The Plan for White Slavery?

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Racism has a hidden face within all of us. Anyone who is different beyond our imaginings is suspect. By placing people in the "other" category, we distance ourselves and make them the enemy. To the Right Wing Nuts, Obama has become the thief.

The Plan for White Slavery | The LA Progressive.

In his bestseller, Blink, Malcolm Gladwell noted that people make powerful associations with appearances and make “snap decisions” based on “thin slices” of experience. One of the many studies he cited required the subjects to assign positive or negative words to images of white or black people. To their surprise, the subjects, including himself, associated positive words with pictures of white people and negative words with photos of black people.

Thus after a history of repeated othering of African Americans in the US, it is not unusual for the picture of the black thief climbing through the windows of our homes to evolve into the imaginings of a black man in the White House stealing our healthcare and hard fought freedoms. As educator and writer Tim Wise, shrewdly observed “the longstanding association in white minds between social program spending and racial redistribution has been long established, by scholars such as Martin Gilens, Kenneth Neubeck, Noel Cazenave, and Jill Quadagno, among others.” What is reparations in the mind of the Right?—another form of stealing. Tim further notes, bestselling writer and conservative commentator Glen Beck, as well as shock talk-show hosts Sean Hannity and Rush Limbaugh, have linked health care reform and every piece of Obama’s legislative program with reparations. “His (Obama’s) goal is to create a new America. A new model. A model to settle old racial scores..,” decries Glen Beck.

Leaders from the healthcare corporate industry and the Right have been tapping into this programming. Observing the town hall rage and media coverage, historian and journalist Rick Perlstein reminds us that throughout history “the crazy tree blooms in every moment of liberal ascendancy, and where elites exploit the crazy for their own narrow interests.” Rick goes on to cite various examples such as Vice President Nixon claiming he found hidden in the White House “a blueprint for socializing America” or the various absurdities from the Right that the 1964 Civil Rights Act would “enslave” whites and that the Soviet Union served as an incubator for the “civil rights movement.” He concludes, “Good thing our leaders weren’t so cowardly in 1964, or we would never have passed a civil rights bill—because of complaints over the provisions in it that would enslave whites.”

However, the escapees of the Goldwater asylum are not the only ones prone to their programming being activated. Each one of us has it in them. Remember, during the struggle for desegregation of the lunch counters and outlawing racial housing covenants, a number of opponents used free market arguments of the “right to refuse service.” As Ronald Reagan once said as he successfully campaigned to be governor of California, “If an individual wants to discriminate against Negroes or others in selling or renting his house, he has the right to do so.” Reagan, who publicly opposed the 1964 Civil Rights Act and the 1965 Voting Rights Act, still overwhelmingly won as president despite launching his campaign with a speech on state rights at the site of three slain civil rights activists. I am not saying all those who disdain any governmental involvement in healthcare want to push people of color to the back of the bus, but in the current healthcare debate, they have de facto shoved those without healthcare to the side to fend for themselves.

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The Truth about Healthcare

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Lots of common sense here. Seems a bit uncommon these days of right wing propaganda filling our media sources. Here is the truth.

David Axelrod
Senior Adviser to the President

We launched www.WhiteHouse.gov/realitycheck this week to knock down the rumors and lies that are floating around the internet. You can find the information below, and much more, there. For example, we've just added a video of Nancy-Ann DeParle from our Health Reform Office tackling a viral email head on. Check it out:



8 ways reform provides security and stability to those with or without coverage

1. Ends Discrimination for Pre-Existing Conditions: Insurance companies will be prohibited from refusing you coverage because of your medical history.


2. Ends Exorbitant Out-of-Pocket Expenses, Deductibles or Co-Pays: Insurance companies will have to abide by yearly caps on how much they can charge for out-of-pocket expenses.


3. Ends Cost-Sharing for Preventive Care: Insurance companies must fully cover, without charge, regular checkups and tests that help you prevent illness, such as mammograms or eye and foot exams for diabetics.


4. Ends Dropping of Coverage for Seriously Ill: Insurance companies will be prohibited from dropping or watering down insurance coverage for those who become seriously ill.


5. Ends Gender Discrimination: Insurance companies will be prohibited from charging you more because of your gender.


6. Ends Annual or Lifetime Caps on Coverage: Insurance companies will be prevented from placing annual or lifetime caps on the coverage you receive.


7. Extends Coverage for Young Adults: Children would continue to be eligible for family coverage through the age of 26.


8. Guarantees Insurance Renewal: Insurance companies will be required to renew any policy as long as the policyholder pays their premium in full. Insurance companies won't be allowed to refuse renewal because someone became sick.

Learn more and get details: http://www.WhiteHouse.gov/health-insurance-consumer-protections/

8 common myths about health insurance reform

1. Reform will stop "rationing" - not increase it: It’s a myth that reform will mean a "government takeover" of health care or lead to "rationing." To the contrary, reform will forbid many forms of rationing that are currently being used by insurance companies.


2. We can’t afford reform: It's the status quo we can't afford. It’s a myth that reform will bust the budget. To the contrary, the President has identified ways to pay for the vast majority of the up-front costs by cutting waste, fraud, and abuse within existing government health programs; ending big subsidies to insurance companies; and increasing efficiency with such steps as coordinating care and streamlining paperwork. In the long term, reform can help bring down costs that will otherwise lead to a fiscal crisis.


3. Reform would encourage "euthanasia": It does not. It’s a malicious myth that reform would encourage or even require euthanasia for seniors. For seniors who want to consult with their family and physicians about end-of life decisions, reform will help to cover these voluntary, private consultations for those who want help with these personal and difficult family decisions.


4. Vets' health care is safe and sound: It’s a myth that health insurance reform will affect veterans' access to the care they get now. To the contrary, the President's budget significantly expands coverage under the VA, extending care to 500,000 more veterans who were previously excluded. The VA Healthcare system will continue to be available for all eligible veterans.


5. Reform will benefit small business - not burden it: It’s a myth that health insurance reform will hurt small businesses. To the contrary, reform will ease the burdens on small businesses, provide tax credits to help them pay for employee coverage and help level the playing field with big firms who pay much less to cover their employees on average.


6. Your Medicare is safe, and stronger with reform: It’s myth that Health Insurance Reform would be financed by cutting Medicare benefits. To the contrary, reform will improve the long-term financial health of Medicare, ensure better coordination, eliminate waste and unnecessary subsidies to insurance companies, and help to close the Medicare "doughnut" hole to make prescription drugs more affordable for seniors.


7. You can keep your own insurance: It’s myth that reform will force you out of your current insurance plan or force you to change doctors. To the contrary, reform will expand your choices, not eliminate them.


