Former Goldman Insider's Take On Obama's Speech And The Massive Pink Elephant In The Room

From Nomi Prins

Obama's Speech and America, Inc.

Watching Obama deliver his State of the Union Speech last night, reminded me of all the rah-rah quarterly meetings that we had to attend as Managing Directors at Goldman, where senior management would remind us all of how great we were, and if there were any areas of competitive weakness relative to our adversaries at other banks, all we had to do was step up our game, innovate and globalize (or something like that.)

Obama wasn't delivering a summary of what has, or is, going on for most Americans last night, no such negative status report. And, if you didn't expect him to, he gave good speech - full of reminders of how it is America's destiny and the American dream to be great and powerful, "robust democracy" that we are.

There was a massive pink elephant in the room called reality though. So, when he waxed proud when he said, "We are poised for progress. Two years after the worst recession most of us have ever known, the stock market has come roaring back. Corporate profits are up. The economy is growing." I had a different reaction.

My reaction was wtf? Two years after the worst recession? After? Really? What about the 26 million people unemployed or underemployed in the country? What about the 4.4 people applying for every job, compared to the 2.9 people per job after the 2000s recession? What about the 4.4 million jobs that should have been added, just accounting for a population coming of job age alone, forget any kind of growth, compared to the fact that instead, the job pool declined by a quarter of a million people in the past two years, because the time required to get a job is at record highs? What about the nearly 8 million FAMILIES that have been foreclosed upon because of the reckless investment bank race to create $14 trillion dollars worth of toxic assets in the five years leading up to the financial crisis and leave them to shatter lives and the non-stock market evaluated economy? What about the fact that the government fiscally stimulated the banking system by a multiple of 20 times more than it stimulated its citizens, with nary a fight from the politicians our democracy is so lucky to have as representation?  What about all that warm, cuddly multi-trillion dollar support from the Fed and the Treasury Department on our country's way to Sputnikian economic greatness?

"The rules have changed," said Obama.

Yes, they certainly have. Businesses can offshore jobs because it is in their best profit and shareholder and stock value interest to do so, with no federal incentive to alter this strategy - that's why corporate profits and CEO salaries are up, whereas the average median employee salary on a comparative basis is stuck somewhere in the 1970s. That's why staring at the abyss of potential bankruptcy in the fall of 2008, Goldman Sachs and Morgan Stanley got the Fed's blessing to become federally subsidized bank holding companies. And we, taxpayers, are still on the hook for the Fed's $29 billion of backing of Bear Stearn's assets taken over by JPM Chase in a government sponsored merger in the Spring of 2008 and coming with a bunch of still-being-wrangled lawsuits, not to mention gleeful federally backing of the further consolidation of the banking system to fewer, more powerful, more obtuse, more risky players.

All of which, though technically not a result of changing rules, but rules staying the same and working for the reckless, were still rubber stamped by the Obama administration (yes, and Bush too, and Clinton's deregulatory team, etc.) and its financial king's, Tim Geithner, until recently Larry Summers, and incoming JPM Chase's Bill Daly and GE's Jeffrey Immelt as job czar. (GE and JPM Chase, having been happy bailout recipients, of course.) Small businesses can't hire as many people, because they can't afford their financing, even if banks will give them usefully sized loans, they don't get the 0.25% interest money the banks get from the Fed when they need it. Individuals got hosed, meanwhile, by shady home loans and shadier modifications and higher fees on all sorts of credit, from cards to student loans (a record $884 billion of which are outstanding to students whose tuitions rise as their job and loan-payback prospects fall). 

We're not talking just about steel mill job eliminations over the years, we're talking about the solidification of the administration's decision to ignore the mistakes and devastating consequences of Big Finance and Obama suggesting last night, that people consider becoming teachers, with a smile. No disrespect to teachers, of course, they work much harder and make do with much less than traders, but you don't see Vikram Pandit, Citigroup CEO rushing out the door to become one, no you see him getting approved for a RAISE, of the sort a teacher can only dream about, from a base salary of $1 million to $1.75 million this year, after Citigroup's survival was ensured only because of massive government stimulus. Why? Because he is now valued at a 75% pay increase, that Washington, and Obama would like to believe is due to his hard work, and not to a government handout. America at its best.

There were some useful elements to his otherwise CEO like speech (you department heads sitting out there - you work together so America, Inc. can be the best it can be.) They included adopting a fair immigration policy that doesn't chuck people out of the country because the path to being here is so laden with decade long bureaucracy and cost, keeping some elements of an otherwise insurance-company gift of a health care reform bill that the GOP House just repealed and that doesn't reform the cost of health care - such as covering pre-existing conditions and people up to the age 26 under their parents' plan (if their parents have a plan, that is) even though Obama backed off from even trying to convince the room to consider full coverage for all without egregious premiums, and wanting to increase the spread of clean energy initiatives (that he said will create 'countless jobs' as opposed to the countable 5 million he said it would create during is campaign.)

But, in the end, Obama's practiced eloquence in delivery, peppered with a few American success stories - who can deny the hero behind the Chilean mine worker rescue his due? -  and the now-debated investment over spending word choice, belied a strong dose of something akin to condescension. If you don't have a job, it's because of the Internet, not the banks hoarding $1 trillion that we gave them at the Fed. If we're falling behind China in education, it's because bad teachers should be removed, good ones rewarded and parents (who apparently aren't doing as good as job as they could of this) are not focusing on the education process more at home. If America, has the 'most prosperous economy in the world' for its corporations and financial insitutions, its because we all share a common, attainable dream.

So, just go out and innovate and compete and get it. We'll be here watching the banks' backs.