Tuesday, March 31, 2009

Well Said

Josh Marshall puts it very simply:

I've always been curious why it is that the big proponents of the theory of man-made global warming tend to be scientists and the big skeptics tend to be talk radio hosts and members of Congress.


This is really weird:

Boat owners are abandoning ship.

They often sandpaper over the names and file off the registry numbers, doing their best to render the boats, and themselves, untraceable. Then they casually ditch the vessels in the middle of busy harbors, beach them at low tide on the banks of creeks or occasionally scuttle them outright.

The bad economy is creating a flotilla of forsaken boats. While there is no national census of abandoned boats, officials in coastal states are worried the problem will only grow worse as unemployment and financial stress continue to rise. Several states are even drafting laws against derelicts and say they are aggressively starting to pursue delinquent owners.

This might be just the time to get a really cheap boat.

Graveyard of Empires

William Lind, a consistent conservative critic of our Iraq invasion, now writes about Afghanistan, and shares this description of Administration deliberation on the issue:

On the one side were Vice President Joseph R. Biden, Jr. and Deputy Secretary of State James B. Steinberg, who argued in closed-door meetings for a minimal strategy of stabilizing Afghanistan…The goal of these advocates was to limit civilian and other nonmilitary efforts in Afghanistan and focus on a main military objective of denying safe haven to the Taliban and al Qaeda terrorists.

The other side of the debate was led by Richard C. Holbrooke, the special envoy for the region, who along with U.S. Central Command leader Gen. David H. Petraeus and Secretary of State Hillary Rodham Clinton fought for a major nation-building effort.The Holbrooke-Petraeus-Clinton faction, according to the sources, prevailed. The result is expected to be a major, long-term military and civilian program to reinvent Afghanistan from one of the most backward, least developed nations to a relatively prosperous democratic state.

And then he adds this:

Short of divine intervention, nothing can turn Afghanistan into a modern, prosperous, democratic state. Pigs will not only fly, they will win dogfights with F-15s before that happens. The most Afghanistan can ever be is Afghanistan: a poor, backward country, one where the state is weak and local warlords are strong, plagued with a drug-based economy and endemic low-level civil war. That is Afghanistan at its best. Just achieving that would be difficult for an occupying foreign power, whose presence assures that war will not be low-level and that no settlement will be long-term.

Instead of a pragmatic, realistic approach to attaining that limited objective, it seems we are committed to a Quixotic quest for the unattainable. Again, that guarantees we will lose the Afghan war. No means, military or non-military, can obtain the unattainable. The circle cannot be squared.

Here we see how little “change” the Obama administration really represents. The differences between the neo-liberals and the neo-cons are few. Both are militant believers in Brave New World, a Globalist future in which everyone on earth becomes modern. In the view of these ideologues, the fact that billions of people are willing to fight to the death against modernity is, like the river Pregel, an unimportant military obstacle. We just need to buy more Predators.

I hate to say this, but I think Holbrooke is a disaster. He seems to have been at least partially responsible for the attempted expansion of NATO into the former Soviet republics during the Clinton administration, which infuriated the Russians and led to the recent chill of the last ten years. So he and Clinton want nation-building? In Afghanistan? It's no wonder the neo-cons seem to be supporting the Obama administration in his new 'Af-Pak' policy, while the left is skeptical, to put it mildly.

Obama seems to be morphing more and more into the very likeness of Lyndon Baines Johnson, with his guns and butter strategy. Liberal, well-intentioned, politically able man. But very bad advisors and a flawed worldview. Remember what happened to him in 1968? I do, because that was the year I graduated from high school. A very bad year in the larger world around my sheltered little world. Johnson's attempt at a land war in Asia had failed, and his Great Society changes in American society weren't affordable along with a major war.

I can't defend this from criticism by my gloating Republican friends. This is definitely not change I can believe in. This is like a nightmare for me. Please wake me up.


David Lindorff sees betrayal in the failure of Obama to support the pro-labor Employee Free Choice Act:

Anyone who thought, as I once did out of an excess of optimism, that this president was positioned to act in this economic crisis as did the once equally reticent Franklin Roosevelt before him, should see clearly now that this president is not that same kind of bold risk-taker as FDR. Obama, rather, is following in the well-worn path of gutless political hacks before him like President Bill Clinton and Jimmy Carter, kowtowing to the wishes of the corporate elite and taking the Democratic grassroots for granted.

Another Good Laugh

From the wacky mind of Andy Borowitz:

In a move signaling his most direct involvement in the U.S. auto industry to date, President Barack Obama announced today that he was opening a Chevrolet dealership on the White House lawn.

As car-carriers dumped hundreds of unsold 2009 Malibus, Silverados and Cobalts onto the grass in front of the President's historic residence, workmen draped a banner in front of the White House portico reading "Buy a Chevrolet from the USA."

A Good Laugh

Bill Bonner of the Daily Reckoning has a way of putting things.....

We're delighted to see Mr. Obama in action...rolling up his sleeves and taking direct action to straighten out the U.S. auto business. In this world of collapsing asset values and depression, we needed a laugh.

But why shouldn't the feds be in the car business? It's right there in the U.S. Constitution, isn't it? The "Car Clause," as Byron King calls it: every American will have the "right to life, liberty and a four- door sedan." Heck, it's in the preamble too: "When in the course of human events, it becomes necessary to take over the automobile industry..."

Talk, Talk

The President of Russia, Dmitri Medvedev, writes today in the WaPO:

Long ago, Alexis de Tocqueville predicted a great future for our two nations. So far, each country has tried to prove the truth of those words to itself and the world by acting on its own. I firmly believe that at this turn of history, we should work together. The world expects Russia and the United States to take energetic steps to establish a climate of trust and goodwill in global politics, not to languish in inaction and disengagement. We cannot fail to meet those expectations.

This is good. Talk, talk is always better than war, war. But I'm sure the neo-cons will accuse him of just being another Hitler in disguise.

American Cars

Richard Cohen writes in the WaPo:

The auto industry is not only late to the table, it comes with a bad rep. We may not understand what AIG did -- what's a credit-default swap, anyway? -- but we sure as hell know what GM did: It made a lot of lousy cars. So did Ford and Chrysler. They made cars with utter contempt for the customer. The industry at one time even opposed seat belts and air bags, and it designed cars that were not safe. I know things have changed, but I remember. I remember.

A little excessive here, I think. Utter contempt? My favorite car was a Pontiac 6000, and my second favorite car is my current Saturn (GM). Our 2001 Dodge Stratus has been a good car as well on the whole. (I also liked my 1991 Honda Civic and might get another, so I have nothing against foreign cars.) So I think American cars weren't that bad, and they seem to have gotten better recently. There wasn't a better minivan than the Dodge Caravan.

However, we never made good small cars (with the exception of the Saturn), because there was little incentive to do so in this country, whereas Japan had plenty of incentive for their market and much of the rest of the world. If our government had done the right thing and put a proper carbon tax in place, I think we could have made small cars too, because the consumers would have wanted them instead of the SUVs and trucks. So it's a little hard to blame just the car companies. Granted that they lobbied hard against such changes, which I'm sure they're regretting now.

I think there is a case to be made for forcing GM to slim down to one or two lines, like Chevy and Buick (I wish they'd keep Saturn going, but that doesn't look possible). Have a lineup the equivalent of a Toyota or a Volkswagon, with basically one car model for every size slot. And do them really well. Perhaps that's what Obama has in mind for them. But then again, that shouldn't be something the President is doing really, with any industry.

Public Flogging

I can't argue with this point made by Eugene Robinson. It is so obvious.

I can't argue with the administration's decision to force GM chief executive Rick Wagoner to resign. It was encouraging, even, to see the White House employ that kind of muscle, given the fact that the president now has to oversee so much of the economy. But shouldn't the first public flogging have involved one of the bankers who got us into this predicament? On Friday, the day when Wagoner got his walking papers, the biggest cheeses on Wall Street went to the White House for a cordial meeting. All still had their jobs when they left.

And why does it seem like something a Republican would do? This Democratic coddling of the banking/financial sector is sickening to me. Maybe that comes from my blue-collar background, with my dad and my brother having worked on the shop floor their whole lives manufacturing not cars but locomotives. I admire their work and think it is worthy of respect. They got up everyday at 6 or 7, worked their eight hours and sometimes overtime, just to have a decent life. We had our small pleasures, like a little wooden boat to go fishing in.

Now the bankers, well, they worked their hours, and had a very good life, with country club memberships and boats, er, I mean yachts. Okay, I accept that. The way of the world and all. But when it comes to equal treatment for having screwed up royally, please don't tell me that we need to go easy on the bankers. That is unacceptable.

