndicated lending to large, relatively risky corporate borrowers. Funding for these "leveraged" loans had migrated in recent years from banks to special purpose vehicles; these vehicles funded themselves by issuing collateralized loan obligations (CLOs), a type of asset-backed security. CLOs were purchased by a variety of investors, including ABCP vehicles. At the time, the sudden stop in origination of new syndicated loans was seen by some as a bargaining ploy by lenders seeking higher interest rate spreads, but a side effect was a modest drop in the market prices of outstanding loans, which in turn raised the possibility of downgrades of some CLOs. As in the case of subprime mortgages, the perceived potential losses on leveraged loans in the late summer of 2007 were significant, although not large enough by themselves to threaten global financial stability. But they damaged the confidence of short-term investors and, consequently, the functioning of money markets and the broader financial system.

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Guest LAW

Statement by

Ben S. Bernanke

Chairman

Board of Governors of the Federal Reserve System

before the

Financial Crisis Inquiry Commission

 

Dependence on Unstable Short-Term Funding

 

Shadow banks are financial entities other than regulated depository institutions (commercial banks, thrifts, and credit unions) that serve as intermediaries to channel savings into investment. Securitization vehicles, ABCP vehicles, money market funds, investment banks, mortgage companies, and a variety of other entities are part of the shadow banking system. Before the crisis, the shadow banking system had come to play a major role in global finance; with hindsight, we can see that shadow banking was also the source of some key vulnerabilities.

 

Leading up to the crisis, the shadow banking system, as well as some of the largest global banks, had become dependent on various forms of short-term wholesale funding. Over the past 50 years or so, a number of forms of such funding have emerged, including commercial paper, repurchase agreements (repos), certain kinds of interbank loans, contingent funding commitments (such as commitments that investment banks provided for auction rate securities, used primarily to finance municipalities), and others. In the years immediately before the crisis, some ofthese forms of funding grew especially rapidly; for example, repo liabilities of U.S. broker dealers increased by 2-112 times in the four years before the crisis.

 

As was illustrated by the ABCP market meltdown discussed earlier, the reliance of shadow banks on short-term uninsured funds made them subject to runs, much as commercial banks and thrift institutions had been exposed to runs prior to the creation of deposit insurance. A run on an individual entity may start with rumors about its solvency, but even when investors know the rumors are unfounded, it may be in their individual interests to join the run, as few entities can remain solvent if their assets must be sold at fire-sale prices. Thus, fears of a run have the potential to become at least partially self-fulfilling, and a run may blur the distinction between an insolvent and an illiquid firm.

 

An increase in the risk of a run induces financial firms to hoard liquidity, for example, by shifting asset holdings into highly liquid securities such as Treasury securities. The supply of highly liquid securities being relatively inelastic in the short run, such efforts do not increase the liquidity of the financial system as a whole, but serve only to raise the price of liquid assets while reducing the market value of less-liquid assets such as loans. Liquidity pressures thus make firms less willing to extend credit to both financial and nonfinancial firms. Central banks, such as the Federal Reserve, can mitigate liquidity problems by lending against less-liquid but nevertheless sound collateral; indeed, serving as "lender of last resort" has been central banks' key weapon against financial panics for hundreds of years. However, the Federal Reserve under normal conditions is permitted to lend only to depository institutions and had the authority to lend to nondepositories only in unusual and exigent circumstances. Thus, the Federal Reserve could not directly address liquidity problems at nondepositories until the crisis was well underway.

 

Money market mutual funds proved particularly vulnerable to liquidity pressures. A large portion of the investments of these funds were in short-term wholesale funding instruments issued or guaranteed by commercial banks. When short-term wholesale funding markets came under stress, particularly in the period after the collapse of Lehman Brothers, money market mutual funds faced runs by their investors. Although actions by the Treasury and the Federal Reserve helped arrest these runs, the money market mutual funds responded by hoarding liquidity, thus constricting the availability of financing to financial and nonfinancial firms.

