Obama “gets it” and other reactions to his speech

February 24th, 2009, 7:33 pm · 21 Comments · posted by Mathew Padilla

(Update: More experts added.)

Reaction to President Barack Obama’s speech…

Kerry Vandell, professor of finance and director of Center for Real Estate at UCI
“I think this guy gets it. His castigation of the bankers and Wall Street was unnecessary, but he seems to understand that the crisis is one of massive systemic asset devaluation and that the gap created between what is owed and what is held is the heart of the problem. His speech reinforces my belief in the need to create the “bad bank” and allow the remaining “good bank” to move forward in a normal fashion, absent of the illiquidity that has characterized the market. He has not yet spelled out how these “bad assets” will be priced, but I am encouraged that his people get it and understand how to get at that. I look for a rally in the stock market tomorrow.”

Kevin Stein, associate director, San Francisco-based consumer group California Reinvestment Coalition
“In general, it was good that he identified the need to increase the flow of credit to consumers and small businesses, the need for greater accountability to ensure taxpayer dollars are being spent wisely and appropriately by banks, and the need for common sense regulatory reform to prevent them from pushing unsuitable products. But there were very few details.

Although other aspects of the economic recovery are important, they’re meaningless if you don’t have a home. President Obama’s housing plan is an important first step, but it still doesn’t do enough to directly help homeowners and gives too much leeway to banks. In fact, the $75 billion plan gives most of that money to servicers and investors, and actually doesn’t require their participation, it just incentivizes it.

I think that has been an ongoing problem with how the bank bailout has been treated. So long as banks continue to receive taxpayer funds, we hope that the White House will pursue greater accountability and responsibility on the part of banks to prevent foreclosures and lend to small businesses and communities — the very things we need them to do if the economic recovery is to work.

We urge the President to strengthen the housing plan to include a six-month foreclosure moratorium, require banks to report data about their loan modifications — including the race, ethnicity and income of who gets them — and push Congress to pass legislation allowing bankruptcy judges to modify loans, probably the only thing that will ensure that servicers will actually modify loans for long term sustainability.”

Jack Kyser, chief economist, Los Angeles County Economic Development Corp., which also tracks Orange County
“A very take charge speech. As for banks, the new lending fund for small business, and car and college loans, this should be good news, as well as for our region.

His promise to make sure banks have “confidence and money,” speaks to more support for banks, but also more regulation and oversight Also, there will be pressure to increase lending. So, it means that banks will have to walk a fine line.

Intriguing is the proposal for a tax-free retirement savings account. That should set off a competitive frenzy among financial institutions.

Obviously, more details need to come, and we will have to review the
upcoming budget.”

Sean O’Toole, president, ForeclosureRadar.com
“I don’t know. Has it not occurred to anyone in Washington that too much debt is how we got into this mess? Isn’t too much debt the reason we have low consumer confidence? To restore confidence don’t we need a realistic plan to reduce household and national debt? Instead the focus is on the need for more debt - nothing more important than to get credit flowing.

Why give banks taxpayer money to get credit flowing? Wouldn’t it be better for taxpayers to keep their money and not pay interest to failed banks on their own money. Worse we are going to borrow that money just to make sure we pay twice. Pretty insane if you think about it.

Kills me too that the support of failed banks is in the name of free markets. By free markets Adam Smith meant free of feudal landlords and rentiers… not free for rentiers to extract money from us using our own funds.

Finally he has to be kidding on the housing plan. $2,000 savings per year? So little of his speech is about housing. They clearly don’t get that the $4T in bad mortgage debt hanging over this nation’s head is the reason consumer confidence is so low. Nothing new on this front tonight… and the loan mod and refi plans announced earlier are warmed over versions of plans that have already failed.”

Jeff Altman, broker, principal, WestCal Mortgage Corp., Orange
“You truly hope that the Orange County homebuyer will benefit. I am always the optimist and hope that some relief will come to the borrowers who really need and want to avoid foreclosure and are ready and willing to work with lenders. Most of the facts will be coming out on March 4th. I just hope that the Lenders will actually work with these people and do not let them suffer any longer. I would hope they drop their rates and/or take some monies owed and put it in the rear of the loan and possibly extend the term.”

