And Now, Playing Center...

Via BooMan, all the news on Obama's expected unveiling of his National Security Team(tm) tomorrow, including SecState Clinton.

The national security team roll-out is coming tomorrow, and the reporting has not changed.

CHICAGO – President-elect Barack Obama will roll out his national security team at a news conference here on Monday morning, including his former primary rival, Senator Hillary Rodham Clinton, as his secretary of state, Democrats close to the process said. Mrs. Clinton is flying to Chicago to appear beside the man who beat her for the Democratic nomination, a person close to Clinton said. Friends previously said she was prepared to join his cabinet in hopes of having more impact than she would in the Senate, but the person close to her said the decision is now official. In addition to Mrs. Clinton, Democrats said, Mr. Obama plans to announce that he is keeping Defense Secretary Robert M. Gates, who has run the Pentagon for the last two years under President Bush. And they said Mr. Obama will appoint Gen. James L. Jones, a retired Marine commandant and NATO supreme commander, as his national security adviser.

Rounding out his national security team, Mr. Obama will also name former Deputy Attorney General Eric H. Holder Jr. as his choice for attorney general and Governor Janet Napolitano of Arizona as secretary of homeland security, the Democrats said. Mr. Obama may also announce former Assistant Secretary of State Susan E. Rice as ambassador to the United Nations, a job that will be given cabinet rank in his cabinet, as it had under President Bill Clinton.

Bolstering the case that Clinton will be tapped for State, the New York Times and Washington Post are both reporting that Bill Clinton will release the names of over 200,000 donors to his library and foundation, paving the way for his wife's confirmation.

The former president has also agreed to allow the State Department and, potentially, the White House, to vet his personal business interests and speeches so as to avoid potential conflicts of interest, according to transition officials.

If the reporting is correct, one significant development is Susan Rice's appointment to be U.S. Ambassador to the United Nations and the restoration of that post to cabinet level. Rice and Holder would be the first African-Americans to hold their respective seats in a cabinet. Joining with the president-elect and Bill Richardson at the Commerce Department, they will present an image of diversity to the world.

The retention of Robert Gates is being well received at the Pentagon, and I have not seen one peep of criticism of Hillary Clinton from the right (there's a lesson in there, by the way). Obama appears to be avoiding the problems that beset Bill Clinton at the beginning of his administration. He is not going to allow himself to get crossways of the military, which is something JFK never recovered from after the Bay of Pigs.

The arguments given for Clinton and Gates et al. are that they work at the pleasure of the President, and if they don't enforce Obama's policies, they will be replaced with someone who will. Obama himself has made this argument last week when he said that the policy is coming from the top..."Me."

The argument against is where BooMan continues:

At this point, I am more interested in the who will be staffing the deputy and undersecretary positions at Defense and State. You may recall that most policy meetings are coordinated at the Deputies level. When the Bush administration kicked Richard Clarke out of the cabinet they also kicked him out of the principals meetings, and Clarke found it very difficult to get his Al-Qaeda warnings heard at the highest levels of government. But the Deputies Meetings are still where most of the choices are formulated for presentation to the principals, and it is therefore very important to have good, solid progressives in the deputy positions.

In other words, if Clinton and Gates staff these important positions with neo-con hawks, the advice Clinton and Gates are going to get are that of neo-con hawk positions, and that's what they will in turn feed to Obama. If everyone is telling you the same thing, you tend to trust and believe your cabinet...you have to.

Twenty plus years of neo-con ossification hardened the lines at State and Defense. The appointments of Clinton and the retention of Gates aren't real conducive to breaking up that hardened, hard-liner position that got us into Iraq.

Gates I expect to keep all his deputies. It's Clinton I'm far more worried about. If even the diplomats are saying "war war is better than jaw jaw" then we could be in for a mess. The lack of progressive voices in the name of political expediency could turn into a nightmare...on top of the nightmares we're already facing in this country.

Hole-Digging In Opposite Land

The far right Investor's Business Daily still refuses to give up their pipe dream on what caused the financial crisis: Bill Clinton, poor black people, and too much regulation.

The Community Reinvestment Act is to blame for the financial crisis, but it so powerfully serves Democrats' interests that they'll do anything to protect it — including revising history.

The CRA coerces banks into making loans based on political correctness, and little else, to people who can't afford them. Enforced like never before by the Clinton administration, the regulation destroyed credit standards across the mortgage industry, created the subprime market, and caused the housing bubble that has now burst and left us with the worst housing and banking crises since the Great Depression.

The CRA should be abolished, along with the government-sponsored enterprises that fueled the secondary market for subprimes — under pressure from Clinton, who ordered HUD to set quotas for "affirmative action" lending at Fannie Mae and Freddie Mac.

But powerful Democrats in Washington want to protect the act — along with Fannie and Freddie — and spin the subprime scandal as the result of too little regulation, not too much.

"Repealing or weakening the CRA would be a mistake," warns Senate Banking Committee Chairman Chris Dodd, D-Conn., who argues that the CRA should be strengthened.

Dodd, the top recipient of Fannie donations and himself a beneficiary of a sweetheart mortgage brokered by a subprime lender, recently invited one of Clinton's top enforcers of the CRA to testify.

"The notion that CRA has caused this problem is a pernicious thought," said former Comptroller of the Currency Gene Ludwig. "These are not truthful statements. The CRA has helped to create a better and sounder world for finance, not the opposite."

Dead wrong. But the mainstream media believe it, and have attacked those, including this paper, who dare to tell the truth about the crisis. Already the debacle has erased $13 trillion in wealth, while putting taxpayers on the hook for up to $8 trillion in bailouts.

It's amusing then that a rule Clinton "viciously enforced" in 1994 caused housing prices to collapse in 2006...12 years later.

Dirt cheap credit after Alan Greenspan cut interest rates to one percent in 2004 and 2005, massive bank and investment house mergers after Gramm-Leach-Bliley was passed in 1999, a torrent of greed in the financial sector and a stock market forming an unsustainable bubble economy due to even fewer regulations in turning subprime loans into securities all of course had nothing to do with it. Banks became greedy and played the markets, riding a huge bubble elevator on the way up that had nowhere to go but down this year.

So much of the financial sector's assets are now tied up in "off-balance sheet investment vehicles" that the banks themselves are largely insolvent. They all played the game. They all lost. They are now all being bailed out.

But gosh, it sure is fun to blame Democrats, poor black folk, and the Community Reinvestment Act for the crisis, and to rewrite history and pretend banksters were all forced to make billions in bad loans to people they knew that were broke instead of admitting a huge pecentage of folks given loans under the CFA -- minorities -- were in fact in much better financial shape than the average subprime borrower.

The article finishes up with facts that supposedly damn Clinton and poor ass negroes as the cause of wiping out $20 trillion of American wealth, facts like "Nearly 4 in 10 subprime loans between 2004 and 2007 were made by CRA-covered banks such as Washington Mutual and IndyMac. And that doesn't include loans made by subprime lenders owned by banks, which were in effect covered by the CRA."

Of course that leaves out the fact that these large mortgage lenders were covered under CRA because they were large mortgage lenders in the first place and being large lenders they made lots of subprime loans in order to make money and then bundle the risk into securitized vehicles, putting them off the balance sheets.

It's pretty idiotic, and any serious person rejects the argument that the CRA forced the banks into making loans they couldn't pay...including the lenders themselves.

But IBD plunges on into the darkness, admitting that even though Countrywide, the largest single subprime lender in America, was not covered under the CRA, it still "came under great pressure to loan to minorities".

No, it came under the pressure of its own greed.

And let's not forget banks like Citigroup that didn't make subprime loans at all, but still collapsed under the weight of their own bad investments they made by choice and had to be rescued with our money.

But IBD and their wingnut buddies keep digging that hole and keep screaming into the abyss that those damn Democrats forced the good Christian Republican God-Fearing white banks of America to loan to the damn negroes who wrecked our country by being too poor to pay the banks trying to fleece them.

There's a lot of blame to go around, but this is like blaming purse-snatchers and bad cooks who start grease fires in New York City for being numerous enough to require all those cops and firefighters to be around when they got the call on September 11, 2001, and then saying the bad cooks and purse-snatchers are the ones who really killed these brave heroes.

Does anyone actually believe the CRA caused $20 trillion in damage to the economy, and not greed, deregulation, and easy credit bubbles?

