by Frank James
President Barack Obama spoke to the Business Roundtable today, the group of corporate chief executives from some of the nation's largest companies, to make a sales pitch for his agenda and to assure the the corporate leaders that he was on their side, even though he wants to raise taxes on the wealthy.
At the end of the session, during a question and answer session, Richard Parsons, the chairman of Citigroup, asked Obama to share his thoughts on confidence since nothing governments do in terms of stimulus spending etc will ultimately be effective if faith in the economic future isn't restored.
Obama said things are never as good or bad as we think, essentially that popular sentiment overshoots on the downside and upside and that he tries to keep that in mind.
Of course, when he talked a few weeks ago about a looming catastrophe if the $787 billion stimulus package wasn't passed, that the economy might enter its final death spiral that didn't exactly make a lot of people feel like it was time to take any risks with their money. The president wasn't averse to using fear.
That was then. Obama has been in full confidence-building mode since the stimulus passed. Obama is bullish on America's long-term future. But it's a conditional bullishness, he says.
The nation's future is bright so long as it attends to structural problems like rising health-care costs and less-than-sterling education for many Americans. Otherwise, if America were a stock, it sounds like he might be shorting it.
Here's the exchange:
PARSONS: As you know, as you know, Secretary Geithner was here earlier today and, I thought, did a terrific job. And as he went through his hastily prepared, but prepared, remarks, I made a little tick mark every time he used the word "confidence" or talked about restoring confidence, until I ran out of ink. I say that somewhat facetiously, but I think he's spot on. I think he's spot on.We're in a battle in this country now, and maybe in the world, where -- between confidence and fear. And it's important that confidence wins, because if consumers are confident, they'll spend. And if they're fearful, they won't. If investors are confident, they'll invest, and if they're fearful, they won't. And all the money of all the governments in the world can't replace that. Right?
PRESIDENT OBAMA: Right.PARSONS: So, you know, I take it down to our -- the banking business. At its core, it's a very simple business. It takes funds from depositors and other providers of funding, and then it makes that -- those funds available in the credit markets. And that's how businesses grow --
PRESIDENT OBAMA: Right.
PARSONS: -- and people buy homes and send their kids to college, buy cars and all that sort of stuff.
PRESIDENT OBAMA: Can I just say, Dick, it hasn't been that simple lately. (Laughter.) But -- but I -- but I get your theory, though. (Laughs.)
PARSONS: I said at its core --
PRESIDENT OBAMA: I'll talk to Jamie (sp).
PARSONS: Please.
PRESIDENT OBAMA: Maybe that's a -- it's --
PARSONS: Some folks got carried away, I'll acknowledge.
PRESIDENT OBAMA: (Laughs.)
PARSONS: But the core business is essential --
PRESIDENT OBAMA: Right.
PARSONS: -- to restoring this economy to full vitality. And one of the things the secretary said was that -- he laid out a four-part program -- and he said at the end of the day, though, we're committed to -- particularly for those institutions that are core to the financial system -- to providing support so that those essential funders -- depositors, bondholders, people who participate in the debt markets -- can have confidence that they'll be protected.
I think if those fundamental funders do have confidence, do believe that we're protected in all this, our money is going -- they will help stabilize the banking system and then what you talked about earlier will happen, the credit cycle will begin --
PRESIDENT OBAMA: Right.
PARSONS: -- and then the country and the economy can begin to heal. I just wondered, does your -- among other "chiefs," you're the confidence-builder in chief. I wondered if you could either elaborate or drive home that point that the secretary made, because I think --
PRESIDENT OBAMA: Right.
PARSONS: -- it will help -- it'll help us all.
PRESIDENT OBAMA: Well, look. This is the most dynamic economy on Earth. And our capacity is undiminished. We got the same smart folks and engineers and scientists. We've still got the hardest working workers on Earth. We got the best universities. We got all kinds of innovations.
And you know what? We've also got a whole bunch of potential customers out there. As bad as the housing market has been, you're starting to see inventories decline and there is a young family out there right now who's going to be thinking about buying a home. And if we can get them credit, they're going to buy that home. And if they buy that home, then that construction worker, maybe he comes in and remodels the kitchen and that means that he can buy the computer for his kid at school and we're off to the races.
So I am very confident about our long-term prospects. We live in such a rapid-fire information-rich environment that people's attention spans -- (snaps) -- go like this.
And that makes for volatility in confidence, right? Smidgen of good news, and suddenly everything's doing great. Little bit of bad news, oooh, we're -- we're down in the dumps. And I am obviously an object of this constantly varying assessment. (Laughter.) I'm the object in chief -- (laughter) -- of this varying assessment.
