Financial Crisis Inquiry

January 14, 2010

By Padmini Arhant

Today, the financial crisis inquiry commission summoned the financial sector executives to investigate the activities that primarily contributed to the financial market’s downward spiraling and led the economy to the brink of collapse. The inquiry is a step in the right direction to convey a strong message that no one is above the law and democracy cannot be undermined.

Although, the executives are perceptive in self-defense and evading responsibility for the financial meltdown, the fact of the matter is, these financial moguls capitalized on the economic vulnerabilities during the Bush administration. It’s generated from the deregulations and substantial prime rate reduction alluring average citizens with a political slogan that linked patriotism to home ownership.

More concessions were offered by the Bush-Cheney Presidency through massive tax cuts for corporations, financial institutions and the wealthy individuals boosting the investment banks’ portfolio, thereby driving them from equity markets to speculative trading.

It created an enormous capital infusion with investment banks competing with the commercial banks in the absence of Glass Steagall Act. Followed by AIG collaborating in the insurance deals on the credit borrowings invested in derivatives and hedge funds with risky assets as collateral and underlying value further exacerbated the risk management.

When the bubble burst, so did their balance sheets. It went disarray with the majority lead players burdened with toxic assets that transformed into dead weight liabilities in the form of large risk exposure eroding their capital and solvency, consequently relying on the taxpayer bailout to salvage the financial market and the economy.

Apart from the financial institutions, the architects behind the policies since the early nineties are equally responsible for the debacle.

For instance, the former Federal Reserve Chairman Alan Greenspan,

The former treasury secretary Henry Paulson and the current treasury secretary Timothy Geithner,

The present Federal Reserve Chairman Ben Bernanke along with the financial team under the Obama administration represent the convenient exchanges between the Wall Street and Washington through the revolving door of Goldman Sachs, Merrill Lynch, Morgan Stanley and the Lehman Brothers prior to being acquired by Barclays…to name a few.

As found in other national issues such as health care, communication and energy, the prevalent culture between Washington and Wall Street is a huge conflict of interest leaving the average taxpayers and consumers at the mercy of the “corporate owned government” enterprise.

Investigation is necessary to determine the cause of the status quo. However, it’s significant to have the financial sector pledge to revive the credit market through liquidity flow to small businesses and corporations. It would jumpstart the economy, since financing businesses and corporations positively impact the job market. Meanwhile, the manufacturing sector could be resurrected pervasively, producing the desirable drastic unemployment contraction.

Simultaneously, the finance industry is required to stimulate the real estate and construction areas of the economy. Considering the dismal job growth accompanied by the plummeting residential and commercial real estate values due to the sub-prime mortgage fiasco,

The financial institutions should invigorate the financing and refinancing options to homeowners and commercial estate holders by offering reasonable, incentivized programs that would allow the property owners to comply with the payments and retain the values respectively. The viable strategy would ease the burden on the lender and the mortgagee leading to the property value appreciation.

President Obama’s proposal to levy taxes against the financial institutions that have benefited from the taxpayer bailout is right on target. Not surprisingly, the financial industry is resisting the tax, estimated to yield $120 billion in revenue for the ailing economy. Taxpayers from bottom up shared the trillions of dollars finance industry bailout.

Having stabilized the balance sheets from the massive interjection of funds, the institutions are now challenging the government against the tax proposal by warning that any such levies in the form of fees and taxes would be hurting the consumers, claiming that the customer will ultimately bear the charges through bank fee hikes.

Alternatively, the banks are threatening to move jobs overseas upon any tax or fee imposition.
Despite the pre-existing exorbitant fee and charges applied to banking transactions, the banks’ retaliation to tax proposal via potential fee increase or job export is not only outrageous but also audacious.

Financial sector being the economy’s engine, the credit flow across the spectrum is pertinent to the swift economic recovery including the financial market gains.

The financial institutions’ lack of concern for ethics and the excessive greed triggered the financial market crisis ultimately affecting the global economy. Therefore, there is an urgent requirement for aggressive financial reform to prevent history repeating itself in the near future.

Thank you.

Padmini Arhant

Obama Administration – Performance Assessment

April 29, 2009

It is one hundred days since the new administration under President Obama took office on January 20, 2009.

