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PRESIDENT BARACK HUSSEIN OBAMAWALL STREET BAILOUTFebruary 2009Hedge Fund Fraud (Feb 2009) It may be difficult to grasp the scope of a $50 billion fraud on Wall Street, so think of it this way: it's three times the size of the loan that the Big Three automakers tried squeezing out of Congress this week. No help? How about 1/14th the size of Hank Paulson's TARP fund to rescue … er … Wall Street? Feds arrested the former chairman of Nasdaq for perpetrating the biggest financial scam since the UN's Oil-for-Food program:A Wall Street powerbroker for nearly 50 years who built an influential firm has confessed to a massive fraud scheme that will cost investors at least $50 billion, federal authorities say.Madoff allegedly told senior employees that his firm had been insolvent for years and that he was running a Ponzi scheme to make money. Madoff used incoming investments to show results for previous investors, a mirage that would eventually leave the last set of investors holding a very large bag. The size of that bag at Madoff's arrest? About $7 billion in redemption demands that Madoff was desperately trying to cover. Why did Madoff tell his employees what was happening? He wanted to warn them about the storm to follow, but not before he fleeced an additional $200 million or more to give his senior employees some golden parachutes before Madoff turned himself in to the authorities. One of the employees tipped off the FBI, which swooped in to end Madoff's fraud. Madoff got released on a $10 million bond pending his trial. Believe it or not, that's twice the maximum fine he could get for his crime. Of course, Madoff could also get 20 years and be forced to provide restitution, but somehow I doubt he'll have much liquidity left by the time a verdict gets delivered in the case. We know that this financial crisis has its roots in government distortion of lending markets and the irrational escalation in housing prices that followed, but that doesn't mean fraud doesn't occur as well. If the feds have the scale correct in the Madoff case, it will send shock waves through the investment community and could fatally undermine confidence in Nasdaq as well. (Source: Hot Air Blog.) (SITE NOTE: The Madoff case is dragging. Madoff's wife withdrew 1.5 million from company the day before Madoff was arrested. Madoff's funds are rumored to be hidden in the Caymen Island banks. On 7 Mar, disgraced financier Bernard Madoff appeared to be moving closer to a guilty plea, waiving his right to have a grand jury review the allegations against him, people involved in the case say. Prosecutors are expected to file additional charges against Mr. Madoff next week in connection with an alleged multibillion fraud, these people say. Mr. Madoff could plead guilty at an arraignment hearing set for Thursday, or he could deny the charges at that time and seek a jury trial. Update on 13 Mar was that Madoff went straight to jail -- and his funds in off-shore accounts still haven't been found.) Stanford's Alleged Fraud of $8 billion (Feb 2009) The billionaire banker accused of scamming $8 billion, R. Allen Stanford, was located by FBI officials and served with civil papers by the SEC, putting an end to a nationwide search. In Feb, Stanford disappeared but was found in Virginia and subsequently surrendered his passport. The SEC accused Stanford of defrauding 50,000 customers around the world by lying about the return rate on certificates of deposits offered by his firm, Stanford Financial. Losses to investors may be $8 billion or more. U.S. Marshals seized his company and its assets, under an emergency federal court order sought by the SEC. Federal authorities tell ABC News that in addition to the SEC complaint, Stanford is under investigation in connection with an alleged drug money laundering scheme for Mexico's Gulf Cartel. In the meantime, the SEC has begun to seize an array of private property owned by Stanford and his firm. Stanford's fleet of six private jets were recalled to the corporate hangar at Sugarland Airport outside Houston, including the Bombardier-700 luxury jet that was used exclusively by Stanford and considered the "Flagship of the Stanford Empire," according to aviation websites. According to flight records, the Stanford jet flew into Washington, D.C. earlier this week and returned to Houston yesterday afternoon. Flight crews said Stanford was not seen on the plane when it unloaded. (Source: ABC News.) Randall Hoven: In case you were wondering, take a trip to Opensecrets.org and search on Bernard Madoff as a contributor. My search says he gave $183,250 over all election cycles, with a cool $100,000 going to the Democratic Senatorial Campaign since 2005 and most of the rest going to individual Democrats.  