8. No, government will not do anything with your bank account: It is an absurd myth that government will be in charge of your bank accounts.  Health insurance reform will simplify administration, making it easier and more convenient for you to pay bills in a method that you choose.  Just like paying a phone bill or a utility bill, you can pay by traditional check, or by a direct electronic payment. And forms will be standardized so they will be easier to understand. The choice is up to you – and the same rules of privacy will apply as they do for all other electronic payments that people make.

Learn more and get details:
http://www.WhiteHouse.gov/realitycheck
http://www.WhiteHouse.gov/realitycheck/faq

8 Reasons We Need Health Insurance Reform Now

1. Coverage Denied to Millions: A recent national survey estimated that 12.6 million non-elderly adults – 36 percent of those who tried to purchase health insurance directly from an insurance company in the individual insurance market – were in fact discriminated against because of a pre-existing condition in the previous three years or dropped from coverage when they became seriously ill. Learn more: http://www.healthreform.gov/reports/denied_coverage/index.html


2. Less Care for More Costs: With each passing year, Americans are paying more for health care coverage. Employer-sponsored health insurance premiums have nearly doubled since 2000, a rate three times faster than wages. In 2008, the average premium for a family plan purchased through an employer was $12,680, nearly the annual earnings of a full-time minimum wage job.  Americans pay more than ever for health insurance, but get less coverage. Learn more: http://www.healthreform.gov/reports/hiddencosts/index.html


3. Roadblocks to Care for Women: Women’s reproductive health requires more regular contact with health care providers, including yearly pap smears, mammograms, and obstetric care. Women are also more likely to report fair or poor health than men (9.5% versus 9.0%). While rates of chronic conditions such as diabetes and high blood pressure are similar to men, women are twice as likely to suffer from headaches and are more likely to experience joint, back or neck pain. These chronic conditions often require regular and frequent treatment and follow-up care. Learn more: http://www.healthreform.gov/reports/women/index.html


4. Hard Times in the Heartland: Throughout rural America, there are nearly 50 million people who face challenges in accessing health care. The past several decades have consistently shown higher rates of poverty, mortality, uninsurance, and limited access to a primary health care provider in rural areas. With the recent economic downturn, there is potential for an increase in many of the health disparities and access concerns that are already elevated in rural communities. Learn more: http://www.healthreform.gov/reports/hardtimes


5. Small Businesses Struggle to Provide Health Coverage: Nearly one-third of the uninsured – 13 million people – are employees of firms with less than 100 workers. From 2000 to 2007, the proportion of non-elderly Americans covered by employer-based health insurance fell from 66% to 61%. Much of this decline stems from small business. The percentage of small businesses offering coverage dropped from 68% to 59%, while large firms held stable at 99%. About a third of such workers in firms with fewer than 50 employees obtain insurance through a spouse. Learn more: http://www.healthreform.gov/reports/helpbottomline


6. The Tragedies are Personal: Half of all personal bankruptcies are at least partly the result of medical expenses. The typical elderly couple may have to save nearly $300,000 to pay for health costs not covered by Medicare alone. Learn more: http://www.healthreform.gov/reports/inaction


7. Diminishing Access to Care: From 2000 to 2007, the proportion of non-elderly Americans covered by employer-based health insurance fell from 66% to 61%. An estimated 87 million people - one in every three Americans under the age of 65 - were uninsured at some point in 2007 and 2008. More than 80% of the uninsured are in working families. Learn more: http://www.healthreform.gov/reports/inaction/diminishing/index.html


8. The Trends are Troubling: Without reform, health care costs will continue to skyrocket unabated, putting unbearable strain on families, businesses, and state and federal government budgets. Perhaps the most visible sign of the need for health care reform is the 46 million Americans currently without health insurance - projections suggest that this number will rise to about 72 million in 2040 in the absence of reform. Learn more: http://www.WhiteHouse.gov/assets/documents/CEA_Health_Care_Report.pdf

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Stressing the Positive for Banks; The Rest of Us Should Be Very Afraid

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NYTimes.com
By PAUL KRUGMAN

Hooray! The banking crisis is over! Let's party! O.K., maybe not.
In the end, the actual release of the much-hyped bank stress tests on Thursday came as an anticlimax. Everyone knew more or less what the results would say: some big players need to raise more capital, but over all, the kids, I mean the banks, are all right. Even before the results were announced, Tim Geithner, the Treasury secretary, told us they would be "reassuring."
But whether you actually should feel reassured depends on who you are: a banker, or someone trying to make a living in another profession.
I won't weigh in on the debate over the quality of the stress tests themselves, except to repeat what many observers have noted: the regulators didn't have the resources to make a really careful assessment of the banks' assets, and in any case they allowed the banks to bargain over what the results would say. A rigorous audit it wasn't.
But focusing on the process can distract from the larger picture. What we're really seeing here is a decision on the part of President Obama and his officials to muddle through the financial crisis, hoping that the banks can earn their way back to health.
It's a strategy that might work. After all, right now the banks are lending at high interest rates, while paying virtually no interest on their (government-insured) deposits. Given enough time, the banks could be flush again.
But it's important to see the strategy for what it is and to understand the risks.
Remember, it was the markets, not the government, that in effect declared the banks undercapitalized. And while market indicators of distrust in banks, like the interest rates on bank bonds and the prices of bank credit-default swaps, have fallen somewhat in recent weeks, they're still at levels that would have been considered inconceivable before the crisis.
As a result, the odds are that the financial system won't function normally until the crucial players get much stronger financially than they are now. Yet the Obama administration has decided not to do anything dramatic to recapitalize the banks.
Can the economy recover even with weak banks? Maybe. Banks won't be expanding credit any time soon, but government-backed lenders have stepped in to fill the gap. The Federal Reserve has expanded its credit by $1.2 trillion over the past year; Fannie Mae and Freddie Mac have become the principal sources of mortgage finance. So maybe we can let the economy fix the banks instead of the other way around.
But there are many things that could go wrong.
It's not at all clear that credit from the Fed, Fannie and Freddie can fully substitute for a healthy banking system. If it can't, the muddle-through strategy will turn out to be a recipe for a prolonged, Japanese-style era of high unemployment and weak growth.
Actually, a multiyear period of economic weakness looks likely in any case. The economy may no longer be plunging, but it's very hard to see where a real recovery will come from. And if the economy does stay depressed for a long time, banks will be in much bigger trouble than the stress tests -- which looked only two years ahead -- are able to capture.
Finally, given the possibility of bigger losses in the future, the government's evident unwillingness either to own banks or let them fail creates a heads-they-win-tails-we-lose situation. If all goes well, the bankers will win big. If the current strategy fails, taxpayers will be forced to pay for another bailout.
But what worries me most about the way policy is going isn't any of these things. It's my sense that the prospects for fundamental financial reform are fading.
Does anyone remember the case of H. Rodgin Cohen, a prominent New York lawyer whom The Times has described as a "Wall Street éminence grise"? He briefly made the news in March when he reportedly withdrew his name after being considered a top pick for deputy Treasury secretary.
Well, earlier this week, Mr. Cohen told an audience that the future of Wall Street won't be very different from its recent past, declaring, "I am far from convinced there was something inherently wrong with the system." Hey, that little thing about causing the worst global slump since the Great Depression? Never mind.
Those are frightening words. They suggest that while the Federal Reserve and the Obama administration continue to insist that they're committed to tighter financial regulation and greater oversight, Wall Street insiders are taking the mildness of bank policy so far as a sign that they'll soon be able to go back to playing the same games as before.
So as I said, while bankers may find the results of the stress tests "reassuring," the rest of us should be very, very afraid.
Copyright 2009 The New York Times Company

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What Caused the Economic Crisis?

