President Obama’s Reasons for Renominating Bernanke to 2nd Term as Federal Reserve Chairman

President Barack Obama made the following remarks on August 25 at his announcement that Federal Reserve System Board Chairman Ben Bernanke was being renominated for a second four-year term.  His current term expires January 31, 2010.

Good morning, everybody. I apologize for interrupting the relaxing that I told all of you to do, but I have an important announcement to make concerning the Federal Reserve.

The man next to me, Ben Bernanke, has led the Fed through one of the worst financial crises that this nation and the world has ever faced. As an expert on the causes of the Great Depression, I’m sure Ben never imagined that he would be part of a team responsible for preventing another. But because of his background, his temperament, his courage, and his creativity, that’s exactly what he has helped to achieve. And that is why I am re-appointing him to another term as Chairman of the Federal Reserve.

President Barack Obama

Ben approached a financial system on the verge of collapse with calm and wisdom; with bold action and out-of-the-box thinking that has helped put the brakes on our economic freefall. Almost none of the decisions that he or any of us made have been easy. The actions we’ve taken to stabilize our financial system, to repair our credit markets, restructure our auto industry, and pass a recovery package have all been steps of necessity, not choice. They’ve faced plenty of critics, some of whom argued that we should stay the course or do nothing at all. But taken together, this “bold, persistent experimentation” has brought our economy back from the brink. They’re steps that are working. Our recovery plan has put tax cuts in people’s pockets, extended health care and unemployment insurance to those who have borne the brunt of this recession, and is continuing to save and create jobs that otherwise would have been lost. Our auto industry is showing signs of life. Business investment is showing signs of stabilizing. Our housing market and credit markets have been saved from collapse.

Of course, as I’ve said before, we are a long way away from completely healthy financial systems and a full economic recovery. And I will not let up until those Americans who are looking for jobs can find them; until qualified businesses, large and small, who need capital to grow can find loans at a rate they can afford; and until all responsible mortgage-holders can stay in their homes. That’s why we need Ben Bernanke to continue the work he’s doing, and that’s why I’ve said that we cannot go back to an economy based on overleveraged banks, inflated profits, and maxed-out credit cards.

Ben Bernanke

For even as we’ve taken steps to rescue our financial system and our economy, we must now work to rebuild a new foundation for growth and prosperity. We have to build an economy that works for every American, and one that leads the world in innovation, in investments, and in experts — exports.

Part of that foundation has to be a financial regulatory system that ensures we never face a crisis like this again. We’ve already seen how lax enforcement and weak regulation can lead to enormous wealth for a few and enormous pain for everybody else. And that’s why even though there is some resistance on Wall Street from those who would prefer to keep things the way they are, we will pass the reforms necessary to protect consumers, investors, and the entire financial system. And we will continue to maintain a strong and independent Federal Reserve.

We will also keep working towards the reform of a health insurance system whose costs and discriminatory practices are bankrupting our families, our businesses, and our government. We will continue to build a clean energy economy that creates the jobs and industries of the future within our borders. And we will give our children and our workers the skills and training they need to compete for these jobs in the 21st century.

Much like the decisions we’ve made so far, the steps we take to build this new foundation will not be easy. Change never is. As Ben and I both know, it comes with debate and disagreement and resistance from those who prefer the status quo. And that’s all right, because that’s how democracy is supposed to work. But no matter how difficult change is, we will pursue it relentlessly because it is absolutely necessary to lift this country up and create an economy that leads to good jobs, broad growth, and a future our children can count on. That’s what we’re here to do, and that’s what we will continue to do in the months ahead. So I want to congratulate Ben on the work that he’s done so far, wish him continued success in the hard work that he has before him. Thank you so much, Ben.

President Obama’s Speech on Financial Regulatory Reform

On June 17 President Obama announced his plans to reform the regulation of the nation’s financial system.  Enclosed below are the unedited remarks he made at the press conference announcing his plans for reform.

President Obama speaking at June 17 press conference

Since taking office, my administration has mounted what I think has to be acknowledged as an extraordinary response to a historic economic crisis. But even as we take decisive action to repair the damage to our economy, we’re working hard to build a new foundation for sustained economic growth. This will not be easy. We know that this recession is not the result of one failure, but of many. And many of the toughest challenges we face are the product of a cascade of mistakes and missed opportunities which took place over the course of decades.

