Remarkable Chaos

by: Matt Stoller

Mon Nov 24, 2008 at 11:20


I'm having trouble wrapping my head around the politics of the current bailout and transition.  The government is now going to lay out $7.2 trillion in lending to the financial system, which Congress ratified with the bailout vote.  And that TARP program is rumored to be enlarged to $1.2 trillion from its current $700 billion amount.  Citigroup is being bailed out with a remarkably awful deal for taxpayers, where the government takes a small percentage of the company in return for hundreds of billions of dollars.  Robert Rubin, who should be living in disgrace, is going to be an important force in the White House, Larry Summers, who helped cause a lot of the policy problems, will run the Fed in 2010, and Tim Geithner, a Rubin disciple, is going to be the Treasury Secretary.

All of this is in the name of 'stability.'  Of course, the automakers are on the brink of devastation, Blanche Lincoln is 'undecided' on the Employee Free Choice Act (so much for that 60 votes in the Senate threshold), and that promise to revise Bankruptcy Laws is far in the distance.  This would be mindblowing if I hadn't watched the runup to the war in Iraq, the impeachment of Clinton, and the elite self-protection games that have gone on for years.  I never expected Obama to be a progressive (since he kept saying he didn't believe in ideology and wasn't part of the left), and took a lot of heat here for saying that repeatedly.  And he's obviously not.  But more than that, I'm just kind of floored by the automatic pilot this political system is on, even after ten years of obviously horrible and embarrassing public policies.  

It's just simply awful.  The law?  Pff, whatever.  The WTO?  No, the rich people want subsidies, that's cool.  Congressional authority?  Nah, it's obvious that the executive branch is going to be dominant for the foreseeable future, and that the public has very little input into, well, anything.  The Very Serious People are still as powerful as they've ever been; we might have helped shuffle around the Village a little bit, but that is it.

Man I hope there is an Obama movement, distinct from Obama himself and with leaders who can create oppositional and proactive stances.  This is really really bad.

Matt Stoller :: Remarkable Chaos

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Remarkable Chaos | 30 comments
It's so weird (4.00 / 9)
It's strange that so much money can be dumped on CitiGroup without anyone batting an eye -- a company whose man focus is to engage in usury -- but a much smaller loan to the auto industry requires a protracted congressional battle.

Conduct your own interview of Sarah Palin!
An eye was batted (4.00 / 4)
There was a big fight over the $700 billion bailout package. While the CitiGroup gift is only partially authorized by that bailout, the principle that Wallstreet should be bailed out at all cost was ratified by congress passing the bailout. That bailout fight was resolved after Obama leaned heavily on the Senate to pass the bill without requiring the financial industry to give up anything.

So far, Obama has not apparently leaned on congress to do anything about the auto industry. Why not? Given Rubin's role as advisor to Obama's economic transition team, this stinks enormously.

[ Parent ]
Well, until the Obama' camp's recent... (4.00 / 1)
...180 degree shift in tone, the scuttlebutt was that Obama was working behind the scenes...  He didn't want to get out in the forefront of the issue, yet, 'cos he wasn't president, yet... and there was a good chance any bill in the lame duck session would fail... so, he didn't want to be associated with that...

The explanation made good sense, and I agreed with it... but, now, they've shifted tone 180 degrees echoing the right wing talking points, so I have no idea what ultimately will happen here...  We're starting to get the idea up here in the rust belt that we may have been betrayed...  

REID: Voting against us was never part of our arrangement!
SPECTER: I am altering the deal! Pray I don't alter it any further!
REID: This deal keeps getting worse all the time!

[ Parent ]
Obama Good Stuff (4.00 / 1)
On the other hand Obama will:
1. End the war in Iraq
2. Install universal healthcare
3. Create a jobs program
4. Promote green energy sources

So ... we can't get everything ... yet.

McCain on the minimum wage

Or... (2.00 / 4)
1.  We never declared war in Iraq.  It's a question of when he will bring our massive numbers of troops who are stationed there home.  And it's looking like that might be delayed.

