Early returns on Treasury Secretary Tim Geithner’s plan to deal with toxic banking assets (3/23): Paul Krugman hates, hates, hates it. Wall Street loves, loves, loves it. The Dow Jones Industrial Average was up 497 points the day the plan was released. Meanwhile, Krugman is overcome with “despair.”
Of course, we should always avoid putting too much stock into what the stock market thinks at any given moment. But before taking a deeper look at the plan itself, one can’t help but note that the varying reactions demonstrate the historically unprecedented position Geithner inhabits—demonized by both the left and the right. Not only can’t he, by definition, please everyone—the very fact that he satisfies one side sends the other into a panic.
As economic historian Brad DeLong noted the previous weekend, the world is divided into “people who are strongly opposed to the Geithner plan because Tim Geithner is a socialist who wants to destroy American finance” and “people who are strongly opposed to the Geithner plan because Tim Geithner is a corrupt plutocrat who wants to give Americans’ money to the princes of Wall Street.”
Krugman, the Nobel Prizewinning New York Times columnist, is upset because he believes that the Geithner plan will waste taxpayer money supporting unrealistic prices for toxic assets that are irredeemable junk. For him, the fact that investors are delighted just proves his point. Anything that makes Wall Street happy must be a sellout to the “wheeler dealers” who got us in this mess. On the other hand, just suppose Geithner had followed the Krugman plan, and announced the immediate nationalization of Citigroup and Bank of America on Monday morning. It’s hardly a stretch to imagine an ensuing market crash as bad or even worse than what we have already witnessed. And market crashes don’t just hurt the pocket-books of the rich. They wipe out pensions and have an undeniable effect on consumer psychology.
If the stock market goes down, right-wing critics declare that Geithner (and by extension, the Obama presidency) is a failure because “the market” has lost confidence in the administration. But if the stock market goes up, the left-wing suspects that’s only due to the unfair funneling of taxpayer money to Wall Street. If one constituency is satisfied, the other is bound to be distraught.
In such an atmosphere, it seems foolish and naive to even hope for a middle path, to imagine that the joint impact of the initiatives rolled out so far by the White House—the stimulus plan, the housing plan, and now the Geithner plan—might mutually support each other, put the brakes on the economic contraction and inject some badly needed optimism into the marketplace. Who knows—maybe a burst of stock market enthusiasm bolsters the first quarter performance of some 401K portfolios, which encourages some households to buy a new car or go out to dinner at a nice restaurant. Meanwhile, the historically low mortgage rates that are in part attributable to the housing plan (in combination with steep foreclosure-driven home price drops) already seem to be goosing the housing market more than anyone expected.
After just two months, despair is a premature reaction. Krugman’s basic thesis is that by failing to act boldly now, Obama is limiting his options for the future. But if there’s one thing we know about Obama from his successful presidential campaign, it is that he is will be cautious, cautious, and more cautious, until that doesn’t work and it is time to be bold. He and his team have thrown a lot at the wall in just two months, waiting to see what will stick. If it doesn’t work, they’ll likely try something else. Whatever else one might want to say about Obama and his economic advisers, they’re not dumb. (Andrew Leonard, Salon.com.)
SAY YOU WANT A REVOLUTION. The wealthy often warn of the dangers of class warfare whenever lower income groups complain about the undemocratic excesses of Wall Street, but Felix Salmon at Portfolio.com (3/23) wonders if we are seeing the first real rumblings of class warfare in this country. “In one corner are the technocrats not only in finance but also in government and the media: people who can understand the importance of distinguishing between a $250,000 base salary, a $2.5 mln bonus, a $250 mln bonus pool, a $2.5 bln bonus pool, a $250 bln bailout package, a $2.5 tln monetary stimulus, and so on. In the other corner are the real people, the angry people, the unemployed people—and with them their elected representatives in Congress. They’re not interested in such distinctions any more, they’re not interested in what’s fair or what’s sensible. They saw their real wages stagnate for decades as the orgy of plutocratic self-congratulation reached obscene levels only to keep on growing. All they ever had was the American Dream: the idea that they, too, might one day become dynastically wealthy and join the overclass. Now, of course, that dream is shattered—and, what’s worse, it turns out that very overclass is responsible for the working classes’ own present straits. While the talking heads in New York and Washington throw around their millions and billions and trillions before commuting home to their comfortable middle-class-and-better lifestyles, the rest of the country is mad as hell, and ain’t gonna take it any more. They’re not interested in constructive solutions or in leveraging private capital or in the sanctity of contracts: ... Those days are over. They want to see jail time, confiscatory policies, and worse.”
