Category Archives: economy

Good News/Bad News

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The good news is that yesterday House Republicans rebelled against Dick the Dick.

The vice president traveled to Capitol Hill on Tuesday to silence a chorus of GOP complaints about Treasury Secretary Henry Paulson’s $700 billion plan. But House Republicans who walked into a closed-door meeting with Cheney steaming over the plan walked out just as angry, and they described what happened in between as both “a bloodbath” and “an unmitigated disaster.”

The bad news is that House Republicans are going to play the partisan politics game with the financial crisis.

Republican leaders are now hoping Democrats load the legislation with unrelated measures that would give them the political cover to oppose it, members and aides said. At the same time, party leaders are using back channels in the business community to gauge member support for a “clean” bill.

Former House Speaker Newt Gingrich (R-Ga.) warned his former colleagues that they would pay a price in November for backing the bailout now — and that John McCain could ride to victory over Barack Obama by persuading voters that the bailout is really the “Obama-Bush plan.”

Maybe I haven’t had enough coffee yet, but I find it baffling that some Senate Democrats are waiting to see how McCain votes on the measure before they decide how they will vote. See also Digby.

Back to good news/bad news. The good news is that Obama has a clear lead over McCain in the latest Washington Post-NBC News poll. Much of this lead is coming from white women switching their preference from McCain to Obama. Obama now has a small lead among white women.

The bad news is that media are still going with the “white women don’t like Obama” story.

File this under “weird news.” Michelle Malkin blames illegal immigrants for the financial crisis. The girl belongs in a carnival freak show.

More weird news, although I’m not surprised. Pew Research says 57 percent of the public favors the Wall Street bailout. On the other hand, the latest Bloomberg/Los Angeles Times poll says 55 percent of the public is opposed to the Wall Street bailout.

The Pew poll told respondents that the government is “potentially investing billions to try and keep financial institutions and markets secure” and asked whether that’s the right thing to do. The Bloomberg/Los Angeles Times poll asked whether “the government should use taxpayers’ dollars to rescue ailing private financial firms whose collapse could have adverse effects on the economy and market, or is it not the government’s responsibility to bail out private companies with taxpayers’ dollars?”

I extrapolate from this that about two-thirds of the public doesn’t know what the hell is going on. Anyway, the good news/bad news I see here is that, politically, it doesn’t much matter what Congress does. All that matters is how it’s explained. This opens the door to the possibility that Congress could do the right thing without political penalty. It also opens the door to the possibility that Congress could do the wrong thing without political penalty.

Sort of bad news: The Right thinks the Fannie-Freddie issue can be blamed on Democrats.

The good news is that John McCain’s campaign manager has been on Freddie Mac’s payroll from the end of 2005 until last month.

Bring it on, righties.

Update: The McCain campaign is slamming the New York Times for running the story about the campaign manager’s ties to Freddie Mac. Not true, says Michael Goldfarb. Freddie Mac did pay a monthly retainer of $15,000 to Rick Davis’s firm, Davis Manafort, but Davis himself did not take any of that money.

For the record, the New York Times story published a statement from the McCain campaign saying David is not receiving income from his company. The Times also said, however, that Davis “as a partner and equity-holder continues to benefit from its income.”

Goldfarb is having one major hissy fit and complaining that the New York Times has not published any nasty investigations into whatever nefarious things David Axelrod, Obama’s campaign manager, is into. Press bias!

David Isikoff at Newsweek is biased also, apparently.

See also John Cole.

Dead Skunk in the Middle of the Road

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Emptywheel:

Hidden in an article reporting that Cheney’s going to go hunt up some support for the $700,000,000,000 bailout is this admission that the Bush Administration has been sitting on it for some time:

    Fratto insisted that the plan was not slapped together and had been drawn up as a contingency over previous months and weeks by administration officials. He acknowledged lawmakers were getting only days to peruse it, but he said this should be enough. [my emphasis]

So, for months the Administration has been telling everyone they’ve got the financial situation under control, then all of a sudden Congress has to pass a $700 billion giveaway to the financial sector right now don’t think about it just do it now now now. And Congress is warned that if it doesn’t act now now now and pass this bill as the Administration wrote it with no changes there will be terrible consequences and they would be Congress’s fault. And Congress can’t take any time to read the bill, even though it’s been sitting around in Cheney’s desk drawer for months.

