Obama’s New Deal
May 12, 2010 by John Myers
"Now, what we’re doing, I want to be clear, we’re not trying to push financial reform because we begrudge success that’s fairly earned. I mean, I do think at a certain point you’ve made enough money." President Barack Obama, April 28, 2010, (emphasis added).
President Barack Obama went to Wall Street last month to champion his cause for financial regulation. Fresh from his healthcare victory the President seems itching for another fight.
Meanwhile the Securities and Exchange Commission (SEC) announced fraud charges against Goldman Sachs, arguing that the firm had committed fraud in structuring and selling its debt obligations. This has Congressman Darrell Issa (R-Calif.) raising troubling questions.
Issa has asked the inspector general of the SEC to investigate the timing of the announcement. He believes the Obama Administration is going after Goldman Sachs just as Democrats are pushing for passage of financial reform legislation in the Senate.
According to Issa, “[This has] fueled suspicion that the Commission … may have engaged in unauthorized disclosure or discussion of Commission proceedings in order to affect the debate over financial regulatory legislation currently pending.”
Last week Goldman Sachs leaked a story that it doesn’t want to engage in a legal battle with the SEC. The Wall Street Journal quoted one senior executive at the firm as saying "We can’t be going to war with the SEC." Goldman understands it needs to choose its battles.
I should have done that better when I took up boxing at the Lilac City Boxing Club. One day I was on a roll, landing a combination on my sparring partner, a man who had once fought Frank Bruno for the World Boxing Association (WBA) heavyweight title. After connecting with a final punch I stepped back. The grizzled old fighter shrugged his hulking shoulders and then gave me a million dollar grin.
“My turn,” said Harvey Steichen.
A few years later I started working for what was then Prudential Securities in Spokane, Wash. I quickly learned that everyone associated with Wall Street was interested in two things—making money and keeping regulators at bay.
One day the Men in Black arrived. As two SEC field agents marched into our offices, one of the old timers whispered to me, “Here comes the Gestapo.” A few weeks later, two up-and-coming brokers were summarily dismissed. I never knew their crime but I understood they were fired because of a judgment by the Federal government. The rumor was they were charged with insider trading.
Don’t get me wrong. I hate Wall Street. After six months at the brokerage company I decided I either had to jump out of my eighth story office or quit.
I think many of you probably feel the same kind of disdain for high finance, especially after learning that big banks deceived their clients into buying risky mortgage investments while they themselves ran side bets that the investments would go bust.
When the house of cards collapsed two years ago it was Washington’s argument that major investment houses simply had to be bailed out. In that aftermath, scores of executives tucked away multi-million dollar bonuses, much of it courtesy of Joe and Jill Taxpayer.
But now the Obama administration is demanding its pound of flesh. According to the The Independent, “This [the fight with Goldman Sachs[ has become the greatest battle between the American government and a private firm since President Franklin Roosevelt took on the ‘House of Morgan’ in the 1930s.”
Obama has stylized himself as a New Deal President the likes of FDR. A couple of months ago Obama denounced “fat-cat bankers” for rewarding themselves bonuses after being saved by government bailouts. “Shameful,” he said. In fact, this President sounds much like FDR, who in 1936 denounced Wall Street for its “financial monopoly, speculation, reckless banking,” and who fueled his fight by saying: “I welcome their hatred.”
I hate Wall Street, but I hate big government even more. The last thing America needs is another FDR. The Billings Gazette recently summed up that Presidency: “FDR closed all the banks, removed the gold standard for the dollar, created innumerable government agencies, established the Tennessee Valley Authority, instituted a minimum wage for workers, encouraged unionization of industry, created the Social Security system, initiated public housing programs and allowed the national debt to soar into the billions. In addition, he attempted to pack the Supreme Court.”
Under Obama’s New Deal the United States has reversed the course set by Ronald Reagan, a man who brought a tidal wave of deregulation and with it, unprecedented economic prosperity. Under Obama’s command the U.S. is veering hard to the Left, a destination that will allow less freedom while creating bigger government. And oh yes, he is also packing the Supreme Court.
“The nanny state is smothering us all,” wrote the Ukiah Daily Journal. “The economic financial crisis which is upon us is being deliberately made worse (or at least being deliberately caused to continue) in order to be used as one excuse to turn the U.S. into a socialist state. If you don’t believe this, stay tuned, because you have been overwhelmed by the lies and myths.”
If you’re like me you’re probably feeling staggered by the Obama onslaught. I urge you to hang tough and stay in the fight. In the words of Lou Holtz, the former football coach at Notre Dame, “We have to fight for our freedom.”
Action To Take
There is a tidal wave of regulation coming down the pike and not just for the investment banks. Big oil is also going to get clobbered in the wake of the Gulf Coast disaster. And the Federal government won’t stop there. I expect that Washington will unroll miles of red tape on publicly traded companies. The result will raise the cost of doing business. That’s a profit killer, something that Wall Street hasn’t yet awakened to. Tighter regulations, growing inflation and rising interest rates will unleash a raging bear market. Therefore, I urge you to stay liquid with cash and/or short-term Treasury bills, physical precious metals and a sprinkling of gold and energy stocks.
Yours for real wealth and good health,
John Myers
Myers’ Energy and Gold Report
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