Romney the Pathetic blasts Obama over recession

By Michael J.W. Stickings

Mitt Romney really is pathetic.

And what's really utterly pathetic is not so much how desperately hard he's trying to be a strident movement conservative, because while he's certainly doing that to some degree he's also playing simultaneously to the somewhat more moderate GOP establishment by presenting himself as what seems to be the lone sober voice in a sea of utter insanity, but how he's trying desperately to join the Republican anti-Obama chorus by lashing out at a president with whom in reality he has often been in agreement.

For example, he said yesterday, clarifying previously ambiguous comments, that Obama has made the economy worse, that "the recession is deeper because of our president." Even then, though, he wasn't clear. Obama has apparently both "made the recession worse" and made the recovery, such as there has been one, "slower and more painful."

In other words, he doesn't know what the hell he's talking about. Or, rather, he presumably does but has gotten himself trapped in his own bullshit spin, not clear about what exactly his talking points are. Are things worse or is the recovery too slow? They can't be both. But Romney, poor pathetic Romney, can't seem to pick his preferred line.

Of course, the recovery has been slow, but how has that been Obama's fault? Obama inherited a terrible economic situation. The recession ended several months after he took office, but he did what he could, early in his presidency, to get the economy moving again. And if there is blame to hand out for the slowness of the recovery, it must be handed to the Republicans who objected to Obama's (and the Democrats') stimulus, or at least to the size of it, and prevented the government from injecting enough money into the economy to get it going again quickly enough. Romney for his part, and to his credit, supported the stimulus, but Republicans generally were the obstacle.

Obama then pushed for the bank and auto bailouts, which, however unpopular (and imperfect in application), certainly pulled the economy back from the brink. If anything, Obama prevented the situation from getting even worse. There was objection on both sides to the bailouts, but, again, the Republicans were the obstacle to recovery, not the Democrats and certainly not Obama, who worked (and led) within the limits he faced to get something done at a time when something was desperately needed. Who knows what the situation would now be like if Republicans had gotten their way.

Does Romney know this? Probably. He's an economic conservative who generally prefers trickle-down economics, but, if I may be generous, he's not a complete idiot. But that also means he knows he has to play the anti-Obama game to have a chance at the nomination. Sure, he's the frontrunner, but he's hardly a secure one. He still needs to play to the extremist GOP base, to the primary voters and their puppetmasters who want Obama's head on a pike.

That's what he's trying to do, but you can see just how bad he is at it, which suggests both that he's a bad attack dog, or at least that he's bad at faking it, and that he doesn't really believe what he's saying.

Like Jon Huntsman, a far less pathetic figure (actually an admirable conservative, if I may say so), Romney would probably prefer to remain civil. But he knows he can't, not if he wants to win, and so what we're getting from Romney the Pathetic is an act that rings anything but true and sincere.

But hey, at least we're not talking about Romneycare. Right?

On the backs of taxpayers

By Creature

Daniel Indiviglio [via Ezra]:

[The FinReg] Conference reconvened due to the protests from centrists Republicans in the Senate who didn't like the idea of taxing the big banks and hedge funds. Instead, taxpayers will pay for the regulation, since any TARP money unspent was supposed to go towards paying down the deficit.

And, in the NYT today, a little reminder of what our Treasury Secretary was up to at his old job:

The documents also indicate that regulators [Timmy!] ignored recommendations from their own advisers to force the banks to accept losses on their A.I.G. deals and instead paid the banks in full for the contracts. That decision, say critics of the A.I.G. bailout, has cost taxpayers billions of extra dollars in payments to the banks.

The banks escape. The people pay. Same old. Same old.

Easy money

By Carl

This is a kind of strawman argument to make by Obama, but nonetheless it will resonate:

In an interview with CBS's "60 Minutes" programme, he said he did not run for office to be "helping out a bunch of fat cat bankers on Wall Street".
Later on Monday, the president will meet some of the US's top bankers face-to-face.
He is scheduled to hold a meeting with executives from Goldman Sachs, JP Morgan Chase and Citigroup.
He is planning to tell them to step up lending to small businesses and get behind legislation to overhaul Wall Street regulations.

