It was another Kodak moment on Capitol Hill.
Heads of the eight biggest banks were invited to a roast at Aunt Nancy’s Funhouse, and they were the ones getting grilled.
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They looked adorable in their little suits lined up shoulder-to-shoulder. Kind of like a group mug-shot for felons; but instead of the wearing orange jumpsuits, they were decked out in Armani.
If this modern day Rat Pack was expecting Dean Martin to croon a few or Buddy Hackett to crack wise, they were disappointed. On the other hand, if they thought they might have to face tough questions from an angry mob of Congressional examiners, they had to be doing a jig.
What this shindig really needed was Donald Trump to tell these stiffs that they were fired. Despite the recent TARP oversight report that shows that taxpayers got ripped off, practically speaking, we own these banks.
If the preferred stock the Feds received for infusing cash into Bank of America was converted to common stock, the American taxpayers would control 60 percent of the outstanding shares. Apply the same calculus to Citibank, and the number shoots up to a 75 percent stake.
When members of the House Financial Services Committee demanded to know where the money went, the bankers shrugged their shoulders. They claimed that they put the money back to work in the economy – their legendary bonuses aside – and that it was other institutions like consumer finance companies and auto lenders that were to blame.
Meanwhile, down the hall, and a bit to the left, the President’s economic stimulus package was headed for passage. At $789 billion, it was smaller than originally hoped, but it appears that it will make it to the Mr. Obama’s desk by early next week.
Anticipated passage of the stimulus bill, however, has not been enough to halt a global slump in the stock market, with the Dow down nearly 2 percent at the open and Nasdaq along with the S&P following suit.
[img]353|left|||no_popup[/img]President Obama’s stimulus plan will also be insufficient to avert the biggest U.S. economic decline since 1946 as consumer spending posts its longest slide on record.
Our economy is projected to contract 2 percent this year, half a percentage point more than last month’s forecast. Even as Obama aims to create 3.5 million jobs with a stimulus plan, economists foresee an unemployment rate exceeding 8 percent through next year.
Amid all the gloom and handwringing, the real surprise was the recently released retail sales numbers. Sales at U.S. retailers unexpectedly halted a record six-month decline in January, an advance that may not be sustained as job losses climb.
The 1 percent increase followed a 3 percent drop the prior month, the Commerce Department said today. Excluding cars, the gain was 0.9 percent. Last month’s rise likely reflected higher gasoline prices and more spending on items including clothing and food.
In a further sign of the times, gold prices pushed back over $950 an ounce and silver has seen a move close to $14. Precious metals analysts are expecting gold to punch through $1000 and silver to find it way back to $15 an ounce.
With the second round of TARP monies about to hit the streets, and another trillion soon to be broken loose by the Treasury Department; one of the best investments might be corporate jets.
We may have clipped the wings of the Wall Street bankers for a couple of months, but with all this new money on its way, something tells me these birds will be flying high again … and soon.
John Cohn is a senior partner in the Globe West Financial Group based in West Los Angeles. He may be contacted at www.globewestfinancial.com