Salting The Earth

In the Third Punic War between the Romans and Carthage more than 2,000 years ago, the Romans sacked Carthage and poured salt onto the fields surrounding the city in a 50 mile radius, rendering the fields useless for crops for years.

The Romans didn't just defeat the Carthaginians, they completely ruined them on the way out the door. Carthage never recovered as a threat to the Romans or anyone else for that matter after that.

Which brings me to Bush and his executive order salting of the earth.

Bush administration aides are rushing to pass a safety rule which would make government regulation of workers' exposure to toxic chemicals more difficult; a rule President-elect Barack Obama opposes.

Public health officials worry the decreased protections will result in additional, unnecessary deaths.

It is just one of about 20 controversial Labor Department proposals being pushed by large business interests, according to a published report.

Other proposals would allow power plants to be built closer to parks and wildlife preserves, and further limit the role of environmental and animal experts in determining where major infrastructure projects may be carried out.

Obama will do what he can, but Bush is going out as nasty and as corrupt as he came into office.

Epic Bush Legacy Fail

Preznitman on his legacy:

George W. Bush hopes history will see him as a president who liberated millions of Iraqis and Afghans, who worked towards peace and who never sold his soul for political ends.

"I'd like to be a president (known) as somebody who liberated 50 million people and helped achieve peace," Bush said in excerpts of a recent interview released by the White House Friday.

"I would like to be a person remembered as a person who, first and foremost, did not sell his soul in order to accommodate the political process. I came to Washington with a set of values, and I'm leaving with the same set of values."

No George. You will not be remembered like this. There are hundreds of millions if not billions of people worldwide who disagree with you there and will make sure that is not the case. I'm one of them.

EPIC FAIL.

StupidiNews, Weekend Edition

• Another violent day in Mumbai continues as Indian commandos sweep hotels and docks looking for terrorists.
• Police search for those who trampled a Wal-Mart employee to death on Black Friday.
• Free Venezuelan heating oil for rural Alaskan villages comes with a steep political price.
• A new study shows US poverty is spreading to the middle-class suburbs.
• The Apple iPhone and Amazon Kindle reader are stoking holiday e-book sales.

Allah-Nomics

I've got your financial crisis solution riiiiiiiiight heeeeeeeere.

Al-Qaida's No. 2 leader appeared in a new video posted Friday calling on Americans to embrace Islam to overcome the financial meltdown, which he said was a consequence of the Sept. 11 attacks and militant strikes in Iraq and Afghanistan.

Ayman al-Zawahri, whose 80-minute recording touched on a number of subjects, also lashed out at Afghanistan's government and said any U.S. gains in Iraq will be temporary.

Zawahri's new recording came in the form of a question-and-answer session with an off-camera interviewer.

Appearing in a white turban and robe, Zawahri discussed the roots of the U.S. economic crisis. He said it was a repercussion of the Sept. 11 attacks in the United States, and that the crisis would continue "as long as the foolish American policy of wading in Muslim blood continues."

"The American economy was afflicted by a downturn and loss of investor confidence in the market following the events of Sept. 11," he said.

"The modern economy has been destroyed by the strikes of the mujahedeen (in Iraq and Afghanistan) and usury," he said, using the Arabic term for holy warriors.

Under Islamic Sharia law, usury, like drinking alcohol, is among the grand sins.

Zawahri then called on the American people to "embrace Islam to live a life free of greed, exploitation and forbidden wealth."

It's really depressing when the crazies on the other side sound better enough than our crazies to actually start making a smidge of sense.

What The Wingnuts Are Whining About Now

...Obama's inauguration is too expensive in today's economic climate, and inappropriate with two wars going on. Shame on him or something!

Granted, the same arguments were leveled at Bush by the Left. The difference is that Obama is trying to end the wars and improve the economic conditions, unlike Bush. And if 4 million American citizens actually want to be involved with the inauguration of their leader, well we can't have that, it's too expensive.

The problem with the right is if the government activity in question benefits ordinary Americans in any way, it's inefficient and too expensive. If it benefits huge corporations, it's vital to our economy no matter what the cost.

Dear America:

"If Obama tries any of this Socialist eco-friendly 'greater good' garbage on Wall Street, why he'll destroy the economy or something!"

--Charles Krauthammer

StupidiNews!

• A third day of chaos rocks Mumbai as a Jewish center is attacked.
• Cuba's Raul Castro says he'd meet with Obama at Gitmo.
• Eurozone unemployment has hit 7.7% and rising.
• Bodyguards for Venezuala's Hugo Chavez and Russia's Dmitri Medvedev got into a scuffle.
• The cyberspace black market is booming despite the economic downturn.

Obama's Holiday Message

Have a good evening, folks. I'll be back with you tomorrow.

Cartoon Of The Moment

Gobble gobble gobble!

The Kroog Weighs In

Paul Krugman and his Nobel Prize in economics weighs in on Obama's economic team, via Greg Sargent and TPM:

Paul Krugman -- a leading voice of worry during the Dem primary that Obama would eschew confrontation for mushy post-partisanship -- has an interesting new post that to some degree clears Obama of the charge that his economic appointments herald an inevitably centrist administration:

A thought I've had: there have been some complaints from movement progressives about the centrism/orthodoxy of Obama's economics appointments. To some extent this was unavoidable, I think: someone like the Treasury secretary has to be an experienced hand who can deal with Wall Street, and I haven't heard anyone proposing particular individuals with clearer progressive credentials to hold that position.

For the leading progressive economic voice to be saying this is obviously good for Obama. But Krugman also has a challenge for the President-elect, pointing out that the new economics advisory board unveiled today offers him "a very good place to give progressive economists a voice."

"Let's see whether progressives do in fact get a seat at this particular table," Krugman says.

Indeed. Obama did say today at his presser that "labor" would be given a seat at this table. Here's the perfect opportunity for Obama to allay the concerns -- founded or not -- that some liberals have been giving voice to.

I'm going to have to agree with the both of them. Actions speak louder than words, and so far Obama's actions are pragmatic to the point of overcautiousness. If Paul Volker's council of advisers is the group giving Obama the real advice on getting us out of the hole we're in, the voices in that council must be unabashedly liberal, and in the classical sense of the word.

A generation and a half of conservative economic theory has been proven a disaster in 2008. Overcautious, incremental change is not going to cut it. Here's hoping.

Why Zandar Is Thankful

I am thankful for a lot of things this year, my continued employment, my family, the four people who read my blog.



Most of all, I am really, really thankful this woman is not Vice President of the United States of America.

(Bon, dunnae click on that.)

Ham sounds good this year, come to think of it...

What are YOU thankful for this year?

StupidiNews, Turkey Day Edition

• A second day of terrorist attacks in Mumbai is wrecking the holiday for some.
• Amazon.com plans to unload some low, low prices this year for Black Friday.
• The Iraqi parliament has set the table for the US troop withdrawal in 2011.
• Americans are making the best of a turkey of an economy today.
• Could there be pardons on the way for Bush's cabinet turkeys?

Have a safe and happy holiday weekend.

In Which Bill Greider Talks Me Back Up

While BooMan does have an excellent point that Obama has things under control for now with a pragmatic, thoughtful, and careful approach with the goal of paving the way for long-term change, The Nation's Bill Grieder argues that the time for caution is long past and that only radical and immediate change will save the country, especially on the economy.

This is not the last word and things are changing rapidly. But Obama's choices have begun to define him. His victory, it appears, was a triumph for the cautious center-right politics that has described the Democratic party for several decades. Those of us who expected more were duped, not so much by Obama but by our own wishful thinking.

Let us stipulate that these are all honorable people, smart and experienced veterans of Washington combat. But they represent the Democratic party that mainly sees itself as managerial--making government work better. The long era of conservative dominance has taught them to keep their distance from big reform ideas that promise fundamental change of the system. Their operating style is incremental and cautiously practical. They conscientiously avoid (or actively block) propositions that sound too liberal or radical. Alas, Obama is coming to power at a critical moment when incrementalism is irrelevant. The system is in collapse. Financial chaos won't wait for patient deliberations.

Events have confronted Obama with a fearful symmetry between past and present, illustrated by his choice of economic advisers. On Friday, we learned that Timothy Geithner, president of the New York Federal Reserve, would become his new treasury secretary and Larry Summers, who held the same position in the Clinton administration, would be the White House overseer of economic policy. On Monday, Geithner was busy executing the government's massive rescue of Citicorp--the very banking behemoth that Geithner and Summers helped to create back in the Clinton years, along with Federal Reserve chairman Alan Greenspan and Robert Rubin, Clinton's economics guru. Now Rubin is himself a Citicorp executive and his bank is now being saved by his old protégé (Geithner) with the taxpayers' money.

