Economy & Budget

America: We need to nation build at home

A $1.2 trillion investment in rebuilding American roads, bridges, transit and water systems would create 27 million jobs over the next 5 years. In the first year alone, the economy would add 5.2 million new jobs and grow by $400 billion. In the second year unemployment would be reduced to 5.6%. These are among the findings of the New America Foundation report The Way Forward.

Nearly everybody agrees that America’s infrastructure is broken and is in need of immediate repair and replacement. The American Society of Civil Engineers gave America a D grade in infrastructure quality and has estimated that $2.2 trillion is needed to bring our nation’s infrastructure to good repair. The World Economic Forum (WEF) ranks the United States 24th in infrastructure quality.


Renewed focus needed on American economy

As we get closer to Election Day and Americans decide who will lead this country over the next 4 years, one item has become abundantly clear – voters want the president and the Republican Congress to focus on the economy and jobs. With an unemployment rate at over 8 percent and thousands of Americans suspending their search for work, voters are demanding answers.

In every election, Americans vote with the wallets and pocketbooks.  Since the founding of our great nation, American families and parents have wanted their children to have a better life than their own.  This ideal, once thought to be guaranteed, is in jeopardy.  

The time has come for President Obama and the Republican Congress to speak in terms that all Americans can understand and appreciate. Keep it simple. Both parties must outline polices that will work to improve our country's economy and to help create new jobs.


Too big to fail is too big to exist

Is it any wonder why banks like JP Morgan can take such great risks?  We have set a precedent whereby our major banks operate with an implicit guarantee that the government will be standing by to bail them out. JP Morgan’s multibillion dollar debacle is just the latest example of why we must better regulate Wall Street, and break up entities that are deemed too big to fail. Taxpayers may not have needed to bail JP Morgan out this time, but a recent history lesson should remind us why banks that are too big to fail are too big to exist.
In October 2008, some big Wall Street firms that had made bad investments in the imploding mortgage market decided that taxpayers should cover their losses. Wall Street flooded into Congress and demanded that taxpayers bail them out by using tax money to buy $700 billion worth of their bad mortgages. Wall Street called them “toxic assets” and called their bailout plan TARP, the Toxic Asset Recovery Program. The plan was for the taxpayers to buy their near-worthless toxic assets, so Wall Street could recover their investments. Our cash, for their trash.


How Obama's 'Too big to fail' policies have made banks too big not to fail

Last week, JP Morgan Chase announced that it had a $2 billion-plus loss on a synthetic credit security hedge as esoteric as the name would suggest.
That is the bad news. The good news?

Markets continue to function. Facebook is still planning its much anticipated IPO. Sales of existing homes were 5.3 percent higher in the first quarter than a year ago.  The world continues to spin.

Meanwhile, shares of JP Morgan are down a reasonable amount for a corporation that just lost assets equal to 0.1 percent of its total assets under management. An efficient marketplace penalizes bad news and rewards good.


We need a plan to turn the economy around

Every day I hear stories of how more layoffs are threatened and economic uncertainty is being brought about by bills such as the health care law and regulations that stifle innovation. In order to create jobs and get folks back to work, Congress needs to work together in a bipartisan way to be a part of the solution.
The best way to lower the unemployment rate and promote job growth is to create an atmosphere that rewards hard work, keeps government out of the way of innovation and incentivizes our businesses to invest in new jobs and equipment.  However, we cannot achieve this if the current administration continues to propose and enact the same failed economic policies. Policies from Washington are making it difficult for small businesses to grow. Massive government expansion into health care, banking and a wide variety of other areas has become a major hurdle to job creation — and small businesses are being hit the hardest.


It's time to end bailout subsidies

The 112th Congress was supposed to change the way business was done in Washington. We were going to make tough choices to lower spending and put our country back on a path to prosperity. We were going to be more open and transparent to shine light on a process often darkened by backroom deals. And, we were going to end the practice of earmarks so that taxpayers were protected from funding powerful Members’ pet projects back home.

