“The United States must increase its national saving rate. Although we should deploy, as best we can, tools to increase private saving, the most effective way to accomplish this goal is by establishing a sustainable fiscal trajectory, anchored by a clear commitment to substantially reduce federal deficits over time.”
The quote came from Fed Chairman Ben Bernanke while giving a speech at the Conference on Asia and the Global Financial Crisis on October 19, hosted by the Federal Reserve of San Francisco. Bernanke also stated, “We were smug”, referring to the years of feckless lending practices when the U.S. economy was bubbling over with easy money from cash-rich countries. I imagine the statement was said rather smugly.
It’s a mystery as to how Bernanke expects consumer saving rates to increase given the lack of jobs and a questionable revival of pre-recession wages for the still-employed considering their sizable pay cuts and reduced hours.
Personal savings of disposable personal income was 3% in August, down from 4% in July and significantly lower than the peak rate of 6.9% in May. Fueled by income tax refunds and stimulus package disbursements, critics at the time suggested consumers were slighting the system by saving rather than spending the money to get the economy moving.
Whatever savings people have managed to accumulate will soon be spent to pay winter heating bills, higher gas prices, medical bills, credit card debt, etc., and quickly consumed during the holiday season to give families a temporary, but desperately needed, good-time feeling.
The sole means by which large numbers of consumers will have the ability to add to their savings is through working. The only way the President could possibly deliver on a promise to create or save 3.5 million jobs by the end of 2010 will be by out-of-focus hocus-pocus employment figures. Obama is not a magician.
Much of the blame to shame goes to Henry Paulson, Ben Bernanke and Timothy Geithner. These overlords of taxpayer moneys squandered their opportunities to leverage the recipients of TARP funds to allocate the handouts where they were intended. Rather than renegotiate home mortgages, banks deliberately refused to accept their part in correcting the fallout from the their historic lax lending practices, which led to millions of residential and commercial toxic loans and a near global collapse of financial markets.
Rather than use relief funds as intended, banks have hoarded the bailouts, denying credit lending to American consumers and restricting lending to small businesses to invest in future growth to create jobs. Wall Street is doing one heck of good job of staying on track for self-propelled titanic gains, assured that Bernanke and Geithner will not allow banking markets to sink, as they had infused banks with the $700B Troubled Asset Relief Program. America is essentially frozen in a void of economic stagnation.
Instead, investment bankers are on another unhealthy round of risky bets that have catapulted the DJIA to over 10,000 points from a low of 6,470 in March as they care more about their own interests than propelling economic growth. The Oganisation for Economic Co-operation and Development leading indicators don’t jibe with the worldwide numbers of unemployed, homeless and destitute citizens.
Thus far this year, banks are so comfortable with the status quo that they have supplied lobbyists with over $220M in a concerted effort to thwart meaningful financial reform.
Be rest assured, our economic whizzers, Ben Bernanke and Timothy Geithner, are on the same scripted page of advising world financial markets that the United States has targeted American consumer savings as a strategy to offset the imbalance of global trading.
"Everyone is going to have to come to terms with the fact that we are going to save more in the United States," Geithner chimed during an interview on October 6 with German weekly newspaper Die Zeit. In other words, don’t count on American consumption to fuel worldwide economic recovery.
“China will carry out the exchange rate regime reform and the United States will increase saving rates so as to promote balanced and strong growth and prosperity in the two nations," read a fact sheet released after the China-U.S.A. Strategic Economic Dialogue held in Beijing where the ‘special representative’ of President George W. Bush was then-Treasury Secretary Henry Paulson, That goes way back to December 15, 2006.
Of lesser importance and with a great amount of vanity, on June 2, 2009, prior to addressing graduates of his alma mater, Harriton High School in Rosemont, PA, Economic Advisor Larry Summers said, “…a higher savings rate can still go with a rising standard of living as long as income is growing.”
