Obama Dials Down Wall Street Criticism

[dkf]

There's an eye-opening, perhaps eye-popping, article in tomorrow's Journal ("Obama Dials Down Wall Street Criticism"), the gist of which is that over the last three months Obama and his team have learned that they've got to start respecting Wall Street and the big banks if they want to get anything done. As Monica Langley describes it, the Obama team went in with a dim view of Wall Street, didn't bring the big bankers in on key policy decisions etc. But now they're realizing they have to play ball. And this is in part why the markets gave a good reception to today's Geithner plan.

Things were coming along until the AIG blow up almost overturned the applecart. Here's the article's concluding graf ...

Bankers were shell-shocked, especially when Congress moved to heavily tax bonuses. When administration officials began calling them to talk about the next phase of the bailout, the bankers turned the tables. They used the calls to lobby against the antibonus legislation, Wall Street executives say. Several big firms called Treasury and White House officials to urge a more reasonable approach, both sides say. The banks' message: If you want our help to get credit flowing again to consumers and businesses, stop the rush to penalize our bonuses.

http://www.talkingpointsmemo.com/archives/2009/03/must_read_4.php

[FrenchieCat]

1. That's what he was talking about........bomb wrapped around them

with their finger on the trigger!

wow! Clear as a bell now!

[960]

3. Too bad we don't have someone in the WH who knows how to disable the bomb.

[FrenchieCat]

5. I think he found a way to diffuse it......

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x5319227

[960]

9. Let's hope so. Because I think that we already have the power to seize insolvent banks such as

Citibank, Wells Fargo, BofaA etc rather than pump trillions of dollars into them.

And Frenchie, everyone wants Obama to succeed - all of our futures depend on it.
Some of us just don't think he's making very good decisions as far as the economy goes.
Can you please take a step back and realize that not every criticism and suggestion is an attempt to undermine Obama?

If he fails, we all lose. He is not perfect, and has even asked us for our advice and to tell him when we think he's doing wrong.

[FrenchieCat]

12. AIG is not a bank.

nor are hedge funds.

[960]

13. Did you read my post? I didn't say it was.

The government does have the authority to SHUT hedge funds though.

Are you denying that the Obama administration is propping up banks rather than seizing them?

[FrenchieCat]

17. Can you locate the information that confirms that the Government

can shut down hedge funds? I couldn't find any.

I can tell you that Banks are seized everyday.

