Complete lack of leadership at this point

[bpwallace49]

..We Need Policy, Not More Posturing — And Now

..By Daniel Gross

.PostsWebsiteEmail .By Daniel Gross | Contrary Indicator – 20 hours ago

....tweet19ShareEmailPrint....."No matter what some agency may say, we've always been and always will be a AAA country," President Obama said in his uninspiring speech on Monday, as the markets melted down.

 

Never mind that this is the sort of thing a coach tells Little Leaguers as they're about to get mercy-ruled. By heaping scorn on Standard & Poor's, President Obama, and the rest of official Washington, Monday violated Gross's Second Rule of Punditry: Don't Pick Down, Pick Up. When you engage in verbal fisticuffs with people below you on the pecking order, it only brings you down and raises them up to your level. Besides, this isn't an episode of Crossfire. We're well past the time for soundbites, catch phrases and discussions about having discussions.

 

Instead, we need declarations -- of policy, not of posture -- from all the parties who have contributed to the current mess. The markets crave certainty. And while no single entity can guarantee it, each of the key players can do a better job of providing certainty on where they stand.

 

First, Standard & Poor's. Critics have complained that the ratings agency's record is horrific and that the reasoning and analysis behind the downgrade are terribly flawed. All true. But with its ability to downgrade other entities whose bonds may not be as resilient as those issued by the U.S. government, S&P has an immense responsibility. Instead of responding to criticism with a few more kicks in the shins, like downgrading Fannie Mae and Freddie Mac, S&P should declare whether its business model has changed. Is it going into the punditry business? If a CEO and CFO fail to get along, will it downgrade a corporation's bonds?

 

And if it is going to ascribe the downgrade to specific political failures, S&P should lay out the specific successes that would cause it to upgrade. Precisely how much deficit reduction over what period of time is necessary? Would a balanced budget amendment do the trick? How about letting the Bush tax cuts expire? If a marker of $4 trillion over 10 years is laid out, would $3.9 trillion over 11 years do the trick? And if not, why not?

 

Next, President Obama. On Friday night, I gave a lot of grief to Republicans for creating the brinkmanship and refusing to do a deal. But President Obama could have avoided this entirely by pushing Democrats to just pass a debt reduction when they held both houses of Congress last year. And critics are right to argue that he never put out a detailed plan that he embraced and pushed. Monday's bromide-filled speech could just as easily have been given before the downgrade and before the loss of 1,000 points on the Dow. He spoke about the need to compromise and come together, and he promised to present recommendations to the newly formed Congressional supercommittee "over the coming weeks."

 

Great. The market (and S&P) have tired of the various gangs, commissions and committees that fail to produce results. And he continues to labor under the illusion that he has real partners in governing. If he's serious about long-term deficit reduction, he -- and Congressional Democrats -- should simply come up with one. This week. As he noted in his speech, it's not rocket science. Obama should offer up a menu of items that would be painful but necessary to close America's long-term fiscal gap while not unduly undermining the faltering economy. Let all the Bush tax cuts expire, tighten up tax loopholes, spend less on defense, attack entitlements. Whatever. Of course Republicans will reject it out of hand, but at least the voters, the markets and S&P will know where he stands.

 

Congressional Republicans: In contrast to President Obama, Congressional Republicans have no shortage of official plans. They're just all unworkable, unpassable and silly to different degrees. The House passed the Ryan Plan, which ends Medicare as currently constituted, calls for withering away of all non-defense discretionary spending and was based on incredible projections (unemployment of 2.9 percent?). Oh, and it would have added trillions of dollars of new debt. The calls for a balanced budget amendment and Cut, Cap, and Balance are plans -- to a point. Except they have no chance of passing and they don't really specify what will be cut.

 

If the long-term budget is to be brought in alignment through cuts alone, Republicans should declare their specifics. And while we know where the Tea Party Caucus stands on taxes, we need a declaration as to where Senators and House moderates stand. Is the Ryan Plan all you're offering? Can you ever contemplate a world in which the tax system brings in more revenue than it does today? Are you capable of making a deal with President Obama and Democrats that involves revenues? Is the plan just simply to wait until Mitt Romney is inaugurated as the nation's 45th president and work with him?