The connections go way beyond irony. They raise very serious questions about where the new president intends to lead and whether he has the nerve to break from the weak and haphazard strategy of the Bush administration. It has dumped piles of public money on the largest financial institutions and demanded little or nothing in return, hoping for the best. Geithner has been a central player in the deal-making, from Bear Stearns to AIG to Citi. The strategy has not only failed, it has arguably made things worse as savvy market players saw through the contradictions and rushed out to dump more bank stocks.

One of these two strategies is going to go by the wayside very quickly unless Obama can manage the impossible: radical, fundamental and complete transformation of our economic system while at the same time maintaining a broad enough coalition of GOP moderates and Blue Dog Democrats to ram through the changes.

And yet the impossible is exactly what Obama will have to achieve, and quickly. Anything less than a total paradigm shift of America's economy will result in the current long-term global recession becoming a disastrous global depression.

It's a daunting prospect to say the least. I don't have the solution to the problem, either. I know where we should start, but it's where we end up that is the important part.

Still...Obama is all we have right now.

In Which BooMan Talks Me Down

As downright pissed as I am about Obama's cabinet selections, the always dependable BooMan offers up some of his usual trademark expert analysis on why I should relax and let Obama do his thing.

Which gets me back to Barack Obama. Obama has not called for an American retreat from the world stage or a radical upending of our foreign relations. He recognizes that our involvement in the Middle East creates problems and blowback, but his solution is cautious and designed to work over a period of time. After stabilizing the financial markets, his number one domestic policy is going to be a green-economy initiative to take some of the pressure off our dependency on Middle Eastern energy. That will give us a freer hand to take risks that might involve a period of regional instability. In the future we might feel secure enough to allow the Saudi regime, for example, to be swept away in a popular uprising. Right now, we'd be too concerned about disruptions in the oil supply to let that happen.

When it comes to Israel, listen to the advice that Scowcroft gave in his August 2002 opinion piece:

Possibly the most dire consequences would be the effect in the region. The shared view in the region is that Iraq is principally an obsession of the U.S. The obsession of the region, however, is the Israeli-Palestinian conflict. If we were seen to be turning our backs on that bitter conflict--which the region, rightly or wrongly, perceives to be clearly within our power to resolve--in order to go after Iraq, there would be an explosion of outrage against us. We would be seen as ignoring a key interest of the Muslim world in order to satisfy what is seen to be a narrow American interest.

That might sound like a progressive critique but it was anything but. The Realist School has long held, correctly, that the resolution of the Israeli-Palestinian conflict is the number one priority of American Middle Eastern policy. It's one reason why George Herbert Walker Bush's administration was so distrusted by many Israeli hard-liners.

So, what is Obama doing? By taking advice from Scowcroft, leaving Robert Gates (for now) in charge of the Pentagon, and by bringing in other Realists on to his team, he is co-opting the centrist Republicans. The Ranking Member of the Senate Foreign Relations committee, Richard Lugar, and likeminded thinkers like Chuck Hagel, are now de facto members of the Obama coalition. They are inside the tent, pissing out. This dulls McCarthyite criticisms from the neo-conservatives and from the Israeli hard-liners as it gives the appearance (and much of the reality) of a bipartisan foreign policy consensus. But Obama did not stop there. He has disarmed the Israeli hard-liners by giving them a seat at the table, as well. Nowhere is this clearer than in his selection of vice-president and chief of staff. If he goes through with the selection of Hillary Clinton as Secretary of State, he will further disarm the hard-liners.

Now, there is a legitimate progressive critique that Obama is staffing up with a toxic combination of people that were either wrong about the invasion of Iraq or that were right, but for the wrong reasons. After all, the Realist School might have been clear-eyed on the ill-advisability of invading Iraq, but they are myopic about their own culpability in creating the problems we face in the Middle East and elsewhere in the world. What is needed is much more far-reaching change. That's true. But that change must be managed carefully, and it will come much easier if it is done with a broad coalition of support.

Barack Obama would be well-advised to find some idealistic progressives for his foreign policy team. He needs to hear their voices even if he doesn't take their advice. His strategy so far is finely honed to getting things done in the Washington/Establishment framework, but he needs allies as well as advice that runs counter to Establishment thinking. We need radical change, but we need to do it in a pragmatic way.

And as usual, he's dead right. Compared to the last eight years of incompetent, moronic, belligerent insanity that we're used to, a well-thought out and pragmatic approach to actual problem-solving in the Middle East is exactly what we need.

And Obama is in fact going out of his way to get as many people on board as he can in order to defuse and disarm the knee-jerk, reactionary opposition to it. If he's successful, then it will assure lasting change.

I just pray BooMan's right.

The Volker Gambit

Obama's plan for getting us out of this mess involves putting Paul Volker in charge of the Presidential Economic Committee On Getting Us Out Of This Mess.

President-elect Barack Obama Wednesday named former Federal Reserve chairman Paul Volcker, 81, to lead a new economic recovery board.

"Paul has been by my side throughout this campaign, providing a deep understanding of financial markets, extensive experience managing economic crises, and keen insight into the global nature of this particular crisis," Obama told reporters, calling Volcker "one of the one of the world's foremost economic policy experts."

Obama said a key purpose of the board would be to provide a perspective from outside the walls of the Washington "echo chamber," which he said "can sometimes keep out fresh voices and new ways of thinking."

The announcement came during the president-elect's third news conference in three days on the economic situation.

Austan Goolsbee, a University of Chicago economist who has been one of Obama's top economic advisors, will serve as Staff Director and Chief Economist of the board.

Obama said he would name other members of the board "in the coming weeks." He is due to take office on January 20, 2009.

The board will brief Obama, offering independent, nonpartisan information, analysis and advice to the president as he formulates and implements his plans for economic recovery, Obama's transition office said.

It will be established initially for a two-year term, after which Obama will determine whether to continue its existence based on its continued necessity.

I suppose that qualifies as a ray of hope on the economy.

Maybe.

Zandar's Thought Of The Day

If neocon con man Max "Bomb Em All" Boot is "gobsmacked" with happiness over Obama's foreign, military, and economic policy picks, then there's something seriously f'ckin wrong with "change we can believe in."

I Can Guess Where More Bailout Cash Is Going

To the FDIC, of course.

The Federal Deposit Insurance Corp. said that the list of banks it considers to be in trouble shot up by 46 percent, to 171, during the third quarter.

Total assets held by troubled institutions climbed from $78.3 billion to $115.6 billion -- a figure that suggests that the nation's top 20 banks aren't on the list, even though they also are getting slammed by the ongoing credit crisis. The FDIC does not reveal the names of institutions it deems troubled.

On average, about 13 percent of institutions on the FDIC's list end up failing.

Nine banks failed during the third quarter, decreasing the FDIC's deposit insurance fund to $34.6 billion from $45.2 billion in the second quarter.

And of course these are far worse than average times.

It's that last paragraph that bothers me the most. Nine banks failed at a cost of $10 billion. More will fail this quarter, indeed some already have.

The $34.6 billion that's left in the FDIC won't make it through spring. Billions will be fed into it. Billions more will be paid out as more and more banks fail.

But it's okay, Bloomberg says Obama's a smart guy for putting some of the same folks responsible for this mess in charge of it.

After all, that philosophy worked so very well for Bush and America over the lest 8 years. It's not like Obama ran on "change" or anything.

StupidiNews!

• More US troop deaths in Iraq this week, bringing the total to 4,206.
• 6,400 uncounted absentee ballots in Minnesota could make the difference in the Senate recount there.
• Yesterday's announced plan to buy half a trillion worth of mortgages lowered 30-year rates across the board.
• After suffering deadly wildfires earlier this month, now California faces major mudslides.
• A Florida judge has overturned that state's 30-year ban on gay adoption.

Gates At The Barbarians

No surprise here, right before Thanksgiving, America gets another Obama turkey.

Several officials close to President-elect Barack Obama's transition tell CNN that Defense Secretary Robert Gates is expected to stay on the job for at least the first year of the new administration.

One source called it "all but a done deal" that the announcement could come as early as next week.

