The Way Forward For Obama, Banks, and Taxes….
There are two developments over the weekend that investors and voters should be aware of for Monday.
First, there remains confusion over exactly what Congress and the Obama administration are going to do over the financial sector of the United States. There were rumors on Friday (and all of last week) that banks were going to be nationlized. This promptly Obama spokesman Gibb to say late in the day that they believe banks should remain in private sector. However, they had to do this because Sen. Dobb said that they may need to nationalize some banks at some point. Today, the WSJ has an article that stating that the Obama administration is thinking now about converting their preferred shares into common and effectively nationalizing the banks.
Also, the FDIC will shortly begin to do the stress testing on banks to decide which ones are capable of survining and lending. CNBC has a report here
Next, President Obama has announced a plan to halve the deficit by the end of his term. This week, he will be giving a speech on Tuesday and holding a conference on Thursday to discuss his plans and to elicit ideas for the budget deficit.
He’s going to include all the off-balance sheet items such as the Iraq War and borrowing from the Socical Security fund to provide a more accurate picture of the deficit. This is something that clearly needed to be done for the American voter, but comes with a purpose. Obama wants to make the deficit as large as possible now (and to blame it on the Bush administration) so that he can make it easier to reach his targets of reducing it later.
He plans on reducing it via ending the wars in Iraq, changing allowances for private equity/hedge funds 9very popular now), ending certain payments to insurance companies for health care, and (drum roll please) raising taxes by allowing the Bush tax cuts to roll off. The NYT has the details here
This sunsetting of tax cuts is something I’ve been predicting ever since Obama won. The earlier plan is to raise taxes on the wealthy of anyone earing over $250,000 starting in 2010.
The news of both the tax hikes and the potential of preferred shares converting will put early pressure on stocks globally when they open later this afternoon.
I’ll be meeting with both Republicans and Democrats on the Hill this week and I’ll report back what I find…..
February 23rd, 2009 at 5:03 pm
isn’t there just a lack of sanity here by the Obama administration and the democrats in general? it seems that they just don’t think market and ultimately economic collapses impact democrats so if what they do causes 12% unemployment and 8-10% inflation well, who cares, “we’re democrats and republicans simply lose.” i thought i heard one comment by a rep saying, “well, we keep getting reelected.” i mean, how can there be any winners in this environment? cash strikes me as king because, not to be overly offensive, but democrats get elected even though they put us all in the economic equivalent of a nazi death camp. i mean if the American voter actually voted on the cost of their bread and this circus they’d get their guns and have a real march on Washington.
March 3rd, 2009 at 1:15 pm
• If we had those $Trillions, the one we spent on un-necessary wars, we could have enough money to come out from this housing disaster. Why you guys do not understand that this war is going to break us financially. Remember that Afghanistan is not win able. Get out from Afghanistan, read the history. Leave those people alone, you will kill more people and will create more freedom fighters. Make America strong from inside, and save our money and soldiers.
• American International Group, Bank of America, CITI and other losers should be allowed to go bankrupt because keeping it and other sick financials alive on government support risks ruining the US economy.