 

Finally, we need to hear from the Federal Reserve. The central bank, which holds its Federal Open Market Committee meeting Tuesday, is prone to speaking in roundabout, indirect language. Ben Bernanke carries a kazoo in his pocket, not a trumpet. But it is time for Bernanke to clear his throat and speak up. What's going on? In 2002, he declared that the Fed had learned the lessons and would not allow another Great Depression to happen. So if the economy threatens to do a repeat of the recession of 1937-1938, what will he do?

 

While the Fed has done a good job combating inflation, it has done a pretty poor job of meeting the other component of its dual mandate: promoting full employment. Is the Fed no longer in this business? Does Bernanke have some ideas as to how Congress and the White House could do so? What are the prospects for a third round of quantitative easing, and what would that be expected to accomplish? And, by the way, what does he think should be done to prevent a repeat of the debt-ceiling debacle?

 

Naturally, these declarations would be meaningless without action. And while markets generally like certainty, we should be careful of what we wish for. It's quite possible that many of the declarations would lead investors to further despair. If the most Washington can muster is a collective shrug and a few soundbites, then maybe it makes sense to readjust our expectations for growth and for the performance of various asset classes.

 

Daniel Gross is economics editor at Yahoo! Finance.

 

all the way across the board . . a complete lack of leadership.

[tazinib1]

Agreed. Perhaps the worst bunch of people in Washington in this country's history. Only congress that even comes close to this is the Jimmy Carter regime. Only president worse was Bush. Collectively, they are the worst across the board. Both sides...tea party included.

[westvirginia]

I've been saying this since before he was elected, but this guy is in over his head. It makes me throw up in my mouth (a lot) to say it, but Hillary would have been a more effective leader. Like her husband, she would have surrounded herself with effective advisors. The obamessiah just doesn't have the experience necessary to cultivate the judgement to perform at the HIGHEST level in the world.

 

And you guys are right, the congress overall isn't much better. Nancy and Harry were in a dream world, and Boehner is about the same. And that mousy idiot senator from SC should just shut his f'n trap. And Mitt Romney will be no better. He gave MA obamacare light and it's bankrupting that state. Bachman and Palin might be inspiring, but they aren't prez material. We need some leadership in this country to restore confidence.

[bpwallace49]

I've been saying this since before he was elected, but this guy is in over his head. It makes me throw up in my mouth (a lot) to say it, but Hillary would have been a more effective leader. Like her husband, she would have surrounded herself with effective advisors. The obamessiah just doesn't have the experience necessary to cultivate the judgement to perform at the HIGHEST level in the world.

 

And you guys are right, the congress overall isn't much better. Nancy and Harry were in a dream world, and Boehner is about the same. And that mousy idiot senator from SC should just shut his f'n trap. And Mitt Romney will be no better. He gave MA obamacare light and it's bankrupting that state. Bachman and Palin might be inspiring, but they aren't prez material. We need some leadership in this country to restore confidence.

 

At this point is really doesnt matter who is president at all. Obama could leave tomorrow and that wouldnt change the composition of congress right now. Congress is complete "eff you attitude" stalemate with each other, and cant agree on what to have for lunch, let alone how to govern.

 

Unless you want a dictator, Congress is quite the chitstorm of stupidity, where ideological purity is now valued over governance.

[Azazello1313]

I agree. let's give them less money and expect them to do less "fixing" of every stupid little pet issue we might have.

[TimC]

You want to kickstart the economy? Take the bailout money from Wall Street a few years ago back and use it to payoff everyone's mortgage making under $250k a year. Imagine the boom.

[SEC=UGA]

You want to kickstart the economy? Take the bailout money from Wall Street a few years ago back and use it to payoff everyone's mortgage making under $250k a year. Imagine the boom.

 

 

Hold on... Let me pull out my tax returns from the past three years..............

