Wednesday, February 25

President Barack Obama's speech to the U.S. Congress

"The question is: will the U.S., the biggest financial player in the world, ever agree to the binding international regulation the Europeans seek?"

I did not watch President Obama's appearance before Congress because earlier in the day it was announced that Britain's Prime Minister Gordon Brown would be addressing Congress on March 4. This meant I had to place myself in the proper state of mind to analyze the reasons for Brown's visit, which I did by watching a Dirty Harry movie -- Magnum Force, to be exact -- that aired on cable at the same time as Obama's speech.

The scheduling conflict was unfortunate but of the two addresses to Congress, Brown's speech will be far more important. However, I did read the prepared text of Obama's speech and William Kristol's Washington Post analysis of it.

Kristol complained that if you blinked you missed Obama's mention of foreign policy/defense issues:
You’d never know from the one-sentence discussion of Afghanistan that just last week the president had ordered an additional 17,000 troops there.

Obama doesn’t seem to think his responsibility as commander in chief is in any way special. He certainly felt no responsibility even to begin to educate the public about this theater to which he’s committing additional American soldiers.

Instead, both the wars in Iraq and Afghanistan were treated as sideshows to “a new era of engagement” that Obama claims has begun.

The only particular place mentioned by Obama, in addition to Iraq and Afghanistan/Pakistan, was Israel: “To seek progress toward a secure and lasting peace between Israel and her neighbors, we have appointed an envoy to sustain our effort.” The Israeli-Arab dispute and its envoy merits a mention. Yet Iran and its nuclear program does not? [...]

This was not the speech of a man who thinks of himself as a war president.

But he is.
Now, now; we must take our cue from Britain's Labor government and not fling around inflammatory terms. The U.S. is not at war; we're engaged in peacekeeping endeavors.

With regard to Iran, here we must take our cue from Secretary of State Hillary Clinton. Last week she argued, in essence, that neither she nor anyone else had ever actually seen North Korea's nuclear enrichment program; ergo, there's no way to tell whether any such program exists or ever existed.

Now do you see how simple life becomes when you don't have to go blind poring over intelligence reports and endlessly weighing their conclusions?

So there's the answer to Kristol's complaint: have you ever actually seen the Iranian nuclear enrichment program? What about Iranian nukes? Do you know anyone who has seen an Iranian nuclear weapon? Then why bother to bring up the subject during a presidential address to Congress?

I note from the text of the speech that President Obama gave much discussion to America's financial situation, which makes sense. I do have one point in response to his statement:
I know how unpopular it is to be seen as helping banks right now, especially when everyone is suffering in part from their bad decisions. I promise you — I get it.
I'm not sure what Obama thinks he gets. Just to make sure that what he thinks he's gotten isn't the idea that free markets caused the crash in the banking sector, here's a quick review of reality courtesy of Spengler's December 9, 2008 column for the Asia Times (H/T Mark at Searock)
[...] In Congressional testimony this autumn, former Federal Reserve chairman Alan Greenspan notoriously admitted that his free-market philosophy was inadequate. Yet nothing that occurred under Greenspan's tenure had to do with freedom.

Banks that enjoyed a monopoly due to their federal charters were permitted to transfer assets away from their balance sheets to other entities, allowing them to use much less capital to support assets than in the past.

Even worse, the Federal Reserve allowed larger and more sophisticated banks to put less capital against assets that bore a high rating from Moody's and Standard & Poor's -- the agencies that later owned up to having sold their souls to the devil for revenues.

Greenspan, it turns out, presided over a bubble manufactured by the most-regulated private companies in the world, the large commercial banks, who operate with the implicit guarantee of the US Treasury.

When the banks got into a hole, the Treasury guarantee became explicit, and floated the banks out of the hole with several trillions of dollars of actual and prospective taxpayer money.

Private interests appropriate a small but noticeable fraction of America's wealth, emulating in a very small way the behavior of private interests in Argentina, which typically steal all the national wealth as well as whatever they can borrow from foreigners.[...]
That's the half of it; the other half, which Phillip Blond spells out in his Rise of the red Tories, explains why the United States was swept into a situation that cascaded into a full-scale crisis because of the devastating speed of events:
[T]he great housing crash is primarily the result of the absorption of all local, regional and national systems of credit into one form of global credit. The world's financial system lacked the firewalls needed to separate local from national and international capital. Unduly reliant on one source of credit supply, the residential asset market collapsed when this supply was compromised.
I disagree with Blond's next statement:
The housing bubble was just the last and most notable piece of neoliberal speculation to burst.
Or rather I would disagree if any two people could agree on a definition of the term "neoliberal." But in the context of his argument clearly Blond thinks of neoliberalism as supporting 'free' financial markets. As Spengler pounded home, it's a myth that the markets are free.

Without knowing exactly what he "gets," how to sum President Obama's speech -- or rather the prepared text, which is stripped of the drama of Obama's address?

The text was short on details regarding plans for the banking sector; as such it can be read as more dithering, of the kind that Treasury and Federal Reserve have excelled at during the past month.

Aside from that I think the speech was constructed to mean different things to different people. As for me, I see the speech as a warm-up act for Gordon Brown's address to Congress.

So I wait and watch, in the manner of a cop on a stakeout.

Mr Brown and Britain's Labor Party are fighting for their political life. I'd say that Labor is bent on extracting as much help as possible from Washington in exchange for -- what? That's what I'm trying to figure out.

One thing is certain: Mr Brown has not earned the honor of speaking before both sitting houses of Congress. And at this point there is no discernable reason why the U.S. government provided him that venue.

What is widely known is that Brown and other EU leaders are pitching a coordinated financial recovery plan that will be formally introduced at the Group of 20 Major Economies meeting in April. The plan, as reported by TIME magazine, calls for the introduction of sweeping international regulations, which a professor at the London School of Economics cuttingly observed will upset America's "Joe the Plumber types."

All that explains nothing about Brown's appearance before Congress -- although it might explain why dithering has become the byword for the Obama administration's approach to the banking crisis. It could be they've just been marking time, waiting to learn how Europe plans to handle the crisis.

(As to whether the European leaders decided to present the plan to the United States as a fait accompli -- either that, or the U.S. involvement in working out the plan has been low-profile.)

One thing is clear: the American people will learn soon enough what Gordon Brown and his political party want from our "special relationship" with the British.

And if my hunch is right, Brown's address to the Congress will put President Obama's speech last night in a clearer context.

Got all that? If not I can boil it down to advice from Dirty Harry Callahan:

"A man's got to know his limitations."


Anonymous said...

The response from the administration in the US has been horrendous.

The stimulus, the money thrown at Citi, BoA and the like, the interest rates at near-zero, all to kick-start economic growth in the US.

Well that's not happening, doesn't look like it will happen.

Add to that the wonderful protectionist overtures coming out of the White House and Congress and you can guarantee that US corporations will not be very competitive in the next decade.

So we have a massive massive increase in the quantity of money, very little growth and a whole lot of unemployment.

Perhaps they will manage to stop the deflationary trend. Trouble is, that might leave the US with a whole lot of stagflation and a debt burden they can't service without devaluing the dollar.

Good times, no?

Anonymous said...

Has anyone WARNED Obama

that this will



Charles Letterman said...

Not sure our government wants anything from the 'special relationship' except for us to kiss your arses whenever requested to.