Well, it was only a matter of time before Tim Geithner ruined one of my weekends, and apparently, it's going to be this one, to be followed, possibly, by all the rest of them. Yes, the Obama administration has leaked the details of their banking fix, and as it turns out, the whole thing might as well be titled Plan 9 From Goldman Sachs. What they intend to propose is nothing more than the same TARPy goodness they've already run up the flagpole, that's not substantively different from anything Hank Paulson did, that didn't get credit flowing to Main Street, and that won't offer the banking system the systemic shock it needs to change its behavior.
In short, they've taken stock of the landscape and have decided that they just cannot imagine a future without Citibank, Bank Of America, and other insolvent institutions carrying little more than Blade Runner brand names. What needs to be accepted is that it's the end of the road for those guys. Yeah, it's been a nice run, but it's time to carve 'em up, strip 'em for parts, get our receivership on, and move on into the future. By Obama's own admission, this old husk of a banking system won't be the mechanism that spurs short term lending anyway. And unfortunately, smaller banks that can still put money on the street are going to end up taking a haircut they don't deserve.
This thing has gotten Gigli-like reviews, folks. You've probably read Krugman. Here's Galbraith, Baker, Yves Smith. You know a positive review of this not written by a voodoo witch doctor with a pair of ladies panties on his face, you let me know!
Anyway, good morning. My name is Jason and this is your Sunday Morning Liveblog. Let's see if any of our beloved media have a discouraging word to say about this plan. This could be something that even Bill Kristol gets right. (By the way, if he comes out in favor of this plan, today, COMMENCE TO PANICKING. Send me an email, why not, or leave a comment, or follow me to the end of civilization on Twitter. And enjoy this:
We would have also accepted, "Hey, Joe Stiglitz."
FOX NEWS SUNDAY
Fox News is apparently still worried about DEFICITS. Oy! IT'S THE FALL THAT'S GONNA KILL YOU, SUNDANCE!
Anyway, Christina Romer is back. What about this CBO estimate? Romer says that the CBO numbers are different because they are underestimating the rate of GDP growth. She also maintains that the White House plans to cut the deficit, and that the health care plan will help cut down the deficit. As far as making additional cuts, they won't be coming from education, energy, and health care, according to Romer. Wallace, though, is not the sort to accept the cost-saving, or revenue generating aspects of these programs. But the pessimistic growth is probably more realistic. Romer won't bottom line anything beyond saying that the White House will work with Congress on the budget.
So, banking plan. Has the anger toward AIG chilled the chances of private investors getting involved with the coming market of toxic assets? Why should it? Private firms get in for 3%, can possibly get a 20% rate of return, stick the taxpayers with losses. It's about as amenable to the corporate zombie machine as it can be.
Christina Romer is a terrible advocate on the teevee for any plan. She just doesn't seem to believe a word she's saying, and is compensating for it by being as patronizing as possible. It's like she had a breakfast of rosy scenarios.
Does she have any worries about inflation? We have a low, low rate of inflation right now! It's been argued to me that a little bit of inflation might be useful.
How confident is she that these policies will work? Romer says that she's very confident. A year from now, "we'll be seeing the signs." And so, she'll be back on Fox News Sunday in one year, which will probably be broadcast on a ham radio out of Chris Wallace's garage.
And now, Rangel versus Shelby! Wallace asks Rangel why anyone would want to do business with the government, after all the hostility directed their way. Know what? This would be a good chance to point out something. Do these financial institutions want to do business with any American? Because doing business with the government=doing business with taxpayers. The point is, it's time they did business on our terms.
Richard Shelby is muttering, "We have loss of signal. No signal. Phone buzz, and now it's gone."
Wallace asks Rangel about his change of heart where using the tax code as a weapon goes. Rangel specifies, I guess, that he means using the tax code as a weapon "against taxpayers." But against AIG, it's okay. What about all the campaign contributions Rangel has received from AIG? "You seem to have changed your tune about" AIG, Wallace says. "It is just that so," says Rangel, who goes on to lamely point out how he's only sucked on the AIG teat a little bit, you know, for the kids! Anyway, his bill will affect other financial companies, so maybe he won't be getting those monies anymore. Won't matter, Rangel's gonna hold his seat FOREVER AND EVER.