Uh huh.

Is Anyone FOR the Bleeping Bailout?

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There seems to be nearly unanimous disapproval of Paulson’s $700 billion bailout, henceforth called “Plan B.”

The Wall Street Journal reports that “Liberal advocacy groups have mobilized to stop the financial bailout package, just as Bush administration officials are urging lawmakers to act quickly and decisively.” At Salon, Glenn Greenwald documents “Growing right-wing opposition to the Paulson plan.”

Righties opposed to Paulson include Little Lulu, who calls Paulson a “wrong-headed, ChiCom-promoting, liberal Democrat-installing, Gore global warming alarmist” (in keeping with Lulu’s understanding of political science — if she doesn’t like it, it must be liberal) and who wants a return to conservatives principles. Yes, I see the oxymoron, too.

One of Little Lulu’s readers responded to the question, “Will the real fiscal conservatives please stand up?” with “There aren’t any. Phil Gramm retired long ago.” They’re still willfully refusing to see that Phil Gramm and “conservative principles” caused the bloody mess to begin with. Oh, and a lot of Lulu’s readers seem to think illegal aliens are behind this, somehow.

But the point is that, wonder of wonders, the Right and the Left halves of the blogosphere are moving toward the same opinion, which is that Paulson’s plan must be stopped.

I’ve been surfing around for a respectable economist, i.e. one not on the Bush Administration’s or Republican Party’s payroll, who supports the plan. The only favorable comments I find are from last week, before details were announced. Now there is near unanimity among economists and finance experts that Plan B is a bad plan.

So, who’s for Plan B? Via Josh Marshall, the Wall Street Journal (behind firewall) says,

House Republican staffers met with roughly 15 lobbyists Friday afternoon, whose message to lawmakers was clear: Don’t load the legislation up with provisions not directly related to the crisis, or regulatory measures the industry has long opposed.

“We’re opposed to adding provisions that will affect [or] undermine the deal substantively,” said Scott Talbott, senior vice president of government affairs at the Financial Services Roundtable, whose members include the nation’s largest banks, securities firms and insurers.

A deal killer for the group: a proposal that would grant bankruptcy judges new powers to lower the principal, interest rate or both on a mortgage as part of a bankruptcy proceeding.

So, says Josh, “finance industry lobbyists are already giving orders to Republican hill staffers not to allow any meaningful reforms or protections for taxpayers. So, just the money. No strings attached.”

(Don’t tell Lulu about not lowering principal or interest rates on mortgages in bankruptcy, or she might change her mind about the evilness of the Plan. Sticking it to the poor and distressed is what righties live for. It makes them feel superior.)

Some things don’t change —

President Bush this morning warned lawmakers against trying to make too many changes to the proposed financial bailout legislation, but Senate Democrats announced that they would add provisions to the plan that could spur opposition from the administration or congressional Republicans and bog down the measure.

In Bush World, Congress is redundant.

Dan Froomkin:

Does President Bush’s support for a radical financial bailout represent a reversal in his political ideology? Not likely.

For one, it seems to be less a reversal than a recusal. Bush appears ideologically spent, rather than transformed. He has for all intents and purposes become the bystander-in-chief, letting others in his administration do the heavy lifting.

Furthermore, the plan concocted by two Bush appointees features some distinctive characteristics of major Bush initiatives past: It would be spectacularly expensive, primarily benefit the very rich, and grant the executive branch unlimited power with no transparency or accountability.

Explained that way, one would think righties would like it. They supported just about every other plan like that that the Bushies have come up with.