Dust Bowl

I just read the WaPo's editorial page discussion of Rick Wagoner's dismissal. There was no consensus, with some saying this sends a message to other corporations that if you come for government bailout, there will be a serious price to be paid. Others said that Wagoner was GM's one hope to get through this period of time, and now it will more certainly descend to bankruptcy, which will cause the whole thing to implode. Plus, removing the CEO was not what a government should be doing, since it makes the government too responsible for what happens about that.

I don't know how I come down on this. But as someone has said, this whole thing may cause the upper Midwest to begin to look like the 21st century version of the Dust Bowl.


Andrew Sullivan argues against the government trying to run either G.M. or Afghanistan:

I understand why conservatives balk at the notion of a politician running a car company. Obama hasn't done much with GM yet, but if he is not careful, he could easily get trapped, as David Brooks notes, in a hell of a pickle. He will face political pressure to hang in, even as the company continues to fail. And he has no expertise of the kind needed to run a car company. And this is the core conservative insight here: success is hard; it requires close attention to the details of a business or an enterprise; it takes experience and judgment and practical knowledge that no politician or economist or analyst has. Now I know GM's management has sucked as well - but that doesn't mean that government won't suck a lot more. This is a classic case of a mismatch between what a politician can do and what he is trying to do: an over-reach, a categorical error.

But why, pray, does this not equally apply to running Iraq or Afghanistan? Why does our conservative elite believe that these vast, complex, foreign cultures and countries are somehow more manageable than GM? What expertise does Barack Obama have in running Afghanistan?

In general, I tend to agree with him here. But it depends on the purpose for which you're intervening. If it's the FDIC going in to take over a bank, cleaning it out, and basically getting out, that's one thing. If it's to try and keep it running, then Sullivan's conservatism makes sense to me.

One exception to this may be the health care system. I'm not sure that you can run this with a hybrid system, with government paying for a large chunk of it via medicare and medicaid, and private industry getting the profits and determining the costs. That's a recipe for unsustainability. It probably needs to be one way or the other--all private or all public. Since all private would be unacceptable to most people these days, given the horrific consequences, all public is probably the only alternative. But I don't think we have the political will to do this until it forced upon us by circumstances, namely a collapse of the system.

The Climate Change Bill

The democrats have just proposed a more ambitious climate change bill than what Obama had proposed. The NY Times reports:

The bill would require every region of the country to produce a quarter of its electricity from renewable sources like wind, solar and geothermal by 2025. A number of lawmakers around the country, particularly in the Southeast, call that goal unrealistic because the natural resources and technology to meet it do not yet exist.
To these lawmakers, mostly from the southeast, I say NO S--T SHERLOCK! That is the whole point of this legislation! If we had the resources and technology to have 25% of our electricity come from renewable sources RIGHT NOW, there wouldn't be a problem. But we don't. And we never will unless we set some ambitious goals.

A couple other things that I wish the Democrats would realize about these kinds of proposals:

1. It is a mistake to make this solely about climate change and global warming. There is a percentage of people out there who will never believe in global warming. The seas may rise ten feet and they will find a way not to blame it on their love of SUVs.

What we should be talking about, instead, is that we do not have enough oil left to power the modern industrial world for much longer. We may be past Peak Oil now, or it may not happen for thirty years. I hope that the truth is more toward the latter, because getting off oil while keeping a modern standard of living is going to be the toughest challenge ever faced by modern civilization. We need all of the time we can get to make this transition, and the bill proposed by the Dems is an essential first step.

2. This is a free market solution to the problem! By setting caps and putting in essence a tax on fossil fuel use, we are telling the free market to go out there and come up with alternatives that will make them money. This gives the impetus to the market rather than the government to figure out the renewable energy solutions that are essential.

Chart of the Day: Hey, What Happened to Our Wages?

Nate Hagens at The Oil Drum provides one of the best one-paragraph descriptions of what has happened to this country economically over the last 40 years. Its based on this chart, which shows that even as worker's productivity has risen, our wages have not. Why? Because energy costs have gone up since the 1970s. So instead of higher wages, we all took on more debt in order to buy the things that we needed in order to feel like we were keeping up with the very rich, whose incomes really were exploding.

Real wages in the US increasing every single decade from 1830 to 1970 (including during great depression), but being flat to down ever since (I am sure there are some demographic explanations). But productivity (adjusted by GDP deflator) since the 1970s due to computers, efficiencies and many other inventions have increased dramatically, and thus so have corporate profits (unless we back out costs for environmental externalities). But remember, we've been on a total fiat system since 1971. So flat real wages in the face of growing overall profits would have resulted in too large of notional wealth disparity which would have lead to social unrest/chaos. There had to be a relief valve, giving the guise that resource limits combined with concentration of wealth had not shut the door on Joe Sixpack. Enter leverage, easy credit, home-equity loans etc.The average person wasn't earning any more, but they were keeping up in positional goods consumption race because of access to debt. Under an fiat system acting only as marker for real capital, a large social wealth transfer (denominated in dollars) was thus camouflaged by leverage and borrowing. As the concentration of wealth got higher, new rules had to be enacted to allow the lower quartiles of social denizens to remain above poverty - low-doc/no-doc loans, further monetary easing, repeal of Glass-Steagal so higher leverage available to wall street, 95%+ LTV mortgages, etc.

Said differently, we have been living well beyond our means not since Peak Oil, but for almost 40 years (and less beyond for longer), - the difference has been made up by borrowing from the future, borrowing from the environment, borrowing from other social classes, and most worrisome, borrowing from thin air.

It is telling that exponential growth in energy production per capita peaked in 1970 (Duncan), US oil peaked in 1970, natural resource backed currency stopped in 1971 and real wages peaked in 1974.

Monday, March 30, 2009

Fear and Anger

Jeffrey Feldman comments on the unrest being generated out in the country:

Fear and anger are rising in Michigan: Fear that things are about to get much, much worse than they already are; anger that the federal government is strong arming the Mitten State just a short while after opening up America's coffers to Wall Street with no strings attached. New York gets what it wants, when it wants it from Washington, Michigan gets slapped in the face. The fat cats on Wall Street caused this problem, they sank the economy, and they got paid off by a robber-baron president as he scuttled out of office and tossed the keys to the new guy. Executives in Detroit get tarred and feathered and escorted to the door.

Fearful, angry arguments are never subtle, never accurate, but always hotter than molten steel. Fear and anger reduces politics down to the simplest of all logic: they did this to us, and they will pay for it.

The Obama administration must think--really think--or the fear and anger could explode into something much hotter.

In all likelihood, Jennifer Granholm does not think it will, which means Obama's auto industry plan is about far more than restructuring. The half-life of hope has come and gone in Michigan. What the White House, GM and Chrysler do this week--and the next six weeks--could be the moment students study 100 years from now. This was where the 2009 recovery worked or, god forbid, this is where it failed.

What I can see happening is a political insurgency occurring that puts forward a third-party candidate for 2012, splitting the liberal-left-populist faction of the Democratic Party away enough to throw the election to the Republicans. It would be the mirror image of the 1992 election where Ross Perot pulled a large enough vote to foil George Bush Sr.'s reelection and elect Bill Clinton with only 43% of the vote.

That would be not only a tragedy but a catastrophe for this country.

Too Much Johnson (and Lincoln) and Not Enough Kennedy

Ray McGovern, former CIA analyst and dissident, writes of eerie similarities between Lyndon Johnson's Vietnam policies and Obama's Afghanistan policies. This is a very good article by an intelligence professional that I respect for his honesty and courage. It makes me even more leery of the new Obama policy on Afghanistan. Extended tidbit:

In his Afghanistan policy speech on Friday, Obama mentioned training eleven times. To those of us with some gray in our hair, this was all too reminiscent of the prevailing rhetoric at the start of U.S. involvement in the Vietnam War.

But our training was not going good then. And specialists who know Afghanistan, its various tribes and demographics tell me that training is not likely to go good there either. Ditto for training in Pakistan.

Obama’s alliterative rhetoric aside, it is going to be no easier to “disrupt, dismantle, and defeat” al-Qaeda in Pakistan and Afghanistan with more combat forces and training than it was to defeat the Viet Cong with these same tools in Vietnam.

Obama seemed to be protesting a bit too much: “Going forward, we will not blindly stay the course.” No sir. There will be “metrics to measure progress and hold ourselves accountable!” Yes, sir! And he will enlist wide international support from countries like Iran, Russia, India, and China that, according to President Obama, “should have a stake in the security of the region.” Right.