The term "fat-cat bankers" is one of those totems of neurolinguistic programming that I have been urging Democrats to pick up on for quite some time. We are not in a race war in this nation, nor are we truly in a political fight with the right.

We are, however, in a class war, one that pits the monied interests against the hundreds of millions of Americans who not only are not wealthy, but stand absolutely no chance of ever becoming wealthy. ("No chance" includes a rounding error to account for that small percentage, perhaps one-tenth of one percent, who might actually get lucky and hit the lottery or write a novel that takes off).

"Fat Cat Banker" raises the image of Mr. Monopoly, Rich Uncle Pennybags, complete with top hat, morning coat and striped pants, wearing a monocle and smoking a cigar, or the image used in so many mortgage and business lending commercials prior to the banking crisis, with a wood-paneled office, drinking brandy from a snifter which the banker then uses to crush the poor little guy trying to get a loan from Megabucks Bank.

But it's the rest of his remarks that truly intrigued me.

"“They don’t get it,” Mr. Obama said. “They’re still puzzled why is it that people are mad at the banks. Well, let’s see. You guys are drawing down ten million, twenty million dollar bonuses after America went through the worst economic year that it’s gone through in decades, and you guys caused the problem.[...]

Much of it was due to the irresponsibility of large financial institutions on Wall Street that gambled on risky loans and complex financial products seeking short-term profits and big bonuses with little regard for long-term consequences.[...]

What's really frustrating me right now is that you've got these same banks who benefited from taxpayer assistance who are fighting tooth and nail with their lobbyists up on Capitol Hill, fighting against financial regulatory control," he said.

And here's the most effective point he's made while raising the image of the greedy banker: not so much that the banks were greedy for their own sake, but that they owe a debt of gratitude to the small business owners and taxpayers who stood by them when the shit hit the fan.

See, any idiot with a degree in accounting or finance (like me) could have told any banker that the risks they were taking by lending to anyone and everyone who walked up with a hat in hand were enormous and unnecessary. That the bankstahs spent more time listening to the shareholders who threatened mutiny if this quarter's earnings didn't meet or exceed last quarter's earnings and the board of directors who insisted on pay-for-share-performance than they did to the people warning them of the cliff they were about to drive over means they now owe a debt to the people who not only warned them, but who got down under the cliff and caught the bank before it crashed.

Greed is pervasive in the capitalist system. Hell, it IS the capitalist system and used wisely, greed is good. I'm not about to stick my neck out on the chopping block unless there's a better than even chance that I'll end up better, much better, off than when I knelt in front of it.

But here's the thing: that same greed should recognize the people who stood by me, my workers, my investors, my community. That same greed should acknowledge the role of my customers and my vendors. AND that same greed should reward the government that put me in a position to take the chance, by creating a framework that was safe for me to do business in.

And if anyone of these groups, these stakeholders, goes above and beyond the call of duty to assist me when I am in trouble, then greed should absolutely be given to them, not me.

The parallel in my mind is alcoholism. If a man is supporting his family and giving to his community and keeping up with his obligations, then by all means, if he's a drunk then let him drink.

But keep an eye on him, because at some point, the drink, the greed, will overtake him and someone needs to be prepared to step in.

The right wing knuckleheads will tell you that this should be a function of his family (the company), taking care of his alcholo problem (his greed), but they may not notice or worse, may not care. That's when someone else needs to step in and stop him.

(crossposted to Simply Left Behind)

Banks continue to record billions in profits

By Creature

I wouldn't mind the profits so much if the money made was being pumped back into the economy. The point of all the rescuing was to first stabilize the banking system, then to energize the economy, in part, by loaning out the money made.  Instead they hoarded, they padded their balance sheets, and they covered over their toxic losses with new math.