"It's now pointing in that direction," one of the sources close to the transition said of Gates being part of Obama's national security team, which may include Sen. Hillary Clinton as secretary of state.

"It's likely to happen," a second source close to the transition said of Gates staying on.

This source noted that Gates could stay for longer than a year if he and Obama end up working well together.

So let me get this straight:

The man who ran primarily on ending the Iraq War is now content in hiring the man who helped sell Bush's surge, there's nobody in Washington among all the generals and admirals and brilliant managers Obama knows that is qualified to run the Pentagon better than the incompetent guy in charge for the last two years, and we're now supposed to believe that magically, things will now improve in Iraq enough so that we can bog ourselves down in Afghanistan.

Oh, and we clearly can't afford either war right now. We gave that money to Citigroup, AIG, and Fannie and Freddie.

Raise your hand if you still believe we'll be out of Iraq before Obama first term ends. I've got a nice package of securitized subprime mortgages to sell you.

But I'm supposed to lay off the guy because he's not in office yet.

His SecDef is in office. Can I criticize him at least? Did Obama's campaign to end the war over the last two years mean a damn thing if he keeps Bush's Pentagon team?

Greg Sargent spells out what Obama's choice means.

It's also worth making a crucial distinction between two different ways of critiquing Obama's staff picks.

The first involves looking at the choices in order to extrapolate Obama's policy priorities -- a somewhat useless exercise, since we won't know what policy direction he's headed in until he proposes actual policies, no matter who he appoints. The second, and more valid, way of looking at his staff choices is to ask whether they're inherently good ideas, regardless of what they suggest about his possible policy priorities.

For instance, as Chris Bowers argues persuasively, keeping Defense Secretary Robert Gates is inherently a bad idea, because it keeps the same leadership in charge of half the Federal budget and, worse, sends the message that Republicans are needed to manage national security.

That mode of critique doesn't involve making any speculative extrapolations about Obama's future policy directions, and seems like a far more sensible way to look at his choices.

It also signals strongly that Obama's chief argument -- that the Bush Administration was filled with incompetent people that John McCain would keep on in full capacity-- is a moot point now.

Obama's foreign policy is now about to be run by the same woman who called his foreign policy "irresponsible and naive" 18 months ago, and he in turn called her" irresponsible and naive" for voting to authorize the Iraq War.

Obama's economic policy is being run by some of the same people who Obama argued got America into this "crisis of historic proportions" not more than a few weeks ago.

Now Obama's military policy is being run by the same folks who brought us the last two years in the Middle East.

Surprised? I'm not. Obama's been angling to keep Gates on since June.

And yes, this does constitute strike three for Obama. Your honeymoon is now over.

Count on it.

Dear America:

"Don't say I didn't warn you when Obama completes America's transformation into a Socialist nightmare of granola-spewing, Prius-driving, welfare-state protectionist bureaucracy and destroys our economy, which was doing perfectly fine until you crazy assholes voted him into office."

--Matthew Continetti, Weekly Standard

Wall Street Journal Stopped Clock Is Right Twice A Day Update

The WSJ asks the smartest question I've heard all week about the CitiBailout:

Why are Robert Rubin and other directors still employed?

More than a year into the financial crisis and decades into the perception that Citi is too big to fail, we once again have three tired guys making it up as they go. We wish Treasury Secretary Henry Paulson, New York Federal Reserve President Tim Geithner and Fed Chairman Ben Bernanke cared as much about their obligations to U.S. taxpayers as they do about the expectations of Asian investors. Few would argue that a bank with Citi's size and scope wasn't too big to fail, but is it too much to ask Washington to develop a policy that isn't crafted in a scramble of private phone calls?

To be fair, there are virtues here, when placed in the context of this year of bailouts. Unlike the initial AIG "rescue," this deal appears to be helping the intended beneficiary. In contrast to Bear Stearns, there is a more plausible case for systemic risk. What is missing is a statement that at least some American bankers still have the freedom to fail, an essential ingredient if we hope to restore functioning capital markets. Not a single one of Citigroup's senior managers and directors will be let go as a condition of taxpayer assistance that now totals close to $350 billion.

"Citi never sleeps," says the bank's advertising slogan. But its directors apparently do. While CEO Vikram Pandit can argue that many of Citi's problems were created before he arrived in 2007, most board members have no such excuse. Former Treasury Secretary Robert Rubin has served on the Citi board for a decade. For much of that time he was chairman of the executive committee, collecting tens of millions to massage the Beltway crowd, though apparently not for asking tough questions about risk management.

The writers at the Deal Journal blog remind us of one particularly egregious massaging, when Mr. Rubin tried to use political muscle to prop up Enron, a valued Citi client. Mr. Rubin asked a Treasury official to lean on credit-rating agencies to maintain a more positive rating than Enron deserved. What signal will President-elect Barack Obama send if his Administration, populated with Mr. Rubin's protégés, allows this uberfixer to continue flying hither and yon on the corporate jet while taxpayers foot the bill?

They have a valid point.

I'm still not convinced the new boss is any different from the corruption of the old boss. Obama's Economic Team(tm) has a lot of questions to answer.

The M Word

And Obama used it today. In public on the Teevee Box.

Mandate.

An interesting moment at Barack Obama's presser on the economy today: He declared in more direct terms than I've heard before that his "decisive" win has unquestionably given him a "mandate."

"We had, I think, a decisive win, because of the extraordinary desire for change on the part of the American people," he said in response to a reporter's question. "And so I don't think there is any question that we have a mandate to move the country in a new direction, and not continue the same old practices that have gotten us into the fix that we're in."

Of course Obama, being smart enough to know exactly what use of the M Word would then entail, promptly backtracks on it.

But Obama also tempered his claim to a mandate by acknowledging that he needs Republican help to succeed.

"I won 53 percent of the vote," he said. "That means 46 or 47 percent of the country voted for John McCain."

He added that he was entering the White House"with a sense of humility and a recognition that wisdom is not the monopoly of any one party. In order for us to be effective given the scope and the scale of the challenges we face, Republicans and Democrats are going to have to work together."

It's a start. No use rubbing it in the faces of the GOP he'll need in order to pass his legislation.

...I'm lying about that. Obama should really just tear into these assholes. Just once. Samuel L Jackson style.

Zandar's Thought Of The Day

If Nouriel Roubini can live with Obama's economic team, I guess I should stop being hard on Tim Geithner.

Maybe.

Hey Look, Another Bailout Program

The Treasury is tossing another $800 billion at the financial sector this morning. What's 12 figures between friends?

The U.S. Federal Reserve, in another massive life-support intervention for the U.S. financial system, Tuesday announced a $600 billion program to buy mortgage-related debt and securities and a $200 billion facility to buy consumer debt securities.

The U.S. central bank said it would buy up to $100 billion in debt issued by Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, the government-sponsored mortgage finance enterprises.

The Fed also said it would buy up to $500 billion in mortgage-backed securities backed by Fannie Mae, Freddie Mac, and Ginnie Mae.

The move is intended to strike at the heart of U.S. economic woes, the collapsed housing market.

Another $600 billion to take near worthless securitized debt off the books of banks. Of course the program is "intended to strike" at the housing depression. The real beneficiaries will continue to be banks with these toxic derivatives on the books.

And after the money comes in, they'll continue to sit on it, or use it to fund mergers and acquisitions. What they won't do is lend money to businesses and consumers, because the housing market and the accompanying collapse in the commercial real estate market is making lending that money out right now too much of a risk.

Besides, the banks know they have trillions and trillions more in bad derivatives lurking just off their balance sheets. $600 billion is just pissing on a skyscraper fire.

The $200 billion for securitized consumer loan products? A nice little gift to credit card companies this holiday season. The consumer is tapped out, and millions of defaults on credit card payments are going to be coming. Credit outfits aren't going to make effort one to use this to loan to new customers. They're going to need it just to stay alive. In this consumer-driven recession, with retail sales falling off a cliff and auto sales stalled out, credit card companies are on the front lines right now. They're in tremendous amounts of trouble.

If Americans walk away from their credit card payments, or even worse, pay off their debts and then cut up their cards in order to get their own financial houses in order, the credit card companies are screwed. This recession is going to put many of them out of business, and those that survive will have to do so by charging usurious rates, exorbinate fees and maximum penalties for cardholders who miss even one payment by one day.

The next couple of years will only be worse, no matter what Obama does.

