Sunday, January 24, 2010

OK, What Do We Do Now?

Borrowing Robert Redford's line after he unexpectedly won his election in the movie, The Candidate, no more appropriate words could describe the political and economic environments at this time, one year into President Obama's presidency. Anyone who is anyone, irregardless of political party, could not disagree with the fact that the populist unhappiness with the current state of affairs in the economy and so many lives is not the fault of one man--there is plenty of blame to spread around, including former presidents Bush and Clinton, the Congress, the Republicans, the Democrats--yet as the point person in our form of government in the U.S., rightly or wrongly, President Obama and his administration are obvious targets because he is the current captain of the ship. The daunting challenge now is to keep the ship from sinking despite the larger and larger waves of suffering and dissatisfaction.

We've heard the statement many times in recent weeks--"what a difference a year makes." A year ago President Obama was swept into office with hopes of change and political non-partisanship to help usher in his ambitious agenda. But therein lies two of his problems--party partisanship and gridlock are more entrenched now than ever and maybe his agenda was too ambitious and many would argue not prioritized as it should have been. Let's face it, despite the rhetoric, the Republicans covertly have hoped all along the President would fail because a legislative victory in his health care reform effort, or any major legislative initiative for that matter, could mean the wave of positive momentum could sink the Republican Party, already barely treading water from ideological differences between its moderate and far right, conservative wings. Merits or not, whether it's the cost, the deficits, federal government intrusion in our lives or ineptitude, you name it, health care reform could not and would not succeed without at least some Republican support. Enter the unemployment crisis and the lingering effects of the Great Recession allowed to fester during the President's watch while a contentious health care reform debate drags on for months and months and you have a perfect storm for what happened in Massachusetts--a Republican senator elected for the first time since 1972. I'm not saying health care reform is not important or badly needed--almost universally this is a given--it's just that the economy and joblessness should trump even health care reform at this time. What good is health care reform when people don't have jobs to pay for it even when you factor federal subsidies in the equation? One could also argue that provisions in the House and Senate-approved plans could even be at least a partial contributing factor in why businesses aren't hiring new employees because of the plans' projected cost implications and advertised penalties to business for non-compliance. At this point, decisions will have to be made on whether any real reform is possible in this overly partisan political environment and/or what watered down version could emerge worthy of the President's signature. If I were a betting man, I would have to say that the chances are not good--certainly below the over 50 percent needed.

So, all this being said, President Obama and his team now are forced to chart a new course in these turbulent waters. Health care reform is relegated to a sidebar issue and the targeted focus turns to where it probably should have been in the first place--the economy and jobs. We'll hear more details on the new course direction in the President's State of the Union address this week. How much the President and his team can really do to help on today's job scene when conditions are so bad is certainly debatable, but something needs to be done and done quickly. As the unemployment crisis drags on, every day solid and responsible middle class Americans are losing their life savings, their retirement nest eggs, their homes, and, more importantly, their sense of security and dignity. Suffering is happening across all demographics but the situation is especially bleak for those 18-29 and increasingly so for those over 50 who want and need to work but have become not only victims of corporate downsizing but also of age discrimination as they try to seek new, full-time responsible paying positions in competition with everyone else. With 6.7 unemployed (not to forget the underemployed) people seeking each single job opening, the odds are not good, especially for those in the 50+ demographic where hiring managers and youthful HR gatekeepers are often quick to dismiss their candidacies as too costly and/or overqualified.

There are no easy answers during these unprecedented times. But one thing is clear. It is not the time to point fingers or crow about artificial political "victories." While things might be rosy with the stock market, on Wall Street, the big banks and others bailed out by the taxpayers, on Main Street a real crisis exists and needs solutions not gridlock. Democrat or Republican, neither party should feel particularly secure about their positioning in this midterm election year. People need help not empty promises.

Sunday, January 10, 2010

What Has Happened to the Financial System Reform Initiative?