C’mon, Larry, you must realize that it’ll be quite some time before “income is growing”. The only things growing are the undeserved Wall Street bonuses and the egos of you and your fellow economists.
Showing posts with label Wall Street. Show all posts
Showing posts with label Wall Street. Show all posts
Sunday, October 25, 2009
Friday, October 2, 2009
Banking Executives vs Football Players
“Why is it we’re going to cap executive compensation for Wall Street bankers but not Silicon Valley entrepreneurs and NFL football players?”
On September 14, President Obama posed the question as he addressed Wall Street from Federal Hall on the anniversary of the collapse of Lehman Brothers. Obama also stated that "we will not go back to the days of reckless behavior and unchecked excess at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses." He continued, “And, of course, to embrace serious financial reform, not fight it."
The President had already set up a game plan months before. I should note that, although he wisely commented about excessive executive compensation during his campaign, Obama’s messages were all about “regulation”.
With little fanfare, Kenneth Feinberg, appointed by the Treasury Department in June and dubbed “pay czar” with the official title of Special Master, the same post he was given to distribute aid to victims after 9/11, has remained a behind-the-scenes administrator, which indicates he’s little more than an Obama implant to promote oversight of financial institutions by means of some regulatory scheme rather than by putting ceilings on executive compensation.
On September 25, Feinberg stated that, when he releases a report next month on the executive compensations of bail-out companies, “ We don’t want specific names next to dollars.” And that, "Avoiding excessive risk means different things to different people in different situations." The wording indicates a degree of coaching from Treasury Secreaty Timothy Geithner who, in turn, may have been teleprompted by Team Obama.
Unlike German Chancellor Angela Merkel and French President Nicolas Sarkoz, both of whom prefer strict governance over banking bonuses, The Administration seems to be treading lightly toward a resolution with Wall Street egos and their troves of lobbyists to relegate satisfactory action to Congress.
Obama’s apparent disdain of Simi Valley entrepreneurs who provide innovation and evolutionary advancements in e-commerce technologies is misplaced as displayed by the Forbes list of the top 10 CEOs and their levels of compensation.
Although Oracle CEO Lawrence Ellison tops the list in compensation ($556M), petroleum CEOs of Occidental ($222M), Hess ($154M), Ultra Petroleum ($116M), and EOG Resources ($90M) round up the top remaining five companies that handsomely reward their CEOs with fortunes. Of course, the President dare not rile the money-mongering emissaries of greenhouse gases.
Nor should Obama attempt to tackle the salaries of football players.
In 2008, Ben Roethlisberger of the NFL Pittsburgh Steelers made $27M. Of other sports figures, Kevin Garnett of the NBA Boston Celtics was paid $27M; Alex Rodriguez of the MLB New York Yankees received $33M; in the NHL Dany Heatley of the Ottawa Senators earned $10M. Not too shabby by any measure of success.
Which takes me back to the interests of Wall Street. When the dot-com bubble burst at the turn of the century, an estimated $7-trillion were lost to investors, primarily in tech stocks. When Wall Street got burned, it was quick to regain its fortunes in the housing market.
In 2005, Yale economist Robert Shiller said, “Once stocks fell, real estate became the primary outlet for the speculative frenzy that the stock market had unleashed. Where else could plungers apply their newly acquired trading talents? The materialistic display of the big house also has become a salve to bruised egos of disappointed stock investors.”
Over these past two years, it’s estimated that U.S. households have lost $7-trillion in home equity, $2-trillion in retirement funds, and $8-trillion in the stock market. But to this day Wall Street shows no shame.
Lawrence White, a professor at New York University's Stern School of Business, said Wall Street believes its pay is justified and that, “The big Wall Street view is 'Hey, we work hard, we achieve a lot, and we deserve what we get paid.” Recent articles and Op-Ed columns in The New York Times shows that many Lehman Brothers ex-employees are remorseful of only one thing: the loss of the jobs that had brought them such riches they may never see again.
