Tag Archives: Financial Crisis

Blinking on Banks

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Paul Krugman argues that the Obama Administration should just nationalize the banks and be done with it.

The real question is why the Obama administration keeps coming up with proposals that sound like possible alternatives to nationalization, but turn out to involve huge handouts to bank stockholders.

For example, the administration initially floated the idea of offering banks guarantees against losses on troubled assets. This would have been a great deal for bank stockholders, not so much for the rest of us: heads they win, tails taxpayers lose.

Now the administration is talking about a “public-private partnership” to buy troubled assets from the banks, with the government lending money to private investors for that purpose. This would offer investors a one-way bet: if the assets rise in price, investors win; if they fall substantially, investors walk away and leave the government holding the bag. Again, heads they win, tails we lose.

Why not just go ahead and nationalize? Remember, the longer we live with zombie banks, the harder it will be to end the economic crisis.

I have to agree with Professor Krugman on this one. Prairie Weather says Obama is listening to too many former Wall Street and financial industry guys right now, and he’s probably right.

Choosing Sides

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Louisiana Governor Bobby Jindal has chosen to refuse $90 million of federal dollars that would have benefited his state’s unemployed citizens. His reason for this is that the state would have been required to change its own laws and expand unemployment eligibility. The federal money would fund the expansion for only three years, after which time the state would have to tax businesses to make up the slack. Therefore, accepting the $90 million would hurt business.

Of course, there is no earthly reason why Louisiana couldn’t plan on phasing out the expansion once the federal money ran out. We’re in an emergency mode, after all. And one would think that putting a little extra money into the pockets of Louisiana residents would be, you know, good for business. People who understand these matters better than I do say that unemployment benefits are a particularly effective stimulus, because nearly every penny is spent:

Temporary increases in unemployment insurance (UI) benefits are particularly effective as stimulus: the benefits go to workers who have lost their jobs, so the added income is likely to be spent quickly. As CBO director Orszag recently told the House Budget Committee, “research has shown that the unemployment insurance system is among the most effective dollar-for-dollar economic stabilizers that we have in terms of counterbalancing periods of economic weakness.”

Already Louisiana is a state that receives more in federal tax dollars than it pays. According to the Tax Foundation, in 2005 for every dollar paid in federal income taxes, Louisiana got $1.30 back. Louisiana got $1.37 back in 2004, so don’t blame Katrina.

Governor Jindal, however, has chosen sides. He is being hailed as a hero by the wingnuts, who are calling the federal dollars a “bribe” and the stipulations attached to it “unconstitutional.”

On the other hand, California Governor Arnold Schwarzenegger just signed into law a $12.5 billion tax increase. Michael Finnegan writes for the Los Angeles Times,

With that, the Republican governor broke one of the few bonds left between his shrunken party and California’s mainstream voters, marring its hard-won image as a guardian against higher taxes.

Actually, California has a hard-won image of a state that lacks the sense to come in out of the rain, or back away from a mudslide, or whatever.

To be sure, none of the GOP lawmakers who demanded that the state close its $42-billion shortfall without raising taxes detailed the doomsday cuts that approach would entail, nor did the activists who lobbied against the tax increases. If the state had laid off its entire workforce of 238,000 — every prison guard, firefighter and clerk — it still would have fallen billions shy of a balanced budget.

I bet no one in the GOP still is talking about a constitutional amendment that would allow Ahnold to be president.

Anyway, these two governors have chosen their sides. Gov. Jindal chose to stay on the sinking ship that is the GOP. Gov. Schwarzenegger, whatever his many faults, at least is smart enough to know when it’s time to grab a lifeboat.

Update: From Liberal Journal —

Keeping money out of the hands of the unemployed during a severe recession is just the kind of stunt that could vault him to the top of the Republican Presidential primary field in 2012. And with potential competition from the mighty Sarah Palin, BJ can’t leave anything to chance.

Exactly.

Who’s the Idiot?

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David Brooks’s column today is titled “Money for Idiots.” Naturally I assumed it must be about a bailout for pundits. But no; the “idiots” are people who are behind on their mortgage payments. And here’s yet another unexpected twist — after berating the idiots for being idiots, Brooks grudgingly admits that we have to help them, anyway, for the sake of the economy.

The nation’s economy is not just the sum of its individuals. It is an interwoven context that we all share. To stabilize that communal landscape, sometimes you have to shower money upon those who have been foolish or self-indulgent. The greedy idiots may be greedy idiots, but they are our countrymen. And at some level, we’re all in this together. If their lives don’t stabilize, then our lives don’t stabilize.

Well, yes, that really is the bottom line. Talk of whether any individual “deserves” help is beside the point. Letting so many people fail amounts to a national economic murder-suicide pact.

I haven’t had time to digest the details in the save-the-homeowners plan. Edward L. Glaeser, an economics professor at Harvard, provides a brief critique that mostly approves of it.

The Right, of course, is opposed to the Obama plan. They don’t have a plan of their own other than to do nothing, but they don’t like Obama’s plan one bit. Their reasons for disagreement range from the stupid to the stupid and clueless to the stupid and clueless plus hallucinatory.

See also: Ryan Chittum, “CNBC Editor: The People Are Revolting!“

Sick of It

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Adventures in the land of the Best Health-Care System in the Worldâ„¢:

They borrow leftover prescription drugs from friends, attempt to self-diagnose ailments online, stretch their diabetes and asthma medicines for as long as possible and set their own broken bones. When emergencies strike, they rarely can afford the bills that follow.

The article is about how you get health care if you’re a 20-something living and working in New York City. However, I suspect this is true of vast numbers of 20-somethings throughout America. And I want to emphasize that we’re talking about children of the middle class. I’m not saying children from lower-class families don’t deserve health care as much. The point is that if this were a coal mine, the canary would be decomposed to a pile of bones and feathers by now.

