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AIG,Big Government and Conservative Populism

Submitted by Pete on Fri, 03/20/2009 - 20:56
in

The Democrats are trying to funnel the public rage regarding the expense and inevitable irrationalities of the bailout into an anti-business populism.  There is no reason why conservatives should allow this strategy to prevail.  The populist outrage is real.   It comes from people feeling that they are getting screwed by the powerful and the connected.

The Democrats are trying to define the villains of this narrative as dishonest, greedy businessmen  and trying to pass off government activism (we'll tax their bonuses good) as the solution.  Conservatives have a better and truer story to tell.  The provision protecting AIG bonuses was  snuck into a pork laden stimulus bill that no one had a chance to read.  The reason no one had a chance to read it was because the Obama administration and its allies were afraid that giving the public a chance to read the bill would doom the bill.  The rush to bigger government helped beget this problem.

One challenge for conservatives is to get into the public mind the idea that Big Government is not the enemy of business corruption of the government but an ally of corrupt and connected business elites.  Obama's cap and trade proposal would be and exellent place to try out a strategy that takes on both bigger and more expensive government and rent seeking companies.  The cap and trade proposal would increase energy cost and government power over the economy.  The Obama administration will try to portray the proposal as a way of standing up to the evil oil companies.  If Obama can frame the issue as consumers paying a little more now in order to pay less later (when the great new green technologies are on line) and as a way of standing up to the oil companies, then the proposal has at least a fair chance of political success.  Given a choice between Big Government and Big Business, the public could go either way. 

Conservatives could frame cap and trade not merely as a regressive tax on consumers and an expansion of government power (the anti- Big Government arguments) but also as a payoff to the companies that will be getting direct or indirect subsidies from the program.  Not only will consumers be paying more, some companies will be making profits (because their products will be profitable at the higher energy prices).  So the government  hurts you and someone else makes a buck. 

My feeling is that the public is less mad at business than at privilege.  The prevailing question is "Where is my bailout?"  If conservatives can convince the public that Big Government is an ally rather than an enemy of privilege, they will have gone a long way toward connecting the current populist frustration with limited government politics.

 

 

 

 

 

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I think Anti-Business

Submitted by Hamandcheese on Fri, 03/20/2009 - 21:59.

I think Anti-Business sentiment is legitimate. Freer-markets as you correctly imply are not necessarily a pro-big-business proposal. And though I'm not a knee-jerk anti-corportate type myself, there is ample room in Conservatism to be anti-business if that business is in fact gaming the system and not playing by market rules.

So in short I think you, and republicanism, errs in assuming the public is naive regarding the current crisis. Anti-business sentiment is not entirely misdirected.

Yes, you would think that...

Submitted by davidfarrar on Fri, 03/20/2009 - 22:26.

...but the message I got from Michael Steele in his email address on the subject is:

"So our tax dollars are going to pay AIG executives millions in bonuses! Just another day of good news from Washington.

 "Meanwhile, don't look now, but Nancy Pelosi and the Obama Administration is busily working to build up a debt larger than our country or any country has ever seen.

"But back to the bonuses. It was a mystery all week how this happened. No one could seem to figure it out.

"But then...it leaked out that Democrat Senator Chris Dodd snuck a provision into the massive spending bill that allowed the bonuses to happen.

"Dodd denied it at first, then changed his story and now admits that he did it, but says he did it at the request of "Administration staffers".

"Finally, the Democrats have been forced to admit that they allowed the AIG bonuses to happen.

"This has got to stop."

Not exactly on point. I hope he can pick up your line of attack and run with it soon before we all starve.

ex animo

davidfarrar

"This has got to

Submitted by Hamandcheese on Fri, 03/20/2009 - 22:36.

"This has got to stop."

Something about that kind of phoney sounding outrage annoys me. AIG is the flavor of the month. I wish Steele would start thinking about actually affecting major change in his party instead of wasting his time framing (rightly or wrongly) every overblown controversy as the democrats fault. People will have forgotten about AIG bonuses by May.

You are right.

Submitted by davidfarrar on Fri, 03/20/2009 - 22:46.

Since he didn't offer any leadership on this issue when Congress started going after private individuals in an attempt to cover up their own incompetence, House reps were left with no leadership. The rest, as they say, is history.

