Yes, no, maybe, depending on the beholder's politics, economic theories and selective reading of the meager statistics and evidence available.
Vice-President Biden speechified yesterday that, after 200 days, the $787 billion stimulus, although not a “single silver bullet” but “silver buckshot,” was helping the economy. “Without it we’d be in much deeper trouble,” he said, claiming that "Instead of talking about the beginning of a depression, we are talking about the end of a recession."
As unemployment reaches 9.7 percent, Republican Chairman Michael Steele was quick to counter, "The Democrats' rhetoric on their economic experiment doesn't match with the reality of millions of Americans remaining unemployed."
The Washington Post takes the middle ground with a headline, "Stimulus Credited for Lifting Economy, But Worries About Unemployment Persist" and reports that "economists generally agree that the package has played a significant part in stabilizing the economy. They are less certain about the size of the impact."
For those who prefer to make up their own minds, the White House Recovery.gov website offers statistics, maps and graphs to show how much money has gone out the door and where, noting that the Council of Economic Advisers will be issuing its first Quarterly Report next week.
The bottom line on the stimulus is there is no bottom line in sight, but that won't keep the pontificators from exercising their opinions as fact.
In his long takeout "How Did Economists Get It So Wrong?" in this Sunday's New York Times Magazine, Paul Krugman notes about his professional colleagues:
"[Robert] Lucas says the Obama administration’s stimulus plans are 'schlock economics,' and his Chicago colleague John Cochrane says they’re based on discredited 'fairy tales.' In response, Brad DeLong of the University of California, Berkeley, writes of the 'intellectual collapse' of the Chicago School, and I myself have written that comments from Chicago economists are the product of a Dark Age of macroeconomics in which hard-won knowledge has been forgotten."
While economists carry on their academic food fight, the rest of us can just keep watching our taxpayer money flowing out and holding our breaths.
Showing posts with label Paul Krugman. Show all posts
Showing posts with label Paul Krugman. Show all posts
Friday, September 04, 2009
Monday, August 31, 2009
Yes We Can...What?
Team Obama is in full campaign mode, firing off e-mails and organizing events to push ahead for health care reform, but nobody knows exactly where the goal line is.
According to the Washington Post, "President Obama's supporters hope to recapture the energy of last year's triumphant election campaign in a bid to regain control of the health-care debate, planning more than 2,000 house parties, rallies and town hall meetings across the country over the next two weeks."
The trouble with such exertion is that the object is not pulling the lever in a presidential election or urging a simple affirmative Congressional vote but influencing thousands of pages of still-shifting legislation in both Houses.
Yes, we can...what?
In the morass of issues involved, only the public option has come into focus to be distorted by lobbyists and loons into a future of government control and death panels, Big Lies that have to be answered with long and convoluted explanations
The demagoguery level is so high that Paul Krugman today resorts to nostalgia for the Unindicted Co-Conspirator, arguing that "Nixon’s proposal for health care reform looks a lot like Democratic proposals today. In fact, in some ways it was stronger."
On the other side of the ideological divide, George Will asserts, with some justice, that on health care reform "our ubiquitous president became the nation's elevator music, always out and about, heard but not really listened to, like audible wallpaper."
All this puts Obama supporters in the position of rushing around in all directions, trying to contain the flames of opposition in the equivalent of a Chinese fire drill.
As the Right revels in its newfound voice and the Left indicts the President for losing his nerve, health care reform is evolving beyond a crucial political and economic issue.
In many ways, it is becoming a test of how well American democracy can let rational voices be heard in a 21st century Tower of Babel--of whether Obama's new politics has enough power to revive and revitalize the best of the old.
According to the Washington Post, "President Obama's supporters hope to recapture the energy of last year's triumphant election campaign in a bid to regain control of the health-care debate, planning more than 2,000 house parties, rallies and town hall meetings across the country over the next two weeks."
The trouble with such exertion is that the object is not pulling the lever in a presidential election or urging a simple affirmative Congressional vote but influencing thousands of pages of still-shifting legislation in both Houses.
Yes, we can...what?
In the morass of issues involved, only the public option has come into focus to be distorted by lobbyists and loons into a future of government control and death panels, Big Lies that have to be answered with long and convoluted explanations
The demagoguery level is so high that Paul Krugman today resorts to nostalgia for the Unindicted Co-Conspirator, arguing that "Nixon’s proposal for health care reform looks a lot like Democratic proposals today. In fact, in some ways it was stronger."
On the other side of the ideological divide, George Will asserts, with some justice, that on health care reform "our ubiquitous president became the nation's elevator music, always out and about, heard but not really listened to, like audible wallpaper."
All this puts Obama supporters in the position of rushing around in all directions, trying to contain the flames of opposition in the equivalent of a Chinese fire drill.
As the Right revels in its newfound voice and the Left indicts the President for losing his nerve, health care reform is evolving beyond a crucial political and economic issue.
In many ways, it is becoming a test of how well American democracy can let rational voices be heard in a 21st century Tower of Babel--of whether Obama's new politics has enough power to revive and revitalize the best of the old.
Friday, August 21, 2009
No "Care" in Health Care
The political debate about healing is looking more and more like the last scene of "The Bridge on the River Kwai," a dazed doctor amid carnage mumbling "Madness, madness."
Not long after that 1950s movie about savagery arising from noble intentions, the psychoanalyst-philosopher Erich Fromm was obsessed with what he called "The Myth of Care." Stunned by social upheaval in the Sixties and rage over Vietnam, the author of "The Art of Loving" and "The Sane Society" kept searching newspapers and TV screens for images of people reaching out to help and comfort one another.
If he were alive today, Fromm would have an even harder time than he did back then finding evidence that, as they argue about health care, Americans haven't turned brutal and uncaring.
Barack Obama, who came to power as a healing figure, is being swamped by public anxieties and, the harder he works at being rational in an overheated atmosphere of fear and distrust, the more the President is judged as having passed the "point at which realism shades over into weakness" (Paul Krugman) and failing to take advantage of "the teachable moment" on health care (Peggy Noonan).
But whatever the potential damage to his party in next year's voting and his own prospects for reelection in 2012, the sight of Obama wandering the ruins of the health reform landscape, still trying to reason with unreasonable opposition, is less an indictment of the most gifted political figure of our time than a reminder that the best-educated, best-informed generations have not evolved much from the benighted days of half a century ago.
If anything, someone eligible for being hailed before a death panel might say that they have slid a long way back.
Not long after that 1950s movie about savagery arising from noble intentions, the psychoanalyst-philosopher Erich Fromm was obsessed with what he called "The Myth of Care." Stunned by social upheaval in the Sixties and rage over Vietnam, the author of "The Art of Loving" and "The Sane Society" kept searching newspapers and TV screens for images of people reaching out to help and comfort one another.
If he were alive today, Fromm would have an even harder time than he did back then finding evidence that, as they argue about health care, Americans haven't turned brutal and uncaring.