2.  Obama has clearly said he is against universal health care.

3.  Sounds a little vague doesn't it?

4.  "Clean coal"

[ Parent ]
point, counterpoint (0.00 / 0)
I hope this exchange is meant and taken as an illustration of how things can be read differently from different perspectives.

Obama can't be roundly condemned for actions he has yet to take, nor can he be lauded for them. A hopeful skepticism is a good progressive position: hopeful so that Obama can be supported when he does good, skeptical so that we don't waste time before criticizing him for falling short.

[ Parent ]
An emotional counter-rant at Booman last night (0.00 / 0)
Some valid points, but I'd like to see more...

http://www.boomantribune.com/s...

John McCain won't insure children

[ Parent ]
carrots and sticks? (2.00 / 2)
Administrations don't respond to carrots and sticks immediately after they have been elected to office.  They're only effective before election day.  It's silly to try to transfer the 'hope' meme to post-election politics, which, rather, are based on competing, and unevenly positioned interest groups vying for power.  Believe me, the neoliberals currently usurping the important administration decision-making positions feel just fine about themselves without our cheerleading.
[ Parent ]
earth is flat, earth is round (0.00 / 0)
"I hope this exchange is meant and taken as an illustration of how things can be read differently from different perspectives."

Well, yes. But in this case, one "perspective" (a pretentious term for "statement") is false, and one is true.

[ Parent ]
My Response (0.00 / 0)

1. There is/was a war in Iraq - whether it was declared or not.

2. OK - health care for everyone who wants it

3. 2.5 million is not vague!

4. But also all of the other non-oil sources.  Solar, wind etc.

It is easy to find fault or just blow things up.  It is harder to build.  I think Obama is a builder.


McCain on the minimum wage

[ Parent ]
A truly shocking amount (4.00 / 3)
The Fed has effectively written a CDS on 250 billion dollars of slightly-written down bad debt. This is probably a worse deal than the monster CDSs AIG wrote which brought down that billion-dollar company. And the rate is minuscule - it's actually rating this mortgage garbage almost as safe as the US government Treasuries! 7 billion dollars for a 5-year guarantee of 250 billion is only 0.56% - an extraordinarily low rate. How can it possibly be legal for appointed bureaucrat to make giveaways of this magnitude? If financial stability required maintaining Citi, it should have been effectively nationalized or put through something resembling Chapter 11 bankruptcy.
Let's wait for economists to review the Bloomberg calculation (0.00 / 0)
Looks like they added EVERYTHING up, whether it's actual payments or not. Do guarantees, which will only lead to money transfer in case of default, really belong into this calculation? That's a bit as if they added the costs of rebuilding New York, taking as granted another 9/11 will happen. This math smells fishy to me.
This is a good point. (0.00 / 0)
When I first read this news, my reaction was, "holy shit. are we all just fucked? is there any, like, hope?", and I would still like to know the answers to those questions. But waiting to find out more info is often a good idea.
[ Parent ]
The amount is still huge (0.00 / 0)
We won't know the true amounts for years. But, for example, the Citi guarantee is probably for their worst assets - otherwise it wouldn't help much. Merrill Lynch's worst assets got 22 cents on the dollar - which would make the Citi giveaway (it would have to have more conditions to even call it a bailout) cost about 150 billion. Certainly, all the giveways so far are going to cost more than a trillion.
[ Parent ]
big shitpile (4.00 / 1)
I am not an economist. Here is my layman's view of all this:

There are about $14 trillion in mortgages. There are $70 trillion in credit default swaps. $70 trillion minus $14 trillion = $56 trillion. Assuming that no more mortgages fail, that leaves $56 trillion worth of imaginary bullshit. Is this attempt to bail out the financial industry a hopeless case of throwing good money after bad? When will it end?

