Discussing The Geithner Plan

Four smart economists, Paul Krugman, Brad DeLong, Simon Johnson and Mark Thoma, discuss the Giethner Plan.

Definitely worth a read.

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    One of those guys... (5.00 / 1) (#3)
    by magster on Tue Mar 24, 2009 at 02:57:20 PM EST
    said that the legal authority already exists to impose Geithner's plan.  So we're essentially betting the future of this country's economy on a Nobel prize winning economist being wrong.  Here's hoping...

    Just curious, would Clinton have appointed many of the same Wall Street folks to her cabinet?

    At least Obama's been good on the environment so far.  

    I'm sure (5.00 / 0) (#9)
    by Ga6thDem on Tue Mar 24, 2009 at 03:06:12 PM EST
    some of them would've been the same but she wouldn't have been as depend on the advisors than Obama is. I'm willing to bet that she would've listened to Krugman.

    I think she would have had more balance (5.00 / 0) (#11)
    by nycstray on Tue Mar 24, 2009 at 03:11:11 PM EST
    in her plan(s). If we rewind back to when this started, she was out there talking about this from more than one angle.

    It's strange (5.00 / 2) (#12)
    by Dr Molly on Tue Mar 24, 2009 at 03:13:03 PM EST
    Obama has surrounded himself with leading, independent-minded scientists and has apparently listened to their expertise - as you say, he's been good on the environment so far. (And, today, there is good news that EPA has halted mountaintop removal mining in Appalachian mountains.)

    So, why hasn't the same thing happened with the economy? Why didn't he appoint and listen to folks more like Krugman than Summers?


    Obama apparently (5.00 / 1) (#18)
    by TeresaInSnow2 on Tue Mar 24, 2009 at 03:21:29 PM EST
    didn't make any private campaign promises to the environmental faction as he did to the banking faction.

    It's just like Bush.  Do as he wishes, ignore public outcry, until it's pretty much too late.

    Heckuva job Timmy.


    Environmental Science vs. Economics (5.00 / 1) (#60)
    by CST on Tue Mar 24, 2009 at 04:35:16 PM EST
    I think that by nature there are a lot more "leading, independent-minded scientists" who work on environmental issues than "leading, independent-minded economists".

    The nature of the beast is so different.  If you consider the political background of professors at universities I bet you will find that the vast majority of the scientific/environmental types lean liberal and the economists lean conservative.

    I mean, how many Krugman's are there?  And is he even available?  Just a thought.


    Very true (5.00 / 1) (#67)
    by Dr Molly on Tue Mar 24, 2009 at 05:47:44 PM EST
    There just seems to be a real dichotomy between the kinds of people he's listening to on these two topics - are there no smart AND progressive-minded economists (other than Krugman)?

    Good Question (5.00 / 1) (#68)
    by CST on Tue Mar 24, 2009 at 06:02:02 PM EST
    There also seeems to be a disconnect between his short-term economic plan (bailouts) and his long-term economic plan (budget) which I think is pretty good.  Listening to his economic people talking about the budget they seem to be on point.

    It's strange that they can "think big" when it comes to things that aren't directly related to finance, but can't when dealing with Wall Street.  Maybe they are too close.  Which begs the question - who isn't that could still do the job?  I sure don't know the answer to that, maybe someone with more information does.


    She would (5.00 / 6) (#15)
    by TeresaInSnow2 on Tue Mar 24, 2009 at 03:19:30 PM EST
    have actually understood what is happening.  

    She would have been under greater scrutiny and much greater criticism than Obama.  

    She would have been accountable rather than untouchable (as Obama is).

    Therefore, yes, she'd have hired different people -- not all, but some.  I don't think she'd have appointed Summers.

    But it's moot.  You didn't elect her.  You elected him.  Don't blame her for his horrible decisions.


    This is the one thing I know without (5.00 / 1) (#77)
    by Anne on Tue Mar 24, 2009 at 07:58:58 PM EST
    a shadow of a doubt: Hillary would know this issue inside and out, would be able to talk about any aspect of it, regardless of whether you started at the beginning or in the middle.

    She would know the BS when she heard it, and would call it in a NY minute.


    Wow (none / 0) (#79)
    by squeaky on Tue Mar 24, 2009 at 08:05:40 PM EST
    Sounds like a god or a really good con artist.

    Or just a very smart person who soaks (5.00 / 2) (#80)
    by Anne on Tue Mar 24, 2009 at 08:14:32 PM EST
    up information like a sponge, and has shown the ability to process and integrate it and contextualize it.  I trust that she will bring that quality to her current position as Secretary of State and we - and the world - will be better for it.

    How are you tonight, squeaky?  


    I'm OK (none / 0) (#81)
    by squeaky on Tue Mar 24, 2009 at 08:23:11 PM EST
    Sounds like Hillary is transcends any Politician ever, in your book. Faith has little place in politics. Giving the benefit of the doubt is often good, but gobsmacked love... risky.

    I would love to hear what both Hillary, and Obama have to say about this:

    A US government lawyer argued against revoking a high-profile travel ban on leading Oxford University Muslim scholar Tariq Ramadan in a court appeal on Tuesday.


