Last Call

You have no clue how much it burns to type "Jennifer Rubin is right" but there you are.

The ball is now in Treasury’s court once again. It seems testimony under oath is the only way this will all come out. And if the Treasury Secretary lied or hid the ball, our modern day Alexander Hamilton certainly will be heading out the door.

Obama did come out swinging pretty hard tonight in California and he did take responsibility for the AIG situation. After eight years of Bush, that's a refreshing change of pace.

But Timmy is in serious trouble here if Dodd is telling the truth. Republicans are going to want to know what he knew, when he knew it, and if Obama is truly serious about transparency in government, he's going to either have to hand over Geithner or accept his resignation.

Underwater The Fish Don't Stink

...but the mortgages do, and people are starting to simply walk away from them at a much higher rate.

In California's Inland Empire east of Los Angeles, where Barnard lives and sells real estate, median home values have plunged more than 40 percent in the last year as formerly sidelined buyers snapped up foreclosed properties.

Those bank-owned homes moved at fire-sale prices that decimated the value of neighboring homes -- many of which are owned by people who have limited "skin in the game" because they put little or no money down at purchase.

Deflating home prices thus threaten to accelerate a negative feedback loop that has sent prices lower, said economist Ed Leamer, director of the UCLA Anderson Forecast.

"Should the downward spiral in home prices, neighborhood condition and equity deterioration continue, more and more mainstream borrowers are likely to walk away from their homes," Credit Suisse said in a December report.

Barnard, who already has stopped making payments on five investment properties purchased in 2005, is on the verge of giving up on his own home that is now worth roughly half its $800,000 purchase price.

Others weigh the predictable and relatively short-term foreclosure-related hit to their credit ratings against the diminishing likelihood of breaking even on their investments or even making monthly payments on such severely "underwater" homes.

The death spiral is accelerating, and unless Obama's foreclosure relief plan makes a real dent in home prices, it's just going to be too much downward pressure to keep the housing market stabilized.

The more people who choose to abandon their homes, the lower the surrounding homes will go in value, putting more homeowners underwater, causing more of them to walk away...the vicious cycle is pretty well set now.

Pray this works. If it doesn't, next stop is Hooverville. We're in the Great Recession. We're playing for avoiding a Depression here. I'm not convinced it'll work.

Officer, He Fell On My Knife 37 Times, It Was An Accident

Aaaaaaaaand Chris Dodd scores a critical hit plus sneak attack damage on the Obama administration.

In a stunning development, Sen. Christopher Dodd said that Obama administration officials asked him to add language to last month's federal stimulus bill to make sure the controversial AIG bonuses remained in place.

Dodd, chairman of the Senate Banking Committee, told CNN that Obama officials wanted the language added to an amendment limiting bonuses that could be paid by companies receiving federal bailout money. He said they were afraid that without it, the government would face numerous lawsuits from employees who were promised bonuses.

Ouch. If this is true, somebody's in deep trouble. So who told Dodd to do this?

On Tuesday, Dodd denied to CNN that he had anything to do with adding the language, which has been used by officials at AIG to justify paying millions of dollars in bonuses to executives after receiving federal money. The nearly $800 billion stimulus bill was approved by Congress in February.

Dodd told CNN he did not speak to high-ranking administration officials and the change came after his staff spoke with staffers from Treasury. The White House did not immediately respond to CNN's request for comment.

Ding ding ding ding! Senator Dodd in the Billiard Room with the Wednesday Night News Dump. Do I win?

Odds of Timmy The Invisible Boy getting tossed under the bus just went way, way up.

However, this means odds of Plan N just went way, way up too. Obama's going to get zero help on bailouts now from Congress or the American people, which means he has no choice but to pursue nationalizing the banks. If this is all true, if Treasury allowed AIG to keep their bonuses and they specifically killed the measure to stop bailout companies from getting bonuses, then Timmy is done.

Obama will not have a choice. The heat really will come down on him for this. That means Geithner thrown under the bus, and that leaves Plan N as the only card in the deck. Calls for him to go are already coming in.