“The road ahead will be long,” said Obama in conclusion. He has that right. The strategy adopted virtually guarantees that. That is why Gen. David McKiernan, the top U.S. commander in Afghanistan publicly contradicted his boss, Defense Secretary Robert Gates, late last year when Gates, protesting the widespread pessimism on Afghanistan, started talking up the prospect of a “surge” of troops in Afghanistan.

McKiernan insisted publicly that no Iraqi-style “surge” of forces would end the conflict in Afghanistan. “The word I don’t use for Afghanistan is ‘surge,” McKiernan stated, adding that what is required is a “sustained commitment” that could last many years and would ultimately require a political, not military, solution.

The 'Really Rich' Rich

Paul Craig Roberts makes a pretty compelling case that those upper-middle income earners making $250,00 are much closer to middle and lower income earners than they are to the truly rich, and therefore should be treated as such by the new income tax increases.

"A Land Full of Nasty Surprises"

Patrick Cockburn, long-time war correspondent in Iraq and Afghanistan, writes a long piece on Afghanistan:

There was a fecklessness about the whole venture on the American and British side. Not surprisingly other Nato allies wondered what exactly they were getting into in sending their troops to Afghanistan. Comparisons with Iraq can be misleading but intervention in both countries never had overwhelming or even majority political support at home. Casualties were not particularly heavy compared to many other wars, but Iraqi or Afghan guerrillas are able to inflict casualties which are politically unsustainable for the American or British governments.

The main US ally in its war on terror was going to be Pakistan under General Pervez Musharraf, though it was an open secret that it was the Pakistani intelligence agency, the ISI, which had fostered the Taliban and established it in power in Kabul. So long as it had the covert backing of the ISI, the Taliban was never going to be truly defeated. "A year after 9/11 it was clear to many Pakistanis," writes Ahmed Rashid in his book Descent Into Chaos, "that Musharraf's support of the US-led war in Afghanistan was not the promised strategic U-turn that would end the army's long-standing support for Islamic extremists but rather a short-term tactical move to appease the United States and off-set India's hegemony." The reality on the ground was that the Taliban was the foster-child of the ISI. General Musharraf was prepared to join in an unenergetic pursuit of Arab members of al-Qa'ida in Pakistan. But the main objectives of the Pakistani army's traditional policy were never abandoned. These were to resist India, support the Muslims of Kashmir, protect the Pakistani nuclear arsenal and seek to establish a pro-Pakistani government in Kabul.

From the beginning, the army saw Afghan President Hamid Karzai's government as an enemy of Pakistan. Once the US decided to invade Iraq in 2003 General Musharraf concluded Washington was none too serious about its war on terror and the Taliban could be quietly revived. By 2006 the insurgency was back in business.

Making Rich Guys Richer

Economist Jeffrey Sachs of Columbia University writes:

We all know the end of the story as it's now being written with an overpriced rescue of the banks. When it comes time for health care reform, education funding, infrastructure rebuilding, and (heaven forbid) help for the world's poor and dying people, there will be no fiscal space. Budgets will be tight. Spending that helps make rich guys richer while leaving the poor to die of hunger and disease seems to be par for the course in our Wall-Street-besotted public policy.

A political storm is coming Obama's way over the bank bailouts. He would be smart to reconsider and get some new economic advisors. Or he could sink like a stone beneath the deluge. And unfortunately, we'll all sink with him.

Dictatorship of the Fed and Treasury on Behalf of Wall Street

I felt it was coming, and the honeymoon is over. Economist/journalist Robert Kuttner begins it--the direct criticism of Obama for his financial policies:

I fear that these columns have been too polite. They have directed criticisms at Treasury Secretary Tim Geithner and national economic policy chief Larry Summers. Lord knows, they richly deserve the criticism. But let's not kid ourselves. The man they work for is named Barack Obama.

President Obama has promised to run an administration of unprecedented openness. And in some respects, such as the ground rules for spending stimulus funds, he has. But in the most important area of all, the financial rescue, the administration is making trillion dollar decisions relying on the Federal Reserve and a small Wall Street club of advisors, with no transparency or public accountability.

In devising their horribly convoluted and risky approach to the next phase of the banking bailout, chief economic strategist Summers and Treasury Secretary Geithner did not consult closely with Congress. The new rescue package was not legislated. There were no hearings. Rather, they met extensively with key Wall Street banking barons, to design government guarantees so lucrative that speculative hedge funds and private equity companies would bid for toxic securities clogging bank balance sheets. They would make a financial killing, but maybe banks would be recapitalized and start lending again.

Even more alarmingly, the administration is now using the Federal Reserve as an unlegislated, all-purpose slush fund. Because the Fed's operations are largely beyond the reach of Congressional appropriations or scrutiny, the Fed can do whatever it wishes with its money. The Geithner plan was negotiated behind closed doors, the main players being the Fed, the FDIC, the Treasury, and power-brokers on Wall Street.

What we have is something perilously close to a dictatorship of the Fed and the Treasury, acting in the interests of Wall Street.

Very tough language. And very tragic, because so unnecessary. The liberal-left is losing faith in Obama's economic personnel and policies, and when economics is the name-of-the-game these days, that spells political trouble. With the honeymoon over, the question is, will this marriage last, or will there be a divorce down the line? We need marriage counseling. But will Obama be interested?

Geithner's Hedge Fund

Robert Samuelson, for what it's worth, in the WaPo:

Call it Uncle Sam's hedge fund. The rescue of the American financial system proposed by Treasury Secretary Timothy Geithner is, in all but name, a gigantic hedge fund. The government would lend vast sums to private investors to enable them to buy loss-ridden assets at discounts from banks with the prospect of making sizable profits. If that's not a hedge fund, what would be? The hope is that the $14 trillion U.S. banking system would expand lending if it could get rid of many of the lousy securities and loans already on its books.

Almost everyone thinks that a healthier banking system is necessary for a sustained economic recovery. Can the Geithner plan work? Maybe, though obstacles abound. One is political. Private investors may balk at participating because they fear populist wrath. If the plan succeeds, many wealthy people will become even wealthier. Congress could subject them (or their firms) to humiliating hearings or punitive taxes. Why bother? Another problem: Investors and banks may be unable to agree on prices at which assets would be bought.

Question: isn't there a way to do this without making wealthy people even wealthier, and worse yet, from the public trough?

World's Worst Legislature

Matt Yglesias writes about the problem of the Senate:

It’s often said that Bill Clinton and Jimmy Carter “failed” in efforts to achieve major progressive structural reforms during their moments of opportunity in 1993-94 and 1977-78. But as Jonathan Chait persuasively argues this is more a situation where the opportunity for progressive change was deliberately squandered by congressional Democrats; especially Senate Democrats who work with the perverse structure of the world’s worst legislature to stifle change. Depressingly, Chait is able to mount a great deal of evidence that some of the same stuff is happening today to Barack Obama’s agenda.

A Pig Roast

What's so weird is the actions taken by the Obama people against GM and Chrysler, versus the (lack of) actions taken against AIG, Bank of America, Citibank, Goldman, Sachs, etc. Is this just obvious to me, or do others see it too?

[Update: I just saw this on Politico: But lawmakers from auto manufacturing states are wondering why their industry gets such tough treatment and a heavy hand from the Obama administration while Wall Street bailout recipients haven't had nearly as much intervention. "Mr. Wagoner has been asked to resign as a political offering despite his having led GM's painful restructuring to date," said Rep. Thaddeus G. McCotter (R-Mich.). "Mr. Wagoner has honorably resigned for the sake of his company's working families. When will the Wall Street CEOs receiving TARP funds summon the honor to resign? Will this White House ever bother to raise the issue? I doubt it."]

Paul Krugman (whom some Obama supporters hate because of his criticism of Obama's economic policies) takes a look at the obscene growth of the financial sector over the last 40 years here.

The big financial institutions--AIG, Citibank, Goldman Sachs, among others--who have brought us down should be allowed to die, then gutted, flayed, sliced and diced, and then roasted over an open fire like a pig. Let's have a pig roast.

And for good measure, throw some of their corrupt leaders in prison for the gigantic frauds and shysters they were. Letting them get away with their millions and billions, while average working people lose their pensions, their homes, and their jobs, is both immoral and unjust.

And it won't work politically in our current political environment. Obama will begin to lose his support on the liberal-left, and I don't believe he can either win or be effective without it.