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GlobalResearch.ca

Warren Buffett called them "weapons of mass destruction" in 2003.
President Bush said they had to be regulated.
So did the chairman of the Securities and Exchange Commission, and the current head of the Federal reserve.
As did the G-20 group of the world's 20 richest nations.
Former Federal Reserve Chairman Alan Greenspan - after being one of their biggest cheerleaders - now says they are dangerous.
And a Nobel prize-winning economist said they should be "blown up or burned", and we should start fresh.
What Are They Talking About?
What are the above-listed folks talking about?
A financial instrument called "credit default swaps" (CDS for short).
CDS are like an insurance contract, where the purchaser buys "insurance" that a company won't go out of business from a seller. If the company stays in business, the purchaser pays premiums to the seller, but if the company goes belly up, the seller has to pay the face value of the CDS "policy".
Why are CDS so dangerous?
According to the experts, CDS were largely responsible for bringing down Bear Stearns, AIG (and see this) and other giant financial companies.
Indeed, many leading experts say that CDS were the main cause of the financial crisis. As just 3 examples:

• Newsweek called CDS "The Monster that Ate Wall Street"


• Former SEC chairman Christopher Cox said "The virtually unregulated over-the-counter market in credit-default swaps has played a significant role in the credit crisis''


• And - as mentioned above- a Nobel economist is so concerned about them that he thinks that existing CDS contracts must be "blown up or burned"

I'll explain the reason that CDS are so dangerous in a future post (basically, they let the financial players to pretend that they had less risk, less stretched-too-thin leverage, and more stability then they really did). But for now, just keep in mind that some of the world's top financial experts say that they are extremely dangerous. They are not the only cause of the financial crisis, but they are one of the main causes.
But At Least the Risk from CDS is Over, Right?
But at least the risks from CDS are over, right?
Not exactly . . .
Credit default swaps continue to bring down large companies, partly because they make it less likely that the companies can restructure.
And one of the main reasons that banks have been hoarding the bailout money instead of lending to consumers it because of CDS.Wall Street firms and banks have been hoarding cash. As the Financial Times wrote on October 7th:

Banks are hoarding cash in expectation of pay-outs on up to $400bn (£230bn) of defaulted credit derivatives linked to Lehman Brothers and other institutions, according to analysts and -dealers.

And as Fox News put it:

Massive positions are just starting to be unwound in the credit default swaps market as tens of billions of dollars worth of these contracts are now getting settled in the aftermath of several high-profile flops.
Banks are hoarding cash in expectation of expected payouts on anywhere from $200bn to $1 tn-no one knows the amount, adding to volatility-for defaulted credit derivatives linked to the collapse of Lehman Brothers, the government's seizure of mortgage giants Fannie Mae and Freddie Mac, the government's rescue of American International Group, and the failure of Washington Mutual.

And guess where most of the AIG bailout went? Yup - to corporations which bought CDS from AIG. $13 billion dollars worth of the bailout money paid to AIG went to Goldman Sachs for CDS contracts. $40 billion dollars worth of AIG's bailout money (and see this) went to foreign banks for CDS contracts. (Even AIG's former chief said that the government used AIG "to funnel money to other institutions, including foreign banks").
Unless something is done to change things, taxpayers may have to continue shelling out bailout money to keep bailing out CDS contract-holders.
Well, At Least the Regulators are Bringing CDS Under control so That They Can't Cause Damage Indefinitely. Right?
Unfortunately, regulators have so far caved into lobbying pressure from those in the CDS industry, and have failed to take any decisive action to reign CDS in.
As Newsweek writes:

Major Wall Street players are digging in against fundamental changes. And while it clearly wants to install serious supervision, the Obama administration--along with other key authorities like the New York Fed--appears willing to stand back while Wall Street resurrects much of the ultracomplex global trading system that helped lead to the worst financial collapse since the Depression.
At issue is whether trading in credit default swaps and other derivatives--and the giant, too-big-to-fail firms that traded them--will be allowed to dominate the financial landscape again once the crisis passes. As things look now, that is likely to happen. And the firms may soon be recapitalized and have a lot more sway in Washington--all of it courtesy of their supporters in the Obama administration...
The financial industry isn't leaving anything to chance, however. One sign of a newly assertive Wall Street emerged recently when a bevy of bailed-out firms, including Citigroup, JPMorgan and Goldman Sachs, formed a new lobby calling itself the Coalition for Business Finance Reform. Its goal: to stand against heavy regulation of "over-the-counter" derivatives, in other words customized contracts that are traded off an exchange...
Geithner's new rules would allow the over-the-counter market to boom again, orchestrated by global giants that will continue to be "too big to fail" (they may have to be rescued again someday, in other words). And most of it will still occur largely out of sight of regulated exchanges...
The old culture is reasserting itself with a vengeance. All of which runs up against the advice now being dispensed by many of the experts who were most prescient about the crash and its causes--the outsiders, in other words, as opposed to the insiders who are still running the show.

Credit default swaps may continue to deepen the economic crisis and prevent a recovery - and cause future crises - unless regulators stand up to the lobbyists and take real action to reign them in.

