Bankruptcy for AIG?
I have been opposed to bailouts since the beginning of this big mess, being particularly suspicious of the “too big to fail category.” I think that the race to the bottom would have gone a lot more smoothly had we just let the bankruptcy bus make its necessary stops. My friend Edward Harrison at Credit Writedowns agrees with me as far as AIG is concerned.
Harrison argues:
At a minimum, this episode should make clear that a pre-packaged or managed bankruptcy administered by the government would be superior to this ill-considered and attempted arms-length transaction at AIG. My short-hand for this divide is “bankruptcy/pre-privatization vs. propping up zombie banks.” Propping up zombie banks while refusing to prosecute any illegal activities is likely to invite a negative populist response as I indicated in my recent post “Where are the perp walks?” In my view, the Obama Administration may well come to be viewed as an enabler of these events unless it can demonstrate a credible willingness to prosecute financial service criminal activity and end the ability of incumbent management to control likely insolvent institutions.
Read more: “AIG: Bankruptcy would have avoided the bonus debacle - Credit Writedowns” -
Obama on AIG
Not What We Had Hoped
I place Civil Liberties on the top of my agenda, and I, like many, had hoped that the Obama administration would roll back the limits that the Bush administration had placed on them. That has not been the case, and instead we see that many of those most distasteful and onerous of Bush policies remain. Salon’s Glen Greenwald reports on some of the more chilling similarities between the Obama and Bush administration policies.
And as much as one might prefer not to acknowledge it, it is becoming undeniably clear that — at least in the realm of civil liberties, executive power and core Constitutional rights — Lowry’s description of Obama’s “three-step maneuver” is basically accurate, and Cheney’s fear-mongering lament that Obama is undoing his Terrorism policies is basically false.
In the “three-step maneuver” the Obama administration denounces the Bush policy, pretends to get rid of it, and then quietly enacts the same policy. A bit duplicituos at best.
The View Down Under
I’ve been in Australia for about ten days now, and one thing that has happened over and over again is that Australians engage me in conversation about the new administration. They are a little slow to engage– just in case I might be int he vocal minority who actually thinks that GWB was a good president, but it doesn’t take long for them to see the optimism that I have about President Obama and what he might do to repair the mess of the past eight yeas. Once they figure out where I stand the Aussies reveal their excitement for the new administration. In the past when I have travel outside the U.S. the folks that I have met have tried to contain their anger or simply not talk about U.S. politics. Suddenly the U.S. is looking like the shining house on the hill again. Here’s an opinion piece from an Aussie pundit– Phillip Adams. Adams came out hard and he came out early for the Obama team. In this one he argues that GWB’s utter incompetence paved the way for the Obama presidency.
Creeping Toward Accountability
Yesterday I called out Paul Krugman’s editorial in the New York Times criticizing the Obama administration’s business-as-usual policies toward the financial services industry. It looks like there may be some teeth in the Administration’s plan. The Wall Street Journal reports that Obama is calling for a cap of $500K for executive salaries in those organizatons that receive bail out money. Executives could receive preferrred stock or other compensation. Chief executives in those companies would not be able to get severance pay. The limits on compensation are definitely a good start, but I am still hoping to see the Administration go further and have the government take an equity stake in any comany that gets bail out money.
The End of the World as We Know It
In Chris Hedges’ column “It’s Not Going to be OK” on Truth Dig he makes some grim predictions for the United States.
At no period in American history has our democracy been in such peril or has the possibility of totalitarianism been as real. Our way of life is over. Our profligate consumption is finished. Our children will never have the standard of living we had. And poverty and despair will sweep across the landscape like a plague. This is the bleak future. There is nothing President Obama can do to stop it. It has been decades in the making. It cannot be undone with a trillion or two trillion dollars in bailout money. Our empire is dying. Our economy has collapsed.
I am not sure that the situation is that bad, but then again I am not sure that it isn’t. It is clear to me that we do need to readjust our expectations for recovery a bit. I am one of those doom sayers who thinks that it’s going to be a long hard ride to the bottom, but I also believe that it’s a ride that we need to take. We cannot continue to finance our consumption with rampant borrowing and our government needs to stop printing money to give to large incompetently run institutions while shouting too big to fail.
Hedges uses Sheldon S. Wolin’s term– inverted totalitarianism in which corporate interests control the government and politics. The answer of course would be a radical restructuring of the way that the system of lobbying and funding of political campaigns through corporate dollars. The Obama campaign seemed to be on the road to break this chain with its grassroots campaign and its wide network of small donors as well as the President’s Executive Order limiting lobbying activity for those who in the administration. But so far we have seen new policies from the Obama administration aimed at changing the basic structures of power that are in play. In Wolin’s words: “The basic systems are going to stay in place; they are too powerful to be challenged,” And as Hedges and Wolin point out we, the public, aren’t nearly upset enough about it.
They paint a frightening portrait of increased govenment power and apathy by the citizenry. It’s a bleak view, but given the numbness that I feel in the face of the continuing downward economic spiral one I find hard to discount.
“Lemon Socialism”
In today’s New York Times Paul Krugman calls the Obama administration’s plan to shore up the failing financial system without making any demands or greater regulation . According to Krugman:
Just to be clear, I’m not talking about the Obama administration’s plan to support jobs and output with a large, temporary rise in federal spending, which is very much the right thing to do. I’m talking, instead, about the administration’s plans for a banking system rescue — plans that are shaping up as a classic exercise in “lemon socialism”: taxpayers bear the cost if things go wrong, but stockholders and executives get the benefits if things go right.
Krugman supports a much bigger bail out than I do. I’d like to see the free market take care of the whole mess and if that means that we need to readjust our standard of living and our expectations so be it. There are some hard lessons to be learned here, but I do agree with Krugman that if the taxpayers are going to be providing the capital for these backs to survive then we should be given the equity stake and the oversight that shareholders get.
We may agree with the President that the nearly $20 million in bonuses handed out on Wall Street for last year’s performance are “shameful,” but if that’s as far as the President goes then we haven’t really changed anything, and we r setting ourselves up for continued turmoil. The inmates have been running the asylum too long; we need the President to back up the harsh words with regulation and accountability for any financial institution that receive tax payer money.
The American people will not tolerate such arrogance and greed…
Stephen Colbert’s Redux of the Obama Stimulus Package
Judge at Guatanamo Refuses President’s Request
The LA Times reports:
The chief judge at the Guantanamo Bay war crimes court Thursday rejected President Obama’s call to halt the prosecution of terrorism suspects, ruling that a delay in the case of a Saudi accused in the Cole attack would “not serve the interests of justice.”
Given that the president issued a request rather than an order means tht the judge’s stance is not as troubling as it might be. It still shows that President Obama’s decision to close Guantanamo will meet some steady resistance. This case is complicated by the fact that the Bush administration admits that the defendant, Abd al Rahim al Nashiri, was waterboarded while in custody. And the new Sheriff in town, Eric Holder, stated clearly at his confirmation hearing that waterboarding is torture, and the LA Times reminds us that the President has banned torture.
So we see the makings of a stand off. The newspaper doesn’t think this one will fester, but I can see the right wingers using this case as a wedge issue and calling the President soft on terror. Nashiri was accused of the acttack on the USS Cole, so it has the potential to become a banner case for them. I would like to see the Obama administration step up here and show that it has a firm reign on the tiller and that the desires of Bush holdouts will be thwarted– quickly, completely, and of course deftly.