Kunstler's take on the future of the American economy:

What’s going on now is nature’s way of telling you that America’s standard of living has to be reduced by something between 20 and 50 percent. You can have it in the form of a compressive deflationary depression, including widespread bankruptcies… or you can have by way of inflation, in which money loses its value. But there’s one basic qualification to this: the way down is not symmetrical with the way up. That is, it’s really not just a matter of ratcheting down to a standard of living half of what it was, say, in 2006, because in the event all the various complex systems that support everyday life enter failure mode before our society re-sets at a theoretically lower level of equilibrium.

I tend to agree with Kunstler here, and not Obama and other Clintonites (what else can we call him, when he has basically recalled every Clinton official for duty for both the economy and foreign policy. It makes me wonder why we were so tough on Hillary.) I do think that Obama and his people feel that we're going to be able to recover economically to the point where we can do all the things he wants (and I want as well), including transitioning to clean energy, transforming health care, providing college education for everyone, etc.

However, I am much less sanguine about our economic ability to do these things, after our national binge of the last 30 years. Which also makes me more pessimistic about the political stability of our country, which is necessary for us to make these changes politically, without upheaval.

Here's my abiding pessimism/realism shining through!

They Like Obama, But Not His Economic Policies

James Kunstler's take today on Obama's trip to Europe:

Mr. Obama heads to Europe now where official hostility is rising against the Anglo-American method of pounding monetary sand down the rat-holes of “non-performing” debt, bankrupt enterprise, and bubble-levitated bonds. Our poised and charming Prez may escape personal obloquy from the quaint old-world street folk, but most of the other G-20 policy playerz take a dim view of the shell-and-pea games being played by the custodians of the world’s reserve currency, including front-end-loader bank bail-outs, the shuffling of worthless securities under TARPS and TARFS, the desperate efforts to prevent the sane re-pricing of real estate, the cannibalizing of treasuries by the Federal Reserve, the now-notorious hijacking of public “liquidity” injections by third parties like Goldman Sachs, and most generally the perceived sacrifice of everybody else’s greater good for the sake of maintaining Lloyd Blankfein’s cappuccino machine.


Paul Krugman writes in the NYT that the biggest cost to America of the current economic crisis is its ability to lead:

Still, it’s a fact that the crisis has cost America much of its credibility, and with it much of its ability to lead. And that’s a very bad thing.

A lot of us were hoping that Obama would be able to provide world leadership, indeed, that he was the 'President of the world'. It doesn't look to be turning out that way, which was probably inevitable, once he had to inherit the responsibilities of power. There is a built-in conflict and antagonism between the U.S. and the rest of the world that is probably unavoidable, and that will tarnish the way he is viewed by the world.

The same thing is true for all of us really, who were his supporters during the campaign. Our hopes ran very high, probably too high, given the realities of power and office. Obama couldn't possibly fulfill all our hopes and dreams. What we have to do now is try to see him in a new, more realistic light. Which means that we have to try and see him objectively, without emotion, and support him when we can, which is often, but also oppose his policies when we feel we have to, without feeling like we're betraying him. It also means being patient and knowing that he can't do everything he wants all at once. But it may mean realizing and accepting the fact that we may be reading into him all of our desires and hopes, rather than what he has decided to do.

Obama is, as many have in fact said, not our Savior, and he is not all-knowing. He has very real flaws and weaknesses that will become apparent as we go along. He is a human leader, and we can support him, pray for him, admire him. But sometimes it means taking issue with decisions he's made, but doing so in a mature and reasonable fashion.

Having said that, Barack Obama is so far a very good President, compared to the previous holders of that office. And for that, we can be very thankful.

Saturday, March 28, 2009

Unhinged Afghan Policy

Blogger Andrew Sullivan has real problems with Obama's announced Afghan policy:

The more I read the more depressed I get. I simply do not believe that we will be able to rid the region of Islamist terrorists by military force, diplomatic genius or civilian outreach. And I suspect that our very intervention has spawned more of these terrorists than might have existed otherwise. The only reason we are there is because Osama bin Laden used the place as a base for the 19 unarmed men who perpetrated 9/11. The question we have to ask is: How is our current policy going to prevent another 19 unarmed men from wreaking havoc in the same way?

I don't see it. And what are the unintended consequences of extending this war into Pakistan, and adding more and more resources to Afghanistan? God knows.

I just try to imagine what the founders would say. With this level of debt, with another country, Iraq, still jammed with US troops, and still deeply unstable, with a global recession threatening to gut our capacity to finance even basic domestic needs, we are about to tackle a region of this complexity and danger. At some level, it is unhinged. It presupposes American responsibility for things we cannot understand, cannot control and cannot defeat. Its premise is imperial responsibility, not a reasonable assessment of national security. Does that make me sound like an isolationist? If isolationism means not trying to remake Afghanistan and Pakistan, then absolutely.

Senators To Be Listened To

David Lindorff, an insightful journalist, writes about those seven Democrats and one Republican Senators who voted against the repeal of the Glass/Stegall Act in the late 90's. These brave and honest Senators--among them are Dorgan, Boxer, Harkin, Feingold, Mulkolski, and Shelby--were right then and have the right to be listened to now, in terms of what they see happening.

Sen. Byron Dorgan (D-ND), one of seven Senate Democrats who voted against revoking Glass-Steagall, said:

“I think we will look back in 10 years' time and say we should not have done this but we did because we forgot the lessons of the past, and that that which is true in the 1930's is true in 2010. I wasn't around during the 1930's or the debate over Glass-Steagall. But I was here in the early 1980's when it was decided to allow the expansion of savings and loans. We have now decided in the name of modernization to forget the lessons of the past, of safety and of soundness.''

And then there’s the late Sen. Paul Wellstone (D-MN), who died in a plane crash during his campaign for re-election in 2002. Congress, he said, seemed:

“…determined to unlearn the lessons from our past mistakes. Scores of banks failed in the Great Depression as a result of unsound banking practices, and their failure only deepened the crisis. Glass-Steagall was intended to protect our financial system by insulating commercial banking from other forms of risk. It was one of several stabilizers designed to keep a similar tragedy from recurring. Now Congress is about to repeal that economic stabilizer without putting any comparable safeguard in its place.''

For the record, also voting against Glass-Steagall repeal in the Senate were lone Republican Richard Shelby of Alabama, and six other Democrats: Barbara Boxer (CA), Richard Bryan (NV), Russ Feingold (WI), Tom Harkin (IO), and Barbara Mikulski (MD).

Obama's Timid Orthodoxy

Alexander Cockburn, acerbic writer from the middle-to-far left of the political spectrum, says what many are probably thinking but not saying:

So Geithner gets pelted with mouldy cabbages, while Obama -- entirely responsible for the basic economic strategy of bailing out the banks rather than taking them over – charms the nation.

It won’t go on forever. If things go badly , the peple know perfectly well where the buck stops. There’s already a powerful drumbeat of disquiet that Obama, for all his smoothness, is Hoover-like in his timid orthodoxy. Back from the political graveyard last week came former N.Y. governor Eliot Spitzer arguing in a strong column in Slate that Obama’s $200 billion payoff to AIG was the real scandal, not the $180 million in bonuses.

Resume It or Kill It?

In Paul Krugman's most recent column in the NYT, he lays out his fundamental disagreement with the Obama financial vision, as he understands it:

In essence, the administration seems to believe that once investors calm down, securitization — and the business of finance — can resume where it left off a year or two ago....the underlying vision remains that of a financial system more or less the same as it was two years ago, albeit somewhat tamed by new rules.

As you can guess, I don’t share that vision. I don’t think this is just a financial panic; I believe that it represents the failure of a whole model of banking, of an overgrown financial sector that did more harm than good. I don’t think the Obama administration can bring securitization back to life, and I don’t believe it should try.

Liberal Backlash

Well, at least I'm not alone in my suspicions about the Summers/Geithner duo, as reported in the Financial Times:

The liberal backlash against President Barack Obama has begun with many prominent left-leaning economists in the US attacking the administration’s plans to bail out the banks. Paul Krugman describes the toxic asset purchase plan as “cash for trash”. Jeffrey Sachs calls it “a thinly veiled attempt to transfer hundreds of billions of US taxpayer funds to the commercial banks”. Robert Reich depicts Tim Geithner, Treasury secretary, as a prisoner of Wall Street while Joe Stiglitz says the plan “amounts to robbery of the American people”.

Thursday, March 26, 2009

The Dollar Down the Drain

Paul Craig Roberts, former Assistant Secretary of the Treasury in the Reagan Administration, writes about a problem that few are talking about:

The unaddressed question remains: Is the US dollar’s status as world reserve currency threatened by the debt monetization and multi-year, multi-trillion dollar issuance of new Treasuries?

Losing the dollar's status as the world reserve currency would reduce our ability to import, while inflation and interest rates would go up, making everything much, much worse. Not a pleasant prospect, but a very real danger that Obama's economic advisors don't seem to be worrying too much about.

