There’s also this from Brad DeLong:

http://delong.typepad.com/sdj/…..chism.html

Mike Whitney at http://www.counterpunch.org in “Geithner’s Hog Wallow” writes today about how BofA and Citigroup are already gaming the system by buying up mortgage backed securities in the secondary market with the expectation that Geithner’s scam bailout will create a nice turnaround profit. In Whitney’s words: “Bank of America and Citigroup have angled their way to the front of the herd, thrusting their snouts into the public trough and extracting whatever morsels they can find amid a din of gurgling and sucking sounds.”

Desmond Lachman chimes in as well: “The parallels between U.S. policymaking and what we see in emerging markets are clearest in how we’ve mishandled the banking crisis. We delude ourselves that our banks face liquidity problems, rather than deeper solvency problems, and we try to fix it all on the cheap just like any run-of-the-mill emerging market economy would try to do.”

First. The rich aren’t like me and you, they have lots of money. Second. They hate you. Got it?

enable banks to start lending, which they have been reluctant to do.”

here’s who to “enable” these banks;

1) take away their tarp funds

2) create a new fund of money that is to be used for lending, only for lending, and lent only to the undustry we want to stimulate.

they get the commisions we set, no more, if they want to getless that’s up to them

bing, problem solved

then if they want to use their shareholder’s money to go and shine their nails, buy planes or give themselves rediculous “bonuses” their share holders can provide the oversite

DIGG IS OPEN

Thank you, Jane. At your last diary about Holder continuing Bush’s discrimination ‘policy’, I left a suggestion that you pass on your diary to Rep. Elijah Cummings. (I know, you probably already have…just making sure)

joseph stiglitz:

Quite frankly, this amounts to robbery of the American people. I don’t think it’s going to work because I think there’ll be a lot of anger about putting the losses so much on the shoulder of the American taxpayer.

The full Brad DeLong interview is here at The Week. Bottom line?

Q: What if this goes wrong? What if the public-private investment portfolios don’t earn nine percent or four percent per year — or even lose value at one percent per year? What if instead they lose value at a rate of 10 percent per year so that in five years the government loses half its money?

A: Then we have worse things to worry about than government losses on TARP-program money–for we are then in a world in which the only things that have value are bottled water, sewing needles, and ammunition.

I called both of my Senators’ offices this morning urging full-blown (read: Real) hearings on the financial services bailout. I also stated in no uncertain terms what a joke I thought the Frank Committee hearings were. “We’ll pass along your message”, was the canned response.

You bet.

i love it when delong’s commenters tear his post apart (which they have been doing for years now when he defends the D corporatists).

But, there is a pressure point.

Q: But if even the Obama administration thinks this plan will accomplish only 3/4 of the job, why aren’t they doing more? Why not do the entire job?

A: Voinovich.

Q: Voinovich?

A: Republican Senator George Voinovich of Ohio is the sixtieth vote in the Senate–the one required to close off debate, avoid a filibuster and move to a vote on final passage of a bill. If the Obama administration wants to do anything that requires legislative action, it needs Voinovich and 59 other senators on board. The White House’s legislative tacticians appear to think that 60 senators are not on board–especially after last week’s AIG scandal. The Geithner Plan is something the administration can do on authority it already has. Doing more would require a congressional coalition that, at present, does not exist.

As we speak Obama is still trying to turn around a rudderless Titanic when all sane people are abandoning ship. This is the time to start building a ‘NEW’ ship. Heaven help us!

Hi Jane,
Above, you quote Paul Krugman: I believe that it represents the failure of a whole model of banking,…
I know that this whole failure didn’t happen overnight and that it must be terribly complicated. And, it doesn’t make be feel incompetent be confused because if it were going to be easy to fix, someone with Krugman’s background would spell out the easy solution to fix this mess.
So, can you explain to me how a wholly new model of banking can be put in place? Is that even possible? Must we wait for a slow conversion to happen.
Thanks in advance.

Boy do we need Al Franken. Real bad.

Thanks for your suggestion to me yesterday.

i don’t think that’s true (not doubting you, just don’t by the 60 vote excuse) because:

1) they could have written their won filibuster rules at the beginning of the 111th congress and chose not to.

2) they’ve been supporting a blank check bankster’s bailout since before the elections – remember tarp was passed without accountability, transparency or any re-regulation. and it was designed not to affect bankster’s compensation. hell, there was even a conference call from treasury and to 800 wallstreet friends the weekend before the vote to explain it.

http://www.netrootsmass.net/20…..r-28-2008/

“The Geithner Plan is something the administration can do on authority it already has.” —–and THAT is the REAL tragedy for the U.S. because Obama will not listen to anyone else except Romer,Summers, and Geithner.