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Top Obama Bank Watchdog to Call for CEO Heads to Roll, Attacks Geithner-Summers Plan

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AlterNet

Elizabeth Warren, chief watchdog of America's $700bn bank bailout plan, will this week call for the removal of top executives from Citigroup, AIG and other institutions that have received government funds in a damning report that will question the administration's approach to saving the financial system from collapse.
Warren, a Harvard law professor and chair of the congressional oversight committee monitoring the government's Troubled Asset Relief Program (TARP), is also set to call for shareholders in those institutions to be "wiped out." "It is crucial for these things to happen," she said. "Japan tried to avoid them and just offered subsidy with little or no consequences for management or equity investors, and this is why Japan suffered a lost decade." She declined to give more detail but confirmed that she would refer to insurance group AIG, which has received $173bn in bailout money, and banking giant Citigroup, which has had $45bn in funds and more than $316bn of loan guarantees.
Warren also believes there are "dangers inherent" in the approach taken by treasury secretary Tim Geithner, who she says has offered "open-ended subsidies" to some of the world's biggest financial institutions without adequately weighing potential pitfalls. "We want to ensure that the treasury gives the public an alternative approach," she said, adding that she was worried that banks would not recover while they were being fed subsidies. "When are they going to say, enough?" she said.
She said she did not want to be too hard on Geithner but that he must address the issues in the report. "The very notion that anyone would infuse money into a financially troubled entity without demanding changes in management is preposterous."
The report will also look at how earlier crises were overcome -- the Swedish and Japanese problems of the 1990s, the US savings and loan crisis of the 1980s and the 30s Depression. "Three things had to happen," Warren said. "Firstly, the banks must have confidence that the valuation of the troubled assets in question is accurate; then the management of the institutions receiving subsidies from the government must be replaced; and thirdly, the equity investors are always wiped out."

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White House sets tough deadline to force overhaul of ailing US carmakers

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StarTribune.com

President Barack Obama refused further long-term federal bailouts for General Motors and Chrysler, saying more concessions were needed from unions, creditors and others before they could be approved. He raised the possibility Monday of controlled bankruptcy for one or both of the beleaguered auto giants.
At the same time, eager to reassure consumers, Obama announced the federal government would immediately begin backing the warranties that new car buyers receive -- a step designed to signal that it is safe to purchase U.S.-made autos and trucks despite the distress of the industry.
In a statement read at the White House, Obama said he was "absolutely committed" to the survival of a domestic auto industry that can compete internationally. And yet, "our auto industry is not moving in the right direction fast enough," he added.
With his words, Obama underscored the extent to which the government is now dictating terms to two of the country's iconic corporations, much as it has already taken an ownership stake in banks, the insurance giant AIG and housing titans Fannie Mae and Freddie Mac.
In an extraordinary move, the administration forced the departure of Rick Wagoner as CEO of General Motors over the weekend, and implicit in Obama's remarks was that the government holds the ability to pull the plug on that company or Chrysler.
Uncertainty about the industry's fate sent stocks tumbling, with the Dow Jones industrial average losing as much as 300 points in midday trading.
Ford Motor Co., the third member of the Big 3, has not requested federal bailout funds, and was not included in the president's remarks.
The Bush administration late last year approved $17 billion in federal funds to help GM and Chrysler survive. It also demanded both companies submit restructuring plans that the Obama administration would review.
Even as he pronounced their effort unsatisfactory, the president said the administration will offer General Motors "adequate working capital" over the next 60 days to produce a reorganization plan acceptable to the administration.
He said Chrysler's situation is more perilous, and the government will give the company 30 days to overcome hurdles to a merger with Fiat SpA, the Italian automaker. If they are successful "we will consider lending up to $6 billion to help their plan succeed," Obama said.
He also announced several steps to reassure consumers, and improve the chances that U.S. automakers will be able to sell their cars and trucks.
The president said the government will now stand behind warrantees issued by the carmakers, a sweeping new guarantee that some in Congress had sought.
He also noted that the economic stimulus legislation he recently signed allows the purchasers of new domestic cars to deduct the cost of any sales and excise taxes. Obama said this provision could "save families hundreds of dollars and lead to as many as 100,000 new car sales."
He also said funds ticketed for the purchase of new vehicles for government agencies would be spent as quickly as possible. The president was flanked by numerous administration officials as he spoke, including Treasury Secretary Tim Geithner.
Obama spoke at the White House with U.S. automakers at yet another crossroads. As the president noted, the industry has shed more than 400,000 jobs in the past year as the recession took hold. Officials announced last week bailout funds would be made available to companies that supply the automakers, an attempt to keep them afloat.
Obama said he is committed to the survival of an auto industry -- on terms that will allow it to compete internationally.
"But we also cannot continue to excuse poor decisions," he said. "And we cannot make the survival of our auto industry dependent on an unending flow of tax dollars."
He also said some of the industry's progress has scarcely been noticed. He mentioned that the North American car of the year in 2008 was produced by GM.
"Let me be clear: The United States government has no interest in running GM; we have no intention in running GM," Obama said.
But that was at the same time he was formally announcing the departure of Wagoner, whom administration officials forced into retirement on Sunday in preparation for the president's remarks.
"This is not meant as a criticism of Mr. Wagoner, who has devoted his life to this company; rather it's a recognition that it will take a new vision and new direction to create the GM of the future," Obama said.
Other changes at GM include new directors on its board. Fritz Henderson, GM's president and chief operating officer, became the new CEO. Board member Kent Kresa, the former chairman and CEO of defense contractor Northrop Grumman Corp., was named interim chairman of the GM board.
"The board has recognized for some time that the company's restructuring will likely cause a significant change in the stockholders of the company and create the need for new directors with additional skills and experience," Kresa said in a written statement.
The Obama move comes amid public outrage over bonuses paid to business leaders and American International Group executives -- set against a severely ailing economy.
GM failed to make good on promises made in exchange for $13.4 billion in government loans. Chrysler, meanwhile, has survived on $4 billion in federal aid during this economic downturn and the worst decline in auto sales in 27 years. In progress reports filed with the government in February, GM asked for $16.6 billion more and Chrysler wanted $5 billion more.
GM owes roughly $28 billion to bondholders. Chrysler owes about $7 billion in first- and second-term debt, mainly to banks. GM owes about $20 billion to its retiree health care trust, while Chrysler owes $10.6 billion.
GM and Chrysler employ about 140,000 workers in the U.S. In February, GM said it intended to cut 47,000 jobs around the globe, or almost 20 percent of its work force, close hundreds of dealerships and focus on four core brands -- Chevrolet, Cadillac, GMC and Buick.

