Rolling US Economy Into The Shitbin Thread

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

here's a choice line from the article:

An executive at Merrill Lynch, where bonuses have also come under fire, said that some employees had asked whether the firm would cover the cost of private security for them.

why don't you use your giant fucking bonus for that, shitbird?! i know everything everyone's been saying on this thread about misdirected anger etc - but it's seriously hard not to hate alot of these people.

oh okay that post was way more hostile than i meant it to be - its not really even directed at you eisbaer jsut general dissatisfaction w/the current wider discussion and how little debate has occured over actual policy cf. aimless's post about monetary policy

my only problem with the AIG thing is that everyone focusing all their hate on AIG prevents people from also hating goldman sachs etc. I want them all to be adequately demonized.

oh okay that post was way more hostile than i meant it to be - its not really even directed at you eisbaer jsut general dissatisfaction w/the current wider discussion and how little debate has occured over actual policy cf. aimless's post about monetary policy

― Lamp, Friday, March 20, 2009 1:02 PM (1 minute ago) Bookmark Suggest Ban Permalink

ya dude well finance and shit is hard, obama is black and tim geithner is sort of cute so why cant we talk about them

lamp: i'm every bit as concerned about actual policy substance as you are! perhaps more so than most ILXor posters -- to the point that i get derided by some as being too much of a policy wonk-wannabe -- and i find the dog-and-pony "optics" shows distracting at best. (not to mention that the presently-absent gabbneb thrives on that kinda inside-baseball shit much more than i ever will!) i don't do maureen dowd's schtick, and i most prefer aimless's and don's substantive posts and article links to the trivial dowd-esque shit.

i didn't everything spell it out in that post that you objected to, but my concern IS about what Geithner and Treasury are or are not doing. and what they appear to be doing (at least to me) is inadequate -- and if it isn't, they aren't explaining well enough what they're doing, why they're doing it, or even if it's just too damn complicated to get it done with already in a fell swoop. i know that a cleanup of the banks is complicated and may take a lot of time (which may be the whole purpose of these stress tests that Geithner mentioned a month ago). but as i said before, whatever action is happening at Treasury is moving really slowly compared to how quickly the stimulus and omnibus bills have been passed.

hey it's been awhile.

Code Pink appeared at the AIG hearing conducted by the House Financial Services Subcommittee, waving some signs expressing their displeasure. Chair Paul Kanjorski admonished Medea Benjamin and friends, ordering them to behave or be thrown out. So how do these "radicals" react? By meekly surrendering their signs and keeping their mouths shut. Pitiful....

These motherfuckers are robbing you in broad daylight. The political class represented by Kanjorski (and Barney Frank, who backed Kanjorski) is looking for ways to help the financial class overcome this PR debacle, and hearings are usually the best method of repair....

What the fuck happened to civil disobedience? Class war is openly being waged on us. We may not win, but at least go down fighting, and perhaps put some fear in these criminals. I wonder if Bush or McCain were in the White House, Code Pink would be so polite and obedient. It appears that Obama has liberals and some leftists right where he wants them -- to the degree that he gives them any thought, of course.

http://dennisperrin.blogspot.com/2009/03/code-mute.html

7 reasons why AIG should be allowed to die
http://www.businessinsider.com/7-reasons-why-aig-should-be-allowed-to-die-2009-3

The worst thing about the AIG thing is that it's going to get Geithner fired, a guy who's been understaffed since minute one and a guy who's arguably as good as anyone is going to be for the job. He's getting turned into a populist sacrifice, another trivial footnote in the pages of politics where the details of his missteps will never be connected to the larger picture.

It's the political element that has always frightened me most about this recession/depression, the impulsive need to appease voters in the short term with carelessness towards the future.

The worst thing about the AIG thing is that it's going to get Geithner fired, a guy who's been understaffed since minute one and a guy who's arguably as good as anyone is going to be for the job. He's getting turned into a populist sacrifice, another trivial footnote in the pages of politics where the details of his missteps will never be connected to the larger picture.

even though i've carped about Geithner, i actually agree with this assessment. i have no idea who could possibly replace him, nor do any of his critics.

i think i might do an OK job

additionally, the understaffing @ Treasury is a concern that is getting much less press than it ought to (even before the AIG bonus kerfuffle). what the hell IS the hold-up? i mean, i'm all for having people background-checked and being sure that any conflicts-of-interest are explained and minimized. but really, these positions have to be filled in order to get ANYTHING accomplished.

it's the same situation with alistair darling as chancellor of the exchequer and mervyn king as governor of the bank of england - they're vilified for not showing "leadership" but frankly no one has any idea what to do

xpost except max, obv!

well i mean i dont have a lot of ideas but i look pretty good in a suit and i can act confident to make people feel better

I'm not sure you can replace Geithner with any plutocrat who isn't up to his elbows in enabling this shit for the last 15 years.

my concern IS about what Geithner and Treasury are or are not doing. and what they appear to be doing (at least to me) is inadequate -- and if it isn't, they aren't explaining well enough what they're doing, why they're doing it, or even if it's just too damn complicated to get it done with already in a fell swoop.

yeah, a lot of the harshest criticism of geithner is exactly on the substance (or lack of substance) of his performance to date. like, krugman, today:

At every stage, Geithner et al have made it clear that they still have faith in the people who created the financial crisis — that they believe that all we have is a liquidity crisis that can be undone with a bit of financial engineering, that “governments do a bad job of running banks” (as opposed, presumably, to the wonderful job the private bankers have done), that financial bailouts and guarantees should come with no strings attached.

This was bad analysis, bad policy, and terrible politics.

(and ok, i do not personally have in my head the name of better person to replace him. but i bet lots and lots of people do.)

I'm not sure you can replace Geithner with any plutocrat who isn't up to his elbows in enabling this shit for the last 15 years.

exactly -- and i don't want to go through some eastern european lustration shit either. not a good place to be, i admit.

You see, I think all this whining about lack of direction, or action, on either side of the Atlantic, seems pretty weird. One thing this whole mess has been characterised by is pretty forceful, imaginative actions by governments to at least not let it get as bad as it could (the do nothing approach).

The whole bonus thing, and Fred Goodwin's flipping pension, is SO irrelevant to the big picture, it's a wonder they get much coverage at all (and also so simple: yes, they are morally defensible, but they are legally enforceable, and they were written by the companies concerned - there is NO responsibility on the part of govt. Story over.)

I'd have thought Obama, with his political capital, could have just made that case and let it drop. The fact that Congress might pass this 90% retroactive tax thing is nothing short of heroic, but still kinda a sideshow.

Anyway, this is a great article about your quantitative/credit easing policy http://www.economist.com/finance/displaystory.cfm?story_id=13326779

And Bernanke sounds like a good guy!
BACK in 2002 Ben Bernanke, then still a Federal Reserve governor, declared that “under a paper-money system, a determined government can always generate higher spending and hence positive inflation.”

That's what we want to hear!

On March 15th Mr Bernanke said that the biggest risk facing the economy now is that “we don’t have the political will, we don’t have the commitment to solve this problem.” At least for the moment, it is not the Fed chief’s gumption that is lacking.

morally indefensible! soz