Of course, some healthy young people who are eligible to get health benefits from employers choose not to do so because they are foolish. But many more, I think, either don’t get health benefits from their jobs or honestly cannot afford what they’d have to pay to join their company group insurance plan.

Today, the same people on the Right who fought S-CHIP expansion tooth and nail suddenly care about young people, although not about their health. Little Lulu and some of the other hysterical shriekers are pushing “porkulus” protests against the stimulus package. Lulu’s got photos of children and youths holding signs saying “I don’t want to pay for the ‘swindle-us’ package” and “Say no to generational theft.” But when Moveon produced videos like the one, for some reason the Right was not moved.

But as Steve M says, if the Right wants to waste its time with tactics that didn’t work for the Left, who am I to complain?

How Conservatism Is Destroying America

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California is on the brink of financial collapse. Jennifer Steinhauer writes for The New York Times,

The state, nearly out of cash, has laid off scores of workers and put hundreds more on unpaid furloughs. It has stopped paying counties and issuing income tax refunds and halted thousands of infrastructure projects.

This crisis has many causes, but addressing it has been rendered nearly impossible by Republicans in the state legislature who block any form of tax increase. Hilzoy says,

They need three (3) Republican votes in each house. They can’t get them. And this despite the fact that the Republicans who have been negotiating have gotten a lot, including, according to the LATimes, “tax breaks for corporations”.

Really. I am not making this up. With the state budget $41 billion in deficit, Republicans held out for corporate tax cuts, and then aren’t even supporting the resulting bill.

Stopping building projects is costing Californians millions of dollars. Borrowing money to keep the government going is going to cost Californians millions of dollars.

As the stimulus bill becomes law today, we learn that a number of Republican governors are lining up to support it. It may be too little, too late for California. But a number of other states, both red and blue, may be pulled back from the brink of disaster by federal dollars — in no particular order, New York, Virginia, Iowa, Tennessee, Missouri, Ohio, etc. etc. Add your state here.

States are in trouble for a lot of reasons, but an immediate one is the loss of revenue by retailers. City and state budgets are breaking all over America.

Florida Governor Charlie Crist, a Republican, explains,

“It really is a matter of perspective,” Mr. Crist said in an interview. “As a governor, the pragmatism that you have to exercise because of the constitutional obligation to balance your budget is a very compelling pull” generally.

With Florida facing a projected $5 billion shortfall in a $66 billion budget, and social costs rising, the stimulus package “helps plug that hole,” Mr. Crist said, “but it also helps us meet the needs of the people in a very difficult economic time.”

And it appears Americans on the whole are glad Congress came through.

So, who’s not happy? Well, we know, don’t we?

As there weren’t enough Republicans in Washington to provide fodder for the story the New York Times wanted to write – they simply took it on the road to those Republicans Governors who also happen to be the ones most hat in hand when it comes to Federal dollars. Yep, quite a “conservative” bunch this crew. Or so the Times would have one believe. …

… How about if the Feds didn’t suck the money out of states to begin with only to wastefully plow it back in?

If you are wondering how the feds are sucking money out of states, read the comments to the rightie blog post linked above. They’ve noticed that poor New Jersey only gets back 70 percent of what it sends to Congress. Yes, and this is something I’ve written about in the past. The wealthier, more industrialized states (nearly all of which are blue) tend to pay more in taxes than they receive in federal dollars. Poorer, less industrialized states (nearly all of which are red) pay less in federal taxes than they receive in federal dollars.

In other words, for many years blue states have been carrying the load for red states that won’t pay for their own messes.

Now, if the conservatives who run the poor red states want to be real conservatives and stop grabbing money out of the hands of New Jersey taxpayers, I wouldn’t object. Let the freeloaders in Mississippi pay their own bleeping taxes, heh?

Of course, in the real world what would happen is that there would be a belt of states sunken into Third World style poverty by their idiot GOP state government, and this belt would stretch across the southeastern U.S. and reach up to the more rural western states. And in the long run it would hurt the U.S. as a whole more than it would help.

Right-wing economic “theory” is destroying America. It’s doing a bigger job on us that al Qaeda could ever have dreamed.

Let’s Make Sense!

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“Let’s Make Sense!” is the name of a game I’ve just invented. I’m still working on the rules, but the basic idea is to sniff out bits of public discourse that don’t make sense. By this I don’t mean bits I disagree with, or even bits that are not factual (although there are plenty of those, and they are not ruled out). I mean things that are just plain disconnected from standard human cognitive processes.

Tim F. at Balloon Juice found a great example. There’s a provision in the stimulus bill that would cap the pay of financial institution executives.

The provision, inserted by Senate Democrats over the objections of the Obama administration, is aimed at companies that have received financial bailout funds. It would prohibit cash bonuses and almost all other incentive compensation for the five most senior officers and the 20 highest-paid executives at large companies that receive money under the Treasury’s Troubled Asset Relief Program, or TARP.

That makes sense, yes? But here’s an objection coming from an adviser to President Obama:

“These rules will not work,” James F. Reda, an independent compensation consultant, said on Friday. “Any smart executive will (a) pay back TARP money ASAP or (b) get another job.”

As Tim F. says, what’s not to like about either (a) or (b)? If the institution can survive without TARP money, then let it do so. Taxpayers don’t need to be propping up companies that don’t need propping up. On the other hand, if the company is sliding into bankruptcy, why is it such an all-fired tragedy if the CEO quits?

Mr. Reda: Let’s make sense! And Obama Administration, let’s make even more sense and stop listening to Mr. Reda.