FUTURES TRADING CHAIRMAN BLOCKED. Sen. Bernie Sanders (I-Vt.) is blocking the nomination of Gary Gensler, a former Goldman Sachs executive and Treasury official in the Clinton administration who Obama nominated to head the Commodity Futures Trading Commission, which regulates $5 tln in daily trading of futures contracts including transactions for crude oil, foreign currency and agriculture products. “While Mr. Gensler is clearly an intelligent and knowledgeable person, I cannot support his nomination,” Sanders said after Gensler’s nomination sailed through the Senate Agriculture Committee. “Mr. Gensler worked with Sen. Phil Gramm and Alan Greenspan to exempt credit default swaps from regulation, which led to the collapse of AIG and has resulted in the largest taxpayer bailout in US history. He supported Gramm-Leach-Bliley, which allowed banks like Citigroup to become ‘too big to fail.’ He worked to deregulate electronic energy trading, which led to the downfall of Enron and the spike in energy prices. At this moment in our history, we need an independent leader who will help create a new culture in the financial marketplace and move us away from the greed, recklessness and illegal behavior which has caused so much harm to our economy.”
SANDERS: STOP WALL STREET LOAN SHARKS. Sen. Bernie Sanders (I-Vt.) has proposed a law that would cap consumer loan rates at 15%. He noted that banks are getting money from the Federal Reserve at near 0% interest rates but they turn around and charge Americans 20% to 30% and as high as 41%—more than double what they paid in interest in 1990. “Recently, some major institutions such as Bank of America have informed responsible cardholders that their interest rates would be doubled to as high as 28%, without explaining why the increase was taking place,” he wrote (3/23). “The Bible has a term for this practice. It’s called usury. And in The Divine Comedy, Dante Alighieri’s epic poem, there was a special place reserved in the Seventh Circle of Hell for sinners who charged people usurious interest rates. Today, we don’t need the hellfire and pitch forks, we don’t need the rivers of boiling blood, but we do need a national usury law.”
States used to protect consumers from predatory lenders, until a 1978 US Supreme Court decision allowed banks to charge whatever interest rate they wanted if they moved to a state without an interest rate cap like South Dakota or Delaware.
Sanders noted that 15% is the maximum that Congress imposed on credit union loans almost 30 years ago, unless the national Credit Union Administration determines that a higher rate is necessary to maintain the safety and soundness of the institution. Currently, the NCUA allows credit unions to charge rates as high as 18%, but most charge lower rates and Sanders noted, “Unlike their counterparts at the big banks, credit unions are not lining up for hundreds of billions in bailouts. In fact, they’re doing quite well. In my view, if these rules have worked well for credit unions for decades they can work for all financial institutions.”
In 1991, a proposal to cap credit card interest rates at 14% passed the Senate by a vote of 74-19, but it never became law. Sanders noted that over the last decade the financial sector has invested more than $5 bln in political influence purchasing in Washington. That sum covers some 3,000 lobbyists and huge amounts in campaign contributions. “The American people are thoroughly disgusted with the behavior of Wall Street and they want their elected officials to respond to the greed of major financial institutions,” Sanders wrote. “A cap on interest rates would be a good start. Do we have the courage?”
TREASURY AIMS TAX MONEY AT MORTGAGE WRECKERS. One of the problems with Treasury Secretary Timothy Geithner’s bank rescue plan is that it seems designed to shovel billions of dollars into the coffers of the same bankers who got rich on the mortgage bubble. Jane Hamsher noted that the Justice Department and the FBI are investigating Countrywide for accounting fraud, insider trading and consciously lending money to people they knew couldn’t afford to repay it. Meanwhile, AIG is suing Countrywide because they have to pay off hundreds of millions of dollars in insurance claims because Countrywide “just flat out lied about the mortgages they were issuing.” AIG’s United Guaranty Mortgage Indemnity Co. said in the complaint filed in federal court in Los Angeles that it had reviewed loan files that showed that most mortgages covered by 11 policies for asset-backed securities were either underwritten in violation of Countrywide’s own guidelines or contained defects, such as missing documents, misrepresented credit scores or false Social Security numbers. (Hamsher noted that American taxpayers have the privilege of paying off AIG’s insurance policies.)