That’s why, as part of this new foundation, we’re seeking to build an energy economy that creates new jobs and new businesses to free us from our dependence on foreign oil. We want to foster an education system that instills in each generation the capacity to turn ideas into innovations, and innovations into industries and jobs. And as I discussed on Monday at the American Medical Association, we want to reform our health care system so that we can remain healthy and competitive.

This new foundation also requires strong, vibrant financial markets, operating under transparent, fairly-administered rules of the road that protect America’s consumers and our economy from the devastating breakdown that we’ve witnessed in recent years.

It is an indisputable fact that one of the most significant contributors to our economic downturn was a unraveling of major financial institutions and the lack of adequate regulatory structures to prevent abuse and excess. A culture of irresponsibility took root from Wall Street to Washington to Main Street. And a regulatory regime basically crafted in the wake of a 20th century economic crisis — the Great Depression — was overwhelmed by the speed, scope, and sophistication of a 21st century global economy.

In recent years, financial innovators, seeking an edge in the marketplace, produced a huge variety of new and complex financial instruments. And these products, such as asset-based securities, were designed to spread risk, but unfortunately ended up concentrating risk. Loans were sold to banks, banks packaged these loans into securities, investors bought these securities often with little insight into the risks to which they were exposed. And it was easy money — while it lasted. But these schemes were built on a pile of sand. And as the appetite for these products grew, lenders lowered standards to attract new borrowers. Many Americans bought homes and borrowed money without being adequately informed of the terms, and often without accepting the responsibilities.

Meanwhile, executive compensation — unmoored from long-term performance or even reality — rewarded recklessness rather than responsibility. And this wasn’t just the failure of individuals; this was a failure of the entire system. The actions of many firms escaped scrutiny. In some cases, the dealings of these institutions were so complex and opaque that few inside or outside these companies understood what was happening. Where there were gaps in the rules, regulators lacked the authority to take action. Where there were overlaps, regulators lacked accountability for their inaction.

An absence of oversight engendered systematic, and systemic, abuse. Instead of reducing risk, the markets actually magnified risks that were being taken by ordinary families and large firms alike. There was far too much debt and not nearly enough capital in the system. And a growing economy bred complacency.

Now, we all know the result: the bursting of a debt-based bubble; the failure of several of the world’s largest financial institutions; the sudden decline in available credit; the deterioration of the economy; the unprecedented intervention of the federal government to stabilize the financial markets and prevent a wider collapse; and most importantly, the terrible pain in the lives of ordinary Americans. And there are retirees who’ve lost much of their life savings, families devastated by job losses, small businesses forced to shut their doors.

Millions of Americans who’ve worked hard and behaved responsibly have seen their life dreams eroded by the irresponsibility of others and by the failure of their government to provide adequate oversight. Our entire economy has been undermined by that failure….Click here to read the rest of speech.

Obama’s Budget Will Double Funding for Community Development Financial Institututions in FY 2010 If Approved

President Obama’s fiscal year (FY) 2010 budget more than doubles funding for the Community Development Financial Institutions (CDFI) Fund. The President’s budget requests $243.6 million for the CDFI Fund – a 127 percent increase over the $107 million appropriated for FY 2009.

The CDFI Fund expands the capacity of financial institutions to provide credit, capital, and financial services to underserved populations and communities in the United States.

Donna Gambrell

“The President’s 2010 budget request for the CDFI Fund clearly demonstrates a strong commitment of support to our critical mission of serving distressed communities,” said CDFI Fund Director Donna J. Gambrell. “Beyond the increased funding for our current programs, the inclusion of funding for the Native Initiatives, Capital Magnet Fund, a new research initiative, and proposed legislative enhancements, will all work together to expand the CDFI Fund’s ability to further economic development in communities most in need.”

