Class Warfare or Inexperience?

I was watching the recent speech the President made concerning a new policy for housing. In this blog I have often argued that no real recovery will sustain until we have good policy attacking the real issues in the housing and financial markets. Watching the speech I could not help but think that this might be a case of doing something that moves in the right direction but which might be enunciated wrongly or positioned inappropriately. As such, it will probably fail. Then I thought a little while longer (ie downed another JD) and it occurred to me that what bothered me about this speech was similar to the indigestion created by previous Obama policy speeches.

His strongest political opponents might rail that despite Obama’s protestations, he relishes in class warfare. They might worry that this new housing solution (which makes it easier for people to remain in their homes and is financed by increases taxes on banks) pits the poor against the rich. That’s a viable option but in this posting I am going to try to convince you that the real problem with Obama’s policies is simple inexperience.  

A good way way to summarize his experience is as a community organizer. He is a speech maker and a rebel rouser. He got a degree at Harvard in law and the closest he came to an MBA degree or an economics course is when he made a wrong turn on his way to the theatre building. There is nothing wrong with this. He is what he is and someone with those kinds of skills could be a great president. But let’s face it – in his case it is the words he chooses in his speeches that belie his real knowledge and experience.

What am I blathering about? Let’s take a funny pill that makes this moment not a presidential election year. Let’s suppose we are simply interested in defining some things as they are. What is a bank? What is a university? What is a pipeline? What is a pharmaceutical company? What is a ________ (you fill in the blank)? What is a bitter and why do people put them in perfectly good drinks?

Let’s consider these companies for a moment – bank, pipeline, pharma,university, etc. Companies exist to produce a good or service for a customer. These companies I mentioned above exist to serve real and important needs for people who want an education, a safe place to put their money, to receive in their home town oil or gas that was produced on the other side of the country, or to take a pill that makes them dance like James Brown (yeow). Okay Prince and Michael could dance okay too.  To serve these needs these companies find investors or savers who would like a good return and use the proceeds to buy or pay for real estate, equipment, materials, workers, and other means of production. Image how hard all that is – especially when other companies are competing with you and try to beat you to the consumers.  And of course these companies have to deal with theft and weather and regulations and all sorts of factors. It is pretty dicey. The closest I came to all this was a Kool-Aid Stand in the summer of 1962 and it gave me so much stress I turned to a life of economics and JD.

Okay, some of you want me to put away the violin and crying towel. But it is true – big or small, there are companies in every country that assemble people and resources every day who take risks and work hard to meet our needs. Owners, managers and employees of these companies also are major sources of charitable giving, community arts programs, political parties, and more. Charities in my community take this support and give money and/or services to the elderly, to people for food, they build houses for the poor and they contribute to the Boy’s and Girl’s Club and many many activities that are good for all of us.

Sorry if the above seems too naive but that is the truth. It is also the truth that some companies – large and small – take advantage of their workers, their customers, and their investors. And that is why I am an economic conservative. Look in any principles of economics text book and you will find a chapter that sets out numerous good and accepted reasons why government needs to exist to police and regulate private enterprise. When small or large companies break our laws or when they simply take advantage of us in legal ways, I believe it is up to government or other organizations to expose and prosecute them.

So when I hear my President’s speech I am offended and disappointed that he neither understands nor seems to care a lick about the difference between good bankers and bad ones. Go back and carefully listen to his words as he labels them all monsters. These monsters make you read small print. These monsters do this to trick us so they can earn unlimited profits. These monsters are smart people who know that the rest of us are dumb. The President waved in front of you a simple mortgage document. Why? Because mean and evil bankers create complicated forms to confuse you and hurt you. All of them do it. Right? There is apparently no other reason for a long and complicated form. 

I don’t think so. What is wrong with this supposedly educated and intelligent President is that he thinks that he knows how to serve the needs of the customers better than thousands of bankers who have been legally and helpfully doing business for decades and decades? Why is it that these folks who day in and day out support their customers, employees, and communities can be called monsters that cannot do their jobs appropriately without the President looking over their shoulders at every detail of their business? Why in his remarks does he aim his poison darts directly at bankers and mortgage lenders (and college presidents, and pipeline executives, and drug makers...) when most experts already admit that a major share of the housing and financial collapse had roots in (1) expansive monetary policy which kept rates too low for too long, (2) government agencies that promoted risky lending, (3) selfish and greedy individuals who took money knowing that with even small changes in their economic situations they could not afford to pay for the money they borrowed, and finally (4) people making what they thought were prudent decisions but not believing that the housing bubble would burst as soon as it did.

In other words, while bad bankers might have some share in the blame, clearly the housing problem was much more complicated than our leader eluded when the cameras started rolling. There are several hypotheses about why an intelligent President could ignore all this. First, Obama really does not have enough knowledge and experience to understand the difference between a good company and a bad one. The second possible explanation relates to the huge number of Is in his speeches. Is he an egomaniac who must be able to solve all the problems of all people all the time? Third, is he simply too lazy to do the real research into what caused problems between companies and their customers – to dig into the facts about bankers, for example, who did break the law and who did purposely swindle people out of their hard earned money. 

Does he really think that a simpler mortgage document is going to help banks make better loans? Will his one page document help prevent banks from making bad loans? Fourth is that Obama is simply playing to his base – a base that is already prejudiced against companies and will take any opportunity to impugn not only the companies but the market system in which they operate. When playing to his base does he not understand that all banks and financial institutions have already faced new and tighter regulations and have been asked to reduce leverage and keep more capital available for future bad times.

It is quite possible that some form of bank tax is necessary to support solutions to the housing and financial crisis. This ought to be on the table. But it ought to be on the table with a true examination of all the facts and causes and all the appropriate ways of funding his solutions. And of course, pointing his boney finger once again at companies in unrealistic, misleading and inflammatory ways is nothing but a prelude to his own downfall.  Just as the Tea Party arose to protest his unreasonable actions in his first two years, he stands to inflame and irate many rational voters if he continues to paint dangerous stereotypes that harm innocent people. These and other companies always have and always will be the institutions that create the sustainable employment opportunities. This is not class warfare – this is just ignorance bad politics.