Tuesday, March 24, 2009

More on the Banking Plan

Apparently Joseph Stiglitz likes the Geithner plan even less than I do.
U.S. Treasury Secretary Timothy Geithner's plan to wipe up to US$1 trillion in bad debt off banks' balance sheets, unveiled on Monday, offered "perverse incentives", Stiglitz said.

The U.S. government is basically using the taxpayer to guarantee against downside risk on the value of these assets, while giving the upside, or potential profits, to private investors, he said.

"Quite frankly, this amounts to robbery of the American people. I don't think it's going to work because I think there'll be a lot of anger about putting the losses so much on the shoulder of the American taxpayer."

Those of us familiar with Stiglitz's characteristic understatement shouldn't be too surprised by the tone of the critique.

Ehud Barak Leads Labor Off a Cliff

Israeli Labour leader Ehud Barak has agreed to be part of the nationalist coalition in Israel, headed by right-winger Benjamin Netanyahu, and gotten labor to go along with it. I've never been much of a fan of Ehud Barak, but even so the sheer stupidity and opportunism takes my breath away. The fact that the rest of the labor party voted to go along with the choice tells me everything I need to know about the state of the labor party in Israel. The fact that Tzipi Lvini, head of Kadima, which is to labors right, refused to be moderate cover to the far-right government of Netanyahu and the neo-fascistic Avigdor Lieberman shows this decision to be all the more craven.
I can't understand why Barak's party would go along with this. It's good for him in the short-run, in that he can play a (minor) cabinet role, but it's suicide for his party. This gains no votes: anyone who likes the nationalists is not going to vote for labor simply for being a lackey of thses parties. It will lose plenty of votes though. What progressive in his or her right mind would vote for such craven party. What constituency does that leave labor with? Barak fans?

Sunday, March 22, 2009

AIG and the Geithner Plan

Though I am generally happy with the Obama teams progressive priorities, especially as spelled out in the recent budget (which now looks imperiled by deficit predictions caused by the downturn an congressional opposition, but that's another matter). I am increasingly unhappy with the Obama administration's handling of the financial crisis. I can't help agree with Paul Krugman's comments on the results of the AIG bonuses as well as the Geithner Plan.
I’ll leave to others the question of who knew or should have known that the bonus firestorm was coming; but it’s part of a pattern. At every stage, Geithner et al have made it clear that they still have faith in the people who created the financial crisis — that they believe that all we have is a liquidity crisis that can be undone with a bit of financial engineering, that “governments do a bad job of running banks” (as opposed, presumably, to the wonderful job the private bankers have done), that financial bailouts and guarantees should come with no strings attached.

This was bad analysis, bad policy, and terrible politics.

The AIG bonuses are not a big deal themselves, but are rather symbolic of the non-accountability of the bailout plan. In a column complaining about the outrage over the bonuses, Michael Lewis begins:
Last September, the U.S. government began to dole out the first of $173 billion to American International Group. A big chunk of it passed right through to banks that had bought insurance from AIG against mortgage and corporate defaults -- foreign banks such as Deutsche Bank and Societe Generale but also some domestic ones, such as Goldman Sachs and Bank of America.

U.S. government officials then went to great lengths to disguise from the public exactly what they had done, and why, going so far as to declare the ultimate list of recipients of taxpayer funds off limits to the taxpayer. To its immense credit, the media -- or, rather, a handful of diligent reporters, the New York Times’ Gretchen Morgenson chief among them -- prevented the public officials from getting their way.

This incredible act triggered hardly any political backlash. In effect, the U.S. taxpayer had paid off AIG’s gambling debts. The end recipient of the money was not AIG, but Goldman Sachs, Deutsche Bank and the others.

This is a good point. The problem isn't the bonuses themselves, it was the way the bailout was structured that allowed things like the bonuses to occur. Lewis is wrong though, to claim that there was no populist backlash at the time, I remember the backlash occurring. However, push was so strong at the time to do something about the crisis populist wouldn't truly coalesce until later.
The Obama administration isn't at fault for the Paulson plan, it was the Bush administration and congress that wrote it (the original plan was worse than the plan after congress rewrote it), but the Obama administration seems to be just fine with the plan, and Timothy Geithner worked with Paulson on the AIG bailout. The approach of the current administration is disappointing and represents little change from the approach of the previous administration.

