Democrats Clamor For Market Chaos, DJIA 9000

And you thought today’s 200+ DJIA loss sucked? It could get seriously out of control by Monday.

Bernanke faces new opposition from Democrats

Federal Reserve Chairman Ben Bernanke’s nomination to a second term is in fresh jeopardy because of growing opposition from Senate Democrats, who have been battered by public anger about the economy and the political setback of losing a Massachusetts Senate seat to the Republicans this week.

At least four Senate Democrats have said they will oppose President Barack Obama’s decision to renominate the Fed chairman. Critics of Bernanke, who was named to his first term by former President George W. Bush, are pressing the case that he was an architect of policies that helped drag the U.S. into a period of recession and high unemployment. His term expires Jan. 31.

“It is time for a change,” Sen. Barbara Boxer, D-Calif., said Friday, hours after Sen. Russ Feingold, D-Wis., announced his opposition to Bernanke.

“It is time for Main Street to have a champion at the Fed,” Boxer said. “Our next Federal Reserve chairman must represent a clean break from the failed policies of the past.”

Bernanke received an important boost late Friday, when Senate Majority Leader Harry Reid, D-Nev., endorsed the renomination. But several other Democrats remained noncommittal.

Amid uncertainty about Bernanke’s fate, the Dow Jones industrial average dropped nearly 217 points, or 2.1 percent, on Friday, after falling sharply a day earlier on Obama’s announcement that he would pursue strict new banking regulations.

See also:
Bernanke’s Nomination in Trouble
Bernanke Reconfirmation Delay Adds to Market Uncertainty
Populist backlash puts Federal Reserve Chairman Ben Bernanke under siege
Growing opposition puts Bernanke approval in question
Opposition Grows Against Second Term for Bernanke
Wall St Week Ahead-Investors brace for earnings, Bernanke vote

Bernake is not perfect but he is the embodiment of market stability as far as investors worldwide are concerned. These frivolous Democrats had better come to terms with economic reality over the weekend and stop grandstanding.

/if this isn’t resolved over the weekend, brace for impact!

Obama’s $2 Trillion Friday Night Dump

Gee, is it any wonder that Obama decided to unload this little gem late on a Friday, just as he slips out of town on vacation, not to be disturbed?

White House Adds $2 Trillion to Deficit Forecasts

The nation would be forced to borrow more than $9 trillion over the next decade under President Obama’s policies, the White House acknowledged late Friday, bringing their long-term budget forecast in line with independent estimates.

The new projections add approximately $2 trillion to budget deficits through 2019. Earlier this year, the administration had predicted that Obama’s policies would require the government to spend $7.108 trillion more than it collects in tax revenue over the next decade.

An administration official, speaking on the condition of anonymity because the report will not be formally released until Tuesday, said the change is due primarily to updated projections of economic growth that are far less rosy than data used when the White House released its first long-term budget outlook in February. At that time, the White House predicted the economy would shrink by 1.2 percent this year; in fact, the economy shrank at an annualized rate of 6.4 percent in the first quarter, the sharpest drop since 1980.

Critics called the administration overly optimistic, charging that Obama’s figures masked the depth of the nation’s fiscal crisis and falsely suggested that his policies would stabilize the nation’s growing debt to China and other foreign creditors.

The nonpartisan Congressional Budget Office has predicted that Obama’s policies would force the nation to borrow $9.1 trillion between 2010 and 2019. Like the White House, the CBO is scheduled to release an updated forecast on Tuesday.

US deficit poses potential systemic risk: Taylor

The U.S. budget deficit poses more of a potential risk to the financial system than the collapse in commercial real estate prices, an influential economist said on Friday.

“We have a huge deficit. … The stimulus package is generating a lot more debt, and there are systemic issues there,” Stanford University economics professor John Taylor told Reuters Television on the sidelines of the Federal Reserve’s annual Jackson Hole conference.

The Obama administration expects the deficit to hit a record $1.58 trillion this year, and sees a cumulative $9 trillion of additional red ink in 2010-1019.

“If that gets out of control, if interest rates start to rise because people are reluctant to buy all that debt then that can slow the economy down. So, that’s the more systemic concern I have,” Taylor said.

