Calling Obama And Washington Back To Reality (Guest Voice)

Calling Obama And Washington Back To Reality

by Marc Pascal

Now that the sky is literally falling, what are you going to do? I realize that less than 100 days into any administration is too soon to expect immediate results. Considering this mess is so large, complicated, interconnected, and global, it will not be completely resolved for several years. However, the U.S. economy and all Americans expect some pretty quick bi-partisan political efforts to address these serious problems.

We may not have control of events or situations, but we certainly are responsible for how we respond to them.

Reorganizing our entire banking and financial sector should not degenerate into a partisan ideological brawl or worse yet a “wait-n-see” game. The rest of the economy is not going to lift that sector out of its self-induced implosion. We need to immediately create a new parallel banking system while we clean up the old one over a protracted period of time. Businesses and individuals need to obtain credit in 2009 and 2010 from viable national financial entities flush with adequate reserves and not crippled by any toxic assets.

The original $787 billion stimulus package, coupled with the $400 billion budget continuing package filled with $8 billion in special congressional projects, are woefully inadequate if the goal is to create millions of new jobs in both in the public and private sectors. Since starting in December 2007, this economy has shed more than 4 million jobs, is losing them at a pace of over 600,000 per month, and will likely shed another 5 million jobs by the end of 2009. And without any intervention, another 6 million more jobs will be lost in 2010.

Those depressing official numbers do not include those whose unemployment benefits ran out even with all the extensions, those who never qualified for unemployment benefits, those who have given up looking for work, and those currently working in part-time positions well below their skills and experience. The army of unemployed and underemployed is now around 25 million. By the end of 2010, it could easily double. Then the rate of foreclosures, non-payment of auto and student loans, and credit card defaults will all increase exponentially, dragging down the economy and the financial sector as well.

The current Treasury Secretary Timothy Geithner appears completely lost on how to proceed. He may be still too intellectually and emotionally tied to his past friends and mindset from his years at the NY Federal Reserve, the IMF, and the Wall Street Brokerage houses that are his professional background. He may be completely unable to think outside the box. His recent home foreclosure rescue proposal is so unnecessarily complex and helps so few people as to be completely useless. Even though the fault of this massive economic downturn belongs to hundreds of other actors making decisions long before today, his continued insistence on throwing public money to buy worthless paper in order to prop up zombie banks and the credit default swaps of AIG, is woefully insufficient if we really need a healthy and viable banking and financial sector now, not years from now.

The President must demand that House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid convene their respective bodies continuously for the next 6 months until we get a firm hold of this national and international crisis. Business as usual is not acceptable. Debating the specifics of health care, educational, environmental, and social security reforms can wait until early 2010. We’ve lived with their many imperfections for decades so another year is not going to make any difference. However, if we do not fix our financial and banking sector, start creating millions of new jobs, and restart the economy on a new, long-term rational and sustainable basis, we will not have any workable platform or functioning economy to debate any desirable reforms in all the other areas of our society.

The SEC should modify the mark-to-market asset valuation rules. Banks should use an alternate average asset valuation system based upon calculating the average of (1) the original price of the asset, (2) all its fair market values every 6 months since its acquisition, and (3) the most recent valuation at least 2 weeks before any required reporting date. This should eliminate the current extreme discounts on asset values because of the breakdown in the markets in which those assets traditionally trade. Predicting likely defaults and non-payments of various debt instruments will be much more difficult and time-consuming. In the end, any entity set up to reorganize the zombie banks would have to determine the final asset valuations for resale purposes to third parties.

A new National Infrastructure Bank for investing in public roads, schools, highways, bridges, airports, seaports, mass transit, high speed and conventional rail, and new energy sources and technologies, would also be another key component of our national recovery. The sale of several trillion dollars in tax-exempt government-insured bonds would be a great new investment vehicle for the general public and global investors. It certainly would provide greater long-term public benefits and provide safe, steady returns based upon building tangible assets. It would not exist to trade in worthless paper and overpriced assets as our prior bubble investments did during the past few decades. It would require allocating specific sources of tax revenues to pay off the principle and interest on the bonds it issues.

Finally, a new trust fund of at least $20 billion should be established and distributed to qualified venture capital firms and local SBA development centers. It would provide seed capital to start-up private companies and financial help to expand existing small enterprises that would eventually operate nationally and globally. The driving engines of our capitalist system are new businesses that employ people in providing new products and services. This was an unfortunate spending omission from the recent stimulus package, missed by both Republicans and Democrats.

We’re now at war for our country’s immediate and long-term economic survival.

We should be dedicating our full attention and public resources to addressing this in a bi-partisan fashion over the next 6 to 12 months. Otherwise, a long and deep recession will make this world a far worse place to live than we ever imagined. We owe it to ourselves and future generations to step up to this once-in-a century challenge.

Instead of posturing for the 2010 and 2012 elections, we must be ready to face this momentous reckoning for all posterity.

Marc Pascal obtained his undergraduate and graduate degrees in music, business and law (B.A., J.D. & M.B.A) over 15 years ago from a respected university in Ohio. Between 1986 and 1998, he served for several years as the in-house counsel for 2 large public corporations, and he also periodically practiced law in Cleveland, OH. Between 1991 and 2006, he started and managed 4 different new business ventures in the Midwest with various friends, all of which were a lot more fun. Since 2006, he has been an independent management and business consultant serving various private enterprises in the Phoenix area. He resides there with his spouse of 11 years and their young son. He regularly guest posts, comments and blogs on TMV in order to exorcise his demons since his consulting business has shrunk considerably during the past 3 months.