Shelby is back from technical difficulties, and he's not happy with Tim Geithner and deems him on "shaky ground" where Congress is concerned. Additionally, Shelby seems to find his own lips to be delicious. Shelby is terrified of deficits. Rangel thinks that Americans need to fundamentally change their way of living, and that there are education and environmental policies coming that will help with growth.
Wallace and Rangel end the segment by digging into Rangel's ethics charges, which Rangel writes off to the ravings of a New York Times reporter. Wallace points out that the ethics committee has had six montths to clear him and haven't yet. Rangel says that's a product of all the holidays that have taken place over that six month period. So, Congress really needs to work more, I guess.
Panel time! With Grumpy, Xanax, Smarmy, and Blanks. Hume thinks that Obama should have tempered the outrage, but that he found it too hard. Liasson continues to suggest that no one is going to want to participate in the sweetheart deal they're being offered to participate in the toxic asset plan. Kristol seems to think that when you read "ten economist blogs" on the matter, you get "ten different opinions." Really? I seem to have been reading the same opinion, over and over again. Luckily, for all of us, this does seem to be a matter that Kristol can get right.
Wallace opens up his Tim Geithner slambook. Hume says Dodd is in more trouble than Geithner, and brother, he ain't kidding! Between two contradictory explanations, the apparent ill effect of his provision, the fact that he's up to his neck in Mozilo/AIG cash, Dodd is in deep. And the whole "Treasury made me do it" excuse is complete crap. We all got free will and what not! Treasury doesn't have a goddamned Chris Dodd voodoo doll.
Liasson says she hasn't heard a word about the stress tests. She needs to listen. Jay Leno has heard about the stress tests. Whether they are calibrated correctly or not is the question.
And more hot fire directed at Tim Geithner. Can't help you, Tim! Seriously. Dude needs to recognize that these banks are dunzo. We ought to be talking about receivership, plain and simple. And yeah, you're going to ravings from the Congressional Joe The Plumber set, but so what? That lot can't win! It's stunning to me that the administration could squander so much political capital on the empty fear that the opposing side might be holding any. But Obama's the only game in town! He needs to go all in, and stop half-stepping. With the right fix, no one's going to remember the slips and fumbles of the first few months.
Meanwhile Iran. Obama's reaching out to the Iranian people is good thing, if only because Kristol hates it! What a load of garbage. It was a direct message to Iranian citizens, and insofar as certain Iranian deadender apparatchiks came back with a toothless "list of demands" is utterly irrelevant. Hume, of course, hates it, too, because it's just not diplomacy unless it's underpinned by the point of a bayonet. Hume says that the "worst thing the Iranians could do is respond positively" to a diplomatic overture. WHAT? Seriously? The slow march to military conflict is preferable? INSANE. And now Kristol is calling it APPEASEMENT, and the drive to ETERNAL RIGHT WING CLICHE IS ON.
Emailer Jeff P.: "Bill Kristol would like America to adapt the Iraqi banking system." Ha! Know who's advising the Iraqis, Bill? ZOMBIES. BRAAAAIIINSSSS.
THIS WEEK WITH GEORGE STEPHANOPOULOS
So, people are angry! ANGRY! Kent Conrad says he doesn't know if the Senate will vote for the tax clawback plan, and he's not sure he will vote for it. Conrad says that AIG needs to ask their people for the money back, or take it on the arches. I think, that given the chance to take to bonus AND get fired from AIG, I might take it. Though, let's face it, AIG on a resume is going to look bad. But hey, school systems are hiring! We need folks on some shovel ready projects!
Susan Collins is not against getting the money back either, but she, like Conrad, has got nothing more than politely asking for it. Or Geithner should "put more heat" on AIG. Pence wants you to know he opposed the bailout in the first place, so vote for him.