See also:
White House to Boost 10-Year Deficit Forecast to $9 Trillion
New 10-year Federal Deficit: $9 Trillion, Up from $7 Trillion
W.H. hikes deficit estimate by $2 trillion
Obama raises 10-year deficit to $9 trillion
$9 Trillion in Deficits for 2010–2019
Obama to raise 10-year deficit to $9 trillion
US to hike 10-year deficit forecast to nine trillion dollars
Warren Buffett warns budget deficit may harm dollar
New deficit projections pose risks to Obama’s agenda
9 Trillion Reasons Health Care May Be Dead

$9 TRILLION DOLLARS? Add another $2.5+ trillion for health care “reform” and cap & trade and Obama’s on track to double our national debt in the next decade! Can’t they see how reckless their policies are, are they on drugs? Unless we turn this borrow and spend trend around quickly, it’s only a matter of time before the U.S. loses its AAA credit rating, defaults on its debt, and spirals into economic collapse.

/STOP SPENDING, CUT SPENDING, DO IT YESTERDAY!

The Banks And Car Companies Are Not Enough!

Obama must have more power, more control! He must reign over everything, the entire U.S. economy belongs to him! You cannot be trusted with capitalism and free markets. Obama knows best and Obama has spoken.

New Foundation, New Stability

Over the past decades, government has often haphazardly weakened and jettisoned the regulations on the financial sector that were designed to bring stability to the economy. The result has been what the President refers to as a “bubble and bust” economy, leaving American families at the whim of greed and excess far beyond their control and hundreds of miles away. As the President said today, it is indisputable that this peril was a leading contributor the economic breakdown America has seen over the past years.

Today marked a culmination of a months-long process in which the President consulted with the most expert and experienced regulators, leaders in Congress, and his entire economic team to craft a revamping of the system, a “new foundation” on which our economy can grow for decades to come. Many of them joined him today as he announced the principles they had agreed upon.

The President began his remarks by diagnosing the problem:

In recent years, financial innovators, seeking an edge in the marketplace, produced a huge variety of new and complex financial instruments. And these products, such as asset-based securities, were designed to spread risk, but unfortunately ended up concentrating risk. Loans were sold to banks, banks packaged these loans into securities, investors bought these securities often with little insight into the risks to which they were exposed. And it was easy money — while it lasted. But these schemes were built on a pile of sand. And as the appetite for these products grew, lenders lowered standards to attract new borrowers. Many Americans bought homes and borrowed money without being adequately informed of the terms, and often without accepting the responsibilities.

Meanwhile, executive compensation — unmoored from long-term performance or even reality — rewarded recklessness rather than responsibility. And this wasn’t just the failure of individuals; this was a failure of the entire system. The actions of many firms escaped scrutiny. In some cases, the dealings of these institutions were so complex and opaque that few inside or outside these companies understood what was happening. Where there were gaps in the rules, regulators lacked the authority to take action. Where there were overlaps, regulators lacked accountability for their inaction.

. . .

The President concluded by making clear the necessity of the solution:

There’s always been a tension between those who place their faith in the invisible hand of the marketplace and those who place more trust in the guiding hand of the government — and that tension isn’t a bad thing. It gives rise to healthy debates and creates a dynamism that makes it possible for us to adapt and grow. For we know that markets are not an unalloyed force for either good or for ill. In many ways, our financial system reflects us. In the aggregate of countless independent decisions, we see the potential for creativity — and the potential for abuse. We see the capacity for innovations that make our economy stronger — and for innovations that exploit our economy’s weaknesses.

We are called upon to put in place those reforms that allow our best qualities to flourish — while keeping those worst traits in check. We’re called upon to recognize that the free market is the most powerful generative force for our prosperity — but it is not a free license to ignore the consequences of our actions.

This is a difficult time for our nation. But from this period of challenge, we can once again tap those values and ideals that have allowed us to lead the global economy, and will allow us to lead once again. That’s how we’ll help more Americans live their own dreams. That’s why these reforms are so important. And I look forward to working with leaders in Congress and all of you to see these proposals put to work so that we can overcome this crisis and build a lasting foundation for prosperity.

And, of course, Obama has a detailed plan for tightening his grip on the free market system.

