Chaos and Opportunity

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Seems to me the outrage over the AIG bonuses presents an opportunity. If the feds are ever going to nationalize failing financial institutions, now would be the time to do it. The public will understand.

Unfortunately, what this episode shows us is that the Obama Administration is being much too cautious — or much too something — in dealing with the financial crisis. Let us not be weenies, Mr. President. Although the President may be, as Glenn says, “sounding the right note,” talk ain’t gonna cut it.

See also the Talking Dog and Balkinization.

Editorial Pencil Alert

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Before it scrolls into oblivion, be sure to read Fareed Zakaria’s latest column at Newsweek. Then notice the slight editorial change made in the same column at the Washington Post.

Newsweek version (emphasis added):

Two weeks into Obama’s term, Charles Krauthammer lumped together a bunch of Russian declarations and actions—many of them long in the making—and decided that they were all “brazen provocations” that Obama had failed to counter. Obama’s “supine diplomacy,” Krauthammer thundered, was setting off a chain of catastrophes across the globe. The Pakistani government, for example, had obviously sensed weakness in Washington and “capitulated to the Taliban” in the Swat Valley. Somehow Krauthammer missed the many deals that Pakistan struck over the last three years—during Bush’s reign—with the Taliban, deals that were more hastily put together, on worse terms, with poorer results.

Many normally intelligent commentators have joined in the worrying.

WaPo version:

Two weeks into Obama’s term, Charles Krauthammer lumped together a bunch of Russian declarations and actions — many of them long in the making — and decided that they were all “brazen … provocations” that Obama had failed to counter. Obama’s “supine” diplomacy, Krauthammer thundered, was setting off a chain of catastrophes across the globe. The Pakistani government, for example, had obviously sensed weakness in Washington and “capitulated to the Taliban” in the Swat Valley. Somehow Krauthammer missed the many deals that Pakistan struck with the Taliban over the past three years — during Bush’s reign — deals that were more hastily put together, on worse terms, with poorer results.

Even liberal and centrist commentators have joined in the worrying.

I guess at WaPo one is not permitted to imply that Krauthammer is an idiot.

Nothing’s Too Big to Fail

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AIG execs don’t want to talk about the bonuses they continue to pay themselves, but they did release a list of the banks and financial institutions that received federal bailout money through AIG. This is, I assume, their way of saying they are putting most of the money to good use.

Still, what about those bonuses? Robert Reich said,

Had AIG gone into chapter 11 bankruptcy or been liquidated, as it would have without government aid, no bonuses would ever be paid; indeed, AIG’s executives would have long ago been on the street. And any mention of the word “talent” in the same sentence as “AIG” or “credit default swaps” would be laughable if it laughing weren’t already so expensive.

More significantly,

Apart from AIG’s sophistry is a much larger point. This sordid story of government helplessness in the face of massive taxpayer commitments illustrates better than anything to date why the government should take over any institution that’s “too big to fail” and which has cost taxpayers dearly. Such institutions are no longer within the capitalist system because they are no longer accountable to the market. So to whom should they be accountable? When taxpayers have put up, and essentially own, a large portion of their assets, AIG and other behemoths should be accountable to taxpayers. When our very own Secretary of the Treasury cannot make stick his decision that AIG’s bonuses should not be paid, only one conclusion can be drawn: AIG is accountable to no one. Our democracy is seriously broken.

Put another way, AIG already has failed. The question in front of us is not whether AIG should be “allowed” to fail, but what role government should play in softening the broad economic fallout of the failure. It’s not about rescuing AIG, but about rescuing everybody else. It may be that propping up AIG somehow is a sensible move, but the execs who took it into failure need either to be removed or made to understand that they are no longer in charge, and everything they do is now open to public scrutiny.

There is talk of a “bailout backlash.” Showing the AIG execs the door would be a hugely popular move right now, I think, and would reassure the public — well, that part of the public that thinks, as opposed to the brainless part — that the Obama Administration isn’t just throwing good money after bad.

Paul Krugman has some interesting comments about the financial crisis in Europe. In a nutshell, Europe is facing the same financial meltdown, but it’s doing even less than we are to deal with it.

Europe’s economic and monetary integration has run too far ahead of its political institutions. The economies of Europe’s many nations are almost as tightly linked as the economies of America’s many states — and most of Europe shares a common currency. But unlike America, Europe doesn’t have the kind of continentwide institutions needed to deal with a continentwide crisis.

This is a major reason for the lack of fiscal action: there’s no government in a position to take responsibility for the European economy as a whole. What Europe has, instead, are national governments, each of which is reluctant to run up large debts to finance a stimulus that will convey many if not most of its benefits to voters in other countries.

Strictly speaking, Europe is not a confederacy, but in some ways it acts like one. Confederacies of sovereign states have a long track record of quickly crumbling apart. Sometimes “big government” is a big advantage.

