The Cynical Economist

Wells Fargo’s Stumpf Sees New Costs for Customers – Wells Fargo & Co. Chief Executive Officer John Stumpf said customers, not just the bank, will bear the financial burden for U.S. regulations that cover services ranging from home loans to credit cards.

U.S. debt not sustainable – Kai Ryssdal talks to Harvard Professor Niall Ferguson about the unsustainable debt load of the United States.

Sun could set suddenly on superpower as debt bites – Good read by Niall Ferguson

21 Reasons Why The So-Called Recovery Is A Joke For Most Americans – Yes, U.S. GDP is growing and corporate profits are beating expectations across the board. Companies are flush with cash, and banks are confident again. It’s surely a recovery… for them.

Recession in U.S. Was Even Worse Than Estimated, Revisions Show – The worst U.S. recession since the 1930s was even deeper than previously estimated, reflecting bigger slumps in consumer spending and housing, according to revised figures.

Taxes: A Defining Issue – At a time when the American people need to make some decisions about the nation’s purpose, along comes Barack Obama to make the choices crystal clear

Who Doesn’t Pay Taxes and Why – For the 2009 tax year, an estimated 47% of U.S. households did not pay any federal income tax. The percentage was a bit higher than normal due to the lousy economy and some allegedly temporary tax breaks that may not be renewed. The long-term percentage of non-taxpaying households is apparently around 40%…

Jim Rickards Compares The Collapse Of The Roman Empire To The US, Concludes That We Are Far Worse Off – the similarities are just far too many, starting with the debasement of the currencies, whereby Rome’s silver dinarius started out pure and eventually barely had a 5% content, and the ever increasing taxation of the population, and especially the most productive segment – the farmers, by the emperors, to the point where the downfall of empire was actually greeted by the bulk of the people as the barbarians were welcomed at the gate with open arms.

UNFUNDED LIABILITIES OF STATE AND LOCAL GOVERNMENT EMPLOYEE RETIREMENT BENEFIT PLANS (pdf file) -Total unfunded liabilities for all benefit plans are an estimated $3.1 trillion

Experts warn Obama panel: Fiscal crisis is getting ‘closer’ – The government should consider capping what it pays in benefit programs such as Medicare, Medicaid and Social Security, experts told President Obama’s fiscal commission

U.S. Economy Grew 2.4% in Second Quarter, Below Forecast - Growth in the U.S. slowed to a 2.4 percent annual rate in the second quarter, less than forecast, reflecting a larger trade deficit and an easing in consumer spending.

U.S. Michigan Consumer Sentiment Index Fell to 67.8 – Confidence among U.S. consumers fell in July to the lowest level since November, posing a threat to the biggest part of the economy.

Free Enterprise — Not Government Oversight — Key to GM Turnaround, Say Company Officials - Free enterprise and the American marketplace – not the guiding hand of government – have revitalized the beleaguered automaker General Motors, which expects to announce another profitable quarter, according to GM officials.

Foreclosures boom among nation’s most creditworthy – A record number of borrowers once judged the most creditworthy are heading into foreclosure as the job market leaves more homeowners unable to keep up with mortgage payments.

How Uncertainty Hinders Economic Growth - Richard W. Fisher’s (currently the President of the Federal Reserve Bank of Dallas) remarks before the Greater San Antonio Chamber of Commerce

China overtakes Japan as No.2 economy – China has overtaken Japan to become the world’s second-largest economy, the fruit of three decades of rapid growth that has lifted hundreds of millions of people out of poverty.

UCF gets $434K NIH grant – The University of Central Florida was awarded a $434,800 National Institutes of Health grant that will allow researchers there to develop a game using life-size avatars and real-life scenarios to promote sexual abstinence among Latina middle schoolers.

