USA banks and industry are sitting on 19 million jobs to make Obama look bad

[WillowTree]

Bear Stearns. Lehman Brothers. AIG.

Remember them? Not subject to CRA or any of the laws regarding LMI loans.

Nor were Goldman Sachs, JP Morgan, or Morgan Stanley.

Nor were any of the countless other banks and countries around the world which crashed.

The GSEs were less than half market share by 2005.

Last time I checked, taxpayers aren't on the hook for Bear Stearns, Lehman Brothers, Goldman Sachs, JP Morgan, or Morgan Stanley.

We are on the hook for Fannie and Freddie.

And, we'll never get off that hook either.

 

[Annie]

Some answers to why businesses are hoarding cash:

The Tax Foundation - Why are Businesses Hoarding Cash and not Hiring?

November 23, 2011
Why are Businesses Hoarding Cash and not Hiring?

by William McBride

Sales are up, consumption spending has fully recovered, and profits are at an all-time high. So why are businesses hoarding cash, both from retained earnings and borrowing, and holding back on hiring? The answer seems to be uncertainty, about a lot of things but particularly Europe's debt crisis, the looming U.S. debt crisis, and the ensuing possibility of another freeze out in the credit markets.

Another source of uncertainty is taxes. In their latest survey of business and government leaders, Ernst and Young find some very disturbing trends:

"Rarely have tax function leaders, tax administrators and tax policy-makers been in such agreement: a convergence of trends has created the ripest environment for tax controversy in years. Audits are more frequent and aggressive, and thus more costly to defend or litigate; assessments and penalties have now entered the realm of billions of dollars; and companies face unprecedented scrutiny and reporting of their tax affairs by advocacy groups and the news media, often hurting brand reputation and - in the worst cases - shareholder value, even when such coverage is unwarranted or inaccurate.

...

* 75% of companies say they have experienced a rise in the volume or aggressiveness of tax audits.
* 97% of tax administrators reported that they will increase their focus on tax risk related to international structures and cross-border transactions in the coming three years.
* 57% of tax administrators identified transfer pricing as being their leading tax risk focus area in the next 12 months. Transfer pricing was also the leading risk focus area for companies.
* Indirect taxes are another key risk focus, with more companies identifying indirect tax compliance as their second leading tax issue.
* 94% of tax policy-makers predict some or significant growth in general anti-avoidance rules (GAAR) and other similar measures in the next three years.
* 65% of tax administrators believe the incidence of double taxation will stay the same or increase. Only 35% believe it will decrease.
* 75% of tax directors in the largest companies (those with more than US$5 billion in annual revenue) report heightened risk or uncertainty around tax legislation. This figure rises to 78% for BRIC-based companies and 83% for US-based companies.
* 78% of companies report that they have experienced an increase in disclosure and transparency requirements made upon their company in the last two years."​

More on complexity and compliance costs here and here.

Plenty of links at site.

 

[g5000]

Bear Stearns. Lehman Brothers. AIG.

Remember them? Not subject to CRA or any of the laws regarding LMI loans.

Nor were Goldman Sachs, JP Morgan, or Morgan Stanley.

Nor were any of the countless other banks and countries around the world which crashed.

The GSEs were less than half market share by 2005.

Last time I checked, taxpayers aren't on the hook for Bear Stearns, Lehman Brothers, Goldman Sachs, JP Morgan, or Morgan Stanley.

Then you haven't checked. To inject liquidity into the system, the Fed purchased toxic assets from Wall Street that are still on its books, and the Fed window is still wide open to them.

 

[Annie]

and as for businesses hoarding cash, maybe not:

Corporate cash piling up? Not really

Corporations sitting on piles of cash? Not really
Updated 11/22/2011

NEW YORK (AP) – Hardly a day goes by without some politician or pundit pointing out that companies are hoarding cash — roughly $3 trillion of it. If only they would spend it, the thinking goes, the economy might get better.But the story is not as simple as that. Though it seems to have escaped nearly everyone's notice, companies have piled up even more debt lately than they have cash. So they aren't as free to spend as they may seem.

"The record cash story is bull market baloney," says David Stockman, a former U.S. budget director.

