The CEO Game

The uncertainty about, the Federal Reserve chairman Ben Bernanke, to second term had raised after two democratic senators showed objection.

Ben Bernanke will get enough votes in the sent to get the second term in the chairman position – said David Axelrod, one of President Obama’s top advisors

“The president is confident that the chairman’s appointment will be approved“ Said Axelrod. At the weekend president Obama contacted the Democratic Party leadership to confirm that Barnanke will receive the required votes for his appointment, an indication for the growing concern in the government about Bernanke’s weakened position.

On his way to a second term?

The uncertainty about Bernanke’s re appointment was worsened this weekend, after two democratic senators had announce that they object his appointing, which caused a sharpest falls in US stock market for the last 10 months. Bernanke critics, which object his second term, claims that the Federal Reserve Bank had failed to prevent the worst financial crisis since 1929 and that the bailout that was handed to the banks came on the cost of US tax payers.

Ailon.

The CEO Game.

The last of the major Wall Street banks to not have repaid its US bailout funds — though certainly not the last organization to hold onto parts of the $245 billion of total bailout money – announced a plan yesterday to return its share. Citigroup has not yet repaid $20 billion of the money it received. It plans to begin doing so this week by selling around $17 billion in common stock and $3.5 billion in tangible equity units. Pending regulators’ permission, it will also facilate the sale of $25 billion that the government holds in bank stock by directly replaying $20 billion of TARP trust preferred secrities and helping the US Treasury in its sale of up o $5 billion of its common shares concurrent with its own stck offering. Finally, Citigroup will end a loss-sharing agreement regarding approximately $250 billion of problematic credit card and real estate assets.

Paying back.

The plan would provide Citigroup with one of the largest capital cushions of any of the major banks. This is necessary in order for the bank to avoid the need for government assistance in the future. Repaying the bailout money also frees Citigroup from many of the restrictions, especially restrictions on executive pay, that came with the acceptance of the funds. Though the move is hoped to aid the economy, create new business, regain the trust of stockholders, and ingratiate the bank to legislators, it comes with its own costs. The return will cause a $10.1 billion loss to Citigroup in the fourth quarter and the new stock offering will dilute the value of shares currently held by stockholders.

Tamar.

The CEO Game.

After Barack Obama attacked the banks, now it’s Brown’s turn.

Britain’s Prime Minister, Gordon Brown has called today all members of the G20 to place taxes on bank transactions worldwide. The revenue, according to him will go to fund social and environmental causes like fighting world poverty and dealing with climate changes.

Brown: Time to Tax the Banks

Brown made this announcement at the stage of the G20 summit which was held today in Scotland, two months after the Pittsburgh Summit in September. The G20 countries represent 90% of the world’s wealth, 80% of its trade, and approximately two thirds of the world population.

Brown’s words symbolize a change in Britain’s approach, which up till now opposed putting a “Tobin Tax” on foreign currency bank deals. The tax which is named after 1981 Nobel Prize winner for Economics, Professor James Tobin of Yale University, is intended to put a penalty on short-term speculation in currencies and in the same time raise funding for meaningful social projects. Nevertheless, the opposition both in the US and in Britain at the time has caused the idea to be put in the back of one’s mind.

“I think we all share a basic interest in trying to make sure we build a system where taxpayers aren’t exposed in the future and where the financiers are bearing the consequences of their mistakes – that they are responsible for the risks they take” he said. “We proposed in the United States a way to achieve that, by making sure that if … the government is exposed to any risk of loss, that we recoup that loss by assessing a fee on the liabilities of banks” he then added. He continued to justify his plan by saying that “it’s fair to the tax payer and it doesn’t put us in the position where retail investors and pension funds are the ones bearing the burdens of that cost”.

Brown went on to tackle obstacles in the way: “I do not in any way underestimate the enormous and difficult practical and technical issues that will need to be overcome that a globally cohesive system requires and raises”. He pointed out that any tax that will be decided on (if at all), should be worldwide and related to all the financial centers of the world- US, the European Union, Asia, the Middle East and Switzerland. Some G20 officials claimed that the tax that Brown referred to could be wider than a Tobin tax, and might include all financial transactions or even banks’ profits. Yet, the tax is supposed to be on a low level of 0.005% – only a tenth of the original Tobin Tax, when the profits will help prevent future crises in the banking sector.