Financial Regulatory Reform: A New Foundation

We must act now to restore confidence in the integrity of our financial system. The lasting economic damage to ordinary families and businesses is a constant reminder of the urgent need to act to reform our financial regulatory system and put our economy on track to a sustainable recovery. We must build a new foundation for financial regulation and supervision that is simpler and more effectively enforced, that protects consumers and investors, that rewards innovation and that is able to adapt and evolve with changes in the financial market.

In the following pages, we propose reforms to meet five key objectives:

(1) Promote robust supervision and regulation of financial firms. Financial institutions that are critical to market functioning should be subject to strong oversight. No financialfirm that poses a significant risk to the financial system should be unregulated or weakly regulated. We need clear accountability in financial oversight and supervision. We propose:

• A new Financial Services Oversight Council of financial regulators to identify emerging systemic risks and improve interagency cooperation.

• New authority for the Federal Reserve to supervise all firms that could pose a threat to financial stability, even those that do not own banks.

• Stronger capital and other prudential standards for all financial firms, and even higher standards for large, interconnected firms.

• A new National Bank Supervisor to supervise all federally chartered banks.

• Elimination of the federal thrift charter and other loopholes that allowed some depository institutions to avoid bank holding company regulation by the Federal Reserve.

• The registration of advisers of hedge funds and other private pools of capital with the SEC.

(2) Establish comprehensive supervision of financial markets. Our major financial markets must be strong enough to withstand both system-wide stress and the failure of one or more large institutions. We propose:

• Enhanced regulation of securitization markets, including new requirements for market transparency, stronger regulation of credit rating agencies, and a requirement that issuers and originators retain a financial interest in securitized loans.

• Comprehensive regulation of all over-the-counter derivatives.

• New authority for the Federal Reserve to oversee payment, clearing, and settlement systems.

(3) Protect consumers and investors from financial abuse. To rebuild trust in our markets, we need strong and consistent regulation and supervision of consumer financial services and investment markets. We should base this oversight not on speculation or abstract models, but on actual data about how people make financial decisions. We must promote transparency, simplicity, fairness, accountability, and access. We propose:

• A new Consumer Financial Protection Agency to protect consumers across the financial sector from unfair, deceptive, and abusive practices.

• Stronger regulations to improve the transparency, fairness, and appropriateness of consumer and investor products and services.

• A level playing field and higher standards for providers of consumer financial products and services, whether or not they are part of a bank.

(4) Provide the government with the tools it needs to manage financial crises. We need to be sure that the government has the tools it needs to manage crises, if and when they arise, so that we are not left with untenable choices between bailouts and financial collapse. We propose:

• A new regime to resolve nonbank financial institutions whose failure could have serious systemic effects.

• Revisions to the Federal Reserve’s emergency lending authority to improve accountability.

(5) Raise international regulatory standards and improve international cooperation. The challenges we face are not just American challenges, they are global challenges. So,as we work to set high regulatory standards here in the United States, we must ask the
world to do the same. We propose:

• International reforms to support our efforts at home, including strengthening the capital framework; improving oversight of global financial markets; coordinating supervision of internationally active firms; and enhancing crisis management tools.

Nowhere in the President’s remarks or in his new regulation plan will you find any mention, let alone an admission, of the government’s primary role in causing the latest financial collapse. Fortunately, IBD tells it like it was.

Regulation Nation

Regulation: The White House wants to impose sweeping new rules for the financial industry to prevent another meltdown. Unfortunately, it was government — not the private sector — that was to blame.

Citing a “culture of irresponsibility” that it says helped cause last year’s financial crisis, the White House on Wednesday released an 88-page report that proposes major changes in America’s financial system. The Associated Press aptly called it “the greatest regulatory transformation since the Great Depression.”

Among the reforms put forward were a new, pumped-up Federal Reserve with greater powers to regulate and oversee the entire financial system, a new consumer credit watchdog to oversee home loans and credit cards, and new rules and oversight for hedge funds and exotic securities, such as credit default swaps and collateralized debt obligations, which some blame for making the financial crisis worse.

It’s nice to see that our government is so concerned about not repeating the errors of the past. But our advice comes from an ancient proverb:

“Physician, heal thyself.”

The White House’s financial regulation proposal blames “gaps in regulation” for our financial crisis. Wrong. It was in fact government misregulation and miscalculation that created our financial crisis — not private businesses. The record on this is quite clear.