See also Sean-Paul Kelley.

Beyond Meltdown

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Paul Krugman’s column explains Henry Paulson’s $700 billion rescue plan for the U.S. financial system. The title of the column provides a hint of Krugman’s opinion — “Cash for Trash.”

Basically, after having spent a year and a half telling everyone that things were under control, the Bush administration says that the sky is falling, and that to save the world we have to do exactly what it says now now now.

Once again, the Bush Administration and right-wingers in Congress are using a crisis to shift more wealth to the extremely wealthy. “Plan B” will reward the people who got us into this mess with a penalty-free bailout. Taxpayers and America in general will be the poorer for it.

Is there any reason outside avarice and corruption that the feds are pursuing this course? A conservative blogger (whose analysis of the crisis is reasonably sane) says,

Of course the almost hysterical urgency is partially because the locks on the coffers change in January. If Obama wins, so will the tax code. The administration’s preferred version of the bailout would be one last Wall Street giveaway before higher taxes and a tougher regulatory environment.

In other words, if Obama wins they’ll no longer be guarding the henhouse, so they’re making off with as many chickens as they can carry while they still can.

Dems in Congress are making noises about help for homeowners and caps on top executive compensation. Will they once again get railroaded into doing what the administration wants? Sean-Paul Kelley says there is room for hope. Very little room, I say. I don’t see what the Dems could lose by sticking to principles, and there is much they could gain, but we’ve been here too many times before, haven’t we?

Elsewhere: You know we’re approaching the End of Days when Sam Donaldson, George Will and Cokie Roberts trash a Republican and praise a Democrat. WTF? you say. My guess is that this trio lost a whole lot of money this week and realized that if they don’t want to be wiped out entirely they do not want to put John McCain in charge of the economy. “John McCain showed his personality this week,” Will said, “and made some of us fearful.” I know the feeling.

Meanwhile, most of the Right Blogosphere remains oblivious to the details of the financial crisis and the atrocity the feds are about to commit to “fix” it. Rather than concern themselves with understanding the issues, they’ve gone into hyper-blame mode. Clif give us his version of the shorter Right Blogosphere: “[T]he reason for the current financial crisis is that the Community Reinvestment Act passed by the Democrats forced banks to lend money to a bunch of shiftless darkies who couldn’t repay their loans.”

My version of the shorter Right Blogosphere: “The elitist Left is behind this. We hates them. We hates them, precious.”

Nothing much else to do but laugh.

Quote of the Decade, and Other Stuff

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From an article written by John McCain and published in the current issue of the journal of the American Academy of Actuaries:

Opening up the health insurance market to more vigorous nationwide competition, as we have done over the last decade in banking, would provide more choices of innovative products less burdened by the worst excesses of state-based regulation.

I’m starting to look forward to the debates.

At Salon, Joe Conason writes,

Now that we’re all about to take on hundreds of billions or perhaps a trillion dollars in new public debt to redeem the nation’s super-smart corporate financiers, there is one thing I hope we can expect in addition to postponing the apocalypse. Will they all please shut up about the wonders of the unfettered free market and the horrors of big government?

The die-hards will not shut up, of course. I just dropped by Lew Rockwell to see if there were any lights in the attic. Nope. They will all go to their graves believing that free markets solve everything.

Going by Memeorandum, right-wing bloggers aren’t saying much about the financial crisis. Today the leftie blogs are all over it. The top three concerns of rightie blogs are (1) Charlie Rangel said something nasty about Sarah Palin; (2) Sandra Bernhard said something nasty about Sarah Palin (she’s a standup comic, people! that’s what they do); (3) liberals hate God.

Yesterday there was some shrieking from the righties about the bailouts and how taxpayers (i.e., them) are getting soaked. There was not a glimmer of recognition from any of them that they had anything to do with what caused the financial crisis. They sounded like juveniles who had a party that trashed their parents’ house, and now Mom and Dad are telling them they have to clean it up and do without an allowance. Poor babies.

