Thursday, January 22, 2009

Keeps Getting Worse

Caroline Kennedy's appointment is still up in the air, but we finally get a decision tomorrow at noon. However, that decision may very well not be Kennedy. Yesterday and this morning it was "personal reasons" involving her stricken uncle Ted Kennedy, but the NY Times has finally gotten to the truth: vetting of Kennedy reveals a Tim Geithner special: a housekeeper with work status issues and taxes unpaid.
During the early afternoon Wednesday, the aide said, Ms. Kennedy became aware of what the aide referred to as a “personal situation” that could prevent her from fulfilling her duties as senator. The personal situation was not related to the seizure that her uncle, Senator Edward M. Kennedy, suffered during an inauguration luncheon on Tuesday, the aide said, declining to be more specific.

Another aide to Ms. Kennedy, while not denying there were issues that emerged during her vetting, said that there was nothing that surfaced that would disqualify her from the appointment, and that the Kennedy camp and the governor’s operation had been discussing how to publicly disclose the issues.

Virtually no one in state politics on Thursday was willing to make a bet on the appointment the unpredictable governor might make in the end. And the governor and his aides remained shocked at the recent turn of events and stung by criticism of their handling of the process. They have maintained almost complete silence since Wednesday afternoon.
Hasn't New York politics already become a complete joke since Eliot Spitzer, and now this.

God help me, appoint a Republican just so we have something to break up the constant stream of Democratic stupidity flowing from the Empire State.

The American Will

Glenn Greenwald takes on the notion that the "American people approve of torture" and other falsehoods of the Villiage Idiots.
One of the most common and most corrosive aspects of our political discourse is the endless assertions -- based on nothing -- about what "Americans believe." It is exceedingly conventional wisdom that Americans generally view the world through the prism of Jack Bauer and therefore want our government to torture, want Guantanamo kept opened, and do not want suspected Terrorists to be tried in civilian courts inside the U.S. It is even more commonly asserted that Americans do not want, and even further, would never tolerate, criminal investigations into the various crimes of Bush officials.

A new Washington Post/ABC News poll released yesterday negates all of those beliefs. Here was the question that was asked about torture -- note that it's phrased in the most pro-torture manner possible, because it is grounded in the ludicrous, 24-clich├ęd "ticking time bomb" excuse that is the most commonly used argument by torture advocates:

Q. Obama has said that under his administration the United States will not use torture as part of the U.S. campaign against terrorism, no matter what the circumstance. Do you support this position not to use torture, or do you think there are cases in which the United States should consider torture against terrorism suspects?

By a wide margin -- 58-40% -- Americans say that torture should never be used, no matter the circumstances. Let's repeat that: "no matter the circumstance." That margin is enormous among Democrats (71-28%) and substantial among independents (56-43%). As usual these days, Republicans hold the minority view, but even among them there is substantial categorical opposition to torture (42-55%).

The poll goes on to say that a majority of Americans favor closing Gitmo and want to see Bush investigated for possible criminal acts.

Obama has said unequivocally that we will end the Bush torture regime and signed an order today closing Gitmo. The question is will he have the courage to investigate and prosecute Bush? The poll gives a 50%-47% result in favor of doing just that, and there's a strong legal argument (put forth by Greenwald and others) that Obama has no choice but to prosecute by decree of US law.

He's two for two so far. Will he make it three for three, as the American people want?

Caught Red Handed

There's no justice quite as expedient in our universe like getting sacrificed on the altar of corporate public relations. Case in point: former Merrill Lynch CEO and now former Bank of America hotshot John Thain, who just got fried up today like shrimp tempura.
Wall Street bonuses, a sore point as the government gives billions of dollars in bailout money to the financial industry, have apparently cost former Merrill Lynch & Co. CEO John Thain his new job at Bank of America Corp.

Thain resigned from Bank of America Thursday following news that Merrill Lynch had rushed out its year-end bonuses, paying them just before Bank of America completed its acquisition of Merrill Lynch and sought $20 billion in additional government bailout money.

The company gave no reason for Thain's departure, but its timing, coming hours after news reports about the bonuses, made it likely that there was a connection with the payouts.

The bonuses to Merrill Lynch executives were also paid out as the company prepared to report a $15.3 billion fourth-quarter loss -- a loss that led Bank of America to request and receive government funds on top of the $25 billion it had already been given.

Bank of America spokesman Scott Silvestri issued a terse statement: "(BofA Chairman and CEO) Ken Lewis flew to New York today to talk to John Thain. And it was mutually agreed that his situation was not working out and he would resign."

