As Obama Sneezes

Obama has thrown his weight last night behind the move to curb excessive risk taking, prompting fears of a return to Glass-Steagall style regulation. Obama's plans are to curb excessive risk taking and protecting taxpayers, preventing banks from sponsoring equity or hedge funds.

What is the Glass Steagall Act?

The Glass-Steagall Act, also known as the Banking Act of 1933 (48 Stat. 162), was passed by Congress in 1933 and prohibits commercial banks from engaging in the investment business.

It was enacted as an emergency response to the failure of nearly 5,000 banks during the Great Depression. The act was originally part of President Franklin D. Roosevelt’s New Deal program and became a permanent measure in 1945. It gave tighter regulation of national banks to the Federal Reserve System; prohibited bank sales of securities; and created the Federal Deposit Insurance Corporation (FDIC), which insures bank deposits with a pool of money appropriated from banks.

The Flip Flop

Obama's administration have initially dimissed this idea back in Dec 2009. Lo and behold, the financial typhoon came along yesterday, sending banks spiralling down. The earnings report for Bank of America initially made me optimistic on the prospects of the company. This combined with the reports from other banking companies convinced me that there is not a need to divest my holdings in Bank of America. Now, however, I am reconsidering it.

"Obama administration officials have dismissed the idea that the financial sector should or can be changed in more fundamental ways than they are now proposing. You can't turn back the clock, they say, and the new requirements they plan to impose on big banks to hold more capital in reserve, put up $150 billion for a rainy-day rescue fund, and disclose more of their risky trades should be enough to keep the financial sector from imploding again. Many of these requirements, among others, are contained in two giant bills making their way through Congress—one that passed the House last week and another that will be debated in the Senate in the new year. "I think going back to Glass-Steagall would be like going back to the Walkman," says one senior Treasury official."

The link to the article can be found here

Obama's First Year in Office

I remembered comparing Obama to an iPhone once. The iPhone to me, was one of the coolest gadgets ever invented, however, it was not extremely useful. It was pretty comparable to a WM6 phone, less customizable (unless you jailbreak it), but everyone had the iPhone cause it was just so cool.

Same with Obama. 8 years of Bush administration made me wonder what the Americans were thinking. The previous Republican president before that was George Bush Snr, and made me wonder is their method of contributing to the economy starting wars to gain oil fields and increase manufacturing. Compared to the Clinton era (Lewinsky-gate excluded), Bush era was just a whole lot of turbulence. So when this African American guy came along with the promise to revamp healthcare, pull out of Afghanistan, he was making all the right moves. He inspired people. One just has to look at his town hall speeches and you would get a positive feeling out of it.

One year on, Obama's reluctance to address the economy and stake an all in wager on healthcare disillusioned many. Furthermore, more troops have been sent into Afghanistan. You can't help but wonder if Obama is all hot air, or what most of us describe as NATO (No Action, Talk Only). I definitely wonder from time to time what has this guy done for USA and possibly the world, and is he capable to be the President of the United States.

The key note would be the timing of Obama's backing of raising the wall between commercial banks and investment banks. Once Brown won the seat of Massachusetts, the Democrats lost their super majority in the Senate and thus if the congressmen voted along party lines, Democrats would not be able to force through the Healthcare plan. Brown's victory in a Democrat stronghold also served as a reminder that the citizens are disillusioned with Obama's inaction over the economy. As such, Obama flipped his stance, pushing for walls to be raised, and causing rising fears over a return to the Glass-Steagall era of regulation. This populist move would satisfy Americans, giving them hope over the economy. But is it too little too late?

I, for one, am terribly disappointed with Obama's administration.