I was naive to think the banks would act in good faith.  I thought it was understood that when the taxpayer covers your ass and saves you from the cliff that maybe the banks would reciprocate.  I was wrong. Business as usual rules the day.  

They only tools the American people have left is reform and regulation.  I hope the Congress and the Obama administration have the stomach for that fight.  As of now, I doubt it very much.

Truth in Comics

By Creature



If it's Sunday, it's Truth in Comics.

Cut the losses

By Carl

This headline is perhaps the scariest business headline of the past six months:

May 6 (Bloomberg) -- Regulators have determined that Bank of America Corp. requires about $34 billion in new capital, the largest need among the 19 biggest U.S. banks subjected to stress tests, said a person with knowledge of the matter. Bank of America fell 9 percent in trading before U.S. exchanges opened.

Citigroup Inc.’s shortfall is more limited because the company already plans to convert government preferred shares to common stock, people familiar with the results said. JPMorgan Chase & Co. doesn’t need a deeper reserve against losses, according to people familiar with that company’s result.

The banks may outline their strategies to add capital, or in other cases buy out government stakes, after the Federal Reserve publishes the stress tests results tomorrow. Companies requiring more capital could raise all the funds through conversions of preferred shares if they choose, the people said.

Sources I've spoken to who have some limited knowledge of the results of the stress tests tell me that roughly half the banks tested will need further bailouts, but BofA is the largest eyesore on the horizon.

Mr. President, Chairman Bernanke, Secretary Geithner, the time has come for triage. Bank of America, for example, has already benefitted from bailouts to the tune of $45 billion dollars. It's clear that it cannot possibly raise another $35 billion on its own, it will rely heavily on government help.

And other banks similarly positioned will be chomping at the bit for a handout. It is time to look at a guided bankruptcy, similar to the one Chrysler filed last week and GM will likely file before long.

This will mean, in the case of BofA, writing off the $45 billion dollars. Better to take the hit now, and work out an arrangement with the new owner of Bank of America for an equity stake over a longer term than anticipated.

Bank of America is a singular case in this instance. Had it not been greedy and purchased Merrill Lynch (at the complicit urging of the Bush administration, we should point out), it likely would have survived its earlier greedy decisions to consolidate the purchases of MBNA, Fleet Bank, US Trust, and its most questionable purchase, Countrywide Financial, just ahead of the sub-prime mortgage crisis of which Countrywide was a, if not the, main player.

It's one thing when a bank gets its clothes dirty playing in the mud of securitized debt obligations and unhedged risk plays. It's another when a bank goes out of its way to collide with the earth.

Or to put it in a clearer idiom, it's one thing to get behind the wheel when you've had a beer, quite another to get behind the wheel drunk and carrying a six pack to consume on the way.

My sense is that Bank of America needs to be reorganized and then recapitalized with a different charter. Indeed, perhaps we ought to rethink the entire banking industry so that there is some safe place for the average American to put his money.

(Cross-posted to Simply Left Behind.)

Here's a quarter...

By Carl

....call someone who cares.

I have the utmost respect for the civic duty that you are now performing at A.I.G. You are as blameless for these credit default swap losses as I am. You answered your country’s call and you are taking a tremendous beating for it.

But you also are aware that most of the employees of your financial products unit had nothing to do with the large losses. And I am disappointed and frustrated over your lack of support for us. I and many others in the unit feel betrayed that you failed to stand up for us in the face of untrue and unfair accusations from certain members of Congress last Wednesday and from the press over our retention payments, and that you didn’t defend us against the baseless and reckless comments made by the attorneys general of New York and Connecticut.

[...] I’m not sure how you will greet my resignation, but at least Attorney General Blumenthal should be relieved that I’ll leave under my own power and will not need to be “shoved out the door.”

Point one: Liddy has agreed to take one dollar as compensation, despite the fact that most of this happened off his watch. Thuis writer has, as well.