    The Oxford University professor has been trying to enter the United States since 2004, when he was due to take up a post at Notre Dame University in Indiana.

    ACLU attorney Jameel Jaffer said the "government had "failed to identify ... legitimate and bona fide reasons for the exclusion."

    Although Obama's administration has made a dramatic break with many of the most controversial aspects of Bush's self-declared "war on terror," there is little sign of a shift on the Ramadan visa debate.

    Raw Story


    I know that Hillary is not perfect; (5.00 / 2) (#82)
    by Anne on Tue Mar 24, 2009 at 08:43:46 PM EST
    she was not my first choice going into the primary season, and I had any number of reasons why I thought she was wrong for the job.

    I found myself, rather unexpectedly, defending her against hard-core Hillary-haters, and in the process came to appreciate the depth and extent of her intelligence and knowledge, and ultimately supported her against Obama.

    I am not blind to her faults, and I can assure you that if she had prevailed and had been elected, that I would find plenty to be critical of.

    Where she differs from Obama are in areas where I think her strengths are needed - her work ethic and that thirst for knowledge.  My daughter's friend interned for two summers in Hillary's DC Senate office, and even though Andy was/is a dyed-in-the-wool Republican, he was over-the-moon impressed with Hillary - said he had never known anyone who worked like she did.  


    How long will he be untouchable? (3.50 / 2) (#23)
    by BrassTacks on Tue Mar 24, 2009 at 03:31:06 PM EST
    How long does his race, the coolness factor, and whatever else, protect Obama?   I'm thinking pretty much forever.  No one will want to admit that they voted for someone they didn't know, with no track record, based on race, good teleprompter speeches, and coolness.  They'll want to keep pretending that the Emperor is not just a good looking, empty, suit.  

    Oh, it'll (none / 0) (#74)
    by Ga6thDem on Tue Mar 24, 2009 at 06:45:32 PM EST
    happen. It always does. I've only seen two Presidents in my lifetime who it didn't happen to: Reagan and Clinton. People all the time change their minds and I'm old enough to remember Nixon winning in a landslide in 1972 and a few years later NO ONE claiming that they voted for him. So while people may not want to openly admit that they voted for a candidate they certainly have a record about lying about who they voted for in the past.

    Nixon was never cool, or Black (none / 0) (#84)
    by BrassTacks on Tue Mar 24, 2009 at 09:53:19 PM EST
    Nixon never had those protections that Obama has.  Race is HUGE in this country.  So many feel that Obama MUST succeed, or we must act like he's successful, regardless, because he's the first Black President.  It would be horrible for a Black President to not be a great President.  That race protection will last a lot longer than anything Nixon had going for him.   I'm old enough to remember Nixon and not only was he not Black, there was NOTHING cool about Nixon.   He was just creepy and weird.  

    She probably would've. (none / 0) (#8)
    by lilburro on Tue Mar 24, 2009 at 03:04:34 PM EST
    But the whole "buck stops here" thing - what kind of plan would she have wanted to see?  What would she accept from them?  It's not worth worrying about though.

    Does anybody really believe this? (5.00 / 3) (#6)
    by nycstray on Tue Mar 24, 2009 at 03:01:55 PM EST
    View #1 is that we're looking at an unnecessary panic. The housing bust, so the story goes, has spooked the public, and made people nervous about banks. In response, banks have pulled back, which has led to ridiculously low prices for assets, which makes banks look even weaker, forcing them to pull back even more. On this view what the market really needs is a slap in the face to calm it down. And if we can get the market in troubled assets going, people will see that things aren't really that bad, and -- as Larry Summers said on yesterday's Newshour - the vicious circles will turn into virtuous circles.

    So (according to view 1) it's our fault?! lol!~

    And if we can get the market in troubled assets going . . .

    Something about that just sounds so . . . wrong.

    Ridiculous! (none / 0) (#28)
    by BrassTacks on Tue Mar 24, 2009 at 03:33:46 PM EST
    In a nutshell, (5.00 / 5) (#24)
    by NYShooter on Tue Mar 24, 2009 at 03:31:44 PM EST
    Obama had two choices:

    1. Spend our money helping average, working class people, the victims of our unfettered "free marketplace," or
    2. Bailing out the "Masters of the Universe," whose immoral, and over-the-top, avarice caused this financial collapse.

    Obama has always lusted for acceptance by the "in-crowd," so appointing the consummate insider, Timothy Geithner, should have come as no surprise to anyone.

    So, think about it; Obama ran on a campaign of "change," changing the culture of Washington, and changing the cozy, symbiotic relationship between Big Business, and our elected officials. So, what does he do once he's elected? He appoints the former head of Goldman Sachs, one of the largest recipients of our bailout money, and also the largest recipient of the taxpayer bailout money passed through AIG.

    Obama, like his predecessor Bush, knows nothing about the economy, and appointed Geithner to head Treasury, not because he agrees with Geithner's solution to our problems, but simply because he likes him. And Geithner, as a card-carrying member of the "masters of the universe," believes, as F. Scott Fitzgerald famously stated, "are different than you and me."