That is if this is all true. Even if it's not entirely the truth, Timmy still has to go.

I Want My Car Loan To Work Like This

So Helicopter Ben and the Fed decide they're going to take $300 billion in borrowed money to buy up Treasury debt.

No really, that's the plan. Take $300 billion in already borrowed money to buy $300 billion in long term debt. Apparently now is the time for HISTORICALLY LOW RATES or something.

It must be a horrendously stupid plan because the markets went from 1-2% loss to 1-2% gain within 15 minutes of this being announced. Behold, the myriad superpowers of Helicopter Ben.

[UPDATE] Jim Cramer says REFI NOW! HISTORICALLY LOW RATES! (insert dancing Jim Cramer here.)

Zandar's Thought Of The Day

Who loses their job first, embattled RNC Chairman Michael Steele, or embattled Treasury Secretary Tim Geithner?

[UPDATE] Republicans seem to really, really want both of them gone. Democrats on the other hand ironically want both of them to stay.

The Most Hated Guy In America Right Now Gets An Op-Ed

That would be AIG CEO Edward Liddy in today's WaPo. Gotta love the Village.

I am mindful of the outrage of the American public and of the president's call for a more restrained compensation system. I am also mindful that every decision we make at AIG has consequences for the American taxpayer. We weigh decisions with one priority in mind: Will this action help or hurt our ability to pay money back to the government?

Although we have wound down more than $1 trillion in the portfolio of the AIG Financial Products unit that is at the root of the company's troubles, there remains substantial risk in that portfolio. The financial downside for taxpayers is potentially very large, and that's why we're winding down this business.

To prevent undue risk exposure in the meantime, AIG has made a set of retention payments to employees based on a compensation system that prior management put in place. As has been reported, payments were made to employees in the Financial Products unit. Make no mistake, had I been chief executive at the time, I would never have approved the retention contracts that were put in place more than a year ago. It was distasteful to have to make these payments. But we concluded that the risks to the company, and therefore the financial system and the economy, were unacceptably high.

To paraphrase the Joker in The Dark Knight:

"Tonight you're all gonna be part of a social experiment. Through the magic of derivatives and counterparties, I'm ready right now to blow you all sky high. Anyone attempts to recoup our bonuses, you all die. Each of you has legislation... to blow up the other political party. At midnight, I blow you all up. If, however, one of you presses the button, I'll let that political party live. So, who's it going to be: Barack Obama's most wanted Wall Street scumbag collection, or the sweet and innocent taxpayers? You choose... oh, and you might want to decide quickly, because the people on the other political party might not be so noble."

With all due respect to Heath Ledger.

Throw Timmy Under The Bus

Henry Blodget takes Timmy The Invisible Boy out back and applies a 2x4 to his forehead as Timmy comes clean to Nancy Pelosi in a letter.

The more troubling part of the letter, though, is Tim Geithner's description of his own approval of the bonuses. He says he registered "strong objections" and then asked for a written legal analysis of why the bonuses had to paid. This does not sound like the behavior a man who has the balls necessary to stand up to the many constituencies that want to roll right over him right now (which is the kind of man we need during this crisis). It sounds like the behavior of a man who is already thinking of how to defend a decision he knows is a bad one.

What Tim Geithner should have said, in our opinion, was "No."

We're also not encouraged by Geithner's defense of AIG CEO Liddy in the penultimate paragraph (people are being unjustifiably mean to him, apparently). Edward Liddy is the CEO of a Fortune 500 company. By now, he should be able to look after himself.

Our concern about Tim Geithner as Treasury Secretary during this crisis is that he's too close to Wall Street to make the kind of decisions that need to be made right now. This exchange bears that out.

In other words, yet another call for Geithner to go. I've been saying that Timmy was always too close to Wall Street to fix this problem from the beginning, but if he actually thinks he can weasel his way out of this and start defending Liddy on the AIG bonus thing, he's toast in every sense of the word.

