Timmy Got Fingered

Yesterday, Chris Dodd fingered Timmy The Invisible Boy for instructing Dodd to take out the anti-bailout bonus provision in the stimulus package. Today, Timmy confirmed the story.

Treasury Secretary Timothy Geithner confirmed Thursday that the department did talk to Sen. Chris Dodd about a clause he put forth in the stimulus legislation that would have strictly limited executive bonuses.

A loophole in the bill allowed bailed-out insurance giant American International Group to keep its bonuses.

The Treasury Department was concerned that legislation that would restrict contractual bonuses would not hold up to legal challenges, Geithner said in an interview with CNN's Ali Velshi.

"We expressed concern about this specific version. We wanted to make sure it was strong enough to survive legal challenge," Geithner said.

To reiterate, the fact that AIG got bonuses has actually nothing to do with me wanting Timmy gone. I know bitching about AIG getting $175 million in bonuses is literally chump change compared to the $1.2 trillion the Fed just printed up. The two reasons I do want him gone are A) he designed the TARP bailout in the first place, and now B) he's been caught lying about knowing about the bonuses.

Tender your resignation, please.

Six Years In

And this is the worst news I've seen all day, as I am reminded that today marks the sixth anniversary of the beginning of the Iraq War, which should be over sometime before its eighth anniversary.

We hope.

Afghanistan on the other hand, who the hell knows how many more years we'll be in there.

Plan N Is Looking Like A Go

This news is the best I've seen all day.

The White House and Congress are rushing to write legislation that allows the federal government to take over and unwind the businesses of a large financial institution—such as AIG or Citigroup —the way it now can with commercial banks, CNBC has learned.

The regulatory authority—similar to the FDIC’s so-called bridge bank powers—was originally expected to be included in a broader reform package addressing systemic risk. But now it's being crafted as stand-alone legislation in the wake of the public uproar over the AIG executive bonuses.

The legislation, being spearheaded by House Financial Services Chairman Barney Frank (D-Mass.) could be ready for mark-up before Congress’ spring recess, which starts April 6, according to a senior Congressional staffer. A public hearing is also expected.

“The President has asked us to fast-track,” said the source. “Drafting is going on at both ends of Pennsylvania Avenue.”

The President Wednesday referred to the pressing need for such authority “get a proper mechanism in place,” adding he had discussed the issue with Rep Frank. It is unclear who is handling it on the Senate side, but it would presumably come under the portfolio of the Finance Committee, chaired by Chris Dodd (D-Conn.)

“What we are working on is a resolution authority that would be similar—not identical, but similar to the powers that the FDIC currently has over banks,” the President said in his comments about the AIG uproar.

FDIC Chairman Sheila Bair Thursday told Congress that the government’s policy of bailing out firms because they were too big to fail had to be replaced.

This is precisely the type of legislation needed to make Plan N a reality. I applaud the effort, for once it looks like both Obama and Congressional Democrats are taking this seriously. No more bailouts, go straight to nationalization, take the bad banks over and unwind them or break them up, and sell off the assets.

This is fantastic news, and getting this legislation on the President's desk ASAP will be the best thing for the country. Obama needs to turn around and have the FDIC use this authority and use it often. Take these bad banks and put them down.

Excellent, excellent news. It means Plan N is a go.

A Trip To The Chopping Maul

I keep telling you guys that the worst is yet to come as the commercial real estate market continues to collapse. General Growth Properties owns dozens of malls across the country, including the local mall where I live here in northern Kentucky. They're basically on the verge of complete bankruptcy now.

Standard's & Poor's Ratings Services lowered its credit ratings on General Growth Properties Inc. on default, a day after the debt-laden mall owner let a due date for $395 million in bonds pass without payment.

The nation's second-largest mall owner by number of properties, which is trying to coax its bondholders into a nine-month extension, is hoping holders of the past-due bonds will forgo filing an involuntary bankruptcy petition against it and instead allow it to restructure its $27 billion debt load out of court.

Some investors, however, consider a bankruptcy filing likely. A bankruptcy filing by General Growth would be one of the largest for a real-estate company.

S&P, meanwhile, lowered its corporate credit line to D from CC and its rating on the company's unsecured debt to D from C, affecting about $5 billion of rated debt.

"While the company has not filed for bankruptcy protection, Standard & Poor's rating criteria indicates a 'D' rating when an interest or principal payment is due and is not paid," said S&P analyst Linda Phelps.

Moody's followed suit as well, reducing it to one step above default. GGP is done for, folks. Bankruptcy for these guys will only be the beginning of the collapse of the commercial real estate market, potentially closing thousands of stores, offices, hotels, and malls and putting millions out of work. The American consumption economy is over, folks. Americans are scaling back massively on spending, credit card companies are warning of record default rates, and this means the retail sector is going to be crushed over the next year. Even if the residential real estate market stabilizes, the commercial one will cause another massive wave of problems for everyone.

Bankruptcy for GGP is imminent. If they can't work out a deal, that's literally a hundred or so malls at risk of closing. You figure 1,000 employees a piece, that's a million folks out of work right there.

Keep an eye on GGP. It's only the start.