Yes We Can

Well, I think it's time for a template change. I tired of the old one.

The Wrong People

Robert Scheer writes about Obama's economic team, in what seems to be a growing consensus on the liberal-left, who want to be supportive of Obama, that he is appointing the wrong people.

Bernie Sanders, the senator from Vermont who is independent in spirit as well as party label, has placed a hold on President Obama's nomination of Gary Gensler to head the Commodity Futures Trading Commission. Sounds like a minor issue to get worked up about, but the senator is right. Like most Americans, I am eager for Barack Obama to succeed, but I see this appointment as further evidence that the president has entrusted his economic policy to the wrong people.

Gensler helped create this financial crisis when he was in the Treasury Department back in the Clinton era, when bipartisan cooperation with Wall Street lobbyists was all the rage. Sanders gets right to the point: "Mr. Gensler worked with Senator Phil Gramm and Alan Greenspan to exempt credit default swaps from regulation, which led to the collapse of AIG and has resulted in the largest taxpayer bailout in US history."

Sanders' hold will not stop the Gensler nomination, because Congress and the president, recognizing the nation's mood, want to give Wall Street whatever it wants to make the stock market go up. And Gensler is a reassuring figure to the moguls of finance; he was a partner at Goldman Sachs before being brought by Goldman honcho Robert Rubin to the Clinton Treasury Department.

After Rubin left to take a $20-million-a-year job at Citigroup, which he helped run into the ground, Lawrence Summers, his protege and replacement at Treasury, elevated Gensler to be an undersecretary. Gensler then performed as Summers' point man in advocating for deregulation legislation that enabled the current debacle.

For whatever reason, Obama is approving this approach. It troubles me and continues to make me question what he says, which all sounds good. I don't get it.

Economic Suicide

I never thought I'd be praising an article by an American Enterprise Institute fellow, but this one by Desmond Lachmond is outstandingly perceptive. (They have all too often been ideological and partisan.) I think he makes a strong case that we are in danger of becoming an economic 'emerging market'. Lachmond seems like someone who, in his later years, has finally seen the light and now has the courage to tell it like it is. May his tribe increase!


A singular characteristic of an emerging market heading for deep trouble is a seemingly suicidal tendency to become overly indebted to foreign creditors. That tendency underlay the spectacular collapse of the Thai, Indonesian and Korean currencies in 1997. It also led Russia to default on its debt in 1998 and plunged Argentina into its economic depression in 2001. Yet we too seem to have little difficulty becoming increasingly indebted to the tune of a few hundred billion dollars a year. To make matters worse, we do so to countries like China, Russia and an assortment of Middle Eastern oil producers -- none of which is particularly well disposed to us.

Like Argentina in its worst moments, we never seem to question whether it is reasonable to expect foreigners to keep financing our extravagance, and we forget the bad things that happen to the Argentinas or Hungarys of the world when foreigners stop financing their excesses. So instead of laying out a realistic plan for increasing our national savings, we choose not to face up to the Social Security and Medicare crises that lie ahead, embarking instead on massive spending programs that -- whatever their long-run merits might be -- we simply cannot afford.

Reasonable Pragmatism

Here is blogger Andrew Sullivan's take on Obama's latest press conference:

Sometimes, we forget just how momentous this past election was. It was momentous because it culminated in a rejection of the politics of the past eight years, and also, to some extent, an understanding that a very new direction was required given the gravity of the many crises facing the US and the world. The only reason Barack Obama is at that podium is the crisis we are in. In any other time, Hillary would be standing there, or McCain. He was elected to change things profoundly, and as he took office, the hurricane forces of economic collapse strengthened. We all know this. Without this context, none of it makes sense. With this context, everything makes sense.

And what does Obama's response to these multiple crises look like two months in at this point? It looks to me like relentless, detailed, reasonable pragmatism. It is what I hoped for. The Geithner package is neither right nor left: it's about solving the problem within the existing structures as far as possible.

Will it work? I cannot know. But it is not dividing one half of the country against another; it is resisting the most radical and irreversible move; it is part of an entire package designed to move the world economy out of a dangerous abyss; if it fails, nationalization remains a list-ditch option. I see it as a good faith effort, and prepared meticulously in the time-table dictated by the crisis and simple human competence....

I said it in the campaign and I'll say it again. He has flaws; he deserves pushback; he needs criticism. But we're lucky to have him right now, in my fallible judgment. Extremely lucky.

I agree with Andrew here, except that I am more skeptical about the economic team of Summers and Geithner because of their backgrounds. I am open to be convinced otherwise, but I need actions and not just words for that.

Obama's Speaking Style

I guess we should not be surprised that conservatives are looking for niches in Obama's armor to try and shoot an arrow through to injure him. When you have an ideological enemy, that's what you do. The left certainly tried to do it with the many odd Bush behavior traits.

And of course, Obama's manner of speaking extempore lends itself to criticism, because it is fairly slow, cautious, and full of fairly normal 'filler words' and stutters. Partly that's because he doesn't want to respond with answers that are glib or superficial, and I like that.

Here is James Fallow's take on this issue:

Obama's opening statement at this evening's press conference, delivered no doubt with the help of a teleprompter, sounded smoother and more polished than his real-time answers through the rest of the event.

The same is true for any public figure who has learned to use a teleprompter (harder than it seems) and whose teleprompter-ready material suits his or her natural speaking style. It sounds smoother than extemporized speech because it should be smoother.

The important point with Obama is that the content, command of fact and concept, and overall intelligence of his extemporized answers matched that of the scripted presentation. That could not have been so if he were teleprompter-dependent.

Wednesday, March 25, 2009

No Mistakes, No Surprises

I wasn't able to listen to President Obama's press conference last night, nor have I had time to read any transcript this morning. But from reactions, it sounded like nothing much new came out of it. He did a good job being Presidential and sounding informed.

It also sounds like no questions were raised about the Treasury bank bailout plan. Now that's pretty strange, given its importance and the questions being raised about it. But there is a lot happening right now.

Tuesday, March 24, 2009

Peace Be Unto You

It seems to me that the Iranian initiative of the Obama Administration, sending a broadcast greeting of respect and best wishes for their New Year is exactly what the doctor ordered. It costs us nothing, shows that as a nation we accept them as fellow members of the community of nations, and, in this case, causes internal disagreements within Iran, as many younger people respond positively to Obama, and not so positively to their own leader's negativity and less-than-hospitable response.

This is why we elected Obama President. I can't even imagine such a thing happening under a McCain Administration.

Drug Cartels

NPR has been having segments in the morning on the Mexican drug cartels and the resulting drug violence in Mexico, and increasingly in the United States. The power of the cartels to commit assassinations by recruiting young boys and to bribe government officials is frightening.

This is one issue I've not thought about much, but it seems like it needs to move up the priority list of important issues.

Monday, March 23, 2009

Keep On Laughing

E. J. Dionne: "I'd rather have a President who laughs, then one who is mean, or one who is glum."

You got that right. The angriest we may ever see Obama is when Joe Biden made a crack about the Chief Justice of the Supreme Court messing up the presidential oath of office.


President Obama got 14 of the 'sweet sixteen' basketball teams correct. That is pretty awesome. I want Duke to win it all, but I'm thinking Obama may be right that it will be UNC.

I'm praying he does as well with his new economic plan.

Swing Set Revisited

I want to revisit the post below on "The Swing Set". As I've sat here on my day off thinking about things, I've decided that I love the swing set now on the White House Lawn, and I also love the garden. It is a reminder that the family living there is fairly normal and not demi-gods. They've got wonderful kids, and they are a great example of what a great family can be.

I guess I just got an overdose of Obama talking about everything under the sun but the financial crisis that threatens to overwhelm us. And that's an overstatement, because he has said some good things. It's just that, as I've said too many times already, he doesn't in my opinion have the right guy(s) in place to carry out what he says he wants. And that puts everything at risk.

I like the swing set. In fact, I want to play on it.

Geithner's DNA

Arianna Huffington's analysis of Tim Geithner here is spot on. Tidbit:

I don't believe Geithner thinks we're stupid (although he almost certainly doesn't think we're as smart as he is). He just can't change who he is: a creature of Wall Street, habitually sympathetic to the people at the top of the financial system, who he clearly thinks were born to run the world. Geithner's actions throughout his career are proof that the toxic thinking that got us into this mess is part of his DNA.