Point two: The writer, Jake DeSantis, is an executive vice president of the Financial Products division of AIG, as "head of business development for commodities", the division that has very nearly, and still may yet, sunk the entire global economy. So I think the question must be asked...

Um, dude? WHERE THE FUCK WERE YOU????

OK, you had a different responsibility, I get that. But you know something?

I am an officer at a firm. My niche is very narrow, and I'm well paid for it. But as a point of order, we officers make it our business to understand what's going on in the rest of the company. Why?

You never know when you'll be put in charge of something else. That's the way American corporations work.

You ask why your CEO "betrayed" you. WHERE THE FUCK WERE YOU???? when your co-workers were scamming money and making bets on bets on bets?

If you want to understand what happened at the Financial Products division of AIG, let me put forth this analogy. It's simplistic and flawed, but it's not completely wrong.

I sell you a homeowner's insurance policy. That's a bet that I make that your house won't burn down. If it does, I owe you the agreed amount. If it doesn't, well, I've scored pure profit from you (your premiums, which are pooled and invested in order to cover any losses suffered by policyholders) but you've had the peace of mind of knowing you won't take a loss.

The way I make money is not directly from your premiums, but by spreading my risk around by selling more and more policies and trying to diversify who buys them, so that if a big fire hits a neighborhood, it will only affect a percentage of the money I'm holding onto.

That's the traditional insurance business. A similar scenario works in the traditional mortgage market.

Now let's move onto the Financial Products division.

I take that policy, and in order to score some quick cash, I let people bet that the policy will earn money. Then, in order to make even MORE money, I sell insurance to the gamblers that will cover their losses.

Oops. You'll notice what just happened: I've taken what risk I had spread out and consolidated it. Worse, I'm on the hook at both ends in the event the house burns down: I pay the policyholder and now have to pay all the gamblers who bet on the policy!

So, Jake, I ask the question again: WHERE THE FUCK WERE YOU???

If a simpleton like me, who only has an accounting degree, can understand that you're betting against yourself, why couldn't a high-powered executive vice president figure out from washroom conversations that your entire division was one big-ass house of cards? You're the head of development of business commodities! How could you not be curious about the products your own people are developing????

And there, right there, that's the problem. These aren't commodities. We're not talking about pork bellies or corn or oil.

We're talking about people's homes. Their lives. Their jobs.

So shut up, walk away, and be glad you got out with your skin and dignity.

(Cross-posted to Simply Left Behind.)

Quote of the Day

By Creature

"It’s just impossible to run our business in this environment." -- an anonymous senior Goldman Sachs executive on why they have decided to return their portion of the TARP money. Now, while getting the money back is all well and good, how about a little humility, Mr. anonymous official, since this environment you bitch about was your own doing. Ingrate.

Truth in Comics

By Creature


If it's Sunday, it's Truth in Comics.

Wall Street's welfare continues

By Creature

Krugman on the Geithner's new plan: "What an awful mess."

Geithner's plan is full of clever all in the name of saving his buddies the trouble of going under. People gambled. They lost. We pay. Wall Street's wonder boy is in denial. He (and, the entire financial services industry) needs therapy. It would be cheaper.

Meme has more.

BREAKING: Newt Gingrich should STFU

By Michael J.W. Stickings

Here's the dramatic headline at Human Events, the "Headquarters of the Conservative Underground," a sort of right-wing BDSM dungeon:

BREAKING: Gingrich Calls on Obama to End Bailouts

Okay, whatever. The MSM still take Gingrich seriously, but I don't, and I don't intend to spend any time on his predictably right-wing populist pander. (I'm not a big fan of the bailouts, but I do acknowledge that the financial sector will collapse without a substantial infusion of capital. And if the financial sector collapses, bank after bank, how is that good for the economy, which in order to keep moving forward needs those with money (i.e., banks) to lend it to individuals and businesses alike -- and how is that good for the American people?)

But how is this in any way "BREAKING"?

