The same excuses that were made for Timothy Geithner—it was a mistake, he paid or intends to pay it, he apologized—now have to be trotted out again for Tom Daschle. Of the two, Geithner owed less but should have paid a higher political price, since he was appointed to run the I.R.S., among other things, and since his “mistake” was, for at least two years of delinquency, almost certainly knowing. But it’s too late—he was confirmed as Treasury Secretary. So, in order to prove that his words mean something more than fine sentiments, Obama should insist that the decent and high-minded Daschle withdraw from consideration as Health and Human Services Secretary.
In today’s NYT, they publish an article describing the emotional misery that employees on Wall Street are suffering due to the low view of such folks by others around the country. The bankers still cannot unserstand why rational people question giving “bonuses” to employees in years when their performance not only hurt their companies, but cost taxpayers billions. They even try to fob off the failure on the rating agencies.
Of course, mistakes were made on Wall Street, says Emanuel Pleitez, a 26-year-old former Goldman Sachs employee who resigned from his job a few months ago to run for Congress in his hometown, Los Angeles. But to a great extent, he says, those mistakes were born of misplaced trust.
“Look, you can talk about collateralized debt obligations all day long,” he said, referring to a type of asset-backed security that has turned famously toxic. “But there were ratings agencies that were supposed to tell us how risky these securities were. We essentially closed our eyes and said, ‘O.K., you say this is rated triple-A, fine, I believe you.’ ” In hindsight, he said, “Everyone should have been more skeptical.”
Gimme a break. The people who created the toxic securities rely on the ratings agencies to analyze them?
Paul Krugman writes that taxpayers should receive equity in exchange for large cash infusions into the nation’s banks. He is correct. Existing shareholders should suffer a loss of their equity positions in companies that failed spectacularly and at great cost to the economy.
So banks need more capital. In normal times, banks raise capital by selling stock to private investors, who receive a share in the bank’s ownership in return. You might think, then, that if banks currently can’t or won’t raise enough capital from private investors, the government should do what a private investor would: provide capital in return for partial ownership.
But bank stocks are worth so little these days — Citigroup and Bank of America have a combined market value of only $52 billion — that the ownership wouldn’t be partial: pumping in enough taxpayer money to make the banks sound would, in effect, turn them into publicly owned enterprises.
My response to this prospect is: so? If taxpayers are footing the bill for rescuing the banks, why shouldn’t they get ownership, at least until private buyers can be found? But the Obama administration appears to be tying itself in knots to avoid this outcome.
The Republicans (most recently in the person of Jim Demint) are claiming the stimulus bill is the largest spending bill in history. Barney Frank correctly points out that the largest spending bill in history is almost certainly going to be the cost of the baseless war in Iraq. Watch the exchange via Crooks and Liars.
Obama’s comments late last week about Wall Street bonuses were interesting mainly for their stridency, but they were probably inconsequential. We’ll see what happens when the next stage of the bailout is announced. This feels like an inflection point where policy could represent a fundamental change, or we could continue the descent into a sort of neo-feudal kleptocracy in which the productive but increasingly hollowed-out parts of society — teachers, doctors, cops, small business owners — send tribute to a handful of unelected government officials, who then dole it out to slightly more legit versions of Bernie Madoff.
Maureen Dowd launches another broadside calling for disgorgement and special prosecutors for financial officers of failed institutions. Good for her. Companies should not be able to take taxpayer dollars and at the same time pay bonuses to employees related to the periods during which the losses were caused. What are bonuses supposed to represent other than strong performance? How can anyone not see this?
The president’s disgust at Wall Street looters was good. But we need more. We need disgorgement.
Disgorgement is when courts force wrongdoers to repay ill-gotten gains. And I’m ill at the gains gotten by scummy executives acting all Gordon Gekko while they’re getting bailed out by us.
Frank Rich, as usual, has a great column today focused on the lack of ideas among Republicans for saving the economy (other than tax cuts).
