Where Obama Needs To Act First


On Friday Barack Obama will hold his first news conference since winning the White House and the country awaits signs of how he might tackle the economic crisis.

Obama, who stands to inherit the worst financial crisis since the Great Depression, faces pressure to announce his picks for key economic jobs, including Treasury secretary, though there were no indications of when he might do so.

As we first told you on Wednesday, names being considered for the job included Timothy Geithner, president of the Federal Reserve Bank of New York, former Treasury Secretary Lawrence Summers and former Federal Reserve Chairman Paul Volcker.

Of course it goes without saying that traders want to see Obama address issues vexing the financial system just as soon as possible. And there are plenty of ideas about how he should go about doing it. In fact there are probably more ideas than there are snowflakes in a blizzard.

But of all those opinions few are more informed than those from Rob Cox, the U.S. editor of BreakingViews.com so we invited him to join us on Fast Money.

As far as Cox is concerned, there are three main causes to the financial crisis, “loose central banks, excess dollars sloshing from the trade deficit, and too much financial innovation.”

He says the solutions are:

1) The Fed needs a new Volckerised mandate: less political meddling, more focus on inflation, no mandate to protect employment.

2) Bank capital injections should be used to force a return of the financial sector to reliance on retail savings...anti-innovation should be the order of the day (hiring too many people from Goldman is like inviting a diabolical poodle into the room). End the tax deductibility for interest payments.

3) Work hard in the G20 to plan to balance the trade account (the ultimate source of much of the problem), with a willingness to reduce American consumption and figure out how to pay foreigners reasonably for their past generosity.

Cox also feels that Obama needs to make it clear that sacrifice will be needed to get out of this mess. “Once people are willing to take some pain, remarkable things can happen,” he says.

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Trader disclosure: On Nov. 6, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (DIS), (BNI), (MSFT), (SDS), (UUP), (WMT); Finerman's Firm Owns (MSFT); Finerman's Firm Owns (OIH) Puts; Finerman's Firm Is Short (IYR), (IJR), (MDY), (IWM), (SPY), (USO), (USO); Najarian Owns (MBI) Put Spread; Najarian Owns (MSFT) And Is Short (MSFT) Calls; Najarian Owns (YHOO) And Is Short (YHOO) Calls; Seymour Owns (AAPL), (BAC), (EEM), (F), (MER); Seygem Asset Management Owns (EEV)

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