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Charles Schwab, founder and chairman of the investment company that bears his name, reiterated his critical views of both Federal Reserve Chief Ben Bernanke and President Barack Obama’s economic leadership on Thursday during the Schwab Impact conference in San Francisco.
Schwab echoed some themes he raised in an opinion piece in The Wall Street Journal in late September. He views significant change in Washington as critical to a turnaround in the U.S. economy.
“What Bernanke is saying is a bit of BS,” said Schwab, 73, in a discussion led by CNBC anchor Maria Bartiromo before about 2,100 advisors and other guests. “The U.S. does not have full control of prices and inflation, which can come from China or could be from oil or another commodity on which we are interdependent as a country.”
(On Wednesday, Bernanke expressed support for the Federal Reserve’s Operation Twist program, which, as part of its overall accommodative policies, will keep the target range for the fed funds rate at zero to 0.25%.)
“I should say that I am generally more positive than what I see on CNBC,” added Schwab. “From a 39,000-foot view, the economy doesn’t look so bad. We have 139 million or 90% of the workforce employed, liquidity is incredible, we’ve deleveraged the economy … many things are highly positive.”
The U.S. economy has “good pools of labor and capital” to help it expand. “We are at a point where we can make a turn,” the former Schwab CEO shared. What must come first, he asserts, is formidable shifts in Washington.
“It requires change and a sense of change in leadership, anticipation of new tax systems, dealing with budget deficits,” Schwab said. “Someone of strength has to make these decisions, and we do not have that strength,” he explained, referring to, but not directly naming Obama.
As for Republican leadership, the party has to have “someone electable,” Schwab said, noting that he sees Dodd-Frank as a “disaster.”
In terms of the Wall Street and other protests over economic inequality, he wants free-market mechanisms to lead the way: “Let’s reward success and not suppress it, and yes, we need tax reforms,” Schwab shared. “To level the playing field, we have to have a robust economic expansion. There’s no other solution. Occupy Wall Street doesn’t get how free enterprise works.”
The needed jump-start to a more robust U.S. economy involves getting consumer, investors and other out of the present “funk,” he adds. “It starts at the top of companies and filters down. The same goes with the country,” Schwab explained. “There are lots of good things about the current administration, I guess,” he conceded.
But the political focus on fairness is off base, in his view. “The world is not fair; it comes down to hard work,” Schwab said, adding that not all of his children "get" this perspective.
To improve our global competitiveness, a shift at the top is also desirable, he noted. “As a country, we’ve lost out in terms of a lack of leadership; we’re thirsty for that … and must have strong leadership, which I hope to see in November 2012,” he said.
He praised economic growth in China, but said Schwab is not ready to do business there yet due to regulatory and other constraints.
In terms of possible U.S. regulation tied to speculation in the markets and the recent “flash crash,” Schwab said that he believes, as in every industry, that some boundaries are needed.
“With computerization, everything--like trades--is happening at high speeds,” he explained. “That’s been negative for the markets. I have some questions and would like to see boundaries here.”
Click here to read AdvisorOne’s complete coverage of Schwab Impact 2011.
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