June 2009Obama Administration to Seek New Power for SEC on Executive Pay (Jun 2009) The Obama administration will seek new powers for the Securities and Exchange Commission to force firms to let shareholders vote on executive pay and make directors who set compensation more independent, an administration official said. Today's proposal, subject to congressional approval, would cover all public companies. President Barack Obama has long supported giving shareholders nonbinding votes on bonuses, salaries and severance packages. The administration also will name a "special master" to monitor compensation plans for firms receiving exceptional assistance in the financial rescue.The changes are aimed at reducing systemic risks and quelling a political uproar over bonuses paid to executives whose companies were bailed out by the government. Treasury Secretary Timothy Geithner has repeatedly blamed pay standards tied to short-term profits for contributing to the worst financial crisis since the 1930s. "It clearly is going to force companies to be more transparent with their disclosure" on compensation, said Irv Becker, national practice leader for Philadelphia-based Hay Group's executive compensation practice. If the measure is implemented, it likely will take several years before shareholders begin to confront management, he predicted. "It'll kind of be novel the first year, maybe the first two, and then likely be a little bit more serious in future years," said Becker, a former head of compensation and benefits at Goldman Sachs Group Inc. Treasury Meeting Geithner is scheduled to meet today (10 Jun) with SEC Chairman Mary Schapiro, Federal Reserve Governor Daniel Tarullo and executive- compensation specialists at the Treasury. The Treasury chief said yesterday that the Fed and other bank regulators will define "standards and principles that supervisors would use to help bring about reforms in compensation practices in the financial industry." "A centerpiece of sensible reforms will be to tie compensation to better measures of long-term investment and return, and to adjust them to reflect the risk" Changing executive pay practices is part of a broader initiative by Obama to overhaul U.S. financial rules in the aftermath of the crisis. Obama will unveil his "series of specific proposals" streamlining and reorganizing regulation on June 17, White House spokesman Robert Gibbs said. Regulation Overhaul The Treasury will name Washington lawyer Kenneth Feinberg to review compensation at companies that have received infusions of government capital, the official said. Feinberg, who works as a mediator, is expected to take the job without pay. Feinberg is retained by corporations, insurers, government agencies and courts to help settle cases. He's best known for being named the special master of the September 11th Victim Compensation Fund, which made payments to the victims of the terrorist attack. Geithner has been a proponent of so-called say-on-pay rules since taking office. In a May 18 speech in Washington, he said that giving shareholders a vote on compensation would bring a "kind of disclosure that can help a lot." In developing the executive compensation rules, the Treasury must reconcile the Obama administration's initial pay policy with measures since enacted by Congress. Senate Banking Committee Chairman Christopher Dodd added a provision to the $787 billion stimulus legislation passed in February that tightened pay restrictions at firms that took government capital, while also making it easier for banks to repay their aid to escape the new regulations. Dodd's Measure Dodd's provision restricts bonuses for senior executives and the next top 20 employees at companies getting more than $500 million from Treasury's financial-rescue fund. Limits on bonuses apply to other companies on a sliding scale based on how much assistance they received. The Obama administration's original proposal, released Feb. 4, limited salaries and required bonuses to be paid in restricted stock. This was intended to provide incentives for bank executives to consider firms' longer-term interests, without setting an overall cap on compensation. Geithner hasn't said how he plans to reconcile the two policies, other than to say that the Treasury will implement the law. The Wall Street Journal reported that the administration intends to drop its own proposals and just leave the firms that received federal rescue money subject to the Dodd measures, citing people it didn't name. Bank of America Corp. and Citigroup Inc. are among the firms that continue to have government shares. (Source: Bloomberg.) Why Obama Blinked On Merging The CFTC And The SEC (Jun 2009) Barack Obama's plan to overhaul the structure of financial regulation leaves in place the split between those regulators who supervise the trading of futures at the Commodities Futures Trading Commission and those who supervise