    Timothy Geithner isn't a bad fellow, he truly believes that the economic model of a couple of years ago was just fine, and that it just got a little over-eager, and just needs a little help to get it back on track. People like Stiglitz and Krugman believe that model was fatally flawed, and was the reason for our current meltdown. And that's why Krugman wrote the other day about his feeling of "dread" as we go forward, milking our taxpayers dry, and condemning us all to a decade, or more, of sub-standard economic conditions, and a permanent reduction in our standard of living.

    NYShooter, you're just wrong. (5.00 / 1) (#49)
    by Lacey on Tue Mar 24, 2009 at 04:03:58 PM EST
    On so many levels I don't know where to begin. First, to say Obama hasn't or won't try helping the working class is simply ignoring what he has done and what he is facing. The housing plan, the stimulus plan and his proposed budget are all geared towards helping the working class. But the bank bailout is not about allowing business as usual. It's about stemming an impending crisis that will hit everyone, the so-called Master of the Universe and the working class.
    Besides, there's this idea that the bailout means they are not going to deal with the underlying problems that have brought us to this point. That is simply ignoring everything the administration has said. They've been quite clear that they improved regulations, new laws and better enforcement are going to be coming. But right now you have to deal with the crisis. Then you change what led us here in the first place.

    Too many generalizations (5.00 / 1) (#62)
    by NYShooter on Tue Mar 24, 2009 at 04:42:47 PM EST
    For me to respond to here and now.
    So, let's just take one: "But right now you have to deal with the crisis."

    His "dealing now" is to re-inflate the banks to where they were a year or two ago. Helping the millions of working class people who have lost, or will soon lose, their jobs, and/or their homes is an afterthought; comes at the end of the line. Not only is that immoral, it's bad economic policy. Much smarter people than me have stated that the concept is upside-down, or at least that helping both groups simultaneously was completely doable.

    Let me ask you this: Suppose the banks are back to their prior, usurious, bonus laden, me-first, campaign contributing selves. And let's imagine they even lighten up a little and make some money available to a few small businesses. (Even they say consumers will be last to get their turn at the spigot) Who will be purchasing any of the goods or services that will become available if there are no jobs?

    Like I said, Obama had two choices: Trickle Down, or Demand up.

    You have your opinion that he made the right choice; I have mine.

    Unfortunately, waiting to see who was right will come over the bodies of millions of unnecessarily hurt people.......IMO.


    Except his first moves were (5.00 / 1) (#70)
    by Lacey on Tue Mar 24, 2009 at 06:27:20 PM EST
    The stimulus and housing plans, both of which were geared toward the wokring class and not banks. I don't think it's some much about reinflating banks so they can go back to their merry old ways. It's about stablizing the situation, then determining what can and should be done to improve the system. But doing that requires a lot of thought and consideration. I think he has been trying to deal with the working class and the banking class. His approach and policies may not be the right medicine -- at least in your view and those of others -- but to attribute Obama's motives as attempting to screw the little guy, to me, seems a big stretch.

    Except his first moves were (none / 0) (#71)
    by Lacey on Tue Mar 24, 2009 at 06:28:02 PM EST
    The stimulus and housing plans, both of which were geared toward the wokring class and not banks. I don't think it's some much about reinflating banks so they can go back to their merry old ways. It's about stablizing the situation, then determining what can and should be done to improve the system. But doing that requires a lot of thought and consideration. I think he has been trying to deal with the working class and the banking class. His approach and policies may not be the right medicine -- at least in your view and those of others -- but to attribute Obama's motives as attempting to screw the little guy, to me, seems a big stretch.

    Sorry for the double post (none / 0) (#72)
    by Lacey on Tue Mar 24, 2009 at 06:28:51 PM EST
    slight correction (none / 0) (#88)
    by NYShooter on Wed Mar 25, 2009 at 01:02:00 AM EST
    I didn't say "trying" to screw the little guy, just that that is the result of his blind loyalty to Geithner, who also isn't "trying" to screw the little guy.

    And BTW, both the housing and stimulus plan were announced first, but will be implimented long after millions will have already lost their jobs, and their homes.

    Too lttle, too late, and mixed-up priorities.


    For some time now, I have been feeling (5.00 / 6) (#46)
    by Anne on Tue Mar 24, 2009 at 03:58:10 PM EST
    like we are the victims of one of the biggest bamboozles of all time, one that is being disguised as "getting the economy back on track" or "strengthening the financial system," but which in fact is all about making sure that the Wall Street Boyz can keep writing huge checks to themselves.

    They want nothing about their lifestyle to change, even as millions of people have lost jobs, lost homes, seen their retirement accounts shrivel, have brought kids home from private colleges to live at home and attend the local state school, have given up health insurance and skimped on essentials.  

    We should have known.  We should have known just by looking at Obama's economic policy talent pool that they were going to fulfill yet another dream of Obama's to really play with the movers-and-shakers, and they were going to teach Obama how to sound like a man of the people while they were going through the crowd picking our and the government's pockets.

