I’m sorry, Miss Manners. I’m going to eschew etiquette and talk about ... politics. I spent most of last month trying to reconcile the inordinate number of ironies intertwined with the news coming out of Washington, D.C. (And Massachusetts, but we’ll get to that later.) First, President Obama announced a proposal to limit the size and risk taken on by the country’s biggest banks. It’s the first time since the Great Depression that the White House has tried to stop banks from becoming too big and too complex. In the line of fire are titans Wells Fargo, J.P. Morgan, Bank of America, Citigroup, and Goldman Sachs, several of which have ballooned in size thanks to recent acquisitions and mergers in the financial sector.
What’s more, Obama is also endorsing former Fed chairman Paul Volcker’s recommendation to restrict the way banks invest their own capital. What that means is that these banks’ investing units, which in many ways were responsible for the excess that lay at the center of the financial crisis, will now have to limit certain investment activities.
Translation: As part of his economic turnaround strategy, Obama expects Wall Street to curtail its spending and reduce its risk. And therein lies the first irony of last month: Obama can’t seem to limit the government’s spending and regulations when it comes to an economic recovery, but he expects Wall Street to do so. Don’t get me wrong. I think that Obama’s decisions to close the Guantanamo prison and order a troop surge in Afghanistan were spot on—worthwhile expenditures that protect human dignity and our collective security. But, his stimulus plan was a hot, heavy mess, with too much fat and far too few real jolts to strengthen market fundamentals or boost consumer spending and confidence (besides that clunky Cash for Clunkers program).
And then there’s his health care plan. Which brings me to the center of the other ironies of last month: Massachusetts. In the race to fill the Senate seat held by the late Ted Kennedy, the winner was Republican Scott Brown. Irony No. 1: Brown, who has pledged to overturn Obama’s national health care plan, is replacing a man who described his staunch advocacy of universal health care as the “cause of my life.” Irony No. 2: Brown’s state is the only one in the country that guarantees its citizens universal coverage (a law Brown voted in favor of). Yet the new Senator still says the national plan must go, while telling his Massachusetts constituents not to worry—their health care is safe. Hmm, maybe hypocrisy is a better word than irony.
I am not saying I am in favor or against the current health care bill before Congress. There are parts I love—and parts that terrify me. So why am I venturing down the dark and dirty road of politics? Because the bottom line is that the decisions made on Capitol Hill will affect us, our businesses, and our industry. For entrepreneurs and mom-and-pop business apartment owners—as well as large, multi-national REITs—health care costs are becoming more and more unmanageable. Our government has an economic and fiduciary responsibility to help its taxpayers control and reduce the nation’s health expenses. In other words, health care reform will happen. The question is when and how.
And as for the banks, I’m glad Obama is further tightening the reigns on their spending. Excess, greed, and rampant disregard for long-term financial stability is what got us here in the first place. There’s a reason that banks and investment firms like Wachovia and Lehman Bros. are no longer around. They were negligent risk managers, and if we are going to discard laissez faire governance, then this is one area where I would personally be glad to see Congress intervene.
There’s just one problem: None of these developments, however ironic and somewhat befuddling, is good for the multifamily industry. The companies that own, manage, and develop housing will still struggle to cover the health care costs of their employees. And banks faced with stricter investment risk measures will continue to be loathe to lend money into an already constricted capital marketplace.
Maybe Miss Manners was right. I should stay away from politics. So how’s the weather? [M]