Highlights of the 2010 budget request for the CDFI Fund include:

• $243.6 million for the CDFI Fund, which represents a 127 percent increase in total funding;
• $113.6 million, a 90 percent increase in funding for the CDFI Program to boost investments and other financial services in underserved communities;
• $80 million for the Capital Magnet Fund, a newly authorized program to increase capital investment for the development, preservation, rehabilitation, or the purchase of affordable housing for low-, very low-, and extremely low-income families;
• The first Administration budget to specifically include funding ($10 million) for the CDFI Fund’s Native Initiatives, which assist Native Communities (Native American, Alaskan Native and Native Hawaiian communities) to overcome certain barriers to financial services;
• A new research initiative to conduct strategic research that will analyze the impact and outcomes of the CDFI Fund’s programs, including the effect of changing economic conditions; and
• Legislative enhancements to the CDFI Fund’s programs to enable greater access to capital for distressed communities

For more information onthe CDFI Fund FY 2010 proposed budget and its justification, click here.

President Obama Outlines Core Principles for Protecting Consumers from Credit Card Industry Abuses

President Barack Obama met with representatives from the credit card industry on April 23 to address the need for greater consumer protection from abusive industry practices.  In the meeting he outlined his core principles for improving consumer protection.  The following are remarks he made to the press after the meeting.

Well, I just had a constructive meeting with the heads of many of the leading credit card issuers here in the country. Obviously we’re at a time where issues of credit and how businesses and families are able to finance everything from a car loan to a student loan to just paying their bills every day is on a lot of people’s minds. And Secretary Geithner and our economic team has worked diligently to try to restore confidence in the credit markets, to assure that the non-bank financial sector is stronger, to ensure that banks have the capital they need, and that that money is getting out the door to the ultimate end user — the American businessperson and individual.

We’re still seeing some problems, although we think that we’ve begun to make progress.

One of the areas, as we move forward and look at financial regulation, how do we create a framework where this kind of crisis doesn’t happen again, and how do we create a sustainable model for economic growth and debt that is not based on bubbles and overleveraging on the part of businesses and consumers is the issue of credit cards and how they’re used and how we can create a more stable, more effective, more consumer-friendly system.

President Obama in meeting with credit card executives on April 23: photo by Pete Souza

We had a discussion with some of the top issuers here, and what I communicated to them is that I think credit cards are an important convenience for a lot of people. They are a source of unsecured debt for a lot of individuals and small businesses who are creating jobs; a lot of startups may use credit cards for that purpose. We think that’s important, and so we want to preserve the credit card market.

But we also want to do so in a way that eliminates some of the abuses and some of the problems that a lot of people are familiar with — people finding themselves starting off with a low rate and the next thing they know their interest rates have doubled; fees that they didn’t know about that are suddenly tacked on to their bills; a whole lack of clarity and transparency in terms of the terms and conditions of their credit cards.

And so there’s going to be action in Congress. Our administration is going to be pushing for reform in this area. We think it’s important that we get input from the credit card issuers as we shape this reform, but there — and I’m going to leave it up to my economic team to work with Congress to evaluate all the various proposals and to get some very definitive language in place.

There are going to be some core principles, though, that I want to adhere to, and I mentioned these to all the credit card issuers involved.

First of all, I think that there has to be strong and reliable protections for consumers — protections that ban unfair rate increases and forbid abusive fees and penalties. The days of any time, any reason rate hikes and late fee traps have to end.

Number two, all the forms and statements that credit card companies send out have to be written in plain language and be in plain sight. No more fine print, no more confusing terms and conditions. We want clarity and transparency from here on out.

Number three, we have to make sure that people can comparison shop when it comes to credit cards without being afraid that they’re going to be taken advantage of. So we believe that it’s important to require firms to make all their contract terms easily accessible online in a fashion that allows people to shop for the best deal for their needs.

Not every consumer is going to have the same needs. And some may want to take on a higher interest rate because it provides them more convenience or it provides them with a higher credit line. But we want to make sure that they can make those comparisons themselves easily. And we think that one of the things that needs to be explored is the possibility that every credit card issuer has to issue a plain vanilla, easy to understand, simplest terms possible credit card as a default credit card that the average user can feel comfortable with.

Finally, we think we need more accountability in the system. And that means more effective oversight and more effective enforcement so that people who are issuing credit cards but violate law, they will feel the full weight of the law.

So we are confident that we can arrive at something that is commonsensical, something that allows the industry to continue to provide loans and to run a stable business model that’s not dependent on bubbles, that’s not dependent on people getting over-extended or finding themselves in over their heads. I trust that those in the industry who want to act responsibly will engage with us in a constructive fashion and that we’re going to be able to get this done in short order.