stock trading at the Securities Trading Association. And while there may be good reasons to keep the commissions separate, mostly likely none of those informed the Obama administration's decision. Instead it was probably just cold politicial calculation. Merging the commissions has long been a popular idea with reformers. It was proposed by Hank Paulson when he was Treasury Secretary, and it is supported by many who think that the divide between the New York centered functions at the SEC and the Chicago centered functions at the CFTC has created unhealthy regulatory gaps. Opponents of merging the commissions can argue that regulatory consolidation rarely leads to greater effeciency, that the Chicago-New York divide in the regulatory structure is beneficial because it reflects a real divide among trading cultures, that years of turf battles that follow regulatory mergers would be too much during while the financial crisis continues and that competition between regulators for jurisdiction leads to bettter regulation. But the merger's greatest obstacle weren't these ideas. Indeed, it's hard to find anyone willing to make these points--they're more like debaters points that you could imagine an imaginary opponent of reform making. Instead, what seems to have made merging the commissions is that fact that each commission is supervised by different legislative committees. The SEC is regulated by the Senate Banking Committee and the House Financial Services Committee. The CFTC falls under the oversight of the Agricultural committees in each house. Any consolidation would deprive one set of committees of its jurisdiction, a serious loss of power, influence and access to campaign cash for the leaders and members of that committee. Most likely, it would have been the agricultural committees that would have lost their supervisory role. And, as the steadfastness of agriculutral subsidies demonstrates, those committees are some of the most powerful on Capitol Hill. Obama needs support of Congressional and Senate Democrats to pass not only the financial regulatory reform, but also his climate and health care proposals. He mosst likely decided he couldn't risk angering the members of the agricultural committees by proposing taking away their authority. And so one of the most basic pieces of regulatory change was dropped for political considerations. (Source: Business Insider.) U.S. may seek new rule for money market funds (Jun 2009) Regulators should consider requiring money market mutual funds to float their share prices rather than maintain the constant $1-a-share value that has made the industry a popular haven for investors' cash, the Obama administration says. The idea is mentioned in the wide-ranging plan released this week by President Obama to revamp financial-industry oversight. The question, the administration says, is whether it would be better for the financial system overall if investors were weaned from believing that money funds can't lose principal value. When a major money fund suffered investment losses that caused it to slightly drop its share price in September, the news triggered a run across the $3.6-trillion industry. That forced the Treasury to step in and issue a blanket guarantee of money fund assets to calm investors. "The vulnerability of money market funds to 'breaking the buck' and the susceptibility of the entire . . . industry to a run in such circumstances remains a significant source of systemic risk," the administration says in its blueprint for regulatory reform. Because money funds own mostly short-term, high-quality corporate and government IOUs, they haven't been required to reflect daily fluctuations in the value of those IOUs in their share prices, unless the securities permanently lose value (say, in the case of a bankruptcy). That has allowed the 38-year-old industry to maintain $1-a-share pricing, which to investors has made the funds appear as safe as federally insured bank accounts. The industry fears that allowing money fund share prices to float, even if the daily changes were tiny, would destroy investors' faith in the funds. Given the record low yields on money funds -- an average of just 0.13% currently, according to iMoneyNet Inc. -- even a slight share decline could wipe out a year's worth of interest earnings. The administration said it was open to other ideas to reduce the risk the industry poses to the financial system, including requiring the funds to buy emergency insurance from private sources to damp the risk of runs. The Securities and Exchange Commission will take up the question of money fund reforms at a meeting Wednesday and may ask for public comment on the $1-a-share pricing issue and other possible changes in money fund regulation, Bloomberg News reported. (Source: LA TIMES.)  