And in other news…

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ocobserver says:

February 24, 2009 at 8:25 pm

Don’t even pay attention to these educated fools. You might as well ask your barber. All you needed to do was look at the DOW futures at 6pm and once again at 7:20pm pst. The first reading was flat. Second reading: fair value down 94 points. The market calls all bets. Obama still hasn’t given us a specific plan. Neither has Geithner. Why? Because they don’t have one. They can’t nationalize the banks because if they do it will cause a bond dislocation, interest rates will soar and it will result in the collapse of our economy and government. On the other hand, if they rely on the private sector to save the banks their share prices will eventually fall to zero which results in disorganized bankrupcies and runs on the banks (FDIC can’t possibly bail them all out). So now you see why Obama and Geithner are playing their cards close to the chest, huh?

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Mia says:

February 24, 2009 at 9:01 pm

“They clearly don’t get that the $4T in bad mortgage debt hanging over this nation’s head is the reason consumer confidence is so low.”

This is incorrect. The reason consumer confidence is so low is because huge numbers of consumers are losing their jobs. The ones who still have jobs largely work at companies with hiring freezes and layoff rumors abound. People are fearful of losing their income.

People are used to mortgage debt. Many homeowners carry a mortgage their whole lifetime, never owning a home “in the clear”. I’m not afraid of paying my mortgage. I’m not even afraid of being upside down on my home, since I have no intention of selling it. I do fear losing the income required to make the payment. THAT is why I do not have the confidence to do anything more than shop for groceries with coupons and stash every spare penny in the savings account.

caseclosed says:

February 24, 2009 at 9:22 pm

Everyone but the bank presidents hate the Obama stimulus plan but the people continue to support him. I guess no one wants to admit they were wrong. Just try to find someone that will admit that they voted for Jimmie Carter or Arnold Schwarzenegger.

the23skidoo says:

February 24, 2009 at 9:26 pm

Our banking system is ALL about confidence. That is why it takes confidence men (CONMEN) to sell it to us. This bail out is just more of the same - spending money we do not have in order to defer actual tough decisions. When will we learn? Probably not until the wheels come off the cart entirely. . .and that is a shame.

anon says:

February 24, 2009 at 9:53 pm

Limbaugh’s country is still going strong…Cognitive capture as some say.

MICHAEL says:

February 24, 2009 at 9:57 pm

Someone inform Kerry Vandell, professor of finance and director of Center for Real Estate at UCI that the reason CA has the most foreclosures of any state in the Union both in numbers and percentage and a more than 20% drop in the values of CA RE is because the CA RE industry is inundated with crooks. Crooks who pushed loans for housing through, made by illegal aliens and others who were not only financially unqualified to purchase the homes they were making loan applications for but unable to make the payments for those loans. And now President Hussein wants the rest of us who are current on our mortgage payments to bail out the irresponsible and unethical.
CA had crooks in real estate appraisal, real estate home loans and real estate sales who allowed people who were unable to afford the paymenst fo the housing that they acquired and now we’re expected to pay for their unethical behavior? I don’t think so. Now anyone who doesn’t realize what has happened to the RE market in CA is either too naive or too ignorant of the facts.

The “worst economy since the Depression?” Well it will be four years from now if we allow President Hussein and the Democrat Party in Congress to continue to spend money we don’t and cannot borrow. By 2012 we will have double digit inflation, double digit unemployment and double digit interest rates and Obama wil be another Jimmy Carter…”one & done!” And the Democrat Party will leave us with the United States of Socialism.

“Liberalism is just Communism sold by the drink.”
P.J.O’Rourke

Skip08 says:

February 24, 2009 at 10:05 pm

Hey All You Doomsayers,

Why not just have another election so you can get your Republican nominee in office to propose the same plan. Then, you would be OK, right!

