Tuesday, February 10, 2009

Zandar's Thought Of The Day

If absolutely everyone hates the Geithner Plan across the board, does it make it A) the only existing compromise in an awful situation, B) the worst existing possible plan of all options, or C) both?

It's no longer a question of "Will Obama nationalize the banks?" but when will he do so.

He doesn't want to nationalize the banks. He can't openly say he's going to. But eventually he will have to.

Sensible Centrism, Israeli Style

Israeli elections held today, exit polls show some interesting results.

The good news, the moderate Kadima party did better than expected in Israeli elections. The bad news, hard liners from the Likud party and the ultra-wingnut Yisrael Beiteinu party came in second and third, leaving the Labor party in the ditch. Kadima + Labor only three weeks) or it's going to be dominated by ultra-right wing nationalist nutbars wanting Israeli Arabs to sign loyalty oaths.

The irony of the government of the Jewish state appropriating facist tendencies is lost on most young Israelis.

Oh, Yeah...

Stimulus bill passed the Senate. I also hear there's a sale on fireproof violins.

Club For Growth has declared all out war on Arlen Specter, calling his vote for the bill "super ultra mega hyper nasty bad epic fail" or something.

[UPDATE] The Republican war on Arlen Specter's 2010 race is heating up.


Paulson's Sword Of Damocles

This video is PA Democrat Rep. Paul Kanjorski talking about the fateful day of September 18, 2008, the day Hank Paulson said we had to have the TARP bailout. That day, America came within hours of a global financial collapse. A partial transcript (h/t Balloon Juice):

I was there when the secretary and the chairman of the Federal Reserve came those days and talked to members of Congress about what was going on... Here's the facts. We don't even talk about these things.

On Thursday, at about 11 o'clock in the morning, the Federal Reserve noticed a tremendous drawdown of money market accounts in the United States to a tune of $550 billion being drawn out in a matter of an hour or two.

The Treasury opened up its window to help. They pumped $105 billion into the system and quickly realized that they could not stem the tide. We were having an electronic run on the banks.

They decided to close the operation, close down the money accounts, and announce a guarantee of $250,000 per account so there wouldn't be further panic and there. And that's what actually happened.

If they had not done that their estimation was that by two o'clock that afternoon, $5.5 trillion would have been drawn out of the money market system of the United States, would have collapsed the entire economy of the United States, and within 24 hours the world economy would have collapsed.

Now we talked at that time about what would have happened if that happened. It would have been the end of our economic system and our political system as we know it.

Perspective on this from No More Mr. Nice Blog: El Rushbo is screaming that this was done on purpose to elect Obama(!).

You know, thinking like that leads to people like this.

Post-Game On Geithner's Plan

Wall Street didn't buy Geithner's plan either. Dow's down nearly 300 points because the Bad Bank plan didn't really have a bad bank plan in it...convincing private investors to buy crap assets they know are worthless? Who is Geithner kidding?

Also, I saw no mention in the plan of the suspension of mark-to-market accounting. That's what the banks really wanted, the chance to continue lying about how much their toxic assets are worth. Instead, the plan appears to involve some middling "tougher standards" that involve actually asking banks how insolvent they actually are to see how much money they'll need.

The answers to those questions are something neither the banks nor Geithner want to contemplate.

[UPDATE] Oh, and this didn't help either.
Administration officials were greeted with sarcasm and laughter Monday night when they briefed lawmakers and congressional staff on Treasury Secretary Tim Geithner's new financial-sector bailout project, according to people who were in the room.

The laughter was at its height when Obama officials explained that the White House planned to guarantee a wide swath of toxic assets -- which they referred to as "legacy assets" -- but wouldn't be asking Congress for money. Rep. Brad Sherman (D-CA), a bailout opponent in the fall, asked the officials to give Congress the total dollar figure for which they were on the hook. The officials said that they couldn't provide a number, a response met by chuckling that was bipartisan, but tilted toward the GOP side. By guaranteeing the assets, Geithner hopes he can persuade the private sector to purchase a portion of them.

If nobody's taking him seriously, then Geithner needs to resign and be replaced by somebody who is.

Pulling The TARP Over Our Eyes

Tim Geithner's not-so-secret plan to "save" the banks is shaping up to have a couple of needed elements in it, but it's mostly recycled TARP. The good:
For his part, Mr. Geithner will blame corporate executives for much of the economic crisis, according to officials. He will announce rules that require all banks receiving capital from the government to submit plans that describe how they intend to strengthen their lending programs and generally restrict them from using the money to acquire other banks until the government money is repaid.
It's a start, or course. But we're long past the point of needing a "good start". Geithner's also expected to announce a second effort to allow bankruptcy judges to be able to modify mortgages in an effort to try to salvage mortgages, something the GOP shot down three months ago.