September 2009Burned by Obama -- Wall St. execs feel betrayed (Sep 2009) In the depths of the financial crisis last year, people like Morgan Stanley's John Mack, BlackRock's Larry Fink, Greg Fleming (then of Merrill Lynch), JP Morgan's Jamie Dimon and Goldman Sachs' Lloyd Blankfein were telling everyone that candidate Barack Obama was a "moderate," and moderation was what this country needed.What a difference a year makes. They won't admit it in public -- but in private conversations, the top guys on Wall Street are feeling burned. The guy who seemed like such a steady voice -- vowing to curb runaway spending and restoring order to the banking system and the economy as a whole -- is instead so driven to achieve his big-government policy goals that he and his policy people are ignoring their own economic advisers on the severe economic costs that his agenda will cause. O: Ignoring his own economic team? I'm told that Treasury Secretary Tim Geithner and chief economic adviser Lawrence Summers have both complained to senior Wall Street execs that they have almost no say in major policy decisions. Obama economic counselor Paul Volcker, the former Fed chairman, is barely consulted at all on just about anything -- not even issues involving the banking system, of which he is among the world's leading authorities. At most, the economic people and their staffs get asked to do cost analyses of Obama's initiatives for the White House political people -- who then ignore their advice. It's almost the opposite approach, the Wall Street crowd complains, from the last Democratic president, Bill Clinton, whose main first-term achieve- ment -- deficit reduction -- was crafted by his chief economic adviser, Robert Rubin. Like Obama, Clinton and Rubin promised to raise taxes on the "rich," and they did. But Clinton didn't raise taxes to embark on a wild-eyed redistribution of wealth and massive programs. In the early Clinton years, Rubin convinced the president that he needed to avoid the grim consequences of runaway spending -- and after the Republicans took Congress in '94, it was no longer an option. Of course, the Clinton tax hikes came at a cost -- before the tech boom ignited the economy in 1995, growth was mediocre at best. But government spending remained under control, and lower interest rates followed, as did an economic recovery. Obama, according to Wall Street people who regularly deal with his economic and budget officials, is acting as if he has a blank check to do what he wants, while ignoring the longterm costs of his policies. As one CEO of a major financial firm told me: "The economic guys say that when they explain the costs of programs, the policy guys simply thank them for their time and then ignore what they say." In other words, the economic people feel that they have almost no say in this administration's policy decisions. Wall Street should have seen it coming. Obama was among the most liberal politicians in the country, despite his campaign rhetoric -- and his record in Illinois and the Senate showed it. He has spoken glowingly over the years of the need to redistribute wealth, a measure that always leads to taxes on small businesses, the economy's main economic engine. The execs who had such hopes for the president are now wondering fearfully just how radical he really is. It's almost comical watching the Street's top players squirm when they hear "class warfare" rhetoric coming from the White House, and it forces them to act in ways they'd never imagined. In addition to recently giving phony speeches about the sins of large compensation packages that they had no problem taking just a few years ago, many Wall Street CEOs are so terrified of being outed as greedy capitalists that they no longer use the corporate credit cards to charge business lunches at their favorite New York restaurants. The funniest story I've heard lately came from a former Wall Street executive and longtime Democrat who anxiously recounted a recent conversation with Obama. The executive said he told the president that he's at a disadvantage because he's relatively inexperienced in economic matters during a time of economic crisis. "That's why I have Valerie," came Obama's reply. "Valerie" is senior adviser Valerie Jarrett -- a Chicago real-estate attorney and one of Obama's closest friends, who has deep ties to the Windy City's Democratic political machine. Now you know why Wall Street is so nervous. (Source; NY Post.)  