Precisely, around that time the nation was in a precarious situation specifically with the economy in severe recession heading towards a possible depression. It required urgent policy decisions to avert the serous economic crisis contributing to the crumbling housing market, potential bankruptcies of the auto industry, tremendous job losses, failing financial institutions and volatile stock market.

Even though, the crises are far from over, the administration demonstrated diligence with the legislation of the $787 billion stimulus bill through American Recovery and Reinvestment Act accompanied by various strategies to reform and revive the financial institutions and housing market.

The financial bailouts were justifiably controversial and awaiting the stress test results due on May 4, 2009. Meanwhile, the alternative of inaction would have proven equally detrimental and exacerbated the liquidity crisis in the financial market.

In addition to the measures in stimulating the economy, the administration’s effort to sustain the existing jobs in different sectors particularly the auto industry is noteworthy. Further planning and policy decisions to create new jobs phrased, as ‘green jobs’ through vigorous environmental and energy programs is the right course of action to efficiently deal with the challenging issues of global warming and energy independence.

Other achievements in promoting science and technology such as the stem cell research within the realm of ethical code, proposal to digitalize medical records as one of many innovative solutions in the health care policy, coordinating with the environmental agencies in the protection of threatened and endangered species are impressive. However, the request from the environmental groups to rescind the rule that limits the protection of polar bears from the melting Arctic ice caused by climate change is pending approval.

In social programs, the signing of two major pieces of legislation into law – the Lilly Ledbetter Fair Pay Act, ensuring equal pay for men and women and the State Children’s Health Insurance Program (SCHIP) that guarantees 11 million low-income children affordable health care are significant actions.

World health crisis in the wake of the ‘pandemic swine flu’ appropriately handled by the Obama administration thus far.

Despite the fragile economic conditions, the Obama administration’s response and reaction to most issues has been right on target. The anticipated legislation of the budget focused on education, energy and health care should accelerate the economic growth for rapid recovery from the existing crises.

The administration must strive hard to isolate investment from wasteful spending i.e. earmarks or pork barrel that often finds its way through major budgets and stimulus packages. Likewise, preventing the special interests and lobbyists’ continuous dominance should be part of the administration’s agenda.

With respect to transparency and accountability, the recent scandals involving legislators raises credibility issue for the majority party. It is important to maintain bipartisanship in legislative matters for national interest since future holds no guarantee with the majority rule. Moreover, divisive politics contributes to polarization jeopardizing national unity and ultimately election results.

In foreign policy matter, the recent participation in international summits appears promising with the exception of the boycotting of the Geneva conference on ‘racism.’ Please refer to the article on ‘Racism – The Durban II Geneva Conference’ @

Obviously, the rising tensions in the international arena from Afghanistan, Pakistan, Iran and North Korea are few of the many challenges ahead. Resolving the Israeli-Palestinian conflict in the form of two states solutions is paramount to attain permanent peace in the region. It would create a pathway for others sharing similar aspirations.

Combat troops withdrawal from Iraq and simultaneous deployment in Afghanistan deserve individual criteria and attention. Military operation always yields immense casualties and often precious lives are lost in the process.

President Obama’s initiative with Russia in the reduction of conventional weapons and other arsenal is praiseworthy. Nevertheless, it remains subject to the real statistics and the actual defense spending contraction by the geopolitical powers. The bold and audacious declaration of nuclear disarmament was music to ears, although the reality of it relies on the willingness and commitment by the other nuclear nations.

At the G-20 summit, the United States’ reluctance to support France’s proposal to force international financial institutions unveil the corporations using tax havens for tax evasions was disappointing. The unpopular yet meaningful recommendation contributed to a major disagreement between France and China leading to the mediation by the U.S. President Barack Obama. The international sources attributed China’s objection to the potential ramifications on the foreign investments in that nation.

In conclusion, the result oriented performance reflects President Obama’s admirable leadership skills and the administration’s ambitious goals in education, energy and health care is a step in the right direction.

I wish President Obama and the administration success in all endeavors.

Thank you.

