Obama To Congress: "Do What's Right For This Country"
RENO, NV – In a sweeping speech here in this battleground state, Barack Obama made a direct appeal to the American people and to members of Congress to support the $700 billion rescue plan that the House of Representatives yesterday obstructed.
It was the first time since the need for such a rescue became clear that the Democratic nominee explained in direct and explicit terms what a total collapse of the credit markets would mean for ordinary people, many of whom are fiercely opposed to the bailout bill.
Quoting Franklin D. Roosevelt, Obama called on Americans to show the “confidence and courage” that he said were essential to the success of the plan. He asked people to believe in the country even if they are angry or anxious about the current crisis, and he tied the rescue plan to his own agenda, saying it would not be the end of what we do to strengthen this economy, but the beginning while spelling out his plans to cut taxes, make health care and college more affordable and promote clean energy, including clean coal.
Obama said this was no longer just a Wall Street crisis, but an American crisis and that failure to pass a rescue plan could mean thousands of businesses could close around the country, million of jobs could be lost and a long and painful recession could follow.
”Because of the housing crisis -- and nobody’s been hit harder by foreclosures in the housing crisis than Nevada -- we are now in a very dangerous situation where financial institutions across this country are afraid to lend money,” he told the crowd gathered on a lawn at the University of Nevada at Reno. “If all that meant was the failure of a few big banks on Wall Street, that’d be one thing. But that’s not what it means. What it means is that if we do not act, it will be harder for you to get a mortgage for your home or the loans you need to go to college or the loan you need to buy a car to get to work. What it means is that businesses won’t be able to get loans they need to open new factories, or hire more workers, or make payroll for the workers they have.”
Obama has shown a new energy over the past two days when it comes to speaking about the financial crisis on the stump. Throughout his roughly 35-minute speech today, he used analogies and humor to try to explain to the audience the predicament facing the American economy and how it related to them. He told college students that even though they may not have big stock market portfolios, failure to stop this credit crisis would make it harder for them to get a job, buy a house and raise a family.
Obama promised to do all he could to help get a plan passed, saying he had spoken with President Bush and Senate Majority Leader Harry Reid about the deal today. He urged Congress to ”do what’s right for this country." He also mentioned the proposal he put forward today to try to improve the bill, expanding the FDIC insurance for bank accounts to $250,000, from the current $100,000, something he said would help small businesses make payroll.
With an eye to casting the bailout deal as a time for patriotic action to save the American economy, Obama did not once mention John McCain. He said that now was not a time for politics or for taking credit or laying blame, and he compared the situation to putting out a fire in a neighbor’s house so that it would not spread to others.
“We’ve got to make sure that we put the fire out and then go start making sure that these folks stop leaving the stove on,” he said. “But right now our job is to put out the fire and we can’t forget that.”
Obama said officials in Washington had failed to do a good job of selling taxpayers on this plan as not a giveaway to Wall Street but necessary aid for the whole economy and that if executed the right way the money the government invests to recover the bad assets would be paid back, or even turn a profit that would go back to taxpayers or to drawing down the national debt.
He again acknowledged that the amount of taxpayer dollars being devoted to resolving the crisis would mean some of his programs would have to be delayed, comparing the situation to decorating a home. He said that while you can afford to avoid put off a new paint job or new curtains, you cannot put off getting a new roof or a new boiler.
“That’s the situation in our economy," he said. "We’ve gotta put away getting new curtains, but we still need a new roof and a new boiler and I’m ready to roll up my sleeves and get out my equipment and start putting a new roof and a new boiler in the American economy."
When asked why it had taken the Democratic nominee so long to spell out the problem facing the credit markets in clear, relatable terms to voters, a spokesperson said that throughout the week, Obama had sought to take a responsible approach to the crisis. He did not want to speak about the consequences of not passing a bill when a deal on the bill had not yet been reached.
“What was clear from yesterday was that people are nervous, people are concerned about what this would mean,” said spokesperson Jen Psaki. “Why he’s talking about the implications of this not passing is that he wants to convey to the American people that this is something that we need to pass.”
(NBC/NJ's ATHENA JONES)
No way, No how!!! Let the cards fall where they may. Look at the rebound in the stock market today!!!!! The people with money are still spending money.....finally congress listens to the people and this fool is urging them to do what is right for the country but against the public majority.....and still promises more programs and spending with tax cuts. Cut the Bull___t Obama! Take off the rose colored glasses and quit smoking whatever your smoking!!!
We're not in love with you so much that we're stupid!!!!
Bailout Plan:
I'm against the $85,000,000,000.00 bailout of AIG.
Instead, I'm in favor of giving $85,000,000,000 to America in a We Deserve It Dividend.
