Obama should rethink the stimulus package

Posted by Shyam Moondra

The government has terribly failed the American people. First, former Treasury Secretary Henry Paulson and FED Chairman Ben Bernanke were saying that sub-prime mortgages were not a problem. Then they wanted the bailout money to buy these so called toxic mortgage-based securities from banks to strengthen their balance sheets. But once they got the bailout money, they changed their minds and ended up buying banks' preferred stocks instead. Now the new Treasury Secretary Geithner and Bernanke want more bailout money to buy those toxic securities they were supposed to buy in the first place. I bet even if they buy the current toxic securities, next quarter there will be more new toxic securities on the books of these banks and the FED/Treasury will ask for even more money to buy more of these securities. I don't think the government officials have really understood the problem or thought through what really needed to be done; they are just throwing money and trying different things thinking that something will work. Well, so far it's not working and tax-payers are out of $700 billion, adding to our already very high national debt.

Now comes this monster stimulus package (full of all kinds of pork barrel projects that candidate Obama said he will not allow) worth almost a trillion dollars that will guarantee that our federal debt will be so big that it will take at least ten years to bring it down to a more reasonable level and it will almost guarantee that we will have higher interest rates in the future. The mismanagement of our economy will ensure that American people will have to accept declining living standard for years to come.

Before we talk about the possible solutions, let us take a quick look at what brought us here:

1. Lack of leadership by President Bush and lack of oversight by Congress.
2. Incompetence of FED Chairman Bernanke and former Treasury Secretary Paulson.
3. Greed. Excessive compensation of the CEOs and market manipulation by hedge funds and investment banks.
4. Lack of regulations that led to these toxic mortgage-based securities and credit-default swaps.
5. Lack of enforcement by the SEC under Chairman Cox.

Now this is what we need to do:

1. Have new leaders in Congress and replace Bernanke immediately.
2. Reform regulations. Regulate hedge funds (they must pay their fair share of taxes and report their trading activities), pass stronger laws to prevent stock/commodity market manipulation by big players (revisit short selling/option trading rules, reduce computerized trading by imposing a simple rule that hedge funds/investment banks must hold a stock they buy for at least five business days before they can sell that stock), and monitor risky financial products offered by financial institutions more closely.
3. Impose strict limits on executive compensations for all publicly held companies, small or big and whether or not they receive federal bailout money. The whole system has become corrupt where the Board of Directors (comprised mainly of other active/retired CEOs) grant outlandish compensation packages (cash, stock, perks). No one, even if she/he works 24 hours a day, deserves to make so much money; it's nothing short of looting of shareholders money by a handful of bandits who have become super rich. Why should these CEOs get to make so much more than President Obama, who has the toughest and the most stressful job in the whole world?
4. Change tax laws as they apply to businesses. When Goldman Sachs, using its web of foreign subsidiaries, pays only 10% in taxes, it's so unfair to the rest of the tax-payers. We need to close these tax loop holes and eliminate tax-exempt status of some of the territories.
5. Suspend TARP - it will never solve the bank solvency problem. The banks made so many mistakes (and they still continue to make mistakes, e,g., buying corporate jets and remodeling their offices) that the government will need several trillion dollars to clean-up their balance sheets. The best thing to do now is to let the bad apples fall from the tree. An overwhelming majority of the American people think that the TARP is a huge mistake and it is an unnecessary wasteful spending of taxpayers' money. Nationalization of banks is not a solution - it will create more failed enterprises such as Amtrak and United States Postal Service.
6. Aggressively and vigorously enforce the laws and protect the shareholders. Strengthen the SEC and mandate them to prosecute the wrongdoers mercilessly. Can you imagine what will be the crime rate on the Main Street if the police was not cruising the street? Believe or not, there are more crooks on the Wall Street than on the Main Street. We need to have an environment where these white-collar crooks think twice before they commit any fraud.
7. Solve the fundamental problem of housing which precipitated the economic meltdown in the first place. Find ways to freeze foreclosures and stabilize the housing market (may be the government should buy the houses overhanging the market, as was done during the 1930's depression). Force the lenders to lower the mortgage rates to 4.5% immediately. Come up with a plan which will reduce forced selling of houses and at the same time provide incentives to the people to buy houses, which will, in turn, help stabilize the housing prices. Once the housing prices start to increase again, everything else will fall in place (mortgage securities will become more attractive and it will become easier for banks to sell those securities).
8. We need a stimulus package but not the one passed by the House, which has a lot of wasteful pork barrel spending that Obama said he will stop. The package should include the following elements: Reduce taxes for the middle-class and increase taxes for the super-rich who make more than $500,000 a year; provide a safety net for those who need immediate help such as extended unemployment benefits, help with COBRA heath insurance premiums, and help to elderly people who live on fixed income; infrastructure spending (satisfies an urgent need to repair crumbling roads and bridges and also creates jobs), education spending targeted to improve our students' performance and make college education more affordable (that means better equipping labs etc. but not re-building our school structures; anything that has only a marginal value in improving students' scores is wasteful spending; also need new tax laws to force schools with huge endowments to roll back their tuition fees and increase student aid, or else the government should seize those endowment funds), set-up a program to help the housing industry, as explained above, and finally, spend on some long-term projects in the area of green technology, energy conservation/alternative energy sources, etc.

