It's All In Your Head

Apparently you'll be glad to know this economic crisis is a mass illusion, and that if folks like you and me would stop believing it, it will go away.

If you think this recession is the worst since World War II, chances are you weren't born or working during the downturns of the 1970s and '80s, you're listening to President Obama too much or you're a white-collar worker in financial services.

If all three are true, you may even think we’re on the verge of another Great Depression.

At this point, the only thing that may be true is your age and employment status.

“The current situation has nothing in common with the Great Depression,” says economist Steve Hanke of the Cato Institute and Johns Hopkins University. “The sooner they [in Washington] stop spinning the bad news story and say nothing, the sooner we’ll be more confident.”

Hanke is not alone in dismissing what appears to be a potent cocktail of misinformation and doom and gloom, wherein the current recession—now in its 13th month—is already considered worse than the 16-month ones of 1973-1975 and 1980-1982.

“We were pretty scared in ’82; things looked horrible for awhile," says Bob Stovall of Wood Asset management and a 55-year veteran of the securities business. “I don’t think you can say it’s worse than then; its different. You have changed the landscape but you did that in the Midwest when you forced a lot of rust-belt companies to the wall."

“This time it's financial firms going out of business, instead of manufacturing ones, and the jobs are going with them," explains Stovall.

Recessions are like The Game, apparently. If you think about it, you've already lost.

I'm sure things will improve any time now, and it's not anything stupid like the Village happy face media blaming the American people. If the economy improves, it's proof that this is all a mental conspiracy launched by George Soros and Barack Obamuslim and he should be impeached, If the economy tanks, it's proof that this is all a mental conspiracy launched by George Soros and Barack Obamuslim and he should be impeached.

Gotta love right-wing logic.

Fili-Busted

Steve Benen has declared war on the Senate filibuster.

Calls for reform are becoming more common. Kevin Drum noted yesterday that there's a problem when "a party can win the presidency, the House, and the Senate by landslide majorities but still can't pass big parts of its program because it needs 60 votes in the Senate." The filibuster, he reminded us, was "never intended to become a routine requirement that all legislation needs 60% of the vote in the Senate to pass."

Matt Yglesias, highlighting this chart, explains the history of the tactic, and notes how this is something of an accident. He concluded, "None of this has ever been a good idea. But when it was genuinely reserved as an extraordinary measure, it was a bad idea whose badness could be overlooked. But as it's become a routine matter, it's become a bigger and bigger problem. It needs to be reformed."

Of course it does. Look at that chart again -- does anyone think last year was a fluke? Or is it more likely the Senate minority will meet or exceed the same number of filibusters in this Congress? And the next?

There are competing ideas. Maybe the number can be lowered from 60. Perhaps there can be some kind of limit on the number of filibusters (kind of like NFL coaches having a limit on how many times they can challenge a referee's call on the field). Maybe senators can be forced to actually filibuster bills, the way they used to before it became easy. Of course, the chamber can also scrap the filibuster altogether.

I don't doubt senators from both parties are reluctant to even consider reform. They should do it anyway.

I agree that the Democrats should hold the Republicans to actually filibustering bills. But it's important to note that some bills really do need sixty votes to pass...and the stimulus bill was one of them. It was in fact the waiver of the existing budget, and that requires three-fifths of the Senate to do.

Still, the GOP will in fact filibuster everything else they can unless the Dems make doing so exceedingly annoying.

When You're Losing, Double Down Again

Coming off their embarassing defeat at the hands of Obama on the stimulus package, with the President going out of his way to deal the Republicans in only to have his hand bitten off in a series of petulant tantrums, the GOP has decided to resort to whining like kindergartners.

Top Republican lawmakers Sunday called on President Obama to change his political strategy, arguing that the passage of a massive stimulus bill on a party-line vote showed he has failed to deliver the "change" he promised.

"If this is going to be bipartisanship, the country's screwed," Sen. Lindsey Graham, R-South Carolina, told ABC's "This Week." "I know bipartisanship when I see it."

Sen. John McCain, R-Arizona, said Obama was off to "a bad beginning," out of step with the vow of bipartisanship both men made after Obama beat out the Republican presidential nominee for the White House in November.

"It was a bad beginning because it wasn't what we promised the American people, what President Obama promised the American people, that we would sit down together," McCain told CNN's "State of the Union With John King."

We call this working the Village, folks. Nobody outside the beltway is buying this crap, but you'd better believe the insular, clueless Village media is going to eat this up.

The End Of GM?

With the deadline for the auto industry's viability plans looming on Tuesday, it looks like GM's plan will be bankruptcy.