Stanford Kurland was president of Countrywide when the predatory lending practice of low introductory “teasers” inflated Countrywide’s mortgage portfolio from $62 bln to $463 bln, Hamsher noted. Bank of America, which bought Countrywide last year, has already paid out $8.7 bln to settle suits brought by states because of Countrywide’s fraudulent practices, including hidden fees and false claims like “no closing costs.” The Illinois suit examined one mortgage broker’s sales of Countrywide loans and found the “vast majority of the loans had inflated income, almost all without the borrower’s knowledge.”
“Just like any Ponzi scheme, the first ones out get rich. And Stanford Kurland got rich on Countrywide, cashing out to the tune of $200 mln,” Hamsher wrote. “So where is Kurland today? Is he in jail? Well, no. He’s going to get rich out of Timothy Geithner’s new scheme.” As the New York Times reported (3/4), Kurland is leading a dozen former top Countrywide executives who have been buying up delinquent home mortgages that the government took over from other failed banks, sometimes for pennies on the dollar.
Ironically, Kurland can participate in Geithner’s plan, but the general public cannot. “The public understands what’s going on all too well. The same thieves are back again to pick their pockets in broad daylight, thanks to the tireless efforts of Timothy Geithner on their behalf,” Hamsher wrote.
PALIN’S POOR TIMING. Alaska Gov. Sarah Palin (R) didn’t let President Obama’s quick apology for his “Special Olympics” joke when referring to his bowling skills stop her from making political hay. “I hope President Obama’s comments do not reflect how he truly feels about the special needs community,” said Palin, who wielded her own special-needs child as a campaign prop last year when she was running for vice president. She said she was “shocked” at the poor attempt at humor, which was “degrading” for “precious and unique people.” But Greg Sargent noted at WhoRunsGov.com (3/23) that less than 24 hours before criticizing Obama, Palin turned down $36 mln in Federal funding for programs catering to special education kids, buried in all that stimulus money for Alaska that Palin turned down the week before, calling it “a bribe.”
PORK CARRIES SUPERBUG. Nicholas Kristof wrote a couple chilling columns in the New York Times in March detailing how hogs and pork producers increasingly are becoming carriers for a severe form of antibiotic-resistant staff infection. About half the hogs surveyed in a study by the University of Iowa are carriers of MRSA, and 45% of the workers in hog confinements carry the superbug. That might be a big part of the reason that MRSA has become such a health threat in rural areas.
Kristof reported that he had arranged to visit Dr. Tom Anderson, a physician in Camden, Ind., a town whose livelihood depends on pork production. Anderson had told Kristof (who raised hogs as a boy) that he couldn’t understand why he was routinely seeing patients with ugly MRSA infections. But Dr. Anderson, 54, died before Kristof could get there. Cause of death was labeled as a heart attack or aneurysm. A Dutch medical journal links MRSA to dangerous heart inflammation, Kristof reported. Dr. Anderson had suffered three bouts of MRSA.
Antibiotics are fed to hogs to help improve their weight gain. Many scientists believe that it is leading to antibiotic-resistant bugs like MRSA, or cryptosporidium—a deadly lung inflammation—which is commonly found emanating from hog waste lagoons in Iowa and North Carolina.
“These dangerous pathogens are now even in our food supply,” Kristof wrote. Five out of 90 samples of retail pork in Louisiana tested positive for MRSA according to a peer-reviewed study published in Applied and Environmental Microbiology last year. And a recent study of retail meats in the Washington, D.C., area found MRSA in one pork sample, out of 300, according to Jianghong Meng, the University of Maryland scholar who conducted the study.
“Regardless of whether the bacteria came from the pigs or from humans who handled the meat, the results should sound an alarm bell, for MRSA already kills more than 18,000 Americans annually, more than AIDS does,” Kristof noted.