U.S. companies are sitting on $358 billion more cash than they had at the start of the recession in December 2007, according to the latest Federal Reserve figures, from June. But in the same period, what they owed rose $428 billion.

Before the recession, you have to go back at least six decades to find a time when companies were so burdened by debt.

Companies borrow money all the time, of course. They borrow to build factories, cover expenses, even make payroll. The problem: Debt doesn't go away. A business can cut costs during a recession. But it can't just shred the IOUs.

Heavy debt means companies could have to dip into those reserves of cash to pay their lenders. And when interest rates eventually go up, companies will have to spend more money just to service the debt.

In the last recession, which ended in June 2009, small businesses that depended on credit cards and bank loans got slapped with higher rates just as sales began to drop. Some got cut off all together.

Peter Boockvar, equity strategist at Miller Tabak & Co., says business debt is too high even if the U.S. manages to stay out of a second recession. If economic growth doesn't pick up, "they'll be more bankruptcies, and more defaults," he predicts.

Even if companies used cash to pay off what they owe, they would be left with plenty of debt — in fact, an amount equal to 83% of all the goods and services they produce in a year, according to Federal Reserve data for incorporated businesses.

In March 2009, the low point of the Great Recession, companies owed 95%. To stay afloat, companies tapped credit lines at banks, increasing debt while they were bringing in less money. They burned through cash to meet expenses.

Before that, though, it has been at least six decades since companies owed so much money as a share of what they produce, says Andrew Smithers, a London consultant who has written extensively about debt.

In short, American business is awash in cash like a man who borrowed from a bank is rich. He may have plenty of money in his pocket, but he still has to return it.

Already, there are signs that companies are struggling to pay off debt. Since this summer, buyers of bonds issued by deeply indebted companies — called junk bonds because they're so risky — have been demanding 14% more in annual interest. Some companies haven't been able to sell bonds at all.

The financial picture is at least better for the biggest, publicly traded firms. Non-financial companies in the Standard & Poor's 500 are making more money than ever and adding to their cash fast. It's middle-sized and small companies that appear to be most vulnerable.

"There are almost two economies out there — the big S&P 500 companies, then everyone else," says Michael Thompson, managing director of S&P's valuation and risk strategies.

But this sunny picture for the largest companies is marred by debt, too. Since the start of the recession, S&P 500 companies have borrowed an additional 44 cents for every additional dollar they've hoarded in cash. For many companies, debt has risen more than cash.

Drugmaker Pfizer added $3.5 billion to cash from the start of the recession. But it added $28 billion of debt, according to FactSet. PepsiCo added $22 billion more debt than cash. Hewlett-Packard added $16 billion more, Wal-Mart $13 billion.

The lack of fear about debt is an about-face from the recession. Back then, Wall Street was worried that many companies had borrowed too much during the boom, and would suffer for it in the bust.

The expectation was that this "wall of debt" would cause some companies to fail. Others would struggle but ultimately pay their lenders. Either way, borrowing would ultimately fall.

But that didn't happen. Instead, the Federal Reserve slashed benchmark interest rates to near zero, lowering yields for conservative investments like money market funds and pushing frustrated investors into riskier corporate bonds offering higher returns. As demand for those bonds rose, businesses were able to issue more of them than ever, and use the proceeds to pay off old ones coming due soon.

"The Fed encouraged debt refinancing, but we need debt extinguishment," says Boockvar. "It's bought time, but it doesn't deal with the fundamental problem."

That problem could upend the expectations of investors. Many are banking on companies using cash to buy back more of their own stock, which might lift sagging prices.

Smithers thinks high debt will eventually force companies to do the opposite — cut buybacks.

And given the big role these purchases play in the market, that could wallop stocks. Smithers says that buybacks by non-financial companies over the past decade have more than compensated for the wave of selling by individuals and mutual funds.

The problem with debt is you don't need an actual recession to cause trouble for companies, just the fear of one. Spooked lenders can hike rates on new loans needed to pay off old ones, or cut companies off completely.

For companies issuing those risky junk-rated bonds, that day has already arrived.