The FDIC is often appointed as receiver for failed & seized banks.
TeamBank, National Association, Paola, KS March 20, 2009 March 24, 2009
Colorado National Bank, Colorado Springs, CO March 20, 2009 March 24, 2009
FirstCity Bank, Stockbridge, GA March 20, 2009 March 24, 2009
Freedom Bank of Georgia, Commerce, GA March 6, 2009 March 11, 2009
Security Savings Bank, Henderson, NV February 27, 2009 March 11, 2009
Heritage Community Bank, Glenwood, IL February 27, 2009 March 11, 2009
Silver Falls Bank, Silverton, OR February 20, 2009 March 10, 2009
Pinnacle Bank of Oregon, Beaverton, OR February 13, 2009 March 10, 2009
Corn Belt Bank and Trust Company, Pittsfield, IL February 13, 2009 March 10, 2009
Riverside Bank of the Gulf Coast, Cape Coral, FL February 13, 2009 March 10, 2009
Sherman County Bank, Loup City, NE February 13, 2009 March 10, 2009
County Bank, Merced, CA February 6, 2009 March 10, 2009
Alliance Bank, Culver City, CA February 6, 2009 March 10, 2009
FirstBank Financial Services, McDonough, GA February 6, 2009 March 10, 2009
Ocala National Bank, Ocala, FL January 30, 2009 March 10, 2009
Suburban Federal Savings Bank, Crofton, MD January 30, 2009 March 10, 2009
MagnetBank, Salt Lake City, UT January 30, 2009 March 10, 2009
1st Centennial Bank, Redlands, CA January 23, 2009 March 10, 2009
Bank of Clark County, Vancouver, WA January 16, 2009 March 10, 2009
National Bank of Commerce, Berkeley, IL January 16, 2009 March 10, 2009
Sanderson State Bank, Sanderson, TX
En Español December 12, 2008 February 5, 2009
Haven Trust Bank, Duluth, GA December 12, 2008 March 17, 2009
First Georgia Community Bank, Jackson, GA December 5, 2008 February 2, 2009
PFF Bank and Trust, Pomona, CA November 21, 2008 February 2, 2009
Downey Savings and Loan, Newport Beach, CA November 21, 2008 February 2, 2009
The Community Bank, Loganville, GA November 21, 2008 February 5, 2009
Security Pacific Bank, Los Angeles, CA November 7, 2008 February 2, 2009
Franklin Bank, SSB, Houston, TX November 7, 2008 February 2, 2009
Freedom Bank, Bradenton, FL October 31, 2008 February 2, 2009
Alpha Bank & Trust, Alpharetta, GA October 24, 2008 February 2, 2009
Meridian Bank, Eldred, IL October 10, 2008 February 10, 2009
Main Street Bank, Northville, MI October 10, 2008 February 10, 2009
Washington Mutual Bank, Henderson, NV and Washington Mutual Bank FSB, Park City, UT September 25, 2008 February 2, 2009
Ameribank, Northfork, WV September 19, 2008 March 17, 2009
Silver State Bank, Henderson, NV
En Español September 5, 2008 March 10, 2009
Integrity Bank, Alpharetta, GA August 29, 2008 February 5, 2009
The Columbian Bank and Trust, Topeka, KS August 22, 2008 February 2, 2009
First Priority Bank, Bradenton, FL August 1, 2008 February 5, 2009
First Heritage Bank, NA, Newport Beach, CA July 25, 2008 February 5, 2009
First National Bank of Nevada, Reno, NV July 25, 2008 February 5, 2009
IndyMac Bank, Pasadena, CA July 11, 2008 March 20, 2009
First Integrity Bank, NA, Staples, MN May 30, 2008 February 2, 2009
ANB Financial, NA, Bentonville, AR May 9, 2008 February 5, 2009
Hume Bank, Hume, MO March 7, 2008 February 5, 2009
Douglass National Bank, Kansas City, MO January 25, 2008 February 5, 2009

After Dodging Many Bullets, Hedge Funds Are Back in Regulators' Sights
Published: March 18, 2009 in Knowledge@Wharton

The hedge fund industry has a long history of avoiding tougher regulation. But as the Obama administration and Congress look for ways to avoid another financial meltdown, that history may soon come to an end.

Although it is not clear that hedge funds actually played much of a role in the current crisis, the industry's sagging performance, combined with investors' and regulators' heightened demand for transparency, will likely cause big changes in the way these secretive investment pools operate, suggest several Wharton faculty members.

Worries about hedge funds are likely to escalate after The Wall Street Journal reported on March 18 that the now-notorious insurance giant AIG might use taxpayers' money to make good on hedge funds' bets that the housing market would fall. At the same time that the government is struggling to revive housing, it could spend billions rewarding hedge funds that profit from the housing decline, the paper said.

Critics have long wanted a regulatory crack-down on hedge funds, arguing that regulators, investors and the public at large know too little about how this industry influences the financial markets. But the industry has staved off regulatory pushes, the most serious of which was a 2005 Securities and Exchange Commission proposal to require the funds to register with the agency and submit to some scrutiny. The industry challenged the move, and in 2006 a federal court ruled that the SEC did not have that authority.

Now the push for regulation is gathering momentum. A bill introduced on January 29 by Senators Carl Levin, a Michigan Democrat, and Charles E. Grassley, a Republican from Iowa, would give the SEC authority to regulate hedge funds. Grassley argues that the political mood has changed since two years earlier, when he had introduced a similar bill that went nowhere.

