President Obama promised CHANGE in his campaign for President, and after 100 days in office, it is easy to give him a grade of A++ on keeping that promise. I must leave it to historians to gauge whether or not his first 100 days will take the top prize in terms of changes instituted in this country, but for sure he will get honorable mention.
I never thought I would find myself in the same camp as the self-acclaimed “democrat socialist” Senator Bernie Sanders of Vermont. But last evening on the Kudlow Report he made a very legitimate case for Government capping interest rates on credit card balances.
On the surface, JPMorgan Chase’s first quarter 2009 earnings look auspicious, reversing the red ink of the last few quarters and exceeding what was expected by investors. But a simple read-through of the press release paints a different picture.
The housing industry is finally just starting to get a bit of life, thanks to mortgage rates that are at the lowest levels in nearly 50 years. Combined with falling house prices, home affordability is the best level in years. Wise homebuyers will take out a fixed rate mortgage, NOT a variable one, however long the term might be, and budget to pay that fixed amount every month.
The sooner those banks which don’t need Federal Government loans – Goldman Sachs? Morgan Stanley? Wells Fargo? – can repay them, the better. Because then those healthy financial institutions will be able to compete head to head with their major competitors, now in essence under the control and management of the Federal Government. When that day arrives – and it can’t come too soon – there will be a real test of private enterprise versus the Government, of capitalism versus socialism. I know where I will put my bet for who will be the winner, and it ain’t with the Federal Government.
Lowering taxes in the midst of a recession is considered, in the science of economics, to be an expansionary move, i.e. one that will help to stimulate economic growth and end the recession.
The obvious corollary is that raising taxes during the midst of a recession is an economically contractionary move, one that will act to remove a stimulus to economic recovery and which will impede growth. So purely from an economic and mathematical point of view, it seems that the tax increases proposed in the current budget plan will only serve to lengthen this already seriously deep recession.
The American Express ‘invitation’ (I wrote about yesterday) to, as they said, “a relatively small number of card members who have sizable balances and little spending and payment activity” may just be the tip of the iceberg.Why are they doing this?It is not out of the goodness of their heart.It is very likely because when they see a large balance with only minimal monthly payments and no new purchases, they are probably rightly concerned that the borrower may have fallen on hard times and may soon be unable to make the monthly payments.If that happens, then the credit card obligation which is currently an asset on the balance sheet will become a bad debt.So it seems to me that American Express is trying right now to strengthen its own balance sheet, and that is fine. But what is important for credit card holders is that you take care of YOUR OWN balance sheet.What the banks devise as their solution is not necessarily the best solution for you.
The stimulus package is a real disappointment because it could have provided a serious punch to shock the economy into action. Instead it is a typical – albeit much bigger than normal – spending bill, which means it is has more than the normal amount of pork and less of the incentives needed to stimulate capital investment, jobs and profits. But frankly, given the dismal state of the economy, I’ll take any spending in almost any form at this time – yes, even pork – provided it is done soon and in a big way. The economy can’t wait much longer.
Watching yesterday parts of the House Financial Services Committee interrogation of the CEOs of the major banks and brokerage firms, I found myself fluctuating between being exasperated and bored It was reminiscent of so many other similar hearings – Congress educating itself after the fact. It was patently clear that our Government leaders did not understand the repercussions of their own political motives in contributing to the housing crisis they themselves fostered over the last twenty years.
While the headlines in the media are all about the stimulus bill coming out of Congress and the Treasury’s bailout plan, there has been little media attention being drawn to a disturbing and growing phenomenon that is seriously impacting the potential retirement savings for employees, namely, the cutback in the corporate match for employee 401(k) plans.
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