    You couldn't swing dead cat without hitting a Goldman Sachs alum - another not very promising sign.

    I can hardly wait for the press conference tonight.  What I would give for Obama to have to face an audience full of economists he has not been listening to, and who know BS answers when they hear them, and see how well Mr. TelePrompter handles himself.  Maybe he will be overcome with the giggles like he was with Steve Kroft...

    This is all just making my blood boil.

    So your answer is (none / 0) (#50)
    by Lacey on Tue Mar 24, 2009 at 04:06:10 PM EST
    To just let the banks fail? I don't understand what you think Obama should be doing.

    You see (5.00 / 2) (#75)
    by Ga6thDem on Tue Mar 24, 2009 at 06:59:41 PM EST
    the problem I have with comments like this is you seem to think that if you don't want Obama's plan (that most people who know what they're talking about say won't work) then you think the option is the banks failing. Here's the problem with Obama's plan: the banks will fail with his plan. All his plan does is delay the event and cost the taxpayers tons of money.

    Letting the banks fail is not the only (5.00 / 2) (#78)
    by Anne on Tue Mar 24, 2009 at 08:04:10 PM EST
    other option; a better plan would be an option.

    My answer is for Obama to get out of the echo chamber and start talking to people who don't agree with him or his team, to get some perspective.

    He will come to realize that it was not a good idea to allow the Banker and Wall Street Boyz to call the shots, and it will be an expensive realization.


    I don't disagree with anything (5.00 / 2) (#53)
    by Alien Abductee on Tue Mar 24, 2009 at 04:13:06 PM EST
    those four economists are saying, but I think they're each just talking about one part of the elephant. This is more like the bigger picture imo:

    The whole point of the Geithner plan is to create a market to set prices...

    if the plan doesn't work, the government has essentially declared a number of banks to be insolvent and unable to sell bad assets at a market price...

        I want the regulators to come into the banks and say - now you have a ready - if somewhat subsidized market for your assets then it is no longer tenable for you to say that the market price for them is unrealistic.

        This asset that you have marked at 95% of par.  We want you to sell some of it (or a part interest in it or similar.)  If you get 75% of par - then we want you to mark your book to 75.

        If - given a real market for bank assets - you are shown to be capital inadequate then you should have time (say 6 weeks) to raise private capital.  Failing that your bank becomes government property.

    If this is the government's strategy, it implies that the main barrier to nationalisation is not the administration's fear of financial meltdown or concern over the logistics of managing huge banks, but is instead the suspicion that they couldn't get the necessary approval from Congress--which would involve a rather large new chunk of money, but might also mean statutory changes to give the administration the legal ability to take receivership of one or several large banks.

    Interesting that they're seeking that legal ability now. And trying to look like they're doing more than twiddling their thumbs while waiting for Franken to be seated of course.

    Exactly (5.00 / 1) (#57)
    by Lacey on Tue Mar 24, 2009 at 04:24:06 PM EST
    The way I see it, the original problem with Paulson's plan was how do you determine the price of these assets. What Geithner's doing is using Wall Street's greed to set a price. The investors and bankers will both be looking to get the best deal they can and by doing so create a fair market price. If it works, the government eventually gets its money back and doesn't lose anything. If it doesn't work, then they just take over the banks.

    Yep (none / 0) (#59)
    by Alien Abductee on Tue Mar 24, 2009 at 04:30:31 PM EST
    Except I don't think there's going to be a whole lot in the way of government eventually getting its money back and not losing anything. Too much of what they'll be buying is illusory. It's wealth that never really existed in the first place.

    I don't know enough to have an opinion (none / 0) (#61)
    by Lacey on Tue Mar 24, 2009 at 04:37:47 PM EST
    On the real worth of the assets. Some economist have said they are worthless, others say that they do have value. I just don't know. But it seems like the government has to toss money in either way, or you just let the banks fail. I don't think letting them fail is a realistic option. So, Giethner's plan is meant to prevent an outright take over but, if it doesn't work, then they can take the nationalization route.

    Well That's Hopeful (none / 0) (#54)
    by squeaky on Tue Mar 24, 2009 at 04:20:55 PM EST
    Pretty tricky though. Sounds like behaviorist psychology.

    I don't know about hopeful (5.00 / 1) (#56)
    by Alien Abductee on Tue Mar 24, 2009 at 04:23:54 PM EST
    In any case it's all a terrible mess and is going to be ruinously expensive for the country.

    GIfts From BushCo (none / 0) (#58)
    by squeaky on Tue Mar 24, 2009 at 04:30:31 PM EST
    That and the Iraq/Afghanistan war. Time bombs in our laps. I am sure that the GOP takes delight every time they think about our problems.

    My understanding is that most of these assets (none / 0) (#85)
    by Green26 on Wed Mar 25, 2009 at 12:08:56 AM EST
    have already been written down significantly, due to the mark-to-market rule. I think the banks are likely to have gains upon sale of these assets, unless the sale/plan is a failure (and no one bids much).