 

Currency mismatches also contributed to the disruption o fwholesale funding patterns during the crisis. For example, major European financial institutions guaranteed the liabilities of some shadow banks. Some of them mainly bought dollar-denominated asset-backed securities and raised funding in the U.S. dollar commercial paper market. When these vehicles lost access to commercial paper funding, their bank guarantors sought dollar funding in dollar-denominated wholesale markets and foreign exchange swap markets. The heavy demand for dollars, coupled with investor concerns about the health of some European banks, put significant stress on these markets. This stress could not be alleviated by foreign monetary authorities through their normal operations, which provide liquidity in their own currencies but not in dollars. The Federal Reserve and other central banks addressed the problem by establishing dollar liquidity swap agreements.

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Guest human

Taxes are going up across the board. Any ways wasn't the stimulus package supposed to have covered the shovel ready projects for infrastructer that his new 50 billion dollar Bill should come out of stimulus 2?

 

 

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The Tax Foundation has released a report showing how the expiration of the Bush-era tax cuts would affect the average middle-income family in each state and congressional district. The report looks at the average family in the middle 20 percent of the income spectrum and compares their 2011 federal income tax liability if all the tax cuts expire to their tax bill if all the tax cuts are extended.

 

Nationally, the typical middle-income family, which has a median income of $63,366, would see its federal income tax burden increase by $1,540 if the Bush-era tax cuts expire.

 

Tax Foundation Fiscal Fact, No. 238, "Effect of Expiration of Bush-Era Tax Cuts on Average Middle-Income Family, By State and Congressional District," is available online at http://www.taxfoundation.org/news/show/26581.html.

 

"The impact of the expiration or extension of the Bush-era tax cuts on families varies according to myriad factors such as income level, sources of income, marital status, number of children and housing status," Tax Foundation President Scott Hodge said. "Family circumstances differ significantly across geographic regions as well."

 

For example, the more children a family has, the more its taxes will increase because the child tax credit will drop from $1,000 per dependent child to $500. Married families will be affected differently than single families due to the so-called marriage penalty provisions that are scheduled to return if the tax cuts are not extended.

 

The average-middle income family in Alaska, which has a median income of $79,541, would pay nearly $2,000 more in federal income taxes in 2011 if the tax cuts expire. By contrast, the typical family in West Virginia, with a median income of $49,082, would pay about $1,300 more. The differences are great among the hundreds of congressional districts as well.

 

To see how the expiration of the Bush-era tax cuts would affect a specific taxpayer, visit the Tax Foundation's interactive calculator at www.MyTaxBurden.org, which allows taxpayers to compare their 2011 federal income tax liabilities under three scenarios: if all the tax cuts expire completely at the end of this year, if they're all extended into 2011 or made permanent, and if President Obama's budget is adopted, which includes a combination of expirations and extensions.

 

For more information about the Bush-era tax cuts, visit the Tax Foundation's FAQ page, available online at http://www.taxfoundation.org/publications/show/26135.html.

 

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

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Linguine, fettucine, martini, bikini!

 

Vince needs to be the voice of "Made in America."

 

 

Stop having a boring tuna. Stop having a boring life.

 

The Slap Chop is an effective marketing tool at bringing down an opponent

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Guest ALWAYSRED

It's settled now. Barack Obama has come clean on his monstrous $787 billion "stimulus" package, acknowledging that it has been a complete bust. Not that we needed BHO to admit it. Since the enactment of "porkulus," the number of Americans receiving unemployment checks jumped by nearly 2 million, while the number of Americans cashing paychecks plunged by almost 3 million. If that weren't bad enough, the U.S. economy has been handcuffed with 16 straight months of unemployment lingering above 9%. A jobs bill it was not, Mr. President. And he's finally saying as much, tacitly at least. Why else would he propose another round of multi-billion dollar expenditures to "create jobs" if his original one worked? He wouldn't need to.

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Guest human

I can tell you this much; If the democrats keep controll of the house, and senate? There will be a flight of capitol from this country.

 

I can promise you that I fear the Democrats more than I fear the terrorists.

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

It's settled now. Barack Obama has come clean on his monstrous $787 billion "stimulus" package, acknowledging that it has been a complete bust. Not that we needed BHO to admit it. Since the enactment of "porkulus," the number of Americans receiving unemployment checks jumped by nearly 2 million, while the number of Americans cashing paychecks plunged by almost 3 million. If that weren't bad enough, the U.S. economy has been handcuffed with 16 straight months of unemployment lingering above 9%. A jobs bill it was not, Mr. President. And he's finally saying as much, tacitly at least. Why else would he propose another round of multi-billion dollar expenditures to "create jobs" if his original one worked? He wouldn't need to.

