The Obama campaign's recent struggles
Bob Rice and Penny Lee on whether the President can recover from recent rough patch
- Duration 20:35
- Date Jun 13, 2012
Bob Rice and Penny Lee on whether the President can recover from recent rough patch
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Let's bring in ball -- now managing partner tangent capital former Justice Department -- loyal.
Well one of -- -- of -- -- -- in here which I think is a very good point on this or -- -- strikes me in my ignorance is a very good point.
JPMorgan Chase lost their own money.
Not the customers' money not the taxpayers money what's the big deal which one of us has never made a mistake JPMorgan Chase is a private companies and no.
Depends what you mean by private but we'll put it.
Let -- get it yeah lovely Friday -- updated in -- pride money at it it's a private company but it's too big to fail so it's a private company with effectively a government backstop.
And if everybody remembers back to the bailout.
The problems were caused by the fact that.
These large financial institutions if we allow them to really suffer serious losses we'll simply cripple the financial system.
So the idea was hey let's make sure that they don't take those kinds of risky bets again.
And this is indicative of them exactly doing that taking very risky bet two million dollars right if they lost -- in some other way no one would be complaining but the way they lost it the kind of trading that was involved here.
He's hair raising I have done quite a lot of work on this site are you understand what the whale was doing.
And if there is no way really is this room trader who was response -- ultimately responsible honestly he wasn't a rogue trader that's actually the problem really he was executing.
Very well known plan within the bank to try to make a lot of money it was a very aggressive bet.
As a hedge against the bank's portfolio and that's what they're saying it's all we made a mistake in the way we hedged -- exposures were so terribly sorry won't happen again.
But in fact this was absolutely a profit seeking highly risky transaction.
Which to you point was he private capital but the reality is what those kinds of things are precisely what led to -- to the didn't break out of our financial system before and everybody -- going -- you know that's why destroying such a strong reaction on Capitol Hill to not all right.
I do we have Connie -- now assassinated I hear somebody saying -- yes that she is.
Full Syria advising -- senator Harry Reid and the lady joining us from DC to the same penny.
And good to see -- what it feels like again is back again here.
Black and we're not going anyway a problem.
Test testifying about by Jamie Dimon on cap on Capitol Hill.
Do you see this is any of congress' business.
It is again because of what we've been through ring in 2008 in there are certain things that you want to make sure that debt.
Taxpayers are not back on the hook again and whether it is setting the limits of what they need to have -- reserved.
Whether or not there is certain points where the regulators if they were going in.
They weren't made it -- three different at three different points they raised a flat kind of -- worried about what was going on some of -- losses.
You -- regulators being in there to kind of raise the flags to make sure.
That again that we don't have the collapse that we saw in 2008 when -- -- banks from being over leveraged.
And they were backed by the federal government to be able to take these risky investments so.
I do think there's a -- there's a proper role.
I don't think you know telling Jamie -- what to do every day of his -- business is the right wolf for governor but safety procedures your safety guards need to be there.
Well another of our viewers writing in -- with this question will living these too big to fail companies fail really -- a bad thing.
It would have been a completely disastrous thing in my opinion back in the day when Lehman Brothers -- -- because there were there was actually no intelligent way to unwind these banks one of the big the big pieces of Dodd-Frank.
It's only people have to understand I know what people like Dodd-Frank it's sounds -- additional government regulation -- terrible but what he did was it gave us the ability.
To do is all these banks in an intelligent and orderly fashion and allow them to be -- -- without -- causing complete financial calamity.
So you're going forward the hope is you can't do that but the the reality is it's always going to be very difficult we only have -- worse shape -- -- else did they look too big to -- other bigger inning to beat another bigger and they'll remain there today I don't larger.
-- -- right yup so everything's just fine it's isn't it.
And talk about it yet.
No -- it didn't even realize it we didn't realize in 2000 -- is evident was.
How intertwined all of the system is both not only domestically but also overseas.
-- there was many nights and I was fearing congresswoman written were dealing with this trying to find the right solutions and trying to put all the parameters around her and the different things.
What we what you didn't have a sense of Pryor but being going into it was how into wind but all of this isn't out -- -- -- all is and how one is dependent on the other.
And -- is eight -- woven wheat of mass that we have for banking system in which we have so.
Yes yes it is this something to be said anyone -- went down boat.
