Is Obama hostile towards big business?
To answer this question, we need to delve a little deeper. Note, I am neither condoning nor praising Obama’s handling of his regulatory efforts. However, I would like to point out certain corrections that do need to be made.
“The truth is that not even the Franklin Roosevelt administration was as hostile to and ignorant about free enterprise as this [Obama’s] administration is.”
–Steve Forbes.
But, is Obama really hostile towards business? Or, is he making needed corrections? There is a fine line here. This issue also points out a serious problem in politics today. That problem is, you guessed it, money. Without money, the world doesn’t work. Without money, candidates don’t get elected. Without money, businesses don’t sell things and make money. Back up the train.. Businesses make plenty of money without governmental help. The trouble is that businesses want to be able to make laws that enable their businesses to make more money and then have the government be lenient with them when issues arise.
The reality, though, is that like the separation of church and state, the government now needs separation of business and state. The two are oil and water, they don’t mix. Government needs to be able to make law without interference from any party. But, businesses have deep pockets and hefty lawyers. These two elements help elect officials and help sway these same officials into making good on promises they made towards these businesses during the election.
Obama’s corrections
While I don’t agree with every single thing Obama has done, I do agree that change is necessary. The change that he is making is intended to correct the issues that led to the economic downturn. The trouble comes with statements from people like Steve Forbes. Mr. Forbes believes that he is the end-all-be-all-know-it-all when it comes to all-things-business. The trouble is, he doesn’t. Yes, he runs a successful magazine, but that doesn’t make him an authority. That makes him a successful business owner.
Obama is walking that fine line. A fine line that shouldn’t even be necessary. But, there it is. The line that’s there to help Obama help the economy, help spur business and growth and reduce the chances of a repeated failure. At the same time, the line is there to show that government values business, but isn’t there to socialize it. The trouble is, this economic downturn was of our own making. By our, I mean Wall Street. The housing bubble was just that, a bubble. Bubbles eventually burst and this bubble was no exception. It’s not as if analysts and intelligent minded people couldn’t see the handwriting on the wall. When the mortgage interest rates got down to 1% and all of those ARM and specialty loans were being issued like water flowing down the Mississippi, trouble was inevitable. We just didn’t know that banks and insurance companies were tying their financial soundness to these extremely risky loans using credit default swaps.
Until the bubble burst, no one really knew just how deep the rabbit hole went. Then, everything came crashing down and all of the nasty subprime mortgage and credit default swap issues came into view in their all fugly detailed glory. The first evidence of that was Bear Stearns followed by AIG (and the subsequent governmental bailout). I still think they should have let AIG fold, I digress.
Government and Business
It’s high time that government distanced itself from corporate businesses. It’s high time congress made laws to separate government from business (including political support). It’s high time that government stopped being a pawn for corporate businesses. Forbes clearly seems to think that Free Enterprise requires socialism to function. Free Enterprise is not part of and does not need socialism. Free Enterprise means that businesses can do whatever they need to do (within the limits of the laws) to make their business succeed. Clearly, there have not been laws enabled that have dramatically impacted Free Enterprise. The laws that have been enacted have been placed there to prevent corporations from producing risky investment vehicles with a high likelyhood of crashing down again. If businesses are now floundering, it’s not because of laws. It’s because corporations have lost their way and are still expecting handouts. Well, you can keep your hand out, but don’t expect the government to be dropping any coin in it.
Corporations have relied, no… depended on the US Government for handouts. That time needs to end. Subsidies for business need to go away. Businesses need to fend for themselves just like Free Enterprise mandates. If a business can’t make it on its own, then let it fail. I’ll repeat, LET IT FAIL. Failure is also part of Free Enterprise. Businesses that will succeed, will succeed because they produce a good product or service. Businesses that fail, will fail because they don’t produce good products or services.
Lost our way
America, and specifically corporate enterprises, have lost their way. For far too long have big corporations depended on favorable governmental conditions (sounds like a weather report) to help them stay in business. Well, that train has left (and must leave). It should be solely up to you and your business practices alone to make or break your company. It is the quality of your products, services and support that makes people want to buy your products or invest in your company. Nothing has changed about this aspect of Free Enterprise.
We need to go back to a time when quality was the key. When providing a superior product was the answer to getting people to buy things. If that also means deflation, then so be it. Businesses need to find their way by learning how to do more with less. How to manage their staff better and stop over-hiring. At the same time, many of them need to stop under-hiring and also value the employees that they have right now.
The key to keeping your business flowing is by keeping your employees active, productive and happy. Morale is a big problem in companies during any downturn. Once fear sets in over the next reduction in force (RIF), then morale falls to all-time-lows. No, taking the employees on an outing doesn’t boost morale. The way to boost morale is to stop RIFing the staff out the door. Yes, I know it gives a temporary boost to the stock price and makes the shareholders happy, but that’s a temporary fix with limited effects. Once the dust settles, the employees who are left become disgruntled, unhappy and produce less. This is completely backwards thinking. Which is why business has lost its way.
Shareholder value vs quality products
I know, someone’s going to say that it is all about ‘shareholder value’. That may be the way things seem now, but it is wrong. Currently accepted actions that lead to improved shareholder value tend to undercut production, stifle innovation, reduce profit margins and lower productivity. Why would you intentionally do this to your business? So, while these measures may seem to help the stock price, it does nothing to help the company improve its quality of products and services. In fact, in the long run, these actions almost always negatively impact the bottom line. So, the fundamental question is, are you in business to make the shareholders happy or are you in business to sell quality products and services? This fundamental question must be answered.