But the bad part of the plan far outweighs the improvements.
It intends to call for the creation of a joint Treasury and Federal Reserve program, at an initial cost of $250 billion to $500 billion, to encourage investors to acquire soured mortgage-related assets from banks.

The Fed will use its balance sheet to provide the financing, and the Federal Deposit Insurance Corporation might provide guarantees to investors who participate in the program, which some people might call a “bad bank.”

“This program will provide government capital and government financing to help leverage private capital to help get private markets working again for the legacy loans and assets that are now burdening the entire financial system,” Mr. Geithner said in his prepared remarks.

A second component of the plan would broadly expand, to $500 billion to $1 trillion, an existing $200 billion program run by the Federal Reserve to try to unfreeze the market for commercial, student, auto and credit card loans. A third component would involve a review of the capital levels of all banks, including projections of future losses, to determine how much additional capital each bank should receive.

So, we're looking at, what, another trillion and a half tossed at banks? What makes anyone think this is going to work, especially when Geithner has sabotaged his own plan?
But as intended largely by Mr. Geithner, the plan stops short of intruding too significantly into bankers’ affairs even as they come onto the public dole.

The $500,000 pay cap for executives at companies receiving assistance, for instance, applies only to very senior executives. Some officials argued for caps that applied to every employee at institutions that received taxpayer money.

Abandoning any pretense about limiting the moral hazards at companies that made foolhardy investments, the plan also will not require shareholders of companies receiving significant assistance to lose most or all of their investment. Some officials had suggested that the next bailout phase not protect existing shareholders. (Shareholders at most banks that fail will continue to lose their investment.)

Nor will the government announce any plans to replace the management of virtually any of the troubled institutions, despite arguments by some to oust current management at the most troubled banks.

Finally, while the administration will urge banks to increase their lending, and possibly provide some incentives, it will not dictate to the banks how they should spend the billions of dollars in new government money.

And for all of its boldness, the plan largely repeats the Bush administration’s approach of deferring to many of the same companies and executives who had peddled risky loans and investments at the heart of the crisis and failed to foresee many of the problems plaguing the markets.

Even the NY Times can see what's going on here. Folks on Wall Street aren't convinced in the least that this will work either.
The new financial rescue plan may not work and could even make things worse because it plunges the US further into debt and it is designed by the same people who failed to forecast the crisis and take measures, legendary investor Jim Rogers told CNBC Tuesday.

Treasury Secretary Timothy Geithner will unveil a long-awaited package of measures to help the financial sector at 11 am New York time.

But Rogers said Geithner, who was president of the New York Federal Reserve Bank, "has been dead wrong about everything for 15 years in a row," and so was President Barack Obama's economic advisor Lawrence Summers, who acted as Treasury Secretary at the turn of the century.

"It is mind-boggling to me," Rogers told "Squawk Box Europe."

"If I were on your show 15 weeks in a row and was wrong, you'd probably never invite me back. These guys have been wrong year after year after year consistently and here they are making the same mistakes again. This is not going to solve the problem, it's going to make it worse."

And therein lies the problem. Geithner is part of the problem with the banks, not the solution.

It's pretty much doomed to fail before it even starts. Obama will be back with TARP III in a few months, surely. Geithner will again ask for patience and once again fail to make any meaningful changes, nor will he do what is needed to be done: nationalizing the insolvent banking system now.

Eventually we will be nationalizing the banks. This plan will not save them. Even the scope of the plan doesn't begin to address the $3 trillion plus the banks will have to write down still in lost toxic debt. The circumstances under which it will happen will be far less pleasant when we're forced to to do than if we did it in an orderly fashion now.

Of course that would entail a tacit and overt admission that America's banks are functionally insolvent, which cannot happen as long as the people involved in getting us to this situation continue to be the people trying to "correct" the problem...people like Tim Geithner.

The O-Bush Administration

The Obama administration's shockingly wrong opinion in a case of five men subjected to extraordinary rendition is shockingly wrong for a number of reasons, but mainly because it is literally and verbatim the exact same utterly indefensible legal position the former Bush administration took on the practice, which amounts to a hideous abuse of the "state secrets" privilege: "We're not going to tell you what we did to these men becase we say we don't have to."
The case involves five men who claim to have been victims of extraordinary rendition -- including current Guantanamo detainee Binyam Mohamed, another plaintiff in jail in Egypt, one in jail in Morocco, and two now free. They sued a San Jose Boeing subsidiary, Jeppesen Dataplan, accusing the flight-planning company of aiding the CIA in flying them to other countries and secret CIA camps where they were tortured.