Tuesday, March 17, 2009

Those AIG Bonuses

An outrage has been kicked off over the $165 million in bonuses awarded to executives in AIG. The commentariat seem as outraged as anyone else.
AIG is arguing that they are legally obligated to pay there executives. Basically, say AIG executives, we didn't want to pay ourselves million dollar bonuses, but we are legally forced to do so. I am not familiar with these legal arguments, but this does strike me as a little suspect: if the government had not floated AIG to the tune of $170 billion, those executives would be getting jack (Robert Reich makes similar arguments about the matter here).
Worse, AIG argues that it needs to retain "talent". Before the crisis, people might even have bought into this sort of argument. Today, this is laughable , especially since this will be going to the architects of the "credit default swaps", what Warren Buffett labeled "financial instruments of mass destruction". These helped stick us in the hole we're in, and now we're rewarding the people who did it.
Obama expressed outrage, as far as he could with his cool style. Supposedly Timothy
Geitner had asked that the bonuses not be paid, but AIG went ahead and paid them anyway. It remains to be seen whether this is genuine, or mere political posturing in the face of popular outrage.
Tyler Cowen argues that this is a good reason not to nationalize the banks because that would "politicize" decisions like this (as if the money we paid to float AIG and the other banks hasn't already politicized this matter). To me, it demonstrates the opposite. If we need to bail-out the banks, but wish to mitigate the moral hazard problem of giving money to those who made this disaster (not to mention the gross unfairness of this) temporary nationalization seems the best option.

Friday, March 13, 2009

Michael Steele Countdown Clock

Yes, Michael Steele stepped in it again, this time over abortion. Steele said both that abortion is an "individual choice" and best left to the states (facepalm). He retracted the comment. Mike Huckabe called the comment as "a violation of the most basic of human rights." Steele also described being gay as not a choice. This is all obvious to me, but in the Republican party, you can't say these things.
This post points out, the shortest serving RNC chair in history is C. Wesley Roberts (his son is Pat Roberts, who is still in the US Senate). Roberts was removed as chair after four months for corruption. I'm not sure that Steele can make it that far.
Steele's likely replacement is Katon Dawson, practically a crypto-segregationist. I'm sure that will be an even bigger disaster.

Wednesday, March 11, 2009

Cramer vs. Stewart

There have been larger spats: Jefferson vs. Adams, Stalin vs Trotsky etc. Still, I'm definitely loving the fight between Jon Stewart and unhinged Mad Money host Jim Cramer. On thursday, I will be watching with baited breath as Cramer appears on the Daily Show. The story thus far:
It started when Rick Santelli called underwater homeowners losers, Jon Stewart responded by lampooning Santelli's CSNBC. Santelli had just wussed out of an interview on the Daily Show, perhaps having some inkling of the treatment he was in for. Here's the original the made such a stir.

Jim Cramer responded to this segment saying he was taken out of context:
Take Frank Rich and Jon Stewart. Both seize on the urban legend that I recommended Bear Stearns the week before it collapsed, even though I was saying that I thought it could be worthless as soon as the following week. I did tell an emailer that his deposit in his account at Bear Stearns was safe, but through a clever sound bite, Stewart, and subsequently Rich -- neither of whom have bothered to listen to the context of the pulled quote -- pass off the notion of account safety as an out-and-out buy recommendation. The absurdity astounds me.

The Daily Show then issued a faux-apology
The Daily Show then issued a faux-apology
Jim Cramer made the rounds, criticizing Stewart, soliciting yet another response from Stewart.
That's where we stand today. As I mentioned, Jim Cramer is going on the Daily Show... big mistake, there's an outside chance that Stewart will roll-over, but if not, Cramer will not look good.

Monday, March 9, 2009

Chait Review Shlaes

A little while back I saw Amity Shlaes on Jon Stewart, and found her performance so mediocre as to be borderline embarrassing. For example, she repeated the right-wing trope that puts Fanny Mae, Freddy Mac at the center of the crisis, although she quickly backed off as soon as Stewart challenged her on it.
I had no idea, though, the stature her book was taking in right-wing circles. Jonathan Chait has a great critique of the book in the New Republic.