StupidiNews!

• More than half of Americans are planning to spend less this holiday season.
• President Bush cranks up the pardon machine.
• Russia's Vladimir Putin wants his old job back.
• After Citigroup, is Bank of America next?
• Forget the NFL in HD, how about the NFL in 3-D?

Another Look At Obama's Team

HuffPo's Robert Kuttner takes a pretty detailed look at Obama's economic plan from a progressive's point of view.

As progressives, we can view President-Elect Obama's emerging economic team in one of two ways. Either he has disappointed us by picking a group of Clinton retreads--the very people who brought us the deregulation that produced the financial collapse; the fiscal conservatives who in the 1990s put budget balance ahead of rebuilding public institutions. Or we can conclude that he has very shrewdly named a team of technically competent centrists so that he can govern as a progressive in pragmatist's clothing--as he moves the political center to the left.

My fears of course are of the former, especially with Tim Geithner as SecTreas. He's constrained of course by *not* having Hank Paulson's job right now, and still having to deal with Bush's plans. But to fix this problem both Geithner and the rest of Obama's economic team are going to have to completely change gears.

I just don't see that happening. As Kuttner says, these are the same people that worked to come up with the Gramm-Leach-Bliley Act, the legislation that massively deregulated the financial industry. Clinton signed it into law and it passed with broad bipartisan support in both houses of Congress.

To his credit, Geithner has been a voice for more regulation. But nobody's talking about repealing GLB, which should be among the first of the major consequences the financial sector should have to accept for taking trillions of taxpayer dollars in corporate welfare.

Still, Kuttner has more confidence than I do.

In fairness, adults are not merely tools of their patrons. In recent months, Larry Summers has disagreed with Rubin on the scale of the needed stimulus. Tim Geithner is for far more regulation than Rubin. Jason Furman, though suggested by Rubin for his campaign post of economic policy director, actually spent more of his career working for Joseph Stiglitz than for Robert Rubin. Peter Orszag has done a fine job as director of the Congressional Budget Office, and is not averse to large scale public spending.

Obama is the president, and he will do what he deems necessary. In my writings during the campaign, I sometimes found myself second-guessing Obama's strategy--and he invariably turned out to be smarter than I was.

Obama is also famous for listening to a wide variety of views. Others among his senior staff, such as legislative director Phil Schiliro, are further to the left. But this economic team will have influence--in posing options, playing the role of gatekeeper, writing position papers, and serving as an echo chamber of each other's advice.

Obama is intelligent enough to reach his own conclusions, and they are likely to produce far more heartburn for conservative Republicans than for those who worked so hard to elect him. But it would be helpful if his senior economic team included even one person who was not a member of the same centrist club - a Joseph Stiglitz, a Jamie Galbraith, a Jared Bernstein or a Sheila Bair. We shall soon see whether the most interesting team of rivals in the Obama White House will be the president and his own economic advisers.

We'll see, indeed. Radical, earthshaking action will be needed to save our economy from depression over the next several months. Will Obama's team, as Obama has said, "do what will be necessary" to save the US economy?

I'm still not so sure. Obama will have to pleasantly surprise me.

Home, Home I'm Deranged

Where the fear and the antipathy play...

The pace of sales of existing homes in the United States fell 3.1 percent in October to a 4.98 million-unit annual rate, while the median home price dropped to its lowest in more than four years, a National Association of Realtors report showed on Monday.

Economists polled by Reuters were expecting home resales to set a 5.00 million-unit pace. September's figure was revised downwards to 5.14 million from 5.18 million.

"Many potential home buyers appear to have withdrawn from the market due to the stock market collapse and deteriorating economic conditions,'' said Lawrence Yun, NAR chief economist.

The inventory of existing homes for sale slipped 0.9 percent to 4.23 million from 4.27 million in September. The median national home price declined 11.3 percent from a year ago to $183,300, the lowest since March 2004 when the median price was $183,200.

The percentage drop in prices was the biggest since the NAR started keeping records in 1968.

"We have favorable affordable conditions, but we need more than that to give buyers with jobs the confidence they need. Without home price stabilization, there will not be an economic recovery,'' Yun told reporters.

Ding ding ding!

Smartest piece of economic analysis you'll hear all year, right there.

Without home price stabilization, there will not be an economic recovery.

And as long as home prices continue to fall month after month, we're trapped in a deflationary spiral. Who's going to buy a home if the price is falling at 15-20% per year, guaranteeing negative equity in a few months and seeing an underwater mortgage in a year?

The problem is deflation now, not inflation. Particularly on long-term borrowing, deflation is going to be a killer on the markets. Less demand leads to price deflation, leading to higher unemployment as people are laid off, leading to even lower demand: the classic deflationary spiral.

The housing collapse is leading to trillions in deflationary pressure. Until housing stops falling, we're in trouble. The housing depression has gone on so long it's becoming self-perpetuating now, and that's the real danger.

Unless Obama can stabilize housing prices, everything else is spitting in the wind.

Team Obamanomics

Obama officially named his economic team today.

President-elect Barack Obama said Monday that the country is facing an "economic crisis of historic proportions," and unveiled the team he has chosen to help get the economy back on track.

Obama said he sought leaders who share his fundamental belief that "we cannot have a thriving Wall Street without a thriving Main Street."

Obama has tapped New York Federal Reserve President Tim Geithner as treasury secretary and former Treasury Secretary Larry Summers as chief of the National Economic Council.

Geithner helped manage Wall Street's financial meltdown earlier this year, overseeing the acquisition of Bear Stearns by JPMorgan Chase, the bailout of AIG and the collapse of Lehman Brothers. He was appointed as the New York Federal Reserve president in November 2003.

Summers served as treasury secretary in the Clinton administration. He was the chief economist of the World Bank from 1991 through 1993. Prior to his career in government, Summers taught economics at Harvard.

University of California-Berkeley economics professor Christina Romer has been chosen to be the chair of the President's Council of Economic Advisers.

The Council of Economic Advisers is a group of economists --including three who are appointed by the president and need Senate confirmation -- that advise the president on economic policy.

Obama also announced Melody Barnes as director of the Domestic Policy Council and Heather Higginbottom as deputy director of the Domestic Policy Council.

So far, nothing about this team makes me think they can handle this crisis any better than the current administration.

I fully expect to see bailout after bailout over the next several months. With today's Citigroup bailout, we're already approaching the $5 trillion $7.7 trillion mark in total loan guarantees, direct intervention, and stock purchases for the financial sector alone.

Citigroup: The Morning After

As noted, Citigroup will get $20 billion in cash and $300 billion more in guarantees.

Citigroup Inc., facing the threat of a breakup or sale, received $306 billion of U.S. government guarantees for troubled mortgages and toxic assets to stabilize the bank after its stock fell 60 percent last week.

Citigroup also will get a $20 billion cash injection from the Treasury Department, adding to the $25 billion the company received last month under the Troubled Asset Relief Program. In return for the cash and guarantees, the government will get $27 billion of preferred shares paying an 8 percent dividend. Citigroup rose as much as 41 percent in German trading today.

The Treasury, Federal Reserve and Federal Deposit Insurance Corp. said in a joint statement that the move aims to bolster financial-market stability and help restore economic growth. The decision came after New York-based Citigroup’s tumbling share price sparked concern that depositors might pull their money and destabilize the company, which has $2 trillion of assets and operations in more than 100 countries.

“It really was a must-do thing,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors, which manages about $85 billion. “If they’d let Citigroup go, that would’ve been disastrous.”

Citigroup’s stock plunged 83 percent this year and dropped below $5 last week for the first time since 1995. The shares were up $1.26 at $5.03 in Germany in recent trading.

If the government had not taken action last night, Citigroup stock would have likely dropped to under $2 a share. Citibank's major depositors would have lined up around the block today to get money out of the bank.

The one thing we've been able to avoid so far is a confidence breaking and very visible public bank run on one of these financial institutions. Imagine what video of Citibank customers lined up around to block to get their money would do to the markets and to the country, when every bank in the country has less than 1% of deposits available on hand as a business decision.

Imagine what would happen if Citibank branches were turning people away, saying "we don't have any more cash right now." Imagine ATMs emptied out across the country.

Panic. Pure, adrenaline fueled national panic.

And it would get worse from there.

That's why Citigroup gets $20 billion in a weekend, and the auto industry will most likely go under as the Big 3 are forced to reorganize under Chapter 11.

