TCS Daily


How Big-Government Is Obama?

By Larry Kudlow - January 8, 2009 12:00 AM

Tax cuts are now 40 percent of his new stimulus package.

Obama spoke Thursday at George Mason University about his American Recovery and Reinvestment Plan — a.k.a. the stimulus package. There's an interesting section that would warm the heart of John Maynard Keynes. It goes like this:

It is true that we cannot depend on government alone to create jobs or long-term growth, but at this particular moment, only government can provide the short-term boost necessary to lift us from a recession this deep and severe.

Well, 28 years ago Ronald Reagan said government was the problem, not the solution. Dealing with a bad recession like this one, the Gipper lowered taxes and domestic spending. Obama on the other hand has offered an $800 billion package, with plenty of infrastructure spending that alleges to create three million jobs.

Nobody really believes infrastructure spending will end the recession or create permanent new jobs. However, it's interesting just how much the Obama plan has changed since the election. The size has been roughly constant. But the mix of tax cuts and spending increases is now totally different.

Instead of $100 billion worth of tax credits, there are now $300 billion worth of tax cuts. This includes a big new piece for business, more cash-expensing for small-business investment, and a restoration of the five-year tax-loss carry-back, which will especially help banks and homebuilders. It might even result in tax refunds for businesses, and might also allow banks to rid themselves of toxic assets, since the losses will now be spread over many years.

So what we have now is an $800 billion stimulus package with $300 billion of so-called tax cuts which could infer less spending than before — maybe only $500 billion worth.

Obama's economic advisers are bragging to me about their new tax-cut package. They say they're very pro-growth. And you know what? I acknowledge it. People like Larry Summers, Austan Goolsbee, Christy Romer, and Tim Geithner are no left-wing big-government whackos. They may not be hard-core supply-siders. But in terms of the economics profession, I would call them center-right.

And they absolutely understand the importance of private business and investment in the job-creating economic-growth process. And I think they're views are the main reason for the reshaping of the Obama package between the campaign trail and the eve of inauguration.

The problem is that they're not reducing marginal tax rates on large and small businesses or individuals. Their tax credits will be two-year's worth, not permanent. There will be no incentive effects to maximize growth. And many of the tax cuts are refundable credits, which really are a form of government spending.

So it's not a supply-side package. However, I've really never met a tax cut I didn't like. And any tax cut is better than a spending increase since private companies and individuals will at least get the money instead of government.

This is the interesting part of the Obama plan. Somewhere in there the tax cuts will have a small positive economic effect. I would have designed it differently, but then again Team Obama won the election. I guess I could say it could have been worse.

Of course, Team Obama will have to contend with the sticker shock of a $1.2 trillion deficit for 2009, just printed by the Congressional Budget Office. And that's before the Obama stimulus plan. But I don't think Republicans really have a leg to stand on with the deficit argument — or for that matter the spending argument.

Yes, Obama is raising the ante, and the new numbers are just about over the edge. But a lot of that new deficit is TARP money that should be scored as investment — not real spending. And in view of all the economic pessimism out there, I doubt if the public is very worried about deficits.

What's most regrettable is that congressional Republicans have yet to make the alternative case. They haven't pressed for marginal tax-rate cuts as an option to Obama's credits. So far, the GOP is me-too. They've offered an echo instead of a choice.

Meanwhile, polls now say the public favors Obama's plan by 55 to 65 percent. His personal approval rating is even higher. And he's being politically astute by reaching out to Republicans. He has virtually removed partisan rhetoric. Simply put, Obama is in the driver's seat right now.

Sure, the Democratic Congress may mangle Obama's plan. They might even repeal the Bush tax cuts this year. So there is considerable uncertainty about the details of the final package. But I must say, a crafty Obama is doing his best to employ his version of the Reagan tax-cut plan. Obama talks big government. But so far his program actually reduces the government-spending share and increases the private tax-cut share.

Very interesting.


This article first appeared on Kudlow's Money Politic$.
Categories:

56 Comments

He lied to get into office..
why would he stop now?

I will hold on to my wallet as tightly as I can.

Or, he is lying now.
You can't figure out where he stands, in that case. Very bad for markets.

"Meanwhile, polls now say the public favors Obama's plan by 55 to 65 percent."

Uh, doesn't Kudlow mean '55 to 45 percent'?

