The Obama administration has spent this week trying to inject some optimism into the stock market, and they have had a positive effect. Until this week this has been a market where any news was bad news, but the combo of being up for a few up days and less gloom and doom from the White House is changing attitudes.
Obama’s optimism carried on through his remarks today after his Economic Recovery Advisory Board meeting with Paul Volcker. Obama said, “Well, I think, as I said at the Business Roundtable, our capacity is undiminished. We have the most productive workers on Earth, and we’ve got some of the most innovative businesses on Earth. We’ve got the greatest universities, incredible infrastructure, and we’ve got the most dynamic free market economy on Earth…But if we are — if we are keeping focused on all the fundamentally sound aspects of our economy, all the outstanding companies, workers, all the innovation and dynamism in this economy, then we’re going to get through this. And I’m very confident about that.”
The Director of the National Economic Council Lawrence Summers invoked F.D.R.’s fear itself line today, “This is the paradox at the heart of the financial crisis. In the past few years, we’ve seen too much greed and too little fear; too much spending and not enough saving; too much borrowing and not enough worrying. Today, however, our problem is exactly the opposite. It is this transition from an excess of greed to an excess of fear that President Roosevelt had in mind when he famously observed that the only thing we had to fear was fear itself. It is this transition that has happened in the United States today.”
The Republicans criticism that Obama had caused the stock market to decline was based on the same faulty premise as my chosen headline for this story that Obama has caused the markets to rally. The market has not rallied only because Obama is helping to calm the fear. What has really moved the market this week has been a combination of good news like the three biggest banks in the country announced that they turned a profit in the past two months of the year, and GM not taking more federal money.
Wall Street is happy with Obama’s message. There is the idea that he is starting to lay out some clear direction and details which is what they have been waiting to hear. One of the things that I have realized this week is that Wall Street is in the same boat as everyone else, in the respect that they are looking for leadership and direction in a time of crisis. However, the current market is completely irrational, so what they view as good this week, could be terrible next week. This market will go as the financials go, and Obama deserves neither all the credit, nor all the blame, but he can change attitudes and that is what he has done this week.