Barack Obama, who came to power as a healing figure, is being swamped by public anxieties and, the harder he works at being rational in an overheated atmosphere of fear and distrust, the more the President is judged as having passed the "point at which realism shades over into weakness" (Paul Krugman) and failing to take advantage of "the teachable moment" on health care (Peggy Noonan).
But whatever the potential damage to his party in next year's voting and his own prospects for reelection in 2012, the sight of Obama wandering the ruins of the health reform landscape, still trying to reason with unreasonable opposition, is less an indictment of the most gifted political figure of our time than a reminder that the best-educated, best-informed generations have not evolved much from the benighted days of half a century ago.
If anything, someone eligible for being hailed before a death panel might say that they have slid a long way back.
Monday, August 10, 2009
Stimulus as a State of Mind
Nothing significant has happened, but suddenly the economy is looking better. Excitement over snippets of good news, or more accurately less-bad news, is underscoring how much of it all is psychological and suggesting that Obama's aggressive stimulus attack, no matter how flawed, wasteful and even wrong-headed, has been crucial to keeping us from going over the edge.
In the past few days, the usually sober New York Times has been agog with happy talk about the economic crisis, climaxed today by a Paul Krugman assertion that Big Government "saved us" by not fearfully cutting spending and "unlike in the 1930s, the government didn’t take a hands-off attitude while much of the banking system collapsed."
This follows an analysis saying: “A report card on the stimulus plan offered by analysts nearly six months after it was passed by Congress suggests that the punch from increased government spending has helped the economy begin to bottom out faster than it would have otherwise.”
Yet another interpretive piece concludes that "the evidence is now pointing pretty strongly in one direction: history books may conclude that the financial crisis of 2008 turned out to be far less bad than it could have been and that Washington deserved much of the credit."
Before passing all this off as liberal wishful thinking, contrast today's situation with the economic free fall of the 1970s when accidental president Gerald Ford tried to cheerlead the nation out of stagflation with WIN buttons (Whip Inflation Now) and presided over low growth and runaway inflation that persisted through the Carter years into the Reagan era.
It will take months, even years, before the verdict is in on the wisdom of every aspect of the enormous Obama spending and deficit growth, but one thing is already clear: All that furious activity has been more reassuring than a President McCain approach of tax cuts and hoping for the best.
For the economy as a whole, Cash for Clunkers may signify the importance of getting consumers to feel that the sky is not falling and, given enough time, they will do the rest.
In the past few days, the usually sober New York Times has been agog with happy talk about the economic crisis, climaxed today by a Paul Krugman assertion that Big Government "saved us" by not fearfully cutting spending and "unlike in the 1930s, the government didn’t take a hands-off attitude while much of the banking system collapsed."
This follows an analysis saying: “A report card on the stimulus plan offered by analysts nearly six months after it was passed by Congress suggests that the punch from increased government spending has helped the economy begin to bottom out faster than it would have otherwise.”
Yet another interpretive piece concludes that "the evidence is now pointing pretty strongly in one direction: history books may conclude that the financial crisis of 2008 turned out to be far less bad than it could have been and that Washington deserved much of the credit."
Before passing all this off as liberal wishful thinking, contrast today's situation with the economic free fall of the 1970s when accidental president Gerald Ford tried to cheerlead the nation out of stagflation with WIN buttons (Whip Inflation Now) and presided over low growth and runaway inflation that persisted through the Carter years into the Reagan era.
It will take months, even years, before the verdict is in on the wisdom of every aspect of the enormous Obama spending and deficit growth, but one thing is already clear: All that furious activity has been more reassuring than a President McCain approach of tax cuts and hoping for the best.
For the economy as a whole, Cash for Clunkers may signify the importance of getting consumers to feel that the sky is not falling and, given enough time, they will do the rest.
Friday, August 07, 2009
Unhealthy Debate About Health Care
Left and right, anxiety over the ugly turn of American politics this month is provoking conflict about the conflict.
Paul Krugman decries "recent town halls, where angry protesters--some of them, with no apparent sense of irony, shouting “This is America!”--have been drowning out, and in some cases threatening, members of Congress trying to talk about health reform."
Across the ideological divide, Peggy Noonan finds, "What the protesters are saying is, 'You are terrifying us,'" expressing "a feeling of rebellion, an uprising against change they do not believe in."
Both sides agree that some of the outrage is trumped up--by "well-heeled interest groups...crass as they come" (Krugman) or the White House itself (Noonan), compiling an "enemies list" with an "email address to which citizens are asked to report instances of 'disinformation' in the health-care debate."
According to The Hill, "The showdowns between lawmakers and constituents have not only fueled the high-stakes battle over healthcare reform but also started a debate over the authenticity of the interruptions.
"With websites like EmbarrassYourCongressman.com encouraging activists to upload video and pictures from the heated meetings, Democratic members are asking Speaker Nancy Pelosi whether they should continue holding town hall meetings with large numbers of people...
"The Speaker has advised her rank and file to do what they deem appropriate. She said scheduled town hall meetings should go ahead as planned. There are other ways to get the message out, including tele-town halls, interviews, one-on-one meetings with constituents and news conferences, leadership aides said."
We are a long way, as Krugman notes, from the Norman Rockwell painting illustrating FDR’s "Four Freedoms" that "shows an ordinary citizen expressing an unpopular opinion. His neighbors obviously don’t like what he’s saying, but they’re letting him speak his mind."
For an historical parallel, we have to go back even more to William Butler Yeat's post-World War I poem, "The Second Coming":
"Things fall apart; the center cannot hold;/Mere anarchy is loosed upon the world.../The best lack all conviction, while the worst/Are full of passionate intensity."
Paul Krugman decries "recent town halls, where angry protesters--some of them, with no apparent sense of irony, shouting “This is America!”--have been drowning out, and in some cases threatening, members of Congress trying to talk about health reform."
Across the ideological divide, Peggy Noonan finds, "What the protesters are saying is, 'You are terrifying us,'" expressing "a feeling of rebellion, an uprising against change they do not believe in."
Both sides agree that some of the outrage is trumped up--by "well-heeled interest groups...crass as they come" (Krugman) or the White House itself (Noonan), compiling an "enemies list" with an "email address to which citizens are asked to report instances of 'disinformation' in the health-care debate."
According to The Hill, "The showdowns between lawmakers and constituents have not only fueled the high-stakes battle over healthcare reform but also started a debate over the authenticity of the interruptions.
"With websites like EmbarrassYourCongressman.com encouraging activists to upload video and pictures from the heated meetings, Democratic members are asking Speaker Nancy Pelosi whether they should continue holding town hall meetings with large numbers of people...
"The Speaker has advised her rank and file to do what they deem appropriate. She said scheduled town hall meetings should go ahead as planned. There are other ways to get the message out, including tele-town halls, interviews, one-on-one meetings with constituents and news conferences, leadership aides said."
We are a long way, as Krugman notes, from the Norman Rockwell painting illustrating FDR’s "Four Freedoms" that "shows an ordinary citizen expressing an unpopular opinion. His neighbors obviously don’t like what he’s saying, but they’re letting him speak his mind."