    Warren Buffet believes there probably is good value in the toxic assets. Here are quotes from him on March 10:

    "The so-called "toxic assets" of the banks, he said, were "probably ... the best prospects for returns if the current value is based on mark-to-market".

    This was the title of that article: "Warren Buffett sees value in toxic bank assets"


    It looks like the toxic securities (none / 0) (#87)
    by Green26 on Wed Mar 25, 2009 at 12:29:39 AM EST
    have already been written down, due to the mark-to-market rule, but toxic loans have not been written down much (if they are still performing). See quotes from tonight's NY Times article:

    "Because of the way they account for the assets on their books, Goldman Sachs and Morgan Stanley -- Wall Street giants that converted themselves into banks last year in an effort to ride out the financial storm -- may be more willing to sell assets than some commercial banks.

    Under accounting rules, banks must carry securities on their books at market prices. Most financial firms have already marked down these assets to prices that might be low enough to lure buyers.

    But banks need not carry ordinary loans at market value. Instead, they are allowed to hold them at their higher values until they are repaid. So, for many commercial banks, selling loans now, at distressed prices, would almost certainly lead to large losses. Such losses might raise questions about how some banks will fare in a so-called stress test that federal regulators are in the process of applying to about 20 lenders.

    "I don't see how they are going to get the banks to sell," said an executive at a large bank, who asked not to be named, given the delicate nature of the Treasury plan. "There are going to be substantial write-downs taken to get them off the books."


    Geithner (3.00 / 2) (#5)
    by squeaky on Tue Mar 24, 2009 at 03:01:25 PM EST
    He was Under Secretary of the Treasury for International Affairs (1998-2001) under Treasury Secretaries Robert Rubin and Lawrence Summers.[5] Summers was his mentor,[10][11] but other sources call him a Rubin protégé.[11][12][13]


    Just curious, would Clinton have appointed many of the same Wall Street folks to her cabinet?

    No question about it, imo.

    Hmmm (5.00 / 5) (#13)
    by TeresaInSnow2 on Tue Mar 24, 2009 at 03:16:01 PM EST
    No question about it...if you believe Bill Clinton and Hillary Clinton are actually the same person....

    More or Less (none / 0) (#16)
    by squeaky on Tue Mar 24, 2009 at 03:19:32 PM EST
    Yes, just as Obama and Hillary are about the same person. The three of them represent who we are as a democratic party today. Not much difference, imo, save for style.

    Although (none / 0) (#17)
    by squeaky on Tue Mar 24, 2009 at 03:21:16 PM EST
    Krugman had a soft spot for Hillary and was more critical of Obama. I pretty much felt the same way.

    Um, you almost make it sound (5.00 / 3) (#22)
    by dk on Tue Mar 24, 2009 at 03:28:16 PM EST
    like those were Krugman's personal feelings toward the two.  Do you know him well enough to know his personal feelings?

    What I do recall is that he thought Hillary's stated policy proposals during the campaign were better than Obama's.


    Personal? (none / 0) (#32)
    by squeaky on Tue Mar 24, 2009 at 03:37:52 PM EST
    I am just going by what I read. I saw little difference between Hillary and Obama but I had a soft spot for Hillary. Krugman also seemed to be softer on Hillary than Obama despite their similarity.

    Well, certainly you can speak (5.00 / 3) (#34)
    by dk on Tue Mar 24, 2009 at 03:40:58 PM EST
    to your own personal feelings.  If you had a soft spot for Hillary, etc.  But Krugman wrote analysis of policy proposals.  As he is doing now.  

    Yeah So What (none / 0) (#40)
    by squeaky on Tue Mar 24, 2009 at 03:50:01 PM EST
    He was also critical of Hillary on some of her economic ideas, for instance when she wanted Greenspan to be involved with solving the Mortgage crisis. IMO, Krugman was far less dispassionate than BTD, for instance.  

    Heh. (none / 0) (#45)
    by dk on Tue Mar 24, 2009 at 03:57:21 PM EST
    Irrelevant (5.00 / 8) (#19)
    by Big Tent Democrat on Tue Mar 24, 2009 at 03:22:35 PM EST
    Obama is the President.

    It's ALWAYS about Hillary (5.00 / 4) (#30)
    by jbindc on Tue Mar 24, 2009 at 03:37:21 PM EST
    Didn't you know?

    Hmm (none / 0) (#1)
    by lilburro on Tue Mar 24, 2009 at 02:50:04 PM EST
    Even Geithner Plan defender Brad DeLong is lukewarm -

    I suspect that in the end we will be driven down the road to some form of bank nationalization -- and if that is where we are going Paul Krugman is correct to say that it is better to get there sooner rather than later. But unless Paul Krugman has 60 Senate votes in his back pocket, we cannot get there now. And the Geithner Plan seems to me to be legitimate and useful way to spend $100 billion of TARP money to improve -- albeit not fix -- the situation.

    It has the added benefit, I think, of laying the groundwork to convincing doubters of nationalization: "We tried alternatives like the Geithner Plan and they did not work" might well be an effective argument several months down the road.