Gordon Brown’s suggestion is expected to fuel rage among British economists and critics. Chairman of the FSA (Fellow of the Society of Antiquaries), Adair Turner, has already suggested the idea of a Tobin Tax in August and encountered severe criticism in London. Still, British charity organization Oxfam has blessed Brown for his idea- “The tax on the banks, might be a big step in the road to destroying the banks’ greed”. “The G20 is responsible to act. The money raised can really effect the day to day course of regular people”, an Oxfam official added. Among the fans of the Tobin Tax, you can find French President, Nicolas Sarkozy and German Chancellor, Angela Merkel who already tried to promote the idea in the Pittsburgh Summit. According to them, this kind of taxing will shrink the banks’ profits and by doing so decrease the bonuses which banks can hand out to veteran bankers.

Some G20 members, had already began taxing on their own, like Brazil which putted a tax on foreign investments in stocks and debentures, keeping in mind funding their 2016 Olympic Games in Rio. Experts proclaim a Tobin tax in the rate of 0.05% (the original Tobin Tax), can yield up to 700 billion dollars yearly almost equal to the entire financial bailout package introduced by Obama’s administration. In conclusion I must say, that it’s only a shame that Tobin who passed out in 2002, missed out on all the action and the publicity.

Omer Shachnai

The CEO Game.

Time to withdraw; what was an absolute last week became mere signs and indicators today.

Still Got a Long Way

Only a couple of days after US administration publicly announced that the “recession is over“, Barak Obama seems to be lowering expectations and claims there are indicators of improvement but America still “got a long way to go”. On his speech today (Monday) at the White House Obama was joined by members of his Economic Recovery Advisory Board and by Paul Volcker, one of his chief financial advisers and former chairman of the Federal Reserve. Obama said that the US has came a long way since January, when he stepped into office, when at that time US was “losing 700,000 jobs per month” and “there was fear of another Great Depression”. “We have pulled the economy back from the brink” said Obama.

Obama referred to last week’s out of the blue announcement and said it was “good news” to hear about the US GDP growing once again. He also said that there are signs starting (and starting only) of “stabilization and, indeed, some improvement” in US and Global economy. Nevertheless, he carefully added that the administration is obligated to take on further steps to support the job market and decrease the national debt. “Actions that we took swiftly through the Recovery Act helped to stem what could have been a disastrous situation for the economy” he commented gladly and added that the actions have produced some positive improvement, all while comparing the situation today to what was at the time Bush closed up shop.

“But the reason we’re here today is because we just are not where we need to be yet” he then changed direction. “We are still seeing production levels that are significantly below peak levels and most distressing is the fact that job growth continues to lag” he added. Obama continued by saying there is no reason why the administration should not be able to create more workplaces as needed and even create the continuous economic growth everybody is expecting. Yet, probably again with the lessons of the sudden weird-like announcement last week by the Ministry of Commerce, he backed himself up by saying that many job losses are expected within the upcoming weeks and months.

In conclusion, President Obama put it best in his speech- “We’ve got a long way to go“. Given the severity of the job losses, more than 7 million jobs since the start of the recession in December 2007 and the unemployment rate which had risen to 9.8% last month, even with the 787 billion dollars worth financial bailout package, he is absolutely correct, and it’s going to require him to lead some innovative action to overcome this deficit and maybe finally prove his administration.

Omer Shachnai

The CEO Game.

Close to addressing the banks, Obama goes after financial giants: Have you enjoyed the financial bailout package? Now lay off 90% of your salary.

Obama Fighting Financial Giants

Obama draws the sword: The US president has made a promise to chop down the salaries of leaders of the financial system and now he plans to keep it. In his efforts to revive the American economy, Obama has decided to give financial institutions a financial bailout package consisting of 700- 870 billion dollars according to experts’ estimations. Now he informed the companies which received the financial aid that they will have to cut down the huge bonuses they use to give their senior workers and the same goes for their salaries.