 

 

 

[Duchess Jack]

You want to kickstart the economy? Take the bailout money from Wall Street a few years ago back and use it to payoff everyone's mortgage making under $250k a year. Imagine the boom.

I never understood why they didn't do this. The banks wouldn't have gotten any less money.

 

Is there any good reason why it didn't happen this way?

[westvirginia]

I never understood why they didn't do this. The banks wouldn't have gotten any less money.

 

Is there any good reason why it didn't happen this way?

 

 

Renters would have caused an upheaval like you wouldn't believe.

[Azazello1313]

You want to kickstart the economy? Take the bailout money from Wall Street a few years ago back and use it to payoff everyone's mortgage making under $250k a year. Imagine the boom.

 

that's kind of a serious proposal from some of the smartest, most influential people around right now. for example, ken rogoff:

 

The most direct remedy, of course, would be to find expeditious approaches to cleaning up balance sheets whilst maintaining the integrity of the financial system. In the case of Europe, this involves very large debt writedowns in the smaller periphery countries, combined with a German guarantee of central government debt in the rest. In return, Germany will have to receive a disproportionate share of fiscal power in a more deeply integrated union, for at least as long as it is making substantial transfers. In the case of the US, policymakers need to offer schemes to write down underwater mortgages, perhaps in return for other concessions such as giving the lender a share of any future home price appreciation.

 

it's an interesting proposal....mortgage principal reduction in exchange for property appreiciation rights. plenty of very strong arguments against it though, both ethical and pragmatic. and you know the moment the politicians got involved it would turn into a massive, wasteful clusterfook.

[Scooby]

I sure hope things can be turned around. I am naive I guess, but I refuse to think that any of our lawmakers are stupid people with low IQ's, and I wont call any that just because I disagree with them politically or find fault with their past policies. I just pray that this great nation's leaders experience a wake-up call, have a serious meeting of the minds, and help this country weather the storm as best as possible; I am wishing for an end to all the name calling and blaming on both sides because all it does is incite discord and cause lack of positive communication in working thru the problems

[Pope Flick]

Renters would have caused an upheaval like you wouldn't believe.

 

 

And conservatives wouldn't?

[Clubfoothead]

I'm going to have to agree with the lack of leadership criticism at this point. This is the S & P's second attack on the American economy in the last 5 years. The fact that F-22's aren't treating their corporate headquaters like one of Saddam palaces is confusing.

 

That I am aware, the United States has missed no payments, nor paid anybody late. That I am aware, the United States currently has the ability to make all debt payments as promised. S & P downgraded the United States because they don't care for the percieved instability as a result of the Tea Party threatening to default. A preemptive strike. Now I loathe the tea party as much as anyone but they have the right to legislate as they deem appropriate without the S & P thinking it has a right to dictate American political policy no matter how misguided the Tea Party may be.

[Ursa Majoris]

it's an interesting proposal....mortgage principal reduction in exchange for property appreiciation rights. plenty of very strong arguments against it though, both ethical and pragmatic. and you know the moment the politicians got involved it would turn into a massive, wasteful clusterfook.

Not only would renters riot, I'd be out there handing them the bricks and Molotov cocktails. I don't give two f**ks what anyone says, bailing out homeowners who got in over their heads while the responsible ones amongst us didn't - and using our f'n money to do it!! - is completely and utterly wrong.

[BeeR]

I guess it shows my economic naivete or lack of knowledge or whatever, but I don't get why S&P has such a ridiculous and extreme amount of economic power, even to the point of a "business rating" for an entire country that everyone freaks out about. wtpho?

 

I've been saying this since before he was elected, but this guy is in over his head. It makes me throw up in my mouth (a lot) to say it, but Hillary would have been a more effective leader. Like her husband, she would have surrounded herself with effective advisors. The obamessiah just doesn't have the experience necessary to cultivate the judgement to perform at the HIGHEST level in the world.