StupidiNews!

• Citigroup is saved to the tune of $20 billion and $300 plus billion in loan guarantees.
• Democrats are planning a massive new stimulus package to be signed into law by Obama on January 20.
• Venezuala's Hugo Chavez scored significant wins in national elections last night.
• The world's biggest cruise ship takes to the seas in Finland.
• The MPAA is looking to handcuff tens of millions of HDTVs by forcing secure digital cable output only, rendering HD antennas worthless.

Deal Or No Deal

As expected, the Sunday Night Deal to save Citigroup is a go.

Citigroup Inc is looking at putting risky assets in a "bad bank" -- a step to reassure investors that the rest of its assets were safe, the Wall Street Journal reported on Sunday.

The "bad bank" might take on some of Citigroup's more than $1.23 trillion of off-balance sheet assets. Citigroup might bear the initial losses on the assets, and the government might cover losses beyond a particular threshold, the newspaper reported, citing people familiar with the matter.

U.S. financial markets are waiting for some sort of Citigroup announcement this weekend, and if nothing happens, the bank's stock is likely to plunge further on Monday, analysts said.

Let me emphasize that one more time so that it sinks in: Citigroup has more than $1.23 trillion of off-balance sheet assets. One and a quarter trillion (with a T!) in toxic derivatives as "assets" means this bank is effectively insolvent. It means our entire economy is effectively insolvent, because the second Citigroup goes under, those "assets" which are nothing more than fancy IOUs get called into question.

Citigroup is just one bank. It holds well over one trillion in IOUs. The IOUs are accepted as having worth because of the confidence that those IOUs will be paid, and every bank it sitting on a pile of them.

Globally those IOUs, these derivatives, are valued at over a quadrillion dollars...a thousand trillion. One million billion dollars.

If Citigroup goes under, then it will take this entire system down with it. More banks will fail. Their chunk of the derivative nightmare will fail too. If those IOUs are being defaulted on, then they become worthless. Only the agreed upon value of these derivatives gives them value. If the confidence that these IOUs have value evaporates, then the actual value of the derivatives evaporates as well.

One quadrillion dollars of theoretical global money vanishing.

Poof. And our global financial system poofs along with it. Yes, this is some scary stuff.

Citigroup is now on the clock. The stock will drop low enough to force another bailout worth tens of billions if not more. If Citigroup fails, it will take the global system with it.

Deal or No Deal. No Deal here means the end of the game.

And so more billions will be thrown to the banks. And the underlying rot at the foundation, the toxic weight of tens upon hundreds of trillions in derivatives, will continue to crush the financial sector. More banks will fail. More will be spent to save them.

Eventually, another Lehman Brothers will happen. Obama can't stop it. His hands are tied. There's nothing he can do, and his choice of Tim Geithner as Treasury Secretary strongly suggests he has chosen to continue the path of bailouts and more bailouts.

But Obama will have to end the bailouts eventually. He will be forced to do so when China and Saudi Arabia can no longer afford to front us the cash.

When that happens, all bets are off.

[UPDATE] The US government and Citigroup are frantically trying to seal the deal before the markets open tomorrow.

The U.S. government and Citigroup are working feverishly to hammer out a rescue plan for the beleaguered bank. If all goes according to plan, there will likely be an announcement of some type of plan in a couple of hours.

The exact nature of plan remains unclear, but the government is leaning towards some sort of cash infusion into Citigroup. The plan will probably be a multi-layered one, which means the government could backstop losses on Citigroup's troubled assets as well. In exchange, Citi may issue preferred stock to the government

Sources with knowledge of the negotiations say "everything is on the table", meaning that even the government plan of buying the troubled assets could be revived.

The problem with buying the assets from Citi is political: People close to the deal know that other firms will line up and ask the government to purchase their troubled assets as well. Brokerage stocks got crushed when Treasury Secretary Hank Paulson reversed his plan on the TARP to direct capital infusions to the banks and away from buying troubled assets.

The Bottom line: This is very fluid and the situation may change again. But as of now, the government is getting cold feet on plan to buy troubled assets, which leaves direct capital infusion on the table.

They have no choice.

They will have no choice when the next major bank goes under.

And the next.

And the next.

[UPDATE 2] The Citigroup deal is expected to be a direct cash infusion of $10-$20 billion for starters, CNBC reports.

A Taxing Problem

Turns out Obama has no intention of rolling back the Bush tax cuts just yet.

President-elect Barack Obama may delay the rollback of high-income tax cuts for the wealthiest Americans, two of his aides said Sunday.

The tax cuts were instated by President Bush and discontinuing them was a key promise of Obama's campaign for the presidency.

Obama's political strategist David Axelrod was asked by Fox News's Chris Wallace if the measure could be allowed to expire on schedule after 2010 and avoid an immediate repeal.

"Those considerations will be made," said Axelrod, who has been selected as Obama's senior White House adviser.

Bill Daley, an adviser to Obama and commerce secretary under former President Bill Clinton, said on NBC's "Meet the Press" that the 2010 scenario "looks more likely than not," Reuters reported.

The change in policy may suggest that Obama is wary of imposing more taxes during a financial crisis or that he is looking to boost Republican support for his recovery measures.

Or that the people running his financial program have no more idea how to fix the problem than the current occupants.

Obama has no need for the Left now. He's running for 2012 as a moderate Republican before he's even sworn in as a Democrat.

The Reality Of Obama's Foreign Policy

I've said on a number of occasions that my biggest problem with Obama is foreign policy. He never saw the US war on Iraq as wrong on moral reasons, but on strategic ones. No person allowed to win the Presidency and the role of Commander-in-Chief would ever tell America that using military force is morally wrong.

Obama sees Bush policy for the most part as incompetent and poorly executed, not wrong. Obama plans to do everything that Bush couldn't do: catch Bin Laden, draw down the "wrong" war in Iraq, and concentrate on the "right" war in Afghanistan and Pakistan. Same quagmire, different location.

Which brings us to the grim realization that -- surprise! Obama's a Clintonian interventionist centrist.

Mr Obama has moved quickly in the last 48 hours to get his cabinet team in place, unveiling a raft of heavyweight appointments, in addition to Hillary Clinton as his Secretary of State.

But his preference for General James Jones, a former Nato commander who backed John McCain, as his National Security Adviser and Arizona Governor Janet Napolitano, a supporter of the war, to run the Homeland Security department has dismayed many of his earliest supporters.

The likelihood that Mr Obama will retain George W Bush's Defence Secretary, Robert Gates, has reinforced the notion that he will not aggressively pursue the radical withdrawal of all combat troops from Iraq over the next 16 months and engagement with rogue states that he has pledged.

Chris Bowers of the influential OpenLeft.com blog complained: "That is, over all, a centre-right foreign policy team. I feel incredibly frustrated. Progressives are being entirely left out of Obama's major appointments so far."

Markos Moulitsas, founder of the Daily Kos site, the in-house talking shop for the anti-war Left, warned that Democrats risk sounding "tone deaf" to the views of "the American electorate that voted in overwhelming numbers for change from the discredited Bush policies."

A spokesman for the President-elect was forced to confirm that Mr Obama holds to his previous views. "His position on Iraq has not changed and will not change."

But the growing disillusionment underlines the fine line Mr Obama must walk between appearing to reach out to former opponents and keeping his grassroot supporters happy.

Mr Obama seems conscious of the need to move fast, to reassure a watching world that he will be ready to hit the ground running on foreign and economic policy.

He will wait until Friday before formally announcing his national security team, but he will on Monday formally unveil his economic team, with New York Federal Reserve bank chairman Timothy Geithner as Treasury Secretary and the New Mexico Governor, Bill Richardson, in the Commerce portfolio.

There's a pretty large difference between "better than McCain" and "change we can believe in." Hillary, the word has it, is already cleaning house of the folks who actually thought Obama was going to keep his word to progressives on the war.

Before Hillary Clinton has been formally offered the job as Secretary of State, a purge of Barack Obama's top foreign policy team has begun.

The advisers who helped trash the former First Lady's foreign policy credentials on the campaign trail are being brutally shunted aside, as the price of her accepting the job of being the public face of America to the world. In negotiations with Mr Obama this week before agreeing to take the job, she demanded and received assurances that she alone should appoint staff to the State Department. She also got assurances that she will have direct access to the President and will not have to go through his foreign policy advisers on the National Security Council, which is where many of her critics in the Obama team are expected to end up.