General Motors Corp, nearing a Tuesday deadline to present a viability plan to the U.S. government, is considering as one option a Chapter 11 bankruptcy filing that would create a new company, the Wall Street Journal said in its Saturday edition. "One plan includes a Chapter 11 filing that would assemble all of GM's viable assets, including some U.S. brands and international operations, into a new company," the newspaper said. "The undesirable assets would be liquidated or sold under protection of a bankruptcy court. Contracts with bondholders, unions, dealers and suppliers would also be reworked."

Citing "people familiar with the matter," the story said that GM could also ask for additional government funds to stave off a bankruptcy filing.

GM declined to comment, the story said.

Contract talks between GM and the UAW have broken down as well over the weekend, making bankruptcy more likely than ever.

By the end of the week, there may not be a Big Three anymore.

The GOP Is Losing It

I'd argue the GOP never had it, but John Cole over at Balloon Juice puts up an excellent summation of the Republican disaster:

But, for whatever reason, the GOP simply can not figure it out. Michael Steele, the new RNC chairman is busy telling everyone there is absolutely no reason for anyone to trust the GOP, while the rest of them are spending their time running around comparing themselves to the Taliban. The reason Steele felt compelled to announce that the GOP can not be trusted is because everyone agrees they can not be trusted. He was merely stating the obvious. Rather than try to build trust, though, rather than sit back and take a breather, compose themselves, and plot a way forward for both the country and the GOP, the Washington Republicans seem intent on committing seppuku. Instead of rebranding themselves and putting forth an alternate vision, they seem to think that unified obstructionism based on the hope that things get worse is the real way forward for them. And they don’t realize that everyone sees through it.

The rest of the country figured it out...well, most of the rest of the country, anyway. There's still maybe a quarter of the US that believes this crap. But the political middle isn't buying it any more. Seven years or so after 9/11, when the GOP said something, that was the reality both inside and outside Washington. Katrina changed all that. People realized the GOP had no credibility in outside, everyday life anymore. Fifteen months later the Democrats were in charge of Congress, and then another two years put them in the White House too.

Republicans swore up and down that this was the best economy ever, and people started to look at their paychecks and saw the fact they hadn't gotten a raise in four years but in that same period of time their health insurance premiums went up 20%, and their 401(k) lost money. Nobody gives a damn about the Terror Threat Color Code of the day when the biggest employer in the county just laid off 8,000 people with no intention of ever coming back. They realized the GOP is full of shit and has been using them for years. As one friend told me, "We can spend trillions on a war with Iraq, but we can't spend a fraction of that on America."

So now at least Obama is trying. The Republicans are assuming that the Village reality, the one inside the beltway, is the same as in the heartland and the valleys and the plant towns and the farms.

It's not. GOP hasn't gotten that yet.

Having Your Cake And Throwing It At The President, Too

Gotta love Republicans.

What is at least a little surprising, though, is seeing some of the same Republicans who rejected the package issue press releases touting the spending measures in their districts.

Rep. John Mica was gushing after the House of Representatives voted Friday to pass the big stimulus plan.

"I applaud President Obama's recognition that high-speed rail should be part of America's future," the Florida Republican beamed in a press release.

Yet Mica had just joined every other GOP House member in voting against the $787.2 billion economic recovery plan.... Mica wasn't alone in touting what he saw as the bill's virtues.

To be fair, it's hard to say just how common this was yesterday; the McClatchy article only points to a couple of examples of the GOP hypocrisy.

But it's nevertheless amusing. In Mica's press release about the stimulus package, for example, he not only applauded the spending for his district, he neglected to mention altogether that he opposed the bill. Rep. Don Young (R-Alaska), who also issued a press release claiming "victory" for an Alaskan contracting program in the bill, also failed to mention that he voted against the measure that he's so excited about.

Yep, that's right...Republicans in the House taking credit for the stimulus bill they unanimously rejected.

How stupid do they think the American people are?

[UPDATE] This anti-reality denial mindset extends to the Senate as well, where Arlen Specter whines his GOP buddies really, really wanted to support it, they just couldn't vote for it because they're just too darn scared of the Wingnut Attack Squad Anti-Traitor Elite Unit Team Go! I believe him. The GOP hasn't changed a bit. Rush and Malkin are still in charge.

Yeah, this is a political party I want to join, where the frothing nutjobs with microphones swearing revenge and pain and lasers are in fact running our public policy.