Consider GREAT BRANDS OF TOMORROW

Credit Suisse released a superb piece of research earlier this year on the great brands of tomorrow.  CS found that a strong brand is a vastly underappreciated investment thesis.   Most interesting, however, is that the strategy approach pays.  According to their research the “brand company” index has outperformed the S&P 500 by 64 points since 1997:

“An underappreciated investment thesis. There are few true competitive advantages in modern industry: scale, proprietary technology, monopolies, and network externalities come to mind. We believe brand is an equally powerful and even more sustainable advantage, but one often ignored by financial markets owing to its intangible nature. Our research indicates that companies focused on brand building consistently generate outsized long-term growth, profitability, and returns. An equal-weighted stock index of companies that spend at least 2 percent of sales on marketing outperformed the S&P 500 by more than 400 basis points annually since 1997; the top quintile of these companies outperformed the market by an amazing 17 percent per year.”

This is an interesting study for several reasons, not the least of which is the global strength it pinpoints.  This is a truly globally diversified portfolio.  So what are the companies they currently consider “strong brands”?  The list of 27 follows:

1. Alibaba

2. Amazon (AMZN)

3. Almarai

4. Apple (AAPL)

5. BIM

6. Capitec

7. China Merchants Bank

8. Comac

9. Enfamil (MJN)

10. Facebook

11. Hyundai

12. Indian Hotels

13. Julius Baer

14. Li Ning

15. Mahindra & Mahindra

16. MercadoLibre (MELI)

17. Mercedes-Benz

18. Polo Ralph Lauren (RL)

19. Sonova Holding

20. Swatch

21. Tiffany & Co. (TIF)

22. Tingyi

23. Trader Joes

24. Tsingtao Brewery

25. Under Armor (UA)

26. Uniqlo

27. Yakult Honsha

Is it only me that sees the disturbing trend in this portfolio?

The bets for future growth are in foreign companies and countries

Compare what the investors held in their portfolio ten years ago and where they  are advised to invest today according to the article

Instead of e-bay.com  - it is alibaba.com and marcado libre

Instead of Coca cola  - it is Tingyi (We will overtake Coke in five years)

Instead of BAC, CITI, GS  - it is Capitec, China Merchants Bank and Julius Baer

Instead of Ford and GM  - it is Mahindra and Hyundai

Instead of GE  - it is Sonova

Instead of Nike –  it is UniQlo, Li Ning and Under armor

Instead of Boeing –  it is Comac

Instead of Hilton –  it is Indian Hotels

Is America NO MORE THE INVESTORS HEAVEN?

Is America NO MORE THE DREAM LAND?

TheCynicalEconomist think so.

Think about it: What is the  American dream all about

My definition is – Through hard work and devotion to rise from poverty to riches…

Can you do it nowadays?….

It is getting harder and harder

The unfriendly business environment is chocking innovations and investments here in the USA… the capital and brains are going abroad in Asia and South America where the governments are lowering taxes and promoting free markets

What is your opinion?

For your amusement here is a song from a time long  gone ….

Time when everyone looked at America as the country of prosperity and good life…

Time when everyone, wished to be an American and worked hard so they could rise from the bottom to the top

Listen to the lyrics….

Where do you get from the bottom to the top?

Where do you shop non stop?

Yeah it used to be the dream land…America

Sorry,  the opportunities in America are gone with the wind now….You can thank our political class, that is working against the interest of the people, who elected them….

At your attention – here it is another story from few days ago ….India unveils prototype of $35 tablet computer…..Yeah, I think we are really, really screwed as a nation……..

Now, haven’t I told you that hyper stagflation (hyperinflation combined with very high unemployment)  is the most probable outcome from all that money printing and government meddling with the free market….

I have seen it first hand in Eastern Europe when the Soviet Union collapsed. Unemployment was over 20% and hyperinflation was so bad, that some of the workers got paid by taking home certain quantity of the products, they were making instead of getting their salaries paid  with cash (in Communist countries no one was writing checks, all transactions were done with cash, just business deals were done electronically by the banks).  I remember I needed a jacket for the winter, but I did not have work back then, so my mother “loaned” me money to buy one. Later I found It took her entire monthly salary to do so. And I assure you I did not purchase some fancy jacket…

Think about it! She worked a whole month and at the end of that month the money, that she earned were as valuable as one jacket…

Of course we do not see the inflation here (yet), but I think it is in our future.

