Geithner wins

The problem with some of President Obama’s selections is that they are too tied to industry and failed policies. Exhibit A is Timothy Geithner. The New York Times is reporting that he prevailed in the internal policy debate on the next round of bank aid. He fought against conditioning the aid on forcing out existing management, and wiping out shareholders’ equity.

Abandoning any pretense about limiting the moral hazards at companies that made foolhardy investments, the plan also will not require shareholders of companies receiving significant assistance to lose most or all of their investment. Some officials had suggested that the next bailout phase not protect existing shareholders. (Shareholders at most banks that fail will continue to lose their investment.)

Nor will the government announce any plans to replace the management of virtually any of the troubled institutions, despite arguments by some to oust current management at the most troubled banks.

Finally, while the administration will urge banks to increase their lending, and possibly provide some incentives, it will not dictate to the banks how they should spend the billions of dollars in new government money.

This is the wrong approach. From a policy perspective, those who invested in a failed company that needs taxpayer aid to survive should lose their investments.  And demonstrably incompentant management should also be removed.

Quote of the day

Republican Florida Governor Charlie Crist, announcing he will appear with President Obama at a rally in support of the stimulus plan tomorrow in Fort Myers, Florida.

“I am eager to welcome President Obama to the Sunshine State as he continues to work hard to reignite the US economy.”

Looks like not all Republicans are against the plan after all. (via TPM)

State secrets (updated x3)

Today we will find out of the Obama administration will follow Bush’s lead in arguing for a “state secrets privilege” to keep past torture episodes out of the courts totally. The administration has already said (via Eric Holder) that there will be no prosecutions of front-line CIA personnel. Will it al least allow the facts to come out?

Update: ABC News is reporting that the Obama administration’s position is no different than the Bush administration on the state secrets privilege. This is another failure on the part of the Obama administration in its promises to protect civil liberties and end torture.

Update 2: More from the New York Times.

The court papers describe horrific treatment in secret prisons. Mr. Mohamed claimed that during his detention in Morocco, “he was routinely beaten, suffering broken bones and, on occasion, loss of consciousness. His clothes were cut off with a scalpel and the same scalpel was then used to make incisions on his body, including his penis. A hot stinging liquid was then poured into open wounds on his penis where he had been cut. He was frequently threatened with rape, electrocution and death.”

Update 3: Even more from Glenn Greenwald and Andrew Sullivan.

The Obama administration will continue the cover-up of the alleged torture of the British resident. The argument is that revealing the extent of the man’s torture and abuse would reveal state secrets. No shit. This is a depressing sign that the Obama administration will protect the Bush-Cheney torture regime from the light of day. And with each decision to cover for their predecessors, the Obamaites become retroactively complicit in them.

So what are they hiding from us? Wouldn’t you like to know?

Compromising compromise

Paul Krugman (who recently won a Nobel prize in economics, is very unhappy with the way that so-called “centrist” senators have affected the stimulus bill.

What do you call someone who eliminates hundreds of thousands of American jobs, deprives millions of adequate health care and nutrition, undermines schools, but offers a $15,000 bonus to affluent people who flip their houses?

A proud centrist. For that is what the senators who ended up calling the tune on the stimulus bill just accomplished.

How bad is it?

This bad.


The green line is the job loss, so far, in the current recession.  We do need action now. (Click the image for a larger version.)

Given these numbers, stunning as they are, I think the Republicans are making a big mistake attacking the stimulus plan as “mere” spending.  As John Maynard Keynes once said, It is better to be roughly right than precisely wrong.”  I believe the focus of the Republicans on tax cuts alone is precisely wrong, but a balanced approach including tax cuts and appropriate spending is likely to be roughly right.

Desparate times…

…call for desparate measures. Now comes Steve Ballmer, spinning in the wake of what can only be called a failure to successfully launch Micorosoft’s flagship operating system, Vista.  He now claims that any business that fails to move to Vista will be attacked by its employees.

“If you deploy a four or five-year old operating system today, most people will ask their boss why the heck they don’t have the stuff they have at home,” the Microsoft CEO said.

Hogwash. XP quite capably performs the basic tasks of an operating system, without the performance hits, unreliability and useless eye-candy of Vista. Vista simply does not add any value over XP yet it imposes significant costs.  I would recommend that if any business organization was planning to move to a new OS, they should seriously consider OS X over Vista.

More on pitchforks and populism (updated)

Frank Rich properly identifies the threat (promise?) of a populist uprising of sorts in the wake the flawed and reckless actions of the elite of US (and world) finance.  People cannot understand why the very individuals who were calling the economic shots should be protected despite their abject failure to properly measure, let alone manage, risks they were routinely taking.  Why should these individuals be protected even if we need to protect the entities they managed for the benefit of the system as a whole?

Now more than ever, the president must inspire confidence and stave off panic. As Friday’s new unemployment figures showed, the economy kept plummeting while Congress postured. Though Obama is a genius at building public support, he is not Jesus and he can’t do it all alone. On Monday, it’s Geithner who will unveil the thorniest piece of the economic recovery plan to date — phase two of a bank rescue. The public face of this inevitably controversial package is now best known as the guy who escaped the tax reckoning that brought Daschle down.

Even before the revelation of his tax delinquency, the new Treasury secretary was a dubious choice to make this pitch. Geithner was present at the creation of the first, ineffectual and opaque bank bailout — TARP, today the most radioactive acronym in American politics. Now the double standard that allowed him to wriggle out of his tax mess is a metaphor for the double standard of the policy he must sell: Most “ordinary Americans” still don’t understand why banks got billions while nothing was done (and still isn’t being done) to bail out those who lost their homes, jobs and retirement savings.


The public’s revulsion isn’t mindless class hatred. As Obama said on Wednesday of his fellow citizens: “We don’t disparage wealth. We don’t begrudge anybody for achieving success.” But we do know that the system has been fixed for too long. The gaping income inequality of the past decade — the top 1 percent of America’s earners received more than 20 percent of the total national income — has not been seen since the run-up to the Great Depression.

Update: Timothy Egan has more along the same lines.