Punch Drunk on Tax Funded BailoutsPosted: March 23, 2009
While the Right Wing is off having tea parties and screaming class war, there appears to be some legitimate soul searching going on in left Blogistan about our “punch drunk” POTUS and his continual campaign like appearances. A lot of the discussion is focused on his dogged support of Turbo Tax Timmy and his bailout of the Suckers who created this bad economy for the rest of us. We’ve been overwhelmed with “heckuva-job-Timmy moments and distasteful ‘gallows humor’. When is enough enough?
Meanwhile, those of us that can’t avoid our jobs by taking a permanent vacation in TVLand are watching the economy unwind in spasms of agony and ecstasy. The market, starved for specific plans and information, provided a big thumbs up on a bail out program that at best reheats Dubya’s. If any one was punch drunk, it was the equity markets today. The leaders were the financials, of course, who will continue to provide profits to the market while writing their costs off to the taxpayer. If you were looking for the fresh cold breath of reality, it wasn’t on Wall Street or on Pennsylvania Avenue.
Lucidity, however, is on the rise in other places. I’m finding it in interesting places like the second episode of South Park where the lampoon on the Dark Knight included this little back ground gem; a satire of the famous Obama picutre with a deer-in-the-headlights appearing Obama and the change mantra tagged by a bright red WHEN?
My answer to the when question is probably never.
Most left wing angst appears to be directed at Tim Geithner since the Light Bringer is still too new to the job to blame. We continue to learn how involved both he and his staff at the NY Fed were in the AIG Bonuses. In fact, the Obama administration is trying to scuttle the Excise tax on the bonuses while verbally denouncing executive greed on TV. We’ve also found out that Citibank has managed to insert similar language to protect its executive bonuses. Let’s see how much change we get on that one too.
Not only are right wing shrills like Fox’s Sean Hannity calling for the head of Timmy Geithner but Progressive Diva Arianna Huffington front paged the call on HuffPo today. When Hannity and Huffington carry the same headline, it’s time for more than a few campaign appearances on Leno and 60 minutes. I’m not sure where all this shock and angst is coming from because it’s been rather obvious to some of us for some time that Obama represented rather narrow interests (not ours). How can every Obama supporter be calling the AIG Bailout a travesty while knowing that the architects and enablers of AIG are continuing the task with the Light Bringer’s blessings and attaboys? Well, Obama just mustn’t realize that it’s all Timmy’s fault and we need his head on a limited edition Obama inaugural platter. But, wait, isn’t Obama the one with that great judgement ? C’mon folks reconcile all this in your mental ledger. It really isn’t that hard.
Jane Hamshear has rediscovered her progressive voice (maybe because she no longer needs credentials to the DNC convention) in a her thread today asking “Why Does Timothy Geithner’s plan make Countrywide’s Kurlin Stanford even Richer?” About a year ago, I was begging her to tell the Obats to act more civil on threads to Hillary supporters while I was pointing to the number of associates that Obama had that were so connected to the architects of the financial system collapse. I wish I had a dollar for every one I tried to get to Google Penny Pritzker. Today, she says this:
Timothy Geithner’s new plan, like all his other plans, seems designed to shovel billions into the coffers of the very same bankers who got rich on the mortgage bubble. When the public gets a glimpse of the tip of this giant iceberg, as they did with the AIG bonuses, they’re dismissed as angry rubes who Just Don’t Understand How Things Work. But his latest scheme is proof that they are absolutely right.
Despite Geithner’s contention that banks are simply “burdened with bad lending decisions,” most Americans understand at this point that there was serious fraud involved in the inflation of the mortgage bubble.
She’s just now figuring out that there was fraud in the mortgage bubble. Didn’t she know that brokers and borrowers alike were faking applications that were never subject to due diligence by banks? So, when does she ask the question why are we picking up the bill for this? Because I’ve got the answer ready, those same folks that we’re bailing out were the major donors to the Obama Presidential Campaign and were basically all over the finance committee.