For an historical parallel, we have to go back even more to William Butler Yeat's post-World War I poem, "The Second Coming":
"Things fall apart; the center cannot hold;/Mere anarchy is loosed upon the world.../The best lack all conviction, while the worst/Are full of passionate intensity."
Wednesday, August 05, 2009
Bloodsucking Bankers Immune to Change
The Obama Administration is making an effort to "name and shame" them, but the vampires in banking and on Wall Street are still busy draining liquidity out of the American financial system.
According to the McClatchy newspapers, "The first report under the Home Affordable Modification Program, involving more than 30 lenders that together collect payments on 85 percent of American mortgages, found an especially dismal performance by two major national banks--Bank of America and Wells Fargo--that received $45 billion and $25 billion, respectively, in taxpayers' bailout money."
From February through July, the bloodsucking banks, too busy padding earnings and paying executive bonuses, started only 9 percent of those eligible for mortgage modifications on the process.
Beyond the Main Street parasites, the wizards of Wall Street are also back doing what they did to wreck the economy, giving themselves huge rewards for speculation that, in a classic definition, combines “private profitability” with “social uselessness.”
As Paul Krugman points out, "Even before the crisis and the bailouts, many financial-industry high-fliers made fortunes through activities that were worthless if not destructive from a social point of view. And they’re still at it."
Even the Wall Street Journal is unnerved by the Citibank trader who raked in $100 million while wheeling and dealing under a government guarantee, with the champions of free markets muttering that "disaster for taxpayers is inevitable when private reward is combined with socialized risk."
It's long past time for Tim Geithner and the Obama economic team to get tough with their former associates in the world of manipulating money for the greed of the few at the expense of the many.
According to the McClatchy newspapers, "The first report under the Home Affordable Modification Program, involving more than 30 lenders that together collect payments on 85 percent of American mortgages, found an especially dismal performance by two major national banks--Bank of America and Wells Fargo--that received $45 billion and $25 billion, respectively, in taxpayers' bailout money."
From February through July, the bloodsucking banks, too busy padding earnings and paying executive bonuses, started only 9 percent of those eligible for mortgage modifications on the process.
Beyond the Main Street parasites, the wizards of Wall Street are also back doing what they did to wreck the economy, giving themselves huge rewards for speculation that, in a classic definition, combines “private profitability” with “social uselessness.”
As Paul Krugman points out, "Even before the crisis and the bailouts, many financial-industry high-fliers made fortunes through activities that were worthless if not destructive from a social point of view. And they’re still at it."
Even the Wall Street Journal is unnerved by the Citibank trader who raked in $100 million while wheeling and dealing under a government guarantee, with the champions of free markets muttering that "disaster for taxpayers is inevitable when private reward is combined with socialized risk."
It's long past time for Tim Geithner and the Obama economic team to get tough with their former associates in the world of manipulating money for the greed of the few at the expense of the many.
Friday, July 17, 2009
Wall St. Wins, We Lose, What Else is New?
Juggling money is still America's biggest growth industry, according to the new earnings boom for Goldman Sachs, Citigroup, JP Morgan Chase and Bank of America, who only months ago came to Washington to fill their begging bowls with taxpayer bailout funds.
Cranky Paul Krugman says such news "shows that Wall Street’s bad habits--above all, the system of compensation that helped cause the financial crisis--have not gone away" and "that by rescuing the financial system without reforming it, Washington has done nothing to protect us from a new crisis, and, in fact, has made another crisis more likely."
Back to business as usual, the big firms are generating huge profits from trading and underwriting securities to make up for the failure of those who are losing jobs to keep up with payments on mortgages and credit cards.
At the same time, the pain is being spread equally to prudent retirees who saved without gambling in the stock market but, thanks to the Fed's concern for Wall Street's ability to keep wheeling and dealing, are earning a fraction of one per cent on their hard-earned money, much of which will now go to keeping up the huge bonuses of those who shuffle it around.
Is this a great country or what?
Cranky Paul Krugman says such news "shows that Wall Street’s bad habits--above all, the system of compensation that helped cause the financial crisis--have not gone away" and "that by rescuing the financial system without reforming it, Washington has done nothing to protect us from a new crisis, and, in fact, has made another crisis more likely."
Back to business as usual, the big firms are generating huge profits from trading and underwriting securities to make up for the failure of those who are losing jobs to keep up with payments on mortgages and credit cards.
At the same time, the pain is being spread equally to prudent retirees who saved without gambling in the stock market but, thanks to the Fed's concern for Wall Street's ability to keep wheeling and dealing, are earning a fraction of one per cent on their hard-earned money, much of which will now go to keeping up the huge bonuses of those who shuffle it around.
Is this a great country or what?
Friday, July 10, 2009
Stimulus Stew
The state of the economy, it's safe to say, is iffy at best but, less than six months after its passage, the market for badmouthing the stimulus bill is booming.
On the left, Paul Krugman insists that a "bad employment report for June made it clear that the stimulus was, indeed, too small" and "damaged the credibility of the administration’s economic stewardship."
From right field, House Minority Whip Eric Cantor tells us "the stimulus or so-called stimulus plan that spent almost $800 billion has not worked," while economist Karl Rove proclaims that "Obama can't be trusted with numbers" as he bashes the White House for being too slow in getting the money out the door.
In the center, Warren Buffet is musing about the need for a second round of pumping money into the economy, complaining that the first was "like taking half a tablet of Viagra and having also a bunch of candy mixed in...as if everybody was putting in enough for their own constituents."
Meanwhile, Joe Biden is on a tour touting positive results here and there, as the Recovery blog announces web seminars (Webinars) to spread the good news.
In this flurry of opinionating, the prize for empty news goes to USA Today for its headlined revelation, "Billions in aid go to areas that backed Obama in '08," which undermines itself by noting:
"Investigators who track the stimulus are skeptical that political considerations could be at work. The imbalance is so pronounced--and the aid so far from complete--that it would be almost inconceivable for it to be the result of political tinkering, says Adam Hughes, the director of federal fiscal policy for the non-profit OMB Watch. 'Even if they wanted to, I don't think the administration has enough people in place yet to actually do that,' he says."
Oh.
On the left, Paul Krugman insists that a "bad employment report for June made it clear that the stimulus was, indeed, too small" and "damaged the credibility of the administration’s economic stewardship."
From right field, House Minority Whip Eric Cantor tells us "the stimulus or so-called stimulus plan that spent almost $800 billion has not worked," while economist Karl Rove proclaims that "Obama can't be trusted with numbers" as he bashes the White House for being too slow in getting the money out the door.
In the center, Warren Buffet is musing about the need for a second round of pumping money into the economy, complaining that the first was "like taking half a tablet of Viagra and having also a bunch of candy mixed in...as if everybody was putting in enough for their own constituents."
Meanwhile, Joe Biden is on a tour touting positive results here and there, as the Recovery blog announces web seminars (Webinars) to spread the good news.
