July 25, 2014
Art, politics, angels, demons . . . and righteous dogs.

Enough With the Kool-Aid

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Last week when I posted a Geithner Kool-Aid toon here, little did I think the Kool-Aid theme would be what was needed the next day for a Newsweek cover story on Krugman.  Amid Capeci didn’t know exactly what the piece would say but wanted a take in which Krugman was being ignored by the White House, out of the loop, regardless of his importance.  Perhaps that Krugman hadn’t “drunk the  Kool-Aid” of Wall St,. as Amid put it.  So here’s the result, with one of the best layouts my work has ever been given. Here’s some of what Evan Thomas says in the piece:

“In his Times column the day Geithner announced the details of the administration’s bank-rescue plan, Krugman described his “despair” that Obama “has apparently settled on a financial plan that, in essence, assumes that banks are fundamentally sound and that bankers know what they’re doing. It’s as if the president were determined to confirm the growing perception that he and his economic team are out of touch, that their economic vision is clouded by excessively close ties to Wall Street.”
If you are of the establishment persuasion (and I am), reading Krugman makes you uneasy. You hope he’s wrong, and you sense he’s being a little harsh (especially about Geithner), but you have a creeping feeling that he knows something that others cannot, or will not, see. By definition, establishments believe in propping up the existing order. Members of the ruling class have a vested interest in keeping things pretty much the way they are. Safeguarding the status quo, protecting traditional institutions, can be healthy and useful, stabilizing and reassuring. But sometimes, beneath the pleasant murmur and tinkle of cocktails, the old guard cannot hear the sound of ice cracking. The in crowd of any age can be deceived by self-confidence, as Liaquat Ahamed has shown in “Lords of Finance,” his new book about the folly of central bankers before the Great Depression, and David Halberstam revealed in his Vietnam War classic, “The Best and the Brightest.” Krugman may be exaggerating the decay of the financial system or the devotion of Obama’s team to preserving it. But what if he’s right, or part right? What if President Obama is squandering his only chance to step in and nationalize—well, maybe not nationalize, that loaded word—but restructure the banks before they collapse altogether?”

kelly-toonPS: On the page behind mine is this cartoon by the wonderful Steve Kelly in the (still publishing) Times Picayune.  Spot-on, as they say.

Crusading and Morally Downright Upright Spanish Judge of the Day

spanish-judge-garzon540SIX of the Bush gang are under special consideration for indictment by Baltasar Garzón, the Spanish investigative judge who ordered the arrest of Augusto Pinochet.  It is said that it is “highly probable” that the case will go forward and arrest warrants will be issued.  The charges will be for torture and mistreatmant of prisoners at Guantanamo Bay  under the Geneva Conventions.  ALBERTO GONZALES. JOHN YOO, DOUGLAS FEITH are the names we see in the paper.  Of course the US is expected to ignore calls for extradition.  And it may be difficult for evidence to be compiled. But, isn’t it possible that the evidence is in mountains and there for the asking.  And, tried in absentia, these party animals could find themselves prisoners forever in the US.  And maybe have enough left over hubris to travel and wind up cooling their heels in some foreign hoosegow?  One never knows do one.

Geithner’s Electric Kool-Aid Acid Medicine Show

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Obama and Geithner’s plan for bank rescue sent the markets into euphoria.  Well it warmed their hearts to see the state subsidizing the same kind of hedge fund profiteering. Was that excitement a scary sign that the markets can see a team winking their way back to the bubble economy?  Paul Krugman thinks so.

“Tim Geithner, the Treasury secretary, has persuaded President Obama to recycle Bush administration policy — specifically, the “cash for trash” plan proposed, then abandoned, six months ago by then-Treasury Secretary Henry Paulson.

This is more than disappointing. In fact, it fills me with a sense of despair.

After all, we’ve just been through the firestorm over the A.I.G. bonuses, during which administration officials claimed that they knew nothing, couldn’t do anything, and anyway it was someone else’s fault. Meanwhile, the administration has failed to quell the public’s doubts about what banks are doing with taxpayer money.

