The Greek debt crisis finally spilled over in full force to U.S. markets, aided and abetted by extreme statements emanating from such esteemed and prominent voices as Muhammed El-Erian of the large bond investor Pimco, who warned that Greece could be just the beginning of sovereign debt catastrophes. In the space of minutes, the major U.S. indices plunged more than 10%, fueled by the same programmatic electronic trades that were part of the battering in late 2008 into 2009. And then in the space of 15 minutes, they recovered, without - it's fair to say - much human decision-making during that interval (and if an individual even tried trading during those 30 minutes, they would have found it difficult or impossible, as web sites such as schwab.com were completely overwhelmed with traffic).
Homo sapiens, that means us, is what's known as an ultrasocial species. That means we're so cooperative that groups of hundreds, even thousands of us, can distribute tasks, share rewards, have common goals and tolerate each other's proximity in abundance. We're the only ultrasocial species whose groups operate more on reciprocity than kin relationships.
If we were the creatures Ayn Rand's disciples think we are, we would live like bears, who have no civilization to speak of, no language in which to speak of it, and never will.
Which is why the current incarnations of plutocracy, patriarchy and all other 'screw you, I've got mine' politics are, in the deepest sense, antisocial. They're anti-civilization. What betrays the reciprocity of the social compact betrays the most useful trait of our species, the one arguably most responsible for our success. The people who hold these views are free riders, parasites, if you will, on the public good of basic human nature.
Not only isn't there anything wrong with that, it's the only basis for policy that can stand the test of time. Just in case anyone still gives as much of a damn about building civilizations as blowing them up.
Apparently the SEC was busy in December going after some operators that tried to steal $68000 by manipulating the stock of the National Lampoon. Yup. Sixty eight thousand versus Bernie Madoff and the mortgage collapse and on and on and on. You can't make this up.
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.
Hank Paulson is an idiot. People on Wall Street quietly think he's one of the worst cabinet picks of Bush's entire term, and while there are no standards for whether the bailout is working, there's no way that you're going to hear honest opinions about his performance because Very Serious People believe that saying what everyone knows is obvious will rattle confidence in the market.
The new Treasury Secretary, Tim Geithner, is embroiled in the last twenty years of monetary mismanagement without the tarnish of being in the private sector (and thus profiting from it). He helped construct the bailout and he was part of the decision to let Lehman fail, Paulson and/or Bernanke's single worst decision so far. I'm slightly more positive towards Geithner since he's younger and more technocratic than ideologically oriented, but not that much.
The appointment of Larry Summers as senior advisor in the White House, despite his ridiculous work in the 1990s pushing through financial deregulation and his utter failure to even admit Enron's manipulation of California's energy market, is evidence that the same people who got us into this mess are in charge of getting us out. But you're not going to hear honest evaluations from anyone, even the very kickass AFL-CIO lawyer Damon Silvers who should be screaming bloody murder as part of the newly appointed oversight board, because they are all being quiet.
Lest they spook the markets. So get ready for more awesome confidence.
For Treasury secretary, Gandy said she suggested Federal Deposit Insurance Corp. Chairwoman Shelia Bair; Alice Rivlin, the first director of the Congressional Budget Office and expert on urban issues as well as fiscal, monetary and social policy; former Commodity Futures Trading Commission chairwoman Brooksley Born, who tried to regulate credit default swaps but was blocked by Summers, former Clinton Treasury Secretary Robert Rubin and former Fed Chairman Alan Greenspan.
I don't know Rivlin, but Bair and Born would seem like excellent choices. Dean Baker likes Bair, who is a Republican and has done a good job at the Federal Deposit Insurance Corporation. Brooksley Born is another one who fought aggressively in the 1990s to regulate the derivatives market, only to be undermined by the good old boys of Rubin, Summers, and Greenspan and their industry allies. Any of these candidates would send a strong message that business as usual is over.
.... Adding that Summers has a background that is just ripe for embarrassing Obama during confirmation hearings, not just in terms of his role deregulating financial markets in the 1990s or associating with people like Ken Lay of Enron, and disparaging women. Larry Summers before Republican Senators for a hearing would be like letting cats into a catnip factory.
A really nasty negative tone in the race, a sour and frustrated public, and an economic crisis is all leading to massive rises in the polls for Democrats. There's a debate today between McCain and Obama, and Chris will be live-blogging it. I'm pretty much interested in what these guys are going to say about the bailout. What I can't figure out is why they keep bragging that they were more effective than their opponent at getting this really unpopular piece of legislation passed.
Anyway, the recriminations are starting, because the bailout didn't seem to solve market confidence problems.
In an article by insider publication The Hill titled 'Doubts grow over rescue', every excuse for the failure of the bailout is given by various financial and think tank pundits, from 'Congress didn't pass it fast enough' to 'Congress didn't 'inspire confidence' in the way it passed the bill to an urging that Congress move beyond partisanship and encourage the Fed to act. My favorite is this one, from former IMF official and current Peterson Foundation fellow Morris Goldstein.
Goldstein said that Congress might have to return to Washington in the next several weeks to pass an emergency economic stimulus package, increase the federal insurance limit on bank deposits or enlarge the financial authority of Paulson to buy distressed assets.
Ah, so the bailout isn't big enough. Peter Peterson, the guy who funds this fellow, is a private equity billionaire Republican who tried to privatize Social Security, so of course, you know, there's always that.
