Assessing the State of the Union

Last week President Barack Obama delivered his 2014 State of the Union address. It was his first such address in which he did not take any potshots at banks or bankers. I was unavailable to watch the live broadcast, since it conflicted with IBA’s annual Legislative Reception, where member bankers have the opportunity to visit with state legislators and administrators on topics pertaining to banking. However I have since read much about it, and I have some observations.

First, it is a bit unnerving that the president intends to bypass the legislative process as much as he can. Our forefathers created a government replete with checks and balances to guard against this kind of dictatorial abuse of power. It will be interesting to watch the reactions of the legislative and judicial branches of government to see if they recognize that the president is overreaching his authority. These branches represent the majority of our checks and balances and will go to great lengths to protect their powers, thus maintaining what is set in our Constitution.

Second, Obama touched on the topic of housing government sponsored enterprise reform. He did not offer suggestions, but acknowledged that there have been some efforts to ignite a discussion in both the House and the Senate. He did emphasize the importance to consumers and taxpayers that some reform needed to occur to protect the financing of this important segment of our economy, and that taxpayer dollars are at no, or limited, risk to support the mortgage market. While I commend his mentioning this topic, it will need to be handled with care. It remains critical that lenders of all sizes and charters have equal access to secondary mortgage markets, so that consumer choices are not diminished. It is also extremely important that the Federal Home Loan Bank system, which performed exactly as Congress had expected it to during the financial crises, not be harmed. Perhaps its product offerings should be expanded, but certainly not reduced.

Third, President Obama offered a teaser of his “myRA” savings plan, a knockoff of the individual retirement account (IRA) product that has been around since the 1970s. I indicate “teaser,” because there were no details about structure, who can or will offer the program, or whether it is strictly a starter program or an independent program. If the myRA savings plan is a new product that banks and other traditional providers can offer, it might be a good thing. If, on the other hand, it is going to be yet another federal government-administered program that competes with the free marketplace, then it could be a real problem. Oddly enough, a bill was introduced in the Indiana Senate this year that would have set up a similar program at the state level, to be administered by the state treasurer. That bill is dead, thanks in large part to IBA efforts. We attempted to amend it, so that banks and other traditional retirement program providers could offer such a program and use the proposed state tax credit. There is little appetite in the Indiana Statehouse, however, for any new tax credits.

Finally, the president came out in support of legislation that would shut down the spate of patent trolls who threaten businesses with patent violations. This is a serious problem for community banks and other small businesses, which often do not have the resources to fight these undeserving predators.

While we would love to have seen the president admit that businesses of all sizes and stripes are needlessly suffering under the excessive regulatory burden — and then call upon Congress to send him bills to reduce that burden — we did not really expect him to. What we will need, and soon, is an administration to do just that, if we are to remain competitive in the worldwide marketplace.

S. Joe DeHaven, 02/05/14

3 Responses to Assessing the State of the Union

  1. Barbara Alexander says:

    Just as a point of reference, so far Pres Obama has issued 144 Executive orders. George W Bush issued 291, Clinton 294, George Bush 166, Ronald Reagan 381, Richard Nixon 346, Dwight Eisenhower 484, Johnson 325, and Kennedy 214. Something to think about–perhaps it is the presence of talk radio/talk news that keeps banging the drum about Executive Orders when the prior Presidents did not have to deal with as much scrutiny.

    • Barbara,
      Thank you for your post and thank you for reading the blog. President Obama has only served five years, while the other presidents you mention each served eight. If you annualize the executive orders of President Obama over those five years and forecast the same rate for all eight years, it equals 230. While that would still leave Obama on the low end in your comparison, I do not recall any other president who essentially used this power as a threat to Congress in a State of the Union address.
      As to this president being under a brighter light because of cable news and talk radio, I believe you are partially right. I do think that Bush II was under just as much scrutiny as Obama. I have never been convinced that these forums are of any value; consequently I rarely listen to or watch these networks and stations, but I know that many people do. I believe that this is a large part of the problem we have in this country, with such a huge political division.
      Joe

  2. Barbara Alexander says:

    Thanks for the reply. Nice to know our comments are read. 🙂

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