To make the math simple, let's assume there are 200,000,000 bonafide U.S. Citizens 18+.
Our population is about 301,000,000 +/- counting every man, woman and child. So 200,000,000 might be a fair stab at adults 18 and up..
So divide 200 million adults 18+ into $85 billon that equals $425,000.00.
My plan is to give $425,000 to every person 18+ as a We Deserve It Dividend.
Of course, it would NOT be tax free.
So let's assume a tax rate of 30%.
Every individual 18+ has to pay $127,500.00 in taxes.
That sends $25,500,000,000 right back to Uncle Sam.
But it means that every adult 18+ has $297,500.00 in their pocket.
A husband and wife team has $595,000.00.
What would you do with $297,500.00 to $595,000.00 in your family?
Pay off your mortgage - housing crisis solved.
Repay college loans - what a great boost to new grads
Put away money for college - it'll be there
Save in a bank - create money to loan to entrepreneurs.
Buy a new car - create jobs
Invest in the market - capital drives growth
Pay for your parent's medical insurance - health care improves
Enable Deadbeat Dads to come clean - or else
Remember this is for every adult U S Citizen 18+ including the folks who lost their jobs at Lehman Brothers and every other company that is cutting back. And, of course, for those serving in our A rmed Forces.
If we're going to re-distribute wealth let's really do it...instead of trickling out a puny $1000.00 ('vote buy') economic incentive that is being proposed by one of our candidates for President.
If we're going to do an $85 billion bailout, let's bail out every adult U S Citizen 18+!
As for AIG - liquidate it.
Sell off its parts.
Let American General go back to being American General.
Sell off the real estate.
Let the private sector bargain hunters cut it up and clean it up.
Here's my rationale. We deserve it and AIG doesn't.
Sure it's a crazy idea that can 'never work.'
But can you imagine the Coast-To-Coast Block Party!
How do you spell Economic Boom?
I trust my fellow adult Americans to know how to use the $85 Billion
We Deserve It Dividend more than do the geniuses at A IG or in Washington DC.
And remember, The Birk plan only really costs $59.5 Billion because $25.5 Billion is returned instantly in taxes to Uncle Sam.
Ahhh...I feel so much better getting that off my chest.
Kindest personal regards,
RD
Ed - from New Orleans, no less - can't you see that helping a neighbor is rewarding in ways that cannot always be measured with money?
Lack of oversight of the greedy caused this, it is clear. The next plan, the one that will address those issues, this crisis - these crises - will be comprehensive and have a kind of spinach-eating quality.
Right now though, we just have to dump the bad stew.
Banks and businesses which have Regulations are not experiencing any econimic crisis, just the investment banks which are de-regulated or have no regulations or oversight! "One of the regulations meant to keep insiders from driving down the prices of their own company’s stock so that they could sell short at will to make a quick million whenever they felt like it was called the “uptick rule”. The “uptick rule” is another one of the FDR Era regulations which the Heritage Foundations was talking about when they said that they wanted to roll this country back to the days of Herbert Hoover. They succeeded. The Bush administration got rid of this safeguard last year---with predictable results.
The uptick rule is fairly simple. "
http://www.investopedia.com/terms/u/uptick...
Hey Randy,
Better double check those numbers again Sparky. And if they were correct, what are you gonna do when a cup of coffee all of a sudden costs $8,200.00.
Hey Scott now you are talking. When coffee hits $8,200.00, lets see I roast 2,000 lbs per week, 1/4 lb to a 12 cup airpot, thats 6,000 cups of coffee a week. $49,200,000.00 not counting tips of course. I sure am glad I converted my assets when McCain predicted this 2 years ago. Check those facts.
I agree, the economic crisis is caused by the SEC's failure to regulate and oversee that stock market. Hedge funds lobbied successfully and convinced the SEC to eliminate the UPTICK RULE. Keep in mind the UPTICK RULE was entact since 1938 and initiated by the first Chairmain of the SEC Joseph Kennedy. As you may recall Joseph Kennedy was the "KING OF ALL SHORT-SELLERS". Joseph Kennedy knew that without the UPTICK RULE it was very easy to drive down a stock price to zero.
The SEC conducted a very flawed pilot of how stocks "would" or "should" perform if the UPTICK RULE were to be eliminated. Please note, this study took place during a "BULL MARKET" and Hedge funds lobbied heavily to have this UPTICK RULE eliminated. Hedge funds claimed the efficient-market hypothesis (EMH) which asserts that financial markets are "informationally efficient", or that prices on traded assets, e.g., stocks, bonds, or property, already reflect all known information. The SEC failed to protect investors and companies from being naked short sold into their demise. Here is a post-study of the reprecussions of the elimation of the UPTICK RULE. Now why didn't the SEC condcut a post-study after they elimintaed the UPTICK RULE?
