Archive for the ‘Bailout’ tag
Obama goes from Spock to Kirk in one speech.
But is it too late?
Last night, Barack Obama finally put the hurt on the Republicans. Listening to Senator John Kyl’s floundering and blustering at the State of the Union address shows that it clearly hit home. Obama did what he had to do. He diverted blame for the economic shit sandwich firmly to the Bush Administration and told America that he hated the bank bailout in no uncertain terms. His frank, confident tone was a breath of fresh air, a pleasant surprise that left us wondering, where his this guy been for the last year?
It took the shock of the Massachusetts upset to get the President thinking he needed to be speaking the people’s language. And he did just that. It’s a long shot to suggest that a single speech will change the course of events in a significant way, but it could – if it’s the beginning of a full-on, sustained populist campaign. The speech was peppered with great sound bites, but one of the themes I was impressed by (partly because I’ve been touting the idea for 18months) was the idea that the government should be run like the American family. Bringing the business of government down to a human level is always a great idea with voters.
In my last post, I suggested that the President get on the road, work out of Air Force One, and talk to the people in this country that are really hurting. Getting into campaign mode, at the same time as attacking Wall Street, pushing the “good for business” aspects of Healthcare reform and other stimulus efforts, as well as enacting serious efforts to stem the foreclosure crisis will really help. As for the deficit, the message is a smart one. Let’s cut it! Except that we can’t in any meaningful way – and because economic recovery will do the job far better. People (who’ve wholeheartedly drunk Reaganomic kool-aid) like the idea. But deep down they know that actually cutting the deficit during the dark times would hurt them so they aren’t really interested in actually doing it.
Keep it up, Mr. President. Don’t make this a one shot lighter.
AIG. Was the Bailout From Hell a Mistake?
AIG = Ask an Idiot and Get
The word du jour right now is “rathole”, a rather ugly expletive that equates to plughole, drain, succubus, and other such unpleasantries. It may however be too polite a phrase for what is going on right now with the bailout of AIG, the government’s new pet project that looks like it’s going to hand the downpayment on fixing the nation’s health care shambles to Goldman Sachs and their ilk.
Just like everyone else in this country, I’m spitting with fury at the idea that the government is handing over money to keep these clowns out of the poorhouse. The bonuses should have been blocked way before they went public, and the fact that the President is being exposed to ye olde “What did you know and when did you know it?” game only eight weeks into his administration does not bode well.
Then there’s the irksome question of whether the meeting where it was decided to keep AIG alive in September of last year was actually a little joke played on us by Goldman Sachs. (After all the key people around that table were Paulson, ex-boss of GS, Blankenfein, current boss of GS, and Tim “someone put me out of my misery now” Geithner). We’ve known for years that Goldmans was a class above every other investment bank, but their ability to game the system seems utterly unparalleled now.
Finally, there’s this little nugget. We were told that if we’d let AIG die the global banking system would have collapsed. That the $1.6 trillion in Credit Default Swaps (CDSs) that they sold to the world’s top financial institutions who’d sunk their dough into those toxic assets would suddenly go away, leaving them totally exposed, and toppling like dominoes. Makes sense, right? I mean, if the insurance company backing those toxic assets goes belly up then the world’s banks are left holding the bag. Stands to reason.
Or does it? With the caveat that I really don’t know what I’m talking about, I’m not so sure. And here’s why. Read the rest of this entry »
The AIG Gravy Train – It Just Keeps Getting Worse
when the insurers need insuring to insure the economy doesn't go totally belly up, that's what i call insurance
Joe Nocera of the New York Times wrote a great post today which adds more grist to the mill on the price discovery issue relating to AIG’s credit default swaps (CDSs). Not only does the government end up propping up the most destructive derivative behavior around, but it does so while allowing AIG to maintain the confidentiality of their shady transactions.
And guess who that protects? You’re spot on. It shields AIG’s counterparties, banks, investors, and lenders who were looking for a way to ‘insure’ themselves on the quiet while they pigged out at the trough just before the fall. Nocera makes the point that this doesn’t sit well with the President’s call for transparency and he’s right. But it’s yet another example of the contradictions that Obama seems to be displaying. High principle on the one hand and almost Bush-like duplicity with the status-quo on the other. It’s becoming increasingly clear that Tim Geithner is lurching from crisis to crisis just like his predecessor. But the situation is far worse now. Paulson was a stooge and everyone knew it, a placeholder and agent for the Street. Geithner is supposed to know better. But he doesn’t seem to be able to escape the shackles of hide-bound “group-think”. Wasn’t the President supposed to put a stop to this kind of thinking?
Robert Reich and Howard Dean. Where are They?
Robert Reich - Not Treasury Secretary
Howard Dean - Not HHS Secretary
Many left-leaning Democrats are asking the same question. Reich would have been a superb choice at Treasury and Dean an obvious choice at HHS. Both are tough, forward-thinking progressive politicians with total command of the briefs in question. Many people inside and outside the Beltway are surprised that neither man was even in the running. Joe Trippi, a top Democratic consultant who ran Howard Dean’s 2004 Presidential bid, “I think Robert Reich would have been a better appointment than Geithner”.
And there are many others who agree.
So why aren’t they the nominees?
There are many, many reasons.
First, both Robert Reich and Howard Dean are liberals, and that means they don’t mesh with Obama’s all inclusive ‘new politics’ (or centrism as it’s otherwise known). They are mistakenly seen by the White House as skilled ideologues in a post-partisan world. Read the rest of this entry »
The Definition of Normal by George W. Bush
normal is just a word
It’s more than a tad ironic that one of the last and most important acts of the outgoing Bush administration will be to attempt an end-run around Republicans in Congress and allow a bridge loan to the US automakers from the the $700 billion set aside all those months ago for the purchase of “toxic securities”.