A year ago the case was thrown out on the basis of national security, but today the Ninth U.S. Circuit Court of Appeals heard the appeal, brought by the ACLU.

A source inside of the Ninth U.S. District Court tells ABC News that a representative of the Justice Department stood up to say that its position hasn't changed, that new administration stands behind arguments that previous administration made, with no ambiguity at all. The DOJ lawyer said the entire subject matter remains a state secret.

Needless to say, The Double G takes the Obama administration to task over the case.
What makes this particularly appalling and inexcusable is that Senate Democrats had long vehemently opposed the use of the "state secrets" privilege in exactly the way that the Bush administration used it in this case, even sponsoring legislation to limits its use and scope. Yet here is Obama, the very first chance he gets, invoking exactly this doctrine in its most expansive and abusive form to prevent torture victims even from having their day in court, on the ground that national security will be jeopardized if courts examine the Bush administration's rendition and torture programs -- even though (a) the rendition and torture programs have been written about extensively in the public record; (b) numerous other countries have investigated exactly these allegations; and (c) other countries have provided judicial forums in which these same victims could obtain relief. As Wizner said:

For one thing, the idea you alluded to, the facts of this story are absolutely well-known, have been the front pages of the New York Times and Washington Post, are in books, and all of these stories are based on CIA and other government sources, that essentially said, well, in this case we got the wrong guy. So the position of the Bush administration, accepted by conservative judges in that case, really the only place in the world where Khalid El-Masri's case could not be discussed was in a federal courtroom. Everywhere else it could be discussed without harm to the nation, but in a federal court before a federal judge there, all kinds of terrible things could happen.

Despite that, the new President -- who repeatedly condemned the extreme secrecy of the Bush administration and vowed greater transparency -- has now acted to protect, purely on secrecy grounds, the government and company that did this...
I would have thought that a government that ran on the principle of Aperture Science's mission statement -- "We do what we must because we can!" -- would have been abandoned by Obama at this point.

But it's painfully clear that the height of intellectual laziness is politics: borrowing verbatim a truly shitty "neener-neener" playground argument for the basis of justice in government makes Obama in this case far, far worse than Bush ever was as President. Obama is a trained Constitutional Law scholar, Harvard Law Review editor, and university professor. He knows exactly what he's saying to the world from a legal standpoint when he verbatim adopts a Bush position on something like this.

He's saying he doesn't give a shit, and that Bush is legally correct, because it's easier than coming up with another solution to the problem. He doesn't have time. He doesn't have the inclination to fix this issue. He knows exactly why this case is a state secret and refuses to discuss it, and yet the case has been freely discussed across the media spectrum, as Greenwald's article points out, discussed openly everywhere but a Federal court. BooMan agrees with Greenwald, saying he's covering up for not Bush/Cheney (and Obama has no intention of going after them at all) but instead he is covering for the intelligence community he needs to maintain.

I personally think they're both wrong on that account. After all, the allegations leveled against the government in this case are nothing short of horrific:
The court papers describe horrific treatment in secret prisons. Mr. Mohamed claimed, for example, that during his detention in Morocco, “he was routinely beaten, suffering broken bones and, on occasion, loss of consciousness. His clothes were cut off with a scalpel and the same scalpel was then used to make incisions on his body, including his penis. A hot stinging liquid was then poured into open wounds on his penis where he had been cut. He was frequently threatened with rape, electrocution, and death.”
We did this. Obama wants no part of it because he knows as President now just how deep this rabbit hole goes. It would implicate not just Bush/Cheney and the intelligence community of the CIA, but also the Democrats on the various House and Senate commitees who signed off on these practices and failed to tell the American people about how Bush broke the law.

Obama is covering up for DiFi, Jello Jay, and the rest of the Democrats who are accessories to Bush's criminal acts. He can't reveal the truth without destroying his own government and his own party. Robert Ludlum couldn't have written a better political thriller ending.

So Obama will take this case to his grave just like Bush. And with it, any real credibility that he had as an agent of change. He has chosen official Washington politics over justice and reason. Some of you will say "But he has no choice."

Which is, if you'll excuse the language, complete bullshit. You always have a choice. Some choices are just far more difficult roads to take, requiring more courage and fortitude than politicians have.

Along with Tim Geithner's craptastic bank bailout plan announced today as the first major screw-up, this legal position represents Strike Two of the Obama administration's progress. Obama hasn't failed yet, he's still infinitely preferable to a McCain administration, which would be up to Strike Twelve by now.

But it's still very hard to swallow and tough to deal with.


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