Monday, March 9, 2009

The GOP Plan, Con't

The Plan is not to save the country. The Plan is to bring down the Democrats. And we have confirmation of that by none other than my favorite GOP person ever, The Odious Patrick McHenry.
McHenry’s description is buried in this new article from National Journal (sub. only):

“We will lose on legislation. But we will win the message war every day, and every week, until November 2010,” said Rep. Patrick McHenry, R-N.C., an outspoken conservative who has participated on the GOP message teams. “Our goal is to bring down approval numbers for [Speaker Nancy] Pelosi and for House Democrats. That will take repetition. This is a marathon, not a sprint.”

McHenry’s spokesperson, Brock McCleary, tells me his boss is standing by the quote.

So yes, the Republican Party has no intention of working with the administration in order to solve any of the problems we all face together as Americans. The Odious Patrick McHenry would in fact rather attack the Democrats over and over and over and over and over again until the next mid-term election.

That's his idea of representing NC District 10. Not solving the double-digit unemployment problem in Catawba, Lincoln, Gaston, and surrounding counties in the greater Hickory area (where Zandarparents live and work and where I grew up). No, his goal is attacking Nancy Pelosi's approval ratings while the furniture plants and cable mills lay off more and more people.

My god, there has to be somebody who can run against this idiot.

Defending Timmy The Invisible Boy

Over at The New Yorker, James Surowiecki defends Timmy.
Secretary of the Treasury Tim Geithner’s job is not getting any easier. Geithner has yet to have any of his seventeen deputies confirmed, and yesterday two expected nominees for Treasury positions withdrew themselves from consideration. The withdrawals seem to have been in part because of frustration with the elaborate vetting process that the Obama Administration has put in place, as well as concern over anticipated attacks from Congressional Republicans. But I have to wonder also whether the withdrawals, and the difficulty Obama is having filling these jobs, aren’t also the result of the endless and vituperative stream of attacks on Treasury in general and Geithner in particular, attacks that are coming from both the left and the right.
Point there. The GOP is indeed trying to sabotage Timmy as much as they can so they can say Obama failed. Part of that is refusing to allow any deputies to be nominated at a time where Timmy is sailing the ship by himself. Would you want to work for Geithner right now?

On the other hand, the rest of Jim's thesis is pure bullshit:
Geithner has been Treasury Secretary for little more than a month, yet the calls for his resignation are already coming fast and furious. More important, the attacks on him don’t, for the most part, take the form of reasoned disagreement. Instead, they assume, and assert, that if, say, Geithner is against nationalizing the banks, he is either stupid or corrupt, when it seems more likely that he’s just reached a different conclusion about the risks and rewards of nationalization. (Henry Blodget’s call, today, for Geithner’s resignation ultimately boils down to saying that Geithner should go because he doesn’t agree with Blodget about the virtues of nationalization.) Treating disagreements over policy issues as prima facie evidence of evil intentions, or as a reason for firing, creates an environment for policymaking that’s toxic, and makes it harder to get good people to work in the public sector. And at a time when we need government more than ever, that’s just not a good thing.
The reasons I'm calling for Timmy to go away is that we don't know what his conclusions about anything are. He keeps trying the same exact plan over and over again, which is attempt to magically remove all the bad debt from banks without sticking the taxpayer with it, and somehow allowing the banks and stockholders to keep all the good assets for themselves, and he can't do it. The reason he can't do it is because he's trying to do something impossible and he keeps wasting America's time trying to come up with new and exciting ways to give the banks all their money and fuck the taxpayer over, and he's hoping nobody will notice.

People then actually notice that whatever plan he pops out every couple of weeks looks suspiciously like allowing the banks to keep all their assets and the taxpayer getting stuck with mountains of toxic debt. Then they call him out on it. Then he says "We're working on it" and floats a new trial balloon that then manages to once again look suspiciously like allowing the banks to keep all their assets and the taxpayer getting stuck with mountains of toxic debt.

It's ludicrous. It's like a teenager coming up with plan after plan to convince Dad to let him borrow the Audi A8 to go to Vegas. It's not going to happen, but the teenager plugs along anyway, operating on the theory that if he just hits the right balance, he can get Dad to totally go along with it.

We don't have time for this bullshit. If Geithner can't come up with a better plan, then replace him with somebody who can. And the person who needs to ultimately make that call is Barack Obama.

Otherwise, yeah, it really will be the Obama Depression. Dig?

