The Bear Whisperer

Bless his little heart. He called for “common sense” rules for Wall Street. He had sharp words of warning for those who didn’t learn the lessons from Lehman Brothers and the global financial crisis. Isn’t that nice? We no longer have to “speak softly and carry a big stick”? I guess those were different times and a different president. Now, we get to speak sharply and carry a big brief case full of cash.

Just in case you missed it (or lectured through it like I did), here’s the full text of President Obama’s Wall Street Speech today.

Oh, and let me be the first to say that our President needs to take a basic finance course or maybe it’s Jon Favreau that needs it.

In fact, while there continues to be a need for government involvement to stabilize the financial system, that necessity is waning. After months in which public dollars were flowing into our financial system, we are finally beginning to see money flowing back to the taxpayers. This doesn’t mean taxpayers will escape the worst financial crisis in decades unscathed. But banks have repaid more than $70 billion, and in those cases where the government’s stake has been sold completely, taxpayers have actually earned a 17-percent return on their investment. Just a few months ago, many experts from across the ideological spectrum feared that ensuring financial stability would require even more tax dollars. Instead, we’ve been able to eliminate a $250 billion reserve included in our budget because that fear has not been realized.

Bottom line: The Banks that didn’t need the money paid it back in a hurry to avoid some one tampering with their executive pay plans. The rest that’s out there (including Citibank’s share) will probably languish for ever or pay ever so slow. POTUS can brag about a 17% return by just simply ignoring the rest of the languishing money and just paying attention to the ones that pay back. After all, Wall Street ignores their toxic assets, why can’t he? Nice to be able to select the AAA tranche of the investment and only count the return on it instead of the entire portfolio. Tsk! Tsk! Tsk!

Unfortunately, there are some in the financial industry who are misreading this moment. Instead of learning the lessons of Lehman and the crisis from which we are still recovering, they are choosing to ignore them. They do so not just at their own peril, but at our nation’s. So I want them to hear my words: 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. Those on Wall Street cannot resume taking risks without regard for consequences, and expect that next time, American taxpayers will be there to break their fall.

Bottom line: Yes, Wall Street funded the POTUS campaign, but he really has to talk tough here because too many folks have been talking about moral hazard. POTUS knows what moral hazard has done to Republicans like Larry Craig, Mark Foley, David Vitter, wait that isn’t it? Oh, well, something is making these guys think we’re going to bail them out again. Heck, we don’t have to bail them out AGAIN since we’re going to continue to bail them out, it’s not an again situation, is it? I mean, doesn’t it all depend on what again means here?

Instead, we are calling on the financial industry to join us in a constructive effort to update the rules and regulatory structure to meet the challenges of this new century. That is what my administration seeks to do. We have sought ideas and input from industry leaders, policy experts, academics, consumer advocates, and the broader public. And we’ve worked closely with leaders in the Senate and House, including Senators Chris Dodd and Richard Shelby, and Congressman Barney Frank, who are now working to pass regulatory reform through Congress.

Bottom line: Yes, I know these congressional guys got sweetheart deals on their homes. What campaign donations? That’s not really going to influence them is it ? Oh, and remember those secret meetings with PHARMA and UHC where POTUS set up the terms of health care reform? You know how well those worked! Well, the ideas and input from industry leaders are going to do more of the same!!! Lucky us!!!

The fact is, many of the firms that are now returning to prosperity owe a debt to the American people. Though they were not the cause of the crisis, American taxpayers through their government took extraordinary action to stabilize the financial industry. They shouldered the burden of the bailout and they are still bearing the burden of the fallout – in lost jobs, lost homes and lost opportunities. It is neither right nor responsible after you’ve recovered with the help of your government to shirk your obligation to the goal of wider recovery, a more stable system, and a more broadly shared prosperity.

You can get anything you want at Barrack's Restaurant

Bottom line: Could you please see to it that you renegotiate some of those home loans? Please please pretty please? Could you please consider NOT going back to all those huge bonus packages? POTUS just knows it’s so obvious who got the bill for your mess. Could you please make it a little less obvious? Please please pretty please? Just a few less mergers and a few more loans, PU-LEEZE?

It was one year ago that we experienced just such a crisis. As investors and pension-holders watched with dread and dismay, and after a series of emergency meetings often conducted in the dead of the night, several of the world’s largest and oldest financial institutions had fallen, either bankrupt, bought, or bailed out: Lehman Brothers, Merrill Lynch, AIG, Washington Mutual, Wachovia. A week before this began, Fannie Mae and Freddie Mac had been taken over by the government. Other large firms teetered on the brink of insolvency. Credit markets froze as banks refused to lend not only to families and businesses but to one another. Five trillion dollars of Americans’ household wealth evaporated in the span of just three months.

Congress and the previous administration took difficult but necessary action in the days and months that followed. Nevertheless, when this administration walked through the door in January, the situation remained urgent…..

One year ago, we saw in stark relief how markets can err; how a lack of common-sense rules can lead to excess and abuse; how close we can come to the brink.

Bottom line: Oh, and did POTUS mention enough times how he inherited this mess?

Bottom Bottom Line: Another speechification with a lot of sharp words and very little detail.

Promises, Promises:

• A new Consumer Financial Protection Agency (I’ll believe that when I see it chartered with some regulatory teeth.)
• Close the loopholes that were at the heart of the crisis (Uh, could we get some specifics here?)
• Create clear accountability and responsibility for regulating large financial firms that pose a systemic risk … while holding the Federal Reserve fully accountable for regulation of the largest, most interconnected firm (Wow, is Ben ever going to be busy and he doesn’t even want this responsiblity. Looks like Temper Tantrum Timmy got his way.)
• Close the gaps that exist not just within this country but among countries (We’re trying to stop them from doing something and they’re pretty irritated at us for not doing anything. Let’s see how well this goes.)

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