view from the US
personal savings,” the official summary of Dodd-Frank asserts.
Greenspan opines But in an article in the Financial Times, former Federal Reserve chairman Alan Greenspan predicted a bad out- come. “It is going to take years to address the unprece- dented complexity of final rulemaking required in the massive Dodd-Frank bill,” he wrote. “The inevitable uncertainty engendered will inhibit financial innovation and intermediation.” On the other hand, the Securities Industry and
Financial Markets Association (SIFMA) says it will con- tinue to work with the President, regulators and Congress “to restore faith and confidence in our financial markets, including effectively implementing the Dodd-Frank Act”. SIFMA has already submitted comments and an impact assessment to some of the agencies involved to ensure it has a hand in crafting future regulations. Greenspan also opined against the burgeoning federal
deficit, which he said creates future tax uncertainty. Eliminating the deficit was a central campaign issue for the conservative, insurgent Tea Party wing of the Republican Party, which made significant inroads against both moderate Republicans and Democrats. Yet Republicans also campaigned against any form of tax increase, even for the richest Americans. A possible way forward is mapped in the recommen-
dations of a bipartisan National Commission on Fiscal Responsibility and Reform appointed by President Obama. Its plan would cut the federal deficit by US$3.8trn by 2020, beginning with US$200bn in spend- ing cuts by 2015. Starting in 2012, it would slash the budget of virtually every agency, including the military, and raise taxes and the retirement age over time. The Commission’s report was received with howls of
anger from both sides. However, it may provide a guide for an eventual plan by laying out all the options for eliminating non-essential spending. The big question is whether Americans, brought up in
the belief that they can have whatever they want if they only wish hard enough, will be willing to swallow the bit- ter medicine the Irish have done, and the British voted to accept. It would take a brave and foolhardy politician to campaign on a promise of sacrifice in the land of the free.
The unemployment challenge The only thing on which everyone agrees is that solving the problem of joblessness has to be Job No 1. With 14.6 million people out of work, the unemploy-
ment rate has been constant at 9.6pc since April, despite a modest increase in hiring. Of the unemployed, 46pc have been unemployed for 27 weeks or more and 31pc a year or more, according to government statistics. Many are professionals and skilled workers, as well as teachers, police and firefighters laid off by state and municipal
governments that, unlike the federal government, are forced to balance their budgets each year. Consumer spending, which economists say accounts
for 70pc of US GDP, is unlikely to be the engine of recov- ery from the current downturn. Studies suggest house- holds able to do so have instead increased their savings rates and plan to continue to build a nest egg even after the recovery arrives. The economy has steadily added private-sector jobs
under President Obama, but the numbers finding work are outmatched by the numbers still in search of work. The rise in unemployment has contributed to the fore- closure crisis the country faces. The tide of foreclosures originally began as a ripple from the subprime lending problem, when banks and other lenders freely extended loans to individuals who were clearly bad credit risks, planning to sell the loans on to investors in a bundle of mortgage-backed securities. The current wave of homeowners being dispossessed
are more likely to be households that did not present a risk but are now unable to make their mortgage pay- ments because one or both spouses has lost a job. In some cases, homeowners who owe more for the property than it is worth in today’s market, are simply walking away from their loans, leaving lenders holding the bag. With more than 2,000,000 loans nationwide in some
stage of foreclosure as of July 2010, and more being added each day, the price of all homes has plummeted. According to RealtyTrak, an online market for foreclosed properties, one in four homes sold in the second quarter of 2010 was in foreclosure. The glut of such properties, combined with the downturn, has contributed to an over- supply of houses for sale that has caused the near-collapse of the home construction industry, and added to the unemployment rolls. “The crisis has been made worse by the discovery that
much of the documentation submitted to courts to sup- port a foreclosure order was false, and maybe fraudu- lent, resulting in the possibility that some families may have been wrongly evicted and throwing a wrench into the process,” says RealtyTrak. Commercial property has also taken a major hit.
There are scenes in some US cities that would be familiar to anyone in Ireland: towering new office blocks virtually unoccupied, strip shopping centres with more vacant than occupied stores and unoccupied housing develop- ments. A National Association of Realtors September 2010 survey found commercial property prices down 18pc on the previous year. Small community banks, once prime lenders to home-
builders, are failing at a growing rate. In 2007, three banks failed. There were 25 failures in 2008, 141 in 2009 and 143 by November 2010. Bankruptcies, both personal and cor- porate, have also risen sharply, court statistics show. Perhaps the one question Americans of all political stripes want the answer to is: ‘Where is the plan?’
52 Irish Director Winter 2010
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84