I hope somebody wakes him up in time to defeat this legislation in the Senate, not only for the sake of the AIG employees, but for the sake of Congress and our liberity as well.

ex animo

davidfarrar

I'm a free-market type of guy

Submitted by Chris Palko on Fri, 03/20/2009 - 23:25.

but I don't got a problem with a punative tax on AIG bonuses.  It's the best way to remedy legally binding bonus payments.

If defending six figure bonuses to corporate executives who have had the government take over their business is conservative, then I guess I'm not conservative.  Fortunately, it seems as most on the right have not defended this arrangment.  However, there is a strand of conservative thought that is very deferrential to these types of massive bonuses.  I hope these guys realize that the very credibility of the free market system is called into question when executives from failing companies are so richly rewarded.  No less than William F. Buckley Jr. decried excessive compensation as a perversion of the free market ethic.

Well said

Submitted by Paleo-Skeptic on Sat, 03/21/2009 - 04:52.

Buckley... decried excessive compensation as a perversion of the free market ethic.

It's kind of like the pro-lifers being against human cloning.

An aversion to perversion through excess is no proof against principle, but rather denotes a fuller understanding of it.

That's all fine and dandy, BUT (and that's a BIG BUT!)

Submitted by lagomorph on Sat, 03/21/2009 - 22:26.

DO NOT pass RETROACTIVE punitive tax laws - EVER!  How would you like to wake up one day and find the Bush Tax Cuts retroactively denied, and find yourselves slapped with not only bills from the IRS, but the attendant interest that accompanies them?  Hmmm? 

The way to avoid the bonus issue altogether is to send AIG into receivership, thus rendering all those contracts null and void.  It was so stupid of Geithner to horse around with excuses about wanting to avoid lawsuits, when of course this retroactive punitive tax punishment is going to do nothing but engender suits all the way up to the Supreme Court.  I hope they tie him up for years.  The man was sold to us as a rocket scientist, when in fact he's nothing more than a Goldman Sachs crony with absolutely no common sense whatsoever.  And you guys are somewhat lacking in that department as well if you agree with Barney Frank on this topic.  You're on the wrong side, and I'm quite certain that Buckley would agree due to the retroactive nature - although I'm always pleased to hear his name and wonderful quotes invoked on The Next Right.  :-)

I'm not so sure that's applicable

Submitted by Paleo-Skeptic on Sun, 03/22/2009 - 01:02.

I won't even appeal to the stare decisis issue and the idea that settled law is, in fact, settled law.

But for the strict constructionists and originalists, here it is:

No Bill of Attainder or ex post facto Law shall be passed.

Then there's that Bill of Rights:

... nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

Bu the Supreme Court has determined over and over again, eg US vs Sullivan (1927) and Garner vs US (1976), that Fifth Amendment protections do not apply in federal income tax cases.

Congress does indeed have the authority to levy taxes (Article One, Section 8).  Merely levying a tax does not make any past act illegal.  Any illegal act could exist only in the future, ie if those taxes were left unpaid.

No retroactive criminal act.  No ex post facto law.

Were it retroactive, then people would be obligated to file amended returns for prior tax years.  No one is talking about doing that.

 

 

A word on Wall Street bonuses

Submitted by johnson springs on Sat, 03/21/2009 - 08:14.

There is plenty of populist political hay to be made from the "excessive" AIG bonuses. But people should be aware of a couple facts about the meaning of "bonus" in the Wall Street compensation model.

First, there is the matter of scale. Most Americans are appalled when they learn how much bankers make. This has nothing to do with AIG, bonuses or success or failure. Wall Street makes a ton of money and most of that money goes to individuals in the form of huge end of year bonuses. It has been that way for a long time.

Arguments can be made that Wall Street's compensation model creates incentives for bad behavior. And I believe the firms need to rethink about how their comp plans work. But the disproportion in scale between Wall Street compensation and most Main Street compensation predates the present mess by decades if not a century.

As for bonuses: the word "bonus" means very different things on Wall Street and Main Street. On Main Street a bonus is typically uncontracted, occasional compensation for extraordinary performance and/or results. Therefore, to many Main Street ears the idea that bankers are getting "bonuses" after the debacle of the last year is incredible and outrageous.