Government widens control over paychecks (Oct 2009) The Federal Reserve joined the Treasury Department on Thursday in imposing new limits on executive pay, extending the government's control over compensation at taxpayer-owned companies to institutions that are merely government regulated. The restrictions were the latest in more than a year's worth of government intervention in matters once considered inviolable aspects of the country's free-market economy and represent a signal moment in the history of the American economic experiment. After years of setting minimum wages, the government is now telling some companies how they should structure pay for those who run them. The actions Thursday put the United States more in line with European governments. France and Germany, in particular, have pressed for international standards to limit executive pay, a move that the United States and Britain have resisted. At Treasury, President Obama's pay czar, Kenneth Feinberg, announced sharp cuts in pay for 175 top executives at seven big banks and automakers that received hundreds of billions of dollars in federal bailout money during the financial crisis. The new structures reduced the cash salary paid to some executives by 90 percent and tied more compensation to long-term stock awards. "There is entirely too much reliance on cash, and there's got to be a better way to tie corporate performance to long-term growth," Feinberg said at a media briefing. "I'm hoping that the methodology we developed to determine compensation for these individuals might be voluntarily adopted elsewhere." At the Federal Reserve, Chairman Ben S. Bernanke proposed a broader but less proscribed plan to restrict pay at banks. The aim is to prevent them from rewarding employees for actions that could endanger the firms' long-term financial health. Unlike Feinberg's more limited plan, the Fed's guidance would cover all banks it regulates -- even those that never received a bailout -- as well as U.S. subsidiaries of foreign companies. However, the Fed's proposed rules have wiggle room: The guidelines would let banks set their own compensation but give the Fed veto power over pay practices that it determines could threaten the safety and soundness of a bank. They would extends the regulators' reach into pay practices affecting tens of thousands of bank employees, from senior executives to traders of complex securities. "I've always believed that our system of free enterprise works best when it rewards hard work," Obama said at the White House on Thursday. "But it does offend our values when executives of big financial firms -- firms that are struggling -- pay themselves huge bonuses even as they continue to rely on taxpayer assistance to stay afloat." Since the crisis began, the federal government has used taxpayer money to inject capital into financial firms in exchange for ownership stakes. Failing Fannie Mae and Freddie Mac were taken over by Washington. American International Group, the world's largest insurance company, is 80 percent owned by U.S. taxpayers. The government has picked winners (Bear Stearns) and losers (Lehman Brothers). And a sitting chief executive -- General Motors' Rick Wagoner -- was effectively fired by the White House. Executive compensation has long been linked to company performance -- the higher profits and stock prices go, the bigger the payday for top executives. But Bernanke, other regulators and many on Capitol Hill say that compensation packages were so high that they led executives to put their companies and shareholders at risk solely for the benefit of multimillion-dollar bonuses. "The Federal Reserve is working to ensure that compensation packages appropriately tie rewards to longer-term performance and do not create undue risk for the firm or the financial system," Bernanke said. The banking industry viewed the Fed's guidelines with ambivalence. Many banks already are moving to revise compensation practices for top executives and other employees who could expose the bank to bet-the-company risks. But industry representatives are wary of the regulations, concerned that they could ensnare even relatively low-level employees of smaller banks. "If it focuses on those who really put institutions at risk, that's fine," said Ed Yingling, chief executive of the American Bankers Association. "But if you get down to the point where you have regulators looking over the shoulders of branch managers, it really does not make sense." Long-simmering resentment over executive compensation boiled over in March when it was revealed that AIG, the recipient of a taxpayer-fueled bailout package worth up to $180 billion, was paying hundreds of millions of dollars in bonuses to a trading division that nearly brought the company and the global financial system to their knees. The seven companies included in the Feinberg's cash crackdown are AIG, Citigroup, Bank of America, General Motors, Chrysler, GMAC and Chrysler Financial. The new pay ceilings are low by Wall Street standards, and they are by no means watertight. They still allow for hefty compensation. For instance: Feinberg reduced the cash salary of 13 top Bank of America executives by $89 million for 2009. But the total compensation for each of the 12 executives beneath outgoing chief executive