BG obama
I hope somebody out there will keep tract of how many entitlement programs he'll stop, or how many useless agencies he'll end, or how many of the more than 100 military bases overseas he'll close, how many less GM Suburbans he'll tell agents to stop buying.
So in sum, I suppose he'll be less big government than Castro or Brehznev, but probably more so than Lord Keynes.

Golden Boy
>So what we have now is an $800 billion stimulus package with $300 billion of so-called tax cuts which could infer less spending than before — maybe only $500 billion worth.

Well, if you start at horrible, and move to bad, I guess you've made a move in the right direction.

It is still a 800 billion stimulus package, payable by future generations. But at least 300 billion of it will be spent by the private sector, which, theoretically, will be spent with greater knowledge and care than it would be spent by the government. Like you said, it could (always) be worse.

The nice part for Obama is that most of the people who voted for him did so for reasons other than his economic policies - they liked his charisma, his good looks, his youth, his color, his non-Republicanness, etc - so he could do a complete about-face on economics and his supporting audience wouldn't even notice, or care. Your typical MSNBC-watching American Democrat really has no economic philosophy (aside from "Rich people make too much money!") so they will not object when Obama shows the Audacity of Change by reversing his position on economics. Or, almost any other issue. While on the campaign trail, he talked big about getting completely out of Iraq ASAP. He started backing away from that as soon as he was elected, but has not lost any support. He could probably do the same on almost any issue and keep his high approval rate.

I suspect Obama was elected not because of his collectivist/socialist ideology, but rather, in spite of it. He can change his policy however he wants, because those who voted for him did so not on the basis of policy, but on image. As long as he maintains that image, he is golden. And most of that image (youth, good looks, skin color, etc.) is not going to change. If he can keep the Democrats in Congress from driving us off a cliff - simultaneously avoiding disaster and distancing himself from the Left Wing Wackos - he may be a two-term president.

Glad to know that you're still around. Hope you had a great start '09
Now that house prices (almost) came back to Earth, I am also planning to invest in a non-productive asset this year.

Mr O's Congressional strategy
"Nobody really believes infrastructure spending will end the recession.."

Huh? Just about everyone is on board with this approach. Otherwise, why indebt ourselves?

"..or create permanent new jobs."

This one is pure disinformation. Obama has been at pains to point out that these jobs will nearly all be temporary in nature. Why would a one-time stimulus include a lot of permanent additions to the federal payroll? Jobs so created would quickly become a drag on the economy.

"However, it's interesting just how much the Obama plan has changed since the election. The size has been roughly constant. But the mix of tax cuts and spending increases is now totally different."

No presidential plan survives Congress intact. Obama has said from day one that he wants to govern from a bipartisan consensus. That means that everybody gets a piece of the plan. The Republicans, for example, signalled they would not get on the train if tax cuts for fat cats were rescinded. So those will remain in place.

That much of the plan will be a waste, from the perspective of recession fighting. As we've seen repeatedly since the Reagan years, let these people spend their money on investment exotica and it all goes up in a puff of smoke.

So THAT much of the plan will perform no useful work. It's just there to get the rest of the package passed. The rest of the money should stimulate spending.. and promote a fresh round of production, bringing the jobs back in the private sphere.. and last but not least, allow tax revenues to resume so the stimulus can be paid down.

Bad math
"It is still a 800 billion stimulus package, payable by future generations. But at least 300 billion of it will be spent by the private sector, which, theoretically, will be spent with greater knowledge and care than it would be spent by the government. "

Q: If $300 billion goes toward tax breaks for rich people (tax breaks for middle incomes was already part of the plan) and $500 billion goes toward the creation of temporary jobs, how much of the package will be spent by the private sector?

A: All of it.

In fact the $500B will be spent more productively, on such things as house and car payments, consumer purchases and debt reduction. Historically, the $300B the investor class will get to spend will just go toward more bubble-junk like asset based securities. And ultimately will be lost to the productive sector of the economy. While the dollars spent by consumers will remain in the economy, and continue doing work.

Getting out of Iraq
"While on the campaign trail, he talked big about getting completely out of Iraq ASAP. He started backing away from that as soon as he was elected, but has not lost any support. He could probably do the same on almost any issue and keep his high approval rate."