In this flurry of opinionating, the prize for empty news goes to USA Today for its headlined revelation, "Billions in aid go to areas that backed Obama in '08," which undermines itself by noting:
"Investigators who track the stimulus are skeptical that political considerations could be at work. The imbalance is so pronounced--and the aid so far from complete--that it would be almost inconceivable for it to be the result of political tinkering, says Adam Hughes, the director of federal fiscal policy for the non-profit OMB Watch. 'Even if they wanted to, I don't think the administration has enough people in place yet to actually do that,' he says."
Oh.
Friday, June 26, 2009
Taking Obama's Measure
With ten percent of his term in office gone, Barack Obama is being graded from the left and right and, not surprisingly, found to be doing (1) not enough and (2) too much.
(1) Paul Krugman faults him for "Not Enough Audacity," praising "Barack the Policy Wonk, whose command of the issues--and ability to explain those issues in plain English--is a joy to behold" but faulting "Barack the Post-Partisan, who searches for common ground where none exists, and whose negotiations with himself lead to policies that are far too weak."
(2) Peggy Noonan sees "a persistent sense of extraneous effort, of ambitions too big and yet too small, too off point, too base-pleading, too ideological, too unaware of the imperatives. And there is the depressing psychological effect of seeing government grow so much, so big, so fast. This encourages a sense that things are out of control and cannot be made better."
Somewhere between these polar views may be many who are less outspoken but trust Obama's instincts and judgment and, given the challenges he has to face, are willing to cut him some slack when he seems to be moving too fast or too slowly or trying to do too little or too much but won't hesitate to criticize him when we think he's going off course.
The opinion polls are getting iffy, but we still seem to be in a majority (pace Rush Limbaugh) who understand that, if Obama fails, we all do.
(1) Paul Krugman faults him for "Not Enough Audacity," praising "Barack the Policy Wonk, whose command of the issues--and ability to explain those issues in plain English--is a joy to behold" but faulting "Barack the Post-Partisan, who searches for common ground where none exists, and whose negotiations with himself lead to policies that are far too weak."
(2) Peggy Noonan sees "a persistent sense of extraneous effort, of ambitions too big and yet too small, too off point, too base-pleading, too ideological, too unaware of the imperatives. And there is the depressing psychological effect of seeing government grow so much, so big, so fast. This encourages a sense that things are out of control and cannot be made better."
Somewhere between these polar views may be many who are less outspoken but trust Obama's instincts and judgment and, given the challenges he has to face, are willing to cut him some slack when he seems to be moving too fast or too slowly or trying to do too little or too much but won't hesitate to criticize him when we think he's going off course.
The opinion polls are getting iffy, but we still seem to be in a majority (pace Rush Limbaugh) who understand that, if Obama fails, we all do.
Tuesday, June 23, 2009
Left, Right and Wrong on Health Care
If you doubt that liberal and conservative have lost all meaning in the health care debate, consult the New York Times' columnists of those persuasions.
On the left, Paul Krugman predicts reform "will be undermined by 'centrist' Democratic senators who either prevent the passage of a bill or insist on watering down key elements...
"What the balking Democrats seem most determined to do is to kill the public option, either by eliminating it or by carrying out a bait-and-switch, replacing a true public option with something meaningless. For the record, neither regional health cooperatives nor state-level public plans, both of which have been proposed as alternatives, would have the financial stability and bargaining power needed to bring down health care costs."
On the right, David Brooks insists: "We’ve built an entire health care system (maybe an entire government) on the illusion of something for nothing. Instead of tackling that basic logic, we’ve got a reform process that is trying to evade it."
Brooks argues for a plan by Democrat Ron Wyden and Republican Robert Bennett to repeal tax exemptions for insurance premiums and provide universal coverage. "The Wyden-Bennett bill has 14 bipartisan co-sponsors and the Congressional Budget Office has found that it would be revenue-neutral," he claims, but Senate Committee leaders of both parties are concentrating instead on "grand rhetoric and superficial cost containment."
The political hot air on Capitol Hill is filled with nonsense from both sides of the aisles, and so far the White House has been unwilling to make them stop the political blather and face reality.
On the left, Paul Krugman predicts reform "will be undermined by 'centrist' Democratic senators who either prevent the passage of a bill or insist on watering down key elements...
"What the balking Democrats seem most determined to do is to kill the public option, either by eliminating it or by carrying out a bait-and-switch, replacing a true public option with something meaningless. For the record, neither regional health cooperatives nor state-level public plans, both of which have been proposed as alternatives, would have the financial stability and bargaining power needed to bring down health care costs."
On the right, David Brooks insists: "We’ve built an entire health care system (maybe an entire government) on the illusion of something for nothing. Instead of tackling that basic logic, we’ve got a reform process that is trying to evade it."
Brooks argues for a plan by Democrat Ron Wyden and Republican Robert Bennett to repeal tax exemptions for insurance premiums and provide universal coverage. "The Wyden-Bennett bill has 14 bipartisan co-sponsors and the Congressional Budget Office has found that it would be revenue-neutral," he claims, but Senate Committee leaders of both parties are concentrating instead on "grand rhetoric and superficial cost containment."
The political hot air on Capitol Hill is filled with nonsense from both sides of the aisles, and so far the White House has been unwilling to make them stop the political blather and face reality.
Friday, June 12, 2009
Jeremiah Wright to the Rescue
With the killings of a Kansas abortion doctor and at the Holocaust Museum, group hatred in this year of Change was losing its bipartisan flavor, but here comes Barack Obama's former pastor from stage left to restore some balance and, insofar as the subject allows, comic relief.
As usual, the Rev. Jeremiah Wright's entrance involves tongue-tripping. After telling a reporter that "Them Jews aren't going to let him talk to me," Rev. Wright has clarified his estrangement from the President to explain that he meant "Zionists," which of course makes all the difference in the world to such Obama advisers of the Hebrew persuasion as Rahm Emanuel and David Axelrod.
Even if, as the President keeps saying, words matter, Wright's bombast can't be equated with bullets from the Far Right, but it can serve as a reminder that reductive stupidity and scapegoating come from all directions in American society, as they always have.
The flavor of the day in zeitgests is what Paul Krugman calls "The Big Hate," an upsurge of "right-wing extremism...being systematically fed by the conservative media and political establishment."
But given the coincidence of widespread economic fears and the installation of an African-American president, it doesn't take Rush Limbaugh, Glenn Beck et al to revive traditional American mistrust of "others" and blame them for misfortunes.
Yes, there were hateful words behind the actions of those lone demented gunmen, but Rev. Wright's reappearance provides a moment of déjà vu that such talk does not inevitably lead to disastrous actions.
Barack Obama overcame it to win the White House, and what he is doing there will determine the future. Meanwhile, as the old Arab proverb says, the dogs bark, but the caravan moves on.