Kenneth D. Lewis still averages $6.5 million this year. Feinberg's actions do nothing to stop Lewis's $70 million retirement compensation. And the companies escape the pay curbs if they pay back all of the bailout money they have received. Still, Feinberg managed to slash about $879 million in total 2009 compensation at the seven companies, compared with 2008 levels. Sen. Charles E. Schumer (D-N.Y.) said Feinberg did not go far enough. He urged Feinberg to push the government deeper into corporate boardrooms via a number of proposals, such as forcing companies to split the jobs of chief executive and chairman. Daniel J. Mitchell, senior fellow at the libertarian Cato Institute, says he worries about the slippery slope. "I fear as politicians get a taste for interfering with executive pay for one little subset of companies where you actually could have sympathy for the approach, what's going to stop them from saying, 'Hey, this was popular. Let's do a little demagoguery before the next election and go after all the CEOs.' " (Source: Washington Post.) (SITE NOTE: The pay caps are disclaimed by the White House as their idea -- leaving it all to Kenneth Feinberg's policy.)  The Pay Czar Is Unconstitutional -- Kenneth Feinberg hasn't been confirmed by the U.S. Senate. (Oct 2009) Last week's announcement that "Pay Czar" Kenneth Feinberg slashed compensation for executives at seven large financial firms by an average of 50% stunned Wall Street, stoked the fires of populist resentment, and troubled economists. Will this government-mandated pay cut drive the most talented professionals away from these companies, endangering their recovery? Does it augur further politicization of economic decisions? Lost in the arguments over economics and political theory, however, is a more basic question: Was this action constitutional? Mr. Feinberg's ukase is the most prominent example (and not just by the Obama administration) of the exercise of power by an individual unilaterally appointed by the executive branch without Senate confirmation—and thus outside the ordinary channels of Congressional oversight. Earlier this month, the Senate Subcommittee on the Constitution conducted hearings into the constitutional basis for this practice, which many see as an end-run around checks and balances. The Obama administration declined Sen. Russ Feingold's (D., Wisc.) invitation to send a witness to the hearing to explain the constitutional basis for its various "czars." So who is Kenneth Feinberg, and where did he get the power to set pay for executives at private firms? As part of the hastily enacted and seldom-read legislation establishing the Troubled Asset Relief Program (TARP), Congress authorized the Secretary of the Treasury to "require each TARP recipient to meet appropriate standards for executive compensation." To carry out this task, last June the Treasury promulgated an emergency "Interim Final Rule," waiving ordinary requirements for a public comment period. As part of this emergency rule, Treasury Secretary Timothy Geithner created the office of "Special Master" for compensation, delegated his TARP authority to set compensation standards to this officer, and appointed Mr. Feinberg (a lawyer and mediator) to this position, without obtaining Senate confirmation. Therein lies the problem. The Appointments clause of the Constitution, Article II, section 2, provides that all "Officers of the United States" must be appointed by the president "by and with the Advice and Consent of the Senate." This means subject to confirmation, except that "the Congress may by Law vest the Appointment" of "inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments." There is no doubt that Mr. Feinberg is an "officer" of the United States. The Supreme Court has defined this term (Buckley v. Valeo, 1976) as "any appointee exercising significant authority pursuant to the laws of the United States." Mr. Feinberg signed last week's orders setting pay levels for executives at Bank of America, AIG, Chrysler Financial, Citigroup, GMAC, General Motors and Chrysler. They have the force of law and are surely an exercise of "significant authority" pursuant to an Act of Congress. He is not a mere "employee," acting at the direction of a superior. That means his office is subject to the requirements of the Appointments Clause. While somewhat more disputable, Mr. Feinberg's is probably an "inferior" officer, defined as one subject to supervision and removal by a member of the cabinet. Although he has substantial discretion and independence, Mr. Feinberg reports to the secretary of the Treasury, who can fire him any time for any reason. This means that Congress could, if it wished, vest the appointment of the pay czar in the secretary, without any need for Senate confirmation. But Congress has not done so. On the contrary, it vested the authority