Why Did Obama Bypass Robert Reich?

what am i, chopped liver?

Of all the cabinet choices that Obama didn’t make, there are a few that really stick out. Not choosing Bill Richardson at State after he had switched loyalties from the Clinton camp early in the game and delivered a big jolt of legitimacy to the Obama team is one, but at least he got a job – if not the one he wanted. The big and potentially most worrying missing name from Obama’s line-up is Robert Reich. Now, it’s very possible that Reich said he wasn’t interested, that he preferred being an academic and a commentator, but it’s also possible he was left out in the cold.

If the latter is indeed true, it would be a very worrying sign for the economic path Obama is likely to take. Reich is the most reasonable, sensible, honest, straightforward and intelligent guy who wasn’t chosen to steer the economy. He knows the mistakes that were made, he saw them coming a mile off, and unlike Tim Geithner, he has no role whatsoever in the disaster that has befallen us. His only ‘crime’ maybe that he is seen as too ‘progressive’, and might ‘scare Wall Street’ (not that Wall Street’s opinion is worth a bucket of spit).

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.

The Fix Is In – Part Two

it's always xmas on wall street

Today, a distinguished board of economists said the country had been in a recession since December ’07, a statement that normally the markets would have discounted, because, yeah, like we knew that. But no, the market’s took a massive swoon, again, giving back all the hard earned gains of the past week’s rally.

Call it rank cynicism, but it just can’t be helped. It’s just too tempting a thought not to consider all this just a tad convenient. Last week the long guys had a party to celebrate a completely predictable new Secretary of the Treasury. This week the toilet beckons because we were told what we already know, and the short guys make a bomb. Coincidence? Perhaps. But if there was collusion between the traders, who after all work either a drink after work or a few desks apart, one could hardly be surprised. After all they’re just trying to make a buck or two with someone else’s money. Right?

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 Inherent Wisdom of Sheep

central casting

“I have no idea”, said one JP Morgan Chase economist today when asked by the New York Times why the Dow shot up over 550 points on the same day yet more recession indicators piled on. That seems to be the best response under the circumstances, but it belies a more serious problem. For years, we’ve been told to trust the market, to listen to the market. We were told that the market has an inherent wisdom.

The inherent wisdom of sheep more like.

Someone decided that the rally was due and bought. Someone else said “things are bottoming out”, and he told his mates. His mates told their mates, and they all got back in to earn some bucks with someone elses tired, downtrodden money. The herd mentality is not a signifier of great intelligence – quite the opposite. And this level of absurd, illogical, delusional volatility is a signal of worse to come. So please, for once and for all, let’s stop listening to the market – oh, and enough of those images of Wall Street traders watching the screens with panic and despair on their faces.

If I could earn a Euro for every time one of those…

Obama’s First Press Conference. Uhh.

Not totally sure what that was all about.

17 Economic Kahunas stand behind the President-Elect, who tells us precisely nothing we don’t already know, except that things are really bad and that he’s going to get right on it as soon as he can. Was there a point to the whole shindig? Was he trying to show he was already governing? No, he kept reminding us that Bush was still in charge. Was he trying to be proactive from a policy standpoint? No, because he didn’t tell us anything concrete he planned to do. Was he showing that when it comes to governing, he’s still got training wheels? Yes.

I think it would have been far better just to have the meeting with the big shots, or maybe a series of meetings with smaller groups of them, rather than grandstand about what a great team he has, and then do nothing with it. It was slightly awkward, to be frank, and nebulous at best.

Most people in the press have been trying hard not to say the obvious – that the press conference was a silly waste of time.