Technical Report on the SEC Uptick Repeal Pilot, November 18, 2008. (copy and paste link below)
http://www.necsi.edu/research/UptickTechReport.pdf
R. C. Pozen and Y. Bar-Yam, "There's a Better Way to Prevent 'Bear Raids,'" The Wall Street Journal, November 18, 2008.
(copy and past link)
http://online.wsj.com/article/SB122697410070336091.html
When U.S. stocks plunged last summer, the SEC adopted several measures to constrain short selling, or betting that a stock's price will decline by selling borrowed shares. These included weekly reporting of short positions by large investment managers, requiring short sellers to line up in advance borrowed shares, and temporarily banning all short sales in financial stocks.
These measures proved ineffective. Even during the three-week ban starting on Sept. 22, financial stocks fell along with the market, after outperforming the market prior to the ban. Moreover, the liquidity of these financial stocks decreased, and the cost of trading them increased, as bid-ask spreads widened.
Given the continued turmoil in the financial markets, the SEC should reinstate the "uptick" rule, which helped limit downward spirals by allowing a stock to be sold short only after a rise (an "uptick") from its immediately prior price. Adopted in 1938, the uptick rule was repealed by the SEC on July 3, 2007, primarily on the basis of a pilot program conducted in 2005. In the pilot program the agency compared 943 randomly selected stocks from the Russell 3000 not subject to the uptick rule to the remaining stocks in the Russell 3000 (a broad-based index of U.S. stocks of all sizes) still subject to this rule.
The comparison was only for six months -- far too brief a time to draw conclusions about a rule that had been in effect for 70 years. The comparison also did not take place when repeal of the uptick rule could be stress-tested: 2005 was a year of rising stock prices with low volatility.
During these six months, the SEC found that the stocks not subject to the uptick rule had 2% lower returns than those still subject to the rule. This difference implies that removing the uptick rule goes farther than the SEC's apparent goal of attaining a neutral environment for stocks. As explained by a research analyst at University of Tennessee, Min Zhao, the SEC's lifting of the uptick rule for large stocks in the pilot "is associated with undervaluation . . . [and makes it easier] for 'predatory' short sellers to aggressively submit short orders and to manipulate stock price downward." The SEC dismissed this 2% difference as statistically insignificant relative to the standard deviation of the Russell 3000 during the pilot period. However, if we eliminate a small number of outlier stocks in that index with returns over 100% during the pilot period, the 2% difference becomes statistically significant. More fundamentally, return differences of 2% within six months are economically important, because annual returns in the U.S. stock market since World War II average 6% to 7%.
The SEC was warned by two commentators not to repeal the uptick rule since it limited "bear raids" -- when short sellers drive down a stock's price in the hopes of scaring other investors into dumping the stock or triggering margin calls to force liquidations. In response, the agency approvingly summarized the views of three other commentators -- that bear raids "are highly unlikely to occur in today's markets, which are characterized by much smaller spreads, higher liquidity, and greater transparency than when the rule was adopted 70 years ago." This summary did not take into account another factor -- the advent of over $1 trillion managed by hedge funds with the ability to short stocks.
In fact, after the repeal of the uptick rule, there was a marked increase in the number of NYSE-listed stocks with price drops of over 40% in a day -- a rough proxy for a bear raid. In the 12 months following Sept. 30, 2007, the number of such huge drops doubled as compared to a prior period with similar market declines and high volatility -- the 12 months following March 31, 2000.
The passage of the Economic Stabilization Act of 2008 has not stopped bear raids, so the SEC is reviewing its tool kit on short selling. Instead of another blunt tool like a temporary ban, the SEC should promptly bring back the uptick rule.
Mr. Pozen is chairman of MFS Investment Management. Mr. Bar-Yam is president of the New England Complex Systems Institute.
Restore the Uptick Rule, Restore Confidence
http://online.wsj.com/article/SB122878208553589809.html
By CHARLES R. SCHWAB
The last time the stock market suffered from extreme volatility and risk of market manipulation as severe as we are experiencing today, our grandparents' generation stepped up to the plate and instituted the uptick rule. That was 1938. For nearly 70 years average investors benefited immensely from that one simple stabilizing act.
Unfortunately, in a shortsighted move, the Securities and Exchange Commission (SEC) eliminated the rule in July 2007, just as we were about to need it most. Investors have now been whipsawed by what appears to be manipulative trading, what we used to call "bear raids," which drive stock prices down without warning and at breakneck speed. Average investors feel the deck is stacked against them and are losing confidence in the markets.