The University of Iowa study was authored by Tara Smith and can be found easily with an Internet search engine. That study noted that MRSA had been transferred from swine to a veterinarian to the vet’s son to a hospital nurse.
Legislation to ban the nontherapeutic use of antibiotics in agriculture has been blocked by agribusiness interests. Rep. Louise Slaughter (D-N.Y.) a microbiologist, told Kristof she planned to reintroduce the legislation. “We’re losing the ability to treat humans,” she said. “We have misused one of the best scientific products we’ve had.”
WHERE IS THE RIDICULE? Dean Baker, at Prospect.org (3/23) wonders why Sen. Judd Gregg (R-N.H.) is taken seriously when he recently said, “The practical implications of (Obama’s budget) is bankruptcy for the United States ... There’s no other way around it. If we maintain the proposals which are in this budget over the 10-year period the budget covers, this country will go bankrupt. People will not buy our debt; our dollar will become devalued.”
CNN called Gregg “one of the keenest fiscal minds on Capitol Hill,” but Baker, who has a doctorate in economics, notes, “There are probably no economists who would claim that the government will go bankrupt based on the spending path in President Obama’s budget. One would expect a member of Congress to be informed about such issues. The dollar will almost certainly fall, but that would happen whether or not the government runs a budget deficit. The dollar will fall because the country is running a huge trade deficit, which is the result of the over-valuation of the dollar. The fall in the dollar is needed to bring down the trade deficit, which will be a necessary part of a stable recovery. It is remarkable that Sen. Gregg apparently has no understanding of how the economy works.”
In the same interview with CNN’s John King, Gregg defended Treasury Secretary Timothy Geithner and White House economic adviser Larry Summers, saying that the two are “doing the right things” and “moving in the right direction.” Steve Benen wrote at WashingtonMonthly.com (3/21), “Given Gregg’s track record, I almost wish he’d said the opposite.”
UNINSURED COST INSURED FAMILIES. When the uninsured cannot pay for the care they receive, health care providers shift costs to Americans with insurance in the form of higher premiums. Ben Furnas and Peter Harbage of the Center for American Progress Action Fund concluded that a failure to cover all Americans accounts for roughly 8% of the average health insurance premium, or $1,100 per average family premium in 2009 (ThinkProgress.org, 3/24).
GOP ‘SECRET BALLOT’ HYPOCRISY. For months, Republican lobbyists and legislators have been carpetbombing the airwaves with one phrase: “secret ballot, secret ballot,” as in, “the Employee Free Choice Act will eliminate the secret ballot,” Laura Clawson wrote at DailyKos.com (3/21). In fact, the bill, which is the highest priority of organized labor, does not eliminate the secret ballot in union elections. But the Washington Independent website noted that the Republican National Committee actually prohibits the use of secret ballots in its own elections [Rule No. 7(d)].
Meanwhile, the EFCA suffered what may be a mortal blow when Sen. Arlen Specter (R-Pa.), who has supported the bill in the past but faces a tough primary race from the right, announced his opposition to the labor bill (3/24). When Sen.-elect Al Franken (DFL-Minn.) is seated, Dems will still need a GOP vote to cut off the filibuster and Specter was their best hope.
PITY POOR AIG EXECS. On Fox News (3/23) Shepherd Smith interviewed Fox Business Network’s Tracy Byrnes in what Todd Beeton of MyDD.com called a “pity party” for AIG bonus recipients: “You and I both talked about how poor Ed Liddy got drilled [by Congress] for things that were completely out of his control, and so then he kindly goes back to his people and says, ‘Do the right thing and try to give it back,’” Byrnes told Smith. “But let’s face it, anybody who gets a bonus, that money is spent long before that check comes in the mail, right? These poor people paying off mortgages, paying off debt, the odds that these people have these bonuses are slim to none right now.”
Beeton noted that Connecticut Attorney Gen. Richard Blumenthal has broken down the AIG bonus distribution and found that more than 400 AIG employees got bonuses, from $1,000 to $6.4 million, totaling $218 mln. At least 73 employees received bonuses of $1 million or more.
