Obama did not run for president "to manage banks" or auto makers
"Our objective is not to supplant or replace markets," Summers told the Council on Foreign Relations in New York. "Rather, our objective is to save them from their own excesses and improve our market-based system going forward...."The actions we take are those of necessity, not choice," he insisted, adding that President Barack Obama had no desire to "manage banks, insurance companies or car manufacturers."
Summers said critics claim the administration was engaging in "backdoor socialism" and flatly denied it. "Where our focus has been as we have intervened when necessary is on the intervention being temporary, based on market principles and minimally intrusive," he said....
--"Summers says financial rescues were "necessity," Reuters, as reported on msnbc.com (6.12.09)
What has been happening, evolving, with the financial rescue programs should be reasonably apparent or understandable to most anyone. But we continue to hear the same refrain from the same predictable political corners. The same low-brow, populist Republican demagogues continue to traffic in fear tactics that grossly misrepresent a complex economic challenge in simplistic capitalist/socialist, good-guy/bad-guy terms. In so doing, they mask the real issues and polarize people who might otherwise be finding common ground together. I even have a few friends--bright enough, well-meaning enough--who have fallen prey to this simplistic message of fear, a dangerous message based on misleading, inadequate, and superannuated economic constructions and interpretations.
And, of course, I would be remiss if I didn't remind everyone that the TARP rescue plan was designed and carried out initially by the Bush administration, as were the first steps to support, restructure and save our automotive industry. And I supported TARP at the time, even if there was little else of the 8-year Bush agenda to approve of or be happy about. I suppose we should be grudgingly impressed at how quickly and adeptly the low-brow Republican operatives have turned it all into Obama's nationalization programs--how they could be so approving and supportive when it was Bush's team leading and acting, and so damning and fear-mongering when it was Obama shepherding those same initiatives to success. (For more on this and our expansive national debt, see my next post.)
Lawrence Summers, chief White House economic advisor, former president of Harvard University, and former Secretary of the Treasury in the Clinton administration, succinctly and directly set the record straight in his speech to the Council on Foreign Relations yesterday. Dr. Summers is accustomed to shooting straight, telling it as it is, a trait that brought him more than a fair share of grief in the politically correct halls of Harvard University. But as a former professor of mine at the Harvard Ed School wrote, whenever Lawrence Summers met with faculty, alumni or other groups at Harvard, there was never any doubt who was the smartest person in the room. Politically, socially sensitive, no; very smart, usually right, oh yes. From the Reuter's article:
Summers said a central element of any reform will be to ensure financial firms have and maintain adequate levels of capital so that they are less vulnerable to over-reliance on debt and borrowing in the future.
The administration is expected to unveil proposals for wide-ranging overhaul of the regulatory system on Wednesday. But he warned that the nation's financial system is not going to be "fail safe" until it is able to handle a failure. That means some type of resolution authority must be in place to deal with failing firms rather than continue the current system in which some firms are deemed too-big-to-fail so that the government is forced to step in to help them.
And now, we are starting to see signs of banks growing healthy enough to assert their independence again, paying back the TARP loans and buying back the government's stock warrants--and with the Obama administration's approval and support. From the Associated Press:
10 big banks can repay bailout: President Obama hails it as ‘an initial return’ to taxpayers for TARP
Ten of the nation’s largest banks were given the green light Tuesday to repay $68 billion in government bailout money, freeing them from restrictions on executive compensation that they say are making it hard to keep their top-performing executives.
The Treasury Department said the banks had been approved to repay the money they received from the Troubled Asset Relief Program created by Congress in October at the height of the financial crisis. Experts say allowing 10 banks to return $68 billion in bailout money shows some stability has returned to the system but caution that the crisis isn’t over. And some fear the repayments could widen the gap between healthy and weak banks....
When Treasury first doled out the money, it received warrants from the banks allowing it to buy stock at a fixed price at some future date. The stock prices are expected to rise as the economy recovers. As a result, the warrants could provide substantial profits for taxpayers. The firms now have the right to purchase the warrants Treasury holds in their firm “at fair market value,” Treasury said Tuesday. Testifying before a Senate panel, Treasury Secretary Timothy Geithner said the value of the warrants for banks permitted to repay TARP funds are in the “several billion dollar range.”
--"10 big banks can repay bailout, Associate Press as reported on msnbc.com (6.9.09)
As all have said, including President Obama, these repayments are a good sign of approaching stability, even if we have a way to go yet. But they also make clear that the Obama administration, as Lawrence Summers has said, has no interest in nationalizing the banks, auto industry or anything else. They are pleased that banks that have passed the stress test, or are raising sufficient capital in the open markets, can now safely pay back government loans with interest, and buy back the stock warrants required for the loans. Certainly, the government had an obligation to American taxpayers to require an appropriate return on taxpayer TARP money used to rescue the financial and automotive companies, just as it had an obligation to the American taxpayers to rescue and reform our financial system and markets--and in the process save financial firms and markets from themselves in the future.
http://www.msnbc.msn.com/id/31315754/ns/business-stocks_and_economy/
http://www.msnbc.msn.com/id/31183784/
No comments:
Post a Comment