And so -- so my view -- you know, people ask me sometimes, "Well, you seem like a pretty calm guy. How do you do that?" I say, "Well, look. I don't think things are ever as good as we say, and they're never as bad as they say." And things two years ago were not as good as we thought, because there were a lot of underlying weaknesses in the economy. And they're not as bad as we think they are now. We're going to restore confidence by, in a very systematic way, getting this financial system fixed.
I think Secretary Geithner and Chairman Bernanke and Sheila Bair have done an extraordinary job. It hasn't gotten a lot of fanfare, but the TALF program that's been put in place; the creation of markets once again for some of these securities that are out there so that they can be priced and we can start seeing financing flowing again; the -- the -- the fact that for all the, you know, angst that's been out there, you've got banking institutions that are still functioning and -- lo and behold -- making profits.
We still have some big problems in the banking industry. That's what these stress tests are about. We are going to make a -- effective assessment. And even with the worst-case scenarios, we're still going to be looking at -- the vast majority of banks are going to be doing fine, and in a position to make profits. Even with the worst-case scenarios -- even if things stay bad for a while, the vast majority of these banks are going to be fine.
By the way, depositors are ALL going to be fine. That's why we've got the FDIC. And so I think Americans understand that their deposits are going to be fine.
The market is going to be responding to all this information out there and -- you know, the whole issue of animal spirits in the marketplace and when suddenly a rally catches. You know, you guys know that better than I do.
But my focus has to be on the long term. And my long-term projections are highly optimistic, if we take care of some of these long-term structural problems.
The one thing I don't want to do is to replicate the false confidence that was premised on bubbles. And I think that we've really got to think through, and all of you as critical captains of industry have to help us think through, how do we prevent this froth that builds up and go back to steady growth, fundamental growth that's based on making things, providing good services, innovating, exporting, you know, as opposed to just borrowing and leveraging?
And that -- that is going to be a challenge. And there's going to be some adjustments. But even with consumers, I mean, we've got this interesting situation where we're actually seeing consumers do exactly what we would have liked them to do, just not all at once, and that's starting to save some: paying down credit-card bills, making sure that they've socked away a little bit each month, for their retirement, for their kid's college education.
That ultimately is a positive thing. We just want to make sure that everybody understands, you know what; you don't have to stop in your tracks here. Things are going to get better. It's going to require some patience.
And the one thing that, I think, our country and our culture will benefit from is an end to short-term gratification and a recognition that, you know what; ultimately you build up value by hard work and dedication and sweat. And there are going to be some bumps in the road. And things take time. But I'm very confident about it. And I hope you are too.
Comments
Interesting that Obama talks about sacrifice and hard work etc. But then wants to give people more rights. Health care is a right , college is soon going to be a right. And to pay for all of this Obama is saying that only 2% of Americans will have to pay for all of this. This sounds like Obama is promising a lot of us instant gratification. Rewards with no risk .
Posted by: Thomas | March 12, 2009 8:16 PM
Someone should tell Parsons that the peons lack "confidence" in him and his fellow ceo's because of folk like:
Thain
Bernie Madoff
Lord Stanford of Cowpuck, Texas
etc.
It's not Obama's job to get rid of executives like these.
Voting trusts and bd of dirs need to clean house and put in some decent people.
Then maybe there wd be some more "confidence".
Posted by: ornery | March 12, 2009 8:19 PM
Health care, Rush Limbaugh, Climate change, stem cell research..........all they are doing is changing the subject and deflecting attention from a systemic global lock down of the credit markets resulting from toxic securities and derivatives built on flawed computer models.
Don't you think a President with any real leadership skills could have stayed focused on the problem long enough to call for open Congressional hearings on credit default swaps and toxic securities?
Don't you think an adult would be able to present a plan 6 weeks into a crisis of this magnitude?
Does Obama have Attention Deficit Disorder or is he burying the problem to cover for his bankster handlers ? I believe it's the latter.
If the Republican Party is in shambles , it's new leader will force the hearings and deny Obama and the Democrats ANY chance to change the subject.
http://us1.institutionalriskanalytics.com:80/pub/IRAstory.asp?tag=346
"What's your plan Mr. President?"
Posted by: Robert Fanning | March 12, 2009 10:13 PM
We all have our fingers crossed, but with the extra taxes coming our way:
gas tax(cap and trade) that will hit everybody when they are down;
With 'cap and trade' electricity prices will increase,
businesses will raise their prices for goods and services, people will stop buying.
Federal government taxes are going to go up,
local, state and school taxes are going up.
Property taxes/millage are going to increase.
Healthcare is going to cost us.
The cost for licenses, fees are going up.
Taxes are increasing.
The people need time to regroup and recoup before these taxes are implemented. Too much, too soon.
This is not what I voted for. This is a disaster with more coming our way.
We're being swept out to sea by an undertow that keeps us from getting ashore.