A maker of private planes in Kansas saw rates on its bonds jump 40 percent in just a month. And on Wednesday, a shipping company in Florida filed for bankruptcy because it was unable to borrow to pay off old loans.

"They thought, 'We survived that one and we won't have another for 10 years,'" says Martin Fridson, global chief credit strategist at BNP Paribas Investment Partners, speaking of the Great Recession. "But the economy is not out of the woods yet."

 

[Toddsterpatriot]

Bear Stearns. Lehman Brothers. AIG.

Remember them? Not subject to CRA or any of the laws regarding LMI loans.

Nor were Goldman Sachs, JP Morgan, or Morgan Stanley.

Nor were any of the countless other banks and countries around the world which crashed.

The GSEs were less than half market share by 2005.

Last time I checked, taxpayers aren't on the hook for Bear Stearns, Lehman Brothers, Goldman Sachs, JP Morgan, or Morgan Stanley.

Then you haven't checked. To inject liquidity into the system, the Fed purchased toxic assets from Wall Street that are still on its books, and the Fed window is still wide open to them.

The Fed didn't purchase toxic assets.
The Fed window requires collateral.
Still not on the hook.

 

[Oldstyle]

Now, about the topic of this thread.

Anyone who says a business hoards cash out of spite is an idiot. Do you really think the CEO of a company is sitting somewhere saying, "You know, I could be investing our cash and beatin the pants off our competitors and selling shit and making record profits, but oh, hell no! I want my competitors to do all that. I'm going to sit here and not make money. 'Cause I hate Obama and...somehow...not making and selling stuff will hurt him more than me..."

Private companies have only one motive to invest capital and that's the belief that they will make a big enough profit to justify the risk. The people who make the call on that could care less about politics. Anyone who thinks CEO's are not investing because they don't like Barack Obama are EXTREMELY naive. They aren't investing because they either don't like his policies or they haven't been able to figure out what his policies ARE because they aren't defined. Business planners abhor uncertainty. Barack Obama is the ultimate uncertain President. Even "he" doesn't seem to know what he wants...

 

[ClosedCaption]

How can having RINO's in the white house be more important than the nations economy?

How can having an avowed Marxist there now help it?

You doing that lying thing again

 

[Dr Grump]

WHY should any hiring go on with the uncertainty that Obama has introduced regarding Obamacare, Taxes, and all the rest of it?

Employment will NOT rise signifigantly until Obama is gone, and the Anti-capitalist Statists in the Congress are shown the door.

What do you propose? These people be forced to hire when they know they won't profit and thier capital will be wasted?

YOU are one of these freaks that think companies exist just to hand out jobs.

Do you know what the biggest problem with you neocon whackjobs and your thoughts/ideas on financial matters? It would turn America into a third world country in a matter of years. And please, don't give me any of this empty rhetoric that America is already there or heading there. Go live in Gabon, Burkina Faso, Togo, Guinea Bissau, Sudan or Pakistan for a reality check.

 

[g5000]

The Fed didn't purchase toxic assets.
The Fed window requires collateral.
Still not on the hook.

They accepted toxic assets as collateral. If the loans fail, we have nothing but toxic assets barely worth the paper they are printed on.

Anyway, the point is, before you diverted from it, the CRA has nothing to do with the global credit crisis, and the Wall Street firms I named were not forced, required by law, or any other way coerced into making the toxic loans they did. They did it deliberately, believing they had "risk management". They got stupid. Very, very stupid.

If you think this did not affect you, look at your 401k statement. Look at your higher health insurance premiums. Look at your higher state taxes.

And look who is President.

 

[Toddsterpatriot]

The Fed didn't purchase toxic assets.
The Fed window requires collateral.
Still not on the hook.

They accepted toxic assets as collateral. If the loans fail, we have nothing but toxic assets barely worth the paper they are printed on.

Anyway, the point is, before you diverted from it, the CRA has nothing to do with the global credit crisis, and the Wall Street firms I named were not forced, required by law, or any other way coerced into making the toxic loans they did. They did it deliberately, believing they had "risk management". They got stupid. Very, very stupid.