Jared Bernstein says that the White House will pursue any legal means to getting the money back - and basically skates up to simply saying that the clawback legislation is well-intended, but terrifically unconstitutional. He says that the bill may be of concern to Obama, but we'll have to see what bill hits his desk.
Now Pence and Bernstein are arguing about who has the legal means to do what. Pence wants it simply to be a matter of not giving any bailout money until the bonuses are paid back. I'm not sure he appreciates how small potatoes the bonuses are, or who is holding who hostage at this point. Susan Collins wants to go back in time and yammer about how the Treasury should have done something different way back when. I don't know Susan - I remember when the Paulson plan came out. Did you vote for that, Susan? If so, did someone force you to do so? And anyway, that horse is on the track!
Bernstein seems to be the only person in the room who's capable of understanding the longterm savings offered by reducing health care costs and achieving energy reform. Mike Pence, by contrast, promises to put forward a comprehensive alternative budget that will put a freeze on spending and exacerbate the downward spiral in the economy. Luckily, Pence doesn't have the votes to pass that nonsense, and so he can talk about how God is the primary driver of the American economy and Hooverism. Conrad and Bernstein, wisely call him out on this anyway. Of course, Conrad "agrees" that a more sustainable budgetary path is needed, long-term. BUT THAT'S WHY YOU REFORM HEALTH CARE AND ENERGY NOW. But whatever: these are the problems these guys run on solving, after they've created them.
Susan Collins sticks up for everyone who wants to filibuster the stuff the American people want. I personally, am still very deeply desirous of the Senate leadership to actually force someone to filibuster. In this environment, let the American people see these idiots reading from the dictionary. See how long it lasts.
Meanwhile, Panel Time! With Betsy Stark, Donna Brazile, Robert Reich, and George "Bringin' That Fraud To The WaPo Op-Ed Pages" Will.
Will, also, will pretend that "populist outrage" against AIG will be the reason no one gets into the sweetheart deal being offered by Geithner. LET'S HOPE HE'S RIGHT. Because I'm afraid that someone out there IS going to take Geithner up on his offer!
Robert Reich, God bless you: "Many of these banks should be put into temporary receivership." This is the irony: this administration is the only gang in town who can sell receivership. That they're not is infuriating.
Reich: "The hybrid that is being created right now is the worst of both worlds." AHH, PREACH ON, BROTHER REICH. Will agrees with Reich on that point, which terrifies Reich a little bit.
Reich is just killing it today: "If workers can be made to make concessions, why not executives." Will says this is what bankruptcy is for. Reich says, yes, that's my point. Stark thinks AIG is too "systemic" to be put into bankruptcy. Brazile counters by saying this is why "too big to fail" is a fools game. And I'm like, woo, hello! Lots of bad deregulation brought us to this point.
Reich rains all over Brazile's Ben Bernanke parade by pointing out that the Fed is "the least democratic part" of the government and is being asked to do things it wasn't designed to do.
Reich praises Geithner for bearing up under pressure, and recognizes that the economy is not his fault, but that he's not cutting a strong enough figure, publicly. Here, Reich sort of loses the thread, because better marketing won't make Geithner's plan better. Only a better plan will make the plan better. And as I've pointed out, MARKETING PLANS CORRECTLY should be the least of Obama's concerns. He's got popularity and political capital and no credible opponent on the horizon. He's acting as if the political state of play is aligned against him, and it's not.
Up until that last part, Reich was making a lot of sense. So much so that, yeah, I found myself not really caring about what the other people were saying. Sorry!
MEET THE PRESS
An emailer, "knelke," sends two defenses of the Geithner plan not penned by "voodoo witch doctors with ladies' panties on their faces." The first, by Brad DeLong. The second, via Ezra Klein, by Lucian Bebchuk. Judge for yourself. Without getting too deep in the weeds, I'd say that Bebchuck is peddling a lot of false hopes.