As economic historian Lawrence White of the University of Missouri has written:

“The expansion in risky mortgages to underqualified borrowers was encouraged by the federal government. The growth of ‘creative’ nonprime lending followed Congress’ strengthening of the Community Reinvestment Act, the Federal Housing Administration’s loosening of down-payment standards, and the Department of Housing and Urban Development’s pressuring lenders to extend mortgages to borrowers who previously would not have qualified.”

Add to that Fannie Mae and Freddie Mac — created and regulated by acts of Congress — which together at one point controlled nearly half of the nation’s $12 trillion mortgage market. The two quasi-private entities served as the grand financial engine by which Congress would boost homeownership.

It worked well for a while. And we can’t fault the intent to help people. But the failure was one of too much government — not too little, which is the rationale for the new financial regulation regime sought for Wall Street and the banks.

As for the Fed’s new powers, we happen to believe the central bank has done a reasonably good job responding to this crisis — though as many others have noted, the vast expansion of the U.S. money supply in the last year poses a future inflationary threat.

But we don’t think the Fed needs enhanced powers. Far from it. It’s too powerful already. Giving it virtually unbridled control over our financial system without having to directly answer to the people is a danger to free market capitalism.

Many have argued that the Fed’s slashing of interest rates from 6.25% in 2001 to 1% in 2003 — following a stock market meltdown, a recession, the 9/11 attacks and the start of the War on Terror — was too much and led to the housing market bubble.

Now, strangely, many of the same people advocate giving the Fed even more power. It makes no sense.

If the White House really wants to fix our ailing financial system, it would do well to start by repealing what remains of TARP, undoing the government’s takeover of our auto industry and halting the fraudulent and wasteful $787 billion “stimulus” program.

Then you might see a real economic recovery take place.

See also:
Obama Defends Financial Overhaul
Geithner: Govt. Needs Better ‘Crisis Management’ Tools
In huge change, Obama’d strip Fed of credit card oversight
Obama: ‘A sweeping overhaul’
Historic Overhaul of Finance Rules
Obama Lays Out ‘Sweeping Overhaul’ of Financial Rules (Update3)
Not Everyone Is Cheering Fed’s New Role
New financial rules: Major changes for big, small
Obama unveils ‘sweeping overhaul’ of financial regulations

The truly ironic part is that most of Obama’s free market control plan has to go through Congress to become law, those most responsible for the financial mess in the first place. Can you just imagine what hideous manner of bull[expletive deleted] regulation will come out the other end? How much additional U.S. government oppression can free enterprise take before major corporations will just say enough already and reincorporate in another country with a more business friendly environment?

/one thing I know for sure from daily first hand stock trading experience, between Obama’s encroachment into the private sector economy and his out of control government spending, he’s spooking the ever loving [expletive deleted] out of the markets

Heavy Meddle

This is your government going way too far.

BofA Urged by Regulators to Revamp Board of Directors

Federal officials have pressured Bank of America Corp. to revamp its board by bringing in directors with more banking experience, as regulators place the bank under increasingly heavy government scrutiny.

The move represents unusual influence by the federal government over the workings of a financial institution in which it doesn’t own a stake. It’s particularly significant because many of the bank’s woes stem from its purchase of Merrill Lynch & Co. — an acquisition that was completed after heavy prodding by federal regulators. The Merrill deliberations were the beginning of regulators’ deepening involvement in the Charlotte, N.C., lender’s day-to-day operations.

The moves underscore the balancing act faced by the federal government as it tries to steer the banking sector through its crisis while also involved in a broader pattern of engagement in the operations of individual U.S. banks.

On May 7, a week after the Bank of America board named Walter Massey to replace Chief Executive Kenneth Lewis as chairman, Mr. Massey unveiled a committee to recommend changes to the board’s structure and size. The committee would also oversee the bank’s response to a federal “stress test” that showed the need for $33.9 billion in additional equity.

Prior to those moves, federal banking regulators — the Federal Reserve and the Office of the Comptroller of the Currency — had signaled to the bank’s leadership that such steps would be well received by the federal government. Government officials also suggested that the task of reshuffling the board be led by independent directors, and that the board needed more members with banking experience.

