EconomicCrisis.US

Summary

President Obama’s proposed reform of US banks has not received universal acclaim. In particular, the UK government’s response has been rather lukewarm. What I think we are seeing are different responses to the same short term political challenge, ie bank bonuses that laugh in the face of suffering tax payers who have made the continued payment thereof possible. US and European (well, British) responses to this challenge are very different. They risk damaging consensus on global banking reform.
Analysis

President Obama signalled a significant change in direction last week, with his proposals to limit the activities of banks. He had previously shown little appetite to interfere with the structure of US banking groups, but simply identify those activities posing the greatest risk and use regulatory and market solutions (eg increased capital requirements) to increase control and/or decrease risk.
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When the time comes, the Federal Reserve will raise interest rates to keep inflation under control, Fed Chairman Ben Bernanke said Monday, adding that that time could be far away.

With the U.S. economy still very fragile and unemployment so high, inflation isn’t a pressing problem right now, Bernanke said in a talk to a group of economists in Washington.

For now, getting the economy back on its feet is the top priority. “We have come a long way from the darkest period of the crisis, but we have some distance yet to go,” Bernanke said, according to the text of his remarks released in Washington. Read Bernanke’s speech.
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U.S. stock futures rose on Thursday as markets interpreted news that Bank of America is repaying the government $45 billion as a sign that economic conditions are improving.

S&P 500 futures rose 3.3 points to 1,111.20 and Nasdaq 100 futures gained 2.25 points to 1,793.70. Futures on the Dow Jones Industrial Average rose 27 points.

U.S. stocks were languid on Wednesday, with the Dow Jones Industrial Average retreating 19 points while the S&P 500 rose fractionally and the Nasdaq Composite rose 9 points. ADP estimated job losses of 169,000 but the Fed’s Beige Book said economic conditions improved modestly.
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Historically, the U.S. stock market has been one of the key leading indicators of a U.S. economic rebound.

With the Standard & Poor’s 500 Index up more than 60% from its March lows – and the Dow Jones Industrial Average up nearly 40% – prognosticators are finally confident that the U.S. economy will dodge the “double-dip” recession that has been the focus of much fear since the Bush and Obama administrations launched their financial counterattacks on the worst financial crisis since the Great Depression.

But those same forecasters are reluctant to forecast a sharp economic rebound for 2010. In fact, as opposed to a classic “V-shaped” economic recovery that would accelerate as the year goes on, many economists are predicting that the rate of growth will slow as the New Year unfolds.
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