As for DeLong, if the good news is that Geithner's plan will right the economy, the bad news is that these institutions will still be run by the same people who ran the economy into a ditch - except they'll have their hooks into us deeper, and they'll be fantastically unafraid of the consequences of their decisions going forward. This style of bailout - without serious repercussions or the consideration of anything tramsformative - will become the means by which these industries are salvaged for their poor decision-making going forward.
Make no mistake, there has to be some real pain, real repercussions, real oversight meted out, and hopefully it won't stop with the architects of this disaster. It must be visited upon those members of Congress who took their money to save their seats in Congress a hundredfold.
So, with that, on to Meet The Press.
By the way, I have no idea what a CTIA is, but am thankful that they used Roxy Music in their commercial.
MTP kicks things off with a discussion on infrastructure spending with Schwarzenegger, Rendell and Bloomberg, the Three Musketeers of Shovel-Ready Goodness. For some reason, David Gregory starts off by referencing the AIG debacle, I guess because he gets a food pellet everytime he utters the most conventional words imaginable. Awkward segue into infrastructure spending follows.
Schwarzenegger says he's long been a proponent of infrastructure spending, because of the economic boost offered by more efficient supply chains. He talks about the partnership with Rendell and Bloomberg. As I've pointed out before, back when I was tracking nationwide public works-related news for my old job, Rendell came up again and again - as governors go, no one was more apt to give the press details about his states public works projects. Oh, what I have managed to forget about Pennsylvania's municipal wastewater initiatives.could fill a shelf of books!
Gregory wants to know, "What is infrastructure?" I want to know why maybe Dora the Explorer couldn't host this segment. Rendell says it's more than "just transportation infrastructure," it's levees and dams and, HA! WASTEWATER SYSTEMS! Better infrastructure upgrades also brings new life to dead communities. Infrastructure spending in the Rust Belt could revive those areas once the economy rebounds. (Yes. I'm meeting you optimists halfway, okay!)
Bloomberg, bless him, notes that the ambitious parts of the agenda - healthcare, education, and energy policy - are the sorts of initiatives that also pave the way for economic growth. Of course, if you are in the traditional media, all those are THE OTHER THING that Obama cannot possibly tend to while he's FIXING THE ECONOMY, the economy that depends on those OTHER THINGS getting done for the FIX TO ACTUALLY HAPPEN. Gregory, true to form, tries to GOTCHA Bloomberg, "But you said Obama SHOULD prioritize." Bloomberg says that the time is now to "galvanize" support behind these measures. It takes a long time to get projects going, so it's best to start now.
Bloomberg also attests that Obama is highly engaged on this issue.
Gregory still wants to know who will pay for it, because serving the taxpayer with great infrastructural return for their investment is, to Gregory's mind, the same thing as taxpayers funding AIG bonuses. Schwarzenegger points out that Americans want these upgrades and they are "willing to pay for it." He uses supply chains as an example: reduced costs bring the costs of goods and services down, bang for the taxpayer buck. Plus, there are the accrued benefits of cheaper travel, better roads, shorter commutes, etc.
Rendell strikes a nice contrast to the news of the week, demonstrating how the tax code can incentivize private partnerships. It's a good message to send in a week where the same tax code is being used as a clawback mechanism. Gotta hand it to Rendell, he's making the case for infrastructure look like a smart move. Bloomberg thinks that the initiative will provide the confidence the marketplace needs.
I find myself wishing these three had done their superhero team-up before the stimpak got carved up by pretend centrists.
Rendell: "The American people are against spending that they can't see...they can't get their arms around" bailouts.
GREGORY: Now, no one at AIG is accused of any wrongdoing or any crime. Just bad judgement at the very least.