The Republicans do have one idea, of course, but it’s hardly fresh: more and bigger tax cuts, particularly for business and the well-off. That’s the sum of their “alternative” stimulus plan. Obama has tried to accommodate this panacea, perhaps to a fault. Mainstream economists in both parties believe that tax cuts in the stimulus package will deliver far less bang for the buck than, say, infrastructure spending. The tax-cut stimulus embraced a year ago by the G.O.P. induced next-to-no consumer spending as Americans merely banked the savings or paid down debt.
We also now know conclusively that the larger Bush tax cuts, besides running up record deficits and exacerbating income inequality, were also at best a placebo on our road to ruin. In a January survey of economists, including former McCain advisers like Douglas Holtz-Eakin and Mark Zandi, The Washington Post determined that the job growth the Bush administration kept bragging about (“52 straight months!”) was a mirage inflated by the housing bubble. Job growth — about 2 percent — was in fact the most tepid of any eight-year period “since data collection began seven decades ago.” Gross domestic product grew at a slower pace than in any eight years since the Truman administration.
The GOP is right. We desperately need tax cuts for the wealthy as part of a stimulus plan. Not.
The average tax rate paid by the richest 400 Americans fell by a third to 17.2 percent through the first six years of the Bush administration and their average income doubled to $263.3 million, new IRS data show.
The 17.2 percent tax rate in 2006 was the lowest since the IRS began tracking the 400 largest taxpayers in 1992, although the richest 400 Americans paid more tax on an inflation-adjusted basis than any year since 2000.
Crooks & Liars captures a great Colbert piece of advice for the Republicans. Watch the video.
Excerpt of Colbert:
Last night—last night’s party line vote was a great start for the 111th Congress. But these hard times demand an even larger meaningless gesture. That is why I am calling on every Republican who voted against this bill to put no money where your mouth is. Refuse to accept a single penny of the eight hundred billion dollars for your Congressional district.
Yesterday, I highlighted the remarks of Sen. Minority Leader Mitch McConnell suggesting that the GOP needs some change. Sure enough, the wingnuts have rapidly turned on their own. I doubt that even the wingnuts are able to come up with an insult more juvenile than this. RedState sounded the alarm for this always-ready-to-battle verbal assault on an apostate, but the site seems to be down at the moment, so here is the Google cache to the war rally heard round the world (or at least that part of the world that subscribes to RedState”s mailing list), together with their oh-so-clever artwork.
Wonkette aptly captures the boy scout attitude of all this.
Mr Thiessen has written in to let us know that he certainly does not consider “enhanced interrogation” or the treatment of Abu Zubaydah torture, and we should not have implied as much. ABC News has reported that Mr Zubaydah was “slapped, grabbed, made to stand long hours in a cold cell, and finally handcuffed and strapped feet up to a water board until after 0.31 seconds [sic] he begged for mercy and began to cooperate”. (Mr Kiriakou says it took about 35 seconds.) So, for the record, we want to clarify that Mr Thiessen should not be attributed with the argument that torture is effective because he does not believe that these techniques are torture. The Economist disagrees on that last point.
Bruce Sterling, a terrific writer on technology, culture and the intersection of the two, has a new essay in Seed. In it he declares 2009 the year of panic. He identifies 7 areas of potential panic (outside banks and derivitives), any one of which could cause social chaos. Read it and be afraid.
Science. To be a creationist president is not a problem. A suicide cult is the most effective political actor in the world today. Clearly the millions of people embracing fundamentalism like to make up their own facts.
Standards of scientific proof and evidence no longer compel political and social allegiance. This is not a return to the bedrock of faith — it’s an algorithm for ontological anarchy. By attacking empiricism, the world is discarding all of the good reasons to believe that anything is real.
If science is discredited, why should mere politics have any intellectual rigor? Just cobble together a crazy-quilt mix-and-match ideology, like Venezuelan Bolivarism or Russia’s peculiar mix of spies, oil, and Orthodoxy. Go from the gut — all tactics, no strategy — making up the state of the world as you go along! Stampede wildly from one panic crisis to the next. Believe whatever is whispered. Hide and conceal whatever you can. Spy on the phone calls, emails, and web browsing of those who might actually know something.
If that leads you to a miserable end-state, huddling with the children in a fall-out shelter clutching silver bullion, then you can congratulate yourself as the vanguard of civilization.