Really Upset

Why are Americans filled with populist anger? Here's why:

Millions of Americans have lost their jobs; millions are threatened with loss of their homes; millions have seen their retirement funds melt before their eyes; millions are threatened with loss of health care. As Americans on Main Street were being devastated, executives of bailed out banks continued to receive millions in bonuses. That straw now threatens to break the back of the fabled American tolerance for the foibles of the capitalist system.

Avoiding Reality

And for my final post of the morning, some bracing words from the always contrarian Monsieur James Kunstler:

If central casting called for a poised, straight-talking, and capable-seeming president, it would be hard to come up with someone better than the Barack Obama who walked and talked around the White House grounds with Steve Croft on "60-Minutes" Sunday night. He may perfectly represent the majority who elected him, though, because he also appears to be in full commanding denial of the realities overtaking our American experience.

Those realities include the fact that we can't possibly return to the easy credit and no money down "consumer" economy no matter how many nominal dollars get shoveled into the fiery furnaces of banks too-big-to-fail. As Treasury Secretary Geithner's underling, Stephanie Cutter, said last week, "Our singular focus is on increasing lending to support economic recovery. Everything we do to stabilize the financial system is done with that goal in mind."

Lending on the scale that became normal over the last decade is for sure the one thing that we will not recover. We turn around in 2009 to find ourselves a much poorer nation than we thought we were a year ago, especially among that broad range of formerly middle-class wage-earners who lived so luxuriously until yesterday. The public can't process this reality and the president, for all his relaxed charm, is either not ready to articulate it, or can't process it himself.

Everything that we're doing right now is engineered to avoid reality, to sustain the unsustainable, to recover the unrecoverable, when the mandate of reality compels us to face our losses in order to move on to the next chapter of a collective American life.

The Swing Set

Joel Achenbach on the White House swing set:

First, that "swing set." Newly installed on the White House lawn, bristling with accessories, the swing set -- really more of an amusement park -- stole the show when Obama's interview aired on "60 minutes" last night. The president called it the Rolls Royce of swing sets, but it was more like the Space Shuttle of swing sets.

A quick glimpse indicates that the play equipment includes: Two swings, a slide, a fortress, an observation platform, a rope, a tunnel, a trapdoor, monkey bars, a zipline, a moon bounce, a trampoline, a live pony, a pop-a-shot, a 24-hour concierge and a wine cave.

Obama talked to Steve Kroft about all the hard decisions he has to make, day in and day out, and how many of them are decisions between a bad option and a worse option. But he doesn't pick out the swing sets. "The Admiral" did that.

I will keep an eye out for a backlash against the swing set. You know: "Main Street" protesting the swing set as excessive, elitist and obscene. Why should some rich kids have giant swing sets with private heliports, while most American kids have to content themselves with a single squeaky little swing perched over a puddle?

Not a good time to unveil the Presidential swing set. I know, petty-petty. But it just seems to enhance the 'out-of-touch', tone-deaf image that Obama is starting to get. NCAA brackets, Direct TV on Airforce One, workout gym in the White House, home everynight for dinner with the family, etc., etc., etc.

ENOUGH ALREADY. Go hide out in the Treasury Department for awhile. And please, please, don't have any cameras around when you're out weeding your arugula. I don't care what Michelle says. Better, just let her and the chef do that.

You Are As Good As Your Advisors

A President is only as good as his advisors. You get boxed into a certain way of thinking, depending on who's giving you the briefing every morning and doing all the nitty-gritty details.

This is probably what happened to Bush, who was surrounded by neo-cons and militarists like Cheney, Rumsfeld, Wolfowitz, and Feith. It's no wonder that we invaded Iraq.

This seems to be what is happening to Obama on economics. He gets an economic briefing from Larry Summers every morning, probably 5-6 days a week. Summers is his economic/financial guru. On other issues, Geithner is his go-to man. So virtually all that Obama sees/hears every day on financial or economic matters is what Summers and Geithner tell him.

So if Geithner is Paulson-lite, and if Summers is Rubin-lite, then what do you have? An Obama whose view of the financial world is aligned pretty closely with that of Wall Street. Add to that a certain leaning toward the 'Chicago School of economics', whose guru was Milton Friedman. Add to that a political centrism that seems natural to Obama. Add to that the huge political contributions from Wall Street. Add to that Raum Emanuel as Wall Street's favorite Congressman as least in terms of political contributions, before he became chief of staff. A perfect alignment favoring the Wall Street world view.

Now the odd thing is, when he is talking to the press, Obama says things that sound good to my ears. But then it rarely gets translated into policy. No surprise there, with guys like Summers and Geithner whispering in his ear.

I will venture to say this: the last thing Obama needs to do is to try and keep Wall Street happy.

Financial Hocus-Pocus

I would surely love to have one of the economic thinkers I respect say a good word about the new Obama/Summers/Geithner plan. But alas, nary a good word is to be found anywhere. Take Paul Krugman, for example, who is near 'despair':

It’s as if the president were determined to confirm the growing perception that he and his economic team are out of touch, that their economic vision is clouded by excessively close ties to Wall Street. And by the time Mr. Obama realizes that he needs to change course, his political capital may be gone.

But the real problem with this plan is that it won’t work. Yes, troubled assets may be somewhat undervalued. But the fact is that financial executives literally bet their banks on the belief that there was no housing bubble, and the related belief that unprecedented levels of household debt were no problem. They lost that bet. And no amount of financial hocus-pocus — for that is what the Geithner plan amounts to — will change that fact.

You might say, why not try the plan and see what happens? One answer is that time is wasting: every month that we fail to come to grips with the economic crisis another 600,000 jobs are lost.
Even more important, however, is the way Mr. Obama is squandering his credibility. If this plan fails — as it almost surely will — it’s unlikely that he’ll be able to persuade Congress to come up with more funds to do what he should have done in the first place.

I would love, dearly love, to have more trust in Obama's judgment on this than Krugmans. But unfortunately, Krugman is Nobel-Prize winning economist, while Obama is relying on Geithner and Summers, and frankly, there is little reason to trust them. He needs to get new economic advisors, who aren't seen as lackeys of Wall Street.

Give the Ball to Paul Volcker

This will be a lengthy post, so just ignore it if you want. Robert Kuttner, in a piece on the Huffington Post does a lengthy critique of the new Treasury plan for the banks, after which he gives his alternative, which is below:

The problem, of course, is larger than Geithner. The entire Obama economic team is far too close to Wall Street and far too much a continuation of the Paulson approach. And though Geithner is primed to take the fall, the plan is the work of senior economic strategist Larry Summers as much as it is Geithner's.

The grave political and economic risk is that Obama continues to let Summers and Geithner lead him down the garden path; the industry-oriented mortgage rescue saves too few homeowners; housing remains in the doldrums and mortgage securities with it; the hedge funds and private equity companies make some money with government guarantees, but the banking system remains comatose; and Republicans increasingly become the instruments of public anger.

For the moment, the president is a prisoner of this thinking and these appointees. If this were merely The West Wing, it would be the stuff of terrific drama. But alas, it's reality; and we all will live with the consequences.

In a different possible scenario, however, Obama lets the financial and political marketplace test the Geithner plan for another week or two. Then, when its failure is palpable, Obama announces a dramatically different approach, either with or without a different treasury secretary.
If this movie were Bull Durham, the most plausible veteran that Obama could bring in to play Crash Davis to Geithner's Ebby Calvin LaLoosh would be Paul Volcker. The former Fed chairman is no fan of the Paulson-Geithner approach.

If Obama handed Volcker the ball, as some kind of senior counsel, they could drastically change the game plan without even having to fire Geithner. This would be the smoothest and least awkward way of changing course. Obama could simply say that we tried variants on the Paulson formula and it didn't work. Now it's time to try something else.

The alternative course, which is winning converts across the political spectrum, is a variant on the Reconstruction Finance Corporation of the Roosevelt era. With an R.F.C. temporarily taking over the insolvent banks, you wouldn't have to bribe hedge funds and private equity companies to speculate on toxic securities. Government would take over zombie banks and use government auditors to determine just how much new money was required to bring a vastly simplified financial system back to life. Shadow banks, loan securitization, and convoluted high-risk schemes would loom smaller, not larger. The process would have far greater simplicity and transparency. And it would be far more likely to get the banking system working again, more quickly and at less public expense.

Barack Obama is a president of great promise, reassurance, and political skill. In the next few weeks, we will learn how he performs in a crisis that is being worsened by his own appointees.

Live and Let Live

This is good. We've got to get along with Russia.

U.S. President Barack Obama has held talks with Mikhail Gorbachev, a spokesman for the former Soviet leader said on Monday, in the latest sign of Washington's efforts to "press the reset button" on ties with Russia.