As usual, the Rev. Jeremiah Wright's entrance involves tongue-tripping. After telling a reporter that "Them Jews aren't going to let him talk to me," Rev. Wright has clarified his estrangement from the President to explain that he meant "Zionists," which of course makes all the difference in the world to such Obama advisers of the Hebrew persuasion as Rahm Emanuel and David Axelrod.
Even if, as the President keeps saying, words matter, Wright's bombast can't be equated with bullets from the Far Right, but it can serve as a reminder that reductive stupidity and scapegoating come from all directions in American society, as they always have.
The flavor of the day in zeitgests is what Paul Krugman calls "The Big Hate," an upsurge of "right-wing extremism...being systematically fed by the conservative media and political establishment."
But given the coincidence of widespread economic fears and the installation of an African-American president, it doesn't take Rush Limbaugh, Glenn Beck et al to revive traditional American mistrust of "others" and blame them for misfortunes.
Yes, there were hateful words behind the actions of those lone demented gunmen, but Rev. Wright's reappearance provides a moment of déjà vu that such talk does not inevitably lead to disastrous actions.
Barack Obama overcame it to win the White House, and what he is doing there will determine the future. Meanwhile, as the old Arab proverb says, the dogs bark, but the caravan moves on.
Friday, June 05, 2009
Ghosts of Harry and Louise
The Senate Republican leader is channeling a couple of GOP golden oldies to oppose a public option in the health care reform pending in Congress.
Unlike Harry and Louise in the 1993 TV commercials to torpedo the Clintons' initiative, Mitch McConnell's protagonists are real people--sort of--Bruce Hardy of England and Shona Holmes of Canada, who have been brought out to personify the horrors of "socialized medicine." But their stories have been as edited as a TV commercial to make the point.
Hardy had to pay for a new cancer drug for two months before it was approved. McConnell's take: “The government bureaucrats who run Britain’s health care system denied the treatment, saying the drug was too expensive...that Bruce Hardy’s life wasn’t worth it.”
About Holmes, who paid for her own surgery in the US as she could have in Canada, the GOP leader finds this lesson: "Here’s how Shona described her plight: ‘If I’d relied on my government, I’d be dead,’ Shona’s life was eventually saved because she came to the United States for the care she needed.”
This Harry-and-Louise flummery is part of a last-ditch effort to persuade Americans that the choice of a public plan to, in President Obama's words, "keep the insurance companies honest" is no less than a takeover of the entire industry.
As Paul Krugman notes, there are two lessons in the current debate: "(1) Don't trust the insurance industry. (2) Don't trust the insurance industry...The insurance industry will do everything it can to avoid being held accountable."
Including manufacturing a new generation of Harrys and Louises.
Unlike Harry and Louise in the 1993 TV commercials to torpedo the Clintons' initiative, Mitch McConnell's protagonists are real people--sort of--Bruce Hardy of England and Shona Holmes of Canada, who have been brought out to personify the horrors of "socialized medicine." But their stories have been as edited as a TV commercial to make the point.
Hardy had to pay for a new cancer drug for two months before it was approved. McConnell's take: “The government bureaucrats who run Britain’s health care system denied the treatment, saying the drug was too expensive...that Bruce Hardy’s life wasn’t worth it.”
About Holmes, who paid for her own surgery in the US as she could have in Canada, the GOP leader finds this lesson: "Here’s how Shona described her plight: ‘If I’d relied on my government, I’d be dead,’ Shona’s life was eventually saved because she came to the United States for the care she needed.”
This Harry-and-Louise flummery is part of a last-ditch effort to persuade Americans that the choice of a public plan to, in President Obama's words, "keep the insurance companies honest" is no less than a takeover of the entire industry.
As Paul Krugman notes, there are two lessons in the current debate: "(1) Don't trust the insurance industry. (2) Don't trust the insurance industry...The insurance industry will do everything it can to avoid being held accountable."
Including manufacturing a new generation of Harrys and Louises.
Friday, May 08, 2009
Morning-Aftering the Meltdown
Congress is pushing through a 9/11-like bipartisan commission to root through the ruins of the economy, discover what happened and figure out how to avoid another meltdown, and the White House has signaled its approval.
With Democrats and Republicans already arguing over how many members each will pick, it promises to be an exercise in finger-pointing unless the lead investigators are imbued with the zeal and bite of the Pecora Commission that unearthed the causes of the 1929 market crash.
Back then, the inquiry started as a Republican whitewash of Wall Street that ran through three tame lead counsels until a bulldog New York assistant DA named Ferdinand Pecora took over and started grilling elite bankers and brokers to lay bare Wall Street abuses, up to and including the fact that J.P. Morgan, Jr. and his partners had not paid any income taxes for two years.
The issues are much more complicated now, and the Meltdown Commission investigators will need not only the subpoena power to root out wrongdoing but the expertise to trace and dissect the complex derivative deals that caused today's mess, and the members will have to have the background to understand what they find.
Congress will undoubtedly round up the usual suspects such as James Baker and Lee Hamilton, but this one could use a couple of Nobel economists who are not uncritical fans of the Obama Recovery campaign. Paul Krugman and Joseph Stiglitz should be at the top of the list.
With Democrats and Republicans already arguing over how many members each will pick, it promises to be an exercise in finger-pointing unless the lead investigators are imbued with the zeal and bite of the Pecora Commission that unearthed the causes of the 1929 market crash.
Back then, the inquiry started as a Republican whitewash of Wall Street that ran through three tame lead counsels until a bulldog New York assistant DA named Ferdinand Pecora took over and started grilling elite bankers and brokers to lay bare Wall Street abuses, up to and including the fact that J.P. Morgan, Jr. and his partners had not paid any income taxes for two years.
The issues are much more complicated now, and the Meltdown Commission investigators will need not only the subpoena power to root out wrongdoing but the expertise to trace and dissect the complex derivative deals that caused today's mess, and the members will have to have the background to understand what they find.
Congress will undoubtedly round up the usual suspects such as James Baker and Lee Hamilton, but this one could use a couple of Nobel economists who are not uncritical fans of the Obama Recovery campaign. Paul Krugman and Joseph Stiglitz should be at the top of the list.
Monday, April 27, 2009
Wall Street's Welfare Queens
As the furor over AIG bonuses fades, Paul Krugman today points to a real outrage: "pay at investment banks, after dipping last year, is soaring again--right back up to 2007 levels."
Such a symbol for unquenchable Wall Street greed may serve a political turning point just as did Ronald Reagan's Welfare Queen who drove a Cadillac three decades ago--with a number of added ironies.
Unlike the Great Communicator's character who was never found to exist, today's investment bankers are all too real and, in the 21st century, are ripping off taxpayers on a scale never imagined in Reagan's wildest dreams. The Welfare Queen's $150,000 has morphed into billions.
As Krugman observes, "Wall Street is no longer, in any real sense, part of the private sector. It’s a ward of the state, every bit as dependent on government aid as recipients of Temporary Assistance for Needy Families, a k a 'welfare.'"