The true answer to this question also shows that Free Enterprise priorities today are all wrong. It used to be that the customer is #1. Now, shareholders are #1 and customers are #2. This is both wrong and stupid. Until businesses go back to the idea that the customer is #1, corporations will continue to fail and need governmental subsidies. While shareholders are considered #1, there is really no such thing as Free Enterprise when it comes to multi-million dollar corporations… which is why they always need a handout from the government.
It’s official, Obama is our 44th President
… and there’s definitely a lot of work to be done. The state of the country is in severe economic disrepair, no thanks to our former president, George W. Bush. President Obama definitely has his work cut out for him.
Bush era over
Bush’s errors have left a legacy of his lack of doing ‘the right thing’ for the country by extreme spending on an unnecessary ‘war’ and economic packages which helped only the rich. During Bush’s reign, we have seen favoritism towards big business at the expense of everything else. Yes, I understand certain business lobby groups are very powerful (read give lots of money away) in order to get the things they want. Under Bush’s watch, he ushered in one of the worst recessions in this nation in years! This happened strictly because he was not focusing on the economy as a whole and instead focused on being overly friendly to his big business buddies. But, what’s more important, making those greedy businesses happy or making the country prosper as a whole? Clearly, catering to big business is both short sighted and part of why we are where we are today. Instead of making these businesses more money, they have, in fact, lost more money as a result of our down economy. Short sighted.
Bush also presided over the monetary system that encouraged bad lending practices without reigning these institutions in. He simply turned the other way and ignored it as though it didn’t exist (again, helping his buddies make more money). Instead, he would firmly focus on the middle east and he thought that everything would be fine. Well, everything isn’t fine and we’re paying that price now. Again, short sighted.
Doing what’s right
The hard choice is to do the right thing for the citizens, the economy and the country as a whole, not what’s right for big business. Clearly, if anything, this downturn has taught us what shouldn’t be done. I believe these are the ‘hard choices’ that will face the Obama administration. Choices that we have yet to see in action. Choices that I’m not even sure Obama will face without falling into the same old traps. That’s not necessarily the fault of anyone, it’s just the way lobby groups and our political system works. Politicians tend to cave into these demands when they don’t see any risk. But, that risk is often masked behind rhetoric and double-talk.
Clearly, lowering the fed interest rate 2-3 years ago to a single point spurred the home lending crisis. It’s now starting again with the interest rate at a quarter of a point. We are now facing the same exact housing bubble possibility that faced our country the first time around. Can we avoid this bubble again? Perhaps, perhaps not. Perhaps it isn’t smart to be lowering this rate this low a second time. It’s all about cause and effect and this effect has already been felt in a major way. We don’t need to experience it again.
Tough Choices
There are a lot of tough choices that need to be made, and those choices will affect us every day. For each tough choice to aid our economy, another problem will result. Is there a choice that can be made to turn the economy around swiftly? Doubtful. Recessions come in cycles. This recession came a bit earlier than expected… it’s usually an 11 year cycle and our last cycle was after the dotcom bubble burst in early 2000.
Clearly, Obama’s words are tough talk on bringing this country back. When it comes down to it, can he really make and live up to these tough choices? Will he be able to say no to businesses over the economy?
Blame the consumer
Because of the mortgage crisis, blame is had from all over for its origins, but one finger is always clearly and firmly pointed at the consumer. While the consumer may have been partly to blame for accepting their bad loan, it was entirely the lending instituions’ fault for granting the loan in the first place. If you hand money to a consumer, they’re going to take it. It is the lender’s responsibility to make the proper and correct decision to give money out and to whom. Yes, that also means that the lenders must take responsibility for their actions when giving money to people who should never have been given that money. It’s also the lender’s responsibility for shuttling people into specialty loans that practically ensured failure.
Fixing the lending practices is one of the first hard choices that must be made. Trying to loosen up credit again isn’t necessarily something that we need to be doing as an economy. This is a hard choice, but it has to be made. It’s one of those choices that has clear ramifications. It means that credit will be limited to those with the best credit scores. But, people who don’t have the money to pay off loans shouldn’t be given loans.
Another tough choice that must be made is to force lending institutions to go back to standard fixed rate loans. We must prevent these poorly crafted specialty loans from ever being granted again, no matter how tempting they may appear or how much it may appear to help out the consumer. Balloon, ARMS and introductory rate loans must become a thing of the past.
If there is one single thing to blame in this process, it’s these poorly crafted specialty loans. These loans created the false impression that people could afford a loan that they couldn’t afford. So, in 2 years, when the loan reset (which was clearly written into the terms), this reset ensured a loan failure. Again, the consumer can be blamed here because it’s easy (and because they accepted the terms). But, it’s really the lending instutition’s responsibility for lacking the foresight in seeing that these loan products were destined to fail.
Days ahead
From here, we will have to see where Obama and his administration takes us. Obama speaks of tough choices, but I’m waiting until those words become action on his part. It’s easy to speak them, it’s much tougher to follow through. We defnitely need a ‘buck stops here’ President who is willing to lay down the hammer. We no longer need, nor can our country afford, a president who caters to the rich. We need a president who is willing to work to bring the country together as a whole rather than filling his own bank account.
Obama, we’re ready and waiting for you to put your tough talk into tough action.
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