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Angry America and the Bailout

The Nation

Obtuse hardly does justice to the social stupidity of our late, unlamented financial overlords. John Thain of Merrill Lynch and Richard Fuld of Lehman Brothers, along with an astonishing number of their fraternity brothers, continue to behave like so many intoxicated toreadors waving their capes at an enraged bull, oblivious even when gored.
Their greed and self-indulgence in the face of an economic cataclysm for which they bear heavy responsibility is, unsurprisingly, inciting anger and contempt, as daily news headlines indicate. It is undermining the last shreds of their once exalted social status--and, in that regard, they are evidently fated to relive the experience of their predecessors, those Wall Street "lords of creation" who came crashing to Earth during the last Great Depression.
Ever since the bailout state went into hyperdrive, popular anger has been simmering. In fact, even before the meltdown gained real traction, a sign at a mass protest outside the New York Stock Exchange advised those inside: "Jump, You Fuckers."
You can already buy "I Hate Investment Banking" T-shirts on line. All the Caesar-sized salaries and the Caligula-like madness as the economy crashes and burns, all the bonuses, dividends, princely consulting fees for learning how to milk the Treasury, not to speak of those new corporate jets, as well as the government funds poured down the black hole of mega-mergers, moneys that might otherwise have spared citizens from foreclosure--all of this is making ordinary Americans apoplectic.
Nothing, however, may be more galling than the rationale regularly offered for so much of this self-indulgence. Asked about why he had given out $4 billion in bonuses to his Merrill Lynch staff in a quarter in which the company had lost a staggering $15 billion dollars, ex-CEO John Thain, typically, responded: "If you don't pay your best people, you will destroy your franchise. Those best people can get jobs other places, they will leave."
Apparently it never occurs to those who utter such perverse statements about rewarding the "best people," or "the best men," that we'd all have been better off, and saved some serious money, if they had hired the worst men. After all, based on the recent record, who could possibly have done more damage than the "best" Merrill Lynch, Wachovia, WaMu, Citigroup, AIG, Bank of America and so many other top financial crews had to offer?
The "Best Men" Fall
Now even the new powers in Washington are venting. Vice President Biden has suggested that our onetime masters of the universe be thrown "in the brig"; Missouri Senator Claire McKaskill has denounced them as "idiots...that are kicking sand in the face of the American taxpayer," and even the new president, a man of exquisite tact with an instinct for turning the other cheek, labeled Wall Street's titans as reckless, irresponsible and shameful.
To those who remember the history, all this bears a painfully familiar ring. Soon enough, that history tells us, Congressional investigators will start hauling such people into the public dock and the real fireworks will begin. It happened once before--a vital chapter in the ongoing story of how an old regime dies and a new one is born.
After the Great Crash of 1929, those at the commanding heights of the economy who had enriched themselves and deluded others into believing that, under their leadership, the United States had achieved "a permanent plateau of prosperity"--sound familiar?--were subject to a whirlwind of anger, public shaming and withering ridicule. Like the John Thains of today, Jack Morgan, Charles Mitchell, Richard Whitney, Albert Wiggins and others who headed the country's chief investment and commercial banks, trusts, insurance companies and the New York Stock Exchange never knew what hit them. They, too, had been steeped in the comforting bathwaters of self-delusion for so long that they believed, like Thain and his compadres, that they were indeed the "best," the wisest, the most entitled, and the most impregnable men in America. Even amid the ruins of the world they had made, they were incapable of recognizing that their day was done.
Under the merciless glare of Congressional hearings, above all the Senate's Pecora Committee (named after its bulldog chief counsel Ferdinand Pecora), it was revealed that Jack Morgan and his partners in the House of Morgan hadn't paid income taxes for years; that "Sunshine" Charlie Mitchell, head of National City Bank (the country's largest), had been short-selling his own bank's stock and transferring assets into his wife's name to escape taxes; that other financiers just like him, who had been hero-worshiped for a decade or more as financial messiahs, had regularly engaged in insider-trading schemes that made them wealthy and fleeced legions of unknowing investors.
The Pecora Committee was not the only scourge of the old financial elite. Franklin Delano Roosevelt, as publicly mild-mannered as and perhaps even more amiable and charming than President Obama, began excoriating them from the moment of his first inaugural address. He condemned them in no uncertain terms for misusing "other people's money" and for their reckless speculations; he blamed them for the sorry state of the country; he promised to chase these "unscrupulous money changers" from their "high seats in the temples of American civilization."
Jack Morgan, called to testify by yet another set of Congressional investigators, had a circus midget plopped in his lap to the delight of a swarm of photo-journalists who memorialized the moment for millions. It was an emblematic photo, a visual metaphor for a once proud, powerful elite, its gravitas gone, reduced to impotence, ridiculed for its incompetence and no longer capable of intimidating a soul.
What happened to Jack Morgan or later Richard Whitney--a crowd of 6,000 turned out at New York's Grand Central Station in 1938 to watch the handcuffed former president of the New York Stock Exchange be escorted onto a train for Sing Sing, having been convicted of embezzlement--was the political and social equivalent of a great depression. It represented, that is, a catastrophic deflation of the legitimacy of the ancien régime. It was part of what made possible the advent of something entirely new.
Speculators and Con Men
Under normal circumstances, most Americans have been perfectly willing to draw a relatively sharp distinction between the misguided speculator and the confidence man's outright felonious behavior. One is a legitimate banker gone astray, the other an outlaw.
Under the extraordinary circumstances of terminal systemic breakdown, that distinction grows ever hazier. That was certainly true in the early years of the first Great Depression, when a damaging question arose: just exactly what was the difference between the behavior of Charles Mitchell, Jack Morgan and Richard Whitney, lions of that era's Establishment, and outliers like "Sell-em" Ben Smith; Ivar Kreuger, "the match king"; Jesse Livermore, "the man with the evil eye"; William Crappo Durant, maestro of investment pool stock-kiting; or the onetime Broadway ticket agent and stock manipulator Michael Meehan--men long barred from the walnut-paneled inner sanctums of white-shoe Wall Street?
Admittedly, their daredevil escapades had often left them on the wrong side of the law and they would end their days in jail, as suicides or in penury and disgrace. Nonetheless, as is true today, many Americans then came to accept that between the speculating banker and the confidence man lay a distinction without a meaningful difference. After all, by the early 1930s, the whole American financial system seemed like nothing but a confidence game deserving of the deepest ignominy.
In that sense, Bernie Madoff, a former chairman of the NASDAQ stock exchange, already seems like a synecdoche for a whole way of life. Technically speaking, he ran a Ponzi scheme out of his brokerage firm, as strictly fraudulent as the original one invented by Charles Ponzi, that Italian vegetable peddler, smuggler and, after he got out of an American jail, minor fascist official in Mussolini's Italy.
Ponzi, however, was a small-timer. He gulled ordinary folks out of their five- and ten-dollar bills. Madoff's $50 billion game was something else again. It was completely dependent on his ties to the most august circles of our financial establishment, to major hedge funds and funds of funds, to top-drawer consulting firms, to blue-ribbon nonprofits and to a global aristocracy of the super-rich. True enough, people of middling means, as well as public and union pension funds, got taken too. At the end of the day, however, Madoff's scheme, unlike Ponzi's, was premised on a pervasive insiderism which had everything to do with the way our financial system has been run for the past quarter-century.
Once Madoff was exposed, everybody questioned the credulousness of those who invested with him: why didn't they grow suspicious of such consistently high rates of return? But the equally reasonable question was: why should they have? Not only did you practically need an embossed invitation before you could entrust your loot to Madoff, but the whole financial sector had been enjoying extraordinary returns for a very long time (admittedly, with occasional major hiccups like the dot-com bust of 1999-2000, which somehow seemed to fade quickly from memory).
Keep in mind as well that these lucrative dealings were based on speculative investments in securities so far removed from anything tangible or comprehensible that they seemed to be floating in thin air. The whole system was a Ponzi-like scheme which, like the Energizer Bunny, just kept on going and going and going... until, of course, it didn't.
Locked Into the Bailout State
After 1929, when the old order went down in flames, when it commanded no more credibility and legitimacy than a confidence game, there was an urgent cry to regulate both the malefactors and their rogue system. Indeed, new financial regulation was at the top of, and made up a hefty part of, Roosevelt's New Deal agenda during its first year. That included the Bank Holiday, the creation of the Federal Deposit Insurance Corporation, the passing of the Glass-Steagall Act, which separated commercial from investment banking (their prior cohabitation had been a prime incubator of financial hanky-panky during the Jazz Age of the previous decade), and the first Securities Act to monitor the stock exchange.
One might have anticipated an even more robust response today, given the damage done not only to our domestic economy but to the global one upon which any American economic recovery will rely to a very considerable degree. At the moment, however, financial regulation or re-regulation--given the last thirty years of Washington's fiercely deregulatory policies--seems to have a surprisingly low profile in the new administration's stated plans. Capping bonuses, pay scales and stock options for the financial upper crust is all well and good and should happen promptly, but serious regulation and reform of the financial system must strike much deeper than that.
Instead, the new administration is evidently locked into the bailout state invented by its predecessors, the latest version of which, the creation of a government "bad bank" (whether called that or not) to buy up toxic securities from the private sector, commands increasing attention. A "bad bank" seems a strikingly lose-lose proposition: either we, the taxpaying public, buy or guarantee these securities at something approaching their grossly inflated, largely fictitious value, in which case we will be supporting this second gilded age's financial malfeasance for who knows how long; or the government's "bad bank" buys these shoddy assets at something close to their real value, in which case major banks will remain in lockdown mode, if they survive at all. Worse yet, the administration's latest "bad bank" plan does not even compel rescued institutions to begin lending to anybody, which presumably is the whole point of this new financial welfare system.
Why this timidity and narrowness of vision, which seems less like reform than capitulation? Perhaps it comes, in part, from the extraordinary economic and political throw-weight of the FIRE (finance, insurance, and real estate) sector of our national economy. It has, after all, grown geometrically for decades and is now a vital part of the economy in a way that would have been inconceivable back when the United States was a real industrial powerhouse.
Naturally, FIRE's political influence expanded accordingly, as politicians doing its bidding dismantled the regulatory apparatus installed by the New Deal. Even today, even in ruins, many in that world no doubt hope to keep things more or less that way; and unfortunately, spokesmen for that view--or at least people who used to champion that approach during the Clinton years, including Larry Summers and Robert Rubin (who "earned" more than a $115 million dollars at Citigroup from 1999 to 2008), occupy enormously influential positions in, or as informal advisors to, the new Obama administration.
Still, popular anger and ridicule of the sort our New Deal era ancestors once let loose are growing more and more common, which explains, of course, the newly discovered voice of righteous anger of some of our leading politicians who are feeling the heat. Certain observers have dismissed popular resistance to the bailout state as nothing more than right-wing, Republican-inspired hostility to government intervention of any sort. No doubt that may account for some of it, but much of the anger is indeed righteous, reasonable, and coming from ordinary Americans who simply have had enough.
Progressive-minded people in and outside of government must find a way to make re-regulation urgent business, and to do so outside the imprisoning, politically self-defeating confines of the bailout state. Just weeks ago, the notion of nationalizing the banks seemed irretrievably un-American. Now, it is part of the conversation, even if, for the moment, Obama's savants have ruled it out.
The old order is dying. Let's bury it. The future beckons.
About Steve Fraser
Steve Fraser is a visiting professor at New York University, co-founder of the American Empire Project, and the author, most recently, of Wall Street: America's Dream Palace. more...
* Copyright © 2008 The Nation

