Obama: Corruption We Can Believe In

Glenn Greenwald has recently posted a very abstract jeremiad about our corrupt "establishment," with multiple concurring citations from Atrios, Paul Krugman, Matt Taibbi, Armando, (Big Tent Democrat on TalkLeft), and even Eliot Spitzer, recently returned from the dead by a collective realization that he was right about everything.

Our "establishment" is corrupt, and public outrage about the AIG bonuses is a very good thing, because it scares the corrupt "elite," and fear is the only force that can control those monsters.

This is only half right, as far as it goes, but it doesn't go quite far enough, and stops at a politically safe distance from the Oval Office, which is exactly where the buck is supposed to stop, and where Barack Obama continues to enable and support the most corrupt financial "establishment" since exactly the same corrupt "establishment" produced the Great Depression.

The whole chorus is singing in unison about the corruption of Henry Paulson and Tim Geithner, and somehow forgetting that Mr. Obama was already supporting humongous give-aways to corrupt banks in their most blatant conceivable manifestation, during his last debate with John McCain, when he endorsed Paulson's grab at an absolutely unrestricted mountain of money, $700 billion, and it wasn't just a blank check that Obama wanted Congress to sign over to Paulson... it even included pre-emptive immunity from prosecution!

Last September, Treasury Secretary Paulson, from Goldman Sachs, drew up a terse 3-page memo outlining his bailout proposal. The plan specified that whatever he and other Treasury officials did (thus including his subordinates, also from Goldman Sachs), could not be challenged legally or undone, much less prosecuted. This condition enraged Congress, which rejected the bailout in its first incarnation.

It now looks as if Paulson had good reason to put in a fatal legal clause blocking any clawback of funds given by the Treasury to AIG's counterparties. This is where public outrage should be focused.

Instead, the leading Congressional shepherds of the bailout legislation - along with Obama, who came out in his final, Friday night presidential debate with McCain strongly in favor of the bailout in Paulson's awful "short" version - have been highlighting the AIG executives receiving bonuses, not the company's counterparties.

So Obama was already on board the gravy train for Goldman Sachs and AIG on October 15, 2008, and celebrating "the financial rescue plan that Senator McCain and I supported," with zero accountabilty, and not even the foggiest idea where the money would go, except wherever Henry Paulson wanted to put it.

And now that Mr. Obama is driving that gravy train, instead of just tooting its whistle in Congress and Presidential debates, it just keeps rolling faster and faster, with yet another trillion dollars on track for "quantitative easing," yet another exotic financial device that almost none of us had ever heard of, only a few weeks ago.

I'm glad that the AIG bonuses have finally waked up a little outrage in the slumbering public, and I'm glad that Krugman and James Galbraith and Glenn Greenwald and Atrios and Armando are denouncing the corruption of our governing "elite," or "establishment," or whatever they choose to call it, but it's absurd to denounce so many soldiers and under-bosses of our homegrown financial mafia, and yet leave out the kingpin of the whole operation, the capo di tutti i capi, Barack Obama, the infinitely generous godfather of the most blatantly corrupt mob of financiers since an almost identical gang produced the Great Depression.

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    Monkey Business (none / 0) (#1)
    by Jacob Freeze on Sun Mar 22, 2009 at 10:13:02 AM EST
    If you never, ever thought you could understand financial concepts like "convexity risk," a good place for a beautiful introduction to the higher econ is MonkeyBusinessBlog, which is currently running a round-about and surprisingly comprehensible discussion of nuts and bolts at Fannie Mae and Freddie Mac

    Another thing that this whole AIG retention bonus affair has messed with is the whole idea of retention bonuses in the first place.  Things are not made any easier when "heavyweights" like Andrew Sorkin of the New York Times go on the Jim Lehrer News Hour and defend AIG's retention of key personnel because they need rocket scientists to unwind the Financial Products Group portfolio.  Sorkin said something like;

    "Look, I consider myself to be an intelligent person and I consider people at the News Hour to be very intelligent.  However, this is SO complex over at AIG that it takes people with very special skills."

    As our friend Banzai Bill told me the other day, "We need a few paralegals, a bunch of guys to hit F9 on the key board and a guy to call the counterparty to make an unwind bid to the counterparties."

    Anyway, while they don't need rocket scientists over at AIG they really might need them over at Freddie and Fannie.  Here is something I wrote back in July 2008....and this was BEFORE the government made Freddie and Fannie the repository for mortgages that go bump in the night!

    When Fannie & Freddie Are Nationalized, Who is Going to Watch Their "Other" Nuclear Arsenal?

    It's gets wonkier after this gentle intro, but everything is explained step by step, and a lot of it is actually funny!

    More Monkey Business (none / 0) (#2)
    by Jacob Freeze on Sun Mar 22, 2009 at 12:24:32 PM EST
    MonkeyBusiness is asking what happens if the few really hard-to-replace people at Freddie and Fannie depart (for where?), and  $15 trillion in sound mortgages is in the wind. Maybe we should pay those guys some kind of retention bonuses, even though the very words "retention bonus" now enrage almost everybody.

    I sort of agree, but unless those mortgages are leveraged into higher-order packages, then a few hundredths of a point in erroneous estmates by the not-so-wonderful replacements wouldn't be a catastrophic problem.

    What I can't understand is how much incorporation into higher-order packages in inexpungeably built into Freddie and Fannie, and if the answer is "a lot," then I agree with Monkey Business, but if the answer is "not so much," then I don't.


    Or not. (none / 0) (#3)
    by Jacob Freeze on Sun Mar 22, 2009 at 12:53:10 PM EST
    I really just don't know.

    Maybe Monkey Business has a whole class of operatives in mind whose existence is impenetrably obscure to the rest of us... guys with decades of experience with risk estimates, and their own proprietary paradigms for structuring them, actually irreplaceable at least in the short- or medium-term, until new cadres invent their own techniques.

    While they learn on the job, everything could go kabluey! ...if there's anything left that hasn't already gone kabluey, and there is.


    Famous Weasels (none / 0) (#4)
    by Jacob Freeze on Sun Mar 22, 2009 at 02:00:01 PM EST
    Obama's ongoing support for Tim Geithner has to feel like a bucket of cold water for progressive bloggers who still hope that they can push Obama to the left, or back to reality, or somewhere, and I guess the only hope remaining is that Obama didn't know exactly what he was doing, when he appointed his economic team.

    But how much of a surprise can it possibly be for Obama that Larry Summers is a take-no-prisoners deregulator of financial services, when exactly the same guy was the point man for the Commodity Futures Modernization Act of 2000, which gave banks the critical permission to leverage deposits into incomprehensible garbage?

    Larry Summers was obviously Larry Summers when Obama made him his chief in-house economic advisor, and Tim Geithner was the same Tim Geithner who smiled down upon the looting from the Federal Reserve in New York.

    I can't believe that Obama is really shocked, shocked to learn that Geithner and Summers are weasels, because they were famous weasels even before he appointed them.


    there's (5.00 / 1) (#5)
    by Ga6thDem on Sun Mar 22, 2009 at 02:59:47 PM EST
    no bucket of cold water for those people. They will make any excuse for him.

    Jacob (none / 0) (#6)
    by jbindc on Sun Mar 29, 2009 at 03:23:38 PM EST
    Larry Summers was obviously Larry Summers when Obama made him his chief in-house economic advisor, and Tim Geithner was the same Tim Geithner who smiled down upon the looting from the Federal Reserve in New York.

    HE can do no wrong, didn't you realize that yet?

    Now I will await squeaky to come here and pick these words out and post them in another comment section and twist them to mean something he knows very well they don't.

    Great post.