    The polling a few weeks ago showed that the public doesn't need convincing.  Apparently Eric Cantor doesn't need convincing.  So who does?  Wall Street?  A few TalkLeft commenters?

    The argument now seems political more than economic - most people seem to be saying nationalization is the way to go.  The question being when.

    Is this supposed to be brilliant (5.00 / 1) (#10)
    by lilburro on Tue Mar 24, 2009 at 03:10:26 PM EST
    or is this as disheartening (in view of what kind of plan Geithner gave us) as it seems?


    "Outreach is operating on all cylinders," says an administration official. Treasury officials have held conference calls with Ford Motor Co., General Motors Corp., Chrysler LLC, Sallie Mae Inc., BlackRock Inc. and other financial firms. In a call to one Wall Street firm, Treasury counselor Lee Sachs sought input on ways to "improve or enhance" Treasury programs in the works. Other Treasury officials also placed calls to senior executives at Morgan Stanley, Goldman Sachs and other firms.

    Bankers were shell-shocked, especially when Congress moved to heavily tax bonuses. When administration officials began calling them to talk about the next phase of the bailout, the bankers turned the tables. They used the calls to lobby against the antibonus legislation, Wall Street executives say. Several big firms called Treasury and White House officials to urge a more reasonable approach, both sides say. The banks' message: If you want our help to get credit flowing again to consumers and businesses, stop the rush to penalize our bonuses.

    They are brazenly holding Obama, and us, hostage.


    So (none / 0) (#14)
    by hookfan on Tue Mar 24, 2009 at 03:18:12 PM EST
    now the declaration of economic warfare against the people is out in the open. Historically, things like this have not ended well.

    For who? (5.00 / 1) (#27)
    by NYShooter on Tue Mar 24, 2009 at 03:33:24 PM EST
    That is the question.

    If they are holding Obama hostage (none / 0) (#90)
    by BackFromOhio on Wed Mar 25, 2009 at 08:35:00 AM EST
    on bonuses, it is Obama who is allowing himself to be held hostage.  I haven't seen evidence that the banks will start lending again only if the government allows bonuses to be paid at the levels Wall St wants, the people be damned.

    I think the real sticking point is (5.00 / 1) (#20)
    by scribe on Tue Mar 24, 2009 at 03:25:09 PM EST
    of all things:  Al Franken.

    As Krugman notes, there are not the 60 votes available in the Senate for the Admin to get legislative approval, so they are stuck doing what they can without getting new legislative authority.  

    Unless and until Franken joins the Senate, the Democrats will not be able to ram whatever legislation needs be passed through the Senate.  And the Admin is stuck doing stuff like the Geithner plan.

    I would, however, remind President Obama of an old principle he might want to let Wall Street get a whiff of:

    Four guys in a car on a long-distance fishing trip. All kinds of conversation.  One of the guys tells this story from his days growing up in NYC's Chinatown:

    A young punk got hooked up with one of the gangs that runs in Chinatown, shaking down restaurants and stores for protection money and feeding their members into the tongs.  He busts up a prominent businessman.  The businessman turns him in, contrary to the regular "deal with it ourselves and keep the cops out" mindset that obtains in Chinatown.  Young man is promptly busted, spends a night or two in the Tombs waiting for arraignment.  He comes before the judge and bail is set at an amount he cannot obtain.

    The complaining witness, Mr. Prominent Businessman, then posts young man's bail.

    One of the other guys in the car is all "WTF?"  Another is cracking up.  WTF guy asks laughing guy why.

    Laughing guy explains:

    Prominent Businessman has just straightened out young man, probably permanently, and ended his gang-tong problem for a good, long time because he has just sent the message:  "I can put you into prison and I can get you out, whenever I want."
    The Wall Street Boys need to understand that, and get with the program.  They can hold out for every last penny and go away, or they can leave something on the table and leave without cuffs and irons.  They should ask Bernie Madoff how 10 South is working out....

    Well (5.00 / 2) (#25)
    by squeaky on Tue Mar 24, 2009 at 03:32:23 PM EST
    Your story could be framed as an argument for Obama giving the guys who control the money carte blanch, rather than Obama controlling the guys with the money.

    I would favor giving the people who are pinched assistance and let the money trickle up. That was supposed to be Obama's plan, trickle up not trickle down.


    Um. No, I don't think so. (5.00 / 2) (#43)
    by scribe on Tue Mar 24, 2009 at 03:56:29 PM EST
    The point is, last week Obama was referring to dealing with this situation as being like trying to talk a guy wearing a suicide vest with his finger on the trigger, into taking the finger off the trigger.

    There is little doubt from their behavior of the last few months that the banksters have been holding "give us more money or we'll blow up the entire economy" over the heads of the world at large.  By comparing the situation to that of a suicide terrorist in a suicide vest, Obama has made a pretty direct and clear - though veiled - point to them.

    And he's the one who can put people in jail.

    Frankly, though, if I were Obama, I'd consider doing one thing:

    Hire Eliot Spitzer as a special US Attorney (find a spot in the line-and-staff diagram for him), recess appoint him (or appoint him on an interim basis) and give him a seven-word charge:

    "Clean up Wall Street.  Take your vengeance."

