Obama's Economic Balancing Act

Everyone will have something to say with regard to the inauguration of Barack Obama as our next president. Like him or not, you have to have some sympathy for the man who is inheriting this economic mess. Obama is going to have an uphill battle on his hands as he tries his own formula for helping America's economy recover. However, diverging too radically from what Pres. Bush instituted during his last few months in office isn't necessarily the answer either-at least not right away. Obama will most likely continue much of what Bush instituted as he also implements his own plans of action.Here is some food for thought from at least one industry insider. Andrew Liegel is a risk and regulation specialist at FRSGlobal, a company that provides regulatory and risk reporting products and services:

"Barack Obama has made no secret of his desire to prop up the U.S. economy with a massive amount of government spending. Many are wondering which industries will be the lucky recipients of government funds that strengthen research, product development, and hopefully, the balance sheets of their beleaguered private sector companies. ...

While bailout money has already been released to a number of financial services firms in the U.S., even more spending will take place in the months and years ahead in the form of new financial regulations. However, Obama is no stranger to presidential history, and regulation of the financial services industry is often interpreted as restrictive and anti-capitalistic. Therefore, instruments like collateralized debt obligations and credit default swaps, that some would like to see regulated and swept away into the dark abysses of the history books, are most likely here to stay. The big difference will be the transparency in the available information around those financial instruments, and transparency comes at a huge cost-a cost which the U.S. government will most likely be subsidizing for the foreseeable future. Rating agencies, banks and asset managers will no longer be able to hold their fingers to the wind to "guess" at what the risk ramifications of a holding might entail. They will be forced to divulge their analytics and the way they came to their conclusions not only with the final risk estimate, but also with strong rationalization as to why they chose a particular risk model. This extended analysis will take a lot of time and money, the latter of which must be supplied by the government in the short term."

Have any thoughts on what the future holds for banks under this new presidential administration? Send us your thoughts or comment below.