Bernanke and the Feds think they can control things much better than the rest of the central banks around the world, because you see, the dollar is the worlds reserve currency, you know…

Not for long, not for long…

From The Telegraph

Bank of England Governor Mervyn King has warned that high inflation will continue to erode earnings power through next year as the economy faces the threat of ‘stagflation’.

Prices rises have consistently defied the Bank’s expectations of a slowdown, adding to pressure on households as wage growth remains weak and the Government introduces a strict austerity package.

The Bank’s rate-setters are charged with keeping inflation at 2% but the Consumer Prices Index benchmark has been above 3% throughout the year.

However, addressing a committee of MPs, Mr King suggested that they will be reluctant to try to curb the problem by raising borrowing costs from 0.5 per cent any time soon because of the weakness of the economy.

“There will come a point when we will certainly need to ease off the accelerator and return Bank Rate to more normal levels,” Mr King told MPs today.

“I look forward to that time because it will probably be a signal that there is a smoother drive ahead, with the economic outlook improving in a durable way. But I fear there is some considerable distance to travel before we can begin to use the word ‘normal.’”

The Bank of England’s Monetary Policy Committee (MPC), which slashed interest rates to a record low of 0.5pc during the depths of the recession, faces an acute dilemma on when to begin raising them. Not everyone on the MPC agrees with the Governor that the threats to the recovery present a greater danger than that of rising prices.

And despite “encouraging” 1.1% growth for the economy in the second quarter, the governor warned that we “cannot be confident” the recovery will be sustained, raising the spectre of ‘stagflation’ – high inflation and stuttering growth.

“We must be careful not to read too much into one number,” King said. “And the wider economic problems around the world underline the fact that we cannot be confident that the recovery in demand, output and employment here in the U.K. will be sustained.”

Howard Archer, an economist at Global Insight, said “one thing that does look clear is that interest rates are likely to remain very low for a considerable time to come.

“Monetary policy will need to remain loose for an extended period to offset the impact of the major, sustained fiscal squeeze,” said Mr Archer.

Mr King also suggested the US has been wrong to prioritise growth over cutting debt levels.

“All countries need to have a credible medium term plan within which they can demonstrate that they will get back to a position in which structural deficits are eliminated and there is a sustainable path for the long-term public finances,” he said.

“Not spelling it out is, I think, a problem.”

The Bank said austerity measures were part of a painful rebalancing of economies towards the private sector.

“I think we are are in for a long haul,” said Mr King.

More Than 1,300 Space Shuttle Workers Get Layoff Notices – More than 1,300 space shuttle workers received layoff notices this week from United Space Alliance, a NASA contractor that is cutting 15 percent of its 8,100-person workforce ahead of the shuttle fleet’s retirement next year.

SEC Says New Financial Regulation Law Exempts it From Public Disclosure – So much for transparency.

Paradigm Shifts And Gold Rocket Launches – You all know where I stand. U.S. government bonds are the biggest bubble I’ve seen in my life. If you are trying to rationalize 10-year yields at 3%, then you are probably the kind of person who rationalized bubble home prices by using the “there’s a fixed amount of land but a growing population” argument

Nevada’s Economic Misery May Be America’s Future – So many homes in Las Vegas have been foreclosed upon that banks rarely bother to hang a “For Sale” sign on the front lawn anymore. Instead, visitors identify bank-owned properties by the brown grass and the 8.5 x 11-inch sheet of paper taped to the front door or the garage.

The Consumption Gap – They thought Asia would save the world economy. They were wrong.

Mortgage brokers to be fingerprinted and registered – Mortgage loan originators will have to be fingerprinted and sign up to a central registry to do business in future, according to final rules issued on Wednesday by the Federal Reserve and other regulators.