See also:
WSJ: Gov’t pressuring Bank of America board change
Pressure is increasing on Bank of America’s Lewis
Regulators urge Bank of America board overhaul
Bank of America Under Pressure

So, after bullying Ken Lewis into buying Merrill Lynch for much more than it was worth, which got Bank of America into financial trouble in the first place, now that same government is trying to tell BofA who can be on their board of directors. Nevermind that Bank of America shareholders just elected the board of directors at their annual meeting on April 29th. The government has absolutely no business sticking it’s nose into the internal affairs of a publicly traded corporation that it owns absolutely no stock in. And I don’t care that the government has loaned Bank of America money either, money that, by the way, Bank of America hopes to repay within a matter of months, that doesn’t make the government a shareholder, entitled to make decisions about who should run the company.

This big brother government interference in the private sector just has to stop and the sooner the better, before Obama and company get more than just there noses into the corporate tent. Hopefully, Bank of America will just say no and not cave in to the government pressure or maybe it will take a shareholder lawsuit to rebuff the nosy camel. In any case, someone needs to put their foot down while there still is something resembling a private sector and free markets.

/seriously, government encroachment like this should scare the [expletive deleted] out of everyone who still believes there is such a thing as capitalism

This Had Better Work

My Plan for Bad Bank Assets

Today, we are announcing another critical piece of our plan to increase the flow of credit and expand liquidity. Our new Public-Private Investment Program will set up funds to provide a market for the legacy loans and securities that currently burden the financial system.

The Public-Private Investment Program will purchase real-estate related loans from banks and securities from the broader markets. Banks will have the ability to sell pools of loans to dedicated funds, and investors will compete to have the ability to participate in those funds and take advantage of the financing provided by the government.

The funds established under this program will have three essential design features. First, they will use government resources in the form of capital from the Treasury, and financing from the FDIC and Federal Reserve, to mobilize capital from private investors. Second, the Public-Private Investment Program will ensure that private-sector participants share the risks alongside the taxpayer, and that the taxpayer shares in the profits from these investments. These funds will be open to investors of all types, such as pension funds, so that a broad range of Americans can participate.

Third, private-sector purchasers will establish the value of the loans and securities purchased under the program, which will protect the government from overpaying for these assets.

The new Public-Private Investment Program will initially provide financing for $500 billion with the potential to expand up to $1 trillion over time, which is a substantial share of real-estate related assets originated before the recession that are now clogging our financial system. Over time, by providing a market for these assets that does not now exist, this program will help improve asset values, increase lending capacity by banks, and reduce uncertainty about the scale of losses on bank balance sheets. The ability to sell assets to this fund will make it easier for banks to raise private capital, which will accelerate their ability to replace the capital investments provided by the Treasury.

This program to address legacy loans and securities is part of an overall strategy to resolve the crisis as quickly and effectively as possible at least cost to the taxpayer. The Public-Private Investment Program is better for the taxpayer than having the government alone directly purchase the assets from banks that are still operating and assume a larger share of the losses. Our approach shares risk with the private sector, efficiently leverages taxpayer dollars, and deploys private-sector competition to determine market prices for currently illiquid assets. Simply hoping for banks to work these assets off over time risks prolonging the crisis in a repeat of the Japanese experience.

See also:
Geithner Banks on Private Cash
White House Defends Plan for Toxic Assets
Treasury’s toxic asset plan could cost $1 trillion
Treasury expected to unveil new entity to help buy toxic assets
A Plan To Purge Banks’ Toxic Assets
AIG fallout could trip up toxic-asset sales
Banker fury over tax ‘witch-hunt’
Pandit’s Memo to Citigroup Employees
Bank CEOs Push Back on Legislation That Would Tax Bonuses
Citigroup, Bank of America, JPMorgan criticize proposals to tax bonuses
Citi CEO says bonus tax could hurt financial firms
Citi’s Pandit warns of ‘setback’ if bonus tax passes
U.S. Department of the Treasury
Board of Governors of the Federal Reserve System
Federal Deposit Insurance Corporation

Gee, now they want the help of private equity? That might be a tough sell after last week’s shameful, sordid infantile tantrum, where everyone in the government from Obama to Barney Frank was hypocritically kicking “greedy” Wall Street executives in the groin and passing retroactive laws to take away money they’ve already legally earned. Why should they cooperate when Washington can turn on them on a whim and change the rules at the drop of a hat?

In any case, I hope the Public-Private Investment Program works. It’s a vital step on the path out of this recession.

/keep your fingers crossed and stay tuned