There Is No Plan has Moved…But Not Far.

It’s the same blog in every respect except one…

Instead of being here at

https://thereisnoplan.wordpress.com

you’ll find it here at

http://thereisnoplan.com

See you there.

Simon

AIG. Was the Bailout From Hell a Mistake?

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.

Let’s start with what everyone knows. We know that the slice and dice mortgage derivatives that the best and the brightest of the world’s financial institutions got suckered into buying because of their AAA ratings (purchased AAA ratings it should be noted) went really, really bad. We know that this stuff has been written down all over the world, but there’s an awfully long way to go.

We know that financial institutions and hedge funds bought AIG’s Credit Default Swaps to the tune of $1.6 trillion (AIG’s own numbers) as a way to insure themselves just in case these investments went bad. We know that AIG didn’t have to back the CDSs with assets like they have to with regular insurance. And if we know that, I’m guessing the guys who are holding these CDSs knew it way before we did. They also knew that there was no way AIG would be able to find more than a fraction of the $1.6 trillion in the “very unlikely” event the assets went bad. In short, as soon as the rats started leaving the sinking ship when Bear Stearns went down everyone knew most of the Credit Default Swaps were worthless.

Wait. Rewind that. “Everyone already knew most of the Credit Default Swaps were worthless.” Far from being the keystone holding the system together, AIG might in fact have been utterly irrelevant to the future of the world’s financial system, except to elite banks like Goldman Sachs. Goldmans, it turns out, were one of the first counterparties out and got paid back in full for their bad bets – by the US taxpayer. Which goes a long way to explaining the scare story that Paulson and Blankenfein (let’s call them the Goldman boys) worked on poor, put-upon Tim Geithner. Paulson signed the check over to AIG, the rathole was dug, and the payouts were readied. Goldman Sachs didn’t want to take the PR hit of taking TARP funds direct, but by instigating “Operation Chump”, ie filtering the TARP funds through AIG first, was a fine and dandy idea. Ka-ching for Blankenfein and Paulson. Ka-ching for the top banks on the planet who didn’t want to face the music. Ka-pow right in the keester for the rest of us.

One could be pardoned for suggesting all this doesn’t pass the smell test. That perhaps AIG could have been left to wither on the vine, and bypassed entirely in favor of the bad bank plan that’s on the cards now, which would have saved us that health care down payment. Or that perhaps the AIG bailout (or “Operation Chump”) might well have been a ruse to salvage the reputation of the top banks.

There are three very painful ironies at the heart of all this. Here’s number one. What made AIG critical to the world economy was the act of saving it.  If AIG had failed, its mainly worthless CDS contracts would have continued to be, well, worthless. But once we made the decision to prop up the company, the world’s banking system knew it had found a sucker to back those contracts again and again. That sucker would be….us.

The second irony is this, If we’d let AIG fail, we would have been forced to price the toxic assets at the heart of the credit crisis, which is the only true way that recovery from the crisis can be quantified. But backing AIG’s CDS’s undermines that vital requirement. Now all we have to do is bilk the US taxpayer for billions upon billions more to honor Credit Default Swaps of banks all over the world at the asking price.

Finally, irony number three. The public is readying a lynch mob. Congress wants blood. Even President Obama is mildly indignant, but it’s all for naught. Because bailing out AIG is the biggest example of moral hazard imaginable. When it comes to punishment, actions speak louder than words. All the feiry rhetoric about AIG execs falling on their swords means nothing if Uncle Sam’s still signing the checks to bail these clowns out. Big banks made really bad bets, then bought snake-oil insurance to back them. Two awful decisions for which they should pay the price. Except that we’re paying it for them.

Someone, please tell me I’m wrong about all this.

Refining Neo-Liberalism

BadBob of Planned Obsolescence very kindly pointed me in the direction of a fascinating Michael Ignatieff piece in the NYT in 2003, just before the outbreak of the Iraq war, which suggests that America needs to accept and embrace its role as the driving force of a new, more benevolent, but necessarily imperial agenda.

Ignatieff’s article presages some of the key points of our neo-liberal discussion, seeing it through the prism of Bush’s – then nascent – conversion to neo-conservative thinking, in the wake of 9/11 and the run-up to his disastrous war in Iraq. More to come on this.

