Rolling US Economy Into The Shitbin Thread

Well, he certainly got a lot of money from Wall Street during his campaign. And he gets a lot of advice from Wall Street insiders. But it seems to me that there's a certain amount of institutional intelligence that makes those relationships vital.

I've always been consistent with "Obama's a Wall Street crony."

Is this your feeling about all nationally-viable Democrats and Republicans (those people with a realistic chance of being elected President)? If not, who do you think isn't a Wall Street crony?

I'm not trying to be snarky. But I suspect you may be holding Obama up to a standard that can't be met by any Presidential candidate that has a real chance to win (which is fine, too).

are we actually in the midst of a scandal now??? Awezome!

Short answer, Daniel: mostly. Is Feingold 'nationally viable'? (I think so.)

srsly, after it became clear TARP I was a scam, they couldn't have been vigilant/smart enough about II to prevent this (or at least sound alarms) before the fact if they wanted to? What's with the Kay Corleone naivete, ppl?

i think geithners gotta go, i cant think of a single thing hes done right since he started

but today's NYT says he's trying really hard!

ilx isnt really the place for it but concern over aig bonuses is the absolute stupidest thing ever all time

lol

As for Republicans pushing a meme that bonuses for AIG were put into the stimulus bill by the White House...you got a link for that Tipsy?

ask and ye shall etc.:

Not a single House Republican voted for this bill and only three Republicans in the Senate did. Obama owns it.

Either Obama did not know the provision was in there, which validates the Republican point that no one read this bill. Or he did, and signed it anyway. Either way, it’s a disaster of his making.

We should lay responsibility for the AIG bonuses where it belongs — directly at the president’s feet.

yes because you see it's the president's fault for not being tough enough in the no limits on executive compensation that most republicans opposed in the first place. it's a total through-the-looking-glass argument. and it makes glenn greenwald's head explode:

The controversy of the AIG bonsues -- which, strictly as a quantitative matter, is rather trival in the scheme of things -- illustrates how warped our political discourse is. Here is the hierarchy of positions regarding executive compensation limits back in February:
Chris Dodd -- advocated full-scale, no-exceptions limits on executive compensation for bailed-out companies
Obama administration -- supported limits but advocated exceptions for already-existing employment contracts
GOP leaders -- opposed all executive compensation limits as Socialist tyranny
Yet everything is exactly backwards in this controversy. The Obama administration has been trying to blame Dodd for the carve-out that allowed the AIG bonus payments, a carve-out that came into being because Geithner/Summers demanded it and becuase they opposed the limits Dodd wanted as too onerous. Yet now, the GOP -- which opposed limits of any kind -- wants to blame the Obama administration and Dodd because the limits weren't stringent enough to stop the AIG bonus payments. And the media is playing along perfectly, having clearly decided that the person who led the way in fighting for absolute limits -- Dodd -- is the real villain responsible for the AIG bonsues.

the new limits on executive compensation, i mean. the NO limits is what republicans were advocating. anyway, sorry, that post is a mess. i'll boil it down.

the ridiculous blame-obama republican line is here:

http://corner.nationalreview.com/post/?q=ZDk3OGU4ZjgzY2Y0NWRiYThhNWE3MmQ0MTg0OWJiODc=

greenwald's response is here:

http://www.salon.com/opinion/greenwald/2009/03/19/gop/index.html

well, the amount of money in question is not very much compared to bailouts/stimulus bill etc., that's for sure. i get that people are extremely pissed off. i am, but then again i'm also annoyed by the demagoguery on both sides and in the media. you know? probably the execs who actually made the decisions that fucked everything up over at AIG financial products are long gone and walked away with millions, and now the people who are stuck there trying to clean it up are going to get the backlash. also regarding the congress trying to impose a 90% tax on these.. seems like a completely terrible idea.

i'm extremely disappointed in the two gawker articles on this that have directly accused dodd of some kind of quid pro quo with AIG, a serious charge for which there is zero evidence, and also seem to basically assume he is kind of a liar anyway - why, I'm not sure, other than the writers don't really give a shit.

the Repugs are beneath contempt on this, dog bites man, etc.

Most of these bonus recipients are FURRINERS, yes? Who did what?

Lamp, "stupider" than EARMARKS mania?