According to Challenger, Gray & Christmas, an outplacement company, only slightly more than 300,000 jobs were lost in the finance industry since the beginning of 2008, as compared to all the other 7.4M jobs lost since the beginning of the recession.
It should be no surprise that, according to an Ipsos Public Affairs survey conducted September 11-14 of 1,000 adults, 60% of Americans are angry about excessive compensation to investment executives.
President Obama should leave Simi Valley alone, let sports fans judge the worth of football players and address the concerns that Americans have about the fortunes that Wall Street executives have reaped at the expense of present day and future taxpayers.
On September 14, President Obama posed the question as he addressed Wall Street from Federal Hall on the anniversary of the collapse of Lehman Brothers. Obama also stated that "we will not go back to the days of reckless behavior and unchecked excess at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses." He continued, “And, of course, to embrace serious financial reform, not fight it."
The President had already set up a game plan months before. I should note that, although he wisely commented about excessive executive compensation during his campaign, Obama’s messages were all about “regulation”.
With little fanfare, Kenneth Feinberg, appointed by the Treasury Department in June and dubbed “pay czar” with the official title of Special Master, the same post he was given to distribute aid to victims after 9/11, has remained a behind-the-scenes administrator, which indicates he’s little more than an Obama implant to promote oversight of financial institutions by means of some regulatory scheme rather than by putting ceilings on executive compensation.
On September 25, Feinberg stated that, when he releases a report next month on the executive compensations of bail-out companies, “ We don’t want specific names next to dollars.” And that, "Avoiding excessive risk means different things to different people in different situations." The wording indicates a degree of coaching from Treasury Secreaty Timothy Geithner who, in turn, may have been teleprompted by Team Obama.
Unlike German Chancellor Angela Merkel and French President Nicolas Sarkoz, both of whom prefer strict governance over banking bonuses, The Administration seems to be treading lightly toward a resolution with Wall Street egos and their troves of lobbyists to relegate satisfactory action to Congress.
Obama’s apparent disdain of Simi Valley entrepreneurs who provide innovation and evolutionary advancements in e-commerce technologies is misplaced as displayed by the Forbes list of the top 10 CEOs and their levels of compensation.
Although Oracle CEO Lawrence Ellison tops the list in compensation ($556M), petroleum CEOs of Occidental ($222M), Hess ($154M), Ultra Petroleum ($116M), and EOG Resources ($90M) round up the top remaining five companies that handsomely reward their CEOs with fortunes. Of course, the President dare not rile the money-mongering emissaries of greenhouse gases.
Nor should Obama attempt to tackle the salaries of football players.
In 2008, Ben Roethlisberger of the NFL Pittsburgh Steelers made $27M. Of other sports figures, Kevin Garnett of the NBA Boston Celtics was paid $27M; Alex Rodriguez of the MLB New York Yankees received $33M; in the NHL Dany Heatley of the Ottawa Senators earned $10M. Not too shabby by any measure of success.
Which takes me back to the interests of Wall Street. When the dot-com bubble burst at the turn of the century, an estimated $7-trillion were lost to investors, primarily in tech stocks. When Wall Street got burned, it was quick to regain its fortunes in the housing market.
In 2005, Yale economist Robert Shiller said, “Once stocks fell, real estate became the primary outlet for the speculative frenzy that the stock market had unleashed. Where else could plungers apply their newly acquired trading talents? The materialistic display of the big house also has become a salve to bruised egos of disappointed stock investors.”
Over these past two years, it’s estimated that U.S. households have lost $7-trillion in home equity, $2-trillion in retirement funds, and $8-trillion in the stock market. But to this day Wall Street shows no shame.
Lawrence White, a professor at New York University's Stern School of Business, said Wall Street believes its pay is justified and that, “The big Wall Street view is 'Hey, we work hard, we achieve a lot, and we deserve what we get paid.” Recent articles and Op-Ed columns in The New York Times shows that many Lehman Brothers ex-employees are remorseful of only one thing: the loss of the jobs that had brought them such riches they may never see again.