Spokesman Konstantin Petrenko said Gorbachev met Obama and Vice President Joe Biden -- who coined the 'reset' phrase last month -- in Washington last Friday. He did not give any details of the discussion.

Visits by veteran politicians have been used by both sides to test the waters before Obama meets Russian President Dmitry Medvedev for the first time on April 1 in London on the eve of a G20 summit. A delegation led by former U.S. secretary of state Henry Kissinger visited Russia last week and met Medvedev.

The Herd

Tony Schwartz reminds us that we all had a hand in the current economic debacle:

We're not all innocent victims. Bernard Madoff may have lost $50 billion, but an awful lot of his investors set aside their better judgment in favor of their greed and handed over their money to someone who produced unjustifiably outsize returns and was unwilling to disclose how he did it.

As for Wall Street more broadly, the bubble that finally burst had many enablers: regulatory agencies that failed to play the oversight role they were assigned; politicians from both parties who oversaw the deregulation of the financial markets; ratings agencies who colluded with the banks that paid them by giving unduly high credit ratings to their toxically risky bonds; and the rest of us, millions of investors and borrowers who poured money into markets as if they could only rise, and took out mortgages in order to buy homes we knew we couldn't afford.

We wanted what we wanted, and we didn't think much beyond that. Bankers and their agents were happy to give us what we wanted in order to get what they wanted, and they didn't think much beyond that.

Far too many of us conspired to get as much as we could while the getting was good, never stopping to consider that if everyone keeps trying to get more - leveraging their bets and running up debt to do so -- there will eventually be a day of reckoning.

Sunday, March 22, 2009

Christianity At Its Most Ridiculous

Even though I'm a pastor, I have used this blog mostly for my personal political and social views. But I couldn't resist posting this picture from a fundamentalist coloring book.
This. Boggles. The. Mind.

What Are They Thinking?

Thomas Friedman writes accurately about the nullity that is the current Republican party, at least at the Congressional level:

I saw Eric Cantor, a Republican House leader, on CNBC the other day, and the entire interview consisted of him trying to exploit the A.I.G. situation for partisan gain without one constructive thought. I just kept staring at him and thinking: “Do you not have kids? Do you not have a pension that you’re worried about? Do you live in some gated community where all the banks will be O.K., even if our biggest banks go under? Do you think your party automatically wins if the country loses? What are you thinking?"

Kill It. It's a Vampire

Get a load of this, from an article by Charles Geisst in the WaPo:

Citibank's problems rankled the public and everyone on Wall Street when it became clear that the country's largest bank had dug itself an inescapable hole. The bank that was too big to fail became a ward of the government and had to scale down its activities to survive. But Citi has some experience bouncing back from low public opinion. In the early 1930s, the National City Bank was widely condemned by all, including Franklin D. Roosevelt and Congress, for having helped create the Crash of 1929 and the Depression that followed. Its president was fired and new banking laws were enacted to protect the financial system and the public. But the bank, today Citibank, survived and prospered. Its former president spent the rest of his working days overseeing a well-known brokerage house.

National City Bank. Citibank. Please, put the stake in its heart, once and for all. It does not deserve to live.

Finger on the Trigger

It strikes me that one of the most overlooked statements made by President Obama recently was his answer to a question on investment bankers or AIG at the town hall meeting in Costa Mesa, California.

He said something like, "they have a explosive belt around their waist and they have their finger on a trigger, threatening to set it off and bring everything down. And what we have to do is carefully talk them out of that."

Really? Portraying the Wall Street denizens as, basically, terrorists is quite interesting. I really wasn't expecting it, and I've been trying to figure out why he would have put it that way. Since it was an improvised answer, I think it may reflect a deeper and perhaps normally unspoken thought.

Probably it was just supposed to be a funny, catchy through-away image. But could it possiby reflect what he is hearing from the financial sector, those who have supported him very generously as a politician recently. That they are threatening to set the whole economy ablaze if they don't get their way? Is that why he seems to be largely giving them their way, via Geithner and Summers?

Obama's Katrina Moment

The best column I've seen today is the one by Frank Rich in the NYT. It reflects my own thinking and feelings on the issues at hand. Tidbit:

A CHARMING visit with Jay Leno won’t fix it. A 90 percent tax on bankers’ bonuses won’t fix it. Firing Timothy Geithner won’t fix it. Unless and until Barack Obama addresses the full depth of Americans’ anger with his full arsenal of policy smarts and political gifts, his presidency and, worse, our economy will be paralyzed. It would be foolish to dismiss as hyperbole the stark warning delivered by Paulette Altmaier of Cupertino, Calif., in a letter to the editor published by The Times last week: “President Obama may not realize it yet, but his Katrina moment has arrived.”

Fire Geithner (and Summers While You're At It)

Am I being too hard on Geither and Summers, Obama's economic team? I don't think so.

I am certainly not anti-Obama. I want the man to succeed. I admire the man, even love him, as much as one can 'love' a politician you've never met. And I have no problem with, for example, Secretary of Defense Gates, even though he's a Republican. Pretty much everyone agrees he's most likely doing a great job, and it was a good move for Obama to keep him.

Ditto Secretary of State Hillary Clinton. I don't see anyone complaining about her, at least yet. She seems to be digging in and doing her job. Good pick, Obama.

But there is so much complaining and griping about Geithner simply because he isn't doing the job, and so many people whose opinion I respect see it. (Of course we may be all wrong, and if that proves to be the case, I'll love Obama even more.)

But I have to say that I get sick of Obama 'taking the responsibility' for the mistakes of Geithner. That is an empty statement, unless he disciplines Geithner or removes him, and replaces him with an economic Gates or Clinton. Until he does that, all of this other stuff like going on Jay Leno is just going to be fluff and showboating, that will simply fly back in his face and undermine his authority and power. And Lord knows, we need a leader NOW.

Get Serious and Get With IT

The columns are full today of pleas from good writers and thinkers I respect to President Obama to get serious about the financial mess we are in.

One complaint is the campaign swing out west, including the appearance on The Tonight Show with Jay Leno, the first time a President has ever appeared on such a show. As Kathleen Parker, a respectable 'moderate conservative', writes in the WaPO:

Despite civic rage and political blame -- even death threats aimed at business executives -- there is a carnival air of unseriousness and grotesquery loose upon the land. Life has become one grand, comic burlesque, a vaudevillian game show where plumbers are journalists, war heroes twitter and the president hits the late-night circuit in the midst of crisis.

Obama's appearance on Jay Leno's show Thursday night -- joking lamely that his bowling is "like Special Olympics or something" -- is symptomatic of a broader blending of the serious and the comic that makes sane people feel slightly displaced. Infotainment isn't a new topic, but the lines are becoming increasingly blurred. Tragicomedy, in which gods and men reverse roles, may be an honored dramatic genre, but is this any way to live?

I'm afraid I agree. It just doesn't feel right to me. I wouldn't have liked it if a President McCain had done it either, if it seemed like an attempt to either distract attention or up his popularity ratings. People want the President to be working hard enough on the financial crisis so that he knows about things like huge bonuses for AIG, and not have it sneak up on him, as if he's somehow out of the loop.

There is so much anger and concern out here in the country. It is simply unseemly for Obama to be acting as if everything is just normal, giving his basketball brackets, talking about watching the NCAA tournament on Air Force One with its direct TV, and joking around on Jay Leno. NOBODY CARES ABOUT THAT STUFF. We want you and Geithner to be focusing on the financial crisis. If you don't get the handle on that, NOTHING ELSE MATTERS because nothing else will get done.

Saturday, March 21, 2009


Jeffrey Sachs, economist at Columbia University, writes:

During the last 20 years Wall Street has had its way with us. On a bipartisan basis it provided the Treasury Secretaries, filled the regulatory agencies, paid itself unconscionable bonuses, and stuffed the campaign coffers. The greed knew no bounds. The distortions of public policy -- right up to Greenspan's infamous decision to leave financial regulation up to the firms themselves -- have wrecked the world economy.

The fascinating thing about this greed is that it is so deeply ingrained that neither the bankers themselves nor our economic leadership understands just how disgusting and dangerous it is. Even after the music stopped, to use Chuck Prince's now famous simile, the bankers keep dancing - with our money. They continue to grab billions of taxpayer dollars (in Merrill's case) or at least hundreds of millions of dollars (in AIG's case) with giddy abandon, in full view and with a straight face. And our economics officials declare that this is unavoidable or too dangerous to curb.

And he concludes:

The faster that the economics team and Congress heed the public call for simple justice and decency in financial matters, and the more rapidly that translates into a true Wall Street clean up, the faster will come the economic recovery.