However, on Wall Street, a "bonus" is a fundamental and often contractual component of a typical comp plan. Any banker/financial professional will have a salary that can be quite low compared to his total compensation. His comp plan will include a bonus that is defined as a range. He gets the low-end in bad years and the high-end in good years. If he knocks it out of the park he may even receive a bonus beyond his contractual range. But bankers get "bonuses" no matter their performance. For Main Street, to call such payments "bonuses" is a misnomer.

For Wall Street, clawing back AIG bonuses represents a huge and unfair hit to the people who work there. The amount of money they make and the size of their bonuses may seem too big or unfair or whatever, but changing the game mid-stream because of popular and political outrage about fairness is ironically very unfair.

js, I hesitate to disagree with you

Submitted by NextRightNando on Sat, 03/21/2009 - 08:23.

js, I hesitate to disagree with you, as you are a voice of sanity on this site.

However: given that the tax clawback is probably unworkable, I am still all in favor of the bill anyway. I think it is a very necessary shot over the bow of the culture on Wall Street, which has to change.

I second all you said

Submitted by acinphx on Sat, 03/21/2009 - 15:01.

And js, i appreciate your thoughts as well.  Andrew Sullivan had a post on his site that included the text of the 'purposes' section of the bonus contract, written in 1/08, and it was clear from the text that the rationale for the bonuses wasn't at all consistent with what would be commonly understood on Main Street as performance or retention bonuses.  It explicitly acknowledged that the contract was based on expected underperformance of the firm in a declining market over the term of the contract.  I wish I could find it now to include here but I can't find it on his site any more;  I'll just say it was entirely consistent with js's description of the form of bonuses as used on Wall Street.  The unitiated to Wall Street practices would view it as dispensing bonuses for bad behavior and poor performance, but with the information that you supplied about bonuses constituting a signicant part of compensation, it seems much less nefarious.

But I agree with Nando's point about the value of a shot over the bow.  As inscrutable as the concept of these 'bonuses' are to Main Street, I imagine that Wall Street culture may be equally as mystified about public outrage over what is SOP there.  I'd like to think they can appreciate how outrageous it is to expect taxpayers to fund multi-million dollar payments to the very people whose bad judgment contributed to the mess, but many of the bonus recipients apparently don't see it as ethically-problematic. 

I also wonder if the administration sees value in using the outrage to solidify support for more regulation and effective enforcement.  The GOP is likely to be very vocal with claims that more regulation is too Big Government and will hamper the free market.  But if half the House GOP can get on board with a punitive 90% tax rate, how can they argue later to maintain the status quo in weak regulation and enforcement that ultimately led to this week's vote?  It should be easier for Pres. Obama to argue after this episode that GOP (or Dem) objections to more regulation and meaningful enforcement is preferable to meltdowns, bailouts and 90% tax rate schemes.

No wonder we're becoming a nation of Mob Rule

Submitted by lagomorph on Sat, 03/21/2009 - 22:32.

It's because Republicans like yourselves and 85 in Congress are so utterly willing to ignore the fact that we are a nation of laws and must adhere to the ones we've passed until we pass new ones. 

There is one thing that Capitalism must have in order to survive that is more important than electricity, than the Internet, than all the newest technology.  That one thing is the Rule of Law.

We should never pass a tax law that "claws back".  If we made poor judgments in the past, we must make good judgments going forward - FROM THIS DAY FORWARD, not from this day backward 2 weeks, 2 months or 2 years.  For godssakes, my good men, please analyze what you've written and ask yourselves if you want to go down this slippery slope toward fascism, for that is precisely where you are headed. 

Since you are all so pleased to fire warning shots across Wall Street's bow, I'm equally pleased to fire this shot across yours. 

Not quite yet

Submitted by acinphx on Sat, 03/21/2009 - 23:39.

lagomorph, you said "we are a nation of laws and must adhere to the ones we've passed until we pass new ones."  Exactly.

Which is why I'm OK with a warning shot.  The House vote isn't law yet. 

The House bill served as an outlet for public anger but I'm confident it will never come out of the Senate/conference committee in anything like the version passed in the House.  Cooler heads will prevail (lobbyists will prevail, as well); concerns will be expressed about its questionable constitutionality; and another shiny object will have come along to distract the mob so the pressure won't be as high for retribution when it hits the Senate (if it ever does).  That's precisely the Senate's role; the rabble gets its say in the House but the Senate is designed to put the brakes on the rabble in the 'statesman's' role (yeah, I know that's laughable with some of the current ones, but still...).  I know I sound cynical, but I truly believe this. 

