Tuesday, August 4, 2009
The Ball Is In President Obama's Court
There is another book on the market for me to read entitled In Fed We Trust - Ben Bernanke's War On The Great Panic - How The Federal Reserve Became The Fourth Branch Of Government - by David Wessel. As I am retired from the world of finance, I doubt that I will buy a copy on Amazon.com. My new book budget was destroyed by the total meltdown of my dividend checks. Besides, I am a painter now, and must use my resources to paint.
The Federal Reserve Bank became the fourth branch of government when Congress created our central bank in 1913. When Paul Volcker was chairman of the Fed, he took control of monetary policy and wrung inflation from the economy and set this country on a stable course. Alan Greenspan, the idiot savant, replaced Paul Volcker as chairman of the Fed, and set the stage for the Great Panic that followed. Chairman Greenspan did not do this all by himself, he had plenty of help from Congress, Presidents Bush 41, Clinton and Bush 43. Let us not forget about the lobbyists supported by Wall Street's commercial banks and investment bankers, for they were pushing for the deregulation that left our economy vulnerable to the abuses that would follow.
As I have written too many times over the last 18 months, the meltdown of the bond market, the financial crisis and the economic crisis that followed were man made events that could have been avoided. In fact, the safe guards had been in place and then were removed by Congress!!! This stuff is not rocket surgery. If people will just take the time to learn a few economic terms and read and think, they will understand the complete picture. But, something "new" is on the horizon.
The Presidential Elections of 2012 is in the near term future for President Obama and his administration. If they want to keep their jobs, they must secure the re-election of President Obama. The domestic economy will be the number one issue again in 2012, and by then, the state of our economy will be owned by President Obama, his administration and Congress.
The movement of credit is essential to the economic recovery of the United States. The structured debt markets play a major role in financing the growth of our economy, and without this segment of the capital markets, our domestic economy will not fully recover. The single biggest challenge standing between full economic recovery, and creeping along at less than full employment, is the credit rating agencies. This very small piece of the puzzle is as necessary as yeast is to make bread rise. Without addressing the integrity question of the major credit rating agencies, the future for structured debt finance and the investors that buy the product (bonds), will remain a major problem, in my opinion. Portfolio managers are not ready to trust the bond ratings from the major CRAs so quickly after this most recent fiasco.
So, the ball is in President Obama's court, so to speak, his administration needs to level the playing field so that investors are not taken to the cleaners. Simple. Let us see what they choose to do.