The Blog Of The Securities Industry Professional Association

Amateur Hour In The White House?

Administration continues to send mixed signals to Wall Street and America

Have you ever gone out on St. Patrick ’s Day and watched usually reserved guys start tossing back beer like it was going out of style? They usually follow up dozens of beers with a ‘boilermaker’ and pretty soon its lights out for the once a year party animal. Lately the Obama administration has acted like the beer guzzling amateur on St. Patty’s day. Another Day and another conflicting signal from the White House. Has there ever been and administration as crossed and confused as this one? The Bush administration was consistently Pro business and in many respects Consistently poor!. However, the Bush administration made clear its intent to allow free markets to prevail no matter what and even if Oil hit $500 per barrel, a free market system was better then Government intervention. The Obama administration however is trying to be all things to all people. When Obama was on the campaign trail he vigorously supported the TARP bailout (The SIPA did not) but once he became President, he acted surprised that the TARP money was used by many of the largest firms on the street to pay huge Wall Street bonuses. His response was not to demand that any and all TRAP funds used for bonuses be returned, but instead called for a rule going forward that would prohibit it in the futures and lo and behold…Goldman Sachs was grandfathered in and did not have to return any money. On January 29th 2009 Obama stated:

One point I want to make is that all of us are going to have responsibilities to get this economy moving again. And when I saw an article today indicating that Wall Street bankers had given themselves $20 billion worth of bonuses — the same amount of bonuses as they gave themselves in 2004 — at a time when most of these institutions were teetering on collapse and they are asking for taxpayers to help sustain them, and when taxpayers find themselves in the difficult position that if they don’t provide help that the entire system could come down on top of our heads — that is the height of irresponsibility. It is shameful.

The SIPA supported the Presidents stance but there was only one problem with his statement; His Choice to head up the Securities and Exchange Commission received a bonus of 25 million dollars to leave FINRA and become Wall Street’s top cop. Let me put this in numbers so you can appreciate it even more. The Head of the SEC chosen personally by President Obama received a going away gift of $25,000,000.00 from a non profit Self Regulatory group that she was in charge of. Obama did not deem that to be ‘the height of irresponsibility or shameful”…it was just a going away gift by the largest firms on the street for looking the other way while they were running rough shod throughout the world.

So now that we know that transparency only applies to certain individuals and firms lets look at his choice for Treasury Secretary. Last week Bloomberg reported that while head of the NY Fed, Geitner cashed out Goldman Sachs depleted and deflated positions at Par value at the expense of main street USA.

“The Federal Reserve Bank of New York, then led by Timothy Geithner, told American International Group Inc. to withhold details from the public about the bailed-out insurer’s payments to banks during the depths of the financial crisis, e-mails between the company and its regulator show.”

AIG was instructed by Geitner to pay 100 % of what ever the position was on all Goldman Sachs positions with their tax payer financed TARP money. These positions would most likely have reaped 10, 20 maybe 30 cents on the dollar in the open market but AIG under his direction paid Goldman the full face value like it was still 2006. Wouldn’t it be wonderful if every homeowner in America could do a government financed sale of their home at 2006 prices?

So today the President, fresh on the heals of getting spanked in Massachusetts decides he will appeal to Main street and call all of Wall Street greedy and show the country that they must be punished…Fair enough, only I wish the President thought of this before he decided to make the big three auto makers approximately 50 billion dollars in tax payer money and then watched them all declare bankruptcy months later. It’s also interesting to note the he met with the Autoworkers Union last week and decided that their Health plans will not be taxed but other “Cadillac plans” must pay the piper. This whole administration says one thing then does another. When taking office, Obama claimed there would be Greater Transparency…..yet he allowed the Senate to make special deals with certain states to get his health care passed, like telling Nebraska the rest of the country will cover your Medicare. Today’s announcement about restricting large Banks from holding hedge funds or prop trading is sort of like telling you wife I promise I won’t have a beer when I go out with boys on St. Patrick’s day…sure you really mean it at the time but you know and she knows that once your out and having a good time watching all the once a year amateurs at the bar…your going to have a few laughs and a few beers. Right now however, this administration is acting like a once a year amateur at the bar.

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January 27th, 2010



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