Why not just give it a chance? It may offeset paying the new taxes we got under your Republican Governor!

None of us KNOW the right plan. We just know we need a plan and hope the plan presented will work to get us out of this morrass.

popcorn says:

February 24, 2009 at 10:08 pm

anon.. are you a product of the current school system?

jack says:

February 24, 2009 at 10:10 pm

Obama = FAIL

http://market-ticker.denninger.net/archives/828-State-Of-The-Union-Verdict-BOOOO.html

jauxmama says:

February 24, 2009 at 10:25 pm

Sean O’Toole said “…Isn’t too much debt the reason we have low consumer confidence”?

Ah, no. Exhuberance brought about the high debt. It was the notion that an asset ( i.e., a home) would continue, ad infinitum, to appreciate in value that caused the run up of debt.

Lack of confidence acts to dampen borrowing and spending since the future is more uncertain. Not only is the primary asset NOT appreciating at the rate it was before, it may even be declining. This is what drives consumer confidence lower.

I’m surprised that a business owner, like O’Toole (foreclosureradar.com) wouldn’t understand that basic precept.

I recommend that every time one of you feels ill at-ease with the way in which our President is handling things, remember back to John McCain saying “the fundamentals of the economy are strong” and flailingly around in a most befuddled state. He was in waaaay over his head.

Love him or Hate him, Barack Obama is the right man and the right time. No one else, that we had before us, could tackle this mess with the same energy and vitality. You may not like the direction he is taking, but at least he’s going SOMEWHERE. The man is not afraid to take charge and lead. How refreshing.

This is clearly a case of “the times picked the man”.

February 24, 2009 at 10:31 pm

ocobserver: how utterly simplistic of you to look at the machinations of Wall Street and see some sort of convoluted oracle. You disconnect Wall Street traders from the worlds other economies and exclude all other factors, including finacial insolvency of the major banks merely to fit your hyper-narrow political view.

This is EXACTLY the kind of thinking that the nation rejected in November (didn’t you get the memo?)

The difference between “those educated fools” and you is an education.

February 24, 2009 at 10:53 pm

Skip08: You truly do not get it. The difference between Democrats and Republicans is almost imperceptible. They are both statists who are willing to print money without end. The only difference comes with what they spend the money on. Even then, the differences are rather small in terms of the total budget.

Statism (& Socialism) will fail, whether led by Republicans or Democrats. Oh, and please do not assume this was written by a Libertarian. Anyone looking to solve these problems through the state is missing the point.

We do not need politicians to solve our problems. So long as we act like we do, we will be in trouble.

Buy Houses Now! says:

February 25, 2009 at 12:25 am

Sean O’Toole gets it.

TIM NGUYEN says:

February 25, 2009 at 4:49 am

DO NOT LISTEN TO WHAT BARACK OBAMA SAYS, BUT CAREFULLY WATCH WHAT HE DOES !!! (HIS ECONOMIC STIMULUS PACKAGE WOULD CREATE AT LEAST 300,000 JOBS FOR ILLEGAL IMMIGRANTS)

Barack Obama is the greatest liar in history (no wonder he is an excellent lawyer!). During his campaign, he told lots of hope in future for America if he was elected, but now he warns Americans of oncoming darker economy and not to put too much hope in his promises. He promises a big plan to reduce budget deficit but, while the nation is in deep depression, his inauguration ceremony was the most costly in history (50 millions) as well as his presidential campaign (600 millions), which was far more than his opponent John McCain’s. He vows to clean up Washington DC, but he failed to first clean up his homestate Illinois, one of the most corrupt state with the scandal of Governor Rod Blagojevich, who greatly helped Obama to win his state senate seat in 1996, 1998, and 2002; not mentioning that many of his cabinet nominees such as Tom Daschle, Tim Geithner, Nancy Killefer, Hilda Solis, and Bill Richardson avoided to pay taxes, hired illegal workers, or involved in corruption charges. Obama asks Congress quickly pass his economic stimulus package of $787 billions, which, with E-verify protection for American workers removed by Democrat-controlled Senate, would create at least 300,000 jobs for illegal immigrants. And his favorite slogan is “Yes, we CAN”, yet he himself CANNOT quit smoking at all !!! (Each year about 1.3 million American smokers quit successfully).