A disaster for sure.
Posted by: betyte | March 12, 2009 11:30 PM
"And they're not as bad as we think they are now. - Barack Obama
What's he saying - "The fundamentals of our economy are sound"?
Posted by: DaveB | March 13, 2009 8:24 AM
Why does BO remind me of Rosanna Rosanna Danna - "Never Mind"?
.
Crisis, What Crisis?
Posted by: Terry | March 13, 2009 8:33 AM
Barack Obama is a shameless liar-
-
It's about time this President was asked about his incredulous statements and disingenuous "goals"- for Obama to portray himself as some sort of deficit hawk just three days after signing the largest spending bill in US history is like Josef Stalin giving a speech deploring conditions in the Siberian gulag.
-
He's been writing his own story as the MSM just parrots it for far too long, and very little of it squares-up with reality. This president is habitually dishonest... and maybe he should finally get called-out on some of it.
-
http://reaganiterepublicanresistance.blogspot.com/
Posted by: Reaganite Republican | March 13, 2009 10:50 AM
So Obama says the economy is "not as bad as we think." So we weren't moments from a complete and total meltdown? Or did merely passing the stimulus and spending weeks and weeks talking about the problems, suddenly, magically, make everything better? Or is the president now saying that the recession was only in our minds?
Posted by: JB | March 13, 2009 11:06 AM
Obama has the right ideas. But, he doesn't have the best and brightest to help him. So, he is taking baby steps. He really needs the pro to tackle the problems. It seems like he is taking advices from amateurs. That's the major problem I see right now for him.
1. Stimilus came off the wrong start: 30% taxcut is way too much. We need to spend everything we got at reducing energy price. The average family pay over 30% in energy cost, that's about $300.00 in heating, $250 in electricity, not including gas for traveling. Imagine if you paid $150 for heating and $100 for electricity? That's a tax cut right there for all of us! Imagine everyone has solar panels and/or wind turbine on their property? We won't be at the mercy of crooked politicians who help the energy company raise their rates every year to ridiculous amount. I don't mind the energy company making profits. The more the better but it shouldn't be at our expense. We got the same service and paid a lot more for it! The large energy companies can still profit from energy efficiency. Just imagine if they manufacture solar panels, install, and sell cheaply here! They would make more money than raising our rates! 20 million homes x $500 for a complete solar installation kit. Plus, service for maintenance, replacement parts. This is a giant economy on its own legs.
2. Need huge projects to convert the ocean into drinking water. There should be hundreds if not thousands ofplants that convert Ocean water to drinking water. Why aren't we doing this? California is dried up. Imagine the benefits from projects like this? This will help reduce sea level too!
3. Universal healthcare is great! But, the first major things that have to be solve before we get there are: costs, and efficiencies. Saving billions on paperwork is a good start, but the major problems haven't gone away. The cost is out of control for insurance on doctors. The cost is out of control for lawsuits. The cost is out of control for drugs and test equipments. The solution: negotiate to lower premiums for all doctors. cap limit on lawsuits to about $ 4 million each person but the expert would have to figure the actual amount that will balance lowering premiums versus moral and fairness obligation. FDA needs to be overhaul. So many new and great drugs and cheaper better machine die at their footstep because drug panels control approval based on interests. Promising drugs and equipment should be fast track. If safety is a concern then give limited approval. Within a few years, it should be reviewed again for full approval. FDA approval process right now is a joke and ridiculous! There is no standardizing right now. It's all up to the FDA panel who are not interested in science only protecting who they represent. What a big joke! Again, I'm all for making huge profits from the drug companies but not at taxpayer's expense.
4. Visa work program is a joke! Companies (not mentioning any company but they know who they are) refuse to pay decent wages so they ask for more visas because they claim there are not enough talents! Duh! There are millions of people out of work at any given time who qualify and would gladly fill those jobs! I am all for Visa work programs.. .but only when this condition truly exist! Not made up requests! And people need to stop blaming the Mexicans, they don't make wages nearly even close to what the average american makes to make the difference. They are merely a political pinada. . . .easy because they can't defend themselves. Hey? Who can and would defend the Scarlet Letter?
All i am trying to say is that we need to make investment in America that will get returns. Example: building sea water to fresh water plants is a return on investment. We get more water! Example: Giving free money to banks. Returns= 0. Bank take money and say thank you! We will still foreclosure your house (because taxpayers will subsidize us now) then turn around and sell your foreclosure house to double our profits!
No returns then No spending on that program!
Posted by: HmongRodneyKing | March 13, 2009 2:27 PM
Obama has the right ideas. His basic problem is that he doesn't have the right people in the right place. He needs the "best" people not the "must" people. It is not hard to fix the problems.
Basic rule #1: You spend money, it must have a return.