Dodd is one of 90+ liars in the Senate, yes.

the fact that dodd -- who by all accounts wanted tougher pay restrictions -- is being cast as the aig bagman here is just totally crazy. i know the story's kind of complicated, but a lot of the media coverage is just willfully obtuse. chris matthews was ranting about it last night and he just had no idea wtf he was talking about. (i know, big shock.) i expect some coordinated pushback today.

yes because you see it's the president's fault for not being tough enough in the no limits on executive compensation that most republicans opposed in the first place. it's a total through-the-looking-glass argument

I might be totally out to lunch on this, but -- what's the old saying? -- the cover up is always worse than the crime. If the Obama Admin. knew that its bailout money would be partially used to honor bonus provisions in AIG's executive contracts, so be it. Maybe the Admin. felt its hands were tied. But Obama then, like Captain Renault in Casablanca, acted "shocked, shocked" about the bonuses. If the Admin. knew beforehand, Obama's reaction seems disingenuous, and would really hurt one of Obama's strongest assets: his reputation for integrity, honesty and being straightforward.

Anyway, as I say, I might be totally out to lunch on this, but that's the scandal I'd worry about most.

it's unclear who knew exactly what about which bonuses, and kind of a red herring because the existence of some bonuses was talked about publicly as far back november. geithner obviously did try to stop these particular bonuses even before the issue blew up publicly, so whatever the administration's level of knowledge was, it's not like they're only reacting after the fact. there's no evidence that these particular bonuses were the the subject of concern that led to the retroactive limits being scrapped in the stimulus bill. i believe dodd when he says he didn't even know about these particular contracts, because i don't know why he would know about them. my sense is that it's a line item that sort of got lost in the mad shuffle, until liddy told geithner, "you know, those bonuses are coming up," and geithner said, "whoa, what?"

but mostly it's just the sheer level of ignorance of everything surrounding aig that's aggravating to me in all the discussion of this. it's like nobody's been paying attention to anything that's happened in the last 6 months. or if people don't hear about something for a week, the entire history of it goes completely out of their minds.

geithner obviously did try to stop these particular bonuses even before the issue blew up publicly

___________________________

my sense is that it's a line item that sort of got lost in the mad shuffle, until liddy told geithner, "you know, those bonuses are coming up," and geithner said, "whoa, what?"

Any links (a) for the first proposition or (b) that provide a basis for the second proposition?

i'm with tipsy on this. didnt AIG just get nailed like 3 or 4 months ago for throwing some excessively lavish banquet (or something like that) with the first round of bailout money?

morbs - effectively it seems like your #1 object of contempt is anyone who is involved in a discussion with you.

i have the general impression that what happened with the bonuses was.. a lot of people including the administration and then dodd, deciding it was the least bad option out of many bad options, and then everybody just hiding their heads in the sand as far as the political damage it could do once the news came out, and then passing the buck once the news came out.

xpost (maybe it was more like 6 months ago, and it was some sort of retreat...?)

if people don't hear about something for a week, the entire history of it goes completely out of their minds.

^^ this. the first round of bailouts came under the bush administration treasury department under paulson, am I right?

Any links (a) for the first proposition or (b) that provide a basis for the second proposition?

the first one isn't a proposition, it's just a fact. it's been in all the coverage that geithner last week told liddy the bonuses were unacceptable, which is what led to liddy's now-infamous "best and the brightest" letter. all of that happened before any of this was reported publicly. the second point seems to be geithner's version of events, so take it for what it's worth. but at the moment there's no evidence to the contrary. anyway, both are summarized in today's story:

On Tuesday last week, as he prepared for a meeting in London of the finance ministers of the Group of 20 nations, Mr. Geithner learned that A.I.G. by Sunday would send out the bonuses to employees at its financial products unit, which developed the risky derivatives now blamed for the global credit crisis.

With few senior political appointees on hand, the word came from one of the numerous career civil servants who keep the Treasury functioning through changes of administration, according to an official.

Mr. Geithner consulted lawyers. They told him the government could not override the contracts that the insurance conglomerate had signed in early 2008, when its financial products unit was fast losing money.

