Pelosi's agenda jeopardizes White House recovery efforts
Speaker Nancy Pelosi continues to be an out of control troublemaker for the White House. Her whack-a-mole performance at Obama's quasi state of the union address notwithstanding, she is no different from her Republican counterpart John Boehner. Their intensely partisan behavior has nothing to do with getting the right things accomplished and everything to do with old style petty pandering politics. Maybe that's why they so obviously detest each other; too much alike.
Leading the 90% bonus tax bill with zealous vindictive rage, Pelosi has once again created a difficult situation for the White House and Treasury. The bill itself is ridiculous and if it becomes law it will sabotage efforts at all major banks to work through this difficult environment. As for the primary target, AIG's key businesses that had nothing to do with the losses incurred will lose value and when and if sold will return far less to taxpayers than otherwise would have been possible.
The problem now is that the program to deal with "toxic assets" on financial firms' books is just about to be launched. This program is designed to restore some measure of liquidity to the securitization markets and to relieve capital adequacy pressures on some financial institutions. Will it work --- probably not to the extent hoped but a beginning of stabilization would be an achievement. This program is built around two actions: first, attracting private equity partnerships to invest in pools of toxic assets that will be heavily financed by Treasury, 85% is the latest number and, second, selecting five or six premier investment management firms to manage and eventually liquify toxic assets that are bought directly by Treasury. The question now is why would any firm want to agree to any involvement with the government when Congress can change rules and mandate management actions at their whim?
TARP has already been a disasterous example of this. Can you believe that in the fall when firms like JPMorgan and Wells Fargo were politely coerced into taking the money they did so willingly in order to stabilize the entire system for the benefit of all concerned. They made supporting statements. Many small banks who were asked to join and take money were actually honored to be included as it was deemed then to be for banks who were healthy enough to receive and make good use of it. With the continual attacks by members of Congress on TARP recipients and the retroactive rules that have been applied, banks that have TARP money are now reviled and handcuffed. They can't appropriately reward their employees, they can't have conferences with their clients that are not held in some spartan environment, they cannot have employee conferences that are meant to reward top performers, they can't hire the best and the brightest from around the world in this global industry, they are accused of hoarding money and not lending enough, why would anyone choose to do business with a government ruled by this bankrupt Congress led by Pelosi and company. What private equity firm or asset management company would put themselves in the postion of being second guessed, attacked and even legislated against if their subsequent actions were not in line with the latest whim or could serve some political purpose beyond their scope. This risk will now already be priced into any deal the administration is able to make, and will be less cost effective for taxpayers. That's what a market does.
This is a big problem, discussed much here, and the absence of intelligent Congressional leadership seems only to be getting worse.
Leading the 90% bonus tax bill with zealous vindictive rage, Pelosi has once again created a difficult situation for the White House and Treasury. The bill itself is ridiculous and if it becomes law it will sabotage efforts at all major banks to work through this difficult environment. As for the primary target, AIG's key businesses that had nothing to do with the losses incurred will lose value and when and if sold will return far less to taxpayers than otherwise would have been possible.
The problem now is that the program to deal with "toxic assets" on financial firms' books is just about to be launched. This program is designed to restore some measure of liquidity to the securitization markets and to relieve capital adequacy pressures on some financial institutions. Will it work --- probably not to the extent hoped but a beginning of stabilization would be an achievement. This program is built around two actions: first, attracting private equity partnerships to invest in pools of toxic assets that will be heavily financed by Treasury, 85% is the latest number and, second, selecting five or six premier investment management firms to manage and eventually liquify toxic assets that are bought directly by Treasury. The question now is why would any firm want to agree to any involvement with the government when Congress can change rules and mandate management actions at their whim?
TARP has already been a disasterous example of this. Can you believe that in the fall when firms like JPMorgan and Wells Fargo were politely coerced into taking the money they did so willingly in order to stabilize the entire system for the benefit of all concerned. They made supporting statements. Many small banks who were asked to join and take money were actually honored to be included as it was deemed then to be for banks who were healthy enough to receive and make good use of it. With the continual attacks by members of Congress on TARP recipients and the retroactive rules that have been applied, banks that have TARP money are now reviled and handcuffed. They can't appropriately reward their employees, they can't have conferences with their clients that are not held in some spartan environment, they cannot have employee conferences that are meant to reward top performers, they can't hire the best and the brightest from around the world in this global industry, they are accused of hoarding money and not lending enough, why would anyone choose to do business with a government ruled by this bankrupt Congress led by Pelosi and company. What private equity firm or asset management company would put themselves in the postion of being second guessed, attacked and even legislated against if their subsequent actions were not in line with the latest whim or could serve some political purpose beyond their scope. This risk will now already be priced into any deal the administration is able to make, and will be less cost effective for taxpayers. That's what a market does.
This is a big problem, discussed much here, and the absence of intelligent Congressional leadership seems only to be getting worse.
posted by John Borden at 4:44 PM
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