Obama’s Elizabeth Warren mess - The right and left are both itching for a nasty fight over who will protect consumers from Wall Street

Feds demand diversity on Wall Street – A little-noticed section of the Wall Street reform law grants the federal government broad new powers to compel financial firms to hire more women and minorities — an effort at promoting diversity that’s drawing fire from Republicans who say it could lead to de facto hiring quotas.

BP taking $10 billion tax credit from Gulf spill – BP PLC will reduce its contribution to U.S. coffers by roughly $10 billion due to a tax credit the company is claiming it incurred from the Gulf of Mexico oil spill.

Schwarzenegger orders more furloughs for state workers – The governor’s new executive order requires employees take three unpaid days off per month.

Federal Debt and the Risk of a Financial Crisis – With U.S. government debt already at a level that is high by historical standards, and the prospect that, under current policies, federal debt would continue to grow, it is possible that interest rates might rise gradually as investors’ confidence in the U.S. government’s finances declined, giving legislators sufficient time to make policy choices that could avert a crisis. It is also possible, however, that investors would lose confidence abruptly and interest rates on government debt would rise sharply, as evidenced by the experiences of other countries.

Richest Americans You have never heard of – Microsoft’s (MSFT) Bill Gates, Berkshire Hathaway’s (BRK.A) Warren Buffett and Apple’s (AAPL) Steve Jobs are all household names in addition to being among the wealthiest people in the country. There are, however, other billionaires, whose companies or products are also among the best-known in the country, yet they live in relative obscurity, unknown to most — including their best customers.

Fed’s Report Shows Slowing Growth – In some regions, the Fed said, economic activity had started to slow

Obama fights against accusations that administration is anti-business - President Obama will travel to New Jersey on Wednesday as part of an effort to refute Republican assertions that he is anti-business.

EPA Puts ‘Environmental Justice’ Front and Center in Its Rulemaking Process – Achieving environmental justice is an Agency priority and should be factored into every decision

What Would Happen if the Bush Tax Cuts Expire – Much of the focus has been on the wealthy, but what will the expiration of the tax cuts mean for everyone else? Brett Arends runs the numbers.

US Debt May Grow To $60 Trillion From $14.1 Trillion According To Economists – Many international economists, bankers, and politicians now believe the US has overplayed its hand.

Jim Rogers Calls CNBC A Market PR Agency Whose Sole Purpose Is To Make Stocks Go Higher

Taleb: Government Deficits Could Be the Next ‘Black Swan’ - In a new edition of The Black Swan, author Nassim Nicholas Taleb warns against depending “on financial assets as a repository of value”

U.S. Cities, Counties Poised to Cut 500,000 Jobs, Report Finds – U.S. local governments may cut almost 500,000 jobs through next year to cope with sliding property taxes, a decline in state and federal aid and added need for social services, according to a report released today.

K Street goes to the defense of Charlie Rangel – Two of the three firms providing legal counsel to Rep. Charlie Rangel, D-N.Y., in his pending ethics cases are lobbying firms

Rep. Barney Frank causes scene demanding discount – Massachusetts Congressman Barney Frank caused a scene when he demanded a $1 senior discount on his ferry fare to Fire Island’s popular gay haunt…

GM Volt’s price induces some sticker shock – The long-anticipated Chevrolet Volt, General Motors’ electric car, will cost $41,000, the company announced Tuesday

The Year America Dissolved – Year 2017… With the dollar’s demise, import prices skyrocketed. As Americans were unable to afford foreign-made goods, the transnational corporations that were producing offshore for US markets were bankrupted, further eroding the government’s revenue base.

Thanks for the memories, Barack: Or, how to bankrupt a country in three easy steps – “Europe’s prospects brighten as U.S. fades.”  Thus a headline in Reuters this morning.

Obama pushes Congress to pass small business plan – President Barack Obama pushed the Senate on Tuesday to pass legislation he says will benefit small businesses and generate jobs, and called on Republicans to back what he described as a plan similar to programs they had supported in the past.