I recall early on in the Obama administration a major provision of his "change" agenda was to dissect what was wrong with our financial system that allowed the meltdown of 2008 and to incorporate changes on Wall Street and within the existing financial system regulatory structure to assure a repeat performance could be avoided in the future. In light of all the constituent outrage and heart-wrenching accounts from millions who have lost jobs, their retirement savings due to stock market slides and now are losing their homes to foreclosure, it would appear reform was certainly politically possible and that a path was "greased" for much-needed legislation. But as we enter a new year--most importantly, a critical midterm election year--as well as amidst high level government economists' declarations that the "recession is over," it appears now that the air has gone out of the proverbial balloon for financial system reform much to the chagrin of millions of middle class Americans who continue to suffer from the effects of this Great Recession. Where did the momentum go and why the change?

Just as quickly as we realized that a gambling casino mindset of recklessness and greed that began on Wall Street and sent shock waves across the world just averting a total financial system collapse, a mindset of euphoria and the "good old days" has returned to Wall Street thanks largely to government bailout induced profits and accentuated by the recent announcement of a new round of big compensation bonuses. Both Senator Chris Dodd of the Senate Banking Committee and Barney Frank of the House Financial Services Committee, as chairmen of their respective committees with jurisdiction on these matters, were quickly out of the gate with major reform bills last year that both included thoughtful, proposed changes to the current system of oversight and regulation--the formation of a new Consumer Financial Protection Agency with increased powers, power shifts amongst existing regulatory agencies, including the Federal Reserve Board, a reexamination of the Glass-Steagall repeal legislation that occurred during the Clinton Administration, which post Great Depression had established a then much-needed separation between the investment banking and commercial banking communities, and a much-needed revisionary focus on the "too big to fail" doctrine that has dogged this country's financial regulatory system and its regulators for decades. But as the months of contentious debate over a major health care reform bill have dragged on, not to forget the debates over Afghanistan, the economic stimulus, the deficits and a host of other issues, combined with the vigorous opposition of the big bank/Wall Street lobbyists already indebted to the American taxpayer for huge government bailouts, "true" financial system reform now seems, in the parlance of " inside the Beltway" political analysts as DOA or "dead on arrival." Also not to be overlooked is the fact that Senator Dodd, the champion of reform in the U.S. Senate, has announced his retirement. It's too soon to tell whether Senator Dodd will cave into the growing anti-reform sentiments or forge ahead with a substantive legacy reform bill in the remaining months of his Senate tenure.

With all of this as backdrop, it will be interesting to see what, if anything, constructive will come out of the public hearings of a blue-ribbon Financial Crisis Inquiry Commission that are scheduled to begin this week. The supposedly bipartisan commission established early last year to investigate what happened on Wall Street and within the financial system to cause the near domestic collapse and international domino effect will hopefully through its leadership and investigative staff bring to light the abuses that contributed to the meltdown and maybe, just maybe, this could reignite the ongoing congressional reform efforts. Concerned middle class Americans everywhere should be rooting for this commission and hope it truly reveals the precarious position our Wall Street/big bank dominated financial system is in and that it can present thoughtful and meaningful recommendations that can be incorporated into reform legislation.

I want to be optimistic but considering all of the factors noted above I am skeptical. Why? Significantly, the pre-meltdown, speculative climate has returned to Wall Street. While millions of Americans continue to suffer economically in the aftermath of the horrific abuses resulting from the near collapse, according to Wall Street the recession is over and happy days are here again. The risk-taking is back as are the collateralized debt obligations (CDO's), the credit default swaps, the speculative and complex derivatives and other exotic Wall Street concoctions that got us into the huge financial mess in the first place. The rating agencies are still being paid by the firms who issue the securities and assigning artificial high grades for unsuspecting and/or uninformed marketplace investors. Finally, and most egregiously, it's big bonus season on Wall Street again with six-and seven-figure bonuses set to be doled out in the weeks ahead as if the 2008 financial collapse and near financial disaster never even occurred. Do these financial executives have any consciences at all? To me, in light of their bailouts, jacking consumer interest rates on even their best customers and other behavior this situation is unconscionable. While they feast on their hundreds of thousands and millions of dollars, there are millions of proud, hard-working Americans who have already and continue to face financial ruin, mostly due to the Wall Street and big bankers' unregulated and senseless excesses. It's indeed a sorry time for this country and one can only hope the powers to be somewhere wake up before it's too late.