Greedy Illusions of Wall Street

Here is a great couple of paragraphs from Matt Taibbi, writing in Rolling Stone:

The most galling thing about this financial crisis is that so many Wall Street types think they actually deserve not only their huge bonuses and lavish lifestyles but the awesome political power their own mistakes have left them in possession of. When challenged, they talk about how hard they work, the 90-hour weeks, the stress, the failed marriages, the hemorrhoids and gallstones they all get before they hit 40.

"But wait a minute," you say to them. "No one ever asked you to stay up all night eight days a week trying to get filthy rich shorting what's left of the American auto industry or selling $600 billion in toxic, irredeemable mortgages to ex-strippers on work release and Taco Bell clerks. Actually, come to think of it, why are we even giving taxpayer money to you people? Why are we not throwing your ass in jail instead?"

Now, go ahead and read the whole article. I dare you.

Friday, March 20, 2009


In my more paranoid and hysterical moments, I sometimes think like this guy here.

Do-Nothing Boards of Directors

Another post by the progressive Yglesias on Democratic super-diplomat Richard Holbrooke and the financial rot within the Democratic Party:

From the “I Can’t Believe It Took The GOP Oppo Shop Until Just Now to Bring This Up” file, it turns out that from February of 2001 until July of 2008, Richard Holbrooke was on the AIG Board. This has no particular relationship to his work as special envoy to the Afghanistan and Pakistan issues, and I think spokesman Tommy Vietor’s statement that “Mr. Holbrooke had nothing to do with and knew nothing about the bonuses” is quite credible.

But of course it’s a little too credible and points toward the rotten nature of corporate governance in America, as well as the incestuous relationships between our overlapping elites in big-time politics and big-time finance. One assumes Holbrooke had nothing to do with any substantive aspect of AIG’s business—he was just there so AIG could fill the board seat with someone important and unlikely to make any trouble for whatever anyone at the firm was doing.

Ezra Klein says that Holbrook made $800,000 in compensation. For doing what? I don't know whether that's per year or over the entire 7 years. In any case, it's mind-boggling.

On Saving Financial Institutions

Some thoughts by blogger Matthew Yglesias:

I think this hits upon a critical ambiguity in the bailout scenario. I, for one, don’t think that “saving” the too-big-to-fail financial institutions is or was among the legitimate purposes of our financial policy. The idea is—or at least ought to be—that we’re trying to prevent them from failing in a way that causes everyone else’s business to go under. When we let Lehman Brothers go down, it’s not as if that was a sad day for Lehman Brothers but everyone else just hummed along fine. It caused problems for everyone who did business with Lehman and problems for everyone whose business was deemed to resemble Lehman, and then lesser problems for everyone who did business with every firm whose business was deemed to resemble Lehman. That turned out to be a wider-than-expected swathe of harm and it brought down a money market fund. That, in turn, threatened the stability of all money market funds, which was threatening the viability of all kinds of companies’ ability to smooth cash flow and make payroll.

Post-Lehman, a determination was made not to have that happen again. Which meant preventing firms from going under. But it doesn’t mean “saving” Bank of America or Citi or AIG in the sense that the goal is that fifteen years from now Bank of America is still this giant firm with richly compensated executives. What we need to do is take these firms into receivership of some kind, pay off their obligations, spin off elements that are capable of running profitably as smaller entities, and attempt to resell their “toxic assets” for however much they turn out to be worth when the economy is growing again. That wouldn’t “save” Citi, it would kill Citi while saving people to whom Citi owes money.

But this is a genuine ambiguity running through the system. A substantial swathe of policy elites, starting with Hank Paulson and Ben Bernanke and George Bush and now evidently including Timothy Geithner and Larry Summers and Barack Obama really do seem to think that saving the firms is the key. That the world as it existed in the years 1996 to 2006 represents some kind of ideal of economic activity, and that they job is to put humpty-dumpty back together again. And it’s true that if you’re doing that, seriously curtailing pay at the bailed-out firms is counterproductive. But since that’s not what we ought to be trying to do, I see being counterproductive as a virtue. If you want to get rich quick, don’t go work for a government-subsidized zombie bank. Go start your own business, go work for a well-managed mid-sized bank and help them grow and prosper.

Does He Get It?

Eugene Robinson of the WaPo, a very strong Obama supporter, writes:

Geithner may indeed be the hardest-working man in Washington. But to survive, let alone succeed, he's going to have to make a more convincing case that he's part of the solution and not part of the problem.

A simpler way of asking the Geithner question is: Does he get it?

Does he understand the profound sense of betrayal that so many Americans feel as we learn that the supposed wizards of finance, the Masters of the Universe who shower themselves with unimaginable wealth, were safeguarding our economic well-being with the diligence and sobriety of a drunken high roller at a craps table in Vegas at 4 a.m.? Does he understand that the crisis is not just an economic watershed but a cultural one as well, and that what once was deemed perfectly acceptable behavior on Wall Street is now seen as reprehensible? Does he understand that outside of Lower Manhattan, the definition of a "retention bonus" is being spared from the latest round of layoffs?

The basic strategy for handling the crisis, begun under the Bush administration and continued by Obama, is to hook up a fire hose to the Treasury and shower irresponsible and greedy financial institutions with money until the fire is put out. In political terms, to put it mildly, this is a hard sell. It becomes an impossible sell when Wall Street displays not gratitude but arrogance, reminding us how emotionally satisfying it would be -- if ultimately counterproductive and even disastrous -- to stand back and let the fire burn.

The vast amount of money poured into Wall Street has bought American taxpayers the right to say that business-as-usual practices such as the AIG bonuses are over. Geithner needs to deliver this message. If he can't or won't, Obama should find somebody who can and will.

The Great Unwind

Things continue to unwind politically for Treasury (and therefore for Obama). It is now widespread opinion that it is impossible that Treasury didn't know about the bonuses, and that Treasury is simply doing Wall Street bidding. Watch Arianna Huffington on Morning Joe show here.

I can't tell you how sad this makes me feel. If the country loses trust in the credibility and integrity of this administration, it will become lame duck overnight. And then all hell will break loose, because there will effectively be no leadership.

The Jay Leno Risk

In the NYT:

But overall Mr. Obama, the first sitting president to be a guest on “The Tonight Show,” delivered a familiarly smooth, winning performance in an unfamiliar setting – a fireside chat for the flat screen age.

Presidents have tested the dignity of their office on television in the past, of course, but rarely so early in their tenure.

The Geithner Watch

Chris Cilizza writes in the WaPo:

Republicans continue to grow more bold in their criticism of Geithner. Georgia Sen. Johnny Isakson said that he would resign if he were in Geithner's shoes and Kentucky Sen. Jim Bunning alleged that the treasury secretary "has an incestuous relationship with Wall Street" in an interview on the Fox Business Network.

Even some Democrats -- privately, of course -- are beginning to grumble that Geithner's time may be up. "His position is not sustainable," said one senior Democratic strategist. "It's clear he knew and approved of bonuses that the White House now thoroughly condemns."

Thursday, March 19, 2009

Liddy's a Goldman Sachs' Man Before He Headed AIG

Robert Scheer writes, with pitchfork in hand:

Another pretend innocent in all this is AIG's CEO Edward M. Liddy, famed defender of the $440,000 AIG executive retreat in Monarch Beach, Calif., held on the heels of the taxpayer bailout. His actions now are defended as mistakes made by a well-intentioned outsider who decided to work for a dollar a year after Paulson appointed him head of AIG. That is just garbage.

Liddy was complicit in Goldman Sachs' role in creating this mess. As a director of Goldman Sachs, he was paid $685,770 in 2007 and would have come in for some questioning if the firm had gone down. Liddy even headed its audit committee during the five years before he resigned that seat to take over AIG in September 2008. As for his salary sacrifice, not to worry; in 2005, when he was still CEO of Allstate Insurance, he received $26.7 million in compensation.

What we have here is a rare glimpse into the workings of the billionaires' club, that elite gang of perfectly legal loan sharks who, in only the most egregious cases, will be judged as criminals--Bernard Madoff, former chairman of NASDAQ, comes to mind. These other amoral sharks, who confiscated billions from shareholders and the 401(k) accounts of innocent victims, were rewarded handsomely, rarely needing to break the laws their lobbyists had purchased.

Not Patient Or Generous

Andrew Sullivan is willing to give Treasury Secretary Geithner more time before judging his performance.

Call me a shill if you want, but after a couple of months, I'm prepared to give the guy a chance.

I guess I'm not so generous nor so patient. But then again, I saw the disaster coming years ago, and Sullivan, like Geithner, totally ignored it.