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Guest LAW

Statement by

Ben S. Bernanke

Chairman

Board of Governors of the Federal Reserve System

before the

Financial Crisis Inquiry Commission

 

Deficiencies in Risk Management

 

Although the vulnerabilities associated with short-term wholesale funding can be seen as a structural weakness of the global financial system, they can also be viewed as a consequence of poor risk management by issuers and investors. Unfortunately, the crisis revealed many other significant defects in private-sector risk management and risk controls. Examples included a significant deterioration of mortgage underwriting standards before the crisis, which was not limited to subprime borrowers; a similar weakening of underwriting standards for commercial real estate loans, together with poor management of concentration risk and other risks by commercial real estate lenders; excessive reliance by investors on credit ratings, especially in the case of structured credit products; and insufficient capacity by many large firms to track firm wide risk exposures, including off-balance-sheet exposures. Among other problems, risk management weaknesses led to inadequate risk diversification by major financial firms, so that losses--rather than being dispersed broadly among investors--proved in some cases to be heavily concentrated, threatening the stability of the affected companies. Risk-management weaknesses were spread throughout the financial system, including at many institutions that were neither large nor too-big-to-faiL For example, problems with commercial real estate lending were concentrated in regional and community banks. Subprime lending was done by small as well as large firms.

 

Private-sector risk management also failed to keep up with financial innovation in many cases. An important example is the extension of the traditional originate-to-distribute business model to encompass increasingly complex securitized credit products, with wholesale market funding playing a key role. In general, the originate-to-distribute model breaks down the process of credit extension into components or stages--from origination to financing and to the post financing monitoring of the borrower's ability to repay--in a manner reminiscent of how contemporary manufacturers distribute the stages of production across firms and locations. This overleveraged before the crisis; collectively, these firms did see a small increase in debt-to-asset ratios from 2006 to 2008, but these ratios tend to be volatile, and the short-term increase was superimposed on a two-decade-long downward trend.

 

Assessing trends in leverage for financial firms is not completely straightforward, in part because available statistics are inadequate and also because, in a world of complex financial instruments, leverage can be very difficult to measure. Traditional measures do not show a large increase in aggregate financial-sector leverage. At large U.S. commercial bank holding companies, for instance, equity capital relative to assets increased somewhat from 2001 through 2006. However, the quality of capital dec1ined--for example, the share of intangible assets increased; consequently, in the crisis, true loss-absorbing capital was often much lower than accounting measures suggested. Moreover, many derivatives contracts have something similar to balance sheet leverage embedded in their structures, so that investors in derivatives can be more leveraged than their balance sheets imply. And, of course, some individual financial firms were overleveraged even by traditional measures.

Leverage tends to be procyclical--rising in good times, when the confidence of lenders and borrowers is high, and falling in bad times, when confidence turns to caution. This procyclicality increases financial and economic stress in the downturn. For example, the decline in required down payments on home purchases seen before the crisis has now sharply reversed, with required down payments of 20 or 30 percent of the house price becoming increasingly common. These tougher requirements, while understandable from the perspective of lenders, have reduced the pool of potential home buyers. With fewer buyers, downward pressure on home prices increases. Lower house prices help to improve affordability but also weaken the financial positions of current homeowners, reducing their capacity to service their mortgages, to purchase new homes, and to consume goods and services.

 

Another procyclical pattern in leverage occurred in the financing practices of many financial firms. For example, recent academic studies have focused on the financing practices of hedge funds, securities broker-dealers, and other similar entities? These entities' assets are primarily marketable securities, and much of their financing is in the form of repos. When times are good, the value of the assets rises and repo lenders impose smaller haircuts on the collateral, allowing more securities to be financed by a given amount ofrepo borrowing--effectively, an increase in leverage. When times turn bad, the value of the assets falls and more-cautious repo lenders demand higher haircuts. In such a situation, the borrower's main available response is to sell assets. However, in the aggregate, such forced sales, particularly into illiquid markets, tend to amplify the downturn in asset values. Declines in asset prices, together with fears of further declines, tend to result in lenders demanding still higher haircuts, which forces more asset sales, and so on. Such phenomena were particularly important in the run-up to the acquisition of Bear Stearns in March 2008 and in the most intense phase ofthe crisis in September and October 2008.

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