If you think this did not affect you, look at your 401k statement. Look at your higher health insurance premiums. Look at your higher state taxes.

And look who is President.

For loans that were repaid? So what?

Where did I say the CRA had anything to do with the global crisis?
Wall Street firms? I'm talking about banks and Fannie and Freddie.

 

[Londoner]

If America's largest banks and non-financial companies would just loosen their death-grip on a chunk of the $3.6 trillion in cash they're hoarding and move it into productive investments instead, the report estimates that about 19 million jobs would be created in the next three years, lowering the unemployment rate to under 5 percent.

Corporate America Is Sitting On The Solution To The Jobs Crisis: Report

You are missing something huge.

The policies of Reagan (which have been in place for 30 years) shifted wealth from the lower and middle classes to the upper class. This was done mostly through tax policy, but additionally by unwinding the government's postwar investment in the middle class. Also, American jobs were shipped to 3rd world labor markets to raise profit margins.

When the middle class was defunded, the Reagan Revolution had a problem. How would the largest consumption economy on earth be sustained in the absence of high wages, solid benefits, cheap education, cheap health care, entitlements, and all the things that allowed the middle class to consume? The answer was credit... debt. Starting in 1980, Household Debt rose at an alarming level so that the middle class could maintain living standards, but also to keep the American economy afloat. Remember: starting in the 60s, America rapidly exchanged manufacturing plants for shopping malls. We shipped factories to China, and they shipped clothes, sneakers, electronic goods and everything else back to our shopping malls. Americans went from being producers to shoppers. The capitalists benefited from cheap labor, while the lower and middle class exchanged high wage jobs for retail wages (which were supplanted by massive credit so they could consume and keep the economy afloat). In fact, the American credit-card-consumer became shopper to the world. Prior to the meltdown, it was the American consumer that sustained the world's large export economies like China.

But the credit cards handed out to sustain Morning in America ended up breaking the bank. The American consumer is broke. American consumers don't have the jobs or the credit to consume. This is why the banks are sitting on money: there are no consumers. The current consumers can't even buy the inventory which exists. There is ZERO reason to invest Reaganomics claims that the consumers will magically appear if the wealthy invest and have more money. This is exactly wrong. The capitalist will not add one job unless there is money in middle class wallets to capture. Government used to invest in the middle class and make them solvent. The great postwar economy was built partly because government made sure there was money in middle class wallets. This gave the capitalist an incentive to invest - because there was money out there to go after. Now the capitalist has ZERO reason to invest because consumers don't have any money.

This is the problem with going too far with Reaganomics. In the 80s it was necessary unburden business- cutting taxes and deregulation made sense. And there wasn't a problem with demand: the consumer was still doing ok because of 35 years of demand centered policies. But as the government started to ignore middle class demand in favor of helping the wealthy, the field shifted. Now the middle class has no money to consume and the wealthy have all the money, but no reason to invest (because there are no consumers, or demand). You will never repair the economy unless the government addresses consumer demand - and this cannot be done by giving tax breaks to people who already have more than they can spend. Giving the wealthy more money won't increase their spending because they can already spend whatever they want. They will only horde the extra cash because their is not enough consumers out there to warrant investment. Reaganomics has created dynastic patterns of wealth accumulation. Money goes to the top and instead of trickling down, it goes into elections, opinion control (media), and inheritances.

The Republicans are promising to bring the jobs back. Don't believe them. They are just going to beef up law enforcement and build more prisons because of their wealth transfer. They have disenfranchised the middle class. The game is over.

 

[IndependntLogic]

WHY should any hiring go on with the uncertainty that Obama has introduced regarding Obamacare, Taxes, and all the rest of it?

Employment will NOT rise signifigantly until Obama is gone, and the Anti-capitalist Statists in the Congress are shown the door.

What do you propose? These people be forced to hire when they know they won't profit and thier capital will be wasted?

YOU are one of these freaks that think companies exist just to hand out jobs.

I'm hiring two new people in March. BTW, what taxes are you referring to? The only thing I've seen Obama even discuss that would effect corporate taxes is the payroll tax. The only thing that would do is keep them lower. The only people who opposed it were the GOP.