BOB says:

February 25, 2009 at 5:30 am

The basic problem that continues to plague us is not credit, it is the lack of income of American households to spend on daily living and save for the future. Credit got us into this mess and it will not get us out! Wages need to realign with the cost of living or a deflationary impact must occur, otherwise we will chase our tails for many years.

BeyondTheMargin.net says:

February 25, 2009 at 6:53 am

He doesn’t “Get” anything… He is as partisan as any other President taking many opportunities to blame the Republicans for the current situation. It was the Democrats that promoted Fannie/Freddie, sub-prime (aka Community Reinvestment Act) loans, and lower lending standards. The banks and lenders obliged (ignorantly), but it was poor government policies that drove the actions. Now we will paper over them with millions in handouts. Disgusting if you ask me.

http://www.beyondthemargin.net/2009/02/revolution.html

mav says:

February 25, 2009 at 7:56 am

If Obama “got it”, he would understand that debt is what created the problem, and now the US has to pay the price. We don’t need more debt, we need people to live within their means and get back to what made America great before the credit bubble of the past 25 years….. fiscal responsibility must return….. many companies need to go out of business, corporate america took on debt based on bubble revenues that will not return any time soon…. the banks need to be nationalized….and the economy needs to be reset… based on savings and investment…. not the philosiphy of debt, increased leverage, and frivolous spending…

ed says:

February 25, 2009 at 8:39 am

Why would anyone wan’t to inflate a bubble that has burst? First thing to do is to patch the hole. All the hot air that Obama can blow won’t help until R.E. prices come down. The free market without the government’s social engineering will work just fine.

toxicnut says:

February 25, 2009 at 4:50 pm

Mav you are half right, we need JOBS SHiPPED OFFSHORE to return. The only thing big business has been concered with in the last 28 years is screwing the American worker over with lower wages and less benefits to be more like third world countries. They have lobbied and recieved ways to move their corprate headquaters to a shoe box in the Dominican Republic so they dont have to pay taxes like you or I. We need to change our laws to make it illegal to offshore jobs, money or headquarters and enact extremely high tarrifs along with stripping the US citizenship of the CEO because they obviously care more about their wallet than the country that gave them the chance to make it big.

Sean OToole says:

February 25, 2009 at 9:53 pm

Couple of quick responses:

Jauxmana wrote: “Exhuberance brought about the high debt” - I respectfully disagree. Easy lending allowed exuberance to happen, not the other way around. Had this debt driven exuberance not pushed home prices artificially higher, they would not be dropping today. Thus if you blame dropping prices on the lack of consumer confidence, then you clearly agree that too much debt during the bubble years is to blame.

Mia wrote: “This is incorrect. The reason consumer confidence is so low is because huge numbers of consumers are losing their jobs.” But why are people losing jobs? No chicken and egg here… Obama’s speech even covered what caused the loss in jobs:

“Too many bad loans from the housing crisis have made their way onto the books of too many banks. With so much debt and so little confidence, these banks are now fearful of lending out any more money to households, to businesses, or to each other. When there is no lending, families can’t afford to buy homes or cars. So businesses are forced to make layoffs.”

I’d add that having 27% of California homeowners with a mortgage in a negative equity situation doesn’t encourage spending either.

They clearly know that too many bad loans from the housing bubble are the core problem… they (Bush and Obama) have just failed to offer a credible solution.

smoothoperator says:

February 25, 2009 at 11:39 pm

Obama’s smoke and mirrors can only last so long, after every speech he makes the stock market loses points. Instead of prolonging this recession by dumping billions of dollars into phantom programs, how about letting this thing bottom out.

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