You know what reason ISN'T given as a possible explanation? That the bailout was a stupid fucking idea put out there by the lying criminal incompetents who got us into this mess.
Seven polls from the DCCC are showing Democratic rematches looking good, all of them in the northeast, mid-atlantic, or industrial midwest. That tracks with the recessionary areas of the country.
There will be Senate vacancies, no matter who is elected President. Frankly, this is the only circumstance I would support a bipartisan cabinet, if you could get a Republican Senator to leave his seat to take a department.
That million includes 166,411 from Florida; 104,230 from Ohio; 76,799 from Pennsylvania; 63,133 in Illinois; 57,282 in Michigan; and 46,523 in Missouri, the six states where WVWV generated the most registrations. In addition, WVWV generated 34,170 in Colorado; 43,518 in North Carolina; 40,154 in Virginia; and 13,509 in Nevada. Over 7,000 people were registered online, including more than 4,000 through Facebook.
The WTO and free trade is going to be a major fight next cycle. Obama's health care and climate change proposals are going to be subject to WTO rules, which means that corporations can sue the US government and dismantle his carbon reduction laws or health care reforms as 'trade barriers'. Lieberman-Warner had a carbon tariff in it, but the bill never went anyway, so nothing came of it. But there's no question the Chamber of Commerce is going to use this legal avenue through American subsidiaries of foreign companies to gut any attempt by Obama to engage in social safety or environmental protection.
Back in March, Elizabeth Warren blogged about a hearing by the Subcommittee on Financial Institutions and Consumer Credit on credit card tricks and traps for consumers. The consumers who showed up to testify were told "they couldn't talk unless they would sign a waiver that would permit the credit card companies to make public anything they wanted to tell about their financial records, their credit histories, their purchases, and so on." This was a deal by the Republicans and Democrats on the committee "to be fair to the credit card lenders."
This was back in March. I blogged about it as follows.
For some time going forward, there's going to be lots of econo-speak about bail-outs and Federal Reserve tools to manage insolvent banks, but remember one basic fact. You can't run a political system and an economy based on loan-sharking, intimidation, and socialism for the rich and powerful. Now, that might sound like a screed, but it's not. I'm not just saying that the rich stealing from the public is a bad thing, I'm saying that it no longer works because there isn't enough left to steal such that the theft can be hidden. Our policy apparatus is falling apart when it has to resort to bribery and threats.
It's almost as if there's a double standard at work.
... There seems to be a little misunderstanding here. I'm not saying the bailout succeeded or failed or was or wasn't necessary, only that last Monday's stories made it sound like the markets would crash without a bailout! And now they are crashing anyway, but you don't hear that the bailout didn't work. If the story is that the Dow is your metric, be consistent about it. And yes, I heard from members that their constituents were afraid they'd lose their 401k and retirement savings and so flipped on the bailout precisely because of the reporting that connected the two stories.
Last Monday, no bailout, we're DOOMED! One week later, there was a bailout, nothing to see here, we're DOOMED!
So Paulson puts 35 year old tech investment banker from Goldman Sachs, Neel Kashkar, in charge of the $700 billion fund. I'm trying to find out more, this guy was a donor to George Bush and a tech banker in San Francisco that worked on 'advising public and private companies on mergers, acquisitions and financial transactions.' He's a senior advisor to Paulson at Treasury and he's also in charge of Treasury's website.
In general, I'm not a huge fan of 2004 Bush max out donors. Goldman people are extremely tight, and it looks like Kashkari is one of Paulson's key lieutenants, and he negotiated the bailout deal itself.
And a new Villager arrives.
... Watching his confirmation hearings, his responsibilities at Treasury were to increase free trade, reduce our dependence on oil through conservation and alternative energy deployment, and respond to the Housing crisis by working to ensure a flow of capital through the private sector to the housing sector while minimizing the spillover of the housing deflation to the rest of the economy.
The Dow has now dropped below 10,000 for the first time since 2004. Last week, when I was trying to convince members to vote against the bailout, I had a conversation and the question was posed 'well what would you tell a small business owner who can't get a loan?' I said that the bailout probably wouldn't help them, not for any economic reason but because it seemed obvious that the people planning the bailout don't actually care about a random small business somewhere. Then last night, a few economists told me that a credit tightening is normal right before or during the initial stages of a recession as banks become more conservative. So what I said was correct on the economics. It's not a difficult concept, but what's interesting is how the press conflated the credit tightening prior to a recession with a run on hedge funds and investment banks. Anyway, there you go.
The Palin-Biden debate attracted nearly 70 million viewers, far more than the Obama-McCain debate. Here's Palin in 30 seconds.
Joe Lieberman on Palin: "She's so strong, she's so capable, she's so competent," Lieberman told the cheering crowd. Emphasizing her "faith," he added that she is someone who "with your help--and God's help--will be the next vice president of the United States." More big cheers.
"Randy Kuhl, my opponent, flip-flopped and yielded under pressure from corporate special interests in the Bush administration to make sure he voted for this bill and it's a very sad day for the American taxpayer," said Massa.
Kuhl's congressional challenger, Eric Massa, says changes to the bailout plan only added pork and corporate tax breaks. He says he would have voted against it both times.
Incidentally, environmental groups were lobbying to pass the bailout bill because it had tax extenders for renewable energy.
I have some questions as to what you all think about the bailout and the performance of the Democrats over the past two weeks. If you're interested in filling out a survey on this bailout, go here. I've got a bunch of questions for us to answer about how various leaders on our side of the aisle performed.