Refining Neo-Liberalism

BadBob of Planned Obsolescence very kindly pointed me in the direction of a fascinating Michael Ignatieff piece in the NYT in 2003, just before the outbreak of the Iraq war, which suggests that America needs to accept and embrace its role as the driving force of a new, more benevolent, but necessarily imperial agenda.

Ignatieff’s article presages some of the key points of our neo-liberal discussion, seeing it through the prism of Bush’s – then nascent – conversion to neo-conservative thinking, in the wake of 9/11 and the run-up to his disastrous war in Iraq. More to come on this.

Turns Out We’re Not Leaving Iraq After All

gates, are you trying to tell us something?

It was a reminder of the bad old days.  But it was today in Baghdad. Big suicide bomb, coordinated attacks on rescuers, dozens dead and wounded, and the customary “bears all the hallmarks of an Al Qaeda operation designed to ferment sectarian strife”.  It’s doubtful whether it had any effect on the tone of Robert Gates‘ interview on NPR this evening, but I’m sure the bombing was on the Secretary’s mind.

We’re not sure whether his boss is on board with this, although it seems likely, but Gates might have given us a little glimpse of reality during the interview. In response to a question about differences between him and the President on a final departure date for our troops from Iraq, Gates was less than convincing about the finality of that. From the NPR report. (My italics)

With regard to Iraq, Gates noted that under the Status of Forces agreement, all U.S. troops will be out by the end of 2011. Gates says he’s on the same page as Obama with the withdrawal and, barring a new agreement with the Iraqis, there will be zero troops in Iraq by that time. But he also speculates that the Iraqis could ask for logistical and intelligence support.

“The president’s statement is absolutely clear and it conforms to our current commitments, that is, according to the agreements we have signed, we will have everyone out of Iraq by the end of 2011,” Gates said. “And unless something changes, that is exactly what will happen. …[A change] would have to be at the Iraqis’ initiative. And the president will have to determine whether or not he wants to do that.”

“Logistical and Intelligence” support might well be a good cover-phrase for something a little more, shall we say, effective. In other words a new agreement ‘at the Iraqis initiative’ to guarantee some “we need your firepower because we’re getting our asses kicked” type support. Obama suspects that Al Qaeda is just waiting for us to shut the door after us before going all out again, so it’s not outside the realm of possibility that the President could make a judgment that keeping a few brigades on base for selective “logistical and intelligence support” might just be the insurance policy we need.

There’s been an awful lot of talk about the President’s philosophy. Nobody seems to know what it is. The reason is simple. His philosophy is the absence of a philosophy. Pragmatism.

Turns Out We’re Not Leaving Iraq After All

It was a reminder of the bad old days.  But it was today in Baghdad. Big suicide bomb, coordinated attacks on rescuers, dozens dead and wounded, and the customary “bears all the hallmarks of an Al Qaeda operation designed to ferment sectarian strife”.  It’s doubtful whether it had any effect on the tone of Robert Gates‘ interview on NPR this evening, but I’m sure the bombing was on the Secretary’s mind.

We’re not sure whether his boss is on board with this, although it seems likely, but Gates might have given us a little glimpse of reality during the interview. In response to a question about differences between him and the President on a final departure date for our troops from Iraq, Gates was less than convincing about the finality of that. From the NPR report. (My italics)

With regard to Iraq, Gates noted that under the Status of Forces agreement, all U.S. troops will be out by the end of 2011. Gates says he’s on the same page as Obama with the withdrawal and, barring a new agreement with the Iraqis, there will be zero troops in Iraq by that time. But he also speculates that the Iraqis could ask for logistical and intelligence support.

“The president’s statement is absolutely clear and it conforms to our current commitments, that is, according to the agreements we have signed, we will have everyone out of Iraq by the end of 2011,” Gates said. “And unless something changes, that is exactly what will happen. …[A change] would have to be at the Iraqis’ initiative. And the president will have to determine whether or not he wants to do that.”

“Logistical and Intelligence” support might well be a good cover-phrase for something a little more, shall we say, effective. In other words a new agreement ‘at the Iraqis initiative’ to guarantee some “we need your firepower because we’re getting our asses kicked” type support. Obama suspects that Al Qaeda is just waiting for us to shut the door after us before going all out again, so it’s not outside the realm of possibility that the President could make a judgment that keeping a few brigades on base for selective “logistical and intelligence support” might just be the insurance policy we need.