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Angry America and the Bailout

The Nation

Obtuse hardly does justice to the social stupidity of our late, unlamented financial overlords. John Thain of Merrill Lynch and Richard Fuld of Lehman Brothers, along with an astonishing number of their fraternity brothers, continue to behave like so many intoxicated toreadors waving their capes at an enraged bull, oblivious even when gored.
Their greed and self-indulgence in the face of an economic cataclysm for which they bear heavy responsibility is, unsurprisingly, inciting anger and contempt, as daily news headlines indicate. It is undermining the last shreds of their once exalted social status--and, in that regard, they are evidently fated to relive the experience of their predecessors, those Wall Street "lords of creation" who came crashing to Earth during the last Great Depression.
Ever since the bailout state went into hyperdrive, popular anger has been simmering. In fact, even before the meltdown gained real traction, a sign at a mass protest outside the New York Stock Exchange advised those inside: "Jump, You Fuckers."
You can already buy "I Hate Investment Banking" T-shirts on line. All the Caesar-sized salaries and the Caligula-like madness as the economy crashes and burns, all the bonuses, dividends, princely consulting fees for learning how to milk the Treasury, not to speak of those new corporate jets, as well as the government funds poured down the black hole of mega-mergers, moneys that might otherwise have spared citizens from foreclosure--all of this is making ordinary Americans apoplectic.
Nothing, however, may be more galling than the rationale regularly offered for so much of this self-indulgence. Asked about why he had given out $4 billion in bonuses to his Merrill Lynch staff in a quarter in which the company had lost a staggering $15 billion dollars, ex-CEO John Thain, typically, responded: "If you don't pay your best people, you will destroy your franchise. Those best people can get jobs other places, they will leave."
Apparently it never occurs to those who utter such perverse statements about rewarding the "best people," or "the best men," that we'd all have been better off, and saved some serious money, if they had hired the worst men. After all, based on the recent record, who could possibly have done more damage than the "best" Merrill Lynch, Wachovia, WaMu, Citigroup, AIG, Bank of America and so many other top financial crews had to offer?
The "Best Men" Fall
Now even the new powers in Washington are venting. Vice President Biden has suggested that our onetime masters of the universe be thrown "in the brig"; Missouri Senator Claire McKaskill has denounced them as "idiots...that are kicking sand in the face of the American taxpayer," and even the new president, a man of exquisite tact with an instinct for turning the other cheek, labeled Wall Street's titans as reckless, irresponsible and shameful.
To those who remember the history, all this bears a painfully familiar ring. Soon enough, that history tells us, Congressional investigators will start hauling such people into the public dock and the real fireworks will begin. It happened once before--a vital chapter in the ongoing story of how an old regime dies and a new one is born.
After the Great Crash of 1929, those at the commanding heights of the economy who had enriched themselves and deluded others into believing that, under their leadership, the United States had achieved "a permanent plateau of prosperity"--sound familiar?--were subject to a whirlwind of anger, public shaming and withering ridicule. Like the John Thains of today, Jack Morgan, Charles Mitchell, Richard Whitney, Albert Wiggins and others who headed the country's chief investment and commercial banks, trusts, insurance companies and the New York Stock Exchange never knew what hit them. They, too, had been steeped in the comforting bathwaters of self-delusion for so long that they believed, like Thain and his compadres, that they were indeed the "best," the wisest, the most entitled, and the most impregnable men in America. Even amid the ruins of the world they had made, they were incapable of recognizing that their day was done.
Under the merciless glare of Congressional hearings, above all the Senate's Pecora Committee (named after its bulldog chief counsel Ferdinand Pecora), it was revealed that Jack Morgan and his partners in the House of Morgan hadn't paid income taxes for years; that "Sunshine" Charlie Mitchell, head of National City Bank (the country's largest), had been short-selling his own bank's stock and transferring assets into his wife's name to escape taxes; that other financiers just like him, who had been hero-worshiped for a decade or more as financial messiahs, had regularly engaged in insider-trading schemes that made them wealthy and fleeced legions of unknowing investors.
The Pecora Committee was not the only scourge of the old financial elite. Franklin Delano Roosevelt, as publicly mild-mannered as and perhaps even more amiable and charming than President Obama, began excoriating them from the moment of his first inaugural address. He condemned them in no uncertain terms for misusing "other people's money" and for their reckless speculations; he blamed them for the sorry state of the country; he promised to chase these "unscrupulous money changers" from their "high seats in the temples of American civilization."
Jack Morgan, called to testify by yet another set of Congressional investigators, had a circus midget plopped in his lap to the delight of a swarm of photo-journalists who memorialized the moment for millions. It was an emblematic photo, a visual metaphor for a once proud, powerful elite, its gravitas gone, reduced to impotence, ridiculed for its incompetence and no longer capable of intimidating a soul.
What happened to Jack Morgan or later Richard Whitney--a crowd of 6,000 turned out at New York's Grand Central Station in 1938 to watch the handcuffed former president of the New York Stock Exchange be escorted onto a train for Sing Sing, having been convicted of embezzlement--was the political and social equivalent of a great depression. It represented, that is, a catastrophic deflation of the legitimacy of the ancien régime. It was part of what made possible the advent of something entirely new.
Speculators and Con Men
Under normal circumstances, most Americans have been perfectly willing to draw a relatively sharp distinction between the misguided speculator and the confidence man's outright felonious behavior. One is a legitimate banker gone astray, the other an outlaw.
Under the extraordinary circumstances of terminal systemic breakdown, that distinction grows ever hazier. That was certainly true in the early years of the first Great Depression, when a damaging question arose: just exactly what was the difference between the behavior of Charles Mitchell, Jack Morgan and Richard Whitney, lions of that era's Establishment, and outliers like "Sell-em" Ben Smith; Ivar Kreuger, "the match king"; Jesse Livermore, "the man with the evil eye"; William Crappo Durant, maestro of investment pool stock-kiting; or the onetime Broadway ticket agent and stock manipulator Michael Meehan--men long barred from the walnut-paneled inner sanctums of white-shoe Wall Street?