But -- it is is the domino effect and that's why I don't regulators need to be in there is because of the overwhelming potential domino effect.
-- that the viewers are very interested in all of this -- and penny ball.
Says -- break them up and the problem.
Listen I think there are a lot of Smart people Bobby Hawkins can come and work my office any time because that's saying hey how -- that's having trouble that we have.
We have quite a few people who are considered to be pretty Smart people who really believe that is the problem I mean if -- there if the banks or -- -- -- remembered the way these things have been formed over time is.
Back in the eighties there were lots and lots of medium sized banks and now there for five and or -- banks because it's been one merger after another after another after another.
Over the course of the last many years the community banks are so small that they don't matter at all and we've got effectively all of our eggs in very few number of baskets.
To pennies point.
Those baskets connect around the rest of the world to other baskets through derivatives.
They're the amount of the derivatives trading is -- mind blowing it's something like twenty times the gross domestic product in the United States of America just.
Enormously large numbers nobody knows who's on the other side of -- contracts nobody knows what those contracts say nobody knows whose hand grenade is gonna blow up if something happens.
So all of this is it's incredibly Dicey situation.
And one other thing I'd like him to bring it back down to regular people in the depositors -- these institutions that the question was it to -- you started by saying to me.
It's a private institution right who cares if they lose money.
Well you know everyone is listening to the show is guaranteeing the deposits in those banks -- -- what you're FDIC insurance is say.
So if they bought gets to pace you do right even if there's not another quote bailout you're already on the hook for the FDIC insurance all right and so you've you've got to be worried about the stuff.
Another another you'll weighing -- Joyce he says it's a private company get that get the government out of private business I think ball probably just -- about point -- -- -- And -- writing is good from 57 penny says.
To your point it's also -- -- we've it's more like when you get your Christmas lights out of the office every year it is a mess.
Would you agree that -- the breaking them up in some ways a better way to look at this sit down the line at least.
What I -- I think that we wanted to connecting -- gonna hear this come back and out of his going to be in the hearing today that I I assume.
In the new congress you're gonna hear calls for calling back Glass-Steagall.
The -- Steagall law we just did separate some of the functions within the banks that then that things had to operate.
In a more traditional sense and they weren't allowed to go into more of the derivative or.
Or boutique type of investment in you gonna hear -- up call for that could those kind of regulations to come -- -- stipulation to come back.
Again team yet.
The banks out of the more riskier.
Transactions that that really have been what we appeal is like the cause -- that is where we've seen kind of green reading with a vengeance.
That type of activity and that.
I'm seeing you gonna ABC a lot of Democrats and maybe some other Republicans calling for that really should be put back into place up.
So good it's really worth spending two minutes on Glass-Steagall because it's a great history lesson all right and a Glass-Steagall explain -- the last thing we're always glad it was named for two senators Glass-Steagall.
Who after the depression after the good.
Imposed this law that required banks to separate their investment banking.
Activities away from their deposit taking -- -- like I did just exactly what I think -- -- whoever mentioned -- a few moments ago was talking about hey why do we need to get -- it.
Get -- -- -- we don't want a government in your world.
-- we want the government in there as long as the government is are issuing the protection of the FDIC insurance and so what the Glass-Steagall law did was say.
-- -- Investment banking activities must be in a separate institution not under even common control with the bank and that was the law in this country for decades and decades and decades and it -- -- rose precisely out of a similar situation that we just had it was the answer to the depression -- in the twenties when the banks were taking all sorts of risky gambles.
Caused the collapse -- congress woke up until we can't allow that anymore and we had this ruled and in fact protected us from that happening again for many many decades up until the late eighties -- early ninety's late eighties I guess it was.
When Glass-Steagall was repealed.
And slowly slowly the investment banking activities got intermingle with the commercial banking activities again all the mergers happen.
And so all of these all of this TNT all this dynamite got assembled in one place one more time because we didn't learn that the lessons of history.
And we'll see what happens -- that's interest I did not know that history lesson thank you very much have a pretty horrified you do not like it's my daughter that I can always I always feel silly but when -- to -- -- jury asking how long question here penny.
Might have maybe you can on -- this.
Would they be able to use antitrust.
Legislation to decertify.
These banks just as they did with AT&T and -- -- mountain Microsoft Microsoft.
You know I mean business is in resuming and they are already under antitrust protection or they have antitrust rules in which they can't they can't cooperate and not all.
