The President protests and borrows too much

President Obama chastised Wall Street yesterday, for daring to fall 4.5% following the announcement of his “rescue” packages. He sounded like a cross parent when a young child receives a very expensive present and honestly explains it is not what he wanted and he has no intention of playing with it.

The President should do what he said he would do when campaigning – listen, and try to build consensus. He has now had two warnings concerning his economic policy – the refusal of most Republicans to vote for it, and the immediate reactions of markets over his first month in office.

He should remind himself that this was a crisis born of borrowing too much, and should go on to ask whether borrowing lots more is the best way to resolve a debt crisis. He does need to help mend broken banks, but should so so in the least risky and expensive way for taxpayers.

Most of us know that if we try to walk on water we get wet.


  1. Stuart Fairney
    February 11, 2009

    Worse if I may, the bankers apologising to the select committee yesterday, because:

    First, it ignores who was responsible for the regulatory codes during the boom ~ as a parliament, the MP’s were. If the model was flawed, they should have said so in the good times not posture in reflected glory.

    Second, let’s not forget the “community reinvestment Act” along with Fannie and Freddie which actually mandated the bad loans which were half the trouble.

    Third, bankers are responsible to their shareholder, AND NO-ONE ELSE.

    Fourth, by kow-towing to non-entities, I have lost any regard for these men.

    Fifth, by asking them what banking qualifications they have, the MP’s reveal total ignorance of business, what does it matter of the Chief Exec doesn’t have some petty accountancy qualification or other? Really not their job.

    Sixth, and worst, it put me in mind of those early Maoist news reels where industrialists were apologising for exploiting the workers (before being killed no doubt)

    And let’s not forget our record budget deficit which had nothing to do with the bankers and everything to do with the MP’s who voted for the various budgets. I would much have preferred them to be combative. And the bonus thing shows ignorance aplenty. If you take over a bank, then part of your due diligence must be to look at exec remuneration. If you did it, you knew when you bought the bank. If you didn’t, you spent billions negligently. What’s your money on?

  2. Ian Jones
    February 11, 2009

    As in the 1930’s there will be plenty of false dawns, traders try to trade ahead of news and once its out sell. Same thing here, you cant spend 800bn on infrastructure that quickly. It will take 18 months to feed through by which time the higher interest rates resulting from all that extra debt will be choking off demand…..

  3. Harry Fredericks
    February 11, 2009

    Completely agree. It looks very much as though Mr Obama believes the media ‘Messiah’ hype that surrounded his campaign.

    I would like to know who is brave enough to buy the treasury bonds resulting from the Feds hyperactive printing presses.

    Too it would be interesting to know in advance how bad the Hyper Inflation is likely to be as a result. I suspect very bad indeed.

    As for the UK…the same problems. Time to take the Bank of England into public ownership. I do not believe any central bank charged with managing the money supply should be in private hands.

  4. mike stallard
    February 12, 2009

    The real problem is that the West has downed tools and has been living off Far Eastern labour. In order to buy all those clothes, cars and vacuum cleaners, transported on ships crewed by Far Easterners, we have borrowed. The borrowing has now run out.
    The big question is this: can America (and Britain too) start making things which people want to buy?
    In the 19th century, desperately, we rutned to opium as something which the Chinese wanted. We also ruled India.
    Neither of these two options are wanted today.
    So, tell me, why are America and Britain living so richly at the Far East’s expense?
    When Germany faced this crisis, the Germans turned to what they are excellent at: machine tooled factories. So there is hope.
    But, I regret, football, Kate Moss and loads of jobsworths are not going to cut the mustard.

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