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Charles Schwab to Moneynews: US Must Be Like Citi and ‘Make a Change’ at the Top

By Forrest Jones and John Bachman   |   Thursday, 18 Oct 2012 05:47 PM

The United States needs to emulate Citigroup and usher in change at the very top, said brokerage founder Charles Schwab.

Citigroup released its third-quarter earnings on Monday, and CEO Vikram Pandit quit on Tuesday. Though the bank said his departure was voluntary, talk is widespread the board of directors forced him out.

The board reportedly differed with Pandit and the bank's chief operating officer John Havens over strategy and operational issues. Havens stepped down as well.

"I think it was time for a change at Citicorp. I think it was absolutely the right thing to do, sort of the way I think about what we have in the White House, we need to make a change," Schwab told Newsmax TV in an exclusive interview.

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Schwab is founder and chairman of the Charles Schwab Corp., a discount brokerage that has made investing accessible to people around the globe. The San-Francisco-based company was founded in 1971 and now has more than 8 million brokerage accounts.

"We've tried, we've tried like crazy in the last four years and nothing has happened in terms of a positive economic outcome," he said. "Same thing with Citicorp. I think the board had to make that change."

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

President Barack Obama's term in office has been marked by fiscal stimulus measures and new regulations rolled out under the Dodd-Frank financial reform bill and the Affordable Care Act, otherwise known as Obamacare.

The Federal Reserve, meanwhile, has pumped trillions of dollars into the financial system to spur recovery by buying bonds held by banks, a monetary policy tool known as quantitative easing that floods the economy with liquidity with the aim of lowering interest rates to encourage investing and hiring.

Side effects to such a policy include a weaker dollar and rising stock and commodities prices.

Some say the Fed has been too aggressive with its policies, such as its third round of quantitative easing, under which the Fed will buy $40 billion in mortgage-backed securities held by banks every month on an open-ended basis until the economy and labor market improve.

Loose monetary policies plant the seeds for inflation down the road, and many are worried that consumer prices will rise once the economy gains steam.

"In my view, it's over-manipulation," Schwab said, adding policymakers could have let the economy heal a little more on its own.

"They manipulated rates all the way through and they've overdone it in my personal opinion. Something is going to happen. Either inflation is going to go crazy or rates are going to go crazy without their being able to control it."

In any event, investors must accept interest rates will remain low for some time to come and allocate their money accordingly.

That means big companies that pay dividends can give investors some yield.

"My recommendation would be to stick with great companies, well-known brand companies that pay a fair dividend of 3 to 4 percent. They will have the ability in any kind of environment to adjust to inflation if it comes about and still be able to pay a dividend," Schwab said.

"You will have to expect a little more volatility — stock prices will go up and down — but I think you'll have much more protection if inflation comes our way. It's hard not to see that occurring given the easy money that we have seen in the last four years."

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

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The United States needs to emulate Citigroup and usher in change at the very top, said Charles Schwab, founder and chairman of Charles Schwab Corporation.
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