The stimulus package passed by the House has a lot of wasteful spending pushed by the liberal wing of the Democratic Party, which will hurt them in the next election. I support the efforts of some of the moderate Republican senators who are now trying to clean-up the bill just passed by the House.

Barack Obama, the 44th President of the United States of America

Posted by Shyam Moondra on January 20, 2009

Today, 45 years after Martin Luther King, Jr. gave his "I Have a Dream" speech at the Lincoln Memorial in Washington, D.C., Barack Obama, an African American, was sworn in as the 44th President of the United States of America.

Obama's father was a Black Muslim from Kenya, although his white mother and maternal grand parents raised him as a devout Christian. It would seem unimaginable that a black man named Barack Hussein Obama could ever become the president of the United States.

It's no coincidence that Obama admires Abraham Lincoln the most and draws inspiration from him. It was Lincoln who ended slavery in the United States and was called by Frederick Douglass, one of the most prominent African Americans in the history of the United States, "emphatically the black man's president." It was no surprise that Obama chose to replicate Lincoln's train ride to Washington, D.C. for his inaugural.

Today's historic swearing-in by Obama, which was witnessed by over two million Americans, is clearly one of the defining moments in the history of the United States. While this was a matter of pride for all Americans, whites and non-whites alike, this monumental achievement has also demonstrated to the world what America is all about – a place where anyone can realize his or her dreams. The inauguration of the Obama presidency reflects the character and strength of America that even our adversaries envy. Obama's election has instantly resurrected the admiration, respect, and love that many people around the world have had for America.

Obama ran a brilliant and disciplined campaign; he was inspiring on the campaign trail; and he offered a message of hope in tumulus times. Obama's emphasis on inclusiveness and unity, sense of individual responsibility and purpose, and governmental transparency resonated well with the electorate. His calm and steady demeanor throughout the tough primary contest showed that he had what it takes to be a great president. His victory in the general election with an overwhelming majority demonstrated that the country was ready for a change.

Obama achieved so much and yet so much remains to be done. He now has to lead the country, in a non-partisan way, out of the current economic malaise. Never before, a new president inherited so much on his plate. Obama has to fix the economy and improve the lives of the middle class, bring the Iraq war to a conclusion, fight terrorism head-on in Afghanistan and Pakistan, solve the health care crisis, achieve energy independence, address the problem of global warming, settle once and for all the Israeli-Palestinian conflict, deal with belligerent Iran and North Korea and an overly aggressive Russia, improve the declining educational system, and tackle the entitlement programs. Obama has the intelligence, laser like focus, and energy to work on multiple issues and achieve big things for the entire world. He may very well nudge the U.S. Congress, that has in recent years become the weakest link in the government, towards becoming a more responsive and productive institution. If Obama and Congress can work together constructively and inclusively, the Obama presidency may prove to be one of the greatest presidencies of our times.

The road ahead is full of obstacles but for now the spirit of America is up and we should celebrate and cherish this extraordinary milestone in our history.

An open letter to Pakistani President Asif Ali Zardari

Posted by Shyam Moondra

I am appalled at how bad things have gotten between Pakistan and India. It's hard to believe that Pakistan and India used to be one country not long ago and now they are arch-enemies.

The state of affairs is very negative for both Pakistan and India, more so for Pakistan than India. In the era of intense global competition, Pakistan and India will fare much better if they stop this destructive animosity and mistrust.