Obama Administration officials also are pushing for tougher regulation, though how tough is still to be determined. According to news reports earlier this week, the administration's broader plan for tighter regulation of the finance industry would include assigning greater oversight of hedge funds to the Federal Reserve. Stricter rules might require the funds to make public disclosures. Conceivably, tough rules could even limit hedge funds' ability to borrow money to supercharge bets, or even curb some high-risk investments. The guiding principal will likely be to assure that a fund's activities can hurt only its investors, not innocent bystanders. And it seems apparent that any regulation will come in stages, with the initial disclosure requirements leading to new rules as hazards are detected.

The 10,000 funds control about $1.5 trillion in assets, according to industry estimates. Hedge funds grew dramatically over the past two decades as investors sought market-beating returns, but now hundreds of money-losing funds have shut down and investors are clamoring to get their money back from many others. "The hedge fund industry is really swooning at this point," says Thomas Donaldson, professor of legal studies and business ethics at Wharton. "We're watching an industry whose bubble has popped."

"We will see a major shift in regulation in the next year or so," adds Wharton finance professor Richard Marston, referring to oversight of the entire financial industry, including hedge funds. "I don't really care if the rich in Palm Beach are fleeced.... I care whether businesses in Philadelphia suffer because hedge funds have set off a panic in financial markets. Hedge funds didn't this time. The banks did it. But next time, it may be the hedge funds."

more... http://knowledge.wharton.upenn.edu/article.cfm?articleid=2185

Hedge funds are exempt from regulation in the United States.

Several bills have been introduced in the 110th Congress (2007-08), however, relating to such funds. Among them are:

S. 681, a bill to restrict the use of offshore tax havens and abusive tax shelters to inappropriately avoid Federal taxation;
H.R. 3417, which would establish a Commission on the Tax Treatment of Hedge Funds and Private Equity to investigate imposing regulations;
S. 1402, a bill to amend the Investment Advisors Act of 1940, with respect to the exemption to registration requirements for hedge funds; and
S. 1624, a bill to amend the Internal Revenue Code of 1986 to provide that the exception from the treatment of publicly traded partnerships as corporations for partnerships with passive-type income shall not apply to partnerships directly or indirectly deriving income from providing investment adviser and related asset management services.
S. 3268, a bill to amend the Commodity Exchange Act to prevent excessive price speculation with respect to energy commodities. The bill would give the federal regulator of futures markets the resources to detect, prevent, and punish price manipulation and excessive speculation.
None of the bills has received serious consideration yet.
http://en.wikipedia.org/wiki/Hedge_fund

[genna]

21. Are saying that Frenchie is wrong on the hedge fund thing?

[girl gone mad]

2. It sounds as if Wall Street has Obama's balls in a vise.

Sorry, but FDR never would have gone for that.

Who, exactly, is in charge of our government?

[dkf]

4. I guess this is one time that having a reputation as a conciliator

doesn't help.

He is going to the wrong folks anyway. Its the investor class that has dropped out of lending funds, not the banks.

[genna]

23. Checking the facts and perspective on the article

UPDATE TO ORIGINAL POST ON TPM:
Noam Scheiber says that "Josh Marshall expresses amazement in response --presumably at the idea that Obama would cozy up to the people who inflicted so much damage on the economy in the first place." Alas, I hope I did not write so unclearly. My surprise at the article is its assumption about who holds the whip hand in this relationship -- the White House and Treasury or the execs and the big banks. And secondarily, whether the White House has beat some sort of hasty retreat from its earlier stands.


So Marshall is saying, I don't know whether these assertions are factual. If they are, WHOA!

Who stands to benefit if the meme Obama is in the pocket of corporations runs the marathon? Wouldn't the resultant lack of confidence disable Obama's ability to regulate these same financial interests?

