In New York Times, CEO rhetoric = unchallenged holy gospel

If you want to read a quintessential example of boilerplate political journalism, look no further than this canard-ridden New York Times article by Sheryl Gay Stolberg and Jackie Calmes. The piece gives new unquestioned legitimacy to the idea that Barack Obama is anti-business, or is at least insufficiently pro-business because,

Nearly halfway through Mr. Obama’s term, the dearth of business and Wall Street types in his administration rankles many executives, if only as a proxy for their unhappiness with his policies and occasional antibusiness political speech.

I had to read this paragraph three or four times before I realized that these words, in this particular combination, actually existed. Before continuing, it should be pointed out that the only sources for this story are McGraw-Hill CEO Terry McGraw, Honeywell CEO David Cote (who actually serves on Obama’s economic recovery board), former CEO for a real estate development company and current Obama advisor Valerie Jarrett, and an unnamed “Democratic lobbyist” who says of Jarrett,

“In the Clinton White House, people in the business community turned to someone like Bob Rubin when there was discussion internally….It’s not an anti-Valerie thing; I just don’t think they believe that there is anybody inside with that stature and that view.”

This is one of those pieces that is cumbersome to refute, not because it’s true, but because it is premised in an alternate reality. It’s like trying to disprove Glenn Beck after he’s spent a half hour outlining an elaborate shit-show on his chalkboard. By the time he’s finished, what you’ve got in front of you is such a clusterfuck of grade-A craziness it’s hard to know where to begin.

Let’s first recognize that just about every Democrat faces the “anti-business” label at some point in their careers. Usually this epithet is hurled by an opponent or some bigshot business executive. The threshold for the application of this terminology is usually very low, and is used to describe anyone who supports policies like Card Check, higher tax burdens on bailed out banks, tougher Wall Street regulation, or anything else that businesses don’t like. Notice how no politician on either side is ever forced to fend off accusations of being “anti-worker,” for the simple reason that no such epithet exists in American politics, which is highly instructive and tells us something about what constitutes acceptable political discourse.

Honeywell CEO David Cote, who is quoted in the Times article, was on CNBC this afternoon shortly after he and two dozen other leading business executives met with Obama at the White House. Cote was very optimistic and said the meeting was “productive,” and at one point commented that it’s been a rough couple of years for business. And that’s strange, since on Tuesday his company’s stock hit a 52-week high, and since Obama took office Honeywell is up 57%. But let’s take a look at the broader equities picture since Obama’s inauguration. Since January 20, 2009, the Dow has gone from 8,280 to 11,457 (a 38% increase), the NASDAQ from 1,466 to 2,617 (a 79% increase), and the S&P from 850 to 1,235 (a 45% increase). This is just in two years. What about inflation-adjusted earnings? Well as Zero Hedge pointed out, those went from $7 a share in January 2009 to $60 a share just this summer—an 857% increase.

Furthermore, corporate profits in the third quarter of 2010 were the highest ever. As Stolberg’s and Calmes’ own paper noted last month,

Corporate profits have been doing extremely well for a while. Since their cyclical low in the fourth quarter of 2008, profits have grown for seven consecutive quarters, at some of the fastest rates in history. As a share of gross domestic product, corporate profits also have been increasing, and they now represent 11.2 percent of total output. That is the highest share since the fourth quarter of 2006, when they accounted for 11.7 percent of output.

And two weeks later the Federal Reserve reported,

[C]orporate cash balances spiked to $1.93 trillion—a 38% increase since the first quarter of 2009—representing $530 billion. This significant increase indicates companies are still accumulating cash rather than redeploying it, according to Treasury Strategies, a treasury consulting firm.

“From our work with clients, as well as survey data collected this week, we see that corporations have experienced very strong growth in cash flow from operations. Given that total corporate cash continues to grow, these findings together tell us that corporations are still not comfortable with redeploying their cash,” says Cathy Gregg, Partner of Treasury Strategies.

And to top it all off, Wall Street executives are once again poised to collect tens of billions of dollars in annual bonuses.

Actually that doesn’t top it off. What tops it off is the Fed’s past, present, and future rounds of quantitative easing in which it allows secondary treasury dealers to front run and push up their prices, coupled with ruinous zero interest rate policies that are crippling American savers, but enriching the banks in what is essentially an ongoing bailout via monetary policy. After all, banks borrow money from the Fed at 0% to 0.25% and then lend that money out at rates of 5%, 10%, 25%, or whatever, and make some easy arbitrage. Sometimes when banks desire safer instruments, they’ll buy treasury notes with yields higher than the rate at which they’re borrowing money from the Fed, making the entire operation a giant taxpayer-funded farce.

What we have here are soaring corporate profits, record amounts of corporate cash on hand, tens of billions of dollars to be doled out in bonuses, a policy of bank-friendly zero percent interest rates, and rigged asset purchases in which Goldman Sachs and other secondary dealers can sell the Federal Reserve—the American central bank—American debt at inflated prices.

If this is anti-business activity, I don’t want to know what pro-business policies look like.

But what about the initial criticism—that there aren’t enough business executives physically in the Obama administration? The unnamed “Democratic lobbyist” quoted in the article laments that there isn’t a Bob Rubin in this White House to act as White House/business sector liaison. That’s the same Bob Rubin who advised Bill Clinton that the derivatives market should be turned into an opaque speculative casino where the only players who know the actual price of the securities are the brokers, while the actual buyers and sellers are left in the dark, meaning the price discovery mechanism—perhaps the most basic concept in all of free market capitalism—was completely absent. The brainchild of this Rubin-aided philosophy was the Commodity Futures Modernization Act of 2000. Shortly thereafter, Rubin left government and received more than $120 million over the course of seven years from his subsequent employer Citigroup, which had lobbied for the CMFA because it just so happened to deal in massive amounts of derivatives.

That’s Bob Rubin’s main contribution to modern finance, and this is the kind of guy that the unnamed lobbyist in the article wants in the Obama administration. Wow. As Max Keiser would say, this guy must be smoking his own bellybutton lint. And don’t forget that Larry Summers was also in the Clinton administration and also advocated the passage of the CFMA. Summers of course, just resigned last month as Obama’s director of the White House Economic Council after nearly two years at the helm. And let’s not forget Tim Geithner’s Goldman connections.

I’ve written all this and I didn’t even mention the completion of TARP, TALF and the auto bailouts under Obama administration.

A lengthy retort to such insipid journalism should be completely unnecessary in light of the above facts which are well known, but unfortunately this “anti-business” mantra reverberates through the media echo chamber. Not because it makes sense, but because many reporters and editors are too eager put the words of important people to print no matter how ridiculous their claims. All it takes is a few CEOs talking on CNBC or giving an interview to the New York Timesto say, “Obama is anti-business,” and immediately the angle becomes a part of mainstream discussion. “Is Obama anti-business?” And off the pundits go all because a few billionaires said the president hasn’t sufficiently fellated them. It’s a sad state of affairs.

- Max

max.canning@gmail.com

ps: I’m not sure why, but I emailed this post to the authors of the New York Times article. I doubt I’ll get a response.