Perhaps the ultimate irony is that the level of Wall Street compensation has always been disproportionate to achievement but turned astronomic only in recent years, as Krugman notes, as "a reward for their creativity--for financial innovation...new, improved ways to blow bubbles, evade regulations and implement de facto Ponzi schemes."
But the reemergence of such greed may eventually prove to be as powerful a symbol for a new populism as Reagan's Welfare Queen was for the rise of conservatism in the 1980's.
Almost 70 years ago, Fred Schwed in his Wall Street classic "Where Are the Customers' Yachts?" noted: "The burnt customer certainly prefers to believe that he has been robbed rather than that he has been a fool on the advice of fools."
That feeling seems to be stirring again.
Such a symbol for unquenchable Wall Street greed may serve a political turning point just as did Ronald Reagan's Welfare Queen who drove a Cadillac three decades ago--with a number of added ironies.
Unlike the Great Communicator's character who was never found to exist, today's investment bankers are all too real and, in the 21st century, are ripping off taxpayers on a scale never imagined in Reagan's wildest dreams. The Welfare Queen's $150,000 has morphed into billions.
As Krugman observes, "Wall Street is no longer, in any real sense, part of the private sector. It’s a ward of the state, every bit as dependent on government aid as recipients of Temporary Assistance for Needy Families, a k a 'welfare.'"
Perhaps the ultimate irony is that the level of Wall Street compensation has always been disproportionate to achievement but turned astronomic only in recent years, as Krugman notes, as "a reward for their creativity--for financial innovation...new, improved ways to blow bubbles, evade regulations and implement de facto Ponzi schemes."
But the reemergence of such greed may eventually prove to be as powerful a symbol for a new populism as Reagan's Welfare Queen was for the rise of conservatism in the 1980's.
Almost 70 years ago, Fred Schwed in his Wall Street classic "Where Are the Customers' Yachts?" noted: "The burnt customer certainly prefers to believe that he has been robbed rather than that he has been a fool on the advice of fools."
That feeling seems to be stirring again.
Saturday, April 04, 2009
Mea Culpa to the Money Man
Paul Krugman and I owe Lawrence Summers an apology. In questioning the Obama toxic asset plan, I rashly compared the President's chief economic adviser to a used-care salesman and Krugman criticized his view of financial markets by suggesting, "Mr. Summers needs to get out more."
Now White House disclosure forms show Summers earned $5.2 million last year from a hedge fund and $2.7 million for addressing avid listeners from such as Goldman Sachs, Citigroup, JPMorgan, Bank of America, and the late Lehman Brothers. (A $45,000 fee from Merrill Lynch a week after Obama's election was discreetly donated to charity.)
Clearly, Summers has no need to be acquainted with previously-owned vehicles, and even Krugman will have to admit that he does get out frequently.
Where he goes is a different matter entirely. No one would begrudge a former Treasury Secretary and university president a standard of living befitting his station, but critics may feel he is giving the President advice that comes from the mindset that only months ago earned large sums and applause from the people now being bailed out by taxpayers.
Barack Obama frequently and rightly complains about being in a White House bubble, but he may want to take a closer look at the range of people he keeps in there with him.
Now White House disclosure forms show Summers earned $5.2 million last year from a hedge fund and $2.7 million for addressing avid listeners from such as Goldman Sachs, Citigroup, JPMorgan, Bank of America, and the late Lehman Brothers. (A $45,000 fee from Merrill Lynch a week after Obama's election was discreetly donated to charity.)
Clearly, Summers has no need to be acquainted with previously-owned vehicles, and even Krugman will have to admit that he does get out frequently.
Where he goes is a different matter entirely. No one would begrudge a former Treasury Secretary and university president a standard of living befitting his station, but critics may feel he is giving the President advice that comes from the mindset that only months ago earned large sums and applause from the people now being bailed out by taxpayers.
Barack Obama frequently and rightly complains about being in a White House bubble, but he may want to take a closer look at the range of people he keeps in there with him.
Wednesday, April 01, 2009
Nobel Economists vs. Geithner
Another winner of the Nobel Prize in economics, and a former Clinton White House adviser, joins Paul Krugman today in turning thumbs down on the Treasury's public-private toxic asset plan and suggests that nationalizing banks would be "preferable."
Joseph Stiglitz concludes: "Some Americans are afraid that the government might temporarily 'nationalize' the banks, but that option would be preferable to the Geithner plan. After all, the F.D.I.C. has taken control of failing banks before, and done it well. It has even nationalized large institutions like Continental Illinois (taken over in 1984, back in private hands a few years later), and Washington Mutual (seized last September, and immediately resold).
"What the Obama administration is doing is far worse than nationalization: it is ersatz capitalism, the privatizing of gains and the socializing of losses. It is a 'partnership' in which one partner robs the other. And such partnerships--with the private sector in control--have perverse incentives, worse even than the ones that got us into the mess."
Stiglitz's denunciation of the Public-Private Asset Plan as "a win-win-lose proposal: the banks win, investors win--and taxpayers lose" follows Krugman's observation last week that "it has become increasingly clear over the past few days that top officials in the Obama administration are still in the grip of the market mystique. They still believe in the magic of the financial marketplace and in the prowess of the wizards who perform that magic."
Not only do we have two Nobel Prize economists trashing the proposal but even the radicals at the Wall Street Journal are unhappy that the trough for investors may be too small:
"So not only is the government going to be anointing a favored few to invest in these assets. It is also giving those favored few the opportunity to collect fees and profit-sharing from anyone else that wants to go in with them. In the wake of the AIG bonfire, Mr. Geithner is tempting another outcry."
Unlike those AIG bonuses, the toxic-asset plan is too complex for "another outcry" by politicians or the public, but in the amounts of taxpayer money involved, it dwarfs that issue.
Even worse, it is a key recovery proposal by a President voters want desperately to succeed. But someone in addition to economists and super-investors like George Soros has to put nationalization of banks in some form on the agenda--and soon.
Joseph Stiglitz concludes: "Some Americans are afraid that the government might temporarily 'nationalize' the banks, but that option would be preferable to the Geithner plan. After all, the F.D.I.C. has taken control of failing banks before, and done it well. It has even nationalized large institutions like Continental Illinois (taken over in 1984, back in private hands a few years later), and Washington Mutual (seized last September, and immediately resold).
"What the Obama administration is doing is far worse than nationalization: it is ersatz capitalism, the privatizing of gains and the socializing of losses. It is a 'partnership' in which one partner robs the other. And such partnerships--with the private sector in control--have perverse incentives, worse even than the ones that got us into the mess."
Stiglitz's denunciation of the Public-Private Asset Plan as "a win-win-lose proposal: the banks win, investors win--and taxpayers lose" follows Krugman's observation last week that "it has become increasingly clear over the past few days that top officials in the Obama administration are still in the grip of the market mystique. They still believe in the magic of the financial marketplace and in the prowess of the wizards who perform that magic."
