Samuel Freeman

EDINBURG, Feb. 7 - Undeniably, President Obama inherited one of the worst messes in presidential history, and consequently, has had a rough first year. 

His State of the Union address gave him a bump in the polls that now has faded. As of 6 Feb., Obama’s approval rating had slipped to tie his previous low of 44 percent. Ominously, the percentage of Americans who strongly disapprove of his job performance is 41 percent, almost as high as his overall approval rating. Only 15 percent of Americans strongly approve of his job performance.

“One year ago, I took office amid two wars, an economy rocked by a severe recession, a financial system on the verge of collapse, and a government deeply in debt… So we acted. One year later, the worst of the storm has passed… But the devastation remains: One in 10 Americans still can’t find work.  Many businesses have shuttered.  Home values have declined… The recession has also compounded the burdens that America’s families have been dealing with for decades, the burden of working harder and longer for less... They don’t understand why it seems like bad behavior on Wall Street is rewarded, but hard work on Main Street isn’t, or why Washington has been unable or unwilling to solve any of our problems.”

Let’s examine some of those statements, and others to follow next week, both to evaluate what Obama has accomplished and failed to accomplish, and to gain understanding of the drop in his approval ratings.

With our economy basically shipwrecked, economic issues appropriately took center stage in his campaign, his first year in the presidency, and his State of the Union Address. His grade for his economic policies, at best, should be no more than C-. POSSIBLY the “worst of the storm has passed,” but there is a lot of bad economic news sitting on the horizon. Our standard of living continues to fall. About 10.7 million homeowners owe more on their loans than their homes are worth. The home mortgage mess remains bleak. Credit Suisse predicts, over the next three years, between 6.3 and 9.0 million homes will be forced into foreclosure. Given six million homes were foreclosed on last year, those numbers are optimistic. Initially, the foreclosure boom was driven by sub-prime mortgages resetting to higher interest rates. That problem is about to rise again, as more variable sub-prime mortgages are about to reset to higher interest rates. But foreclosures today are being driven as much, or more, by people losing their jobs.

Supposedly, the economy is in recovery. President Obama said as much in his address. But we need to understand, whether we are in a recession or a recovery depends almost solely on how Wall Street is doing. IF the stock market is up, we are in recovery. If the stock market is down, we are in recession. What is happening on “Main Street” - whether people still are losing their jobs, whether the unemployed are finding jobs, whether people can pay their bills or stay current with their mortgages - all are totally irrelevant to the press and government. Herein lies the rub. Until recently, the stock market has been making relatively steady gains over the past year. Thus, we are in “recovery.” But it has been a “jobless recovery,” because jobs are not being created. Over the past two weeks, more than 930,000 workers filed first-time applications for unemployment compensation. Folks, if we are shedding about 470,000 jobs per week, we ain’t in no recovery. Actually, there is no real recovery at this time, just a paper recovery - a recovery at the top, as money is put into the pockets of the rich, with the dishonest contention it will “trickle down” to the rest of us as banks “free-up" credit.

Obama said we had to bail out the banks, even though he “hated it.” Maybe he hates taking orders from his masters, but I doubt it. Otherwise he would not have populated his administration with the likes of Lawrence Summers and Timothy Geithner; and he would not have re-nominated Ben Bernanke for another term as chairman of the Federal Reserve. When the foundation for the financial meltdown - sub-prime loans, derivatives, default credit swaps, bank deregulation - was being laid, these three excuses for human beings worked on Wall Street, up to their corrupt necks in the shenanigans that brought our country to its knees. These people - along with the top executives of all of the nation’s major financial institutions - belong in prison.

While we could not allow the banks to fail, as some advocated, the Bush-Obama bailouts were not right either. Consequently, we remain mired in recession and, more importantly, the things that needed to be done to move us out of the recession, to put our economy back on a firm foundation, and to implement measures to prevent this kind of mass larceny from happening again, have not been done. Talk is cheap; and as well-crafted as Obama’s address may have been, his words are worthless, because he has followed the wrong policies, and has not been honest with the American people.

We must not forget the first bank bailout, the “Troubled Asset Relief Program (TARP), began under President Bush. Obama quickly followed with his own “welfare for the rich” give-away. Basically, the government “loaned” hundreds of billions to financial institutions for them to use to reconcile their bad debts. Some strings were attached that the bankers did not like to include requiring them to give up their bad home mortgages. The banks resisted. If the mortgages are bad, why not give them up? The banks wanted to write off their losses with TARP funds, but keep the assets. I want to sell my 1989 Supra, but still keep it. So far, I have not found anyone willing to buy my car, and then allow me to keep it. Maybe I should have contacted President Bush. Maybe Timothy Geithner or Ben Bernanke can help me.

Actually, Bernanke is the bankers’ “go to guy.” Not liking the very modest requirements TARP placed on the banks, Bernanke lowered the Federal Reserve interest rate to ZERO. That’s right; banks are borrowing trillions from the Federal Reserve at zero percent interest. To sweeten the deal, Bernanke then allowed banks to deposit their borrowed money with the Federal Reserve, and the Federal Reserve pays the banks interest on the money they deposited with the Fed. Now, let’s get this straight. The banks borrow money from the Fed at zero percent interest, then deposit the money with the Fed and earn interest on money they borrowed. I’m sorry, my brain is sending an error message.

Obama boasted in his speech about how the banks had paid back most of the TARP money, but did not bother to explain they did this by borrowing trillions from the Fed at zero percent interest, and then using a portion of that to pay back the TARP “loans.” Once those “loans” were paid, the banks no longer were under any of the onerous TARP regulations, nor any other regulations of any consequence. Thanks for that goes in part to Summers, Geithner and Bernanke, who were pom pom girls for deregulation in the Bush regime. Thanks also go to our good buddies like Phil Gramm, who passed financial deregulation bill after financial deregulation bill until finally, Glass-Stengall, the last meaningful regulation legislation, was repealed. “Banks Gone Wild.” Somebody should make a peek-a-boo video and advertise on late night TV.

And continue to go wild they have - not lending money for home loans, or to restructure troubled loans to enable people to stay in their homes, or to small businesses for investments in equipment and supplies, and hiring workers. No. That would be economically beneficial, but not nearly sufficiently profitable to satiate financiers’ greed. They have entered international speculation markets where the promise of profits is far greater, creating new speculation bubbles that ultimately will burst, sending new shock waves around the world, and push the U.S. deeper into recession. But, hey, it’s OK. Really. The rich will be richer still, and the “recovery” will get another “boost” while unemployment continues to rise and the standard of living continues to fall, just as Obama noted in his address.

Obama understands the problem; he just is not willing to do what needs to be done.

Samuel Freeman is a political science professor based in the Rio Grande Valley. His weekly Left Is Right column appears exclusively in the Guardian.

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