Even if my cynicism fails me, as you said, we're a nation of laws, and the AIG execs will have a suit filed the day it becomes law.  It will take some time to make its way through the courts but ultimately they will prevail, they will get the bonuses and hopefully the court decision will discourage similar stupidity in the future (but I'm cynical enough not to put a bet on that). 

I completely agree with your blog post excoriating Barney Frank. Publicizing the names and addresses of the AIG execs is truly frightening.  Hopefully even someone as dim as he is will see how that leads certain groups taking it upon themselves to use the information in disturbing ways.  But there are a lot of groups out there with more disturbing plans than a bus tour, so if that's the worst this engenders we've dodged a bullet. 

Two things: I'm not a Rep and not a gentleman (wrong gender for that).  I think Nancy Pelosi played the Republicans who voted for that ridiculous bill like a harp. Hmmm, now what was the GOP saying about not raising taxes .... oh yes, they support punitive 90% tax rates!  So when that 3% hike proposal comes along, that's small potatoes by GOP standards, right?

That's right - which is why I published a link to their votes!

Submitted by lagomorph on Sun, 03/22/2009 - 00:44.

Nice to see other women here who enjoy analyzing politics.  I'm a small "l" libertarian Republican.

You trust the courts a helluva lot more than I do, especially with loose cannon Kennedy in the middle of SCOTUS. 

Supposedly the whole reason Geithner urged Dodd to change his language in the bill to permit the contracts was to avoid lawsuits for breaking the contracts.  So much for that strategy.

I just tripped across some fascinating Muckety fodder linking Felix Rohatyn (think Lazard Freres, NYSE and Rothschild family), Zbigniew Brzezinski, George Soros and Barack Obama.  Coincidence?  I think not.

Yes, it's nice to encounter

Submitted by acinphx on Sun, 03/22/2009 - 01:54.

Yes, it's nice to encounter other women with a similar vice!  Looking at your posts I'd say we share a generally similar outlook.  Respect for the rule of law is one of my hot buttons too.  I used to be Republican but reached a point that I couldn't remain in good conscience so after AZ opened its primaries I swtiched to Independent. 

Point taken on the SCOTUS and maybe my faith is misplaced, but I'd be very surprised to see this issue get that far.  Geithner's strategy hit the skids but that's a big part of why I think they'll pull out all the stops to get this fixed in the Senate and keep it out of the courts.  Court proceedings tend to air a lot of dirty linens and the bedsheets in this case positively reek.

You're clearly working above my pay grade because I have to admit utter ignorance of your reference to the Muckety folder.  Is that something you'll blog about?

 

 

 

Muckety Connections and the Slippery Slope to P3 Corporatism

Submitted by lagomorph on Sun, 03/22/2009 - 18:16.

Muckety.com is a website that allows searches and displays of relationships between entities such as persons, organizations, government agencies, etc.  Click here for an example of a search for Timothy Geithner's relationship to Goldman Sachs Asset Management and Hedge Funds, for example.  To do advanced searches, simply use the word "and" between multiple entities.  If you search for Rohatyn and Soros and Obama, though, beware that the number of connections will literally black out the entire page so you have to be a little more selective if you want to "follow the money".

It's a family affair.  Rohatyn is involved with House Speaker Pelosi as not only a financial backer and economic advisor, and Soros with Obama as a major contributor, and both Rohatyn and Soros are successful investors who are equally qualified to participate in Public Private Partnership relationships with the Obama administration. The following is an excerpt from today's Institutional Investor:

Nick Rohatyn's very connected hedge fund

Onetime wunderkind Nick Rohatyn, who made his name building J.P. Morgan's emerging-markets business, is assembling a hedge fund backed by a group of business and banking luminaries. The biggest star of all: his daddy.

Rohatyn's new money management firm, Rohatyn Group, has begun raising money for a hedge fund specializing in emerging-markets investments. New hedge funds are a dime a dozen, but Rohatyn Group has assembled a glittering global advisory board that seems likely to attract attention and money.

The list is topped by Felix Rohatyn, famed Lazard Frères investment banker and former U.S. ambassador to Paris.