He made this statement prior to the soon-to-be revealment of his financial plan, which will force the bigger seven institutes, who used the most of the aid funds to give up 90% of the salaries of their 25 most senior workers. In addition, Kent Finberg, which was appointed by Obama to be the “pay czar” of the White House, has made plans that include measurements to be taken in the White House, where many senior officials and employees who enjoyed over the years high salaries will also have to give up half of the bonuses and compensations they deserve.

As of lately, he was tangled up with many problems yet to be solved and many hard dilemmas to cope with. As a democratic, liberal president he was elected and is expected to end the wars in Iraq and Afghanistan, but up to now nothing has changed. As a matter of fact, the situation have gotten worse, when everybody was talking about pulling the troops out of Afghanistan- he had to face decisions whether to send another 40,000 troops as requested by Army General Stanley McChrystal which claimed ‘More Troops Or Lose Afghan War‘. It wasn’t a win-lose situation but a situation which no matter what you choose you lose. Not to mention, the delay with finding a solution for a nuclear Iran, nor Guantanamo, nor any progress in the Middle East at all. No major progress was made with the health care legislation and the unemployment issue as well. When taking on a different front, a less frightening one, he also failed and lost the Olympic Games to Rio De Janiero. Don’t forget the worldwide criticism on his Nobel Prize win, with some critics blaming the Nobel Prize committee of being political and only that and some saying he was chosen only because he ain’t Bush. Some say, if all those occurrences were packed into a movie, the best title for it would be “Land of the lost”, imagine that.

Moreover, with the constant rise of the European Union’s power, a possible alliance of China and Japan and the demise of the dollar, which is just isn’t being bought enough, Obama needs this small time victory, it isn’t much but he needs to win at least in this financial war back at home, the US, since he isn’t scoring anywhere else right now.

Omer Shachnai

The CEO Game.

Barak Obama attacks US banks: When you needed, you were helped; now it’s your turn to give back.

The President of the US addressed all the banks that were helped during the ongoing financial crisis and requested them to return a favor. In his words, now it’s the time for the banks to do their part and chip in to help the financial recovery and give more credit to little businesses. He is practically saying, hey the US tax payer helped you bail out; now the time has come for you to give something back to the public.

Time For A Change?

Obama made this statement at his “weekly address” which is broadcasted live via the radio and the internet. In his speech, he commented that many business owners in America are having a hard time to get credit from the banks, even though the government had done a lot to improve the financial situation of the banks after the economic collapse in September 2008, which afterwards the banks stopped handing out loans for small and medium businesses.
“These are the very taxpayers who stood by America’s banks in a crisis, and now it’s time for our banks to stand by credit worthy small businesses and make the loans they need to open their doors, grow their operations and create new jobs” Obama said. He pointed out the White House is willing to take the steps needed to encourage the banks to give credit, but he didn’t mention what steps will be taken if at all. “It’s time for those banks to fulfill their responsibility to help ensure a wider recovery, a more secure system and more broadly shared prosperity” he added.

Earlier last week, Barak Obama criticized the American banks and financial institutes and claimed that they were working through Congress to try and sabotage his idea of a federal agency the “Consumer Financial Protection Agency”. Obama blamed them for “using every bit of influence they have to maintain the status quo” that has helped them get richer “at the expense of American consumers”. That is in spite of the fact that recently those same consumers helped them bail out as a consequence of their wrong decisions.

According to estimations, the financial bailout package cost taxpayers around 700 billion dollars. In his address last Saturday, Obama also said that small businesses have created two thirds of US new jobs over the last 15 years, thus making them a crucial part of the economy, that we must help to sustain- “they must be at the forefront of our recovery”, he said. In addition, last week, he asked Congress to increase the size of SBA loans (small business administration) and announced his rewarding plan: to give low interest loans to banks, who do help and agree to lend more money to small businesses.

When playing business simulation games, you can learn from these past mistakes and learn how to foresee the consequences of your actions. During the development of The CEO Game, we have kept in mind the financial crisis and have taken a great deal of effort in creating and simulating a vast real-life like economic system which generates and is influenced all the time by unplanned events and misfortunes, that every CEO has to cope with in order to succeed.

Omer Shachnai

The CEO Game.