Maybe you should read more.. or at least watch the TV news once in a while. You haven;t heard of the Status of Forces Agreement? President Bush signed that a month ago. The manner and timing of our leaving Iraq have already been worked out in detail. There's nothing left for Obama to do.

Bush has agreed that we are currently to serve in a support role only, with Iraqi forces taking the lead in every military action (unless we're in the field and get directly fired upon). Any action plan originating with US forces must be cleared in advance with the Iraqi military.

After this coming June 30 we are confined to base. No coalition troop presence in inhabited areas of Iraq will be permitted.

And by the end of December, 2011 all coalition troops are to have left Iraq. All of them. No more permanent bases.

You didn't hear about any of that?

".. It establishes that U.S. combat forces will withdraw from Iraqi in late 2008 between Iraq and the United States. It establishes that U.S. combat forces will withdraw from Iraqi cities by June 30, 2009, and all U.S. forces will be completely out of Iraq by December 31, 2011, subject to possible further negotiations which could delay withdrawal and a referendum scheduled for mid-2009 in Iraq which may require U.S. forces to completely leave by the middle of 2010.[1][2] The pact requires criminal charges for holding prisoners over 24 hours, and requires a warrant for searches of homes and buildings that are not related to combat.[3] U.S. contractors working for U.S. forces will be subject to Iraqi criminal law, while contractors working for the State Department and other U.S. agencies may retain their immunity. If U.S. forces commit still undecided "major premeditated felonies" while off-duty and off-base, they will be subject to the still undecided procedures laid out by a joint U.S.-Iraq committee if the U.S. certifies the forces were off-duty."

http://en.wikipedia.org/wiki/U.S.-Iraq_Status_of_Forces_Agreement

I guess you weren't tuned to MSNBC. :)

Some number of budget cuts President Bush made..
How many was that again?

Some number of budget cuts President Bush made..
How many was that again?

Describe the lie for us
"Meanwhile, polls now say the public favors Obama's plan by 55 to 65 percent."

"Uh, doesn't Kudlow mean '55 to 45 percent'?"

Actually, no. That's the approval range. Depending on the poll, his economic stimulus plan has an approval rate of between 55 and 65 percent. The CNN poll, for example, gives him 56 percent.

Therefore "disapprove" plus "no opinion" would be in the 35-45% range.

But your point was that you think he's lying. Meaning he offered the public one view while secretly he harbored another. And I'd like you to describe that lie.

The Great Irony
About GW Bush is that despite the fact he's basically a fiscal liberal. As far as spending, never met a bill he didn't like.

I really don't get the left-wing histrionics.

Too Much Credit
Your typical MSNBC-watching American Democrat really has no economic philosophy (aside from "Rich people make too much money!") so they will not object when Obama shows the Audacity of Change by reversing his position on economics.

You think its that sophisticated?

Spending is spending
Why does it matter if it is 'productive'?

"dollars spent by consumers will remain in the economy, and continue doing work.
"

If these dollars were taken from other consumers in the first place, how can they continue to do work? It's like breaking a window or having a war in order to stimulate demand.

"There's nothing left for Obama to do."
What an excuse!

HE,the ONE, will be president. He can do anything.

What will Iraq do if he tells them to **** off and withdraws ALL forces on 21 JAN 09?

Who cares what Iraq will do? No one cared during the campaign.

Bush??
Who said anything about Bush? In any case, he and even Reagen and all of them haven't made the proper budget cuts to maintain no deficit.

phony history again from Roy
He said that historically the investor class will blow their money on junk. This isn't true, just like most of his history. I've actually met some rich people, and found out that they actually spend money on normal stuff too, like houses and cars etc. In addition they often also invest in such things as productive capacities of firms, and start firms, and invest in firms that do useful productive things.
What school of economics is it that says that rich people are just usless wastrels?

Some of the rich build libraries
Like Andrew Carnegie.

Among many of his legacies is Napoleon Hill's "Think and Grow Rich" and "The Power of Positive Thinking".

Carnegie understood the opportunity potential the USA offered and created institutions to expand opportunities for millions.
Just one billionaire has done more to help others prosper than all government programs combined in US history.

Too bad the envious, covetous socialists can't appreciate that.

just about everyone....
Not me, I don't believe it and for similar reasons to why it didn't work in Japan. And then, "otherwise why indebt ourselves". Simple answer too; because of stupid economics, Keynsianism/Marxism.