The bonuses raise the question of how proper it was for executives in a struggling company to be given big payments even as its soon-to-be-parent was accepting billions of dollars in government money.

"He's just completely tone-deaf to the culture of BofA" if he was paying out bonuses days before reporting a multibillion dollar quarterly loss and as Lewis was securing more government support, Tony Plath, a finance professor at the University of North Carolina at Charlotte, said about Thain. "My surprise is the board gave him an opportunity to resign and didn't just fire him."

Door. Ass. Hit. Way out.

Obama's Choice

When it comes down to it, Obama will be remembered most for his response to the economic crisis more than anything. It's a bit disturbing to find the chorus of voices growing louder that are saying that Obama will have to make a fundamental rewrite of our economic system to save America.
The nation's fast-darkening circumstances define the essential dilemma of Barack Obama's presidency. His instinct is to govern by consensus, in the moderate middle ground of politics. Yet dire events are pushing the new president toward solutions more fundamental than those he had intended. The longer he resists taking more forceful action, the more likely it is that he will be overwhelmed by the gathering adversities.

Three large obstacles are blocking Obama's path. The first is one of scale: his nearly $800 billion recovery package sounds huge, but it is perhaps two or three times too small to produce a turnaround. The second is that the financial system--still dysfunctional despite the bailouts--requires much more than fiscal stimulus and bailout: the government must nationalize and supervise the banks to ensure that they carry out the lending and investing needed for recovery. This means liquidating some famous nameplates--led by Citigroup--that are spiraling toward insolvency. The third is that the crisis is global: the US economy cannot return to normal unless the unbalanced world trading system is simultaneously reformed. Globalization has vastly undermined US productive strength, as trade deficits have led the nation into deepening debtor dependence.

While Washington debates the terms of Obama's stimulus package, others see disappointment ahead. The Levy Economics Institute of Bard College, an outpost of Keynesian thinking, expresses its doubts in emotional language that professional economists seldom use. "The prospects for the US economy have become uniquely dreadful, if not frightening," Levy analysts reported. The institute's updated strategic analysis warns that the magnitude of negative forces--the virtual collapse of bank lending, private spending, consumer incomes and demand--"will make it impossible for US authorities to apply a fiscal and monetary stimulus large enough to return output and unemployment to tolerable levels within the next two years." Instead, the unemployment rate is likely to rise to 10 percent by 2010. Obama's package amounts only to around 3 percent, annually, of GDP in a $13 trillion economy. Levy's analysis calculates that it would require federal deficits of 8 to 10 percent of GDP--$2 trillion or more--to reverse the economic contraction. And yet, the institute observed, it is inconceivable that this level "could be tolerated for purely political reasons" or that the United States could sustain the rising indebtedness without terrifying our leading creditors, like China.

In other words, Obama's stimulus package is a fraction of what it has to be. Republicans will never allow a larger one...but a massive package three times what Obama is planning is our only realistic hope.

The alternative is the dreaded Japan scenario: a decade long depression that will cost tens of millions of jobs and drop the standard of living in this country to a bare memory of what it is today. In order to avoid the slow death of our economy, a massive jolt of capital is needed immediately.

Sometime within the next couple of months, Tim Geithner and Ben Bernanke will be pleading for trillions again. They will be throwing around the N word...nationalization. The reported unemployment rate of 9 or 10% will in reality be much closer to 20 to 25% or more.

In other words, by 2010 we'll most likely be in the middle of the Second Great Depression.

Wrap your head around that. You'll have to. We'll all have to. Obama's window to truly fix the problem is growing narrower every day. Time is almost up.

If It's Thursday...

...It must be time for another 589,000 new jobless claims and another record low month for new housing starts.

More Bad Bank News

Big banks like Citigroup and Bank of America are in deep trouble. Quite possibly, they are already zombie banks, their financial corpses animated by TARP billions and the promise of more billions from Obama in the future.

That's what makes today's earnings news from mid-size regional banks all the more depressing. Across the board, regional banks like KeyCorp, Comerica, Huntington, SunTrust, BB&T and Fifth Third (especially Fifth Third) announced staggering losses this morning.

How many of these banks are zombie banks? I'm betting more than you think. The entire financial system is collapsing around us. Many of these banks won't be around in year, I'm thinking. Massive consolidation is coming in the industry in 2009 out of necessity, and it will involve a number of regional banks like this being snapped up the way Cleveland's National City was.

Look for banks to take another round of stock hammerings today and tomorrow.


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