For the sake of our children and grandchildren, and to avoid a needless future repeat of a bad situation, it is time to restore the uptick rule.
The uptick rule may seem far from a kitchen-table issue, but it is critically important to ordinary investors. With more than half of all U.S. households invested in the stock market, either directly or through a retirement plan, it matters a great deal. The average 401(k) retirement account has lost 20%-30% of its value over the last 18 months -- more than $2 trillion in retirement savings has been wiped out. Behind those numbers are real people who planned and saved, and who are suddenly facing an uncertain retirement and the prospect of working longer.
In the wake of the Great Depression, the uptick rule was established to eliminate manipulation and boost investor confidence. The rule said that short sales could be made only after the price of a stock had moved up (an "uptick") over the prior sale. This slowed the short selling process making it more expensive and limiting the ability of short sellers to manipulate stocks lower by piling on, driving the share price quickly down and quickly profiting from the downdraft they created. In July 2007, however, the SEC repealed the uptick rule after a brief study. Manipulative short sellers couldn't believe their luck.
The SEC's study took place during a period of low volatility and overall rising stock prices in 2005 through part of 2007 and didn't anticipate the kind of market we are experiencing today. We live in an environment now where 200 point drops or more in the Dow Jones Industrial Average are increasingly common, where a stock losing 20%, 30% or even more of its value in a single day barely warrants a second glance at the ticker. Ironically, it was just this sort of volatility that inspired the regulators of the 1930s to implement the uptick rule in the first place. Without this vital control mechanism, short sellers have been having a field day, betting heavily on lower prices and triggering panicked investors to sell even more.
Don't get me wrong. Legitimate short selling where a trader has borrowed shares for future delivery and believes those shares will lose value over time plays an important and stabilizing role in our markets. It provides a check on overexuberant prices on the upside, and provides natural buyers on the downside. The uptick rule, however, prevents short selling from turning into manipulative activity. Reinstating it will help smooth out the markets and reduce the speed of price drops. It will limit the ability of a small number of professional investors to trigger fast dramatic price drops that create panic among investors.
The SEC has an opportunity to make a real difference in helping to control future market stability and restore confidence in the fairness of our capital markets. But the SEC has been strangely silent as the crisis has worsened. It did step in earlier this fall to implement short stock borrowing restrictions and a temporary ban on short selling, first on 19 stocks in the financial services sector, and later in a broader swath of 900 stocks across several sectors. But these steps were a temporary half-measure and didn't fix the problem for the long term.
Clearly, the SEC will need to work on some of the mechanics of reinstating the uptick rule. Regulators should act quickly to establish a framework and solicit public comment, then reinstate the rule and remain flexible and willing to fine tune it if necessary.
Ordinary investors' expectations for investing are reasonable. They want a fair playing field. They want to be successful. They want to provide for their families, support their children's education, have a comfortable retirement, and maybe even leave a little bit for future generations. But they can't succeed when the markets are gripped by fear and manipulated by those who want to profit from that fear, at the expense of everyone else.
It may be too late for the restoration of the uptick rule to have much impact on where we are today. But there is no reason to wait and we need the protection in place for the future. It is time to restore it. It's what our grandparents did for us in 1938, and it worked for nearly 70 years. With that kind of track record, we should tip our hats to the regulators of yesteryear and acknowledge that they had it right all along.
Mr. Schwab is the founder and chairman of the financial services firm that bears his name.
How to Handle the 'Uptick Rule' Removal
http://www.thestreet.com/newsanalysis/stockpickr/10371933.html
On July 6, Rule 10a-1 of the SEC 1934 Act was eliminated. The rule's original intent was to restrict short-selling in a declining market. There are intricacies to the rule, but the very general concept is that short-selling can only occur when the last trade is at a price higher than the previous one. Without the rule, short-sellers can drive prices down in times of uncertainty and effect greater price declines than might ordinarily occur.
The rule was designed essentially as a market-stabilizing feature and added greater certainty to the markets. Stability adds confidence, confidence attracts buyers. Less stability and confidence are generally not good as they tend to drive the rational decision-making process into an irrational one.
The net effect is greater market price swings, i.e. volatility. In times of more significant uncertainty (such as we have now), where it is going to take a while to sort out the woes of the credit and subprime mortgage markets, we are destined to get more significant price swings, much more so than we would have if the so-called Uptick Rule had not been removed.
The Uptick Rule has had particular effect (and potential opportunity) on the stocks that people have been most eager to short. It's these shorts, unleashed by the abolition of the Uptick Rule, that could become most vulnerable to a squeeze.