    You could even make it four words, leaving the last three implied instead of expressed.

    But there's a guy who knows where the bodies are buried, who put them there, how to dig them out, and how to turn a moribund NY AG office into a force.


    Perfect! n/t (none / 0) (#47)
    by NYShooter on Tue Mar 24, 2009 at 04:02:28 PM EST
    Yes (none / 0) (#48)
    by squeaky on Tue Mar 24, 2009 at 04:02:33 PM EST
    I would support that. Too bad Spitzer is so toxic. Having a nanny off the books is cause for tar and feathers, having a nanny lapdancing etc... oy.  

    Actually, Delong is (5.00 / 1) (#29)
    by dk on Tue Mar 24, 2009 at 03:35:31 PM EST
    the one who, in his response to Krugman, puts forth the argument that Obama can not nationalize until he gets 60 votes, and that those 60 votes are not yet available.

    Krugman (at least if I may paraphrase arguments he has been making) would likely say his concern is that Obama's political capital will only go down from here, and that delaying nationalization will actually make it less, not more, likely to be sold to congress and the American public down tht road.  Furthermore, in the meantime, hundreds of thousands, or more, jobs will be lost needlessly.


    OK. (none / 0) (#39)
    by scribe on Tue Mar 24, 2009 at 03:49:53 PM EST
    It was in the Krugman article....

    But if Republicans are calling (none / 0) (#31)
    by lilburro on Tue Mar 24, 2009 at 03:37:49 PM EST
    for nationalization, why not just take them up on it?

    Taking them at their word is a waste of time. (5.00 / 3) (#37)
    by scribe on Tue Mar 24, 2009 at 03:49:17 PM EST
    The English had a saying:  "answering the Irish question.  When the English would get close to the answer, the Irish would change the question."

    The Rethugs are spouting their pro-nationalization bullcrap today, b/c they know (a) it ain't gonna happen (yet) and (b) if it did they could trot out Bachmann and all their other reliable mouths to stir the black helicopter ZOG idiots like she tried to do this morning.  The minute Obama went to nationalization the Rethugs would be against it and never mention (and, courtesy of their echo chamber, never be called on) their prior endorsement of it.

    Just look at the way Specter has decided to be against EFCA, despite having co-sponsored it originally (2003), and voted to send it to a floor vote (2007).  Exhibit A of hypocrisy-thy-name-is-Republican.


    well, Franken won't solve that problem. (none / 0) (#42)
    by lilburro on Tue Mar 24, 2009 at 03:55:59 PM EST
    He isn't vote no.60.  We'll still have to pick off one or two of the doubless hypoctrical Republicans.  Is that actually going to get easier with time?

    Tell them they can join us (none / 0) (#44)
    by scribe on Tue Mar 24, 2009 at 03:57:15 PM EST
    or lose the filibuster.

    Yeah (none / 0) (#52)
    by jbindc on Tue Mar 24, 2009 at 04:10:27 PM EST
    That won't happen.  Because eventually the Dems will lose the Senate (2010?  2012?) and will want that little weapon in their back pocket.

    60 votes (5.00 / 5) (#64)
    by souvarine on Tue Mar 24, 2009 at 04:56:01 PM EST
    Seems to me that if you want 60 votes for nationalization you should be arguing for nationalization, not against it. So far Obama seems to be doing everything in his power to prevent a consensus in Congress for nationalization. The public is leading the way on this question, followed by the House, followed by the Senate, followed by Obama.

    How come the Dems claim to need 60 (none / 0) (#91)
    by BackFromOhio on Wed Mar 25, 2009 at 08:42:07 AM EST
    votes to get anything done and the Republicans, when the majority in Congress do not.  Anyone else tired of excuses?  And the government does not need Congress to put banks themselves into fed receivership.  In addition, state insurers may have authority over insurance part of conglomerates and could work together with federal authorities.

    Maybe there's (none / 0) (#2)
    by Ga6thDem on Tue Mar 24, 2009 at 02:53:10 PM EST
    another way: just let it go on until there's no other plan than nationalization. If the Geither/Obama plan hangs out there long enough to create enough opposition from the rank and file of both parties then it's DOA.

    Maybe that's what they're doing? (none / 0) (#4)
    by lilburro on Tue Mar 24, 2009 at 02:59:37 PM EST
    Geithner wants to shovel some food to the Wall Street piggies first...then we can nationalize.

    That kind of spending will be the revival of the GOP though.


    I don't (5.00 / 1) (#7)
    by Ga6thDem on Tue Mar 24, 2009 at 03:03:02 PM EST
    know. It seems that everything Obama has been doing is reviving the GOP. He constantly made the mistake of legitimizing them and now is going to suffer the consequences of that.

    There's been lots of speculation (none / 0) (#92)
    by BackFromOhio on Wed Mar 25, 2009 at 08:43:28 AM EST
    that Obama admin eventually plans to nationalize, but I've not seen any basis for this idea other than the speculation, have you?