I blame Pakistan more than India for the current stalled relations between the two countries.

Here is my synopsis of what is going on:

1. Pakistan erroneously believes that it's "equal" to India. India is a much bigger country and is a major emerging economic power. Also, India is a full-functioning democracy, while Pakistan's history on that front is weak. So this concept of "equality" is misplaced.
2. India has made good economic progress in recent years, thanks to the reforms that were started during the Rajiv Gandhi administration. I suspect Pakistan is jealous of that and it tries to pull India down through terrorism.
3. Pakistan started using terrorism as a policy tool against India through its out-of-control ISI. Initially, the focus of this campaign was Kashmir, but in recent years terrorism is being extended to targets in India (e.g., last month's attacks in Mumbai, attack on India's Parliament building, and previous Mumbai attacks) and elsewhere (e.g., Indian embassy in Kabul). These attacks are criminal because they target innocent civilians, which is contrary to the teachings of the Koran.
4. The support of ISI given to terrorist organizations has made them stronger. But once these terrorists found a foothold, they began to target Pakistan itself. These undesirable elements are trying to eat the hands that once fed them.

I think India has shown tremendous restraint and deserves credit for that. India understands that going to war is not going to solve this problem; wars have unpredictable outcomes and it will bring only misery, more to Pakistanis than to Indians. On the other hand, if Pakistan continues to use terrorists as a proxy to bring India down, then India is put in a position where it has no other choice but to attack Pakistan militarily.

Here is what I think Pakistan and India need to do:

1. First, Pakistan MUST stop ISI's support for terrorist organizations. Pakistan MUST handover the terror suspects of recent Mumbai attacks to India or MUST bring them to justice via Pakistani courts. Putting them under house arrest or arresting them but releasing them a few months later is a sham, not justice. They killed 180 innocent civilians, Pakistan must show better moral judgment than it has done so far. These terrorists must be hanged or jailed for life. If Pakistan doesn't take decisive actions this time, terrorism will destroy Pakistan itself.
2. Pakistan needs to reform its ISI and remove its bad elements. ISI must report to the civilian administration. The military must be put under firm civilian control as well, like in all other democracies. I think the American aid to Pakistan must be contingent upon these administrative reforms. A full-fledged democracy is a prerequisite for Pakistan to do well on the world scene, like India and Japan have done.
3. Pakistan needs to have governmental control of all of its territories, including the northern tribal provinces. If parts of Pakistan are not controlled by the central government, then, in strictest sense, Pakistan is not really a sovereign country.
4. Pakistan and India should stop treating each other as enemies. Stop hatred and animosity - all it does is bring destruction and block economic progress. Who knows, some day, Pakistan and India will become one country again (starting out as a federation, if not a fully integrated country - I think it's doable).
5. Kashmir has been a thorn between the two countries. I think the sensible thing to do is to agree upon the present Line of Control (LOC) as the final border (with some minor adjustments) and put this issue to the rest. I don't think any other solution will be accepted by the populations of the two countries (and leaders have to concede to the public opinion or else they will be thrown out of office by the voters). Pakistan and India may work out special provisions to have unrestricted access from one part of Kashmir to the other and allow free trade between the two parts.
6. The future of Pakistan and India lies in close relationship, increased trade, open borders, etc. It's that kind of relationship that will bring economic progress and improve the living standard for both populations. Terrorism will bring only misery - that's a dead end; all it will do is lock you in perpetual poverty.

In recent years, globalization has been the trend; we have more and more interdependence among the countries. Pakistan and India need to resolve their differences peacefully and reap the fruits of globalization - there is no other way.

I hope, you will see the wisdom in what I am saying and show strong leadership and statesmanship to do what needs to be done right now and in coming months and years to put the relations between Pakistan and India on the right track.

I might point out that your wife Benazir Bhutto and the late Indian Prime Minister Rajiv Gandhi saw the wisdom in good relations, and if they both were still alive today, it's safe to assume that Pakistan and India would have been like brothers again. Now it's up to you to realize their vision and improve the lives of your people.

Obama's leadership, sense of optimism, and competence will boost the stock markets

Posted by Shyam Moondra

The person who occupies the White House has enormous impact on how the country, and for that matter the world, fares. Below is a synopsis of what has happened during the recent presidencies and what could one expect during the Obama administration.

