Some Wall Street economists think President Obama could have voiced some sympathy about the plight of frightened shareholders when he compared the stock market’s plunge to an election tracking poll that “bobs up and down, day to day.”
They worry that the president is underestimating the important role the stock market plays in the economy’s performance, and that the markets’ precipitous slide is actually a vote of no confidence in the administration’s handling of the economy. There’s also a suspicion that Mr. Obama and his advisers think only wealthy people own stocks.
“There is some of that feeling that rich people are the ones who have stocks. He does have somewhat of that feeling. But you’ve got to remember that most people who own stocks aren’t rich,” said David Wyss, chief economist at Standard & Poor’s, the influential Wall Street financial research and forecasting firm.
With the stock market in a practical free fall since he was sworn in to office Jan. 20, Mr. Obama seemed to dismiss the plunge in equities Tuesday in an Oval Office conference with British Prime Minister Gordon Brown, suggesting that he was unconcerned about Wall Street’s daily fluctuations.
“What I’m looking at is not the day-to-day gyrations in the stock market, but the long-term ability for the United States and the entire world economy to regain its footing,” he said.
“The stock market is sort of like a tracking poll in politics, it bobs up and down, day to day. And if you spend all of your time worrying about that, then you’re probably going to get the long-term strategy wrong,” he told reporters.
But Mr. Wyss and some of his colleagues on Wall Street - where investors have lost trillions of dollars in savings and the market is not so much bobbing as dropping straight down - think Mr. Obama could have shown more concern for the markets, which represent the economy and signal its future direction.
“I suspect he didn’t dismiss campaign tracking polls when he was running for president. Even though it may have the same day-to-day bounces, I’m sure he was watching the tracking polls when he was running,” Mr. Wyss said in a telephone interview with The Washington Times.
“I agree with him that you can’t obsess about it day to day, but you cannot ignore it, because it’s telling you something,” he said.
Harm Bandholz, an economist at UniCredit Research in New York, called this attitude toward the stock market, “one of the big problems with the administration, that they underestimate the role of the stock market in the current recession, because without the stabilization or recovery of the stock market, the U.S. economy won’t be able to get out of this recession.”
“This is the crucial point: We have the impression that the government is not doing anything to stop the plunge in the stock market and that he said he is not worried about it. But this is not day-to-day fluctuations. This is a significant downward plunge,” Mr. Bandholz said.
In his comments Tuesday, Mr. Obama talked up buying stocks as “a potentially good deal,” though with the caveat “if you’ve got a long-term perspective on it.”
The Dow Jones Industrial Average responded by continuing to drop, losing 436 points for the week, bringing its losses to 1,600 points since the Obama inauguration and 3,000 points since his election. Thursday’s closing of 6,594.44, though there was a 30-point gain Friday, put the Dow at levels not seen since 1997 and just half the index’s 2007 highs.
White House press secretary Robert Gibbs on Tuesday rejected the idea that Wall Street should affect White House decision-making, tying such an idea to the George W. Bush administration and referring, though somewhat favorably, to “the investor class.”
“For many years, as the president has said often, we had a mind-set that, if it was good for Wall Street, it was good for Main Street. Now we know that’s not the case,” Mr. Gibbs said, though he added later that “obviously, there is concern for the investor class, because the investor class … is a great percentage of the American public.”
The week of stock market talk was sharply criticized by Republican leaders in Congress and television stock market commentators.
“It’s not a tracking poll. It’s real. The stock market reflects real money. It reflects real loss,” said House Minority Whip Eric Cantor, Virginia Republican.
“The stock market is the country right now. This is where people’s wealth is, this is their pension plans, their 401(k)s and IRAs,” said CNBC investment guru Jim Cramer, who went from being an Obama voter to one of Mr. Obama’s fiercest critics.
But now the criticism is beginning to come from Wall Street, too, as the economy worsens and stock markets have fallen sharply in the past month.
Mr. Wyss, for example, questions whether Mr. Obama should be turning his attention, as he did last week, to health care reform at a time when the economy is critically ill and he doesn’t have much of the team in place at the Treasury Department.
“Health care is a critical issue, but you have got to concentrate on getting this economy going first,” he said.
“There’s [Treasury Secretary] Timothy Geithner sitting in his office, trying to save the world, and without an undersecretary, a deputy secretary or an assistant secretary. I talked to some people at Treasury, and they say they’re not hearing from Geithner because those layers of posts in between are still vacant.”
Asked whether he would say the markets’ plunge was a sign of no confidence in the White House’s recovery plans, Mr. Wyss replied, “Yeah, I would say.”
“Part of it is, they feel there’s no ‘there’ there. They don’t have [fully worked out] plans. They are still in the formation stage. These guys have been there 45 days, but he promised to hit the ground running, and it’s more like they landed up to their knees in cement. A lot of the cement was left there by the previous administration.”
“I don’t think Obama’s done the greatest job, but the bar has been set pretty low by the previous administration,” he said.
Added Mr. Bandholz: “They’ve done nothing to stop the fall in the stock market, nothing directly.” Asked what they could do to turn the markets around, he replied, “They could cut the capital-gains taxes.”
“The administration has not had much sympathy for stockholders or the market in general,” he said.
After the rough week, Mr. Obama used his weekly radio and Internet address for an economic pep talk, telling Americans he understands their hardships and to tick off the steps he’s prodded government to take.
“We will continue to face difficult days in the months ahead,” Mr. Obama said. “But I also believe that we will get through this - that if we act swiftly and boldly and responsibly, the United States of America will emerge stronger and more prosperous than it was before.”