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Geithner’s Rant, Obama Administration’s Desperation?, Ramifications of the Clunker Plan

This story is quite disturbing. The Obama administration is sliding down a slippery, or should I say, slimy slope. In Q4 of last year fear mongering was the tactic of choice to push policy (e.g. auguring global financial ruin if senators didn’t quickly pass questionable legislation.) In Q1 & Q2 of this year financial market manipulation was the potion incorporated to conjure up support for far-reaching and possibly destructive government controls. Apparently Q3 ushers in a new age of coercion. When I read the story below I wonder: Is this a show of unbridled audacity (to use an Obama term) or is this the beginnings of something altogether more desperate? As ratings slip and agendas meet resistance is this how our “esteemed” president and his “brilliant” entourage conduct themselves?

Please take a good look at the June 30 post. You may feel a more acute impact of the cartoon’s message after reading about the behavior described in the story below. Shouting, expletives and coercion are a common trait for the gaggle depicted.

Geithner vents as overhaul stumbles – WSJ
WSJ reports Treasury Secretary Timothy Geithner blasted top U.S. financial regulators in an expletive-laced critique last Friday as frustration grows over the Obama administration’s faltering plan to overhaul U.S. financial regulation, according to people familiar with the meeting.

The proposed regulatory revamp is one of President Barack Obama’s top domestic priorities. But since it was unveiled in June, the plan has been criticized by the financial-services industry, as well as by financial regulators wary of encroachment on their turf. Mr. Geithner told the regulators Friday that “enough is enough,” said one person familiar with the meeting. Mr. Geithner said regulators had been given a chance to air their concerns, but that it was time to stop, this person said.

Among those gathered in the Treasury conference room were Federal Reserve Chairman Ben Bernanke, SEC Chairman Mary Schapiro and FDIC Chairman Sheila Bair. Friday’s roughly hourlong meeting was described as unusual, not only because of Mr. Geithner’s repeated use of obscenities, but because of the aggressive posture he took with officials from federal agencies generally considered independent of the White House. Mr. Geithner reminded attendees that the administration and Congress set policy, not the regulatory agencies. Mr. Geithner, without singling out officials, raised concerns about regulators who questioned the wisdom of giving the Federal Reserve more power to oversee the financial system.

Clunker plan gives car sales a lift – WSJ
The Wall Street Journal reports U.S. auto sales in July climbed to their highest pace in 11 months, as customers rushed to showrooms amid uncertainty about the future of the federal government’s “Cash for Clunkers” incentive program.

Now, car makers, the Obama administration and the Senate face tough decisions about how to respond to the clunker program’s apparent success. The administration on Monday stepped up a campaign to persuade senators to approve $2 bln more in funding before Congress goes on vacation at the end of the week. The House on Friday approved a $2 bln funding extension. Administration officials have warned the program could be forced to end. But some key senators in both parties are balking. White House spokesman Robert Gibbs said Monday that President Barack Obama would use a Tuesday lunch meeting with Senate Democrats to push for an extension of the program. The administration gained ground Monday when Senators Susan Collins (R., Maine) and Dianne Feinstein (D., Calif.,) dropped their opposition to additional funding, saying data released by the administration persuaded them that most vehicles scrapped so far have been sport-utility vehicles and trucks, and that 60% of the people using the program had purchased cars.

What they don’t tell you:

These cars need to have a lot of mileage on them to be considered “clunkers”

People driving old “clunkers” typically come from an income bracket that can’t afford a new car

This plan is encouraging these people to spend money they could be using to pay down debt or worse, inducing an increased debt burden
The incentive program requires car dealers destroy each clunker’s engine and drivetrain. This will drive up the cost of used car parts that lower-income car owners who don’t enter the program depend on.

Pulling demand forward, while possibly good for opinion polls, will make the future rather daunting for the auto companies.

History, unfortunately, must repeat itself. This demand pull through is identical to the shenanigans Barney Frank and his cohorts concocted in the real estate market and we all know how that ended. Barney’s bunch forced banks to lend to individuals who could not afford the home they were buying. Predictably, demand dried up and foreclosures exploded when the well ran dry.

About Bret Rosenthal

Interpreting the news that moves markets. Principal of RCM, LLC, and founding partner of the Fortune's Favor Family of Funds
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2 Responses to Geithner’s Rant, Obama Administration’s Desperation?, Ramifications of the Clunker Plan

  1. daizie says:

    When faced with a problem I’ve noticed that this administration as well as other Democratic administration just throws money at the problem instead of actually trying to fix the problem. This just gets us into more debt, causes problems in the private sector and does nothing to solve the original problem and in fact sometimes adds to it.

    This is even more so with this administration that seems to make decisions and acts without a plan of execution or end, they seem to just be “flying by the seat of their pants” ( to quote an old saying)

    I find it ironic that what Bush was accused of is exactly what Obama and friends are doing. Acting without a plan. When in reality apparently Bush had a plan and it worked, he kept us safe for 8 yrs. There were no more bombings of our country, ships or embassies

  2. amazed says:

    You lost me at “The Obama administration is sliding down a slippery, or should I say, slimy slope. In Q4 of last year …”

    Was there a coup by the Obama administration in Q4 I was not aware of ???

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