On Wednesday evening, Mr. Geithner called Mr. Liddy, and demanded that he renegotiate payments. The next morning, Mr. Geithner informed White House advisers. Later that day a senior adviser, David Axelrod, informed the president.

probably the execs who actually made the decisions that fucked everything up over at AIG financial products are long gone

yeah, this article confirms that's the case: http://www.washingtonpost.com/wp-dyn/content/article/2009/03/18/AR2009031804104.html?hpid=topnews
if it's to believed, the employees getting these bonuses didn't lose money for AIG and were offered the bonuses to stay on at a failing company in order to unwind its contracts, but now they're going to return the bonuses but also walk away from AIG, which will ultimately cost taxpayers $$$ when all AIG's counterparties take advantage of the lack of institutional knowledge

http://gregmankiw.blogspot.com/2009/03/trivial-pursuit.html

Unless, of course, you think that our elected leaders are more likely to make things worse than better.

Ah, I misunderstood your first point. Got it now. Thanks for the link on the second point.

(xp to TM)

Not Mankiw again. "Hey I trusted Bush, why didn't you punks! I hate you all."

Now things get interesting.

The fact that the Fed just announced (yesterday) that it plans to purchase a trillion dollars in Treasury bonds and mortgage securities has been totally overshadowed by the $165 million in AIG bonuses. Maybe that's because ordianry people don't have a freaking clue what the Fed announcement means.

If, as seems almost certain, the Fed in not planning to enter the secondary Treasury bond market, but rather to buy these bonds as new issues at Treasury auction, then this is the equivalent of printing about $1,000,000,000,000 (<-- trillion) in new money - what usually gets called "the government just running the printing presses" by unsophisticates.

I cannot say whether this is a horrible thing that will bury our economy in funny money, or an heroic attempt to slow the speed of the financial collapse. But it sure as sin is unprecedented at this scale.

My gut feeling is that the economic advisors around Obama have decided that the government must somehow keep pumping air into wreck of the housing bubble, because allowing it to fully unwind would have unthinkable consequences. It is just this sort of thinking that could easily ignite a hyperinflation, if it is carried to its logical end.

My other gut feeling is that the politics of deflation vs. re-inflation will eventually shift to the deflation side, as the Congress and the US voters discover what kind of deficits we'll need to run, and who benefits most from the re-inflation scheme. The AIG ruckus is just a prototype for this battle.

Obama will need to get this straight in his head. He will need better political instincts than his economic advisors have shown. Otherwise they will take him down.

That's interesting, Aimless. I've always wanted to learn more about the notions of hyperinflation and deflation, their relationship to interest rates and how the Fed calibrates the economy to avoid threats on either end of the continuum (high inflation v. high interest rates).

I is an unsophisticates.

Yeah, me too, on this subject. I did some reading on various finance blogs about it and.. I don't grasp the significance. Wasn't this done on a smaller scale in the early 70's? regrettably, most days I get caught up in the cavalcade of stupid that dominates the public discouse (stay tuned for another outrage tomorrow).

discourse

as the Congress and the US voters discover what kind of deficits we'll need to run

And yet when I posit that very idea upthread, I'm shouted down.

But you're right Aimless, and it's not unsophisticated to call the Fed's latest action as one of printing money.

Oh, and here's the money quote from that Greenwald link:

Treasury Secretary Timothy Geithner told CNN Thursday his department asked Sen. Chris Dodd to include a loophole in the stimulus bill that allowed bailed-out insurance giant American International Group to keep its bonuses.

Did you post that earlier? I must've overlooked it. (Not being sarcastic, this is all quite far over my head so would prob not recognize essentially the same thing stated 2x w/different wording.)

Haven't been following the news that closely, except to see 'anger at AIG bonuses' headlines for a week or so, but Holy Fucking Shit at 90% tax on Wall Street fatcats.

Excuse me: a 90% *retroactive* tax on Wall Street fatcats.

yeah Geithner might need to go--he's been too gunshy about making the hard decisions to survive something like this AIG scandal--which is unfortunate for Obama because the last thing he needs to keep politically solvent enough to actually be able to do something to keep the economy afloat is to have to switch out another Cabinet member...

geithner has never established any credibility, and at this point i think it's impossible for him to do it. (this is as much a matter of affect as policy, imo. he stands up there and sounds weak and weaselly.) wall street smells weakness, the republicans smell weakness, the pundit blowhards smell weakness, i think the guy is done. how quickly obama realizes that, and how he reacts, will be sort of telling. if he was bush, he'd keep the guy forever just to prove a point, but he is supposedly not bush. getting rid of him would set off an inevitable short-term feeding frenzy -- and coming out of it would really depend on getting somebody better in there. (i.e. switching out geithner for summers wouldn't do any good at all.) i have no idea who the right person is, but i hope axelrod or somebody is thinking about it.