Yet, once again, this Congress takes two steps forward and one step back in the name of political expediency. This week, the House of Representatives will vote on the National Defense Authorization Act (NDAA) and unfortunately, I will have to propose an amendment which bans the government from once again interfering in the private market to prop up a failing business.


SAFE Act necessary in wake of JP Morgan loss

When JP Morgan, the nation’s largest bank reports a $2 billion gambling loss, it’s time to reconsider a measure that failed to make the cut when Congress approved financial reform law in 2010: a limit on bank size. On May 9, Senator Sherrod reintroduced  the Safe, Accountable, Fair and Efficient Banking Act (SAFE  Act). This limits any bank from holding more than 10 percent of total U.S. deposits, and caps total liabilities to about $1.3 trillion.

Even bankers agree that we haven’t solved the “too big to fail” problem, where failure of a large bank could lead to another taxpayer bailout. 

Yes, Dodd Frank includes many important tools to restrict excessive risk-taking, such as the Volcker Rule. CEO Jamie Dimon, however,  claims the Volcker Rule didn’t apply. He claims the failed bet constituted a “hedge” undertaken for risk management. If risk management undertaken by the firm credited with inventing the discipline can go this wrong, sterner measures may be necessary. MIT economist Simon Johnson concludes, “The lessons from JP Morgan’s losses are simple. Such banks have become too large and complex for management to control what is going on.”


No more delay to help homeowners

Imagine that your neighbors’ house is on fire. The family calls the fire department but, when they arrive, they’re carrying hooks and ladders but no fire hose.  As the flames begin to consume all that your neighbors have built over the years, and spread dangerously close to your own home, the firefighters explain that they’d be happy to help, after they perform several feasibility studies, run surveys, and complete a cost-benefit analysis.

That’s essentially the message Ed DeMarco, the acting head of the agency that oversees Fannie Mae and Freddie Mac, sent Americans this week.  DeMarco had promised a decision by May 1st on whether Fannie and Freddie can use the critical tool of principal reduction—bringing what struggling homeowners owe down to a fair rate that they can successfully repay—in our nation’s effort to stem foreclosures and rebuild our economy. But on May 1st DeMarco’s agency, the Federal Housing Finance Agency, said it was delaying a decision indefinitely. “FHFA continues to work on its principal forgiveness analysis and is in discussions with the Department of the Treasury,” an FHFA spokeswoman said. “A final determination…is being deferred until we conclude these activities.”


Reform and reauthorize Flood Insurance Program now

The federal government’s National Flood Insurance Program will expire at the end of this month. The next day, Hurricane season begins. As these two events draw near, it is critical that the NFIP be reauthorized for the sake of our economy, our communities and the program’s 5.6 million policyholders.
This vital program has had a rocky history in the past several years. It was extended for brief periods and actually lapsed four times in 2010. The consequences of allowing that to happen again could be dire.

The Federal Emergency Management Agency has said that if Congress fails to reauthorize the NFIP, the agency would not be allowed to issue new policies, renew existing policies or make policy modifications. This would create a great deal of uncertainty for the thousands of communities and millions of policyholders who rely on flood insurance provided by the NFIP as a source of protection against the property losses that result from flooding, the most common natural disaster in the United States.


Taking us backwards on nuclear spending

America is in the midst of a major fiscal crisis. Spending will outpace revenue by more than a trillion dollars this year. Red ink hovers over all government decisions. At the same time, our country faces multiple security threats. Transnational challenges including terrorism, the spread of weapons of mass destruction, and cyber attack loom.

Unfortunately, the National Defense Authorization Act for 2013 being marked-up by the House Armed Services Committee (HASC) today misses the mark. Rather than comprehensively addressing these threats in a manner that deals clearly with both our security and fiscal challenges, the HASC bill takes a step backwards. Judging by the proposals in this bill, one would think that the Soviet Union hadn’t dissolved and that taxpayer funds were limitless.  Remarkably, this bill funds pet nuclear projects as if the Cold War were at its peak while busting the fiscally-prudent defense spending cap that Congress agreed to last year as part of the Budget Control Act (BCA).