According to Challenger, Gray & Christmas, an outplacement company, only slightly more than 300,000 jobs were lost in the finance industry since the beginning of 2008, as compared to all the other 7.4M jobs lost since the beginning of the recession.
It should be no surprise that, according to an Ipsos Public Affairs survey conducted September 11-14 of 1,000 adults, 60% of Americans are angry about excessive compensation to investment executives.
President Obama should leave Simi Valley alone, let sports fans judge the worth of football players and address the concerns that Americans have about the fortunes that Wall Street executives have reaped at the expense of present day and future taxpayers.
Sunday, August 30, 2009
A Stroll Down Wall Street
As if we’re allowed to believe otherwise, Wall Street’s continued surge is all but sure to continue to rise toward a closing bell figure of 10,000. And there are plenty of examples of news to keep those faint of pocketbook from being fearful of losing their skivvies after their pre-recession wealth has already been stripped of their greenbacks.
The second quarter 1% decline in the Gross Domestic Profit was better than expected by one-half a percent point, a vast improvement over data released by the Commerce Department for the previous two quarters that showed declines of 6.4% January-March and 5.4% October-December 2008.
Looking ahead, an anticipated 2% increase in GDP for the period July-September is based on the assumed affects from the $787B stimulus plan and the Cash for Clunkers program. If this fails to materialize, expect to hear the words “market correction” as financial news commentators continue to grin in front of the camera to no one’s joy but for their own paychecks.
A hopeful sign for economic recovery was the announcement that only 247,000 jobs were lost in July, the smallest figure in nearly a year. It could have been worse and may still spike higher on the chart of the unemployed, but the outlook on the Street is a view of a clear road ahead to a higher Dow Jones Industrial Average. Consumer spending declined a mere 1.2% during the same period. Not too dismal, huh?
A positive light in employment figures show that state and local governments have added 110,000 jobs since the recession began, along with their above free market salaries and overly generous benefits. But Jon Shure, deputy director of states’ fiscal policies of the Center on Budget and Policy Priorities, is realistic in saying, “Crunch time is still to come for the states.” What a killjoy!
In May, the savings rate among Americans reached the highest level since 1993 at 6.9%, keeping nearly $770B from circulating through the economy, the highest rate since 1959 when statistics were first gathered. Not only that, in April borrowers slowed down their buying power with a 16.5% decline in credit card purchases, or 16.5B on $1 trillion of total debt. This is no way to spur an economy that thrives on ever-increasing consumer debt.
According to international lender ING Direct, European Union members have cut back on using plastic money by 10-20% while 46% Americans say they have refrained from adding to credit card debt. Meanwhile, with high unemployment, foreclosure figures, tight credit and reduced consumer spending….
The Conference Board, an independent research group, released information last week that the Consumer Confidence Index (CCI) rose from 47.4 in July to 54.1 in August, quite a bit better than the expected 47.9 that had been forecast. Still, the index is well below 90, the minimum level indicative of a healthy economy. There’s a lot of boom to go before the economy is deemed revived.
As a reference, the significance of historical data of the CCI, it stood at 109.4 (August 1996); 82.2 (October 2001, after 9-11); 110.3 (January 2007).
The Expectations Index, taken from the same sampling of 5,000 households and measures a 6-month view on economic conditions, rose from 63.4 in July to 73.5 in August.
On the flipside of consumer view of economic recovery, the Reuters/University of Michigan Consumer Sentiment Survey, also taken of 5,000 participants, decreased from 66.00 to 63.2 from July to August although economists surveyed had expected an increase to 69 so, although the news isn’t good, it’s not as bad as feared, so it’s actually good news. Right?
The benchmark for the Confidence Survey is 1985; the Reuters/UM Sentiment Survey is referenced to 1966 with both having a base figure of 100.