Not only do we have two Nobel Prize economists trashing the proposal but even the radicals at the Wall Street Journal are unhappy that the trough for investors may be too small:
"So not only is the government going to be anointing a favored few to invest in these assets. It is also giving those favored few the opportunity to collect fees and profit-sharing from anyone else that wants to go in with them. In the wake of the AIG bonfire, Mr. Geithner is tempting another outcry."
Unlike those AIG bonuses, the toxic-asset plan is too complex for "another outcry" by politicians or the public, but in the amounts of taxpayer money involved, it dwarfs that issue.
Even worse, it is a key recovery proposal by a President voters want desperately to succeed. But someone in addition to economists and super-investors like George Soros has to put nationalization of banks in some form on the agenda--and soon.
Sunday, March 29, 2009
Newsweek and Krugman: New Realities
In a magazine cover, we have a reflection of what's happening not only to the American economy but politics and journalism as well: a close-cropped half of a bearded face and the lines, "Obama Is Wrong: The loyal opposition of Paul Krugman."
Newsweek's story tells us about the economist-turned-pundit who "criticizes the Obamaites for trying to prop up a financial system that he regards as essentially a dead man walking," but also illustrates the desperation of newsweekly magazines to survive.
In financial straits, Newsweek has been cutting its circulation and redefining itself away from the traditional role of presenting the week's news with attitude. With so much of both available on the Internet and cable TV, Newsweek has chosen less news and more attitude.
"If we don’t have something original to say," editor Jon Meacham points out, "we won’t. The drill of chasing the week’s news to add a couple of hard-fought new details is not sustainable.”
The 21st century has not been kind to Henry Luce's invention of Time in the 1920s to make sense of "the million little chaoses of raw news." In a 24/7 tower of babble, Americans no longer need a Voice from Above to tell them what it all means.
As Newsweek moves away from Time and US News, it will be competing for eyeballs and ads with such as the Economist, the New Yorker and Atlantic in telling readers what they don't know they want to know until they see it in a magazine.
The Krugman story is a promising start, a profile of a quirky Nobel Prize winner who keeps offering those in power reality checks and ends thus:
"Krugman thinks that Obama needs some kind of 'wise man' to advise him and mentions Paul Volcker, the former Fed chairman who tamed inflation for Reagan and now heads an advisory panel for Obama. How about Krugman himself for that role? 'I'm not a backroom kind of guy,' he says, schlumped over in his Princeton office, which overflows with unopened mail. He describes himself as a 'born pessimist' and a 'natural rebel.' But he adds, 'What I have is a voice.' That he does."
In these parlous times, so does Newsweek, and we can use both.
Newsweek's story tells us about the economist-turned-pundit who "criticizes the Obamaites for trying to prop up a financial system that he regards as essentially a dead man walking," but also illustrates the desperation of newsweekly magazines to survive.
In financial straits, Newsweek has been cutting its circulation and redefining itself away from the traditional role of presenting the week's news with attitude. With so much of both available on the Internet and cable TV, Newsweek has chosen less news and more attitude.
"If we don’t have something original to say," editor Jon Meacham points out, "we won’t. The drill of chasing the week’s news to add a couple of hard-fought new details is not sustainable.”
The 21st century has not been kind to Henry Luce's invention of Time in the 1920s to make sense of "the million little chaoses of raw news." In a 24/7 tower of babble, Americans no longer need a Voice from Above to tell them what it all means.
As Newsweek moves away from Time and US News, it will be competing for eyeballs and ads with such as the Economist, the New Yorker and Atlantic in telling readers what they don't know they want to know until they see it in a magazine.
The Krugman story is a promising start, a profile of a quirky Nobel Prize winner who keeps offering those in power reality checks and ends thus:
"Krugman thinks that Obama needs some kind of 'wise man' to advise him and mentions Paul Volcker, the former Fed chairman who tamed inflation for Reagan and now heads an advisory panel for Obama. How about Krugman himself for that role? 'I'm not a backroom kind of guy,' he says, schlumped over in his Princeton office, which overflows with unopened mail. He describes himself as a 'born pessimist' and a 'natural rebel.' But he adds, 'What I have is a voice.' That he does."
In these parlous times, so does Newsweek, and we can use both.
Friday, March 27, 2009
Obama's Used Car Salesmen
I wouldn't buy one from Larry Summers. I might take a chance on Tim Geithner but have a good mechanic check it out first.
As the President's top two economic advisers keep offering us financial vehicles for the rocky road ahead, they just don't inspire confidence in survivors still stunned by the crash of those in which the two of them had so much involvement over the past decade.
Summers tell us the Administration's new toxic asset plan will create "better functioning capital markets," but Paul Krugman points out:
"Leave aside for a moment the question of whether a market in which buyers have to be bribed to participate can really be described as 'better functioning.' Even so, Mr. Summers needs to get out more. Quite a few economists have reconsidered their favorable opinion of capital markets and asset trading in the light of the current crisis.
"But it has become increasingly clear over the past few days that top officials in the Obama administration are still in the grip of the market mystique. They still believe in the magic of the financial marketplace and in the prowess of the wizards who perform that magic."
Just so. The Treasury Secretary's Congressional testimony about the proposal to regulate non-bank financial institutions reflects a curious ambivalence, recognizing damaging excesses but hesitating to ban much of Wall Street's gambling.
In answer to a question, Geithner said that. "my own sense is that banning naked credit default swaps isn't necessary and wouldn't help," that it is "terribly hard" to differentiate between a legitimate hedge and a pure speculative bet.
The recent stock market surge only adds to the unease. After weeks of sheer panic, are the insiders only grabbing at the chance for cashing in on the huge but temporary infusion of free money?
With so much at stake, the Obama Administration might help the case for its recovery proposals by letting us hear more from Paul Volcker and other respected Wall Street outsiders in a situation where credibility is critical.
As the President's top two economic advisers keep offering us financial vehicles for the rocky road ahead, they just don't inspire confidence in survivors still stunned by the crash of those in which the two of them had so much involvement over the past decade.
Summers tell us the Administration's new toxic asset plan will create "better functioning capital markets," but Paul Krugman points out:
"Leave aside for a moment the question of whether a market in which buyers have to be bribed to participate can really be described as 'better functioning.' Even so, Mr. Summers needs to get out more. Quite a few economists have reconsidered their favorable opinion of capital markets and asset trading in the light of the current crisis.
"But it has become increasingly clear over the past few days that top officials in the Obama administration are still in the grip of the market mystique. They still believe in the magic of the financial marketplace and in the prowess of the wizards who perform that magic."
Just so. The Treasury Secretary's Congressional testimony about the proposal to regulate non-bank financial institutions reflects a curious ambivalence, recognizing damaging excesses but hesitating to ban much of Wall Street's gambling.
In answer to a question, Geithner said that. "my own sense is that banning naked credit default swaps isn't necessary and wouldn't help," that it is "terribly hard" to differentiate between a legitimate hedge and a pure speculative bet.
The recent stock market surge only adds to the unease. After weeks of sheer panic, are the insiders only grabbing at the chance for cashing in on the huge but temporary infusion of free money?