Please share your ideas on how to protect consumers from credit card abuse by commenting on this post.

Barack Inc.: Winning Business Lessons of the Obama Campaign Focus of Feb 2 Economic Perspectives

Barry Libert, co-author of BARACK, INC. Winning Business Lessons of the Obama Campaign, will discuss the best business insights to be learned from President Barack Obama’s election campaign on the February 2 edition of Economic Perspectives.   Libert and co-author Rick Fault believe the Obama campaign is an inspiring business case study of exemplary leadership values and winning tactics that can beat even the toughest competitors.

“We believe Obama’s political pioneering set a brilliant standard for any business seeking to prosper in the Web 2.0 world of the 21st century.  Hence this book: Obama’s campaign saga annotated for business use,” write Libert and Faulk.

Through interviews with Obama supporters and study of the presidential election coverage the authors identify the following three pillars of Obama’s successful campaign strategy:

• Create a vast online community of supporters by harnessing the power of online social technologies
• Keep cool under pressure
• Become a catalyst for change

Barry Libert is chairman of Mzinga, a leading provider of social software solutions that create online communities for marketing, customer support, and learning for major corporations around the world including ABC, AOL, Disney, MTV, and Sports Illustrated.  Mzinga manages more than 14,000 communities and has over 60 million unique visitors every month.  He is a pioneer in using communities and Web 2.0 technologies to help enterprises thrive and accelerate business growth.  He was co-author of the recently published We Are Smarter than Me, a critically acclaimed book created in collaboration with Wharton Publishing that used the Wiki-based contributions of more than 4,000 people to illustrate how businesses could profit from the wisdom of crowds.

Obama Announces Choice to Lead SBA

With the swiftness of his announcement of Karen Wells as his choice to be the next Administrator of the U.S. Small Business Administration on December 19, President-elect Barack Obama has clearly indicated the importance of that position to his administration.  He has named his nominee to be the SBA Administrator much earlier than the Clinton and Bush Administrations did when first elected, who made their choices known in March 1993 and February 2001 respectively.

Preident-Elect Obama and Karen Mills

More important than the early selection of his nominee for SBA Administrator is who recommended Mills, Maine Senator Olympia Snowe, the former Chairman and current Ranking Member of the Senate Committee on Small Business and Entrepreneurship.  Snowe had sent a letter to Obama on December 8 asking that the Adminstrator position be re-elevated to Cabinet-level status.

In her press statement congratulating Mills for being nominated for the SBA position Snowe said, “…I hope President-elect Obama will carefully consider my proposal to re-elevate the SBA Administrator to Cabinet-level status — as under the Clinton administration — so that Karen can have the maximum impact on America’s 26 million small businesses, which create three quarters of net new jobs annually.”

So what experience will Wells bring to the table?   Equipped with an MBA from Harvard University, Wells has 25 years experience as a principal in the private equity and venture capital industry and has taken a leadership role in the growth of more than 20 companies in the consumer products, food, distribution, textile and industrial component sectors according to the press statement released by President Elect Obama.  A resident of Maine, she chairs the Governors Council on Competitiveness and the Economy.

Mills appointment was praised by Massachusetts Senator John  Kerry, Chairman of the Senate Committee on Small Business and Entrepreneurship.

“The President-elect’s selection to lead the SBA demonstrates his commitment to bring Washington in touch with the real needs of Main Street.  Karen has been a champion of small business,” said Kerry in a press statement.

January 19: Interview of Author of Say It Like Obama

In honor of the inauguration of President-elect Barack Obama, we will rebroadcast an interview with Dr. Shel Leanne, author of SAY IT LIKE OBAMA on the January 19 edition of Economic Perspectives.  The interview is also available for download by clicking here.  The interview was originally  broadcast on  September 29 . 

In this book Dr. Leanne examines the lessons to be learned from the communication practices that have helped bring about Obama’s success.  The book is about the art of persuasion, the power of presentation, and the most effective techniques of communicatiom.

Dr. Shel Leanne

Dr. Leanne is president of Regent Crest, a leadership development company that helps empower young business leaders for success.  Prior to launching her company, Dr. Leanne worked for McKinsey and Company and Morgan Stanley.  A Fulbrigth Scholar, Dr. Leanne holds a B.A. from Harvard College, and earned Masters and Doctoral degrees from Oxford University.