ME: Whoa, whoa, whoa, there, David Gregory. Let's find some middle ground between committing a crime and using bad judgement. You go read Matt Taibbi's soup-to-nuts on this whole thing and come back and tell me if you can suggest that all of this was a simple matter of a few honest mistakes! Good grief! No, this wasn't illegal, but it was WRONG all the same! Demonstrably wrong! And the people that perpetrated this knowingly participated in a massive con. They meticulously structured these derivative products to make the risks invisible to the naked eye. They indulged themselves in the rosiest of upside scenarios. They batted nary a lash at the overseers of this economy. They exploited the fact that those of us who are just walking the earth down here cannot keep up with jargon and the calculus and the pure byzantium upon which it was all founded. They gave kings' ransoms to elected officials, to keep their system in place.
And now, they are using the same set of obfuscations to argue: WE ARE THE ONLY ONE'S WHO CAN GET US OUT OF THE MESS WE CREATED.
Crime OR bad judgement? FALSE CHOICE.
Schwarzengger points out that the American people need greater accountability from elected leaders and from Wall Street. But that the topic they have come to discuss, is infrastructure.
But that discussion is lost. We're onto all-AIG all the time. Jeez. HEAVEN FORFEND MEET THE PRESS OFFERS AMERICA A DIFFERENT DISCUSSION THIS MORNING. I appreciate Bloomberg's point that not every AIG employee is a KING DICK OF THE UNIVERSE. We shouldn't be lynching the people managing payroll and procuring office supplies and running their IT and what not.
It's funny to hear people talk about the crisis-opportunity metric. Weirdly, I think that because Rahm Emanuel once said that we shouldn't waste a crisis, that there's been all this cynicism attached to the idea that crises equal opprtunity. Everybody who goes to work in national service believes in that hopeful, dynamic exchange very deeply. I believe we should treat crises as opportunities. I think we should own that. I think we need that. I'm glad that Arnold is speaking like an unjaded idealist about that.
I have to laugh at the whole question about whether Obama has "gotten caught up in the anger for political reasons." JESUS. They had a whole sketch on Saturday Night Live that poked fun at the fact that Obama seemed to be the only guy in the room unwilling to rise to fury! It was funny because it was true. And sort of weird, in its truth!
Bloomberg: "He has to explain to the public why we have to get a functioning banking system, why we want to reward people who take risks and are successful."
All these guys support the President and support Geithner, and man, hey, I hope they end up being right! I'd love to be wrong when I say I'm not a fan of this banking plan. I am ready, right now, to throw a party to my wrongness! Everyone can throw pies at me!
Clearly though, these guys are right that no one should have expected the stimulus package to start working THE NEXT DAY.
Bloomberg sort of makes my point, though: "The president can't worry about what's politically popular." Definitely. Like I said, he's the only strong brand in politics right now."
Arnold turns Gregory's question on his pessimistic take on his approval ratings into a fundamentally sound and passionately argued statement on infrastructure spending as it relates to employment. Just to the bottom of the frame, you can see Rendell pointing in agreement. And Bloomberg attests to the stimulative effect of a well-educated populace. All three governors speak very optimistically of the future.
And for some reason, these three have to take this weekend's "Special Olympics" question. Schwarzenegger says that it was a "slip" but that the President's heart, he believes, is in the right place, and that they'd previously had discussions about the Special Olympics program that cause him not to worry about how the President feels. And then, nicely, Schwarzenegger talks at length about how great the Special Olympians are and how the program has grown to honestly kick-ass heights.
My wife works with special needs kids every day, and I can tell you that I really govern myself tightly against making those sorts of remarks. Hey, it's not easy! Exercising self-control isn't meant to be easy people. But, I think that reflecting on what a struggle it is for these kids to have a happy childhood really helps. And the kids my wife works with are really great!
My wife, by the way, has a hoodie with "PL 94-142" on it. Extra points if you know what that is!
