Posts Tagged ‘TARP’
The AIG Gravy Train – It Just Keeps Getting Worse
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?
AIG. Another $30B? Enough.
Frank Rich’s piece in today’s NYT suggests that a populist backlash against corporate malfeasance and greed could do serious damage to Obama’s agenda, and give the GOP a bridgehead from which to fight back. On the very same day, AIG is apparently to receive another $30bn of taxpayer largesse. This might be the straw that breaks the camel’s back, and for a myriad of reasons both economic and moral.
Firstly, either the government should have let AIG die and backed their Credit Default Swaps, or else let the CDW’s lapse and allow legitimate price discovery for the CDOs on that basis. The CDWs prop up fictitious value at our expense which is exactly what we shouldn’t be doing. Secondly, last week Congress removed billions for education spending. This week it gives that money to AIG? We’re about to try and overhaul the healthcare system. The $150 billion that we’ve committed without accountability to a dead company could have been a useful downpayment on the single biggest drain on the US economy. Is Tim Geithner trying to be Hank Paulson, because his leadership at Treasury shares the same “making it up as he goes along” characteristics.
Obama is getting all squirly on us. First he signs up a centrist cabinet and give progressives like Robert Reich and Howard Dean the cold shoulder. Then he dumps bipartisanship in favor of a progressive budget. And now he gives yet another handout to the street by protecting their crazy CDOs. Who is he? The answer is we still don’t know.
Healthcare Reform IS The Economic Stimulus We Need
In today’s NYT, Paul Krugman wonders why we haven’t heard more about major healthcare reform in the first few days of the new administration. His concern is that the economic crisis will only make the oncoming healthcare catastrophe that much more severe. It’s a very good point. Krugman surmises that perhaps solving the economic meltdown is dominating the agenda to the exclusion of almost everything else.
But Krugman doesn’t go far enough. What he fails to mention is that solving the healthcare crisis will, over the medium term, will dramatically help overcome America’s deep economic weaknesses.
It goes like this. Regardless of the plan adopted, and it’s most likely to be a build on Obama’s idea of offering a competitive government plan that will release the grip on our healthcare held by profiteering private insurance companies, the new system will have a very significant downward pressure on healthcare costs. Read the rest of this entry »
Gordon Brown Is Back!
It was British Labour Prime Minister Harold Wilson who coined the term “A week is a long time in politics”, and while Gordon Brown’s astonishing turnaround as British Prime Minister has taken a little longer than that, it has been truly remarkable.
When the British public turn on their leaders, they do it with a viciousness that’s positively medieval. A year ago, Gordon Brown was political poison. In the great tradition of British politics, his Labour Party was openly plotting his demise in the tea rooms and bars of Westminster. His demise was expected in a matter of weeks, and his stoic Scottish demanour combined with an almost uncanny lack of political savvy conspired to hasten it.
But then something happened. Gordon found his mojo. Starting with an unexpectedly stirring keynote speech at the Labour Party Conference in September, Brown began to take on his critics in the best way a leader can, by being exactly that – a leader. The speech was a dignified mea culpa of his mistakes and failings, combined with a cogent vision for the future, and it stopped the bleeding.
The speech was followed by another masterstroke. Amid the flailing response by Hank Paulson, the Bush Administration and Congress to the galloping credit crisis and precipitous market collapse, it was Gordon Brown’s plan to buy stakes in the UK banks that, overnight, calmed the waters. First, the Euro-zone and then, unwillingly, the US, followed the Brown plan, and the immediate panic dissipated, virtually overnight. Brown’s status as British political whipping boy was replaced by a standard grudging acceptance by the grudging Brits that he did, well, okay. Read the rest of this entry »
700 Billion is the New $7 billion
Things are turned way around when Liberals are agreeing with quirky, flat-tax Steve Forbes, but when called Hank Paulson the “worst Treasury Secretary in living memory” there are few diehard progressives that would disagree.
But old Hank has at least done us one big, big favor. By steamrolling through the TARP at a cost of $700 billion and then doing precisely squat with it, he turned $700 billion into the new $7 billion. Suddenly, with the exception of the bailout for the once mighty now hopeless auto industry, fears of excessive spending seems petty next to the cost of TARP, the Citigroup, AIG, and Fannie and Freddie bailouts. We’re awash in borrowed money, and nobody seems to care. Another day, another dollar, or a hundred billion of them. Whatev.
So when Obama announced his massive public works program (let’s call it the New New Deal or NND) and didn’t even bother to mention a pricetag, the only Cassandra was the ever-predictable American Enterprise Institute. With the economy losing half a million jobs a month, the American people are ready for it. So don’t expect the whining from Club for Growth knuckle-draggers in Congress to be anything more than mumbled griping at worst. Read the rest of this entry »
The Cannibalism Of Capitalism
There’s something diabolical about a creature that consumes itself. It seems so profoundly irrational, so utterly insane. We file stuff like that in some ‘unspeakable’ part of our minds.
Except that we live it every single day.
Capitalism is a great system in many ways, but it has a tendency to destroy itself if left unchecked. We’re seeing that all too clearly right now. There are two areas where capitalism is profoundly cannibalistic. Read the rest of this entry »