The Costs On Plan N

Matt Yglesias theorizes the reason why Obama and Timmy The Invisible Boy haven't pulled the trigger on Plan N yet is because they know it'll cost trillions of dollars, and Congress isn't about to give that to them.
Nationalizing banks would mean nationalizing the banks’ losses. That would cost a ton of money. Money that congress would need to authorize. If I were a member of congress, I would gladly vote to appropriate the funds. But would the actual members of congress? You can see where doubts might creep in. Indeed, where I giving the president advice on legislative matters I would say, at a minimum, that if it’s at all possible it would be better to just keep delaying on the bank issue until the 2009 appropriations bill and the 2010 budget have both passed, lest the price tag of the banking fix drag the rest of the administration’s agenda down with it.
Which is a good point. The problem is the "keep delaying on the bank issue" part, which is rapidly becoming a non-viable option. At some point the clock becomes the enemy in this game (and increasingly becomes the friend of the GOP). Obama's got one last real shot at this before Congress tells him no more money, and he has to make it count. I appreciate the situation. But if he doesn't act soon, he'll no longer have the luxury of choice.

Oh Yeah, And On Top Of All This

Scientists are growing increasingly worried that carbon reduction efforts will have at best a "50/50 chance" of keeping global temperatures under the point of no return.(h/t BooMan Tribune)
The chilling forecast from the supercomputer climate model of the Met Office's Hadley Centre for Climate Prediction and Research will provide a sobering wake-up call for governments around the world, who will begin formally negotiating three weeks today the new international treaty on tackling global warming, which is due to be signed in Copenhagen in December.

The treaty, which is due to replace the 1997 Kyoto Protocol, is widely seen as the Last Chance Saloon for the community of nations to take effective action against the greatest threat the world has ever faced. But the Met Office's new prediction hits directly at the principle guiding all those hoping for an effective agreement, with the European Union in the lead: that of stopping the warming at two degrees Centigrade above the "pre-industrial" level (the level of average world temperature pertaining two hundred years ago).

Today, world average temperatures stand at about 0.75C above the pre-industrial, and many scientists and politicians agree that further increases have to be stopped at 2C if catastrophic impacts from the warming are to be avoided, ranging from widespread agricultural failure and worldwide sea level rise, to countless species extinctions and irreversible melting of the world's great ice sheets.

But the Hadley Centre's simulation indicates that even if global emissions of carbon dioxide, the main greenhouse gas causing the warming, were to be slashed at a very high rate the chances of holding the rise at the C threshold are no better than even. The scenario, prepared for Britain's Climate Change Committee, the body recommending the UK's future carbon "budgets", visualises world CO2 emissions peaking in 2015, and then falling at a top rate of 3 per cent a year, to reach emissions of 50 per cent below 1990 levels by 2050.

At the moment, global emissions are thought to be rising at nearly 3 per cent a year – so turning that into a 3 per cent annual cut would be a gigantic slashing of what the earth's factories and motor vehicles are pumping into the atmosphere. There is as yet nothing remotely like that on the table for potential agreement in Copenhagen, and if a deal of this ambition were to be done, it would be regarded as a triumph.

Yet even with that, the Hadley Centre research suggests, the chances of keeping the rise down to about 2C by 2100 would be only 50-50. Furthermore, the simulations suggest that there is a worst-case scenario – about a 10 per cent chance – of the rise by the end of the current century reaching, even with these drastic cuts, a level of 2.8C above the pre-industrial, which is well into disaster territory.

There's a cheery thought, eh? As Steven D points out, banks don't matter if they're underwater.


The Next Tsunami

I've been talking about the coming commercial real estate disaster for some time now. It's no longer "coming" but very much here now.(emphasis me)
Cleveland and Detroit lead the U.S. in commercial mortgage delinquencies, a sign the housing crisis that brought down Wall Street is spreading beyond the residential market.

Office, retail, apartment and industrial properties with mortgage payments 60 days late or more rose to 3.93 percent as of March in the Cleveland area and to 3.75 percent in the Detroit area, according to data compiled by Bloomberg. The North American commercial property delinquency rate is 1.1 percent, according to Standard & Poor’s.

“There is really no part of the country being spared,” said Robert Bach, chief economist at Santa Ana, California-based broker Grubb & Ellis Co.Cleveland and Detroit are just the first to feel the stress. They’re the canaries in the coal mine.”

The second year of the U.S. recession is reducing demand for commercial real estate after prices hit a record in 2007. The slump in housing and rising unemployment will probably take a toll on retail and office landlords, Bach said.