Speaking of Sarah Palin — Kos posts Palin’s favorability trajectory. Enjoy.

Democrats are better for the economy than Republicans. The record is clear. I especially liked …

The Ranking of the Last 13 Presidents by Job Creation (as of 2002)

1) Roosevelt (1933-45): +5.3%

2) Johnson (1963-69): +3.8%

3) Carter (1977-81): +3.1%

4) Truman: (1945-53): +2.5%

5) Kennedy (1961-63): +2.5%

6) Clinton (1993-2001): +2.4%

7) Nixon (1969-75): +2.2%

8) Reagan (1981-89): +2.1%

9) Ford (1975-77): +1.1%

10) Eisenhower (1953-61): +0.9%

11) Bush (1989-93): +0.6%

12) Bush (2001-present): -0.7%

13) Hoover (1929-33): -9.0%

Looks like a pattern to me.

Bogeyman Regulations

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John McCain is calling for a “9/11 Commission”-style probe of the financial crisis to find out what caused it, although he has already decided the blame resides with “the old-boy network and the corruption in Washington.” Meanwhile, his running mate Sarah Palin said “We are going to reform the way Wall Street does business and stop multi-million dollar payouts and golden parachutes to CEOs who break the public trust.”

Although the commission idea has a certain amount of retro charm, I don’t believe the causes of the financial crisis are any big mystery. And the “multi-million dollar payouts and golden parachutes to CEOs who break the public trust” are just a symptom of the disease, not the disease itself.

One factor the wingnuts cannot truthfully blame on the financial mess — which of course doesn’t mean they won’t do it — is excessive government regulation. The nondepository institutions like Lehman Brothers that are collapsing right now got government off their backs several years ago. In fact, that’s when the trouble started.

There’s a good background article by David Lightman at McClatchy Newspapers that explains what happened, and I urge you to read it all. In a nutshell, what happened was the Reagan Revolution and the fantasy that markets and securities can regulate themselves without government oversight.

This isn’t just a problem with “Wall Street.” The entire financial system is breaking down. Further, the rolling disaster we’re seeing now could not have happened had some critical New Deal regulatory programs been left in place. For example, Lightman explains how dismantling the 1933 Glass-Steagall Act led directly to what’s happening on Wall Street.

Lightman also says that President Clinton signed the Glass-Steagall “reform” into law, which is true. But the driving force behind getting rid of Glass-Steagall was then-Senator Phil Gramm, who is now Senator John McCain’s economic adviser and a co-chair of his presidential campaign.

The talk is that if McCain is elected, Gramm would be first in line to be treasury secretary.

The free market true believers remain in denial of what’s actually happening, which tells me they will not learn from experience, and there’s no point pretending they will. Our only recourse is to be sure they aren’t the ones making real policy.

Good Reads:

Sasha Abramsky on McCain’s pathetic attempt to capture the Reagan magic.

“In Candidates, 2 Approaches to Wall Street” reveals McCain’s bottomless hypocrisy.

“On Wall St. as on Main St., a Problem of Denial.” Or, why smart executives make stupid choices.

Economy in Meltdown?

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When Paul Krugman begins a column this way, it does get your attention:

Will the U.S. financial system collapse today, or maybe over the next few days? I don’t think so — but I’m nowhere near certain. You see, Lehman Brothers, a major investment bank, is apparently about to go under. And nobody knows what will happen next.

People with online brokerage accounts probably put their sell orders in last night. This will not be a happy day at the New York Stock Exchange.

At the Agonist, there’s a discussion among some of the smartest people in the blogosphere about what’s happening with financial institutions. I recommend it. The consensus is that we’re unlikely to see a massive 1929-style stock market crash, followed by the second Great Depression. We are more likely to experience a series of dips and recoveries over the next few years, but overall the market will be drifting down, not up.