Daddy Rohatyn made news with his partner Warren Rudman in this Washington Post article titled It's Time to Rebuild America - A Plan for Spending More -- and Wisely -- on Our Decaying Infrastructure from on December 13, 2005:

The shortfall in investment is aggravated by the fact that most infrastructure money is given out by formulas that do not force all projects to be evaluated on consistent or rational terms. The solution to both issues could begin with a national investment corporation (NIC) that would be the window through which states and groups of states and localities would request financing or grants for all infrastructure projects requiring federal participation. It could, over time, replace the existing dedicated trust funds, as well as address new missions for America's public infrastructure programs, including renovation of public school buildings.

The NIC could use its financial power to bring about improvements in policy. Funds for new highways, airports or water projects would not be granted unless modern technology, appropriate user fees and other non-structural solutions had been brought to bear. Capital grants to individual school districts would be contingent on adopting management and human resource practices that would improve school performance.

The NIC should have the authority to issue bonds with maturities of up to 50 years to finance infrastructure projects. The bonds would be guaranteed by the federal government. [emphasis mine]

It all sounds pretty good, unless we look back into Rohatyn's past and reputation as described on Democratic Underground last year:

"Democrat" moneybags Rohatyn was the leading backer of Gen. Augosto Pinochet's bloody fascist coup in Chile in the 1970s, along with "Republican" fixer George Schultz. Jesse Jackson, Sr. for years has pushed Rohatyn's and Schultz's "economic infrastructure" policies which call for private financial interests buying up and controlling public infrastructure, and for drastic austerity against public budgets as a whole--it's all modeled on Pinochet's economics, and on Mussolini's Italian "corporatist" fascism earlier.

What do we mean by Mussolini's Italian "corporatist" fascism?  It almost sounds antithetical, since fascism is statism and corporatism is corporate control, but Mussolini himself said the two ultimately went together like peanut butter and chocolate in an essay he wrote in 1935 titled Fascism: Doctrine and Institutions:

The corporate State considers that private enterprise in the sphere of production is the most effective and useful instrument in the interest of the nation. In view of the fact that private organisation of production is a function of national concern, the organiser of the enterprise is responsible to the State for the direction given to production.

 

State intervention in economic production arises only when private initiative is lacking or insufficient, or when the political interests of the State are involved. This intervention may take the form of control, assistance or direct management.

Bruce Marshall wrote an article on this subject about a year ago (February 2008), titled Barack Obama Fronts Wall Street's Infrastructure:

When Senator Obama states that his National Investment Reinvestment Bank will magically turn $60 billion into trillions of dollars as he did in his Feb 13th Jamesville, WI speech, one can easily realize that the only way that this can happen is through the perverse magic of Wall Street. What would happen is that bonds floated by the NIRB will be bought on the open market, to then be speculated upon, securitized as derivatives, traded and ultimately used as collateral on the newly built infrastructure.

What we will see is the emergence of an infrastructure bubble to replace the mortgage bubble, propped up by initial government expenditures towards infrastructure. This is just the start as Obama will fund the feel good 'carbon credit' swap to be the next blast of hot air to make Wall Street giddy. This is a key insight to a true understanding of what is going on. Bailout the financial powers with a clever plan that will raise money to then buy up hard assets, in other words the remaining wealth of our nation, as the meltdown crisis of over a quadrillion in derivatives losses grows and grows..

Well fine, you say, but what do Public Private Partnerships have to do with the Fed's TALF (Term Asset-Backed Securities Loan Facility)?  For that we can refer to the WaPo's 3/6/09 article titled U.S. to Invite The Wealthy To Invest in The Bailout:

The government is seeking to resuscitate the nation's crippled financial system by forging an alliance with the very outfits that most benefited from the bonanza preceding the collapse of the credit markets: hedge funds and private-equity firms. [emphasis mine]

The program, which could involve the government lending nearly $1 trillion to these investors, exceeds the size of every other federal effort to address the crisis so far. The initiative's approach could be the model for future federal efforts to aid the credit markets, sources familiar with government planning said. Officials call this strategy a "public-private partnership," but in essence the government is offering good deals to private investors to draw them into its rescue efforts.

Architects of this initiative have long been sensitive to the political challenges of teaming up with hedge fund managers and private-equity firms. But officials see these private investors as among the few who have ample cash available. In public statements, officials have sought to focus attention on the ultimate goal of freeing up credit for consumers.