The Swedish Solution

Nouriel Roubini and fellow NYU professor Matthew Richardson take to the WaPo to push for Plan N. The details:

Nationalization -- call it "receivership" if that sounds more palatable -- won't be easy, but here is a set of principles for the government to go by:

First -- and this is by far the toughest step -- determine which banks are insolvent. Geithner's stress test would be helpful here. The government should start with the big banks that have outside debt, and it should determine which are solvent and which aren't in one fell swoop, to avoid panic. Otherwise, bringing down one big bank will start an immediate run on the equity and long-term debt of the others. It will be a rough ride, but the regulators must stay strong.

Second, immediately nationalize insolvent institutions. The equity holders will be wiped out, and long-term debt holders will have claims only after the depositors and other short-term creditors are paid off.

Third, once an institution is taken over, separate its assets into good ones and bad ones. The bad assets would be valued at current (albeit depressed) values. Again, as in Geithner's plan, private capital could purchase a fraction of those bad assets. As for the good assets, they would go private again, either through an IPO or a sale to a strategic buyer.

The proceeds from both these bad and good assets would first go to depositors and then to debt-holders, with some possible sharing with the government to cover administrative costs. If the depositors are paid off in full, then the government actually breaks even.

Fourth, merge all the remaining bad assets into one enterprise. The assets could be held to maturity or eventually sold off with the gains and risks accruing to the taxpayers.

The eventual outcome would be a healthy financial system with many new banks capitalized by good assets. Insolvent, too-big-to-fail banks would be broken up into smaller pieces less likely to threaten the whole financial system. Regulatory reforms would also be instituted to reduce the chances of costly future crises.

The more I see about Plan N, the more I believe Geithner and Obama will have no choice but to go this route. Yes, it includes the dreaded "bad bank" there as step 4, but remember, the main problem of "bad bank" is the quandary that there's no price that can be paid for these toxic assets that both keeps the insolvent banks afloat and isn't a complete waste of taxpayer money. If you nationalize the insolvent banks beforehand, the moral hazard of the first half of the unsolvable "bad bank" equation vanishes, and you only then have to worry about getting the taxpayers a good deal, which is much easier.

Of course, "good deal" in this case is relative. They're still crap and will remain crap for a long time.

Still, this is the clearest argument yet for Plan N, how it would be executed, and why it should be so (read the whole thing).

Ironically the main argument I'm seeing against Plan N is not the argument you'd expect. People are yelling that nationalization is evil, that it's fundamentally against the free market and all that. That argument is dead and buried after the multiple wave of taxpayer bailouts are now the only thing keeping these zombie banks going. They are already effectively nationalized and would be gone without the bailout billions, period. There's no argument against that.

Rather, again, it's the political argument, as I've said. Obama can't nationalize the banks because of the political backlash. But eventually, the political backlash of the failure of the economic system in this country will exceed that of Plan N, and when that happens, he has no choice.

The argument then becomes when he'll do it.

Al Versus Norm, Part 275

The Senate Race That Will Not End came much, much closer to actually ending this week with a major ruling against Norm Coleman.

The Minnesota election court has just handed down a very important ruling that will determine the entire course of the rest of this trial -- and it's very bad news for Norm Coleman, cutting off multiple avenues he was pursuing in order to get more votes for himself thrown into the count.

Yesterday the court heard arguments regarding the campaigns' positions on 19 categories of rejected absentee ballot envelopes, and whether the voters should be cut sufficient slack as to allow the ballot in. The court has now handed down a ruling on 13 of those categories -- and it's an emphatic No.

Coleman has currently been allowed to argue for the inclusion of about 4,800 ballots, which were selected from the total pool of over 11,000 rejected votes and just so happen to come largely from his own strongholds. What this ruling means is that he is going to have to significantly chop that list down for the remainder of this trial.

This is not the final word on this question -- Coleman will almost certainly appeal it -- but it's been a very rough day.

When Coleman finally runs out of avenues for his bullshit arguments and has to take it to the Supremes, I hope they tell him "Sorry, this is a state matter. You lose, sir. Good day."

This Week's Busted Banks

If it's Saturday morning, it's time to check to see how many banks the FDIC put under last night, and the answer this week is four.

Banks in Florida, Illinois, Nebraska and Oregon were shut by state regulators, boosting the toll of failed institutions to 13, as a worsening economy and slumping housing market pushes home foreclosures to records.

Riverside Bank of the Gulf Coast in Cape Coral, Florida; Sherman County Bank in Loup City, Nebraska; Corn Belt Bank and Trust Co. of Pittsfield, Illinois; and Pinnacle Bank of Beaverton, Oregon were closed by state regulators yesterday. The Federal Deposit Insurance Corp. was named receiver.