In any event, Treasury Secretary Henry Paulson and the feds are shoving everything they’ve got under the markets to keep them propped up until after the November elections.

Expect all candidates to be spitting out the word “change” at machine-gun pace today. McCain and Palin will continue to talk about “cleaning up” Washington and, thereby, Wall Street. However, when McCain and Palin talk about “change” and “reform,” they are talking about cleaning up corruption, not changing the system. As I understand it, today’s crisis wasn’t caused primarily by corruption, in the sense of doing something illegal for personal gain. It was caused by the system.

The McCain-Palin campaign (or should that be Palin-McCain?) also opposes the very kind of “propping up” that the feds are doing. They’ve been calling the government takeover of Fannie Mae and Freddie Mac “spending the cookie jar.” The takeover is likely to cost the Treasury $100 billion to $300 billion. $300 billion is roughly equal to three years in Iraq War dollars.

Yes, this is seriously bad, but McCain-Palin are focusing on symptoms, not the disease. They continue to pledge allegiance to deregulation and Reaganomics.

Andrew Leonard writes at Salon:

Over the last three decades Wall Street sought, and received, a climate of deregulation and minimal oversight that allowed it to create new markets at will, permitted investment banks and commercial banks to commingle their activities, and exempted critical new innovative financial products from any meaningful government restraint.

Now, we are staring at the kind of mess you get when you give two-year-olds a few buckets of paint and tell the baby-sitter to take the day off. Clean-up is going to be a bitch.

“Last three decades” = rise of Reaganomics. Thanks so much, Ronnie. Note that the rise of Reaganomics to some extent preceeded Saint Ronald’s ascension to the presidency. To some extent the right-wing “deregulation uber alles” ideology was also promoted by the Carter Administration. Some of the deregulation that Saint Ronald gets “credit” for actually began under Carter. But Reagan accelerated it, big time. There’s some historical background here (scroll down a bit).

Short-term, the challenge to the Obama campaign is to get people to understand that we face a systemic crisis more than a crises of corruption, and that Palin-McCain’s “change” message is not about the kind of change that’s needed. People need to hear, over and over, that Palin-McCain’s economic policy proposals are no different from what George W. Bush has been doing. Long-term, the sad fact is that, thanks to Reaganomics, there will be no money to do much of the good stuff Obama wants to do.

It’s the Stupid (Republican) Economy

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I think somebody ought to have an ad featuring these McCain quotes from a January 2008 debate running 24/7 —

Q: Are Americans better off than they were eight years ago?

A: You could argue that Americans overall are better off, because we have had a pretty good prosperous time, with low unemployment and low inflation and a lot of good things have happened. A lot of jobs have been created. … We need to make the Bush tax cuts permanent, which I voted for twice to do so. … I think we are better off overall if you look at the entire eight-year period, when you look at the millions of jobs that have been created, the improvement in the economy, etc.

This should be juxtaposed with a clip from Dubya’s Tuesday press conference.

He’s not worried.

On a day that saw one economic bombshell after another, President Bush squinted, smirked and grimaced into the future Tuesday, declaring – contrary to a growing mountain of evidence – that the country’s financial system is “basically sound.”

“I’m an optimist,” a sometimes testy Bush said in his first White House news conference since April. “I believe there’s a lot of positive things for our economy.”

Dan Froomkin cites an AP poll that says “by a 2-1 margin, Americans believe McCain would generally continue Bush’s economic policies.”

Harold Meyerson has a must-read column on McCain’s economic policies in today’s WaPo.

… as McCain tries to balance the tattered libertarianism of Reaganomics with the financial exigencies of the moment, he and his campaign have moved beyond inconsistency into utter incoherence. He vows to balance the budget while also cutting corporate taxes and making permanent the Bush tax cuts for the rich — even though the rich and corporations made out like bandits during the Bush “prosperity,” while everyone else’s incomes stagnated. McCain squares this circle by vowing to cut entitlements, a move that would reduce, rather than enhance, consumer purchasing power at a time of economic downturn (or any other time, for that matter).