He’s already sent Volcker off to address the tax code and refused to bring up or mention at all -and believe me there were many- the questions posted at the whitehouse.gov ‘town hall’ section about Geithner’s ripoff of the taxpayer or why there are so many financial industry appointees in his Admin.

Add to that this:”The Obama administration rejected a Tribune request under the Freedom of Information Act to review Freddie Mac board minutes and correspondence during Emanuel’s time as a director. The documents, obtained by Falcon for his investigation, were “commercial information” exempt from disclosure, according to a lawyer for the Federal Housing Finance Agency.”

BUT they are not.

What ever happened to the supposed ‘progressive laision’ that Obama was appointing?

Larry Summers is to Obama’s Bankster policies as Cheney was to Bushes military, espionage policies.

“A number of the CEOs met with Geithner last night at a dinner sponsored by the Financial Services Roundtable.”

How nice of them to buy Treasury Sec’s dinner, after they ate his lunch.

i don’t know if this is what krugman is talking about, but most of the deregulation that created the shadow banking system is relatively new.

imo we’d be a lot better off without “too-big-to-fail” banks, without commercial banks being permitted to merge with investment banks and insurance companies. we need to regulate cdss like insurance and gambling. we need sensible bankruptcy laws for individuals and for corporations so that debt to workers is given priority. we need usury laws. and we need to roll back the corporate globalization of the financial services industry which imposed deregulation on many other countries.

i don’t know what to do about all the off shore, let’s hide what we’re doing banking that just seems to cover up money laundering etc. david cay johnson probably has some ideas on that.

shit. how crazy is it that progressives are arguing for the roll back of legislation?

The Geithner plan is another giveaway to the banks. Its goal like all previous efforts is to get the government to buy up their crap assets for far more than they are worth. It does so in a way that is more dishonest than most such plans in that it uses the fiction of private participation when it is the government that assumes virtually all of the risk and receives only a marginal amount of any putative profits.

It also is dishonest because it does an unconstitutional end run around Congress. Most of the funding for it will ostensibly come from the FDIC or the Fed, but in fact losses in the program will eventually be dumped back on the government and through it on us.

I should also point out that Geithner also presented his regulatory plan this week as well. It can be summed up as lots of shiny meaningless oversight, little regulation, and no enforcement.

I say this a lot but this can only end badly.

The critters have to decide do we save capitalism from itself and inability to control it’s excesses ie regulation?

Do critters try to fix the messed problem of the financial markets by buying their crap and hoping that they wound be repeat offenders and reward them big time even though they created the mess?

Perhaps we should take some things away from the capitalists and give them to the government to run? Transport, energy, health, education, banking, insurance. Capitalists, left alone tanked most of that on their own or in the case of energy are taking us the cleaners daily.

Housing is a tough one because it tends to bubble up because of increasing demand and diminishing supply

Let the capitalists do industry – make things and sell them.

Why save THIS capitalism? Why not create another $$$$$ism?

I have the suspicion that Brad DeLong has either taken, or been asked to take, the role of the administration’s “defense” against Paul Krugman. I have no specific reason for believing that could be true. I’ve only watched the back and forth between them over the years. Historically, they have shared the same side of whatever the economic argument of the day is more often than they have been at odds. That was true for the full 8 Bush years. Krugman knows that DeLong knows what Krugman and DeLong both know. For DeLong to take the position he has taken suggests to me that he is some unofficial conduit for the Obama administration’s approach. It’s full of holes, and it really doesn’t seem to me that DeLong has taken any effort to plug them. He simply lets them stand. In that sense he is both messenger and foil.

I’m no political science student. I do study economics. And, I am old enough to remember driving with a 5 gallon can of gas in the trunk of my car in 1974 hoping like hell I wouldn’t be rear-ended. I find DeLong’s responses to be interesting because he knows his stuff. So I am puzzled. What is the function of what he’s doing?

When wall street rallied on news of the plan – you knew who was making out. It’s that simple.

We pay and they get to play… some more.

The more I think of the financial meltdown, one question comes to mind.

Why was AIG bailed out if, as Geithner claims, it can’t be regulated like banks? Wasn’t the whole point to protect AIG’s counterparties, many of whom were banks? Couldn’t we have let AIG fail and just bailed out the affected banks, which would be under Treasury’s control?

It seems the whole reason to pump billions of US taxpayer dollars into AIG was to shore up foreign banks, banks which are in countries that have decided to criticize the way the US is doing things. And oh yeah, Geithner’s friends need to not lose any money.

I hate these people.

How nice of them to buy Treasury Sec’s dinner, after they ate his lunch.

nope. the plan is to eat ours.

“I specifically ordered the Bollinger ‘62 and they have the nerve to bring me the ‘63? This is an outrage!”