TIB Bank of Naples, Florida, will buy Riverside’s $424 million in deposits, except $142.6 million in brokered deposits, for a 1.3 percent premium. Heritage Bank of Wood River, Nebraska, will pay a 6 percent premium for Sherman County’s $85.1 million in deposits. Carlinville National Bank of Carlinville, Illinois, will assume Corn Belt’s $234.4 million deposits for a 1.75 percent premium. Washington Trust Bank of Spokane, Washington, assumed Pinnacle’s $64 million of deposits, the FDIC said.

Regulators seized six banks in January, the highest monthly toll since 1993. State and federal agencies shuttered 25 banks last year, matching the combined total for 2001-2007, as home foreclosures soared and bank profits tumbled.

That last paragraph should scare the ever-loving snot out of every American who has a bank account.

From 2001-2007, the FDIC closed one bank on average roughly every 102 days. That's normal, baseline stuff.

In 2008 the FDIC closed one bank on average every 15 days, almost 7 times the going rate.

In 44 days through 2009 so far the FDIC has closed one bank on average every three and a half days. That's thirty times as many bank closings as just a few years ago. Thirty times. We're on pace to close 108 banks alone just this year.

We've gone from closing 3 banks a year to closing 3 banks a week recently. The pace is accelerating at an alarming rate.

Obama will have no choice but to nationalize the industry. Dozens, maybe hundreds of banks are zombies. They will not make it. They are insolvent, people. The industry is insolvent. The financial system is insolvent.

The country is insolvent.

StupidiNews, Weekend Edition

• Venezuela has kicked out a Spanish EU diplomat over describing Hugo Chavez as a "dictator".
• Blackwater has renamed itself "Xe" in an effort to rebrand after Iraqi deaths.
• Another wave of violence rocks Iraq as a third straight day of attacks kills dozens.
• The Donald says "You're fired!" to himself as he resigns ahead of Trump Entertainment's possible bankruptcy.
• Researchers may have broken the terabit data transmission barrier with photon technology.

Even A Broken Grandfather Clock...

Politico: Nobody Could Have Predicted(tm) that the House GOP would unanimously vote against the stimulus bill!

You know, except that I predicted it.

I've said time and time again that the House GOP never had any intention of voting for Obama's plan to fix the economy whatsoever. They were always going to oppose it, they were always going to obstruct it, they were always going to do everything they can to sink it with the intention that they fully expected the economy to come apart at the seams.

Not holding my breath for Politico to give me a job or even acknowledge I exist. I'm a fourteenth-string blogger with a readership of, well, you three.

But, you know, I was right. Suppose mathematically I had to be eventually.

[UPDATE] Looking over the last couple weeks, a lot of folks thought the Republicans were going to cave in the House, including BooMan.

When the House votes on final passage of the stimulus bill, somewhere near two dozen Republicans are going to vote for it. That was the point, despite the fact that no one gives a shit what the House Republicans think. We care about what the public thinks. And Obama is already talking to the people by blasting Republicans with ads in their districts. Yesterday's vote was not the final vote.

Hate to say I told ya so, bro, but...there you are.

The problem is you can't keep assigning logical characteristics to GOP behavior when you should be assigning mental illnesses from the DSM-IV.

One Last Step Before The Journey

Stimulus passes the Senate, 60-38, or will as soon as Ohio's Sherrod Brown arrives from his mother's funeral. Wingnuts are already predicting the end of America's economy and a GOP sweep in 2010.

Gonna file THAT prediction away.

Definition Of Insanity

Albert Einstein is credited with the saying "The definition of insanity is doing the same thing over and over again and expecting different results." Think Progress catalogs Obama's growing insanity over bipartisanship:

– What Obama did: Trusted Judd Gregg when he indicated that, “despite past disagreements about policies, he would support, embrace and move forward with the president’s agenda.”

– What Obama got in return: A “change of heart” from Gregg, who said that he “couldn’t be Judd Gregg” at Commerce.

– What Obama did: Reached out to have dinner with right-wing pundits Bill Kristol, Charles Krauthammer, and David Brooks.

– What Obama got in return: A ripping from his right-wing friends, who called it the worst in “galactic history.”

– What Obama did: Tried to work with the House GOP by preemptively including tax cuts, stripping stimulative spending proposals, and attending their conference meeting.

– What Obama got in return: Zero votes (and a bunch of false myths about his plan)

– What Obama did: Tried to reach out to John McCain to work together on “solving our financial crisis.”

– What Obama got in return: Nothing. McCain voted against the legislation, and even went so far as to call it “generational theft” and hypocritically complained that it contained “corporate giveaways.”

