Wall Street Ponders President Obama
Wall Street has been trying to wrap its head around an Obama presidency and possible Democratic control of Congress.
There are two main concerns: Tighter regulation of runaway financial institutions in the wake of the credit crisis and economic policies that lead will to further contraction, ranging from higher taxes to more government spending.
Obama's tax policies play much better on Main Street than on Wall Street -- he is for raising capital-gains taxes and taxes on wealthy Americans.
But traders and analysts are speculating, perhaps hopefully, that a President Obama may look around the struggling economy, which likely will be solidly in recession when he is inaugurated in January and think, "Maybe now is not the best time to raise taxes."
CNBC anchor Erin Burnett noted today that Obama has called on centrist Democrats, such as Clinton Treasury secretary Bob Rubin and others for his advice, none of whom Burnett said she would deem "freakishly left."
Others are less bullish on an Obama presidency.
Broker Peter Schiff, a supporter of Rep. Ron Paul's (R-Texas) presidential bid, speaking on CNBC earlier today, said the only good news about an Obama presidency is that, four years from now, the U.S. will be in much worse economic shape, which will ensure no second term for Obama.
I asked Bill Mann of Alexandria's Motley Fool about the potential impact of Democratic government control on the markets.
"If the Democrats end up with untrammeled power, controlling both houses with supermajority as well as the White House, it is going to be a very bad outcome for capital (and therefore with stocks)," Mann wrote in an e-mail today.
CNBC's Bob Pisani said traders on Wall Street fear a filibuster-proof Democrat-controlled Senate that will seek to fight the economic crisis with "New Deal-style programs," where the government takes a much bigger role in the economy. (We wrote last week on two professors who blame FDR for extending the misery of the Great Depression with his relief programs.)
"The big fear I have regarding Obama's economic policy is twofold: first, there will be little resistance for the more excessive components of his tax and regulatory policy on Capitol Hill; but more importantly second, the American people are at a place where they are saying 'Yes! Regulate us! Don't let this happen again!' " Mann said. "You know the old saying about there being no atheists in foxholes? Well, there aren't that many libertarians in a credit crisis, either."
Here's a good side-by-side analysis of the economic policies of Sen. Barack Obama (D-Ill.) and Sen. John McCain (R-Ariz.).
Mann reminds us: "George Bush ran as a fiscal conservative, came into office in the midst of an economic downturn, and hasn't stopped spending since. You just never know what changes the realities at the time will wring out of these folks when they actually get the credit or the blame for things they don't actually have much control over."
-- Frank Ahrens
Posted by: HeavyJ | November 3, 2008 4:33 PM | Report abuse
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