Or, in the Conservative Dungeon, is it just "BREAKING" whenever Newt opens his mouth? That it seems to be -- for there is nothing new here, nothing genuinely breaking -- says a great deal about the state of conservatism today.

Instead of actually doing anything to boost the economy, and to support the American people in a time of historic crisis, Newt and Rush and the rest of them are just sniping from the sidelines, spewing ideological extremism and otherwise being anything but constructive.

The GOP: against regulating pay before they were for it

By Creature

I can't defend the Obama administration too much over the AIG bonus fiasco (their blaming of Chris Dodd has started an avalanche that is just unacceptable). However, it's good to see that the president today took a shot at the hypocrisy coming from the GOP on all this. Greg Sargent:

In an apparent shot at GOPers who are blasting the bonuses, Obama said that there are "a whole bunch of folks now feigning outrage" that a year or two ago would have said "we should never meddle" in the private sector.

ThinkProgress runs down the flip-flopping Republicans here.

Fake populism

By Creature

Besides being idiots, what do Rick Santelli, Glen Beck, and Rush Limbaugh have in common? They say they care about the little guy, but really they care only about the little guy who pulls in a seven figure income. Too many people in this country consume their media just like they vote. That is, against their own interests.

Breaking! ... Obama takes action, seizes AIG's March Madness office pools and brackets

By J. Thomas Duffy

Feeling a building backlash to the corporate bailouts, and the news this weekend of insurance giant A.I.G. (Always Incredibly Greedy) paying out hundreds-of-millions in bonuses, federal marshalls, in this country, along with various law enforcement in other countries, raided A.I.G. offices and seized the company's March Madness office pools and tournament bracket funds.



The order came from President Obama:

"In the last six months, AIG has received substantial sums from the U.S. Treasury. I've asked Secretary Geithner to use that leverage and pursue every legal avenue to block these March Madness pools and make the American taxpayers whole," Obama said.

A spokesperson for Treasury indicated they would follow through with the president's directive but that Secretary Geithner was "unaware" that March Madness had begun.

Press Secretary Robert Gibbs said that President Obama ordered the action late yesterday, shortly after the NCAA Basketball Tournament selection process was completed:

"We expect this will net hundreds-of-thousands-of-dollars," a stern Gibbs announced, citing much taxpayer money it had already given A.I.G. in the previously-released TARP fund bailout.

"The President found it unconscionable that public funds would be used in this manner."



Rumors are circulating in the capital that President Obama is weighing issuing an executive order to effectively nationalize all March Madness office pools and bracket funds, redirecting the money to possible future stimulus packages or additional corporate bailouts.

Reaction to the move by President Obama against A.I.G fell along party lines.

Speaker of the House Nancy Pelosi hailed the action, saying it was "unfathomable" that A.I.G would be running March Madness pools in light of the dire circumstances facing the company.

Pelosi stopped short of endorsing the possible nationalizing of March Madness pools, saying that "they are not on the table at this time."

Congressman Eric Cantor (R-VA) slammed Obama:

"The President talks about creating, or saving jobs. Well, he just wiped out dozens of them, the people that create the squares, run around the office selling them, collecting the money, having to monitor the tournament and update the squares ... That's not change you can believe in."

Senator Richard Shelby (R-AL) called on the president to direct General Motors and the UAW to downscale their March Madness office pools to match the March Madness office pools of non-union shops.



In a scathing press release, A.I.G. Chief Edward Liddy said he was "extremely disappointed in the President's actions" and that there may be "legal ramifications" to the seizing of A.I.G.'s March Madness office pools, suggesting that some of the employees "may have used their own, personal funds."

When pressed by reporters, Liddy admitted that he picked the University of Connecticut to win the tournament.

**********

Bonus "Always Incredibly Greedy" Bonus Riffs

Glenn Greenwald: The sanctity of AIG's contracts

Jane Hamsher: Who Stole Our Country, and How are We Going to Get It Back?

TBogg: Bring on the Bobs

Robert Stein: Bailout Roulette

Steve Benen: AIG'S TENTACLES...