Update: Josh Marshall writes,

What’s really driving this forward — and what makes it such a dangerous moment for the White House — is the jarring image of the administration’s impotence.

Secretary Geithner found out about the bonuses. He told AIG CEO Edward Liddy it wouldn’t fly. And Liddy, in a curiously imperial letter, tells Geithner that much as he is pained by the situation — to blow it out his ass. Which he apparently proceeded to do.

I think the Obama Administration needs to take this situation in hand before public support for the President’s economic policies melts away.

How to Be an Expert

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Yesterday the blogosphere was buzzing about the Jon Stewart-Jim Cramer smackdown (if you missed it, see James Fallows). Via Memeorandum I found this article called “How much money would taking Jim Cramer’s advice have cost you?” The title pretty much tells the story.

Even when times were good CNBC and other “money” channels depressed me, so I’m far from a regular viewer, and I’ve seen only occasional blips of Cramer. But yesterday I wondered, “where does this guy come from?” I checked out his bio, and he did in fact make a lot of money as a hedge fund manager. He also has some background as a reporter. But his hedge fund success, I noticed, came during the late 1990s. You didn’t have to be a genius to make money in the late 1990s.

I put Cramer in the category of “unexpert expert.” These are people who somehow gained reputations in something and are considered experts, but if you check out their backgrounds, and what “wisdom” they actually offer, there’s nothing there. Most political “pundits” are unexpert experts, of course.

The prototype of the unexpert expert is William Bennett, who is considered an “expert” on morality in spite of his gambling addiction and the fact that his ideas about morality never advanced beyond Sister Gertrude’s third grade class at Our Lady of Perpetual Chagrin. All you need to be an expert is (1) your own certitude that you are one; and (2) an ability to project an aura of knowing what you are talking about (see Dick the Dick Cheney). Actual expertise is, of course, not necessary.

Infinite Debt

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harpercoverIf you’re anywhere near a newsstand this weekend, look for the April issue of Harper‘s. I scanned in a photo of the cover. There’s an article in it by Thomas Geoghegan called “Infinite Debt” that’s a must read. As in must. read.

It’s a long and complex article, but Geoghegan makes a case that the financial sector has been sucking the life out of the economy. There’s a huge imbalance between finance and industry. Money has been going into financial instruments, not manufacturing. Consumer debt plays a part in this mess also.

Here’s a snip:

What is history, really, but a turf war between manufacturing, labor and the banks? In the United States, we shrank manufacturing. We got rid of labor. Now it’s just the banks.

Which is why the middle class is shrinking. Basically, we’re all waiters now; we’re bowing and scraping and working for the banks. Look closely at any American, and it’s even odds that he or she, directly or indirectly, is somehow employed by the “financial services sector,” which covers insurance and real estate and financial instruments of any kind. As brokers, lawyers, loan collectors, loan consolidators, secretaries at big investment firms, chauffeurs of private limousines, or even the high-tech types who exist solely to service banks — all of us, millions of us, are part of it, living off it in some way, as three generations ago we lived off manufacturers.

When the Music Stopped

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There are those rare moments in the flow of daily life, about as rare as a solar eclipse, when history does a quiet, tectonic shift, and the ordinary landscape suddenly looks irrevocably dated, in an unannounced, unnerving way. Mark Morford – at the San Francisco Chronicle (give yourself a treat and subscribe to his feed) – writes what it was like during a recent trip to Lowes:

…One fine and sunny Saturday just recently, I visited a sparkly new Lowe’s home-improvement megastore to spec out a replacement oven for my apartment, an experience I was dreading not merely because it was the last place I wanted to spend a pristine Saturday, but because on weekends those places tend to be crammed and torturous and teeming, and such crowds generally give me hives.

I needn’t have worried.

It was like walking into a private game reserve, or some sort of museum of the long-lost American dream, a spectacle not unlike being the last person on the planet. The huge doors swooshed open, and I was greeted with the eeriest scene imaginable, aisle after aisle of shiny new roto tillers and chainsaws and barbeques, lawn furniture and rolls of sod and lighting fixture and every exotic gorgeous manly power tool imaginable.

And not a single human in sight.

Check that: a handful of humans milled about, but most were sales clerks looking equal parts bored, lonely, confused. The few actual customers I finally noticed were barely visible at all, swallowed up by the gleaming mountains of unsold goods, like a few tiny ants in a farm designed to hold ten thousand.

It was, in a word, disquieting. It was, in six more, strange and dreamlike and unexpectedly sad.

I had the same experience a few weeks ago – of walking into a big home improvement store, with mountains of shiny, pristine merchandise on shelves stocked to the gills, aisles and aisles of it, and no customers in sight. A few days ago, I visited a gigantic Whole Foods Market – which had plenty of customers – but I couldn’t help but wonder whether the moment has passed for ever-bigger retail stores. This store seemed as big as a football field, with who knows how many tens of thousands of square feet. How they could possibly run it at a profit baffled me. At the checkout, high end boho lifestyle magazines with names like "Simplify" called out, but they too, seemed to be published from an earlier age when there was such a thing as "discretionary income".