Actually, Obama just said
"everyone's going to have to put some skin in the game." That is, you'd better be prepared to be called upon to sacrifice...and that includes all you stupid Leftist Liberal Democrats who believed you were going to be given what was robbed from the "evil rich".

This is classic power-grab stuff that he's doing. In spite of his stupidity, Obama knows that Reid/Pelosi actually DON'T represent the majority view by any stretch.

If Obama could lie so blatantly to get himself elected, he cannot be trusted. He's either a total liar all the way or he's an incredibly immature imbecile who stumbled into office without knowing a damned thing and being totally out of touch with reality...like Beanie Baby.

Obama's lies
What can you expect from such a guy? He won't even show his real birth certificate, but only the Photoshop copy.

Filled with hot air and IOUs
...that's what you get when too much money leaves the cash registers down here on earth and gets into the upper reaches of speculative bet placement.

It's a matter of efficiency. When someone's net worth is near or below zero, we know that every dollar that gets into his hands will be immediately spent. If nothing else, it will be used to pay down debt.

Offer windfalls to the already rich and you don't get that effect. These fortunates are in the position that they've already bought everything they want, and have money left over. What they do with that exces money is to indulge in speculation.. gamble with it.

It's nice to give this a grand name, and say they're investing in the future. But what they're actually doing is taking a flyer. The money is far more likely to end up in some bubble that in a few years will pop than it is to end up doing useful work. That's what recent financial history tells us: that we're now trapped in a cycle of repetitive booms and busts in "air-ware".. the selling of abstruse financial vehicles few are equipped to understand or predict behaviorally. It's just gambling.

Therefore relief should be targeted toward the lower income brackets if the purpose is to stimulate spending.. and by doing so, stimulate sales, production and employment.

So now let's look at the other side of the coin. There are always some good ideas in search of funding so they can become reality. But we know that venture capital is only a tiny segment of the total amount of capital in circulation. It certainly has little to do with the investment total tied up in hedge funds.. worth, I think, something like 100 times the size of the global economy. That stuff is just hot air.

When we look at investment in established companies, don't you think they should be managed in such a way that when they want to make payroll they can just reach into their cash reserves? Why should giants like GM fail when they go a couple of months without borrowing more money? Doesn't that say they're doing something wrong with their profits? Do these people really always need to be snorting fat lines of credit, or contriving stock offerings to help make ends meet?

I think it would be a very useful discipline to bring about a financial world where a company had to make a profit to stay afloat. And if the prop of ever more abundant investment funds were to dry up, they wouldn't have to sink like a stone. They could draw a check from their account at the bank.

That is, I'd like to see a world that wasn't so complicated we couldn't see that ALL its accounts were overdrawn, and whose viability was just based on theoretical accounts receivable from other accounts that were just as overdrawn. Because that's exactly how the banking industry works (and with it, the bond market and the derivative markets). They're all being held up by empty promises to pay.

Imagining ourselves rich and successful
We do appreciate our Andrew Carnegies and our Bill and Melindas. But they are relatively rare among holders of vast amounts of wealth. The majority of wealth remains in private hands, where it does no work but to amass yet greater wealth. Thus it is less than fully useful.

I will admit that our large funds and endowments are dependent on this kind of accumulated wealth. But when speculation has run rife, as it has over this past year, even those pensions and university endowments have run upon the rocks.

And to tell us that Carnegie's endowment of libraries a century ago is somehow more significant than all the funding educational institutions have gained from tax-based state and federal finances.. that's just idiotic. If governments had said that one old man had done their job for them and there was no need for constant funding for education, we'd all just be sitting around today, reading how we could just "think and grow rich".

No Subject
If you're saying that way too much credit has been made available in rceent years, I think I and everyone else would agree with you. A house of cards has been built on vague promises.

"..when Obama shows the Audacity of Change by reversing his position on economics.
You think its that sophisticated?"

Okay, I'll bite. What has been his position on economics? And what do you think it will change to?

Also, if it's being led by old veterans like Paul Volcker, should we feel that the correction they're putting together will not be sophisticated? The Obama team has kind of a deep bench in economics.

"where it does no work but to amass yet greater wealth." What an oxymoron!
That is one of the functions of wealth, putting it to work to create more wealth.

What do you think seed corn is but wealth that will be put to work next year.

