published Friday, June 24th, 2011

Banker predicts averted ‘disaster’

Ethan Harris, managing director and head of North America economics at Bank America Merrill Lynch, speaks Thursday at the Mayors' Appreciation Breakfast at the Chattanoogan. He addressed economic issues including oil and the housing market.
Ethan Harris, managing director and head of North America economics at Bank America Merrill Lynch, speaks Thursday at the Mayors' Appreciation Breakfast at the Chattanoogan. He addressed economic issues including oil and the housing market.
Photo by Allison Carter.
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A top Bank of America economist predicted here Thursday that a last-second deficit deal in Congress later this summer will avoid a markets-jarring U.S. default on its debt.

“This is one of those negotiating games in which you give no ground to the very last second,” said Ethan Harris, head of North America economics for Bank of America Merrill Lynch Research. “I think we’re about to avert the big disaster.”

Harris, speaking at the Mayor’s Business and Industry Appreciation Breakfast, said the U.S. has “a fixable budget deficit,” but that the economy is fragile.

“We should not be playing games of chicken with the debt ceiling,” he said. “We need good, smart policy. Not crazy politics.”

“BAND-AID” LIKELY

Harris, who holds a doctorate in economics from Columbia University, predicted Congress will produce “a Band-Aid result” on the deficit in the short term, with the markets pressuring Congress by late July.

He said he expects officials will undertake modest budget cuts, agree to a process of dealing with the deficit and extend the statutory debt ceiling.

“My hope is that after the [presidential election]..., we’ll actually get sensible policy,” Harris said.

The former Barclays and Lehman Brothers economist also said there’s room for a tax increase, citing a preference for a higher gasoline levy.

“We need to share the pain,” he said. “We can’t say no taxes at all.”

He also called for sensible controls on medical care cost growth and noted the country has high defense spending.

“The problem is that the deficit is so big, it has to be a broadly shared reduction,” Harris said.

Concerning oil, he said he hopes the hit consumers felt at the pump earlier this year will pass.

“Hopefully as we go into the second half of the year, the oil shock fades,” the economist said, which will add to economic growth.

He forecast the nation’s jobless rate will drop to about 8.1 percent by the end of next year.

LOCAL ECONOMY

Harris said the Chattanooga-area economy will likely bounce back more quickly than the national one. The area’s housing market didn’t experience the excesses of other parts of the country, he said.

Hamilton County Mayor Jim Coppinger told the group he wants to continue to have “a business-friendly environment.”

“One of the ways we hope to help is to hold the line on taxes when it’s possible,” he said.

Mayor Ron Littlefield called Chattanooga “the most transformed city in America.” He said that more than 23,000 area businesses employ over 200,000 people, generating nearly $30 billion in annual sales.

Tom Edd Wilson, the Chattanooga Area Chamber of Commerce’s chief executive, said that while the area welcomes new investment, existing businesses remain the foundation. “Your ability to remain competitive has positioned Chattanooga to move ahead,” he said.

about Mike Pare...

Mike Pare, the deputy Business editor at the Chattanooga Times Free Press, has worked at the paper for 27 years. In addition to editing, Mike also writes Business stories and covers Volkswagen, economic development and manufacturing in Chattanooga and the surrounding area. In the past he also has covered higher education. Mike, a native of Fort Lauderdale, Fla., received a bachelor’s degree in communications from Florida Atlantic University. he worked at the Rome News-Tribune before ...

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joepulitzer said...

The former Barclays and Lehman Brothers economist also said there’s room for a tax increase, citing a preference for a higher gasoline levy.

“We need to share the pain,” he said. “We can’t say no taxes at all.”

SO, WHY DIDN'T BANK OF AMERICA SHARE THE PAIN WITH THIS:

Bank of America, although proudly being the largest financial institution in the United States and serving clientele from over 150 countries, came into the news yet again. Along with other money lending institutions in the United States, it was for what has commonly become known as the “robo” signing case.

Bank of America had already attracted itself enough negative publicity with the Meryl Lynch incident and the multi fraud accusations made against the institution by public services such as hospitals and schools in 2010. Now it has found itself in the top headlines again in the fall of 2010 for the “robo” signing case.

“Robo” signing has been used by many financial institutions besides Bank of America, such as JP Morgan Chase and Allied Financial. All of these companies being involved with the recent scandal.

“Robo” signing has taken place in hundreds of thousands of foreclosure property deals, where the bank, instead of in some cases going to court to legally acquire the foreclosed or REO property, have “robo” signed numerous documents. Hence stands the question of who do some of these properties from Bank of America foreclosures actually belong to and where do potential buyers stand who already made a deposit or down payment on a property before the scandal unfolded. The answer is that there is now a great shortage of foreclosure properties for sale. Also, there are hundreds of thousands of people who may potentially lose their homes because it was not the legal property of the bank or lending organization to sell.

June 24, 2011 at 6:01 p.m.
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