Was saying it before he even won the nomination and thought it was stating the obvious, but few cared and it didn't matter. He was different, eloquent, "cool." The libs and many moderates became mesmerized and ignored reality. Talk about a textbook example of in the right place at the right time; coulda raped a nun and still been elected. But that's not to say the mess we're in is all his fault by a long shot and much as I like McCain personally, it mighta been as bad or even worse under him, who the frak knows... Edited August 10, 2011 by BeeR

[Azazello1313]

Not only would renters riot, I'd be out there handing them the bricks and Molotov cocktails. I don't give two f**ks what anyone says, bailing out homeowners who got in over their heads while the responsible ones amongst us didn't - and using our f'n money to do it!! - is completely and utterly wrong.

 

I agree, but if there were some sort of quid pro quo that came back in return (a stake in any future appreciation) then it could be written off as a type of "investment". not saying I'm in favor, but that reasonable arguments can be made.

 

in any case, when you talk about "bailing out those who got in over their heads at the expense of those who didn't"....isn't that just the whole rationale of the welfare state/social safety net in a nutshell? I mean, you say they got in over their heads, sounding like a coldhearted conservative scrooge, but more often than not it really is no fault of their own. something like 30% of US mortgages are underwater. lots of places have had property value decreases in excess of 20%, the down payment of "responsible people". a lot of homeowners who are underwater had about as much culpability in their own situation as the okie farmers in the dustbowl who defaulted on their family farms.

 

so if you don't have any problems with blatantly redistributive tax policy, and in fact you hold it to be an important priority of the government, why would you suddenly have a problem with taxing the responsible and fortunate to bail out the unfortunate on this one policy?

[Ursa Majoris]

in any case, when you talk about "bailing out those who got in over their heads at the expense of those who didn't"....isn't that just the whole rationale of the welfare state/social safety net in a nutshell?

No.

[TimC]

Well, it would solve the crisis almost overnight. There are many (if not most) Government programs that help someone at the expense of others. It's up to our leaders to make the choice. There is no doubt this economy is screwed because of mortgages. You need to tackle that problem and it would lead to recovery quicker than the mess they are trying now. Whole states such as Florida, Nevada, Arizona and California will take decades (if at all) to recover from the mortgage meltdown.

 

I've come up with a doable plan that WILL fix things. Will Congress?

Edited August 10, 2011 by TimC

[rbmcdonald]

What pisses me off is with the Debt limit, they screw around and screw around, and in the end do not do a damn thing except pretend to cut spending at some point in the future. However, let a major financial institution or corporation get in trouble, and they are able to sh*t money out of their a** in an instant. Another thing that just chaps me raw is back with the all the bailouts, there was this talk about "their too big to fail", well fine, then why the hell didn't taking bailout money require being broken up into to smaller pieces?

[yo mama]

I never understood why they didn't do this. The banks wouldn't have gotten any less money.

 

Is there any good reason why it didn't happen this way?

Because this way the banks get to collect from both the government *and* the homeowners.

[yo mama]

Not only would renters riot, I'd be out there handing them the bricks and Molotov cocktails. I don't give two f**ks what anyone says, bailing out homeowners who got in over their heads while the responsible ones amongst us didn't - and using our f'n money to do it!! - is completely and utterly wrong.

FWIW, I think there's a *right* way to do such a program that actually benefits the rest of us. Right now we're shoveling cash into a furnace without anything tangible to show for it. Meanwhile, the economy limps along despite the existence of an available solution.

 

Look, if we're going to give the country away anyways, better that we give it away to Americans rather than foreign lenders. And imagine the overall economic impact of: (1) an instantly stabilizing the real estate market; (2) the augmented personal spending from people who currently can't keep up with their mortgages; and (3) shoring up what may be the single largest basket of contingent liabilities on the books of many lenders. You and I would be undeniably better off in the long run. We'd just have to forgive a mixed crowd of deadbeats, idiots, and genuinely unfortunate homeowners, plus get over the (morally correct) ideology that we who did no wrong are getting bent over. To me, its just a practical question of whether we'd rather take the entire 12 inches for another decade, or *just* the tip - once - and be done with it.

