The American Recovery and Reinvestment Act (ARRA) signed into law by President Barack Obama on February 17, 2009 did rewrite Section 111 of the Emergency Economic Stabilization Act of 2008 (EESA) and did provide modified rules for the Troubled Asset Relief Program (TARP). The Stimulus or Recovery Act is worth $787 billion and it contains multiple programs: Tax Cuts – $244 billion, Aids For State and Local Government – $217 billion, Relief (Extended Unemployment, Health Insurance for Unemployed) – $120 Billion, Infrastructure – $101 Billion, Energy Efficiency – $59.5 Billion, and Human Capital – $45.5 Billion. TARP allowed the US Department of the Treasury to purchase up to $700 billion of difficult-to-value assets – MBS and CDO – from banks or other financial institutions. Since the enactment of TARP in October2008, more than 360 US banks have received at least $353 billion of funds from the Treasury. Continue reading ‘TARP Barometer’
Archive for the 'Political Analysis' Category
The controversial economist John Williams once said “If the federal government were a corporation, the President and senior Treasury officers would be in federal penitentiary.” Paraphrasing his statement, I would say: if governments around the world were business school students they would gloriously fail every single subject and get kicked out of school after their very first semester. I have always been a strong believer in the idea that the socialist system was the biggest failure of the twentieth century. It is all understood that socialism does not create a system built on incentives, becoming a theory inconsistent with human nature and ultimately doomed to fail. The recent financial crisis could be considered a failure of capitalism followed by a failure of the governments’ policies. The process of socializing the private losses from this crisis has shifted the troubled liabilities of the private sector (e.g., large banks, financial institutions and households) onto the books of the sovereign. Continue reading ‘Why Bother To Vote?’
If history taught us something is that during the economic booms, the expansion of the private debt leads to credit-fuelled bubbles. When the economic growth is replaced by financial crises, more borrowers default on their loans and consequently banks report mounting credit losses. At that point, governments intervene by bailing out the banking system and as a result the public debt surges while the private debt collapses. These days, many European countries are facing high public debt levels and large external deficits. It is well known that PIIGS countries should urgently address the public debt issue and most importantly repair their image amongst investors. Under the current Maastricht treaty, it is clear that EU could not provide public financial support to one of its members. Nevertheless, few European politicians are proposing the creation of an IMF carbon-copy European Monetary Fund (EMF) aimed at fixing the current and future sovereign debt crises. Continue reading ‘EMF – EU’s Piggy Bank’
In an effort to end a deadlock in the Congress over the bill aimed at overhauling the medical system, President Barack Obama is to give Democratic lawmakers a new set of directions. The Washington administration is proposing a comprehensive plan that will ultimately bring the first real changes to the nation’s health system since the 1965 creation of Medicare and Medicaid. After the health care bill failed to become law in 2009, the Democrats are willing to concede some key Republicans’ demands: to limit medical malpractice lawsuits and to uncover the massive fraud within the Medicare program. Given the fact that Democrats control 59 of the 100 Senate seats, in order to pass this bill, Democrats are calling for a parliamentary maneuver called reconciliation – which requires a simple majority vote. Continue reading ‘Health Care Bill – Do Or Die’
At its peak, financial industry earned a staggering 40 percent of all US corporate profits, four times what they earned in 1980, while the average Wall Street paycheck doubled, and top bonuses sextupled. Not surprisingly, the finance lobby is the strongest campaign contributor in Washington, with an astonishing $475 million during the 2008 election cycle, almost $60 million more than two decades ago. The finance lobby is known as the FIRE lobby—Finance, Insurance, and Real Estate, and it includes basically anyone who makes money by handling money. That includes big money-center banks, small community banks, Wall Street investment banks, insurance companies, mortgage brokers, hedge funds, credit card issuers, trade groups (ISDA), private equity firms, credit unions, and more. To understand just how extravagant the finance lobby’s power is, we need to understand some history first. Continue reading ‘The Power Of Money’
Since the beginning of the year, governments all over the world have worked on new sets of regulations for financial institutions after they spent more than a year bailing out firms like AIG, Northern Rock or Royal Bank of Scotland. In my opinion, the absolutely necessary process of re-regulating the banks is starting to get more traction and political support. The methods that lawmakers have used handling the too-big-to-fail investment banks, have created a moral gap between Wall Street and Main Street. Between 1933 and 1999, the Glass-Steagall Act restricted commercial banks to underwrite stocks and bonds, and investment banks to take in deposits from customers. It turns out that a very plausible cause of the global banking meltdown could be the 1999 repeal of the Glass-Steagall Act, which gave financial giants the power to outplay the regulators. Continue reading ‘Washington vs. Wall Street’
Undoubtedly, December 22nd 1989 has been one of the days I could never forget. To this day, it still stands at the crossroad of my life. Twenty years ago I was a little younger but much more restless unwilling to buy all that propaganda cooked-up by a communist regime and put in practice through a mad dictatorship. Amongst many things that have been said about the so-called Romanian Revolution one part is indisputable: it was a coup d’etat well designed by Moscow and blessed at the Malta Summit. In 1989, one country after the other – from Hungary to Bulgaria, was removing from power the leaders of the Communist Party. Romania remained the last soviet bastion in Eastern Europe where Ceausescu seemed like he had not received the Warsaw Pact memo labeled “The Communism Is Dead”. Continue reading ‘Remembering The 1989′
The presidential election campaign started last Friday in Romania. According to the polls, there are four major contenders: incumbent President Traian Basescu – a Liberal-Democrat (PDL), Mircea Geoana – a Social Democrat (PSD), Crin Antonescu – a Liberal (PNL) and Sorin Oprescu – an Independent. Without any political affiliation, I will impartially scrutinize the presidential candidates’ economic platforms. Among the many topics included in the abovementioned presidential aspirants’ programs, I will put the spotlight on two critical economic issues: near-term economic stimulus and fiscal policy. Continue reading ‘The Election Conundrum’
The Beginning Of The End
Last Monday, Arizona lawmakers approved a comprehensive immigration bill aimed at fighting the illegal border crossing from Mexico, despite massive accusations of potential practices that could lead to racial profiling. Senator Al Melvin told the press that “this bill goes a long way to bringing law and order” to a state with an estimated number of 460,000 illegal immigrants and the nation’s busiest border crossing point. Prior to this bill, Arizona enacted a law in 2005 making human smuggling a crime and in 2007 it prohibited employers from hiring undocumented workers. This new bill would make it a state crime for people to not have an alien registration document and it would give police the right to question people about their immigration status. Continue reading ‘The Beginning Of The End’