Apparently the Washington Post definition of "wealthy", unlike the Obama administration's definition, is not limited to citizens whose total family income is at or above $250K...  So what does it all mean?  The WaPo article above reveals that there will be efforts to engage private pension funds in these P3 efforts.  The whole thing sounds to me like it's shouting Danger! Risk! Warning! Risk! Slippery Slope! Risk! but the Obama administration keeps turning the volume on mute so we don't need to trouble ourselves hearing it.  I think we should hear (and read) a lot more before we encourage Tim Geithner and President Obama to ram through a nontransparent, secretive financial agenda with hedge fund managers like Soros and Rohatyn whose track records are not exactly known to be "democratic" regardless of their so-called Democratic Party affiliations.

I know the Rohatyn name

Submitted by Ironman on Sun, 03/22/2009 - 18:19.

from the NYC bailout of the 1970's

You might have read, the one where the original giveaway plan was nixed by Jerry Ford and he got the "Ford to City: Drop Dead" headline (which cost him the '76 election IMO)

Well the actual bailout worked since the city was put on GAAP and stopped borrowing for operating expenses, playing games with off-budget authorities et al.

Felix Rohatyn was the honcho on that one and made the City buckle down and pay its obligations  If I thought for a second anyone doing Obama's economic policy could carry his briefcase, I wouldn;t be as petrified as I am about their agenaa. 

Something happened to Rohatyn on the way to the Louvre...

Submitted by lagomorph on Sun, 03/22/2009 - 19:35.

Apparently he's a real Renaissance Man - and I mean that in the context of the 14th Century city-state, and not the one you'd necessarily recognize from the 70's, LoL.  According to his own remarks at the Academy of Arts and Sciences gathering in Paris on 6/6/2000:

How can we encourage greater cultural diversity? I believe we need enlightened government support for arts and education, as well as tax policies that encourage giving to educational and cultural institutions. Most of all, we need an educated and discerning public that seeks out quality and originality. We need to teach students at all levels that art and knowledge are not luxuries but necessities of life. In this area, Europe is a very good model for the United States.

We are moving rapidly toward a world of culture and ideas also without borders. In this world, Europe and the United States are destined to be different but also destined to be leaders. Europe and the United States have different histories and cultures and different economic and political systems, but we both value innovation and originality—and the liberty of expression. We both recognize that if they are heard, great men with great ideas, from John Adams and Thomas Jefferson to Jean Monnet, have the power to change minds, to change lives, and to change the world.

Enlightened government and a world without borders strikes me as code for...oh, I dunno, Agenda 21 implementation at worst, and devolution of the nation-state at best.  I read that Rohatyn's "unintended consequences" in New York included the slashing of municipal services, the shutdown of hospitals, schools and firehouses, the wipeout of the City's once thriving industrial base, and the depopulating of many of the city's poorer, formerly blue collar historic neighborhoods.  If you remember the period from your own living history, it would be interesting to get your take on the success (as opposed to the msm spin) of Rohatyn's efforts. 

The most scathing critique I've read of Rohatyn's Big MAC involvement is this:

The most important city in the world had its sovereignty stolen by the bankers, in much the same way Schacht had demanded that German sovereignty be ceded to the bankers to solve its fiscal crisis.

The most praise I've read of his endeavors is that while implementing pain and austerity, he promised to implement it "fairly".  However, the Larouchies claim:

In the New York crisis, the bankers had the vast majority of their debts repaid at great profit; the investment bankers made hundreds of millions in fees and commissions marketing Big MAC securities; meanwhile, services for the majority of citizens were cut, hundreds of thousands of workers had their pay and benefits slashed, and tens of thousands of others lost their jobs, victims of Rohatyn's “fairness.”

Rohatyn is a Keynesian.  He's no Austrian free marketer, nor Friedman-esque monetarist.  His advice to Pelosi and previous Democrat luminaries such as Gore, Clinton, Dukakis, and Pam Harriman's Democratic Leadership Council does nothing to persuade me that I would put my faith in his policies or trust him not to purge the pension funds for his own corrupt greed to further an agenda that was "best for all of us"...  In other words, I don't share your optimism on this guy being able to teach the Gang Who Couldn't Shoot Straight how to hit any target except the bullseye on our wallets.

Is it 2010 yet? 