Whether Americans are even experiencing a downturn has been a matter of some dispute in the McCain camp, since former senator Phil Gramm, until last week one of McCain’s chief surrogates on economic issues, deemed America a nation of “whiners” mistaking subjective insecurity over the economy for an objective economic fact. For McCain, who had the misfortune to be campaigning in Michigan the day that Gramm’s remarks dominated campaign news, Gramm’s insensitivity was appalling. But McCain has never expressed any concern that Gramm wrote the legislation that enabled the $62 trillion credit default swaps market to remain unregulated, which, as David Corn documented in Mother Jones, meant that banks and hedge funds could accumulate liabilities that they could not cover if the markets — most particularly, the subprime mortgage market — went south. To the contrary, McCain has viewed Gramm as one of his economic gurus. “There is no one in America that is more respected on the issue of economics than Senator Phil Gramm,” McCain declared in February. …

…One problem is that McCain himself has no real ideas about how to fix the economy, which leaves his tetherless surrogates free to roam the policy landscape. An even deeper problem is that standard-issue Republican economic policy has run out of plausible mantras. The ritual extolling of markets and denigration of government make no sense at a moment when a conservative Republican administration is rushing to save the markets through governmental intervention.

Or, to use Reagan’s construction: Republican economics is not the solution to our problem; Republican economics is the problem — for our nation, surely, and also for candidate McCain.

Fairy Tales

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E.J. Dionne wrote a column last week in which he said that free-market economic theory has collapsed.

You know the talking points: Regulation is the problem and deregulation is the solution. The distribution of income and wealth doesn’t matter. Providing incentives for the investors of capital to “grow the pie” is the only policy that counts. Free trade produces well-distributed economic growth, and any dissent from this orthodoxy is “protectionism.”

The old script is in rewrite. “We are in a worldwide crisis now because of excessive deregulation,” Rep. Barney Frank (D-Mass.), the chairman of the House Financial Services Committee, said in an interview.

To which I say, ha. Since when does the Right let anything like real-world experience or empirical evidence get in the way of a good fairy tale?

I’ve been watching today to see who’s commenting on the Fannie Mae-Freddie Mac crisis, and it’s mostly been us Leftie bloggers, with a few moderate Right exceptions. The Right is already coming up with creative ways to blame the Left. It’s what they’re good at.

Tantrums

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David Usborne of The Independent reports that a record number of Americans are now on food stamps. Predictably, right-wing bloggers panned the article as an example of liberal media bias.

One can argue that the headline of the article — “The Great Depression” — is over-the-top, since we’re not in an economic depression and our situation is not nearly as dire as the real Great Depression. Yet. Also, the accompanying photo is more than two years old. You can count on righties to pick the headline and photo apart and ignore the article, which presents a sobering picture of economic life in America. If the data presented are true, we should be concerned.

BTW, David Jolly reports for the New York Times:

UBS, the largest Swiss bank, said on Tuesday that it would write down another $19 billion related to “U.S. real estate and related structured credit positions” and said Marcel Ospel, its chairman, would step down.

UBS said the write-down would result in a first-quarter loss of about 12 billion Swiss francs, or $12 billion, and that it would seek new capital of about $15 billion, in the second time it has announced plans to raise new funds since the credit crisis began. The bank’s board proposed that Peter Kurer, currently general counsel for the bank, take over as chairman, pending shareholders’ approval at a meeting on April 23.

The news came as Deutsche Bank, the biggest German lender, said Tuesday that it expected a first-quarter loss of about $3.9 billion on write-downs of United States real estate loans and assets. Global banks have now written down more than $200 billion of soured loans in the market debacle that began last summer with the implosion of the American subprime mortgage market.

On the plus side, Bush’s chief of Housing and Urban Development, Alphonso Jackson, resigned yesterday. Jackson is under investigation for allegedly giving lucrative housing contracts to friends.