Majority of Small Business Sector Facing Higher Taxes Under Obama Plan – This is a huge slap in the face to small businesses

Housing recovery is about timing and location – The latest report on home prices confirms that real estate is all about timing and location.

Rule By Elites Has Been Tried — And Failed – by Thomas Sowell – The idea that the wise and knowledgeable few need to take control of the less wise and less knowledgeable many has taken milder forms — and repeatedly with bad results as well.

Obama to Hold Aug. 17 Housing Conference on Ways to Repair Fannie, Freddie – The future of our housing-finance system is critical not only to our economic recovery, but also to millions of American homeowners in every corner of our country

If President Obama carries on like this, he will turn into a lame duck – The president hasn’t grown into the job – all that’s needed to beat him is a serious Republican, says Simon Heffer in New York.

Course of Economy Hinges on Fight Over Stimulus

Tax-Hike Hypocrites

Audit: US cannot account for $8.7B in Iraqi funds

From the White House to the Big House: 25 Impeachable Crimes and Counting

Deportation of illegal immigrants increases under Obama administration

Arizona’s Immigration Surprises

Los Zetas drug cartel seizes 2 U.S. ranches in Texas - In what could be deemed an act of war against the sovereign borders of the United States, Mexican drug cartels have seized control of at least two American ranches inside the U.S. territory near Laredo, Texas. The invasion started many years ago, but now it is done in plain sight, since the invaders see that the US president is suing his own states, which are trying to defend themselves

Mexican inmates are set loose to kill, officials allege – Guards and officials at a prison in northern Mexico let inmates out, lent them guns and allowed them to use official vehicles to carry out drug-related killings, including the massacre of 17 people last week, prosecutors said Sunday.

Documentary Filmmaker Exposes Border Threats

Four Shocking Bombshells Bernanke Did NOT Tell Congress About Last Week - by Martin Weiss – In his testimony before Congress last week, Ben Bernanke lifted the Fed’s skirt and gave us a glimpse of the disasters now sweeping through the U.S. economy. But there are four bombshells he did NOT talk about….

Desperate days for the warmists – Warmists may be winning the big grants, but they’re not winning the argument, says Christopher Booker

Gross: Three-Decade Bond Rally Ending – Pimco co-CEO Bill Gross says the 30-year-long bond rally will fizzle and expire as nations sell record amounts of debt to fund their deficits, a move that will in turn will spur inflation and push interest rates higher

The Democratic Fisc – Tax revenues are smaller, spending is greater, and the deficits are thus larger than the White House has been saying.

A MID-YEAR UPDATE ON THE PRESIDENT’S PLAN TO SPEND, AND THEN TAX, IN EPIC PROPORTIONS – Peter Orszag, the president’s outgoing Director of the Office of Management and Budget, released the annual mid-year update to the administration’s budget projections at 3 pm last Friday afternoon in a conference call with reporters. That was a dead giveaway that the administration was hoping not to make much news with its latest budget projections, or at least not make news in a way that anyone would notice.

Geithner: Private Investment Needed – Treasury Secretary Timothy Geithner said the economy has now recovered sufficiently for government to begin to make way for private business investment. LOL

FDIC to Issue Bonds Backed by Residential Mortgages – The Federal Deposit Insurance Corp. plans to issue securities backed by about $500 million of home mortgages acquired from failed banks, leaning again on guarantees to help sell the debt. That is a AAA deal to steal. LOL

Muni `Race to Bottom’ May Cost $1 Trillion, Former Los Angeles Mayor Says – U.S. cities and states may need more than $1 trillion of federal assistance in the next three years to stave off financial failure, former Los Angeles Mayor Richard Riordan said. It is OK to estimate, anyway we are going to print as many dollars as needed.

State mandate: Clearwater’s lifeguard station needs to be handicapped-accessible – Another example of your tax dollars at work.