Don't get me wrong. Obamacare sucks and I'd like to see it repealed. I think Obama sucks as a president and I won't vote for him. I just don't buy into the bs propaganda from The Right any more than I do from The Left. Obama is not all powerful. He can't even introduce legislation. He has never raised taxes. I don't know a single exec who has ever decided against a demand-spurred hire, because of tax rates. That's just plain foolish.

 

[Valox]

Lending has increased and there is no conspiracy by banks to make Obama look bad.

Banks are lending again to businesses after nearly three years that included the recession and falling loan balances, according to the latest data from the Federal Reserve.

A pickup in lending resumed this summer and continued through October, latest data available.

Total outstanding bank loans grew at an annual rate of 3.9 percent in the July-through-September period and at a 7.4 percent rate in October. By comparison, bank loans declined in 2009 and 2010.
Banks lending again, Fed says - Pittsburgh Tribune-Review

 

[IndependntLogic]

Lending has increased and there is no conspiracy to by banks to make Obama look bad.

Banks are lending again to businesses after nearly three years that included the recession and falling loan balances, according to the latest data from the Federal Reserve.

A pickup in lending resumed this summer and continued through October, latest data available.

Total outstanding bank loans grew at an annual rate of 3.9 percent in the July-through-September period and at a 7.4 percent rate in October. By comparison, bank loans declined in 2009 and 2010.
Banks lending again, Fed says - Pittsburgh Tribune-Review

Holy Ship! A solid, fact-based counter with supporting evidence!

Well done sir!

 

[Oldstyle]

If America's largest banks and non-financial companies would just loosen their death-grip on a chunk of the $3.6 trillion in cash they're hoarding and move it into productive investments instead, the report estimates that about 19 million jobs would be created in the next three years, lowering the unemployment rate to under 5 percent.

Corporate America Is Sitting On The Solution To The Jobs Crisis: Report

You are missing something huge.

The policies of Reagan (which have been in place for 30 years) shifted wealth from the lower and middle classes to the upper class. This was done mostly through tax policy, but additionally by unwinding the government's postwar investment in the middle class. Also, American jobs were shipped to 3rd world labor markets to raise profit margins.

When the middle class was defunded, the Reagan Revolution had a problem. How would the largest consumption economy on earth be sustained in the absence of high wages, solid benefits, cheap education, cheap health care, entitlements, and all the things that allowed the middle class to consume? The answer was credit... debt. Starting in 1980, Household Debt rose at an alarming level so that the middle class could maintain living standards, but also to keep the American economy afloat. Remember: starting in the 60s, America rapidly exchanged manufacturing plants for shopping malls. We shipped factories to China, and they shipped clothes, sneakers, electronic goods and everything else back to our shopping malls. Americans went from being producers to shoppers. The capitalists benefited from cheap labor, while the lower and middle class exchanged high wage jobs for retail wages (which were supplanted by massive credit so they could consume and keep the economy afloat). In fact, the American credit-card-consumer became shopper to the world. Prior to the meltdown, it was the American consumer that sustained the world's large export economies like China.

But the credit cards handed out to sustain Morning in America ended up breaking the bank. The American consumer is broke. American consumers don't have the jobs or the credit to consume. This is why the banks are sitting on money: there are no consumers. The current consumers can't even buy the inventory which exists. There is ZERO reason to invest Reaganomics claims that the consumers will magically appear if the wealthy invest and have more money. This is exactly wrong. The capitalist will not add one job unless there is money in middle class wallets to capture. Government used to invest in the middle class and make them solvent. The great postwar economy was built partly because government made sure there was money in middle class wallets. This gave the capitalist an incentive to invest - because there was money out there to go after. Now the capitalist has ZERO reason to invest because consumers don't have any money.