As if to confuse matters, a third sampling of 1,000 participants conducted by telephone, the ABC News Consumer Comfort Survey reflected a rating of –45 (yes, that’s a negative sign on a scale of –100 to +100). Putting this in perspective, the 23-year average is –12. Only 8% rated the economy in a positive light, maintaining a single-digit trend for 43 of the past 46 weeks. By all measures, not very comforting.
And let’s not ignore the 77% decline of funds held by the FDIC from $45.2B a year ago. The current $10.4B balance would be considerably, and alarmingly, less but for the $9.1B in higher deposit fees garnered from banks in the first quarter. Not to worry, your banking account balances are still covered up to $250,000. The FDIC can draw on its no-limit credit line with the Treasury Department as it did in 1993.
Sales of new one-family homes increased 9.6% in July (plus or minus 13.4%) over June figures but 13.4% below July 2008 figures (plus or 12.9%). The plus or minus figures leave a don’t add up to anything but confusion and doubtful significance.
On a truly positive note, August figures show an increase of 4.9% for durable goods over July, and upward swing for three out of the past four months.
Who’s to say our economic future is anything other than what is portrayed by the wooly bullies on Wall Street? Anybody?
The second quarter 1% decline in the Gross Domestic Profit was better than expected by one-half a percent point, a vast improvement over data released by the Commerce Department for the previous two quarters that showed declines of 6.4% January-March and 5.4% October-December 2008.
Looking ahead, an anticipated 2% increase in GDP for the period July-September is based on the assumed affects from the $787B stimulus plan and the Cash for Clunkers program. If this fails to materialize, expect to hear the words “market correction” as financial news commentators continue to grin in front of the camera to no one’s joy but for their own paychecks.
A hopeful sign for economic recovery was the announcement that only 247,000 jobs were lost in July, the smallest figure in nearly a year. It could have been worse and may still spike higher on the chart of the unemployed, but the outlook on the Street is a view of a clear road ahead to a higher Dow Jones Industrial Average. Consumer spending declined a mere 1.2% during the same period. Not too dismal, huh?
A positive light in employment figures show that state and local governments have added 110,000 jobs since the recession began, along with their above free market salaries and overly generous benefits. But Jon Shure, deputy director of states’ fiscal policies of the Center on Budget and Policy Priorities, is realistic in saying, “Crunch time is still to come for the states.” What a killjoy!
In May, the savings rate among Americans reached the highest level since 1993 at 6.9%, keeping nearly $770B from circulating through the economy, the highest rate since 1959 when statistics were first gathered. Not only that, in April borrowers slowed down their buying power with a 16.5% decline in credit card purchases, or 16.5B on $1 trillion of total debt. This is no way to spur an economy that thrives on ever-increasing consumer debt.
According to international lender ING Direct, European Union members have cut back on using plastic money by 10-20% while 46% Americans say they have refrained from adding to credit card debt. Meanwhile, with high unemployment, foreclosure figures, tight credit and reduced consumer spending….
The Conference Board, an independent research group, released information last week that the Consumer Confidence Index (CCI) rose from 47.4 in July to 54.1 in August, quite a bit better than the expected 47.9 that had been forecast. Still, the index is well below 90, the minimum level indicative of a healthy economy. There’s a lot of boom to go before the economy is deemed revived.
As a reference, the significance of historical data of the CCI, it stood at 109.4 (August 1996); 82.2 (October 2001, after 9-11); 110.3 (January 2007).
The Expectations Index, taken from the same sampling of 5,000 households and measures a 6-month view on economic conditions, rose from 63.4 in July to 73.5 in August.
On the flipside of consumer view of economic recovery, the Reuters/University of Michigan Consumer Sentiment Survey, also taken of 5,000 participants, decreased from 66.00 to 63.2 from July to August although economists surveyed had expected an increase to 69 so, although the news isn’t good, it’s not as bad as feared, so it’s actually good news. Right?