Edited August 10, 2011 by yo mama

[Ursa Majoris]

FWIW, I think there's a *right* way to do such a program that actually benefits the rest of us. Right now we're shoveling cash into a furnace without anything tangible to show for it. Meanwhile, the economy limps along despite the existence of an available solution.

 

Look, if we're going to give the country away anyways, better that we give it away to Americans rather than foreign lenders. And imagine the overall economic impact of: (1) an instantly stabilizing the real estate market; (2) the augmented personal spending from people who currently can't keep up with their mortgages; and (3) shoring up what may be the single largest basket of contingent liabilities on the books of many lenders. You and I would be undeniably better off in the long run. We'd just have to forgive a mixed crowd of deadbeats, idiots, and genuinely unfortunate homeowners, plus get over the (morally correct) ideology that we who did no wrong are getting bent over. To me, its just a practical question of whether we'd rather take the entire 12 inches for another decade, or *just* the tip - once - and be done with it.

OK. I get that there might be some practicality to it (as I choke back the puke) but any appreciation in house value would have to be the property of the government and no loans e.g. HELOCs could be made against the house, at the very least.

[yo mama]

OK. I get that there might be some practicality to it (as I choke back the puke) but any appreciation in house value would have to be the property of the government and no loans e.g. HELOCs could be made against the house, at the very least.

100% agreed. The government would also have to get first dibs on any sales proceeds, and the property would have to be - and remain - the person's primary residence (i.e., the taxpayer can't turn it into a rental, or save a vacation home). People would have to have to have owned their homes for some reasonable, minimum number of years (to preclude fraud). The government would also have to *actually* negotiate with bank to pay less than the full value of the loan balance (otherwise there would be rampant - well, more rampant - graft on the part of banks).

 

In a generation the government would probably actually make an ass-load of money: just think about how stabilizing the nation's entire real estate market would increase the value of the government's new nationwide real estate investments. :drool: And perhaps we could also have a front-end deal that any such profits would fund future tax cuts for home owners who did not need such assistance.

Edited August 11, 2011 by yo mama

[Grimm74]

I never understood why they didn't do this. The banks wouldn't have gotten any less money.

 

Is there any good reason why it didn't happen this way?

 

I CANNOT believe to this day folks still do not understand the "Wall St" bailout. WE NEVER GAVE THEM THE MONEY. THEY BORROWED IT FOR A FEW MONTHS AND PAID IT BACK WITH INTEREST!!!!!!!! Holy smokes... This is the stuff that should be taught in school and on exams right before you walk in to vote.

 

There is a big difference in SPENDING and LENDING.

 

On top if it all not all the banks who took the money needed it, but it was the only way to get the guys who really needed it to take it. None of these faltering banks wanted to show weakness to potential and current clients, if they did they would die anyways. The only way the bailout could work is if they all took the money...which of course the US taxpayer made money...

 

Moving on to Fannie and Freddie....they are freaking expensive and a massive loss to THEIR OWN GOVERNMENT DOING. I blame Clinton for politically pushing them to lower their standards and exponentially raising the sub prime mortgages in the market. Then Bush stands around all day long during his 8 years yelling HOME OWNERSHIP is at an ALL time high... Honestly if he cut those programs it would have been political suicide b/c it would have vastly slowed down the housing market where everyone was making coin... He made some speeches and point a very small finger at the US gov housing agencies but he did squat. So he was just as at fault. Wall Street on the other hand just started riding the big waves of the storm developing a very large private secondary mortgage which was always dominated before by the back stop firms fan and fred. They developed all sorts of ingenious mathematical ways to "protect themselves"......then the music stopped.... opps we are all screwed and there is enough blame to go around.

 

Handing out bundles of cash would have been the ultimate death of the US. If you do not understand why, I am sorry I do not have time to explain.

[Boilerduff]

Bush tried to do something with Fannie and Freddie, but Barney Frank and his ilk, couldn't let that happen! Fannie and Freddie are fiscally sound he said! There is no problem here!