With so much at stake, the Obama Administration might help the case for its recovery proposals by letting us hear more from Paul Volcker and other respected Wall Street outsiders in a situation where credibility is critical.
Saturday, March 21, 2009
The Price of Congress' Crazy Rage
This has been a bad week for American leadership, and next week could be worse. In trying to calm the country, Barack Obama made one joke too many while lawmakers in Washington spent their time acting out the worst stereotypes of politicians as fools, cowards and knaves.
"Congress," writes New York Times business columnist Joe Nocera, "with its howls of rage, its chaotic, episodic reaction to the crisis, and its shameless playing to the crowds, is out of control. This week, the body politic ran off the rails.
"There are times when anger is cathartic. There are other times when anger makes a bad situation worse. 'We need to stop committing economic arson,' Bert Ely, a banking consultant, said to me this week. That is what Congress committed: economic arson."
The scorched earth from that diversion now litters the battlefield of next week's crucial fight over how to clean out toxic assets from the paralyzed banking system. But how can there be a rational discussion of the Administration's plan to partner with private investors after all this madness? How do people in Wall Street now feel about making deals with a government held hostage by lunatic lawmakers?
When Treasury Secretary Tim Geithner unveils his plan, there will be serious doubts, some of which are surfacing beforehand. Paul Krugman predicts:
"In effect, Treasury will be creating--deliberately!--the functional equivalent of Texas S&Ls in the 1980s: financial operations with very little capital but lots of government-guaranteed liabilities. For the private investors, this is an open invitation to play heads I win, tails the taxpayers lose. So sure, these investors will be ready to pay high prices for toxic waste. After all, the stuff might be worth something; and if it isn’t, that’s someone else’s problem...
"This plan will produce big gains for banks that didn’t actually need any help; it will, however, do little to reassure the public about banks that are seriously undercapitalized. And...when the plan fails, as it almost surely will, the administration will have shot its bolt: it won’t be able to come back to Congress for a plan that might actually work."
That argument against Geithner's proposal deserves serious discussion. But in the face of a Congress still slavering from its fit of AIG bonus hysteria, with whom?
"Congress," writes New York Times business columnist Joe Nocera, "with its howls of rage, its chaotic, episodic reaction to the crisis, and its shameless playing to the crowds, is out of control. This week, the body politic ran off the rails.
"There are times when anger is cathartic. There are other times when anger makes a bad situation worse. 'We need to stop committing economic arson,' Bert Ely, a banking consultant, said to me this week. That is what Congress committed: economic arson."
The scorched earth from that diversion now litters the battlefield of next week's crucial fight over how to clean out toxic assets from the paralyzed banking system. But how can there be a rational discussion of the Administration's plan to partner with private investors after all this madness? How do people in Wall Street now feel about making deals with a government held hostage by lunatic lawmakers?
When Treasury Secretary Tim Geithner unveils his plan, there will be serious doubts, some of which are surfacing beforehand. Paul Krugman predicts:
"In effect, Treasury will be creating--deliberately!--the functional equivalent of Texas S&Ls in the 1980s: financial operations with very little capital but lots of government-guaranteed liabilities. For the private investors, this is an open invitation to play heads I win, tails the taxpayers lose. So sure, these investors will be ready to pay high prices for toxic waste. After all, the stuff might be worth something; and if it isn’t, that’s someone else’s problem...
"This plan will produce big gains for banks that didn’t actually need any help; it will, however, do little to reassure the public about banks that are seriously undercapitalized. And...when the plan fails, as it almost surely will, the administration will have shot its bolt: it won’t be able to come back to Congress for a plan that might actually work."
That argument against Geithner's proposal deserves serious discussion. But in the face of a Congress still slavering from its fit of AIG bonus hysteria, with whom?
Wednesday, March 11, 2009
Upcoming: Ultimate Bank Bailout
As piecemeal rescue plans sputter, Washington is moving toward a consensus on a huge public-private partnership to strip banks of bad assets and get them moving again.
Like spoiled children of families facing hard times, financial institutions have whining about their allowances and the chores they have to do to earn them. Some are stamping their feet and returning or refusing to take the money.
In the face of public outrage, the government has been demanding more and more reform--delaying evictions and modifying mortgages for strapped homeowners, letting shareholders vote on executive pay packages, cutting dividends and canceling expensive junkets.
As banks reach out for help but complain about the strings, the outline of a simpler but more drastic approach is taking shape, as Sheila Bair, head of the FDIC, and others have been suggesting in recent days.
The government would partner with private investors to buy troubled assets, in part by providing financing at low cost. Federal officials are debating the amount of the subsidy that would allow investors to pay higher prices, limiting the losses that banks would record but also exposing taxpayers to greater risk.
"You end up with two healthy institutions," Bair contends. "It's not a good bank and a bad bank; it's an aggregator bank with good upside potential because it bought at good discounts and you've got a clean balance sheet over here with an opportunity to raise private capital."
But critics like Paul Krugman will take a lot of convincing. He contends that "by using taxpayer funds to subsidize the prices of toxic waste, the administration would shower benefits on everyone who made the mistake of buying the stuff. Some of those benefits would trickle down to where they’re needed, shoring up the balance sheets of key financial institutions. But most of the benefit would go to people who don’t need or deserve to be rescued."
In any event, when the administration decides on the right formula, perhaps in the next week, the Ultimate Bailout will be unveiled for a global vote of confidence--by investors, politicians, the financial industry and world markets. That tally will tell us much about where the economy is headed and for how long.
Like spoiled children of families facing hard times, financial institutions have whining about their allowances and the chores they have to do to earn them. Some are stamping their feet and returning or refusing to take the money.
In the face of public outrage, the government has been demanding more and more reform--delaying evictions and modifying mortgages for strapped homeowners, letting shareholders vote on executive pay packages, cutting dividends and canceling expensive junkets.
As banks reach out for help but complain about the strings, the outline of a simpler but more drastic approach is taking shape, as Sheila Bair, head of the FDIC, and others have been suggesting in recent days.
The government would partner with private investors to buy troubled assets, in part by providing financing at low cost. Federal officials are debating the amount of the subsidy that would allow investors to pay higher prices, limiting the losses that banks would record but also exposing taxpayers to greater risk.
"You end up with two healthy institutions," Bair contends. "It's not a good bank and a bad bank; it's an aggregator bank with good upside potential because it bought at good discounts and you've got a clean balance sheet over here with an opportunity to raise private capital."
But critics like Paul Krugman will take a lot of convincing. He contends that "by using taxpayer funds to subsidize the prices of toxic waste, the administration would shower benefits on everyone who made the mistake of buying the stuff. Some of those benefits would trickle down to where they’re needed, shoring up the balance sheets of key financial institutions. But most of the benefit would go to people who don’t need or deserve to be rescued."
In any event, when the administration decides on the right formula, perhaps in the next week, the Ultimate Bailout will be unveiled for a global vote of confidence--by investors, politicians, the financial industry and world markets. That tally will tell us much about where the economy is headed and for how long.
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