Padmini Arhant

Bailout Failure

September 29, 2008

The democratic system has failed to rescue the nation at the hour of crisis. The party bickering and “partisan politics” has taken precedence over “main street” struggles. It is clear from the action of the legislators voting against the “emergency” plan that their concern for the return to power is paramount than the “average citizen’s” livelihood. The explanation for their refusal to cooperate does not resonate with the realities in the “main street”. The nature of global economy is slighted with distracted opinions and determined position in this crucial legislation.

Excerpt of one of the legislators reason to vote against the bailout.

Source : – Thank you.

According to Democratic Congressman Rep. Dennis Kucinich – “Is this the United States Congress or the Board of Directors of Goldman Sachs?” Rep. Dennis Kucinich Rejects $700 Billion Bailout
The House is set to vote today on a $700 billion emergency bailout plan for the financial industry. The proposed legislation was forged during a marathon negotiating session over the weekend between lawmakers from both parties and Treasury Secretary Henry Paulson. The 110-page bill would authorize Paulson to initiate what is likely to become the biggest government bailout in US history, allowing him to spend up to $700 billion to relieve faltering banks and other firms of bad assets backed by home mortgages, which are falling into foreclosure at record rates.

AMY GOODMAN: Right, but the Democrats are in charge of this.

REP. DENNIS KUCINICH: Right. You know, I’ll tell you something that we were told in our caucus. We were told that our presidential candidate, when the negotiations started at the White House, said that he didn’t want this in this bill. Now, that’s what we were told.

AMY GOODMAN: You were told that Barack Obama did not want this in the bill?

REP. DENNIS KUCINICH: That he didn’t want the bankruptcy provisions in the bill. Now, you know, that’s what we were told. And I don’t understand why he would say that, if he did say that. And I think that there is a—the fact that we didn’t put bankruptcy provisions in, that actually we removed any hope for judges to do any loan modifications or any forbearance. There’s no moratorium on mortgage foreclosures in here. So, who’s getting—who’s really getting helped by this bill? This is a bailout, pure and simple, of Wall Street interests who have been involved in speculation.

AMY GOODMAN: Congressman Kucinich, can you explain how it is that the Democrats are in charge, yet the Democrats back down on their demand to give bankruptcy judges authority to alter the terms of mortgages for homeowners facing foreclosure, that Democrats also failed in their attempt to steer a portion of any government profits from the package to affordable housing programs?

REP. DENNIS KUCINICH: Well, I mean, those are two of the most glaring deficiencies in this bill. And I would maintain there was never any intention to—you know, well, many members of Congress had the intention of helping people who were in foreclosure. You know, this—Wall Street doesn’t want to do that. Wall Street wants to grab whatever change they can and equity that’s left in these properties. So— .”

Review: There is no disagreement in this context. However, the repercussions of failing to act is far greater than the stakes involved in the initial bailout that is being carried out cautiously and judiciously by the remaining members of the “Congress”. The legislators’ rhetoric does not serve the purpose as the U.S economy is the engine of the global markets and the ripple effect is already felt in Europe and worldwide. Today’s plummeting of the stock market is yet another sign of the “financial catastrophe” at our doorstep.

With respect to the elimination of “bankruptcy provision” as discussed in the above interview, the “Democratic Presidential Candidate”, i.e. Senator Barack Obama’s position is apparent in the “housing market” debacle. It is time for the Democratic Party to be forthcoming to the democratic base as well as others and explain the reason behind such notion to alienate the worst hit population i.e. the “homeowners” in this bailout proposal.

As for the GOP members of Congress, defying the national interest by voting against the bailout proposal, the following questions arise,

1. Where were the legislators when the economic meltdown was happening under their watch?

2. Why did they not alert their own party and the administration that is notorious for reckless
policies and “bankrupting” the economy under their reign of power?

3.Whatever happened to the passion and pessimism about the “Wall Street” performance leading
the world’s economic power on the verge of collapse?

Alas, “Rip Van Winkle” is awakened by the financial “thunderbolt” and causing havoc in the “Capitol Hill” , the heavenly abode of the legislators.

Ironically, the two extreme political factions appear to come in terms with agreement on a single platform , i..e. protests the bailout and attempts to derail the entire economic infrastructure. The spectacular performance is to earn voter confidence and retain power for further economic disasters.