NYC in the late 70's did have all those nasty things happen

Submitted by Ironman on Sun, 03/22/2009 - 20:28.

but then again, didn;t somewhat say "the wages of sin is death".. The wages of overspending on social programs is debt.

If you overborrow, you need to pay back the money. If the quality of life suffers, them's the breaks. There was no other way out for late 1970's NYC than painful readjustments to pay debt service.

As for the depopulation and deindustrialization of the outer boroughs, the same stuff happened in every NE and Midwest city in this era--the burbs and the South were too alluring. 

We'll have a nasty national example if we adopt the Obama budget and Premier Wen makes good on his promises to get paid back what he lent us in real money, not Weimer currency. You saw my example of the overextended apartment  complex; high rents, deferred maintainance and no profits for thr owners

lagomorph - about the shot across the bow

Submitted by NextRightNando on Sun, 03/22/2009 - 08:12.

lagomorph - do you agree that the culture on Wall Street needs to change? I have in mind two specific things: 1) the idea that companies exist for the purpose of being looted by their employees; and 2) the idea that the markets can operate solely on the "bigger fool theory" - the underlying fundamentals of companies or assets are uninportant so long as you can find someone to sell the thing to.

The clawback bill (which will never pass the Senate), the hearings, the media attention are all delivering to Wall Street the message that party is over.

Which is a good thing.

 

Barack Obama and the "Culture on Wall Street"

Submitted by lagomorph on Sun, 03/22/2009 - 15:52.

I'll let Christina Romer, Chair of the Council of Economic Advisers for the Obama Administration, speak to your very good question on whether the culture on Wall Street needs to change.  The following is a portion of the transcript between Romer and Chris Wallace on today's Fox News Sunday. 

WALLACE: The Treasury Department will announce its plan tomorrow to buy toxic assets to get financial institutions lending again, but the plan depends on getting private investors -- hedge funds, private equity companies -- to partner up with the government to buy those assets.

Question: How much damage has the furor over AIG, hauling these members up before Congress, this 90 percent tax passed by the House -- how much damage has that done to getting private investors to partner up with the government?

ROMER: I think we ought to be careful for a minute, right? So the -- we ought to -- we have to acknowledge that the outrage is genuine. It's something that we all feel. And absolutely, what the president has said is what's happened at AIG is completely unacceptable. So that's crucial to get on the table.

In terms of what -- you know, I think we're going to have a sensible strategy going forward. The president has very much drawn a distinction.

We understand firms that at some level are only in existence today because the government has stepped in and supported them -- the kind of restrictions you'd put on them for executive comp. All right? That's -- the taxpayers are involved and, absolutely, that -- that makes sense.

What we're talking about now are private firms that are kind of doing us a favor, right, coming into this market to help us buy these toxic assets off banks' balance sheets. And I think they understand that the president realizes they're in a different category, and I think they are going to have confidence that they're going to be able to come into this -- into this program.

WALLACE: And they will be treated differently.

ROMER: I think, you know, we certainly are going to apply all the laws that we have to apply. But they should know that the president understands they are in a different category. They are firms that are being the good guys here, are coming into a market that hasn't existed to try to help us get these toxic assets off banks' balance sheets.

WALLACE: Are you prepared to say right now that the president won't sign a 90 percent tax or even what's talked about in the Senate, a 70 percent tax on these bonuses?

ROMER: That obviously is a decision for the president. What he has said is that he's going to look at any legislation. And I'm sure he will do that.

The other thing I think is so important -- the president's really been very -- I think very wise in saying we all feel this tremendous anger towards AIG, but let's channel that in a sensible way.

And he's already gone to Congress to talk about resolution authority, about saying the next time we've got a company like AIG, we need a mechanism where there is a judge in control, like a bankruptcy judge who can say, "We're breaking this contract, we're not going to do this," and that's really what's been missing this time, and that's why we're in this mess.

WALLACE: What do you say? You said, "Well, the companies should have confidence. They're going to -- they're in a different category. They'll, in effect, be treated differently."

What do you say to the head of a private firm who looks at the last week, who looks at being hauled before Congress, who looks at Congress changing the rules -- the House -- the deal that was made, and now taxing bonuses at 90 percent and says, "Why on earth would I want to do business with the government?"

