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Kneale: Is Obama Out of His Freakin' Mind?

Wednesday, 4 Mar 2009 | 11:39 AM ET

At the risk of redundancy I'll ask it again: Is he? Is President Obama effin' CRAZY?

President Obama blames the continuing global financial crisis for the unmitigated carnage on Monday, when the Dow fell below 7000 and closed down 300 points (or 4.2 percent) at a 12-year low of 6763.

Bullspit! The man is in denial. By now we know the economy is ailing. The main thing that has changed: The disturbing details of Obama’s tax-and-spend plans are becoming all too clear.

Most of the moves he has made in his first 43 days in office have been bad for the markets, damaging to investors, ill-advised for the economy and detrimental to repairing the financial collapse wracking the entire planet.

Yesterday Treasury Secretary Timothy Geithner told a House committee the new budget’s “single most overriding priority” is to “stimulate private investment.” Yet Bam proposes to more than double the tax rate on hedge funds and private equity funds, engines of private-sector growth. Can’t be good for firms like Blackstone

He wants to rescue housing—but aims to cut back on the tax deduction for interest paid on mortgages, targeting anyone who earns over $208,000. Aren’t these the people who could most afford to buy a new home? That hurts homebuilders like Toll Brothers.

Bam also wants to rebuild America’s industrial might. Yet his cap-and-trade program would slap billions of dollars in new taxes on manufacturers for the emissions that are a byproduct of making goods. That could hurt General Motors and Caterpillar and United Technologies and other behemoths.

Worst of all, the President has kept Wall Street in the dark, pretty much, on how to fix the big banks’ toxic assets. On Tuesday President Obama's minions floated yet another painfully tentative trial balloon—a full four months after we elected this guy.

Uncertainty kills on Wall Street, and yet once again the Bama posse is infuriatingly vague on details. The latest plan would set up several public-private funds to bid on toxic assets with the help of government loans. But we don't know how many funds, who would run them, what the price tag might be and how government and the private guys would split up the risks and rewards.

Nor is it clear how this multi-headed hydra would heal the primary affliction infecting mortgage-backed securities: No one knows the right price for these damaged goods. That’s because we don’t know how much they have been marked down already, how bad the defaults will get, or what the government rules will be for working out this mess.

One hope: that the Obama boys would use the TALF (Term Asset-backed Lending Facility) to grant government loans to the brave souls who buy toxic mortgage assets. So far TALF aims mainly at loans for cars, college students and credit cards; using it for shredded mortgage assets is merely "under consideration," Treasury said yesterday.

Related Links:

  • Obama Downplays Turbulent Stocks
  • Fed Launches $200 Billion Credit Program
  • Bernanke: Government Action is Key
  • Obama: U.S. Recovery Won't be Quick
  • Feds Won't Run Firms for Long Time: Bair

Get on with it for gawdsakes! The toxic trauma is fixable, and this column has talked twice before about the “Rob plan." It would gather the banks’ sickest securities and swap them for new ETFs that pay a 4 percent tax-free dividend to the banks, which later could sell the ETFs into the open market.

A critical aspect of this approach: a government guarantee of the underlying assets. Jack Mounteer, president of a Compass Bank branch in Daytona Beach in the bubble state of Florida, says a guarantee would be “the easiest way out of this mess.”

He adds: "Why would the government lend or give money away to homeowners, private industry, or the banks when it could easily motivate a myriad of private investors to loan the same money simply by guaranteeing a portion of that debt?”

Private investors would be eager to buy guaranteed assets. They line up to buy U.S. Treasurys and settle for near zero percent interest because they seek the safety of a government guarantee.

In the mortgage meltdown, the guarantee approach would be a cheaper option than government’s buying all those bad assets outright, Mounteer says. The feds would spend nothing until a default actually occurs. “The taxpayer is left with a much smaller bill,” he notes.

Instead, he laments, “I've been watching in disgust as our people in Washington let the economy slide into the dumper, clueless.” Amen. One last thing: Jack Mounteer no longer at Compass Bank—he is one of 1,200 people who just got laid off by the parent company.

We need a fix, and fast. But so far, President Obama is making things all the worse.

More from Dennis Kneale

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