It is time to focus on the dire situation and market reaction in the United States and worldwide that is beckoning to act promptly and effectively by facilitating liquidity in the financial market.

The lawmakers concerned about taxpayers must also realize that taxpayers’ investments are the major casualty in the current political fiasco.

It is the duty of every legislator to put “partisan politics” aside and act diligently by coming forward and resolving the national and world financial crisis in the best interest of the people, responsible for their power.

Thank you.

Padmini Arhant

Economic Security

September 28, 2008

The legislators are currently addressing the financial crisis confronting our nation and it appears that a consensus has been reached to bailout the Corporations from the burden of bad debts. According to the lawmakers, the “bill” is structured to largely benefit the taxpayers and assist with the stabilization of the financial market.

It is important to recognize the fact that the twenty first century economy is a global economy and the investments are tied to one another directly or indirectly and traded in the global markets. Therefore, it is vital for the U.S. economy to remain stable and provide necessary market assurance to both domestic and foreign investors with stakes in U.S. investments.

The other important factor for the unprecedented government intervention in a “free market” environment is to eliminate loopholes to avert such catastrophe in the future. When the actual agreement proposal is presented to the taxpayers, it should reflect the absolute protection of the taxpayer’s funds and profitable return on any investments.

At the same time, politics should not take precedence over “American taxpayers” interest in terms of “Appropriation of funds” for a certain political faction like “ACORN” or for that matter a “private sector” from the “Wall Street” with any misrepresentation to provide insurance on the “mortgage backed” securities with no prospective buyer in sight.

The “bill” must include provisions for full disclosure of the deals regardless of the nature and size of the bailout amount.

Further, it is essential for the “impending bill” to fund the bailout in “installments” rather than a lump sum settlement as it would indicate the initial results on the venture carried out on a “trial and error” basis. This would also allow public opinion to analyze the “pros and cons” of such investment and facilitate the required liquidity in the financial market with a “majority” approval.

The task ahead of our nation is to restore economic security with the revival of the “housing” and “job” market. As stated earlier, the “housing market” crisis is directly related to the “credit crunch” and “subprime mortgage” failure leading to “foreclosures” and that could be resolved by overhauling the lending practices and assisting the “homeowners” with affordable revised mortgage package. The foreclosed homes should be made available for sale to potential investors with verifiable income and credit history.

Commercial lending should resume freely yet carefully to promote and revitalize the small businesses and Corporations relying on credit for the growth and development in the job market. The flow of goods and services without any disruption will contribute to the anticipated growth and help the nation in reducing the multi-trillion dollar debt due to trade and budget deficit which otherwise will be the inevitable burden on the next and future generation.

It is time to focus on this crisis as “national” rather than “individual” and collectively deal with the issue for a better future of all.

Thank you.

Padmini Arhant

Economic Crisis

September 25, 2008

Our nation is currently experiencing a deep financial crisis due to major financial institutions, investment banks and insurance industry failure.

It all started crumbling like the house of cards beginning with Fannie Mae and Freddie Mac, Lehman Brothers, AIG and others in line with bad loans from the sub-prime mortgage crisis.

The economic meltdown in late 2006 precipitated nationwide housing market decline with saturated equity borrowing.

The entire network in the real estate and financial sector with hedge fund managers, underwriters, financial institutions processing the mortgage applications, mortgage brokers, realtors, homebuyers and sellers were primarily interested and vigorously involved in promoting and wrapping the deal with minimal and/or non-compliance of the standard rules and regulations that are specifically set up to avert such catastrophe.

The housing market bubble eventually burst contributing to credit crunch and massive foreclosures across the nation.

The commercial sectors were also hit in the process due to lenders streamlining measures and Congress legislation in an effort to slow down the escalating credit crisis.

Subsequently the ripple effect was felt in the job market with small businesses and medium size corporations struggling to maintain their credit limit from the sharp increase in interest rates on the borrowings and capital depletion essential for survival in the highly competitive market economy.

Meanwhile, some investors diverted their attention from real estate to stock market for short-term gains and as a result certain stocks earned the preferred status in stock value despite any performance history.