Ronald Reagan (1981-1988): The Dow Jones Industrial Average increased from 900 to 2,500 or 178%. President Reagan believed in smaller government, strong defense, and lower taxes. He introduced trickle-down economics, i.e., prosperity of the rich people will trickle down to the poor (George H. Bush called it "voodo economics"). Reagan's strong and decisive leadership and inspiring communications skills led to optimism on the Main Street and Wall Street. However, lower taxes combined with increased defense spending led to large budget deficits.

George H. Bush (1989-1992): The Dow Jones Industrial Average increased from 2,500 to 3,200 or 28%. Bush is noted for his successful execution of Desert Storm war campaign that led to the expulsion of Iraqis from Kuwait. However, Bush tried to reduce the deficit caused by Reagan's policies by increasing taxes, breaking his pledge of "read my lips - no new taxes" and lost his re-election bid. The Reagan momentum carried into the Bush presidency and the stock market went up to a new high, but huge budget deficit remained a big drag on Bush's presidency. Bush also suffered from his lack luster communications skills.

Bill Clinton (1993-2000): The Dow Jones Industrial Average increased from 3,200 to 11,000, or whopping 244%. Clinton brought more centrist style government. His practicality, competence, superior intellectual abilities, uncommon political skills, and superb communications skills enabled him to grow economy, strengthen national defense, turn budget deficit into budget surplus, and entice people to move off the welfare rolls and become productive working members of their communities. Clinton demonstrated what a pragmatic and non-ideology driven government can accomplish. Clinton shied away from rash decisions on using the military power. His more cautionary approach in foreign affairs enabled the U.S. to achieve its goals in Kosovo without overextending the military while keeping our alliances strong. Even though Clinton's second term was marred by the Monica Lewinsky affair, overall he showed that a smart government can make a big difference in people's lives.

George W. Bush (2001-2008): The Dow Jones Industrial Average declined from 11,000 to 8,800 or 20%. The Bush years were the most incompetent, incoherent, visionless, and destructive years in the history of the United States. He led a government based on ideology and stubbornness (even if he made a mistake, he would refuse to change the course). His administration represents one of the most corrupt administrations in our history - he appointed incompetent and unqualified people in important government positions as political payoffs that led to disastrous results as was evident from how badly his administration handled the Katrina disaster. The award of no-bid contracts and missing billions of dollars in Iraq show how pervasive was corruption in his administration. His overemphasis on deregulation and lack of enforcement by the SEC led to a complete breakdown of our economic system. He spent money like a drunken gambler and turned the biggest budget surplus into the largest budget deficit. He hurriedly pumped hundreds of billions of tax payers' money into the financial system, only to be misused by the corrupt financial institutions. Bush misled the country by using manufactured intelligence to justify the invasion of Iraq that turned out to be a major blunder. He sacrificed thousands of American lives (many more wounded and now forced to live limbless lives) and hundreds of thousands of Iraqi lives, and he wasted $800 billions that could have been used right here to do good things for the American people. All of that was to get rid of Saddam Hussein, who, as Bush explained, "tried to kill my dad." This unnecessary war brought Al Qaeda to Iraq (and thus made us less secured) and fractured our alliances. Bush will go in the history as the worst president we ever had.

Barack Obama (2009-2016?): The Dow Jones Industrial Average is expected to grow from 8,800 to 18,000, or 105%. Obama is already showing many of the presidential characteristics that will help restore confidence in the country's future and our prestige around the world. Obama's inspiring written and oral communications skills (often compared to those of Lincoln, Kennedy and Reagan), his intellectual capacity and competence (often compared to those of Kennedy and Clinton), his emphasis on making life better for the low- and middle-class Americans (often compared to those of Roosevelt, Lincoln and Clinton), and his ability to think big (often compared to Lincoln who abolished slavery and Kennedy who called upon NASA to land a man on the moon). Obama, being a young man from the generation of Blackberry, e-mails, and YouTube, brings something new that is unprecedented - his strong belief in using technology to solve many of our problems. His focus on using green technologies to create new high-paying jobs and achieve energy independence, aggressively pursuing stem cell research to find cures for many diseases, and making extensive use of IT technologies to reduce the health care cost will help our economy start growing again. Obama represents a composite view of many of the desirable presidential characteristics, as exhibited by many of our past great presidents, that bode well for the future of our country.