The benchmark for the Confidence Survey is 1985; the Reuters/UM Sentiment Survey is referenced to 1966 with both having a base figure of 100.
As if to confuse matters, a third sampling of 1,000 participants conducted by telephone, the ABC News Consumer Comfort Survey reflected a rating of –45 (yes, that’s a negative sign on a scale of –100 to +100). Putting this in perspective, the 23-year average is –12. Only 8% rated the economy in a positive light, maintaining a single-digit trend for 43 of the past 46 weeks. By all measures, not very comforting.
And let’s not ignore the 77% decline of funds held by the FDIC from $45.2B a year ago. The current $10.4B balance would be considerably, and alarmingly, less but for the $9.1B in higher deposit fees garnered from banks in the first quarter. Not to worry, your banking account balances are still covered up to $250,000. The FDIC can draw on its no-limit credit line with the Treasury Department as it did in 1993.
Sales of new one-family homes increased 9.6% in July (plus or minus 13.4%) over June figures but 13.4% below July 2008 figures (plus or 12.9%). The plus or minus figures leave a don’t add up to anything but confusion and doubtful significance.
On a truly positive note, August figures show an increase of 4.9% for durable goods over July, and upward swing for three out of the past four months.
Who’s to say our economic future is anything other than what is portrayed by the wooly bullies on Wall Street? Anybody?
Friday, January 9, 2009
Lenders By Any Other Name
I assume that if you regularly read, watch or listen to any news source that you’re fairly knowledgeable on the game players in the financial markets, however underhanded they have been at cheating investors, homeowners, and every other segment of the economy. But what about your neighbors, friends and relatives? Are they also “in the know” or just breezing through the economic mess in denial or, more likely, oblivious to the world outside their favorite reality shows, sports and show biz gossip?
If a conversation should arise about the economy and you start throwing out names of troubled financial institutions, you might want to give them definitions that would make sense to anyone less informed so as not to unduly alarm them.
Lehman Brothers – An exclusive haberdashery.
Goldman Sachs – An outlet store of Saks on Fifth Avenue.
J.P. Morgan – One of the partners of the Law Offices of Morgan & Morgan.
Morgan Chase – An ambulance-chaser service of Morgan & Morgan.
AIG – Artificial Intelligence Group, which happens to be a fair description.
Standard and Poor’s – Business liquidity ratings: par and sub-par.
No company currently qualifies for a higher rating.
Washington Mutual – Bipartisanship on Capitol Hill.
SEC – Collegiate Southeast Conference (Go Gators!)
Securities and Exchange Commission – Brokers on Wall Street trading other people's securities in exhange for hefty commissions.
Wall Street – a barren dead end street.
These definitions won’t give you personally an ease of mind, but others are best left in blissful ignorance because what they don’t know won’t create undo concern, as if they could do anything about it anyway.
If a conversation should arise about the economy and you start throwing out names of troubled financial institutions, you might want to give them definitions that would make sense to anyone less informed so as not to unduly alarm them.
Lehman Brothers – An exclusive haberdashery.
Goldman Sachs – An outlet store of Saks on Fifth Avenue.
J.P. Morgan – One of the partners of the Law Offices of Morgan & Morgan.
Morgan Chase – An ambulance-chaser service of Morgan & Morgan.
AIG – Artificial Intelligence Group, which happens to be a fair description.
Standard and Poor’s – Business liquidity ratings: par and sub-par.
No company currently qualifies for a higher rating.
Washington Mutual – Bipartisanship on Capitol Hill.
SEC – Collegiate Southeast Conference (Go Gators!)
Securities and Exchange Commission – Brokers on Wall Street trading other people's securities in exhange for hefty commissions.
Wall Street – a barren dead end street.
These definitions won’t give you personally an ease of mind, but others are best left in blissful ignorance because what they don’t know won’t create undo concern, as if they could do anything about it anyway.
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