So the calls for Giethner’s resignation continue while the President giggles that “he still has the job and he has a lot on his plate and he’s doing a terrific job.” Okay, well that’s not heckuva job, Timmy, that’s terrific job Timmy. At what point will Axelrod slap the President in the face with the phrase political liability? Any one watching TV, reading papers, searching the blogs, or waking up on Mars knows that Giethner’s going to be the first to go. I’ve heard Geithnergate, Geithner as Obama’s Rumsfeld, and Geithner as Obama’s Katrina moment references so many times today that I’m personally searching for new terms for political appointee Armageddon.
Look around, we had a health summit and no single payer supporters were allowed at the table. The only one absent from the current TARP and bailout discussion is Paulson. How is this actually going to create the change that seemed so much in reach a year ago?
For those of you following our discussions on the bailout, I’m recommending Economist’s View at this Point for a look at the alternatives and a moderate rationalization for the Geithner plan. I’ve been over at Brad Delong’s justification for the plan all weekend and it’s been overrun by a lot of opinion and not a lot of knowledge so I’ve tired of following the thread there. However, you can check it out because it does have a layman’s summary of the plan. You’ll notice a few familiar names if you check the comments closely. These are folks I’ve seen on other blogs, but never on any of the academic economist blogs so the times are really changing if we economists are suddenly part of the glamorous sites.
Mark basically looks at three plans: the nationalization scheme, the old Paulson plan from the fall when TARP was originally introduced and the Geithner refitting of the Paulson plan. Here’s his take away line.
So which plan is best? Any plan that does these two things, removes toxic assets from balance sheets and recapitalizes banks in a politically acceptable manner has a chance of working. The Paulson plan does this if the government overpays for the assets, but the politics of that are horrible (as they should be). The Geithner plan also has these two features, though it has a “lead the (private sector) horse to water and hope it will drink” element to it that infuses uncertainty into the plan. The plan for nationalization most certainly has these features, but it has political problems as well.
Christine Romer must have called up Brad for reeinforcement because other than Lucian Bebchuck, Brad’s site is the most Geithner plan friendly. Like I said, his Geithner plan FAQ has become a maelstrom of comments so wade into that section if you dare. Interestingly enough, the New Yorker has been watching the back and forth also.
Who Can At Least Tolerate the Geithner Plan?
Most of what’s been written about Tim Geithner’s plan for a public-private partnership to purchase toxic assets from banks has been, unsurprisingly, negative, since Geithner’s plan does not involve the preferred solution of most bloggers and pundits: nationalizing the banks. But there are some interesting exceptions. The most useful post in terms of understanding the thinking behind the plan is Brad DeLong’s FAQ. (There is one clarification to make to Brad’s description of the plan: the outside investors and the Treasury Department will split the profits from their investments, if there are any, fifty-fifty.) And Mark Thoma of Economist’s View, who is actually an advocate of nationalization, has nonetheless written two excellent posts explaining why there are problems in the market for toxic assets and why the Geithner plan, while not ideal, could work in solving them.
As I said, I was knee deep in both blogs over the weekend. I follow both blogs carefully and use them in my classes. I’ve settled in today to watching the reaction in the media and the more political blogs. Again, the first thing that is really striking me is there is a critical eye on Obama and a hyper critical eye on Geithner. I don’t think either of them have much time or political capital left on the meter. The shrieks aren’t just coming from the usual right wing talking heads so there’s been an awakening. I’m still guessing the G20 meeting will be THE ACID test for the Obama’s such a great leader/speaker/thinker meme but the Geithner appointment appears to be a QUICK Ratio.
I have to say, I’m happy about the markets but I don’t think it will last. If you really need to sale something for cash. Look to do it soon. My guess is the next set of numbers coming from the real sector–like unemployment, industrial production, and things like that, won’t be pretty and unless they can find another dead cat, the bounce will be gone. My guess is that shortly thereafter, Geithner will be gone too.