Admittedly, their daredevil escapades had often left them on the wrong side of the law and they would end their days in jail, as suicides or in penury and disgrace. Nonetheless, as is true today, many Americans then came to accept that between the speculating banker and the confidence man lay a distinction without a meaningful difference. After all, by the early 1930s, the whole American financial system seemed like nothing but a confidence game deserving of the deepest ignominy.
In that sense, Bernie Madoff, a former chairman of the NASDAQ stock exchange, already seems like a synecdoche for a whole way of life. Technically speaking, he ran a Ponzi scheme out of his brokerage firm, as strictly fraudulent as the original one invented by Charles Ponzi, that Italian vegetable peddler, smuggler and, after he got out of an American jail, minor fascist official in Mussolini's Italy.
Ponzi, however, was a small-timer. He gulled ordinary folks out of their five- and ten-dollar bills. Madoff's $50 billion game was something else again. It was completely dependent on his ties to the most august circles of our financial establishment, to major hedge funds and funds of funds, to top-drawer consulting firms, to blue-ribbon nonprofits and to a global aristocracy of the super-rich. True enough, people of middling means, as well as public and union pension funds, got taken too. At the end of the day, however, Madoff's scheme, unlike Ponzi's, was premised on a pervasive insiderism which had everything to do with the way our financial system has been run for the past quarter-century.
Once Madoff was exposed, everybody questioned the credulousness of those who invested with him: why didn't they grow suspicious of such consistently high rates of return? But the equally reasonable question was: why should they have? Not only did you practically need an embossed invitation before you could entrust your loot to Madoff, but the whole financial sector had been enjoying extraordinary returns for a very long time (admittedly, with occasional major hiccups like the dot-com bust of 1999-2000, which somehow seemed to fade quickly from memory).
Keep in mind as well that these lucrative dealings were based on speculative investments in securities so far removed from anything tangible or comprehensible that they seemed to be floating in thin air. The whole system was a Ponzi-like scheme which, like the Energizer Bunny, just kept on going and going and going... until, of course, it didn't.
Locked Into the Bailout State
After 1929, when the old order went down in flames, when it commanded no more credibility and legitimacy than a confidence game, there was an urgent cry to regulate both the malefactors and their rogue system. Indeed, new financial regulation was at the top of, and made up a hefty part of, Roosevelt's New Deal agenda during its first year. That included the Bank Holiday, the creation of the Federal Deposit Insurance Corporation, the passing of the Glass-Steagall Act, which separated commercial from investment banking (their prior cohabitation had been a prime incubator of financial hanky-panky during the Jazz Age of the previous decade), and the first Securities Act to monitor the stock exchange.
One might have anticipated an even more robust response today, given the damage done not only to our domestic economy but to the global one upon which any American economic recovery will rely to a very considerable degree. At the moment, however, financial regulation or re-regulation--given the last thirty years of Washington's fiercely deregulatory policies--seems to have a surprisingly low profile in the new administration's stated plans. Capping bonuses, pay scales and stock options for the financial upper crust is all well and good and should happen promptly, but serious regulation and reform of the financial system must strike much deeper than that.
Instead, the new administration is evidently locked into the bailout state invented by its predecessors, the latest version of which, the creation of a government "bad bank" (whether called that or not) to buy up toxic securities from the private sector, commands increasing attention. A "bad bank" seems a strikingly lose-lose proposition: either we, the taxpaying public, buy or guarantee these securities at something approaching their grossly inflated, largely fictitious value, in which case we will be supporting this second gilded age's financial malfeasance for who knows how long; or the government's "bad bank" buys these shoddy assets at something close to their real value, in which case major banks will remain in lockdown mode, if they survive at all. Worse yet, the administration's latest "bad bank" plan does not even compel rescued institutions to begin lending to anybody, which presumably is the whole point of this new financial welfare system.
Why this timidity and narrowness of vision, which seems less like reform than capitulation? Perhaps it comes, in part, from the extraordinary economic and political throw-weight of the FIRE (finance, insurance, and real estate) sector of our national economy. It has, after all, grown geometrically for decades and is now a vital part of the economy in a way that would have been inconceivable back when the United States was a real industrial powerhouse.
Naturally, FIRE's political influence expanded accordingly, as politicians doing its bidding dismantled the regulatory apparatus installed by the New Deal. Even today, even in ruins, many in that world no doubt hope to keep things more or less that way; and unfortunately, spokesmen for that view--or at least people who used to champion that approach during the Clinton years, including Larry Summers and Robert Rubin (who "earned" more than a $115 million dollars at Citigroup from 1999 to 2008), occupy enormously influential positions in, or as informal advisors to, the new Obama administration.
Still, popular anger and ridicule of the sort our New Deal era ancestors once let loose are growing more and more common, which explains, of course, the newly discovered voice of righteous anger of some of our leading politicians who are feeling the heat. Certain observers have dismissed popular resistance to the bailout state as nothing more than right-wing, Republican-inspired hostility to government intervention of any sort. No doubt that may account for some of it, but much of the anger is indeed righteous, reasonable, and coming from ordinary Americans who simply have had enough.
Progressive-minded people in and outside of government must find a way to make re-regulation urgent business, and to do so outside the imprisoning, politically self-defeating confines of the bailout state. Just weeks ago, the notion of nationalizing the banks seemed irretrievably un-American. Now, it is part of the conversation, even if, for the moment, Obama's savants have ruled it out.
The old order is dying. Let's bury it. The future beckons.
About Steve Fraser
Steve Fraser is a visiting professor at New York University, co-founder of the American Empire Project, and the author, most recently, of Wall Street: America's Dream Palace. more...
* Copyright © 2008 The Nation