One view of an alternative banking system, scaled down to size, see article by former official/economist at IMF:

http://www.theatlantic.com/doc/200905/imf-advice

i don’t study econ, but i did at one time study delong (or at least read him every day). he was always the mouthpiece of the corporate dems. what has changed, imo, is how much krugman has been radicalized. it started during the bush years, but it’s really become apparent the last few weeks. amazing and very heartening to see.

I just read the article where Obama is meeting now with The Hole In The Wall Gang to plead with them to give him back some of the loot they robbed from us. If he gets anything out of them it will be a grander scheme to enrich themselves further at taxpayers’ expense.

How smart is it to reach into a rattlesnake den to immunize yourself against their poison? (/s)

The melting economy has made more John Q Publics interested in what’s going down. Usually they are at the bar, doing NASCAR or sports or some other distraction. But now they have taken it on the chin and their is anger and there is attention to what’s going down.

They don’t like what they see happening, whether they understand it or not. We don’t like it either and we have a better view of the big picture.

The biggest picture of all is the system we are exist in economically speaking. It skewed to the rich, the powerful, corporations and does little but toss some crumbs to people. It exploits their labor, taxes them and then doles their money to the DOD for BS and wars against people who are no threat to the USA.

Our government has turned out to be a tool for the corporations, a funnel to pass tax dollars to them while sheltering them from their share of the burden to support this nation. They’v e engineered tax dodges, hide their money offshore and laugh at everyone who actually works 8hrs for a living. Oh and they run slave operations to produce cheap goods to shove on us. Lovely.

Obama is meeting now with The Hole In The Wall vault Gang to plead with them

Fixed it for ya

if it were going to be easy to fix, someone with Krugman’s background would spell out the easy solution to fix this mess.

Actually a lot of this is easy to fix. Stiglitz and others have talked about the creation of a “good bank”. You take the good parts of the current system and leave the old banks with their crap to resolve things as best they can.

This isn’t actually that new of an idea other than the name. We have talked around here for some time, eCahn in particular, about how the nuts and bolts of most banking is fairly simple and mundane. It looks a lot like what many of the regional banks (who aren’t in trouble) do and have always done. We could take over the physical plant of the big existing banks, its system of branches, and use the money that will be wasted in this latest bailout to sponsor normal everyday lending operations.

I’ve heard that the banks are FLUSH with capital but shopping around for good “buys” companies whose value is dropped and can be had at fire sale prices.

The money that these “counter parties” are getting is not becoming credit to peope and business. They won’t loan because people and businesses are not low credit risk. With the business economy so down they don’t want to support business – they want to make MONEY and so they sit on their capital.

People at FDL have been screaming that since day one. Let banking be banking and NOTHING ELSE.

Contrary to the Bullshit Media there are laws against the crimes committed by the financial services and politicians. As a start we should procescute the criminals throw them in prison and then redraw the criminal boundries and make financial law tougher and more easy for the perps to understand. As an example any of these scams that contributed to our economic collapse would be punishable by life in prison. The term ‘working outside the box’ is what it is, committing a crime.

Obama is meeting now with The Hole In The Wall vault Gang to plead with beg them

Fixed it for ya

Ditto:)

seconded

And Dodd is saying he is trying to ’save capitalism’.

Here’s a solution; every State And the Federal Government open a bank along the lines of the North Dakota State bank. People would move their money faster than a candle can be blown out if such were to occur and that fixes a lot of the problems.

i think the problems are not in the policies – they are in the politics. glenn greenwald pulled this quote from simon johnson’s piece (which i’m having trouble reading carefully because of all the imf hagiography):

In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets (and only in emerging markets): South Korea (1997), Malaysia (1998), Russia and Argentina (time and again). . . .But there’s a deeper and more disturbing similarity: elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.

Not sure, but I’ll dig out masaccio’s post on how the know very well what the value of these assets are, the markets aren’t moving because they think they see a big investor (the government) sitting on the sidelines willing to overpay.

I understand about the IMF but if you read Johnson as coming from a realpolitick perspective it’s still very enlightening.

absolutely agree – which is why i’ve tried several times to read that piece.

been reading baselinescenerio every day (i think i first got a link there a few months ago from naked capitalism) and trying to catch podcasts, etc of simon johnson. fascinating stuff. i can have a different political perspective and still appreciate his analysis. even wrote a diary on the hearing he appeared at with lori wallach (of public citizen’s global trade watch)

it’s just that particular article has been a little hard to swallow all in one go and i don’t want to skim it.

Thanks, Jane…. Goldman Sachs’ too friendly takeover of the Fed & Treasury

Simon Johnson really nails the destruction of America’s social contract between capital, management, labor & consumers by co-opting the relationship between financialized business and government. Citizens are virtually left out of the equation.

