The decline in President Obama's popularity has heightened the vulnerability of his fellow Democrats in this fall's congressional elections.» Read More
The following is a statement from the Federal Reserve following its Jan. 26-27 meeting:
Information received since the Federal Open Market Committee met in December suggests that economic activity has continued to strengthen and that the deterioration in the labor market is abating.
Stocks shrugged it off yesterday, but I’d like to commend President Obama for his three-year budget freeze plan.
It gave me good old-fashioned, American patriotic State of the Union pleasure to praise the president when he does good.
Now, sir, let's join hands, you and me, and go for a full-throated spending and debt limitation approach that will last not three years, but many decades to come. It will keep us out of bankruptcy, re-balance our books and promote growth.
And, sir, let's you and I visit with Sen. Scott Brown, sit down and watch his ad of President John F. Kennedy talking about the need to grow the economy and create new private jobs by slashing marginal tax rates across-the-board for all families and all businesses. No class warfare. Together, we'll show the stock market what pro-growth really means.
And then sir, let's you and I visit with beleaguered Ben Bernanke.
Let’s tell him to stop covering up bailout nation. Put all that behind us. Instead, Mr. Bernanke should be defending the value of King Dollar to give American families more consumer spending power in their pocketbooks. Now that will get the stock market's attention.
I want to welcome you sir, with open arms, back to the free market supply-side capitalist camp. It’s just what we talked about at George Will's house in Washington a year ago when you had dinner with a few of us.
And I renew my invitation to come on this show for further discussion. Especially since at least this week you seem to have abandoned your humongous spending, borrowing, taxing and government controlling ways.
Now I still remember when you told me at George Will's beautiful home that you really believed in private enterprise. It's been a long year sir. But it’s not too late for you to join Saul and me on the burning bush road to economic Damascus.
I look forward to this brand new gospel chapter in the brand new year.
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Why did Senate Republican campaign chief John Cornyn tell me last night on CNBC that it is numerically impossible for the GOP to retake the upper chamber this November?
I asked him about this twice, and he stayed with it. It came out sounding defeatist. Sort of like General Patton telling Ike, “We will never get to Berlin.”
In fact, it is numerically possible.
And more to the point, it is politically possible.
There are 18 Democratic senators up for grabs.
Right now, the GOP is in excellent shape to take Illinois (President Obama’s seat), Delaware (Vice President Biden’s seat), Nevada (Harry Reid’s seat), and North Dakota (Byron Dorgan’s seat). So that’s four. It would give them 45 seats. So they need six additional seats out of 14.
It may be the mother of all FOMC statements.
The political firestorm over the fate of Fed Chairman Ben Bernanke will bring extraordinary scrutiny to the central bank’s policy meeting decision Wednesday and is bound to spark heated debate over whether Congressional pressure had any influence over it.
What exactly did Ben Bernanke promise Senate Democratic leader Harry Reid?
That’s the big question right now. Reid reluctantly endorsed Bernanke after a one-on-one meeting. Here’s what Reid said, according to the Las Vegas Sun: “I made it clear that to merit confirmation, chairman Bernanke must redouble his efforts to ensure families can access the credit they need to buy or keep their home, send their children to college, or start a small business.”
So, in a desperate search for votes, is Bernanke going around the Hill making easy-money promises? Even easier money than we have had in the last year? A Wall Street Journal editorial on Mondayopposing Bernanke’s nomination is spot on. Monetary quid pro quos will destroy Federal Reserve independence and could generate yet another bubble.
And while Bernanke was right to gun the printing presses in the fall of 2008, he has overstayed his easy-money welcome by at least six months. The emergency has long passed, but the emergency policies continue. Breaking a window between 2002 and 2005 -- when Greenspan and Bernanke kept rates too low for too long (especially negative real interest rates) -- and then fixing that window later on is no way to run a policy.
Bernanke’s trillion-dollar purchase of mortgage bonds and other consumer loans is a fiscal action, not an appropriate monetary policy. Over the past year, while the dollar has fallen about 10 percent, and the gold price has risen 20 percent, the consumer price index has increased 2.7 percent with producer prices jumping 4.4 percent. Bernanke’s blatant disregard for preserving a stable King Dollar, and his stubborn resistance to using inflation-sensitive market-price indicators as a monetary guide, are two important reasons why he should not be reconfirmed.
Sen. John McCain intends to vote “no” on the Bernanke nomination, saying “I believe that he must be held accountable for many of the decisions that contributed to our financial meltdown.” McCain is dead right. The Fed missed the boat in terms of monetary and regulatory policy. It is time for a change at the Fed.
And following the Scott Brown victory, Republicans have an opportunity to push for a much sounder monetary thinker for the Fed post.
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Taxing and bashing banks is no way to run an economic recovery plan. Sure, banks made mistakes. And I still believe that no bank bonuses should be paid while the banks were under TARP. But they have paid TARP down. Right now we need the banks to service customers and expand loans when economic recovery moves into the credit-demand, loan-demand phase.
President Obama wants to restrict the size and activities of our biggest banks. He wants them to get out of the hedge fund business, get out of private equity, no trading for their own account. Plus, he wants a tougher cap on bank deposit market share. The only problem here is that hedge funds and proprietary trading were not the big problems in the financial meltdown. Bad loans were. This of course includes mortgage loans, commercial real estate loans, credit card loans, etc. That was the biggest problem.