This is the problem with going too far with Reaganomics. In the 80s it was necessary unburden business- cutting taxes and deregulation made sense. And there wasn't a problem with demand: the consumer was still doing ok because of 35 years of demand centered policies. But as the government started to ignore middle class demand in favor of helping the wealthy, the field shifted. Now the middle class has no money to consume and the wealthy have all the money, but no reason to invest (because there are no consumers, or demand). You will never repair the economy unless the government addresses consumer demand - and this cannot be done by giving tax breaks to people who already have more than they can spend. Giving the wealthy more money won't increase their spending because they can already spend whatever they want. They will only horde the extra cash because their is not enough consumers out there to warrant investment. Reaganomics has created dynastic patterns of wealth accumulation. Money goes to the top and instead of trickling down, it goes into elections, opinion control (media), and inheritances.

The Republicans are promising to bring the jobs back. Don't believe them. They are just going to beef up law enforcement and build more prisons because of their wealth transfer. They have disenfranchised the middle class. The game is over.

Hold on...in what way have the Democrats done anything more to keep jobs from going overseas than the Republicans have? I keep hearing this refrain and it's just nonsense. Barack Obama's own "Jobs Czar" heads a company that has shipped tens of thousands of jobs to China. Why aren't you all over Democrats for that? Yes, there has been a dramatic loss of high paying low skilled union jobs over the past 50 years but that has NOTHING to do with Reaganomics. We've become a global economy and the same forces that prompted the loss of jobs from New England textile mills in the 70's to mills in the Carolinas...eventually prompted the loss of those same jobs to Mexico and then China. I'm sorry but if you're a relatively unskilled machine operator who was making twenty five bucks an hour then you WERE going to be replaced by either a robot or a foreign worker that will do it for eight and it didn't matter who was in the White House. That's the reality of the global market we now live in.

We're in a fight for our economic lives right now against China and India. We have to be smart about our fiscal policy. We have to get control of our debt and trim the size of our out of control government. Passing idiotic legislation like ObamaCare isn't going to help us do that. Neither is passing Cap & Trade legislation. We need to unleash the American private sector and give them incentives for developing new technologies that we can sell to the rest of the world.

 

[Harry Dresden]

Do you what the biggest problem with you neocon whackjobs and your thoughts/ideas on financial matters? It would turn America into a third world country in a matter of years. And please, don't give me any of this empty rhetoric that America is already there or heading there. Go live in Gabon, Burkina Faso, Togo, Guinea Bissau, Sudan or Pakistan for a reality check.

or El Centro California.....

 

[Claudette]

"Funny how you don't demand the same thing from Solyndra execs."

This jewel was financed with money from republican investors and GW Bush allies when GW Bush was in office.

Obama apparently thought it was important to help republicans get through their disaster.

Bullshit dude. The Bush administration nixed Solyndra.

Barry boy came in and had to pay back one of his big doners and push his green, unaffordable bs. Hence we taxpayers got hosed for 500 million via a bankrupt Solyndra. His big assed doner is first up for payback as well.

 

[Dr Grump]

Do you what the biggest problem with you neocon whackjobs and your thoughts/ideas on financial matters? It would turn America into a third world country in a matter of years. And please, don't give me any of this empty rhetoric that America is already there or heading there. Go live in Gabon, Burkina Faso, Togo, Guinea Bissau, Sudan or Pakistan for a reality check.

or El Centro California.....

LOL...but they have health care now!

 

[merrill]

Do your local community a favor...

Move Your Money
Why put up with megabank megalomania? Here are two websites to help you find a local bank that gives a damn about you and your community:

Welcome to CU National Finder
and http://www.moveyourmoney.info/find-a-ba

 

[The T]

"Funny how you don't demand the same thing from Solyndra execs."

This jewel was financed with money from republican investors and GW Bush allies when GW Bush was in office.

Obama apparently thought it was important to help republicans get through their disaster.

Bullshit dude. The Bush administration nixed Solyndra.

Barry boy came in and had to pay back one of his big doners and push his green, unaffordable bs. Hence we taxpayers got hosed for 500 million via a bankrupt Solyndra. His big assed doner is first up for payback as well.

Correct.

Obama’s Big Green Boondoggles; Solyndra circus! Dems’ Blame Bush/Big Oil mantras; OMB warned: Firm “not ready for prime time;” Update: Treasury IG investigates; “Everyone knew”

Solyndra Pestered Bush Administration Over Delays in Approving Federal Loan, Emails Show