Obama’s message to voters: Things could be worse – President Barack Obama, who rocketed to the White House promising “change you can believe in,” is now telling voters they shouldn’t change a thing.

The Big Hiring Freeze – Judging from corporate profits, we should be enjoying a powerful economic recovery

No more ‘me first’ mentality on entitlements – Unless we control our deficits we will face stifled economic growth and impaired standards of living, perhaps even as soon as a few years from now. LOL That’s written by Neel Kashkari. Where was he, few years ago, when we were told that is essential for our survival as a country to bail out his banking buddies? I guess, deficits didn’t matter then

Has the gargantuan stimulus stimulated anything? – Weak GDP effect of federal spending is consistent with the modern peer-reviewed literature; not only are the White House economists familiar with it, some of them have contributed to it.

Justice Dept. parties with tax dollars — arcade games, bowling, and skateboarding! – Well over $100 million tax dollars over five years has been spent on “to fight crime” according to Sen. Tom Coburn, R-Okla., who also notes that at least $200,000 was spent for officials to visit Florida and Palm Springs golf resorts to attend conferences.

There is something in the Earth atmosphere….Otherwise there is no way to explain all these people and events that are gone insane around the World in the last few years

From The Telegraph
By Martin Banks

European bureaucrats have set up a secretive fund of £400 million to pay for projects that include promoting a “smelly-foot” dance and producing postcards about the causes of “social exclusion”.

Researchers have unearthed a series of grants issued to schemes deemed “confidential” that have not been subject to outside scrutiny. Taxpayers’ money spent on the projects, many of which have been described as “crazy”, has increased since the onset of recession.

The schemes include £145,000 to print 736 postcards that “reflect the current problems in Europe that generate social exclusion” and £166,000 on a street circus project whose aim is to “strengthen international understanding”.

Producing the postcards in six EU countries cost nearly £200 per card.

According to a report by Open Europe, a UK-based think tank, the £400 million was allocated to projects originally deemed “confidential”. The projects have now been listed on the European Commission’s newly-created database of beneficiaries of EU funds.

Open Europe analysts said they had unearthed “some pretty outrageous stuff”.

Stephen Booth, of the think tank, said, “There are some crazy projects but also a lot of money going to projects considered ‘confidential’.

“The Commission’s website simply says that ‘in certain cases, some parts of the information displayed on a particular grant or contract may be masked, for example, for security reasons’.”

Between 2007 and 2009, the database shows the Commission awarded a total of 727 grants in which the beneficiary is marked as confidential, amounting to a total value of just over £400m.

Some recipients have been named including the London-based Flying Gorillas troupe, whose act includes the “brilliant smelly foot dance and the incredibly difficult iguana four-step”. It received £162,000. Another £124,000 went to London-based artists BodyDataSpace for a project on “evolving global, social and technological shifts”.

From USA Today
By Karen Mracek and Thomas Beaumont

Goldman Sachs sent $4.3 billion in federal tax money to 32 entities, including many overseas banks, hedge funds and pensions, according to information made public Friday night.

Goldman Sachs disclosed the list of companies to the Senate Finance Committee after a threat of subpoena from Sen. Chuck Grassley, R-Ia.

Asked the significance of the list, Grassley said, “I hope it’s as simple as taxpayers deserve to know what happened to their money.”

He added, “We thought originally we were bailing out AIG. Then later on … we learned that the money flowed through AIG to a few big banks, and now we know that the money went from these few big banks to dozens of financial institutions all around the world.”

Grassley said he was reserving judgment on the appropriateness of U.S. taxpayer money ending up overseas until he learns more about the 32 entities.

Goldman Sachs (GS) received $5.55 billion from the government in fall of 2008 as payment for then-worthless securities it held in AIG. Goldman had already hedged its risk that the securities would go bad. It had entered into agreements to spread the risk with the 32 entities named in Friday’s report.

Overall, Goldman Sachs received a $12.9 billion payout from the government’s bailout of AIG, which was at one time the world’s largest insurance company.