AIGFP is a paradox — both predator and parasite of a sustainable economic model. This is the system Geithner’s Gambit is designed to preserve. Obama’s concerned with whether it can be preserved by doubling the national debt.

We here at FDL and elsewhere ask, why should it be?

It is quite disturbing to have the President willing to take on financial counsel from the big players who are failing and taking tax payer money than to bring on the top economists who have a much more clear take on what to do.

I think the next election is lost.

deep in epu-land, but perhaps i should add that i have this crazy idea that what allowed the nixon presidency to be brought down was that there was a fracture within the elite – and that opened up so many possibilities for information to come out, etc.

i’ve seen the radicalness of the bush presidency, especially during the last couple of years as threatening to cause something similar. obama’s talk of bipartisanship i came to understand was primarily a call to reconciliation among the elite.

what i now see simon johnson saying is that obamaco has to figure out a way to create a fracture among the oligarchy so that the necessary real reform will be possible. but he’s not taking into account how central it is to obama’s presidency that a fracture NOT happen.

or i’m full of it. but still, find reading johnson very interesting.

For better or worse, Johnson has a unique perspective as former top economist at the IMF. As I observed yesterday on Marcie’s Big Media as Systemic Risk thread:

After reading John Perkins’ book in 2004, I knew how this inevitable reckoning would play out.

The tables are turned now, but just like IMF/World Bank imposed structural adjustment in the developing world, the American people will pay the tab while their leaders walk away more powerful than ever.

It was only a matter of time.

At least these countries came out with some physical infrastructure like dams, roads, water systems and power grids. We Americans get to fill in the Grand Canyon of naked CDS losses to repeal the law of gravity for AIGFP and its counterparties.

haven’t read perkins (my impression is that it is not based on open source material?). but anyone who has followed what we’ve done to other countries even a little bit can, i think, see the parallels. although i have to say that naomi klein’s book i’ve found very helpful in seeing some of the political plays – for example when the push was on for the tarp last fall and so many activists (especially big labor which really broke my heart) sat on their hands too stunned i think to know what to do.

Thanks, Jane. I’ve been following masaccio’s posts, so I probably read it. As of late, I’ve not been following DeLong as closely as I’ve been following Krugman. This entire price discovery plan the administration has been pushing seems dodgy as heck to me. And, I don’t know why DeLong would appear to be in opposition to those economists he has tended to agree with in the past. I understand the point that selise makes, but I wonder about the person who titles a post The Revised, Extended Geithner Plan Catechism. Catechism? Anyway. Thanks for your response.

Confessions of an Economic Hitman was published in 2004. Amy Goodman’s interview (linked above) really captures the essence of the book.

Naomi Klein’s Shock Doctrine is a brilliant expose` of how the weapons have been turned on America, and by whom.

Both are worthwhile in these perilous times.

i did listen to the perkins / goodman interview at the time. i’m just a little shy of writing that’s not based on open source documentation. i loves me the endnotes and primary source material *g*. it lets me follow up on items of particular or just spot check to get an idea of the level of spin.

Support documentation is best. Perkins offers a first hand account of his personal experience inside the financial colonialism beast. The question is, does his description fit the observable results in Central and South America & SE Asia during his tenure without resorting to conspiracy theories or axe grinding spin?

Excellent post, Jane. I’m glad to be at a more progressive place.

TomP (known at dkos). Someone used that name so I’m using this one.

When will the money trickle down you you? Play Six Degrees of Tim Geithner.
http://businessmonkey.today.co…..m-geithner

joseph stiglitz:

Quite frankly, this amounts to robbery of the American people. I don’t think it’s going to work because I think there’ll be a lot of anger about putting the losses so much on the shoulder of the American taxpayer.

The fraud was caused by those who set up the housing bubble and all the rest. What’s happening now is a sharing of the pain, so we can get banks back to normal lending and so we can regulate the financial industry and get it all working properly.

To say the people are being robbed makes it sound as though this isn’t a crisis situation.

You take the good parts of the current system and leave the old banks with their crap to resolve things as best they can.

So you favor government stealing a bank’s assets? Are you a Socialist or what?

What if you have a CDO which has good & bad mixed in together? Isn’t that a bit complicated?

It is quite disturbing to have the President willing to take on financial counsel from the big players who are failing

Specifically who, outside of his government group, has given him advice that he’s taken?

If you’re going to just make up crap you shouldn’t be surprised if somebody asks you to prove it.

Naomi Klein’s Shock Doctrine is a brilliant expose` of how the weapons have been turned on America, and by whom.

I suspect the “whom” isn’t yet entirely clear.