The real bad apples? Lehman, Bear Stearns, AIG, Fannie Mae, Freddie Mac and Merrill. But the big banks like JPMorgan bought the bad apples, and in the process, helped save the system. And if the big banks are forced to sell off their trading securities, it may very well create another financial bloodbath.
Regarding taxpayer insured deposits, there is a firewall that prevents them from being used for risky trading purposes. So strengthen the fire wall, but don't destroy the banks. Don't threaten to dismantle them, or break them up. Don't tax them to death either. We need them for recovery.
This whole story smells to me like mistaken left-wing populism, a flawed attempt to respond to the rising tea party revolt and voter outrage against big government spending, taxing and overreach. Bashing banks is not the answer. Smaller government and lower taxes across-the-board is. Let's not disrupt the economy, let's try and heal it.
Let’s put in better capital requirements; let’s put limits to leveraged borrowing; and most of all let's get rid of the too-big-to-fail doctrine. That is probably the root cause of all of these problems.
Left-wing populist bank bashing is not an economic recovery plan. It isn’t even a political recovery plan. Truth be told, with Obama policy currently in complete disarray, nobody can possibly tell what their next move is going to be. And frankly, that is a big-time contributor to this week’s stock market plunge.
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It’s simplistic, cynical and disingenuous to conclude that President Obama announced a set of controversial proposals to crack down on big banks simply to divert attention from the Democrats senatorial defeat in Massachusetts and his declining poll ratings.
President Obama wants to cut down to size those too-big-to-fail banks. But his vow on Thursday to rewrite the rules of Wall Street left many questions unanswered, including the big one: Would this really prevent another financial crisis?
It’s about tax cuts, and spending cuts, across-the-board.
Sen. Scott Brown’s epic victory in Massachusetts on Tuesday night dealt a crushing blow to Obamacare, cap-and-trade, card check (and other union favors), and most importantly, all the tax hikes that are lingering on the table. But does Washington really understand the Scott Brown message?
President Obama thinks his “remoteness and detachment” are the problems. This is nonsense. Obama’s tax hikes and spending explosion are what caused the populist tea-party revolt that was punctuated by Scott Brown’s extraordinary victory.
And that leads to the next question. Are the Republicans listening? Do they really understand why Scott Brown was victorious? If they do, why aren’t members of the Republican leadership loudly campaigning for an end to tax hikes, just like Scott Brown?
The cornucopia of tax hikes currently on the table includes higher levies on capital-gains, top earners, dividends, investment (via the payroll tax), carbon, millionaires, banks, stock transactions, and estates (via the death tax). It’s a long Democratic wish list of anti-growth policies, and Scott Brown’s triumph should signal the end of it. But it won’t happen unless GOP congressional leaders make a bid deal about it.
For example, some Blue Dog Democrats want to extend the Bush tax cuts, rather than letting them expire next year. Republican leaders should be making a big deal about this. They need to get it front and center, making expiration a condition to any new legislation.
Remember that Brown ran on a JFK/Ronald Reagan platform of across-the-board tax cuts to promote economic growth. Take a look at what the senator-elect had to say during his victory speech Tuesday night:
"This [health care] bill is not being debated openly and fairly. It will raise taxes, it will hurt Medicare, it will destroy jobs and run our nation deeper into debt . . . I will work in the Senate to put the government back on the side of people who create jobs and the millions of people who need jobs. And remember, as President John F. Kennedy stated, that starts with across-the-board tax cuts for businesses and families to create jobs, put more money in people’s pockets, and stimulate the economy. It’s that simple."
There you have it. Scott Brown could not have been any clearer. That’s the great thing about his message -- its breathtaking clarity. Across-the-board tax cuts and a revival of free-market capitalism on the supply-side.
And recall that when President Obama mocked Scott Brown for driving a pickup truck, Brown quickly responded that unfortunately, in this economy, not everyone can buy a pickup. “My goal is to change that,” he said on the eve of the election, “by cutting spending, lowering taxes, and letting people keep more of their own money.” Right on message.
And during that campaign, Brown argued that health-care reform is a tax hike and that cap-and-trade is a tax hike. This should become the Republican message, too. It’s about taxes, as well as spending.
A recent Washington Post poll showed that by 58 to 38 percent, voters want smaller government and fewer government services. This, too, should be the Republican congressional message.
It is, in fact, an economic-growth message, the likes of which we haven’t heard since Jack Kemp promoted it in the late 1970s. And the brilliance of Scott Brown was to use the JFK tax cuts -- an across-the-board reduction in marginal tax rates -- to attract Democrats and independents to his message.
An across-the-board tax cut is the fairest pro-growth message of them all. Lower tax rates for everybody. Get out of the box of rich people and class warfare. For the Ted Kennedy Democrats, that box has been a loser for decades. But for timid Republicans always on the defensive, now is the time to break out and adopt the Scott Brown theme.
Rep. Barney Frank, chairman of the House Financial Services Committee, told CNBC Thursday that he supports President Obama's proposed banking curbs but that they should be implemented over a longer time frame of "three to five years."
"You shouldn't require a whole bunch of the same things to be out at the same time and discount their value," he said. "And you shouldn't be disruptive at a time when the economy is troubled."