Goldman Sachs also revealed to the Senate Finance Committee that it would have received $2.3 billion if AIG had gone under. Other large financial institutions, such as Citibank, JPMorgan Chase and Morgan Stanley, sold Goldman Sachs protection in the case of AIG’s collapse. Those institutions did not have to pay Goldman Sachs after the government stepped in with tax money.

Shouldn’t Goldman Sachs be expected to collect from those institutions “before they collect the taxpayers’ dollars?” Grassley asked. “It’s a little bit like a farmer, if you got crop insurance, you shouldn’t be getting disaster aid.”

Goldman had not disclosed the names of the counterparties it paid in late 2008 until Friday, despite repeated requests from Elizabeth Warren, chairwoman of the Congressional Oversight Panel.

“I think we didn’t get the information because they consider it very embarrassing,” Grassley said, “and they ought to consider it very embarrassing.”

The initial $85 billion to bail out AIG was supplemented by an additional $49.1 billion from the Troubled Asset Relief Program, known as TARP, as well as additional funds from the Federal Reserve. AIG’s debt to U.S. taxpayers totals $133.3 billion outstanding.

“The only thing I can tell you is that people have the right to know, and the Fed and the public’s business ought to be more public,” Grassley said.

The list of companies receiving money includes a few familiar foreign banks, such as the Royal Bank of Scotland and Barclays.

DZ AG Deutsche Zantrake Genossenschaftz Bank, a German cooperative banking group, received $1.2 billion, more than a quarter of the money Goldman paid out.

Warren, in testimony Wednesday, said that the rescue of AIG “distorted the marketplace by turning AIG’s risky bets into fully guaranteed transactions. Instead of forcing AIG and its counterparties to bear the costs of the company’s failure, the government shifted those costs in full onto taxpayers.”

Grassley stressed the importance of transparency in the marketplace, as well as in the government’s actions.

“Just like the government, markets need more transparency, and consequently this is some of that transparency because we’ve got to rebuild confidence to make the markets work properly,” Grassley said.

AIG received the bailout of $85 billion at the discretion of the Federal Reserve Bank of New York, which was led at the time by Timothy Geithner. He now is U.S. treasury secretary.

“I think it proves that he knew a lot more at the time than he told,” Grassley said. “And he surely knew where this money was going to go. If he didn’t, he should have known before they let the money out of their bank up there.”

An attempt to reach Geithner Friday night through the White House public information office was unsuccessful.

Grassley has for years pushed to give the Government Accountability Office more oversight of the Federal Reserve.

U.S. Rep. Bruce Braley, a Waterloo Democrat, said he would propose that the House subcommittee on oversight and investigations convene hearings on the need for more Federal Reserve oversight. Braley is a member of the subcommittee.

Braley said of Geithner, “I would assume he would be someone we would want to hear from because he would have firsthand knowledge.”

Braley also noted that the AIG bailout was negotiated under President George W. Bush, a Republican.

He said he was confident that the financial regulatory reform bill signed by President Obama this week would help provide better oversight than the AIG bailout included.

“There was no regulatory framework in place,” Braley said. “We had to put something in place to begin reining them in. I’m confident they will begin to be able to do that.”

From The New Yorker
by James Surowiecki

The U.S. economy is limping along. The job market is in rotten shape, and business investment is hitting historic lows. And, if you’re looking for a culprit for this dismal state of affairs, many businesspeople would be happy to point you to the White House. Companies aren’t hiring or investing, businessmen say, because the combination of Barack Obama’s anti-corporate attitude and a blizzard of new regulations and proposed taxes has created what Ivan Seidenberg, the C.E.O. of Verizon, calls “an increasingly hostile environment for investment and job creation.” In a recent Newsweek column, Fareed Zakaria pointed to the fact that Fortune 500 companies are sitting on a cash hoard of $1.8 trillion, and suggested that a “profound sense of distrust” might be why they weren’t spending it.