The White House supported this turnaround with a fabulous piece of Bush logic. To wit; In normal times, the Bushies would have much preferred that the market decide the fate of the automakers, but these, it suggests, are not normal times, and therefore extraordinary measures are needed.
Not a bad version of the West Wing Shuffle, one might think. Except the logic has one drawback. It is as a result of years of allowing the market to take its ‘normal’ course that we are in the mess we are in now. One doesn’t test the beliefs of true free market ideologues during normal times. The only time they can be truly tested is in extremis. Read the rest of this entry »
Some Bailouts Are Big Gifts. Some Bailouts Are Bad Loans.
Maybe it’s the rise of the Internet that did it, but there are an awful lot of lemmings in the fourth estate these days. Once the zeitgeist gets hold of a word it’s everywhere fast. That’s especially true of catch-all terms that lose their meaning the moment anyone begins to dig even a tiny bit deeper into a story.
Take the term “Bailout”.
In economic terms it means ‘assistance to a financial or other institution in distress’. But assistance can mean anything from a loan that nobody else will give with very stringent terms to a total and utter gift.
There have been a ton of bailouts in the last few months. We don’t have to list them all, we’re just going to focus on two ‘institutions’, Citigroup and the Big Three Auto manufacturers.
Let’s look at what these two have in common. Both of them are vast with global reach and influence. Both of them made awful business decisions in the short, medium and long term that led them to the brink of collapse.
Now let’s look at what people perceive they have in common, namely that both are “too big to fail”, another term of limited meaning. Citigroup is too big to fail because of the depth of its interconnected interests throughout the financial world. The Auto Industry is too big to fail because whole regions of the country depend on it for their economic welfare.
Finally let’s examine where they are different. Citigroup is a financial institution that buys and sells assets with client and depositor funds. It employs in the region 300,000 people worldwide. The Auto industry makes cars and trucks, is the backbone of US manufacturing and directly and indirectly employs around three million Americans.
It’s a tribute to how well the Finance, Insurance, Real Estate or FIRE sector has sold itself over the last twenty years of the Reagan Revolution that a bloated, shapeless and rudderless behemoth of a bank should be regarded so highly, while the jewel of America’s industrial crown should be treated as if it’s already on the scrapheap.
That contrast is perfectly reflected in the way that the United States Congress and the Administration has handled the ‘bailouts’ to Citigroup and the Auto Industry. Read the rest of this entry »
Ford + GM Have Been Making Small Cars For Years. In Europe.
Recognize these?
The one on the left is a Ford Ka, the one on the right is GM Vauxhall Corsa.
Small, good-looking, low cost, not at all thirsty, and sold in Europe for years.
Ford and GM during their latest congressional grovel sessions, said they’d tool up to produce small cars in the US. Great idea, except they’ve been making small cars for decades. Good ones too.
Here’s the rest of the Ford Europe Range, and here’s the GM Europe Range (brand name Vauxhall). Take a look. Would they be able to take on Toyota and Honda in the US? Definitely.
They both have great well designed ranges that could be really competitive in the US, with low emissions, great gas mileage (almost as good as a hybrid for way less money) and far better European styling than we’re used to here in the US even from the Japanese.
So why weren’t they for sale here? Read the rest of this entry »
Treasury Runs Out Of Money To Give Away. Fed Rides In
paulson + bernanke
This is getting silly. Two days ago, Toxic assets were out. Then Treasury bailed out Citigroup’s…toxic assets. And now the Fed (they’re the ones who actually print all those T-bills) have taken over and pledged $800 billion to bail out all toxic securities built on consumer credit card debt. In one fell swoop that’s a bigger bailout than the one we haggled over during the campaign.
Crass incompetence is kind of quaint when we can chuckle about it in other parts of the world, but when it’s taking place here at home and hitting you hard in your pocketbook it’s not quite so funny. It only goes to show, you can only really judge the quality of government during a time of crisis.
By the time Obama rides in, we’ll be lucky to have an economy left at all.
The Fix is In – The Long and the Short Of Wall Street
Another bumper day on the Street. The Government bails out another basket case bank. Everything’s right with the world. Hurrah! Yet again, Wall Street proves it’s an utterly amoral, self-interested, club that has nothing whatsoever to do with you and me.
panic on wall street. or not.
Massive market volatility, huge gains on the basis of nothing, followed by huge losses and back to gains. Is there a pattern to all this? Not on the surface, at least. The press loves reasons, and tacks on some or other reason for that day’s movements. Recession indicators, new appointment at Treasury, another baby for Angelina and Brad.
But maybe something else is in play too, something mysterious, something very, very fishy.
Traders either go “long” hoping a stock will rise, or they go “short” on borrowed stock hoping the stock will drop and they get to keep the difference on the sale. Long traders and short traders are not in competition, but supposing they were, even in some unspoken way, in collusion. Wall Street traders aren’t known for their mild-mannered approach to business, so could be…
Let’s Talk About “The System”
hi, i'm the system
Back in the eighties there was an awful lot of talk about the nefarious “system”, a deep and dark conspiracy of the powerful to keep down the powerless. Before resentment became a tool of the right, it was a clarion call of the unreconstructed left, a youthful, incoherent, but somehow meaningful rallying cry that drove many a drunken, sophomoric conversation. You don’t hear too much about “The System” these days. Nobody seemed to care anymore, when “The System” was delivering them flat screen TVs and great opportunities to flip condos.
But it seems to me that it’s time to revive talk about “The System” because it’s become very clear what it is.
Undiluted socialism for the rich and influential, and the legal and enforcement system to protect it. Read the rest of this entry »