And now Mr. Obama has apparently settled on a financial plan that, in essence, assumes that banks are fundamentally sound and that bankers know what they’re doing.

It’s as if the president were determined to confirm the growing perception that he and his economic team are out of touch, that their economic vision is clouded by excessively close ties to Wall Street. And by the time Mr. Obama realizes that he needs to change course, his political capital may be gone.”

The plan to incentivise investors to handle the toxic waste in the banks in question puts the taxpayers at a disadvantage, risks huge amounts of money with a sketchy shot at recouping it.  No thought of anything that would restructure the way things are done, get us into these banks and really get the straight scoop on what they’ve been doing. Instead it looks like a continuation of more of the same by Geithner and Summers, folks who helped set us up in the first place.

Naomi Prins, MotherJones.com on what could happen next:

“Here’s another possibility: The (newly purchased) assets have little or no value, because they have no incoming cash or no buyers—otherwise known as the situation we’re presently in. To this day, we don’t even have any knowledge of what exactly these assets are. The government won’t tell us because the banks won’t tell the government. And if the assets zero out, the private investors will largely be covered. The taxpayers, of course, won’t.

That plan is based on the assumption that private funds want to bother with any of this. One thing’s certain, though: The sweeter the deal the government makes to entice investors to buy assets they’d otherwise have no interest in, the worse it is for taxpayers. That’s the brand of capitalism that was at work before this crisis, and it seems to have survived the economic collapse intact.

Geithner told the Wall Street Journal last week, “Our judgment is that the best way to get through this is if we can work with the markets…We don’t want the government to assume all the risk. We want the private sector to work with us.”

The private sector helped create and spread a toxic stew of derivatives. Yet Geithner’s strategy to “fix” the financial system is to ask its riskiest, most opaque players—the companies that shirked the most in taxes and were led by the execs who made the most money during the build-up years—to buy the system’s junky assets in order “to cleanse it.” And this will come after $350 billion of capital injections and trillions of dollars of Federal Reserve loans haven’t fixed the problem.

On top of this, Geithner doesn’t think investors who participate in his program should be subject to any restrictions. No executive pay caps, no nothing. Moreover, the toxic assets to be brokered under this plan will be selected by the players that have not been able to unload them so far. It’s like going to a used car dealership and saying to the car salesman, “I’ve got $100,000 to buy whatever you have to sell me,” and expecting him to provide you with his most valuable inventory.

Of course, bank stocks rallied on this cheery news. The Dow perked up like a heroin addict about to get a fix. Why wouldn’t banks welcome the chance to participate in a government-sponsored program to clean their polluted balance sheets, where their old clients, the same ones who wouldn’t be caught dead purchasing these toxic assets, could be paid for participating?”

Grasslier Than Thou

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It’s been a cathartic day going after AIG and the bonuses.  It’s a political chocolate factory; free righteous indignation about the bonuses (nobody’s mentioning the billions going to banks through AIG that don’t need them.  Elliot Spitzer (yes him) wrote interestingly about that on Slate (http://www.slate.com/id/2213942/). Chuck Grassley last night called for the bonus boys to commit hari kiri. To sample the current mood on Capitol Hill we’ve asked four Representatives to join us for their take on AIG.  Thank you panel

Wither Print 2 of 3

pi-guillotineToday marks the death of the Seattle Post Intelligencer. Published since the civil war, nothing could stop this paper, except our situation today. Hearst, who owns it and killed it today, promises a dynamic online replacement. What will it replace? What is now lost? Interestingly the SeattlePI.com website has a strong video about what will be lost here. The site, as promised, will feature new columnists: a raft of current and former government officials. What does that feel like to you? I can only conclude that a part of our civilization is lost now unless we can organize somehow to replace this necessary imperfect creation, the newspaper. We cannot function very well at all without it. And we have to do this fast.