What have we are at now for 510 banks right now they all they have there are certain antitrust protections there.
I don't know all deferred evolve on the Sunday -- actually don't know the answer whether or not they -- -- actually you know shot.
Downloading -- -- I don't I'm not sure the answer is they don't need to -- Office of the Comptroller of the Currency BO CC regulates all licenses and regulates all these banks and improves all the mergers and -- -- they don't need the antitrust rules they did that did it's we it's completely plausible under existing power.
For the regulators to break these banks up.
You know momentum in the other direction -- it's overwhelming.
So they're not going to do that I think -- it's a practical matter but they got the power -- -- were right now we chose to do it right penny a couple of argue is also writing in here saying isn't this isn't.
The whole financial system based on the premise of the greater the risk the greater reward and -- -- -- it riding -- -- just saying we -- -- risk.
Could you imagine if they said that back in 1776.
I can say historical comparison is -- entirely relevant but.
And there isn't there a point that bit.
That we've made great gains.
Because of people taking risks.
It is not that the regulators or that what we're trying to say is that we we want to -- -- There is always a healthy amount of her -- to be taken especially in these financial.
Vehicles in which you can't but what we saw what we don't want to return to it is.
The kind did you know it's the in boutique where the I mean I remember sitting in meeting with secretary Paulson chairman Bernanke and others it.
You know dating even really understand what a credit default swap was -- understand kind of the you know exotic type.
Of lending or at the exotic type that processor that were were taking place.
-- so that it is winning it is as you know as with the we'll engaged in.
You know the -- -- mount a rest in which are taking that -- amount in which -- -- putting taxpayers dollars at risk.
-- JPMorgan has enough to cover it so they can technically say.
They're right now taxpayers are on the clock.
But what we don't know again is is domino effect that it could have had what if they.
-- enough reserves on on the -- that it was a regulation put in by Chris -- What if there were other safety measures in which that company actually did.
So we are still in a fragile state and we're not saying deny -- rest what we're saying is these exotic type her -- in these ones in which they take it.
At a at a level that shouldn't be had.
Right in again I would I guess -- you really think it's useful to keep remembering that the reason these issues all -- you know don't let them take risk.
Look if they didn't have commercial deposits that we are all guaranteeing and if they weren't so big that their failure threaten the entire world economic system.
I would say go crazy -- -- all the risk you want.
Awesome that's the American way it's great but that's not the circumstances -- eagle -- as you explained it the -- to that it is it as it.
-- complete -- it is a complaint it's a radical answer but it is a complete answer you say commercial banking deposit taking holding people's money keeping it safe.
That's one kind of institution.
Taking investment banking risk betting on credit derivative swaps that's a completely different kind of institution that's not an ideological point of view right all right interesting okay.
Only gets a little politics now penny if we may.
I have not been the past few days the President Obama.
And we've seen some of the polls moving in Mitt Romney's favor and I'm not just -- and the national polling.
But also doing some -- key battleground states.
Is the president is struggling a bit right now.
You know that there's Atlanta at too rapid a different boat last week but it was it was it it was a tough week and for the campaign but the good news is it is June.
Hopefully they have gotten some of the oxygen out of the air.
You know they did it all stems back to that the jobs -- this jobs number and that John's report was.
You know weaker than they had -- 69000.
Pound they had been on a trend going forward.
And that is really again back to what this campaign is gonna be about and that is on the economy so.
It was it was a month in which I know the date they -- how people with and hopefully the next months can go for it.
But as you know it's going to be a struggle but the campaign is not over and they and they are not hitting the panic button they aren't anything.
They are a well seasoned team with -- -- seasoned crew and this is something that we saw in 2008 whenever there was a little bit of a bump in the road or younger the Jeremiah Wright's and other things into a lot of this is going to be devastating for the Obama campaign.
They are steady as you go they have a plan and they know how to execute.
But -- and in it.
In the -- the way campaigns are run now in the way the media is.
Every marine every misstep every small wood at a place of whatever it really does get magnified his -- and to say something like.
The private sector is doing just fine.
What -- the reality of it whatever the context of it just doesn't sound good -- this economy.
Know course it doesn't nor does -- Mitt -- statement he was gonna hiring more firefighters and policemen and right I think you know.
But -- these kinds of statements especially when as they so often or for both candidates taken slightly out of context and -- blown up into some giant scandal.