WINGERS MOVE TO IMPEACH OBAMA. After putting up with illegal and unethical behavior for years from President Bush, the right wing has come around to advocating the impeachment of President Obama—for “wasteful Washington spending.” ThinkProgress.org noted that “tea party” protests nationwide are being coordinated by former GOP Majority Leader Dick Armey’s PR firm ‘FreedomWorks.” They are also being supported by Newt Gingrich’s “American Solutions for Winning the Future” and Fox News ranter Glenn Beck.
BACHMANN WANTS PEOPLE ‘ARMED AND DANGEROUS.’ Rep. Michele Bachmann (R-Minn.) is back and still nuts, Barbara Morrill of DailyKos.com noted (3/23). Before the election Bachmann said Obama had anti-American views and she called for an investigation of fellow members of Congress to “find out if they are pro-America or anti-America.” In February she claimed that the stimulus bill gives ACORN $5 bln (it isn’t mentioned in the bill) and moves to ration health care. In March she said Obama was making the final leap to socialism and that Democrats “are about to institutionalize cartels.” During an interview on a Minnesota right-wing talk radio station (3/21), according to Eric Ostermeier of the University of Minnesota’s Humphrey Institute of Public Affairs, Bachman said, “I’m a foreign correspondent on enemy lines and I try to let everyone back here in Minnesota know exactly the nefarious activities that are taking place in Washington. ... I want people in Minnesota armed and dangerous on this issue of the energy tax because we need to fight back. Thomas Jefferson told us ‘having a revolution every now and then is a good thing,’ and the people—we the people—are going to have to fight back hard if we’re not going to lose our country. And I think this has the potential of changing the dynamic of freedom forever in the United States.”
GOP BEGS CHENEY: GO BACK INTO HIDING. Congressional Republicans are telling Dick Cheney to go back to his undisclosed location and leave them alone to rebuild the Republican Party without his input, The Hill reported (3/23). Displeased with the former vice-president’s recent media appearances defending the Bush-Cheney record and suggesting that the country is not as safe under President Obama, Republican lawmakers say he’s hurting GOP efforts to reinvent itself after back-to-back electoral drubbings. Rep. John Duncan Jr. (R-Tenn.) said, “He became so unpopular while he was in the White House that it would probably be better for us politically if he wouldn’t be so public ... But he has the right to speak out since he’s a private citizen.” Potential Illinois Senate hopeful Rep. Mark Kirk (R) told The Hill that Cheney would better shape his legacy by writing a book.
BOEHNER DENIES DEREGULATION. When asked by CNN’s Wolf Blitzer about Republicans who wanted a free market, House Minority Leader John Boehner (R-Ohio) insisted “there was no deregulation of anything in the financial services industries. As a matter of fact, there was an increase in regulation.” He forgot about the Gramm-Leach-Bliley Bill, which in 1999 repealed the Glass-Steagall Act and allowed banks, securities firms and other types of financial institutions to join together to offer consumer services, and the Commodity Futures Modernization Act of 2000, which deregulated futures trading and specified that products offered by financial institutions would not be regulated as futures contracts. That bill was incorporated into the Omnibus Budget Bill in December 2000. Boehner voted for both bills.
DOBBS ATTACKS ST. PATRICK’S DAY. Lou Dobbs may have bashed an ethnic group too far when he attacked St. Patrick’s Day as a needless “ethnic holiday.” “How about an American day,” he proposed. He wondered if other groups, like Jews or Asians, had “ethnic holidays,” but he couldn’t think of any. “Is there a Jewish ethnic holiday? ... No. Okay. … How about an Asian ethnic holiday? Is there one? You know, St. Jing-Tao-Wow?”
Ali Frick noted at ThinkProgress.org (3/17), “Dobbs’ is right: What about an American day? Besides Independence Day, Presidents’ Day, Martin Luther King Day, Columbus Day, Thanksgiving, Veterans Day and Memorial Day, there’s barely a chance to celebrate America at all.” (Also, for what it’s worth, there are many Jewish and Asian ethnic holidays.)
As for St. Patrick’s Day, the Catholic Church honors a saint nearly every day of the year, but Irish Americans started parading on St. Patrick’s Day in Boston, New York and other cities in the 1850s as a show of force against the nativist “Know Nothings” who were harassing Irish immigrants—not unlike the current Hispanic immigrants who are showing solidarity against the latest generation of xenophobes.
From The Progressive Populist, April 15, 2009
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