1. Energy: Spend money in the likes that no mankind has never seen into green energy and public projects ($4 trillion if not more). We need hundreds if not thousands of plants here and around the world to convert sea water to fresh water. This will help California and drought areas. Just imagine the benefits and returns on projects like these? Imagine thousands of farms all year round; no drought all year round. This will also help lower the sea water level. Trillions of dollars into solar panels. Arizona and desert states would benefit from massive solar installations. No, we are not talking about 2 here or 3 installations there. Litterly millions of solar panels. Enough to generate several states!
We should build thousands of facilities that use technology that turn water H2o, to hydrogen for fuel and release oxygen into the air instead of carbon. Just imagine if we pump oxygen into the air instead of carbon? Holy cow, your thanksgiving turkey could double in size!
Build billions of solar panels to the likes of no one has ever seen. Even, average Joe should be able to afford solar panels like buying a computer today!
2. Forget Universal healthcare if you can't reduce the costs. Universal healthcare can only happen if we reduce- a. premiums for doctors, limit lawsuits to something reasonable b. overhaul of FDA so new drugs and cheaper and more effective equipment can be rush to the public without safety compromise. FDA approval process is a joke! A board of FDA panels that has no interests would just kill a good drug or product. FDA needs reform so there is standards based on science, efficiency, costs. Limited approval then final approval if there is safety concerns. c. Negotiate with drug companies to reduce drugs. d. Import doctors or increase the number of doctors allowed to practice. This is necessary to reduce the amount of stress the healthcare system will incurr.
3. Reform work visas. I do agree we need people like Eistein. But, companies claim they lack talents and so they need work visas for programmers and other skilled workers?? Pluah..what a joke! There are millions of qualified and talented Americans but they never get a chance because companies don't want to pay the higher wages. I am all for the work visas program but the companies never had to prove they couldn't replace them with Americans here. Instead, the only proof they need is to have this silly job opening note posted on the HR bulletin althought it is already filled by a foreign worker. What a big joke! LOL
6. No more tax cuts! I do not want my tax cut! Take it and spend it on Green Energy! Please!!! There is absolutely no returns except that we spend it at Walmart, and in return they order more goods made in China Zero job creation here! I don't mind outsourcing to China. But, we have to identify core business that should never be outsource for the sake of profit because the CEO thinks he can make millions off it. Yeah, he did make millions but he will find out no one can afford his products because they have no jobs! And his stock will be 10 cents!!! LOL
Ok, I got my 2 cents in. Again, I repeat: No tax spending without a Return for all of us, Americans!
Posted by: HmongRodneyKing | March 13, 2009 3:17 PM
You don't rise to the top in business unless you are an expert at both dishing it out and smelling it from a mile away.
-----
Obama looked the other way while the Pelosi half loaded up the 787 billion volt across-the-heart stimulization package with pet projects so that even in final form it attracted zero bipartisan support in the House. ZERO bipartisan support. Then afterwards Obama says it's time to get serious about pork and earmark reform. That's what's going through the minds of corporate execs while they listen to Obama cheerlead -- ZERO bipartisan support, a look-the-other-way president, and how increasing federal debt is going to drive up the cost of issuing corporate debt instruments in the near future, post-recovery.
-----
And the CEOs listening to Obama rah-rah wouldn't turn their nose up at saving a 'measly' $8 billion on a $410 billion project the way pork and earmarks were glossed over as "last year's business" in another spending package. They'd breach their fiduciary responsibilities to stockholders if they did.
------
Another thing going through CEOs' minds is what Frank James pointed out: Obama isn't adverse to using fear to advance the Pelosiobama agenda. As a result of people panicking to find safe haven, quality corporate bonds now have to pay 9-10% to try and lure some billions away from 3.5% 30-year T bonds -- and a bubble is forming in the 10-year note.
-----
And CEOs hear Parsons blah, blah, blah about: "... providing support so that those essential funders -- depositors, bondholders, people who participate in the debt markets -- can have confidence that they'll be protected" but know that Paul Volker's advice to separate deposit-side banking from investment-side won't be heeded, even though Volker was fed chairman following the Carter disaster with a 20-plus percent prime rate.
-----
CEOs in their late 40s to early 60s also factor in that with a like-wise aging population, investment-risk-adverseness has skyrocketed. Anyone within 10 years of retirement isn't going further out on a limb to invest in stocks, particularly as their current investment portfolio could be down 50%. Might as well go to Vegas with a few grand quarterly -- you could do no worse there.
-----
So the CEOs at the business roundtable smiled when appropriate, laughed when appropriate, and otherwise looked attentive and intrigued when Martin and Lewis put on their comedy show because, hey, they may need mo gov'ment money and/or favors in the future.
Posted by: dom youngross | March 14, 2009 8:17 PM