On Record As Stupid

The House is voting right now on the bill to tax bailed-out bonuses at 90%. Due to procedures (this would be a suspension of rules vote) the bill would need a two-thirds supermajority to pass, which means House Republicans do have the means to kill the bill and then stab themselves in the face as Steve Benen points out.

House Minority Leader John Boehner (R-Ohio) is drawing fire this afternoon for opposing a measure to recoup AIG bonus money, after complaining all week about how outrageous the bonuses are. House Democrats are on the offensive.

A spokesperson for GOP House leader John Boehner confirms that he will be voting No on a measure being introduced by House Dems today to slap a 90% tax on bonuses paid to AIG execs with family incomes topping $250,000 -- and a senior Democrat on the Senate side blasted him for expressing "manufactured outrage" about the AIG controversy.

Senate Dems are demanding to know whether Boehner's opposition -- which doesn't matter much on the House side because of the Dems' lopsided majority -- signals that GOP leaders will oppose the measure in the Senate, where the Dem margin is much slimmer.

"He will vote 'no' on the Democrats' bill, which will recoup some of the AIG bonus money eventually," Boehner spokesperson Michael Steel emails me. "He supports the House Republicans' better alternative, which would recoup all of the money immediately."

Right, and what's the "Republican alternative" on this? It's a non-binding resolution asking the Treasury Department to figure out a way -- the GOP's bill doesn't specify -- to recoup the money AIG paid in bonuses. Seriously, that's it. The "alternative" bill basically just passes the buck, telling Treasury Secretary Tim Geithner, in effect, "We don't have a policy per se, but be a mensch and go get all the money back." That's the "better" Republican "alternative" to the Democrats' plan to recoup the money through taxes.

And if Geithner didn't figure out a way to get the money back? Nothing happens. This, Boehner believes, "would recoup all of the money immediately."

And Republicans wonder why it's so difficult to take them seriously on policy issues.

Plus there's the added bonus of Republicans going on record refusing to get bonus money back, which will pretty much end them. The Wingnuts have gone off the Galt cliff, and have pretty much turned themselves into complete fools over this issue.

On the other hand, we still have the multi-trillion dollar problem of the bailout itself, which is what both parties should be passing laws on right now rather than feigning outrage at each other. Let's recover 90% of the bailout cash.

Hopefully we can move on and get the problem taken care of (cough Timmy cough).

[UPDATE] The House indeed passed the measure 328-93, well more than the two-thirds needed. We'll see what the Senate does.

America Is Already Bankrupt

One of two things is going to have to happen to our economy, either deflation, or hyper-inflation. Right now we're in deflationary mode with the housing death spiral, but odds are pretty good that Helicopter Ben will try to inflate our way out of this mess. Remember, our total debt including treasuries is over $50 trillion. Our economy is barely a fourth of that.

To make up the difference, we're going to be forced to hyper-inflate the dollar all to hell as Hong Kong's Puru Saxena explains.
Saxena's not kidding. No democracy ever defaulted, they always inflated out of the mess. The value of the dollar is going to disintegrate and our standard of living will go along with it. We will have to pay China, Japan, and the Gulf oil states back the trillions we owe them or default. They will not be able to afford our debt much longer. When they come calling, our time is up.

The Forest For The Trees

I agree with TPM's David Kurtz: Obama's guys don't seem to get how truly pissed people are at AIG and how they have latched onto it as a symbol of everything that is wrong with the bailouts so far. David Axelrod saying stuff like "People are not sitting around their kitchen tables thinking about AIG" is flat out wrong. People are very much thinking about AIG, and what Obama is going to do to stop them.

Whoever ends up on the wrong side of this (AIG's side, fair or not) is going to pay dearly in the court of public opinion. The Wingnuts are already finding this out. The GOP is following suit. Obama needs to stay on the path.

[UPDATE] The Congressional Budget Office says AIG can't pay back those billions. This problem is not going away. Plan N, please!

If It's Thursday...

...It must be yet another record high for people on unemployment benefits again.

The number of U.S. workers drawing state unemployment benefits scaled another record high early this month, according to government data on Thursday that highlighted the difficulties of getting new jobs in the recession-hit economy

However, the number of people filing new claims for jobless benefits fell to a seasonally adjusted 646,000 in the week ended March 14, the Labor Department said, still at levels consistent with a distressed labor market. The prior week's number was revised up to 658,000 from 654,000.

Analysts polled by Reuters had forecast 652,000 new claims.

650,000 new jobless each week is not good, and with a staggering 5.47 million people on benefits now, it's just getting worse. 4.1% of American workers are now on benefits, the worst since June of '83.

It will continue to get worse for a long, long time.

The Wrong Side Of History

As I pointed out on Tuesday, the wingnuts are happily lining up on the wrong side of this AIG issue. Now we see the Grand Kleegles of Galtism have weighed in, as Doug at Balloon Juice reveals.

This is kind of interesting, given the negative reaction from GOP Congressional leaders (from Greg Sargent via Sully):

Rush Limbaugh recently said: “I am all for the AIG bonuses” and attacked the Obama administration for trying to undo them. He also blasted Dem efforts to get the names of the AIG bonus recipients as “McCarthyism.”