"Conor O'Clery's "The Billionaire Who Wasn't" (Public Affairs, 2007) documents the story of Atlantic founder Chuck Feeney, who made his fortune as co-founder of Duty Free Shops and secretly transferred all of his wealth to The Atlantic Philanthopies in 1984."

http://atlanticphilanthropies.org/about/the_billionaire_who_wasn_t

Hughes Medical Institute is still doing research.

I don't begrudge anyone the ability to do what they want with their money, but I think such money could be more productive if used to establish new enterprises like Paul Allen with Spaceship 1 and Branson's new space tourism business.

Too often foundations morph into funding socialist front organizations that the original founder would NOT approve of, like Ford.

BHO may be conrolled like Clinton
Besides be led by his little head, he has a history of needing to be popular.
I think BHO will operate in a similar fashion. When challenged to take a principled stand he will give in to the poll of the day.
Everyone needs to start squeaking as that wheel gets the grease.

your hot air.
You said that what they do with excess money is to 'indulge in speculation, gamble, etc. This is also not true because only SOME people do that. What about all the other who invest in companies that they have researched, done their due diligence and invest in them? Maybe they'll buy share in 3M, or Dupont, or some of the thousands of decent companies out there. I'll bet that Warren Buffett is really insulting by your opinion that he has only been gambling all these years. Wait a minute, I'm also insulted.

Insufficient capitalization
"Maybe they'll buy share in 3M, or Dupont, or some of the thousands of decent companies out there."

A moment's reflection should cause you to realize that these are large, old, well established companies. So what do they want with your money? Why would they have to rely on an investment stream from without, when presumably they have been running at a profit?

If so, the prudent thing for these companies to do would be to keep adequate capital reserves.. from which to fund expansion, retooling, etc. And if they're not doing that, the management is not of a quality that I'd be confident investing in.

Let me ask you this: what sorts of companies are going into bankruptcy now, or at a minimum closing plant and laying off workers? Aren't they precisely those companies that are running short of operating capital?

It's a defect in the system. Companies are spending their funds imprudently, borrowing from banks that in turn are just inventing imaginary sums to lend them, and still having to look to the investors to bail them out with yet more money.

Not to be smug, but when I was self employed I never went to the bank, other than to make a deposit. I drew my own salary from a healthy bottom line.. not from the wallets of rubes dumb enough to "invest" in something they didn't manage themselves.

"Neither a borrower nor a lender be." ..Ben Franklin

Old companies adapt or die
They require investment to keep adapting.

How many typewriters does IBM make today? If they did not adapt, they would no longer exist.

what they want with our money
Newsflash for Roy, these publicly listed companies offer their shares for sale whether they have a lot of money on hand or not. What about Google, do you think they should go private again? For a guy with such a patronizing attitude, trying to tell us that we don't know anything, some of your comments seem incredibly stupid, and now you show you don't even know about share issues.

The funny thing is
Obama is not good-looking and not any kind of great speaker. Bill Clinton won on his relatively good looks (which have since faded), as was predicted before the very first election he won by a female political pundit whose name I now forget. Clinton also won on his great public speaking ability (not that he says much of substance, but he's definitely superior to Obama there, too).

So, Obama won because: he's not a Republican; he's black; he was 25 years younger than McCain; he used ACORN for extra votes; and McCain ran one of the worst election campaigns in American history (some believe on purpose).

Translation: Obama won because he appealed to anti-white racism, the immature, the fraudulent, and the utter disappointment that conservatives and independents alike felt for the Repubublican nominee...and he still only won by six percentage points--not the predicted "landslide".

The concentration of wealth
"That is one of the functions of wealth, putting it to work to create more wealth."

That would be a great "gotcha" line if we hadn't just had a lengthy course in what wealth concentration actually does. it short changes suppliers, employees and government alike in siphoning off wealth in the form of profit. It doesn't rally CREATE any wealth (to do so would be inflationary anyway).. it redistributes it into different pockets.

The two recent Bush administrations have created fewer jobs than any we've had since Herbert Hoover.

http://blogs.wsj.com/economics/2009/01/09/bush-on-jobs-the-worst-track-record-on-record/

http://democrats.senate.gov/journal/entry.cfm?id=273646

http://budget.house.gov/doc-library/2008/2008-0731bush_econ_fiscal_rec.pdf

This concentration of the nation's resources has centered on the financial and defense industries, to the exclusion of all else. Manufacturing, our nation's original base of wealth, has gone into the hopper along with our trade balance. And job creation has been noticeably tepid, in comparison with any other administration in memory.