It's looking very much like Obama's going to have to make a choice damn soon, and that's "Do I throw Timmy under the bus?"

I say Timmy's got to go. Granted, I've been saying that since, oh, November, but now may be the point where he gets the heave-ho.

Nice Bluff, Now Let's See Your Cards

White House Budget Director Peter Orszag isn't backing down on the threat to use a process called reconciliation in the Senate to get the President's agenda through, which would allow the Senate to pass bills with a simple majority of 51 votes instead of having to defeat filibusters with 60 votes.

Peter Orszag, the director of the White House Office of Management and Budget, said the Obama administration would prefer not to use the budget "reconciliation" process that allows measures to pass the Senate on simple majority votes.

Orszag said he wouldn't rule it out, however. The legislative tactic is being considered to push through Obama's global warming and health care programs, and perhaps his proposals to raise taxes on the wealthy.

"We'd like to avoid it if possible," Orszag told reporters at a luncheon in Washington. "But we're not taking it off the table."

Members of Congress are bracing for a political donnybrook should the Democrats use the reconciliation process to sidestep the Republicans and their power of the filibuster in the Senate. Under normal Senate rules, it requires 60 votes in the 100-member Senate to shut off debate and force a final vote. Democrats currently have 58 Senate votes. Under reconciliation, 51 votes can force anything through.

How HORRIBLE! Orszag is throttling the Senate! it's unconstitutional! Why, this reconciliation thing never happens! Republicans would never do that if they were in charge!

Oh wait, not only would they, they did on several occasions.

There is plenty of historical precedent of using it by both parties, including Republican Presidents Ronald Reagan and George W. Bush, who used it force through big tax cuts.

"Pretty much every major piece of budget legislation going back to April 1981, April '82, April 1990, April 1993, the 1990 act, the 2001 tax legislation, they were all done through reconciliation. Yet somehow this is being presented as an unusual thing," Orszag said.

"The historical norm as opposed to the exception is for a major piece of budget legislation to move through reconciliation."

Yep, Saint Ronnie, Poppy Bush and Dubya all used them to jam through tax cuts, as did the Big Dog for his budget in '93 (and that was before Newtie and the Contract With America when, like today, Dems were running the whole show.) Obama will be no different on this, looks like.

Clearly the administration is calling out the Senators' bluff from Friday. Good for them. BooMan has argued several times that the GOP will fall in line and stop obstructing Obama once they understand that Obama will resort to reconciliation to give them zero voice at the table when crafting legislation, just like House Republicans have no real voice right now. Obama has plenty of precedent for it, and the GOP knows it. Ergo, the GOP has to play ball and not only has to stop obstructing the President on principle, but they also have to vote for the legislation they helped to craft if they want any say in where the money goes in the future.

If the GOP were logical, BooMan would be correct. The GOP we're actually stuck with however is counting on a 1994 style revolt in the populace, giving Republicans control of both chambers of Congress in 2010. The only way they can engineer that of course is to completely obstruct the President on everything, force him to take measures like reconciliation, proclaim the economy is now 100% Obama's fault, and then pray the financial system fails badly enough and that enough Americans then lose their jobs in the next 18 months to give the GOP a massive landslide next year. They are executing The Plan. Destroy Obama, Destroy The Country. This, they believe, will convince you to vote Republican in 2010.

We'll see who is right.

[UPDATE] Sensible Centrist Senate Democrats are in fact calling out Orszag on this, saying they have enough votes (8) to kill Obama's agenda even with the 51 vote threshhold of reconciliation. This is getting serious.

StupidiNews!

• AIG CEO Edward Liddy faces Congress in hearings on Capitol Hill today over "outrageous bonuses."
• Protests and flying shoes greet former President George W. Bush as he gives a speech in Canada.
• The provision in the stimulus bill for state legislators to overrule governors on what to do with the money may be unconstitutional.
• Britain faces the fastest monthly rise in unemployment since 1971.
• U.S. universities are seeing the first rise in Computer Science majors enrolled since the dot com bust.