The first victims of Mrs Clinton's anticipated appointment will be those who defended Mr Obama's flanks on the campaign trail. By mocking Mrs Clinton's claims to have landed under sniper fire in Bosnia or pouring scorn on her much-ballyhooed claim to have visited 80 countries as First Lady they successfully deflected the damaging charge that he is a lightweight on international issues.

Foremost among the victims of the purges is her old Yale Law School buddy Greg Craig, a man who more than anyone led the rescue of his presidency starting the very night Kenneth Starr's lurid report into the squalid details of the former president's sex scandal with Monica Lewinsky were published on the internet in 1998. Despite his long and loyal friendship with the Clintons, Mr Craig threw his lot in with Mr Obama at an early stage in the presidential election campaign. As if that betrayal to the cause of the Clinton restoration was not enough, Mr Craig did more to undermine Mrs Clinton's claims to be a foreign policy expert than anyone else in the some of the ugliest exchanges of the battle for the Democratic nomination.

Underneath the catty sniping is the truth: Obama's foreign policy won't differ from Bush or Clinton. Hillary must have realized that her best shot at the White House isn't around Obama...but through him.

The wars will rage on until economic circumstances force something else.

StupidiNews, Weekend Edition

• Obama's weekly address outlines a 2.5 million job public works program.
• Could Janet Jackson's famous Super Bowl "wardrobe malfunction" case hit the Supreme Court?
• The Saudis declare war on Somali Pirates.
• The one Dow stock that's really cooking in this "soup line" economy? Campbell Soup.
• Apple's iPhone 2.2 OS is out with some new Google Maps love.

It's Geithner

NBC is leaking that NY Fed Chair Tim Geithner is Obama's pick for SecTreas.

Barring last minute changes, the nominee for Treasury Secretary will be NY Fed President Tim Geithner -- a career Treasury official under both Bob Rubin and Larry Summers -- who actually had worked at the Treasury in three administrations under five Secretaries -- going back to 1988.

Geithner has been a key player in the current economic crisis -- helping Treasury Secretary Hank Paulson and his team manage the wall street bailout.

Former Treasury Secretary Summers -- also considered for the post -- might still play a major future role in the Obama administration, according to sources. Summers came under fire from women's groups because of controversial comments he made about gender issues while President of Harvard, but sources say the decision to choose Geithner had more to do with Obama's interest in "change" and getting someone new on the team.

Also expected Monday -- an announcement that former U.N. Ambassador and Energy Secretary in the Clinton administration, New Mexico Governor Bill Richardson, will be Commerce Secretary.

How BAD is this pick?

The Dow shot up almost 500 points on the news in the last hour of trading.

I can't get over how hideous of a pick this is. You might as well leave Hank Paulson in charge. There will be no appreciable change in economic policy in the Obama administration, more bailouts for Wall Street, more money thrown down the rabbit hole.

Geithner is literally the worst pick Obama could have made short of letting Paulson keep his job. Not only is he part of the same Ben Bernanke/Alan Greenspan Fed team that got us into this mess, as New York Fed Chairman, there's no single bigger government cheerleader for Wall Street itself than this man.

Obama's message is clear: Wall Street, not Main Street. I hope this is wrong. Honestly, I do. Because if this is true, Obama just sold America down the river, and he most likely has no intention of making the hard choices that have to be made in order to save the economy. Geithner's been the point man for the bailout on the Treasury/Fed side of the deal and while he has made noises about the US economic position being in trouble, his actions speak to supporting the same useless Fed actions that produced this debacle. If anything, Geithner was showing Bernanke "the ropes" 16 months ago.

Among executives of the district banks, Geithner, 46, has the most extensive background in responding to upheavals. During the Clinton years, he was an aide to Robert Rubin and Lawrence Summers, who both served as Treasury secretary. In that role, Geithner helped broker emergency loans for Thailand, Indonesia, South Korea, Russia and Brazil when their currencies sagged. While he was at the Treasury, the U.S. participated in interventions to strengthen the yen in 1998, and the euro in 2000.

``It is a team that is new to the challenge, but it is a pretty smart group,'' said Harris. Bernanke ``really studied for the job. He is familiar with the history of the Fed, the policy errors, and he is a Great Depression buff.'' Bernanke contributed to Depression research with a 1999 paper co-authored with Mark Gertler and Simon Gilchrist on how financial markets can worsen economic downturns.

With Friday's action, Bernanke and his colleagues have ``tip-toed in'' and are ``trying to strike the right balance between doing nothing and riding to the rescue,'' said Gary Schlossberg, senior economist at Wells Fargo Capital Management in San Francisco, which oversees $200 billion in assets. ``They've left the door open to a full-blown easing of monetary policy. The results are mixed so far, and early returns suggest we're not out of the woods yet.''

That worked out well, huh guys?

Geithner's a clueless twit, just like the rest of the Fed crew. Obama's just hung a sign on Wall Street this afternoon: "Under New Management, Same Old Business."

Clinton is arguably strike one, but Geithner is definately strike two for Obama. Two and a half weeks and he's already showing major signs that "Change you can believe in" is the same goddamn thing as Bush.

I am pissed.

[UPDATE]More Geithner is Great! quotes...

I would say the market is going to like it," said James Awad, managing director of Zephyr Capital. "[Former Clinton Treasury Secretary Larry] Summers was more controversial. People will view it as a safe choice, an experienced guy.

"There's a little bit of a question because he's associated with the bailout," Awad added, "and that's still a work in progress and not totally successful. There will be a few who'll be upset because he's associated with the TARP."

"Geithner is a solid choice. He has shown more independent thinking," said Former Sen. Don Riegle, who chaired the Senate Banking Committee during the savings and loan crisis. "He has also seen this financial system meltdown from the inside ... he can offer highly skilled and pragmatic advice to Obama."

"He will understand the urgent necessity of assembling a world class team at Treasury ... and be able to attract the talents he needs," Riegle continued. "This choice will also facilitate close cooperation between the Treasury Department and the Federal Reserve, [which is] much-needed given the increasing scale of the economic crisis."

"He is battle-tested with Rubin and Summers and has done an excellent job orchestrating the Fed's response to the worst financial crisis since the Great Depression," said Chris Rupkey, economist at Bank of Tokyo-Mitsubishi. "A crisis manager par excellence who will hit the ground running, as he has been on the case since the Global funding crisis began way back in July 2007. I cannot think of a better choice who will mesh seamlessly with the Fed and FDIC."

If you actually think the Fed has done a excellent job in any way, shape, or form, then yes, Geithner's your man.

Spin Citi

No go on the Citigroup rebound. Stock's down another 20% to around $4 a share and falling here at 10:45 AM or so. Dan Wilchins at Reuters is already running down the list of what the Gubment can do, which boils down to four choices:

1. Government buys a crapload MORE of Citi preferred stock,
2. An AIG style multi-billion "loan",
3. An FDIC liquidation, WaMu style,
4. Government guarantees all Citigroup debts and derivative obligations.

Number 2 is the most likely, 3 cannot be allowed to happen, but I'm assuming the government will screw around with 1 first.

Which means of course option 4, the option that would actually work, won't be considered. Once the government starts acting as derivative counterparty for Citi, every bank in the country will want the same exact guarantee, period. It's the derivative obligations that are going to kill the banks, and they both know it...but eventually this is what will be have to be done. Banks still refuse to come clean on derivative debt and the fact the banks are basically insolvent because of it.

So yeah, we'll stick with 2. Big old loans. They've worked GREAT so far. Obama's Treasury Secretary is going to be the worst job on Earth.

But at least it's a job.

Dear America:

"Quit complaining about the economy. We'll be fine, just as soon as you realize there's nothing fundamentally wrong with the global financial picture and you get your ass to Wal-Mart like you've been doing and deal with the fact Obama's going to fail to keep any of his domestic spending promises and will have to slash spending across the board like McCain was going to do anyway."

--Irwin Stelzer

The Enemy Of My Enemy

Seems the universe has an unlikely ally in fighting those pesky Somali pirates off the Horn of Africa: militant Somali Islamists.

Dozens of Somali Islamist insurgents entered a port on Friday in search of the pirate group behind the seizure of a Saudi supertanker that was the world's biggest hijack, a local elder said.

Separately, police in the capital Mogadishu said they ambushed and shot dead 17 Islamist militants, in the latest illustration of the chaos in the Horn of Africa country that has fueled a dramatic surge in piracy.