NYT: A.I.G. Lists Which Banks It Paid With U.S. Bailout Funds

MSNBC: Obama seeking ways to block AIG bonuses ... President calls $165 million in bonuses an 'outrage to the taxpayers'

CBS News: White House May Want AIG Money Back ...Administration Investigates Ways To Retrieve Some Of The Millions AIG Used For Bonuses




(Cross-posted at The Garlic.)

Nationalize AIG

By Creature

I hate to say it, but I think Josh Mashall is right here:

Like you, I've been watching this AIG bonus story unfold over the weekend. And though I did not see it at first, I think it may prove to be a turning point, both for AIG and the government.

I don't believe the bonuses themselves are the heart of the matter, nor the fact that they're going to the very executives who caused AIG's implosion or even the galling reality that, since all money is fungible, they're being paid with taxpayer dollars. What's really driving this forward -- and what makes it such a dangerous moment for the White House -- is the jarring image of the administration's impotence.

It's not that the Obama administration is any more or less impotent than Bush's was or McCain's would've been, it's the mere fact that this now is happening under his watch. Besides the outrage over the bonuses generally, the optics are horrible . However, there is a way out for the administration. Nationalize AIG. Nationalize them now and, as I said in my earlier post, destroy the Financial Products division (the group responsible for this mess). The political and popular will would certainly be behind such a move. If AIG is really too big to fail, then the administration has no choice. It's either a takeover or they live with the AIG monkey on their back throwing shit and pissing on their grand plans for the next four years.

AIG to pay $165 million in bonuses

By Creature

I understand the systemic risks, I understand the legal reasoning, but giving bonuses to the exact people who took the entire world economy to the brink is ludicrous. With the taxpayers' $170 billion investment in AIG, do we not have have the power to simply spin off and destroy the Financial Products division of AIG (again, the group that made these bad deals and are receiving the bonuses) and leave the well-run insurance division intact?

Larry Summers today reminded us that we must respect the law and the weight these contracts (which provided for these bonuses) have. Yes, we must preserve, respect, and not set new precedent for the abrogation of contract law in the future, but these are novel times and any precedent set by breaking these contracts would certainly be limited to the extraordinary circumstances under which they were born (and hopefully destroyed).

587

By Creature

That's the dollar amount in billions that our major banks have reported as their "current net loss" from derivates tied to such vehicles like mortgages and other loan instruments. It's a number that "reflect[s] a jump of 49 percent in just 90 days." It's a number far worse than expected. As McClatchy reports, if the economy recovers, the banks could easily cover that gap. However, if the economy continues to tank, it's not just Citi and BoA that will fall. Hold on to your hats and your wallets.

61.7

By Creature

That's the number of dollars, in billions, lost by AIG in the fourth-quarter of last year. It's the biggest quarterly lose in the history of quarterly losses. It also means we, the people, will be ponying up another $30 billion to help keep this house of cards standing. That's $30 billion on top of the $150 billion already used to prop this giant up. Ridiculous. Don't get me wrong, I understand the systemic risk involved, but that doesn't mean I have to like it.

"It’s Japan all over again"

By Creature

Here's the thing, while I appreciate the attempts to put some checks on banks and some transparency to the bailout transactions, the administration's new game plan is really a lipstick-on-a-pig scenario. The first half of TARP didn't work. Credit is still basically frozen and those toxic assets still stink up balance sheets. Yes, the first half of TARP may have staved off total collapse, but now the Obama administration plans to spend the next half in almost exactly the same way and request even more money from Congress. In the end they are just buying time and hoping things work out. How very Bush of them.

White House: No nationalization of banks

By Creature

With Citi and BoA stocks tanking today over nationalization fears, wouldn't now have been the perfect time to take them over? Timing is everything and the White House just shot their own recovery plan in the foot. Not a mortal wound, mind you, but a wound nonetheless. This bad bank band-aid must get pulled.