Fox News followed suit, also comparing Dems to “Joe McCarthy.” And Sean Hannity has now derided efforts to tax the execs by saying: “In other words, we’re going to just steal their money.”

And here’s Glenn Beck:

They have a contract. You want to break a contract, then you file Chapter 11. You let the company fail. If the government can just break a contract, well, then how do you know you’re safe? It’s their contract with AIG that they would have to break first! They would have to break two contracts, the one they made with AIG that Christopher Dodd wrote and then they would have to break the contracts that AIG broke. They have to break two contracts. “Well, if I can’t trust the United States government and their contract, why should I trust their money. Why should I trust the treasury. Why should I trust the Fed. I know I can’t trust Washington and congress and the White House. I haven’t been able to trust them for years.” Why should you trust the contract that you have with your boss? Why should the unions be able to trust their contract?

Nice. In other words, El Rushbo, The Manatee, and Doom Bunker are all lining up behind AIG on this. The natural question to now ask is "When will the GOP do a complete 180 and vote against the House measure to tax bailout bonuses by 90%?"

Oh please, please, please let the GOP fold under the weight of Rush's ego on this and start backing AIG. PLEASE. You want to talk about the end of the GOP...

[UPDATE] Ask and ye shall receive!

Republican leaders today slammed a Democratic bill that would tax the now-infamous AIG bonuses out of existence, but it's not clear if Republicans are completely unified in their opposition.

House Minority Leader John A. Boehner (R-Ohio) called the bill “nothing more than a sham” and an effort to cover up for “the damage that’s already out there.”

But Boehner was quick to point out that he's not pushing for party unity on this bill. The Republican Study Committee this morning sent out a notice encouraging conservatives to vote against the bill, but Boehner is not trying to enforce that message.

"We're not whipping," Boehner said. "Members will make their own decisions."

House GOP Conference Chairman Mike Pence (R-Ind.), meanwhile, called the bill a “cynical attempt to divert attention from the truth: that Democrats in Congress and the administration approved legislation that made these payouts possible."

My lord, can the Republican Party really, really be this stupid?

Coulda At Least Sent An E-Mail

Front pager of today's WaPo: Helicopter Ben's crew knew about AIG and didn't tell Timmy or the Boss.

Federal Reserve officials knew for months about bonuses at American International Group but failed to tell the Obama administration, according to government and company officials, exposing problems in a relationship that is vital to addressing the financial crisis.

As pressure mounted on AIG employees to return the bonuses, new details emerged yesterday about what the Fed, the Treasury Department and the White House knew regarding the payments and when. AIG executives said the Fed was informed three months ago by the company that it would pay $165 million by March 15 to employees working at its most troubled division. The Treasury and White House said they learned of the payments from Fed officials only days before they were due.

So really, Helicopter Ben's the guy we should all be mad at then? Not necessarily...

Although Treasury Secretary Timothy Geithner told congressional leaders on Tuesday that he learned of AIG's impending $160 million bonus payments to members of its troubled financial-products unit on March 10, sources tell TIME that the New York Federal Reserve informed Treasury staff that the payments were imminent on Feb. 28. That is 10 days before Treasury staffers say they first learned "full details" of the bonus plan, and three days before the Administration launched a new $30 billion infusion of cash for AIG.

"Treasury staff was informed about the new bonuses in a Feb. 28 memo that the March 15 [bonus-payment] date was upcoming," a Federal Reserve source tells TIME. A Treasury Department source, speaking on background, confirmed the e-mail memo and its contents, saying, "Everybody knew that [AIG] had a retention issue."

So Timmy knew for at least a couple of weeks. Lots of finger pointing, lots of not telling the President, lots of egg of faces. Gets worse for Timmy too.

The Treasury Department official says the fault appears to lie with career staffers at the department who failed to report the imminent bonus deadline up the chain to Geithner. This failure may be a by-product of the difficulty Geithner has had staffing up at Treasury. But he still has personal vulnerability on the issue. It was Geithner, as head of the New York Federal Reserve, who negotiated the AIG bailout last September. At that time, he could have sought to get bonuses repealed as part of the massive government loan.

And frankly no matter how you looked at it, Geithner (having negotiated the deal for AIG's bailout including keeping its bonuses) knew exactly what was going down: it was his deal in the first place.

If the e-mail chain shows Geithner knew and then, you know, lied to Congress about it, he's gone. Worst case scenario: Obama pulls a Gonzo and claims executive privilege on Timmy's e-mails, which would drop the President's approval ratings by about a third. Best case scenario, Geithner falls on his sword and Obama follows Oliver Willis's advice:

On the off-chance that does happen, just send a car for Professor Krugman.

In the Kroog we trust.

StupidiNews!

• New Mexico Gov. Bill Richardson has repealed that state's death penalty.
• Obama's plan for Afghanistan could involve doubling the number of troops there.
• Companies are doing an end run around layoff announcement laws in Charlotte.
• The House plans to vote on taxing bailout bonuses for a number of companies by 90%.
• IBM plans to make a move to buy out rival Sun Microsystems, but what does Big Blue really get?