I felt like getting a camera and taking pictures of the inside of Lowes and Whole Foods to show my grandkids, what the full-blown consumer lifestyle was like, in all its glory, back in America, before the crash.

O noez!! Scandal!

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So the headline on Ben Smith’s blog at The Politico says the FBI has raided the office of an Obama appointee. Two people were arrested on bribery charges. Rightie response: Christmas just came early.

But, wait … the office was not the Obama appointee’s office, but his former office.

The office was that of the chief technology officer for Washington, DC. An Obama appointee, Vivek Kundra, served in that position until February 4. After February 4, I assume, he vacated the office. Or, according to other stories, Kundra resigned just last week, after he was hired by the Obama Administration to be the Federal Chief Information Officer. I assume eventually the time discrepancy will be straightened out.

Today, FBI agents raided the Washington technology office, hereafter called the WTO, and arrested one employee and one private contractor. The employee, Yusuf Acar, is an information systems security officer in the D.C. government.

As far as anyone knows at this time, Vivek Kundra is not part of the investigation. We may learn otherwise in the future. Or, we may learn that Kundra was a whistle blower who led the FBI to the criminals. Or that he didn’t know anything about it. Whatever. In right-wing lore, Kundra will forevermore be a corrupt bribe-taker.

Health Care Scare

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Ezra Klein talks about “zombie lies that will not die.” He links to a ridiculous Bloomberg article by Amity Shlaes, who raises the dreadful specter of “government-run health care,” which I assume is a system in which heartless government bureaucrats decide what medical treatments you will receive. This would be a huge departure from our current system, in which heartless insurance company employees decide what medical treatments you will receive.

Shlaes writes,

The administration seems almost to relish the sinister aspect of government-run health care. Otherwise it wouldn’t have created a position called “National Coordinator of Health Information Technology.” That’s a title worthy of Rhineheart, Neo’s boss, who tells him, “This company is one of the top software companies in the world because every single employee understands that they are part of a whole.”

Ezra writes,

This idea that the stimulus bill “created a position” called “National Coordinator of Health Information Technology” got its start in another Bloomberg column written by Betsy McCaughey. She called the National Coordinator of Health Information Technology a “new bureaucracy.”

But this just isn’t true. It’s not sort of true or arguably true or caught in arguments about the nature of truth. George W. Bush created the position of National Coordinator of Health Information Technology in 2004. Five years ago. The current director of the office is a Bush appointee by the name of Robert Kolodner. He has served there since 2006. He exists. If you prick him, he will bleed. If you touch him, he will recoil, because he is subject to our laws of space and time and as such was not somehow created by President Obama back when George W. Bush occupied the Oval Office.

What passes for “opinion” in wingnut world comes from the Pan’s Labyrinth dreamworld they live in. Don’t even try to make sense of it.

Elsewhere in Bloomberg News, John F. Wasik writes a nice piece about single-payer.

In a “Medicare-for-all” program, care would be publicly financed and privately delivered. You would keep your own health- care providers and hospital. The government wouldn’t dictate who your doctor is or choose your hospital. It would be acting more like a huge purchaser bargaining for the best treatment and drugs at the lowest price. …

…There would be a national market and regulation for health policies and no one could be denied affordable coverage. No more “cherry-picking” of only the healthiest people and rejection of the sickest or those with chronic conditions.

Wow, think of that.

Of course, even if their ideas are absurd, the fact that the Right is proposing changes means that we’ve progressed from the position they held as recently as the 1990s, and probably into the 2000s, which was that the health care system we have is just fine the way it is, and if it ain’t broke, don’t fix it. I believe George H.W. Bush used those very words in his re-election campaign against Bill Clinton.

With wingnuts, things have to get this bad before they acknowledge there’s a problem. On the other hand, they are grand at making up phantom problems (e.g., Saddam Hussein is going to nuke us) and flogging them ceaselessly. But real problems are uninteresting to them.

In other words, they get worked up over imaginary monsters under the bed and don’t notice the roof is coming off the house.

That’s why Tom Friedman shouldn’t be surprised. He writes today about the financial crisis:

Friends, this is not a test. Economically, this is the big one. This is August 1914. This is the morning after Pearl Harbor. This is 9/12. …

… Yet I read that we’re actually holding up dozens of key appointments at the Treasury Department because we are worried whether someone paid Social Security taxes on a nanny hired 20 years ago at $5 an hour. That’s insane. It’s as if our financial house is burning down but we won’t let the Fire Department open the hydrant until it assures us that there isn’t too much chlorine in the water. Hello?

See also Paul Krugman, “Can America Be Saved?”