I think a nation's wealth has to do more with job creation than anything else. Look at the PRC for example.

In 1978 China was just a failed socialist state, unable to move the nation forward in any economically productive sense. Then they began to concentrate on job creation.. allowing private individuals to employ other individuals for the first time since the Revolution.

The rest is history. China is well on its way to becoming the key player in this century.

This is the way nations prosper. Once they leave their base as a provider of goods and services to the world, and invest all their resources in the purely financial sphere, they're on their way to second tier status. Look at great Britain in the 19th century, or the Netherlands in the 18th.




Where does profit go, in a mattress or burned?
"That would be a great "gotcha" line if we hadn't just had a lengthy course in what wealth concentration actually does. it short changes suppliers, employees and government alike in siphoning off wealth in the form of profit. It doesn't rally CREATE any wealth (to do so would be inflationary anyway).. it redistributes it into different pockets."

Wealth concentration allows for investments in cities like Dubai. Paul Allen can invest in the X-prize. Branson can create an entire industry, space tourism.

Others, like Perot and Gates, fund the US government by concentrating their wealth in T-bills.

If you were serious about US employment, you would support ending the minimum wage and controlling the border.

What is a 'purely financial sphere'? Banks finance enterprises. That's how they make money.

Burned
Back in 2002 it was calculated that the financial markets had lost between $7 and 8 trillion in value in the collapse.

In 2008 it had also been calculated that the loss (this time in the stock market alone) stands at $7 trillion.

That's about a trillion a year that gets wasted. It does no work. It's a pure loss.. based on specualtion in assets that turn out to be nonexistent.

Investment in the real economy of one trillion per year would result in a resurgence of the good life for our entire middle class.. people who work hard, don't like living in debt and want their savings to be protected.

2. What's a purely financial sphere? That's when millions of home loans get sold to repackagers who turn them into "asset based" securities, and sell them in turn to investors around the world.

Let me tell you how the banks in my area have been investing in enterprises. They've provided the funding that's fueled the boom in construction, almost exclusively. And it has provided essential employment, for sure. But what they've funded has been the creation of hundreds of thousands of horribly overpriced homes, and worked in tandem with appraisers and lenders who've promoted an unsustanable boom.. one that has now collapsed.

I'd like the good times to come back. And I'd like to see banks lending again. Only I'd like to see them lending real money and not just lines of credit from the Fed. And I'd like that money to go into realistically priced homes whose value had a chance of remaining stable.. at rates that didn't suddenly balloon on the buyer. I'd like to see a rational, almost subdied, residential real estate market.

It would be a lot better for us in the long run. And people wouldn't get caught up in pipe dreams that explode in their faces.

Re-privatising
As it happens, there are a lot of companies buying back their shares now. And some very good reasons for doing so.

http://uk.reuters.com/article/rbssConsumerGoodsAndRetailNews/idUKHKG34462920090102

http://beginnersinvest.about.com/cs/newinvestors/a/060401a.htm

http://www.investopedia.com/articles/02/041702.asp

"What about Google, do you think they should go private again?"

Yes I would. They used to have control of policy, and went by the motto "Don't be evil". Now they're an octopus, the biggest shark in the tank. And ruled by no law but Mammon.

Paper losses
No one looses any money in the stock market unless the stock is sold for less than paid for.

I have lost no money in my 401K since I have not sold any shares.

If someone has a paid off house for which they paid $200K, and its market 'value' was $300K two years ago but is now $250K, how much money did they loose? They have lost nothing and will gain if they sold now.

As for repackaged loans, if Fannie and Freddie did not guarantee such products, the practice would not have been initiated.

Wachovia bragged it was doing such a thing, as I pointed out to you many times, to meet their 'obligations' under the government CRA.

"CHARLOTTE - First Union Capital Markets Corp. and Bear, Stearns & Co. Inc. have priced a $384.6 million offering of securities backed by Community Reinvestment Act (CRA) loans - marking the industry's first public securitization of CRA loans.