The Sirius Star -- a Saudi vessel with a $100 million oil cargo and 25-man crew from the Philippines, Saudi Arabia, Croatia, Poland and Britain -- is believed anchored offshore near Haradheere, about half-way up Somalia's long coastline.

"Saudi Arabia is a Muslim country and hijacking its ship is a bigger crime than other ships," Sheikh Abdirahim Isse Adow, an Islamist spokesman, told Reuters. "Haradheere is under our control and we shall do something about that ship," he said.

Islamists on one side, pirates on the other, and we're stuck in the middle. Lovely.

I'm assuming then standard US operating procedure and asking "So, which side do we start bribing first to kill the other?"

A Smidge Of Good News On Housing

As Fannie and Freddie are suspending foreclosures until after the New Year.

The six-week halt will begin Nov. 26, a day before the U.S. Thanksgiving holiday, and last through Jan. 9, the companies said in separate statements today. The hiatus is designed to give servicers more time to implement a streamlined loan modification program for struggling borrowers.

“It’s a giant time out,” Paul Miller, an analyst at FBR Capital Markets in Arlington, Virginia, said today in a Bloomberg Television interview. “I wouldn’t be surprised to see this across the board.”

Fannie and Freddie, government-sponsored enterprises that own or guarantee $5.2 trillion of the $12 trillion U.S. home mortgage market, were placed under federal control Sept. 6. They have since been pushed to work harder at modifying troubled single-family and multifamily mortgages to curtail foreclosures.

Better than nothing, especially if other mortgage lenders follow suit. But six weeks from now, folks will still be underwater on their mortgages and out on the streets in January.

And a hell of a lot more people will follow over the next 18 months.

StupidiNews!

• Attorney General Michael Mukasey collapsed after a speech last night and has been hospitalized.
• Obama's personal cell phone records have been compromised by Verizon employees.
• Hillary Clinton will indeed be named Secretary of State next week.
• US military contractors in Iraq could soon be facing charges under the new agreement worked out this month.
• Will California soon be testing a statewide electric car charging grid?

Global No Confidence Vote: The Naked Citi

Economically we're approaching another fateful moment, another fork in the road...and quite likely another cliff ahead. The Dow tumbled to near 7,500 today, representing a devastating loss in the last week as the auto bailout has stalled out until December.

Far more sinister is the collapse of Citigroup, the number 2 bank in the US. Announcing 53,000 layoffs on Monday, the bank's stock has now imploded under the vital $5 a share point where institutional investors like pension plans and hedge funds aren't allowed to tread. This could trigger a massive selloff that will sink the company, and indeed Citi is now shopping itself around in a last ditch effort to get above the $5 mark.

It's the latest company to play "Deal or No Deal."

Citigroup Inc., which fell 26 percent in New York trading today, is considering selling off pieces of the bank or the whole company, the Wall Street Journal reported online, citing people familiar with the matter.

Talks are preliminary and don’t suggest that New York-based Citigroup is backing away from its insistence that it has sufficient capital and funding, the Journal said.

Buffeted by four straight quarterly losses, Citigroup has raised about $75 billion since December by selling assets and equity stakes, including a $25 billion injection from the U.S. Treasury. The government will do whatever it takes to stabilize Citigroup, including pouring more money into the company, because of the threat its failure would pose to the global economy, said Peter Wallison, a fellow at the Washington-based American Enterprise Institute.

“There is no question that Citigroup will not be allowed to fail,” said Wallison, who was Treasury Department general counsel under former President Ronald Reagan. “I would not think it is a good idea to restore the ban on short selling,” he said.

Citigroup declined $1.69 to a 15-year low of $4.71 on the New York Stock Exchange at 4:15 p.m. It has fallen 84 percent this year.

Like AIG, Citigroup will not be allowed to go under. Hundreds of billions will be poured into it over the next few days by Hank Paulson and friends. Another loaded Weapon of Financial Destruction has been pointed at the global financial system, and as sure as Jack Bauer saves the day in "24" the government will save the floundering company. Bank of America, the number one bank in the US, has slid to $11.25 or so.

The largest banks in the US are failing.

But even more sinister than that, the S&P 500 hit its lowest close since 1997.

"It was pretty brutal," said Phil Orlando, chief equity market strategist at Federated Investors.

He said the market is at a critical point, with the S&P having "tested" or closed below the lows of the previous bear market. Investors will be looking closely at the next few sessions to see if stocks can hold those key levels.

Since peaking at an all-time closing high of 1,565.15 on Oct. 9, 2007, the S&P 500 has lost 52%. The Dow has lost nearly 47% since closing at an all-time high of 14,164.53 on the same day. Since hitting a bull market high of 2,859.12 on Oct. 31, 2007, the Nasdaq has lost 54%.

"The wealth destruction is phenomenal," said Tom Schrader, managing director at Stifel Nicolaus.

Cut in half and still falling. Nobody knows what to do. We're out of rate to cut. We're not running on fumes, we're running on OTHER COUNTRY'S FUMES.

It's rather depressing. What's worse is I don't see a bottom to this yet. The housing crash rolls on, unemployment is rising sharply, and the consumer-driven economy is running out of consumers to consume.

It's a race to see who gets bailed out first, the automakers or Citigroup. I'm betting Citi, and I'm betting a deal will roll around before Monday, stoking another lovely bear market rally that will run smack into the reality of a dismal holiday shopping season come a couple weeks or so.

Citigroup will not be long for this earth in its current form. Bank of America is most likely next. These institutions are testing multi-year lows this week. We're down to a massive decision point here. Too Big To Fail is about to be tested.

Citigroup shares lost more than one-quarter of its market value on Thursday as investors questioned the banks ability to handle potential credit losses and writedowns in 2009.

The bank has been reeling on concerns that mounting losses from credit cards, mortgages and toxic debt could overwhelm its efforts to slash costs and add deposits. Citigroup has access to U.S. Federal Reserve funds, is working at insuring some of its debt and is reducing its balance sheet faster than any other company in the banking industry, said analyst Bove who believes these steps backstops the bank's liabilities.

"It would take a Depression every bit as large and long as the 1930s debacle to shake this company's viability," Bove said.

Care to test that theory? Nevermind...we're testing that right now.

Be prepared.

Cross-posted at the Frog Pond.

Waxman On, Waxman Off

Democrat Rep. Henry Waxman, that is. He's now the Chair of the mega-powerful House Energy and Commerce Committee after taking the spot from Michigan Rep. John Dingell.

Rep. Henry Waxman (D-Calif.) will become the next chairman of the House Energy and Commerce Committee after House Democrats voted to replace current Chairman John Dingell (D-Mich.).

Waxman won 137-122 in the secret ballot vote.

The dramatic intra-party showdown for the coveted position signals a leftward turn for the Democratic agenda. The outcome was a blow to the seniority system and a victory, at least in perception, for House Speaker Nancy Pelosi (D-Calif.).

Though her aides denied it, many saw the hand of Pelosi in Waxman’s challenge for the post, which conveys great power over how the Democratic agenda of President-elect Barack Obama will be implemented.

Waxman is considered more liberal on issues like climate change, energy and business regulation, and potentially more aggressive on healthcare. Dingell, the longest-serving House lawmaker, is close to the auto industry and autoworkers.

Dingell has long been the main obstacle on the Democrat side of the aisle to reforming the auto industry and to clean energy technology. He fights for his home district of Detroit deep in UAW country and he's fought for it well, but he's put the auto industry's needs ahead of America's for decades now. It's time for the country to move on. Environmental and energy reform are far more important now, not to mention badly needed reform of interstate trade laws and REAL climate change legislation. This committee would handle health care reform legislation on the House side too, most likely working hand in hand with Ted Kennedy and presumptive HHS Secretary Tom Daschle.

Waxman taking this committee over is a big neon sign that Obama's domestic agenda is on the front burner and cranked up to boil. This is huge folks, Dingell has been the ranking Democrat on this committee since Reagan and it means Obama's allies in Congress are gearing up swiftly and effectively to launch into signfiicant action come January. Going after Dingell is something even Clinton wouldn't contemplate, much less do. This is the kind of change we need.

Obama knows exactly who he needs to have going into the fights ahead...and he knows who he needs to have moved aside. I'm feeling better and better about the real prospect of effective environmental, energy, and health care legislation.