ROMER: I think the key thing that you would say is what the president has said, which is, you know, these are firms that -- you know, he talks about changing the culture, right? We understand. We're fans of the market. We understand that when a firm's going well, people deserve to be paid well.

But he said there's got to be a new culture, that when firms are in trouble, when the government is having to step in, in that case, for heaven's sakes, don't go out in your same old way, paying great big bonuses.

And so I think they're going to understand that that's -- that's got to be the cultural change that the president has talked about.

WALLACE: And what do you say to taxpayers about why the government should partner up with Wall Street fat cats -- we're talking about private equity firms, hedge funds where people make a lot of money -- and allow them to get even richer in a situation in which the government puts up most of the money and takes most of the risk?

ROMER: Because -- right. The key thing, right -- we've got trouble in our -- let's do the big picture, right? We've got banks with a lot of these toxic assets. What toxic means is they're just highly uncertain. And because they're on banks' balance sheets, we think banks aren't lending. They're afraid to lend. And private equity or private capital is afraid to come in, right?

And so that is certainly the big picture here. And so I think we're -- we're just -- that's going to be the main reason for doing this.

WALLACE: We need them.

ROMER: We just -- right. We simply -- we simply need them. We need them -- you know, we've got a limited amount of money that the government has to go in here, so we need to partner, not just with private firms, but with the FDIC, with the Fed, to leverage the money that we have.

The other thing is we think the private sector is going to be very helpful here. We don't want the taxpayers on the hook for paying too much for these assets. And so part of what we're doing is using that expertise that the private sector has and going in as their partners.

WALLACE: There are growing calls -- relatively small, I grant you, but growing -- for the resignation of Timothy Geithner. What would the impact be on the financial markets and the president's recovery plan if Geithner were to step down and we didn't have a treasury secretary for the next few months?

ROMER: I think -- I think all of this discussion is -- is really silly. Tim Geithner is an excellent secretary of the treasury. He has been dealt an unbelievably difficult hand to deal with. But he's actually doing a fantastic job, right?

It was much easier to read this than it was for me to listen to this woman's relentlessly cheerful voice and watch her Cheshire Cat-meets-Mary Lou Retton grin as she exposed the fact that Barack Obama is going to remain in bed with "the culture on Wall Street" because "we need them".  There is something potentially disturbing about the Public Private Partnership scheme, of which I've touched only the tip of the iceberg in my research thus far.  The gist of it is that the Treasury bankrolls the private sector to purchase and then own real assets that were formerly owned, regulated and staffed by the public sector (at public sector wages).  I highly recommend you investigate it and see for yourself.  I'll give you a hint: the KBR Halliburton model.

"Culture on Wall Street"?

Submitted by davidfarrar on Sun, 03/22/2009 - 21:39.

What the heck are you talking about? Just where in the Constitution does it give the government the power to declare a culture good or a culture bad? Just where in the Constitution does it give the government the power to change a "culture" it deems needs to be changed?

The only thing the government should have done when this whole sorry mess started was to stay the heck out of the market in the first place. I am including Bush in this sorry scenario as well.

We have good bankruptcy laws in this country that are Constitutional and are perfectly capable of dealing with this whole sorted financial situation. All we have to do is allow the normal processes of the market place to work. And guess what, it would not have cost the taxpayers one extra dime, and the market place would have recovered in six months.

But now we are in danger of repeating history by turning a bad recession, brought on by government misfeasance into a depression. Allow Obama to spend a few more trillion and he will add "Great" to this depression as well.

ex animo

davidfarrar

Quickly, off the top of my head

Submitted by NextRightNando on Sun, 03/22/2009 - 21:56.

Quickly, off the top of my head, a few cultural norms that have been successfully challenged via governmental action:

  • its OK to drink and drive, I drive better when I've had a few drinks
  • domestic violence is just one of those things,
  • if a consumer buys a car that turns out to be a lemon, well that is the consumer's fault
  • rivers are excellant dumping grounds
  • acid rain is just the price we pay for successful industry
  • black folks and white folks should go to different schools in the South, becasue that is the way things are done down there

 

Text of AIG Retention Plan

Submitted by gs on Sun, 03/22/2009 - 18:16.

...Andrew Sullivan had a post on his site that included the text of the 'purposes' section of the bonus contract, written in 1/08...but I can't find it on his site any more...

According to Josh Marshall, this is the contract.  (Sorry, don't have time to read and confirm.)