The stock market was warming up with superficially inflated stock prices along with futures trade speculation on oil stocks mostly responsible for the crude oil price elevation triggering the sensitive energy crisis.

At the top level, the monetary authority and incumbent administration as the economic growth and development oversight implemented policies including lowering of prime rates to an unprecedented level in recent times creating opportunities for financial institutions to outreach borrowers with no solid credit history.

The executive branch euphemism to display patriotism through home ownership factored for unscrupulous practices in the housing market debacle.

It has further come to light that some legislators are beneficiaries of personal financial deals as VIP PATRONS of the failed financial institutions such as Fannie Mae and Freddie Mac, Lehman Brothers and more.

However, it does not exclude Presidential contenders’ campaign advisors confirmed to be the financial institutions’ lobbyists/former executives enlarging the oversight conflict of interest.

Hence proving the theory….corruption and cronyism thrives in economic and political systems.


The government proposal to bail out these Corporations indulging in reckless undertakings with staggering $700 billion of American taxpayer’s money is currently debated in the House of Congress.

There is also anxiety over the executive branch cavalier approach for the clean bill immediate approval without tax payer investment protection or oversight for an unprecedented and historic venture.

The irony is the Treasury Department and the Federal Reserve Bank with the primary responsibility to monitor and recommend any regulation in the financial sector is experiencing labor pain after nearly twenty two months gestation and demanding Congress to deliver regardless.

With current Presidential race in process, one has to hope that this situation does not lead to the controversial Pro-Life vs. Pro-Choice debate on the financial crisis.

Congress favoring Pro-Choice to ensure the bearers safety and security would be prudent particularly with taxpayers bankrolling Corporations bailout and their erroneous decisions.

The urgency to regulate the financial sector granting unilateral authority to an individual – the Treasury Secretary with a sum approximately equivalent to Argentina and Chile’s combined GDP arouses legitimate skepticism among legislators on both sides of the aisle.

Some of them reminisce the current administration’s similar demand prior to invasion and occupation of Iraq.


Since the bailout is imminent and crucial for the stabilization of the financial markets, it is imperative for legislators to secure investments with conditional offers.

Several economists and experts have come forward and presented their thoughts and strategies for the existing national crisis.

1. The consensus among all of them is to establish an Independent Oversight with no Special Interests or Lobbyists infiltration posing conflict of interest.

2. Oversight Committee to approve after reviewing the proposal to invest in mortgage-backed securities to relieve the remaining financial institutions from the bad debts burden.

3. These securities purchase price carefully taken into consideration with a set profitable return upon instruments sale would be beneficial. It is also important to identify the buyers and sellers.

4. Open Bid transparency during investments’ sale or purchase is vital for investor confidence and value enhancement.

5. Corporate Executives pay off for poor judgment and weak performance eliminated as a precedence to existing and future Corporations heading in that direction would prevent repeat mistakes.

6. The hedge fund managers subjected to strict scrutiny and ethical standards is vital in addition to management fees and asset allocation determined in a manner to yield nothing less than profitable return to the investors i.e. the taxpayers.

7. Moratorium on foreclosures in bipartisanship agreement would relieve homeowners across the nation.

At the same time, the home owners to be evaluated on individual basis by the lenders with Oversight Committee alongside and encouraged to make payments equivalent to rental payments or interest only on revised mortgage package whatever is affordable.

Again, this offer made available only to the first home buyers dealing with foreclosures.

Successful sales and marketing of foreclosed homes to potential investors could expedite the housing market revival besides helping communities restore social and economic security through property taxes used for funding public school education and other services.

8. External audit on financial institutions listed as risky and brought to public focus would restrict undesirable activities.

9. The firewall resurrected between the commercial and investment banks protects public funds.

10. Sound and solid lending practices in both private and public sector would energize markets.

United States economy has proven record of accomplishments to rebound following crisis throughout the twentieth century.

The United States economy is resilient with a highly productive work force that has risen to the occasion and challenged the market forces acting against it.

The economic boom will resume and prosperity shared by the global markets.

The temporary turmoil in the market will be settled with prudent economic strategy, robust fiscal policy, leadership and confidence of the people of the United States of America.

Thank you.

Padmini Arhant