The affordable mortgages were originated or acquired by First Union Corporation and subsidiaries. Customers will experience no impact - they will continue to make payments to and be serviced by First Union Mortgage Corp. CRA loans are loans targeted to low and moderate income borrowers and neighborhoods under the Community Reinvestment Act of 1977."

http://www.wachovia.com/inside/page/textonly/0,,134_307%5E306,00.html

SOX
Many companies are going private to escape onerous government regulations.

"Degnan-Manning says going private makes sense for Kronos because it allows the company to invest in new technology and new markets without getting dinged for poor short-term financial results. She sees Hellman & Friedman not only bankrolling a long-term expansion plan but offering sound management advice as Kronos works to integrate new pieces such as Unicru and Captor. Kronos is “sort of the big gorilla that has an even bigger gorilla supporting them in their expansion,” she says."

http://www.workforce.com/section/00/article/25/05/20.html

Another good reason to encourage venture capitalists have the assets to invest.

“I certainly am not going to miss the Sarbanes-Oxley stuff,” he says.
http://www.workforce.com/section/00/article/25/05/20.html

Portfolio losses are every bit as real
Those trillions in portfolio losses represent very real dollar losses. People who retired back in 2002 took a very real hit when they were forced to cash in retirement funds.

People who paid $325K for homes that are now only worth $250K are taking a real hit. They have negative equity but are still paying based on full purchase price.

When they move they will be unable to sell. And any rent they could realize would be much lower than their note. So effectively they are unable to move.

What we're seeing is a huge equity loss in every investment category. My point was that the original paper equities used by the biggest investment houses (shoddy mortgages) did no useful work in our economy. Instead they were used to fuel the fire that has consumed so much.

Real money went into all these instruments. And bad paper came out. So our operating funds should still go into bogus investments, not people's pockets?

Also, I don't know why you continue to harp on the CRA. It's been in effect since 1977, and loans made under that program have showed no signs of going bad until about 2004. Something happened, all right. But it had nothing to do with the original act.

So you agree, no loss until you sell. AS FOR CRA.....
As for CRA;

WACHOVIA ADMITS TO SLICING AND DICING MORTGAGES TO MEET CRA REQUIREMENTS AND THAT FREDDIE AND FANNIE ARE EFFECTIVELY GUARANTEEING THE MORTGAGES TO PEOPLE WHO CAN'T AFFORD THEM. THEY WERE SOCIALIZING THE RISK AT GOVERNMENT REQUEST.

(Yes, I AM shouting!)

THIS WAS IN 1995!

The big problem
with Obama's tax cuts, is that most of them go to people who don't pay taxes.

In roy's world, moving money from one pocket to another will make you richer.
Asset based securities.

Crazy things like mortgages.

Money that never existed can't be lost
I have a coin that my father gave me.

5 years ago it was valued at $25.
Last year it was valued at $5.

Q: How much money have I lost.
A: None.

Until I sell the coin, it is nothing more than a coin. At the time of sale, it becomes dollars.

The fault lies in the law that required them to cash in their portfolios.
If the law allowed them to hold onto the portfolios and sell at a time of their choosing, those loses could have been avoided.

roy truely believes that the rich keep their cash in the safe.
If a rich man puts that money in the bank, it's immediately available to be lent out.

If a rich man puts uses that money to buy stock, that money is immediately available to be used by a company.

Investments do not make money disappear.

A moments reflection. I wish for once you would.
"A moment's reflection should cause you to realize that these are large, old, well established companies. So what do they want with your money? Why would they have to rely on an investment stream from without, when presumably they have been running at a profit?"

Are you claiming that large companies have all the money that they need?

Why should Obama be forced to accept a deal worked out by Bush?
If he felt strongly about the issue, he could demand that the Iraqi's renegotiate it.

Or he could just ignore it. It's not like liberals have much problem ignoring contracts.

roy still believes in fairy tales
"Huh? Just about everyone is on board with this approach. Otherwise, why indebt ourselves?"

Outside a couple far left economists, nobody believes that infrastructure spending will do any good for the economy.

The reason why the politicians like the program is that it allows them to 1) Funnel money to campaign contributors. 2) Con the voters into thinking that the politician has done something for them.

2011
This just out. None of the money for infrastructure is scheduled to be spent before 2011.

So even if taking money from one person in order to spend it on someone else, was capable of helping the economy, none of the benefit will be felt for over 2 years.

What is it about Democrats
That they feel the need to be led by narcisists raised in broken homes.

TCS Daily Archives