[FrenchieCat]

6. You mean Obambi, doncha?

:shrug:

[girl gone mad]

7. You mean "the Messiah", don't you?

Two can play at that immature game.

[FrenchieCat]

10. Whatever you say, Oh superior one! I am but a child; while you are all knowing!

[acmavm]

8. Oh, he's dealing with Wall Street all right...

<sAIG has given twice as much $$ to Democrats since 2006. Dodd & Obama
Posted by chill_wind
got the single largest amounts.

Just some additional factoids I gleaned (and journaled at DU) back in September (much of it since updated) while watching Congressional players and behavior during the giant wealth transfer of taxpayer money to Wall Street aka The Bailout. And watching since.

http://journals.democraticunderground.com/chill_wind/73



Money to Congress: 2008 Cycle

Dems: Dems: $452,526
Repubs: Repubs: $144,792
Others: Independents: $0


Top Recipients

Senate Obama, Barack $104,332
Senate Dodd, Chris $103,900
Senate McCain, John $59,499
Senate Clinton, Hillary $37,965
Senate Baucus, Max $24,750
Presidential Romney, Mitt $20,850
Senate Biden, Joseph R Jr $19,975
House Larson, John B $19,750
Senate Sununu, John E $18,500
Presidential Giuliani, Rudolph W $13,200


<snip>

[FrenchieCat]

11. Were these checks written by the company, or by employees of AIG.

Because last I checked, AIG had 116,000 employees.

Cause I want to know if anyone working for any financial institution,
should just not give money to any political campaign, because of these kinds of
accusations that are later aimed at the politicians.

Public financing of elections would most likely get rid of this difficulty,
otherwise, almost all donations can be made to look suspect if one only
looks at the face of it, in order to indict whomever they want.

[acmavm]

16. Nice try. But don't waste my time.

[FrenchieCat]

18. That's like a non response, with a brush of a superior hand.

Is that like "No comment" when one is asked a question they don't want to answer?

how quaint!...to make statements, cut and paste and offer not rebut when someone responds.

[acmavm]

19. This is the ONLY response you'll get from me from now on. You are a

total waste of time. You would much rather see politics and business as usual with the American people taking the hits than to stand up for the futures of our children and grandchildren just because its Obama who is undermining their futures for the benefit of Wall Street. If we were to ever name a queen of the Bots, you're it.

Oh yeah, did you miss this this morning?


<snip>


Oh Goody- Obama attempts to appoint another Goldman Sachs exec who worked with Phil Gramm
I reported back in February on the case of Gary Gensler, the former Goldman Sachs employee and derivatives cheerleader who President Obama nominated to head the Commodity Futures Trading Commission (CFTC). Gensler’s nomination sailed through the Senate Agricultural Committee but Senator Bernie Sanders has placed a hold on the nomination (as has a second senator who is as yet unnamed). A statement from Sanders’s office said:


http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x5322140

_______________________________________________________________-

What Obama is 'giving' to the American people (how quaint a phrase since the American people have to pay for it all) is PEANUTS compared to what he'd done for his 'constituents'.

[natrat]

14. should read "neocon shadow gov orders obam to tone down wall st criticism"

[dkofos]

15. Sounds like extortion to me.

[D-Lee]

20. Proper regulation requires consideration of both consumers and industry

The Administration is trying to strike a new balance in the regulation of the financial and banking industries -- something which has been on the skids since Reagan loosened the reins and which escalated with our last Bush.

The process will have some messy points in the process, including some push back by the industries subject to proposals of increased regulation.

All of this process is perfectly understandable and predictable. The vital point is that the Obama administration looks pretty relentless in its desire to re-balance the scales and consider all the factors.

No single event, no single blow back, should be considered as anything more than a chess move right now IMHO.

[genna]

22. It is eye popping "MUST PLAY BALL?"

I contend Obama has to listen to all sides even when he disagrees and legislates against. Is the MSM and Wall Street telling us we must trust the same forces who brought the world's economy to halt to KNOW BETTER?