to implement TARP's compensation provision in the secretary of the Treasury. The secretary may sub-delegate that power to someone else—but that someone must be an "officer" properly appointed "by and with the advice and consent of the Senate." The Supreme Court observed in Buckley v. Valeo that the provisions governing appointments under the Constitution reflect more than "etiquette or protocol." They embody the Founders' conviction that all power under U.S. laws must be exercised by officers with constitutional authority. The Founders understood that the president and heads of the executive departments could not single-handedly carry out the law, so they required Senate confirmation as what the Federalist Papers call "an excellent check" on abuse or favoritism by the president. Yes, there are some offices so inferior that this check may be eliminated—but it is for Congress to judge which ones these may be. Congress and Congress alone has power to dispense with the safeguard of the confirmation process. The power to set compensation at large American businesses is especially subject to potential abuse, favoritism, arbitrariness, or political manipulation. It is no reflection on Kenneth Feinberg, who has a sterling reputation and who appears to have approached these sensitive duties with a spirit of commendable integrity, to say that the checks and balances of the Constitution should be scrupulously observed. They were not. Because he is not a properly appointed officer of the United States, Mr. Feinberg's executive compensation decisions were unconstitutional. --- Mr. McConnell is on the faculty of Stanford University Law School, director of its Constitutional Law Center, and a senior fellow at the Hoover Institution. He was a federal judge on the 10th Circuit Court of Appeals from 2002-2009. (Source: WSJ.)  On The Road To Economic Recovery Or On The Eve Of A Great Depression (Oct 2009) Remarkable similarities between where we stand today economically and where the Country stood in 1930, one year after the collapse of the Stock Market (DJIA) in 1929 ……. The Great Depression lasted from 1929 to World War II in 1942, 12 years in length. In nearly half of those years the Dow Jones Industrial Average (DJIA) recorded advances, in some years, subtantial advances. Did any of those advances signal an "economic recovery"? Of course not! The following claims can be confirmed at these sites: http://stockcharts.com/charts/historical/djia19201940.html http://seansrant.com/ive-said-it-before-and-ill-say-it-again-the-decline-still-isnt-over-and-heres-why-im-short-the-djia/ The DJIA high in 1929 was 381.17. After the 1929 "crash" the DJIA stood at 198.69, a 48% drop. The DJIA "rebounded in 1930 to a high of 294.07, a gain of 95.38 points, a nearly 50% recovery, a recovery very similar to our current recovery in 2009. The real "crash" of the Great Depression began in late 1930 when the DJIA began a decline to a level of 41.22 in 1933. Between 1930 and 1933 there were several sharp "spikes" upward, followed by precipitous drops of the DJIA. Does our current "spike" indicate a recovery? Certainly not! The toxic assets are still on the Bank's books, yet the financial marklets are leading the recovery. Commercial real estate is on the brink of collapse, home mortgage foreclosures continue to climb – while the Obama mortgage assistance program has resulted in less than 2000 permanently modified mortgages - the President pledged to help 9,000,000. Credit card defaults and personal bankrupties continue to climb and the unemployment rate – incorrectly called a "lagging indicator" – continues to climb. Unemployment doesn't lag – it is "current" – unemployment can only be said to "lag" other indicators which are actually "predicting" future activity. The DJIA current level is "predciting" that "profits" and associated dividends will be better six months from now -that "prediction" is based on a set of "assumptions", one of the assumptions is that unemployment will improve and not worsen. The unemployment rate predicts nothing – it is a number that "understates" a current condition. The DJIA is not predicative of economic health. The following from: http://www.online-stock-trading-guide.com/great-depression-stock-chart.html If you changed the dates from 1929 – 1930 to 2007 – 2009 you'd have an almost identical set of charts. http://seansrant.com/ive-said-it-before-and-ill-say-it-again-the-decline-still-isnt-over-and-heres-why-im-short-the-djia/ The DJIA has "zero" value in predicting whether our economic health has "turned" the corner. To this mix we will now add a half trillion dollars in new taxes to pay for Health Care Reform ….. this is a recipe for disaster! What is the truth about the underlying fundamentals is our economy …… (Source: McAuley's World.)
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