anyone have a national deficit graph (adjusted for inflation) that predicts the next 10 years or so, with the current with the 2 trillion we're supposed to see come back? i wanna know if the averaged-out deficit (adjusted for inflation) over those 10 years will be as large of a jump as the deficit was over the Bush years. and a prediction graph would be pretty handy overall to show people that bush was much worse of a president.

x post

people need to recall these guys assumed control way after the crash. there is more scrutiny aimed at what geithner/obama are up to than what bush/paulson did before, during, and after september 19, 2008 in their little plutocratic incompetence spree. rationality and patience are what matters now

http://img15.imageshack.us/img15/4263/w3671607.png

The dollar today dives down from 0.77 to 0.73 euro.

people need to recall these guys assumed control way after the crash. there is more scrutiny aimed at what geithner/obama are up to than what bush/paulson did before, during, and after september 19, 2008 in their little plutocratic incompetence spree. rationality and patience are what matters now.

indeed -- although it should be noted that as more details emerge about the post-9/15 or 9/19 spree, it's becoming clearer (to me anyway) that bush's and paulson's activities were much less incompetent and much more a case of looting and crony capitalism (e.g., the very interesting "coincidence" about how well Goldman Sachs done relative to its one-time competitors). and the key problem for obama and geithner has been that to date their activities on bank bailouts have NOT appeared to be demonstrably different than their predecessors'. geithner's and Treasury's missteps and inactivity stands out like a sore thumb not only because correcting the bank mess is so important to getting the economy back on its feet, but also because it stands in such stark contrast to how boldly the Obama administration has acted in other areas.

in the meantime, however, let's all have a pity party for the poor beleaguered AIG execs who received those bonus checks

my favorite goldman thing is how they told the treasury they were actually going to give back $10 billion in assistance because the terms were too onerous. and then a month later it's revealed that goldman received $12 billion from AIG as a counterparty payment, footed by the us treasury.

I'm not sure anymore Eisbaer if its a good thing demonizing the AIG execs...aren't these execs supposed to be part of the solution and not part of the problem (ie unwinding the complicated and toxic derivatives)?

oh god this is turning into dictionary definition of "clusterfuck"--it seems that everyone involved (Liddy, The Obama Administration, Congress, the media) has done everything they could to obfuscate the issue. It's not a scandal until fingers get pointed...

the bonuses thing is so fucked up

however small the % of the bailout the bonuses are, what happened to nattering about "the narrative"? NY Post-style outrage is trumping the White House here.

too true. the administration needs to set the record straight here that they are dealing with a lot of provisions leftover from the crisis' culprits. it's still fine to blame bush et al. because a) it's true, and b) bo has only served two full months

One A.I.G. executive, who spoke on the condition of anonymity because he feared the consequences of identifying himself, said many workers felt demonized and betrayed. “It is as bad if not worse than McCarthyism,” he said. Everyone has sacrificed the employees of A.I.G.’s financial products division, he said, “for their own political agenda.”

LOL

yes Einstein it's just as bad as being barred from working in your chosen profession because of what you believe

Yeah, there's a nationwide witchhunt falsely accusing people of having worked for the AIG financial products division.

geithner's and Treasury's missteps and inactivity stands out like a sore thumb not only because correcting the bank mess is so important to getting the economy back on its feet, but also because it stands in such stark contrast to how boldly the Obama administration has acted in other areas.

gtfo with this "misstep" and "inactivity" bs. replacing geithner seems pretty inevitable at this point i dont want to get into fukken digipundit blog asshole talk about "political calculus" or w/e makes this necessary - i think it sucks but its not a major thing. but seriously fuck you and fuck this post you are ruining america

because: a) the bold action you laud has drastically reduced the administrations ability to react to the economic crisis by tying fiscal recovery to a # of unrelated activites b) no one is "correcting" the banking mess like some its some dim student's math test c) the whole post reeks of narrow-minded short-term thinking that cares more about "optics" and has caused so much of the admin's reaction to be half-hearted and a little disorganzed