And pushed out through you know the social media sites that the various campaigns control everything yes it all becomes overwhelming I think exhausting I had you know -- -- I was thinking this morning of these into like baseball games meaning that they never end content that this happened at his best -- have enough.
And way to -- you know there's you know we can all tumbled -- you know do would do -- -- -- news hour to -- a pitch was in the strikes and are not the strike zone and but if you zoom back.
You know you're talking about the context of a nine inning game and there will be ups and downs for both candidates over the course of this thing and I don't think anybody can get excited or too excited.
You know whether the score is five to three or five to four in the fourth inning.
I just don't think anybody should overreact to that.
UW -- weighing in -- strife says honestly if I hope his rough patch continues LL.
Joyce he says the last three years of being a rough patch.
Obvious Celsius is the Willis is what happens when you get -- -- Gordon makes no difference.
What President Obama says now.
And -- riding in.
Petty says picking up when -- point nothing that happens before September will be remembered in November it's not the truth of this that really until we get policy conventions.
Where they'll be -- sedans and swings both ways and it really doesn't matter unless you make a huge gap right now.
I don't know when he is is bill will look you know what we always said was to find yourself define your opponent and then to find mistakes -- games that's how we will always laid out campaign.
And right now you're -- that define your pop up on at all moment.
And it but it but I would agree is that it really comes down to September and it's in the three key things will be -- the porky things will be.
Both of them giving the speeches.
Which -- zero -- an American couple we'll see their speeches on the convention floor and then the three debates leading up to the election there in November.
But email in his meantime though serious chances in which you want to make sure that you have defined your opponent in such a way.
That perhaps certain things -- they say either his feature in the debate.
Can be challenger can be you know this is shown for what -- so debt is a critical time -- is a key time in which we are out so.
It is important to be able to get out they're -- not only what you wanted to say but also define who your opponent is well.
You think in September is when it's really it really -- smattering but you know it's a funny thing IDs.
I -- that's a historical wisdom but I I think that right now you're in a situation where there are so few undecided voters and so few of those and divided -- is really matter because they're the ones who live in -- undecided states the swing states.
Did that both campaigns are really.
Nervous about early impressions being set -- and then people kind of forgetting about them until unless September brings major changes.
You're not gonna see change from a significant change in the overall electorate and I actually think that's the case I think -- we pretty much.
Where this election if we held two -- we -- -- -- gonna look very much like election that we that we all today.
To -- point about trying to find your opponent I think this is one of the things that I think Obama has really made a huge mistake here.
-- is the of attack on Mitt Romney about the private equity his private equity like at Bain Capital.
And the reason is there's an important reason it it resonates with what people fear about Obama which is that he doesn't understand the economy because those attacks.
On -- are very naive.
They -- they look -- sound like they're coming from someone who doesn't understand how private equity works.
And I -- in that sense.
I think the attack is really backfired and I think that's the main -- his biggest problem last week and over the last couple weeks it's been exactly that even some very prominent Democrats.
For on the war -- about.
Him being on the war -- about private equity and it really -- it were -- his attack is actually one of reinforcing.
His own vulnerabilities heading would you agree that he's -- -- own vulnerabilities like going off to Mitt Romney on that particular subject.
I think he's absolutely fair game in the background he has made himself out and is and is said to lynch barker.
-- the reason why he should be if he's elected president is because he knows how to create jobs.
Winning fact that his record and Bain Capital is exact opposite you know when he ran in 1994 against Ted -- -- he traded 101000 jobs.
Then Alison he runs for president it's a 100000 jobs and now it's back down did well maybe tens of thousands of jobs so.
What we don't know is because he has -- at least transparent campaign -- we have seen in the modern history he hasn't opened up the books to -- he hasn't.
Released his own tax records he won't release you know who is bundling for his campaign and where the money is coming from.
So is the least transparent and what we're saying is okay wallets if you were such a job creator.
Then open up your books and by the way you -- that same argument.
When you ran for governor every Meserve for governor in -- -- 47 out of fiftieth -- job creation so.
He is the prayers go after him for saying instead of him saying that I worked at Bain Capital and I was a wealth creator he -- I created jobs would just doesn't prove to be true.
All right penny leave -- -- senior advisor to senator Harry Reid.
Great to have you back with us I think we'll see you next -- that places Jonathan thank I very much indeed it's lovely to -- back.