What would happen if the government just let all these banks go into bankruptcy, have the government take over whatever is left of these institutions and keep making the loans that need to be made to keep the real economy going. And take a fraction of what this bailout has cost and put a trillion into the real economy to build infrastructure and green energy and help poor people and  prevent state and local governments from having to lay people off?

miasmo.com

[ Parent ]
Chris Hedges Sums it Up (4.00 / 8)

"Our oligarchic class is incompetent at governing, managing the economy, coping with natural disasters, educating our young, handling foreign affairs, providing basic services like health care and safeguarding individual rights. That it is still in power, and will remain in power after this election, is a testament to our inability to separate illusion from reality. We still believe in "the experts." They still believe in themselves. They are clustered like flies swarming around John McCain and Barack Obama. It is only when these elites are exposed as incompetent parasites and dethroned that we will have any hope of restoring social, economic and political order."

The Idiots Who Rule America

Nails it completely as far as I am concerned.


Lincoln and Landrieu and Nelson(x2) and Bayh and Johnson (4.00 / 3)
can all vote against EFCA, they just damned better not vote against cloture and help the Repubs filibuster. Of course, we are talking about Harry Reid here, so my faith in party discipline is close to nil.  
Yeah, when vicious attacks on your presidential candidate (4.00 / 2)
result in no meaningful punishment, what punishment could possibly be inflicted for going rogue on one vote?
[ Parent ]
For the rich only (0.00 / 0)
We all like to talk about government by the people, for the people, etc., but the truth is that the government is a corporation, and is beholden only to its shareholders, i.e. the wealthy. The "people" are needed for their votes, which are secured via high-tech marketing campaigns--"change you can believe in" for example.
So we have come full circle. (2.67 / 3)

Soon we will have caught up to Nader (that scumbag asshole!). Our job now that the Republicans are marginalizing themselves is to replace them except we must do so on the progressive side of the Democrats rather than the authoritarian side.

But we are trapped by the "two party" system here of first-past-the-post (plurality not majority elections) geographically based (gerrarymandered) winner-take-all (only one representative per district.)

At worst the Republicans will come back. At best we will have a new Chicago style system where Democrats rule as a one party system made up of Daleyites.

So then the question becomes how do we create a progressive quasi party within the Democratic party?

We could do it with technology like Obama did with his volunteer system. But that's going to take some professional grade software and management.

Jeff Wegerson

We are laughing (4.00 / 1)
at the Republicans, whose only answer to electoral failure is always to "become more conservative" and yet the entire system these days is premised on the same thinking that makes "damn the torpedoes" seem like wise strategy.  

This is conservative capitalism's "surge."  It will be a "massive success" - just ask its beneficiaries, they'll tell you.  

We will pay for this (0.00 / 0)
Ask the Iraqis what it's like to be at the receiving end of Republican destruction. That destruction is now being wreaked on our economy, and such resources we have that could help are being stripped away by this corruption on an incomprehensible scale.Yes, it will probably result in electoral oblivion for them, but it's not worth it.
[ Parent ]
How awful things are (4.00 / 5)
I just don't think anyone has any idea what's going on. There's nobody in charge and Obama has to be de facto president 2 weeks after he's elected. If I were him, I'd look around for whoever I thought could give a cogent explanation of the situation and suggestions for how to approach the problem. You can't start talking solutions (and have any confidence that they're actually going to solve something) yet because nobody fully understands what it is they're trying to solve.

When I was in business school, I studied with a guy named Russ Ackoff. His approach to problem solving was very organized and started with what he called Formulation of the Mess, mess being defined as a system of problems that defied simple solution because it was a bunch of interrelated problems rather than an individual problem. This is what needs to happen here.

Romer and Barnes (4.00 / 2)
Now that we have Obama's official announcement of his economic team this morning, what does everyone think of the picks? I think everyone's weighed in on Geithner and Summers, but what about Christina Romer (director of the Council of Economic Advisors), and Melody Barnes (director of the Domestic Policy Council)? Both seem to be more from the progressive side, even if they're at second-tier positions.

Conduct your own interview of Sarah Palin!
EFCA is going to be a tough slog... (4.00 / 3)
...this GM thing has brought out the union haters on both sides of the aisle (sadly, many so-called "progressives" hate unions) and no one is challenging the myths that are coming out in the news...