There’s no doubt that Obama is unpopular in the business world. On Wall Street, he’s persona non grata, thanks to his push for financial reform and his rhetorical sallies against fat-cat bankers. Private-equity managers hate him for trying to take away their lucrative carried-interest tax break. The Chamber of Commerce has attacked him for having “vilified industries” and enacted “job-destroying regulations,” while the publisher and real-estate investor Mort Zuckerman declared that Obama heads “the most hostile administration to business . . . in decades.” Some of this is just political posturing—when haven’t businesses wanted less regulation?—but it also reflects a real conviction among American businesspeople that Obama has made profit seem like a dirty word.

Set aside the question of whether there’s anything to these charges. From an economic perspective, the important question is whether such perceptions are really what’s keeping the economy in neutral. Those who think that they are say that “uncertainty surrounding regulations and taxes,” as Zakaria puts it, is making business hold back. But uncertainty is a fact of business life, and the impact of new regulations on most companies has been overhyped: unless you’re a financial-services or health-care company, Obama’s initiatives aren’t remaking your business. In fact, Wall Street and health care are among the few industries currently adding jobs, which suggests that new regulatory burdens aren’t the cause of sluggishness. In surveys, meanwhile, fewer small businessmen cite regulation as their biggest problem today than did in the boom years of the nineteen-nineties.

There’s also a pervasive feeling that Obama’s tone—as evidenced by tough rhetoric against Wall Street and BP—is dampening the spirits of business leaders, making them unwilling to take risks. The implicit idea here is that when businesspeople feel poorly treated they’ll just take their ball and go home, even if that means giving up chances for profit. This isn’t a completely crazy idea: as Keynes argued, “animal spirits” play an important role in driving business decisions, and there are historical examples of so-called “capital strikes”—where investors pulled capital out of an economy in reaction to anti-business policies. But there’s no evidence that anything like this is happening in the U.S. right now. Corporate profits are healthy. Investment may be low, but, given how slowly the economy is growing, it’s about where you’d expect. If businesses truly were holding back on hiring new workers or building new plants in the face of real opportunities, we’d see them working their current employees and factories to the limit. But they aren’t: weekly hours worked have scarcely budged in two years, and factory usage is at just seventy per cent of capacity, which is historically quite low.

If businesses aren’t hiring or investing, in other words, it’s because they don’t need to: they have enough workers and factories to meet the demand for their products. And there are few signs that this is going to change any time soon: consumer demand remains weak, economic indicators—inflation rates, consumer confidence, the stock market, bond rates—aren’t forecasting a quick return to boom times, and, just last week, the Fed chairman, Ben Bernanke, told Congress that the state of the U.S. economy was “unusually uncertain.” So it’s no wonder that companies are feeling cautious. The uncertainty that’s keeping businesses from spending or hiring isn’t uncertainty about what Barack Obama is doing or saying. It’s uncertainty about whether the economic recovery is going to stick.

As for that $1.8-trillion pile of cash that companies are sitting on, it isn’t a new phenomenon but part of a long-term trend. Companies have been saving more and spending less: according to a study by the economists Thomas Bates, Kathleen Kahle, and René Stulz, cash holdings doubled relative to assets between 1980 and 2006. Global competition has made business riskier, and companies remember all too well the pain of the recent credit crunch, when even the safest companies found it hard to borrow money. At a juncture like this, who wouldn’t want a cash cushion?

The impulse to blame Obama for all this corporate timidity is understandable: aside from the fact that plenty of businesspeople don’t like his policies, it would make things so much easier if a President could jump-start the economy just by making the suits feel better. But the attacks reflect the same blind faith in Obama’s powers that the hero worship of his election campaign did. As the political scientist George Edwards showed in his masterly study “On Deaf Ears,” people vastly overrate the influence of the bully pulpit: in most cases, the capacity of a President to change voters’ opinions is slim, and there’s no reason to think that he has any more influence over corporate executives. A different President isn’t going to get businesses off the mark. Only a different economy will