Loans secured by properties that were written assuming rental growth have been unable to meet targets, leading to increased defaults. The delinquency rate for North American commercial real estate loans in mortgage backed securities may triple in 2009 as loans default, Standard & Poor’s credit analyst Eric Thompson said in a Feb. 17 statement.

Circuit City left behind 18 million square feet of empty retail space when it closed its doors for good yesterday, not to mention another 34,000 jobs lost. That will be repeated in empty malls, vacant strip storefronts, unused offices and hotels across the country at the retail-driven consumer economy grinds to a halt.

Space for rent signs will be popping up like weeds as the commercial real estate crashes and stores fold. Entire malls will go under as enough shops close to make the rest of the mall unprofitable as empty space goes unused. Millions of jobs will be lost as the retail sector disintegrates, causing more stores to close, etc.

In other words, the next stage of the recession/depression is upon us now. 10% U-3 and 20% U-6 by the end of the year are very, very conservative estimates.

A Graduate Course In Extortion

AIG is conducting a graduate course in extortion, costing you, me, and the government billions of dollars. If AIG is allowed to collapse, it could lead to global systemic meltdown of the world's financial systems, and they know it.
AIG warned of turmoil around the globe if the government allowed the insurer to fail, adding “it is questionable whether the economy could tolerate another shock to the system that a failure of AIG would produce.” The value of the U.S. dollar might fall, Treasury borrowing costs could rise and the agency would face “doubts about the ability of the U.S. to support its banking system,” according to the presentation, parts of which were reported earlier by the New York Times.

Under the scenarios sketched by AIG, European banks that bought credit-default swaps might need to raise $10 billion in capital and could face rating downgrades. Life insurance customers, their faith shaken in the industry, would redeem some of their $19 trillion in U.S. policies, overwhelming firms already weakened by the credit crisis, AIG said.

The $38 billion in support provided by the firm to money- market funds would be in jeopardy, AIG said, possibly forcing some to “break the buck.’’ The term refers to a money fund that suffers losses so large that it must pay investors less than the traditional $1-a-share value that gives the short-term funds their reputation for safety.

It would be the collapse of Lehman, only much, much worse. The longer Obama refuses to pull the plug however, the worse the results will be when AIG finally gives out under its own weight of debt. Eventually, Congress will revoke Obama's credit limit for bailing out AIG, and when that happens...
Outside the U.S., where AIG operates in more than 140 countries, a collapse could lead to the “immediate seizure’’ of its businesses by regulators and could impair “the entire insurance industry within certain regions,’’ the presentation said, which added that its conclusions were “speculative’’ and a matter of judgment.

“Who knows if what they’re saying is true?’’ said Phillip Phan, professor of management at the Johns Hopkins Carey Business School in Baltimore. “A lot of it sounds like conjecture, that if AIG collapses the rest of the industry will, too. It’s a way of creating a crisis atmosphere and the sense you have to respond quickly.’’

Ahh, but investigating if AIG's collapse would indeed cause a global meltdown would reveal to the world that the global financial system itself is already insolvent. But Obama is running out of plays to call. In fact he's down to three, Muddle Along, Plan N, and Let 'Em Fail. Muddle Along is rapidly approaching the point where it's no longer a going concern. Congress will start demanding one of the two other actions. That leaves Plan N and Let 'Em Fail.

Democrats want Plan N. As we saw this weekend, the GOP wants Let Em' Fail. Now, remember the GOP plan: Destroy Obama, regain power. If Obama indeed lets AIG go under, and it nukes the financial system, they win. Of course they want the big banks to fail. They know doing so will take Obama with them.

So that really leaves Plan N, which the Republicans will now fight with every breath in order to either play out the clock with obstructionism so that something fails anyway, or force a failure by populist dint.

While AIG is certainly showing the government a graduate level course in extortion, the GOP is running a post-doctorate thesis in the long con, one where Obama gets pinned with the collapse of the banking system that they created themselves and Obama then inherited from Bush.

Thus, Obama has to risk the rest of his political capital on Plan N almost immediately. If he doesn't make the bold play, the GOP will eventually cut him off at the knees and the whole system will go under. Shelby doesn't want the banks to fail. He wants Obama to fail. The GOP is counting on an ignorant, angry populace to call for these taxpayer supported zombie banks to be put down the hard way, which would of course collapse it all and become Obama's Depression overnight.

Of course, the whole system might go under anyway. But Plan N is Obama's best (and only viable) option...and that goes for the rest of the world as well.


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