Obama got burned every single time he tried, and this was just in the span of roughly three weeks. The good news is Obama has learned his lesson. Now the hard part begins.

A Little Exposition Music, Please

If you're just joining us, here's the plan for Team Obama:

1. The Bank Bailout Plan
2. The Stimulus Bill
3. The Foreclosure Relief Package

Obama is counting on a combination of all three to get us out of the mess. First, the bailout. This is the part I like the least, as the total cost of it seems to be around $2.5 trillion and nobody seems to be sure exactly what it does. We do have some broad details, like that the plan contains an effort to assess how strong the remaining banks are and determine what needs to be done to save each bank, if anything.

It's this part of the bank plan that actually may be the true thrust of the effort to save the banks. The theory is that banks found wanting will be dealt with harshly, while at the same time announcing which banks are healthy will assure the public. It's a possible road to Plan N, the nationalization of the banks. It's also the first real inkling we have that Obama and Geithner may be ready to make tough decisions about which banks stay and which are gone. My only real problem is that I don't think any of the banks are solvent at this point, certainly not Citi or Bank of America, and certainly not any of the regional banks like Regions Bank, SunTrust, or Fifth Third. A lot of banks are going to go away very soon regardless. Jury's still way out on this one.

Second is the stimulus bill. This one will most likely be on the President's desk on Monday, he'll sign it, and we'll get started. My major issue is that the spending part of the bill is far, far too small (especially after anti-stimulus tax cuts.) However, economists say there will be 3 to 4 million additional jobs created from this bill. That's good news, because we've already lost 3.6 million jobs since December 2007, and 2.6 million in just the last five months alone.

But that's assuming the pace of the job creation will be able to overcome the job losses period. We're up to the point of losing 600,000 jobs a month now, and the stimulus is expected to work over a period of two years. Granted, it'll help, but the reality is it'll be a while before this bill starts kicking in the jobs and slowing down the rate of losses. Will it be enough?

Finally, the foreclosure package. Details on this get announced Wednesday, but the gist is a standardized process to get homeowners payment relief and the chance to refinance to a rate both banks and homeowners can live with. There's pretty widespread support for this, mainly because the banks don't want to get stuck with foreclosed homes they can't sell that are falling in value any more than homeowners want to get kicked out on the streets. Foreclosures are lose-lose for everybody right now.

The good news is that even the GOP would be mega stupid to block this, which means they will, saying that all the people that will benefit are poor broke-ass minorities or something that will knock another 10% off their already sub 35% ratings. The bad news? This is something that needed to have been done a year ago. Now it's still critical, but it may again be too late.

We'll see what happens.

Screw It, Let's Go Get A Burger

Josh Marshall tosses in the towel on this whole bipartisanship garbage.

So John McCain says that Obama needs to work on bipartisanship, which is about par for the course from McCain and for other Republicans these days. I just heard a reporter on MSNBC say that the Republicans have emerged from this battle with their reputation for fiscal discipline strengthened while Obama has had his reputation for bipartisanship tarnished.

Josh, compadre, two things:

1. Fifteen years ago a generation of reporters made their bones off the backs of making Bill Clinton's life miserable. Clinton played the bipartisanship card, the GOP kicked him square in the balls, and the Village chimed in at the right times and pointed and laughed. Since then they've been the cool kids. They stick with what they know, and what they know is the GOP will bend over backwards to utilize them as power brokers.
   
2. And they like being the cool kids. Once you point out the Village doesn't matter, all the cool vanishes. They see Obama's Youtubery and transparency and intertoob useage as a direct threat to their gatekeeper status of What America Is Thinking. They keep telling the masses what they should think, but the masses already read the story in three different places on the 'net this morning and are going "Man, this guy is full of crap."

They hate being left out of the loop.

For my part, I don't think there's any problem with having party line votes where both parties really fundamentally disagree on the policy question at hand. But to the extent that there's a question of who's making an effort to operate in a bipartisan manner, this one is really not even close. Reporters' idea that the entire 'bipartisan' enterprise is Obama's responsibility, as though Republicans, in their depleted state, actually get to dictate the content of bills -- I don't think people buy that. Which is probably why Obama's still really popular and congressional Republicans are extremely unpopular.

You think the Village will catch on that they are backing the losing side? I don't. I think the Village enjoys the fact that they need the GOP as much as the GOP needs the Village. The Democrats? They don't depend on the Village nearly enough.

Better to help the GOP and maintain the power structure of the Village than to help Obama and get bypassed by the net.