There’s been an awful lot of talk about the President’s philosophy. Nobody seems to know what it is. The reason is simple. His philosophy is the absence of a philosophy. Pragmatism.

What Will it Take For Us to Get Serious About Global Warming? Serious Global Warming

hope y'all like swimming

Let’s start with a little history of something totally unrelated. Cigarettes.

Smoking and global warming have very little in common, except this. They both show that human beings are not too great at getting a message. It was in the early sixties that a definitive link was made between smoking cigarettes and lung cancer. And yet here we are forty-five years later with people dying in their droves the world over. Sure, communication is better than ever, as are the scare tactics, let alone the evidence, but cigarettes are still a very profitable business.

There’s only one reason for that, and it can be summed up in a few very simple words. “It ain’t gonna happen to me”.  Humans are eternal optimists. Half a million people a year are dying of smoking-related diseases each year. But it ain’t gonna happen to little old me. Right.

Now let’s take global warming. For years a vast preponderance of experts have been telling us that global warming is coming. Only a few days ago, the Intergovernmental Panel and Climate Change (IPCC) said that they’d got it wrong in their earlier reports which they pretty much said were politically watered-down to make their recommendations even remotely workable. Turns out that they’d figured we’d be more energy efficient by now, and stop with our coal addiction. But efficiencies flattened out and coal is now the fossil fuel du jour for China and India. Their forecasts for serious global warming just got way more dire.

What Will it Take to Get Serious About Global Warming? SeriousGlobal Warming

Let’s start with a little history of something totally unrelated. Cigarettes.

Smoking and global warming have very little in common, except this. They both show that human beings are not too great at getting a message. It was in the early sixties that a definitive link was made between smoking cigarettes and lung cancer. And yet here we are forty-five years later with people dying in their droves the world over. Sure, communication is better than ever, as are the scare tactics, let alone the evidence, but cigarettes are still a very profitable business.

There’s only one reason for that, and it can be summed up in a few very simple words. “It ain’t gonna happen to me”.  Humans are eternal optimists. Half a million people a year are dying of smoking-related diseases each year. But it ain’t gonna happen to little old me. Right.

Now let’s take global warming. For years a vast preponderance of experts have been telling us that global warming is coming. Only a few days ago, the Intergovernmental Panel and Climate Change (IPCC) said that they’d got it wrong in their earlier reports which they pretty much said were politically watered-down to make their recommendations even remotely workable. Turns out that they’d figured we’d be more energy efficient by now, and stop with our coal addiction. But efficiencies flattened out and coal is now the fossil fuel du jour for China and India. Their forecasts for serious global warming just got way more dire.

Sadly, there is nothing the IPCC could say that will make more than a tiny dent in the problem. The train has left the station, and we’re on a one way ticket to Palookaville. Not enough. The ice-caps are melting. Eah, heard that one before. The Maldives are one big puddle. The what-dives?  Sure we’d all like to see global warming put back in the box of nightmares, but we’re not too sure about having to cut our carbon emissions by 10% let alone 50% or 75% that will be required to seriously put the brakes on the feedback loop we’re sliding into.  That will basically put an end to the world economy as we know it.  Recycling grocery bags, drinking tap water, and driving a Prius are not going to cut it. Not to mention the fact that the Chinese and Indians think it’s our problem, while we think it’s everyone’s problem.  Plus there’s the whole question of whether it actually is a problem. I mean it’s only a bunch of egg-heads telling us this stuff. What do they really know? The sun’s still shining. And not that many people are dying. So who gives a whoot?

It’s a good point. We talk a good game, and use everything green to sell more stuff, and our polticians come up with some pretty smart plans to combat global warming, but the truth is simpler. Until billions are dying of thirst, billions more are fleeing their low-lying countries in panic, malaria makes a comeback in what’s left of Manhattan and tsunamis, water wars, floods, hurricanes and other plagues brought upon us by this or that “told you so” deity are everyday occurences, will something – and maybe not that much, be done.

It may sound cynical, but the human race will only come together and combat global warming, when it’s quite literally knee-deep in it.