REID: Voting against us was never part of our arrangement!
SPECTER: I am altering the deal! Pray I don't alter it any further!
REID: This deal keeps getting worse all the time!
Half of everything we produce. (4.00 / 3)
Americans were outraged at the $700 billion bailout, but this new report of $7.4 trillion, not only makes that $700 billion much easier to swallow (and makes the initial outrage seem like an over-reaction), but also makes the numbers seem that much more abstract, hence producing what I call the numbing of America.  The numbers are simply too big for them to mean anything to the average American in themselves.

What we are missing is perspective.  The GDP is defined as the total market value of all final goods and services produced within the United States over a year.  That number (per wikipedia) was $13.8 trillion for the United States.  So when you go to work today, know that the income from HALF of EVERYTHING you produce or service you provide, and half of everything EVERYONE YOU KNOW produces or provides, will be going to bailout these companies.  Half of your paycheck.  Half of Beth's paycheck.  Half of Tom's paycheck.  Half of Juan's paycheck.  Half of Naomi's paycheck.  Half of Michael's paycheck.

the scary thing (0.00 / 0)
is that it truly is "abstract" -- at that size, it's no longer an adjustment to the economy, but the economy itself. We have no idea how to value $7.4 trillion in any kind of real terms. A dollar is a dollar, a billion dollars is still a billion dollars, but when that kind of intervention gets going, it's not sensible to think of it as "just a lot of billion dollar packages."
[ Parent ]
Looting (0.00 / 0)
That's the only word for what's going on now. The Republicans are looting on a massive scale before they must relinquish the levers of power.

Why just last week, I read a post here that expressed joy that Paulson intended to leave 350 billion of the bailout package for Obama to use. I expressed skepticism, and it looks like I was right.

http://www.bloomberg.com/apps/...

The lack of accountability is without excuse (4.00 / 1)
Period.  

No transparency.
No accountability.

No clawback for the Lay's and Skilling's of the financial world - much less some jail time.

And a prioritizing of these banks, over regular people and their actual PRODUCT producing jobs.

Just pathetic, and inexcusable.

Here's an idea (4.00 / 2)
Why not start a Progressive Presidential Campaign 2012 web site, complete with fund-raising capability? I mean now. The idea is to have likely candidates for President in 2012 declare themselves ASAP, and individuals can show their support by funding it (hopefully with weekly or monthly automatic bank deductions). The candidates should all declare themselves on, say, the top 20 issues likely to be in the voters minds not just in 2012, but 2008, 2009, 2010, and 2011. (Red flags should be awarded to the likely candidates wherever their voting record diverges with their declarations.) I suppose the money should be escrowed, with contributors being entitled to release the funds to any of the candidates who pass some minimal threshold (which will have entitled them to be included in the Progressive Presidential Campaign 2012), who follow through and actually run for President in 2012. In the unlikely event that none of the likely candidates actually runs for President, the money will stay in escrow, and the contributor can release them in 2016.

Basically, this idea is to kill two birds with one stone. Firstly, to show Obama that he should not take progressives for granted. He should know that we know that there are better candidates out there. And secondly, to provide that most necessary of ingredients in running for office to ideologically more congruent candidates - viz., money.

I think Dennis Kucinich would be an 'early adopter'.

I think Obama knows that he needs to produce on the economy if he wants to be more than a 1 term President. While he may not have contributed much to the problems, his crappy choices of who he's surrounding himself with, plus his shameful behavior in helping procure the 700 billion bailout (which he said should not be a blank check), means that he will own the problem. Because the economic problems are so bad, I expect him to be vulnerable in 2012*. The existence of a well funded Progressive Presidential Campaign 2012 may give him enough extra pause for thought to not sell out the country completely to Wall Street.

* Actually, I would expect any President to be vulnerable in 2012. I think things are going to get really ugly, and since the US refuses to back off from globaloney and empire, and the debts are astronomical, this would not be an easy nut to crack for anybody.

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