Saturday, March 7, 2009

The Catholic Church's "Morality"

A 9 year-old is raped in Brazil, and the Catholic Church in that country is outraged... about the abortion. Outrage is completely called for, but one must be a moral cretin to not see that one should be outraged about the rape of the girl. The church ignores this, but is up in arms over the abortion.
One thing the article points out that I didn't know is that abortion is illegal in Brazil except in cases of rape or when the mother's life is in danger.
The big story to follow with the Catholic Church is the way Benedict is trying to transform the institution. From an article on the subject in the New Yorker.
It is well known that Benedict wants to transform the Church of Rome, which is not to say that he wants to make it more responsive to the realities of modern life as it is lived by Catholic women in the West, or by Catholic homosexuals, or even by the millions of desperately poor Catholic families in the Third World who are still waiting for some merciful dispensation on the use of contraception. He wants to purify the Church, to make it more definitively Christian, more observant, obedient, and disciplined—you could say more like the way he sees Islam. And never mind that he doesn’t seem to like much about Islam, or that he has doubts about Islam’s direction. (His doubts are not unusual in today’s world; many Muslims have them.) The Pope is a theologian—the first prominent theologian to sit on Peter’s throne since the eighteenth century. He views the world through a strictly theological frame, and his judgments about Islam, however defiant or reductive they sometimes sound, have finally to do with the idea of Theos—God—as he understands it. Those judgments have not changed much, in character, since he left Germany for the Vatican, twenty-six years ago.

The direction he is taking the church was made clear recently (as if it wasn't already obvious) when he de-excommunicated extremist priest (I previously mentioned this in this post) including two who denied the Holocaust. He's clearly acting to shore up the far-rightwing of of the Catholic Church.
All this shows how little the Church has changed over the last thousand years, as if we needed more proof after their horrific handling of the pedophile priests.

Wednesday, March 4, 2009

How Long Can Michael Steele Last?

In my previous post, I noted Michael Steele's craven apology to Rush Limbaugh. This brings me to another question: how long can Michael Steele last as RNC Chair? U.S. News:
"If his implosion continues, RNC members are likely to call a special session to dump him for an effective chairman. There is not much patience for failure."

Besides the Limbaugh flap, there's possible corruption and Steele's incessant embarrassment of the GOP trying to sound gangsta (Democrats want the stimulus package for "bling bling"). I can't say for sure, but I think Michael Steele is too big a moron, even for the Republican party.

Operation Hog Bait

It should come as no surprise when Rahm Emmanuel brilliantly characterizes Rush Limbaugh as "the voice, energy and intellect of the GOP".
The Politico details the Democrat's plan to make Rush the face of the GOP.
The strategy took shape after Democratic strategists Stanley Greenberg and James Carville included Limbaugh’s name in an October poll and learned their longtime tormentor was deeply unpopular with many Americans, especially younger voters. Then the conservative talk-radio host emerged as an unapologetic critic of Barack Obama shortly before his inauguration, when even many Republicans were showering him with praise.

Soon it clicked: Democrats realized they could roll out a new GOP bogeyman for the post-Bush era by turning to an old one in Limbaugh, a polarizing figure since he rose to prominence in the 1990s.

Just how low are Limbaugh's numbers? Pretty damn low.
Paul Begala, a close friend of Carville, Greenberg and White House Chief of Staff Rahm Emanuel, said they found Limbaugh’s overall ratings were even lower than the Rev. Jeremiah Wright, Obama’s controversial former pastor, and William Ayers, the domestic terrorist and Chicago resident who Republicans sought to tie to Obama during the campaign.

Then came what Begala called “the tripwire.”

“I hope he fails,” Limbaugh said of Obama on his show four days before the president was sworn in. It was a time when Obama’s approval ratings were soaring, but more than that, polls showed even people who didn’t vote for him badly wanted him to succeed, coming to office at a time of economic meltdown.

The best part of this strategy is Rush keeps playing directly into their hands, and the congressional Republicans have been caught in the middle. As the strategy has continued more and more congressional Republicans (and the pathetic RNC head Michael Steele) have tried to break with Limbaugh, only to issue abject apologies (see here, here and here).