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• FDR: Time-travelling destroyer of economies (boingboing.net)
• TakePart Looks Back: FDR's New Deal (takepart.com)
• Stimulus Bill Rekindles New Deal Debate (cbsnews.com)
• Wall St., a Financial Epithet, Stirs Outrage (nytimes.com)
• Another Great Depression? (cbsnews.com)
• Steve Fraser: Beyond the Bailout State (huffingtonpost.com)
• The Deeper Truth About John Thain's Ouster From BofA (time.com)
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The Rorschach Geithner plan

Paul Krugman Blog - NYTimes.com

An old joke from my younger days: What do you get when you cross a Godfather with a deconstructionist? Someone who makes you an offer you can't understand.
I found myself remembering that joke when trying to make sense of the Geithner financial rescue plan. It's really not clear what the plan means; there's an interpretation that makes it not too bad, but it's not clear if that's the right interpretation.
The plan deserves praise for what isn't in it, at least as far as I can tell. There doesn't seem to be provision for mass purchases of toxic waste at premium prices; there also doesn't seem to be a massive "ring-fencing" guarantee against private losses on bad assets. In that sense the plan is better than what the last few weeks of leaks led us to expect.
What is in it, in reverse order:
1. Super-TALF: a big expansion of the Fed's quantitative easing, with Treasury backing. I'm OK with that.
2. Private-public purchases of questionable assets; as I understand it, private investors would be the junior partners, so this is probably not a big giveaway (unless there's huge public financing, in which case it amounts to ring-fencing after all). I also suspect it wouldn't accomplish much, but no harm, no foul.
3. Stress test: everything depends on how this is actually implemented. What happens if, or more likely when, a major money center bank is stress-tested and found to have negative net worth? One possibility is that the auditors are told to come up with a different answer; that's a big concern. The other is that the bank is effectively nationalized; as I read the language that could be achieved as part of the public capital injection.
So what is the plan? I really don't know, at least based on what we've seen today. But maybe, maybe, it's a Trojan horse that smuggles the right policy into place.

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• Geithner's Plan: Bail out the Banks, Keep the same people in charge and let them do what they want (firedoglake.com)
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• U.S. Bank Bailout to Rely in Part on Private Money (nytimes.com)

The Rorschach Geithner plan

Paul Krugman Blog - NYTimes.com

An old joke from my younger days: What do you get when you cross a Godfather with a deconstructionist? Someone who makes you an offer you can't understand.
I found myself remembering that joke when trying to make sense of the Geithner financial rescue plan. It's really not clear what the plan means; there's an interpretation that makes it not too bad, but it's not clear if that's the right interpretation.
The plan deserves praise for what isn't in it, at least as far as I can tell. There doesn't seem to be provision for mass purchases of toxic waste at premium prices; there also doesn't seem to be a massive "ring-fencing" guarantee against private losses on bad assets. In that sense the plan is better than what the last few weeks of leaks led us to expect.
What is in it, in reverse order:
1. Super-TALF: a big expansion of the Fed's quantitative easing, with Treasury backing. I'm OK with that.
2. Private-public purchases of questionable assets; as I understand it, private investors would be the junior partners, so this is probably not a big giveaway (unless there's huge public financing, in which case it amounts to ring-fencing after all). I also suspect it wouldn't accomplish much, but no harm, no foul.
3. Stress test: everything depends on how this is actually implemented. What happens if, or more likely when, a major money center bank is stress-tested and found to have negative net worth? One possibility is that the auditors are told to come up with a different answer; that's a big concern. The other is that the bank is effectively nationalized; as I read the language that could be achieved as part of the public capital injection.
So what is the plan? I really don't know, at least based on what we've seen today. But maybe, maybe, it's a Trojan horse that smuggles the right policy into place.

Related articles by Zemanta

• Geithner's Plan: Bail out the Banks, Keep the same people in charge and let them do what they want (firedoglake.com)
• Timothy Geithner Announces New Financial Stability Plan (businesspundit.com)
• Geithner Reax II (andrewsullivan.theatlantic.com)
• U.S. Bank Bailout to Rely in Part on Private Money (nytimes.com)