OKAY, here we go. Erin Burnett basically describes the Geithner plan as: PAULSON PLAN+undefined "sophistication." Here's the key quote: "If it works, this means the banks have some freed up space to make more loans and that's if it works." Of course, that Paulson plan did such a BANG UP JOB getting banks to lend again, didn't it? So, either TARP II manages to hit the magical money threshold at which points banks achieve capital equillibrium and the toxicity is removed from the balance sheets, and - BLAMMO! - loans! Or, as I fear, we miss the magic money threshold, the downturn roots, and we're told that a third pass at the magical money threshold (which will be called, pun intended, "TARP THREE: TOKYO DRIFT") will be required. And at no time will the toxic managers of these monies be stripped from their footing in the financial system.
Tom Brokaw says that Geithner must "move to the next round" by defeating economic Gonzaga, I guess.
In discussing Geithner, you could call Obama Aaron Burr by the way he's dropping Hamilton.
Now three people who are gonna come out of all of this just fine, where personal wealth are concerned are talking about social contracts. Hope you all feel like your souls are getting stirred.
Now Gregory is showing some clips of a relatively calm Obama, supposedly "governing in anger." It just doesn't seem to me to be the sort of anger that, say, breeds an unnecessary military expedition in Iraq.
"I think everyone, not just Wall Street, was shocked to see the level of rancor," Burnett says. I don't know! Seems like much the same old rancor!
Brokaw says that it's okay to be angry about the AIG bonuses but that there are better ways to get the money back. Are there? Brokaw cites Thomas Friedman's idea of, basically coming on bended knee and asking politely for it back. I don't know Thomas! Should Obama show such weakness while the TERRORISTS ARE WATCHING?
Brokaw offers this breakthrough: "The motivation for people who go to work on Wall Street is that they want to make money." As Matt Yglesias counters:
If you think of a talented and ambitious businessman, after all, you have to remember that you're talking about a guy who, unlike normal people, mainly focuses his life on earning as much money as possible. That's a weird state of mind in many ways. But it's a good thing there are some folks like that around, because one good way to earn a ton of money is to invent a product that lots of people find useful when sold at a profitable price. None of my best friends are talented and ambitious businesspeople, but most of my favorite stuff is made by firms managed by such people. But if you're a talented and ambitious businessman working at a government-support zombie financial institution then you don't earn your riches by selling products to people. Instead, per Simon Johnson here and here, you maximize income by maximizing "tunneling," i.e. "borderline legal/illegal smuggling of value out of businesses" and finding other ways to bilk the taxpayer.
If it turns out that you can make a comfortable living at zombie institutions but can't earn big bucks there, then smart, confident, ambitious, greedy people will leave their jobs and go do other things. In a good way! Maybe they'll start small businesses. Maybe they'll join non-enormous, better-managed firms and help them grow and prosper. That's the kind of thing smart, confident, ambitious, greedy people ought to be doing. Putting their talents to work in the pursuit of profitable market exchanges. Not putting their talents to work trying to run scams at taxpayer expense. What needs to happen at these firms now is a quiet, orderly, lawful winding-down of business so that the institutions themselves can be broken up and the world can move beyond this mess. That's no kind of job for an intelligent and hard-working, yet money-obsessed, individual. It's a job for a competent civil servant who's happy to draw a decent paycheck to do something useful with his life.
Let the business geniuses, if any there be in these firms, get out and go do something useful.
Like Tom Brokaw! He wrote a book! He wrote a bunch of books, and made money, and it didn't hurt anybody.
Erin Burnett ponders the future: "We're probably not going to have three cars in every driveway. We might have two cars. Or one car."
Or we may have NO CARS and a well-funded public transit system. We might WALK a little. We might have congestion pricing! We might have carbon auctions that generate revenue for even more affordable transportation. Oh, but I'm thinking too big, I guess.
Ahh, and that's that. Really, go watch some basketball now. We'll see about this banking proposal this week. I sure hope Mr,.Geithner's right, and that I'm wrong about PLAN 9 FROM GOLDMAN SACHS. Like Romer, I'd be only too happy to come back in a year, and testify to how wrong I was about this banking plan. But I said the same thing about going to war in Iraq! DIDN'T WORK OUT TOO WELL, AS IT TURNS OUT. Have a safe and happy week!