    Yup, this is just the first step (none / 0) (#21)
    by BrassTacks on Tue Mar 24, 2009 at 03:27:28 PM EST
    On the road to nationalizing all the banks, and all the financial institutions, to be followed by the auto industry and others, as is deemed necessary.  

    This plan is designed to give Obama more reasons, and much more support, for nationalizing everything when it fails.  It's just a stepping stone to where he wants to go.  


    And what does nationalization cost? (none / 0) (#51)
    by Lacey on Tue Mar 24, 2009 at 04:09:17 PM EST
    That what I'm trying to understand. If the banks are nationalized, is there a cost involved and what is it.

    my current understanding (none / 0) (#66)
    by souvarine on Tue Mar 24, 2009 at 05:40:15 PM EST
    As I understand it the government is at a minimum on the hook for the insured deposits. Beyond that the government has to decide how much economic disruption it wants to prevent, i.e. how much it wants to bail out the uninsured deposts, bond holders and other senior debt with notes against the bank.

    For instance CitiBank holds about 800 billion in deposts, but only 100 to 200 billion of that is insured. The rest is foreign deposits or otherwise uninsured deposits. Once the government has recovered what value it can from CitiBank's assets presumably most of that 800 billion will be covered, and the government would have to determine how much of the remainder, and beyond that how much of the bonds, it is willing to cover.

    Doesn't give you a figure, but might give you a sense of the scale.


    So in other words (none / 0) (#73)
    by Lacey on Tue Mar 24, 2009 at 06:31:55 PM EST
    A lot of money, either way. It seems Geithner wants to take a more cautious approach that leaves the door open for nationalization. The argument against that is that nationalization is inevitable and the further delay there is will simply create more problems and pain. Is that correct?

    caution is expensive in this case (none / 0) (#83)
    by souvarine on Tue Mar 24, 2009 at 08:44:38 PM EST
    Yeah, not enough money to save the banks, under the Geithner plan, since they would have to make everyone whole to get the banks lending as they are currently structured. Keeping the banks on life support won't fix the financial system, so the recession will continue eating up jobs and weakening the banks balance sheets.

    Taking over the banks and restructuring them would at least free up capital for lending. Getting enough money to clean up the obligations would be tough.


    Taking over banks is expensive... (none / 0) (#89)
    by BigElephant on Wed Mar 25, 2009 at 07:36:03 AM EST
    I've heard numbers that the FDIC taking over a small community bank for a short period of time is several million dollars.  Nationalizing all the banks in the US would be trillions.  Couple that with the fact that we've never done anything like it before, so expect it to look a lot like Iraq -- we'll get in and it will be hard to really execute on the exit strategy, because we'll be learning as we go.

    I spent yesterday studying the Geithner plan.  It's not horrible. The Legacy Loans program seems pretty good actually, although you must make sure you stop fraud (keeping a bank from effectively buying it's own property back at a higher price).  The main knock against it is if it goes far enough.  But I think you'll be able to determine that in pretty short order.  And I think it will be interesting to see what types of valuations we really see come out of it.  

    All in all, this is the first time in a long time that I'm somewhat optimistic about the economy.  


    Is there any left blogger defending Geithner... (none / 0) (#26)
    by magster on Tue Mar 24, 2009 at 03:33:09 PM EST
    ...other than Booman?  I'd like to read something hopeful on the economy, even if it's likely fiction.

    Kevin Drum (5.00 / 1) (#36)
    by gyrfalcon on Tue Mar 24, 2009 at 03:47:32 PM EST
    at Mother Jones isn't pro-Geithner plan per se, but he's the only one I'm aware of out there who's still open to argument and information from both sides.  Economist/blogger Brad DeLong thinks it maybe might work partially, he hopes, possibly, if we're very lucky.

    Business/finance columnists Steven Pearlstein at the Wapo and Joe Nocera at the Times are cautiously supportive.


    Al Giordano (none / 0) (#33)
    by Big Tent Democrat on Tue Mar 24, 2009 at 03:39:39 PM EST
    doesn't qualify (none / 0) (#63)
    by souvarine on Tue Mar 24, 2009 at 04:51:53 PM EST
    He said fiction, not fantasy.

    Good Question (none / 0) (#35)
    by squeaky on Tue Mar 24, 2009 at 03:41:01 PM EST
    Considering that the GOP hates his plan. Seems like Geithner has little support from anyone.

    in today's atmosphere (5.00 / 2) (#76)
    by CoralGables on Tue Mar 24, 2009 at 07:04:51 PM EST
    of everyone staying at a Holiday Inn Express last night, and acting like nattering nabobs of negativism who know better than everyone else, I'll take the middle ground and hope he may just have the perfect plan.

    dawg, that's depressing . . . . (none / 0) (#41)
    by nycstray on Tue Mar 24, 2009 at 03:53:50 PM EST
    head on over to the DK rec list! (none / 0) (#38)
    by lilburro on Tue Mar 24, 2009 at 03:49:21 PM EST
    or wait, does this not inspire confidence?

    I have a degree in economics from what most people consider a really good college, and I follow this stuff pretty closely...And all I know from reading Paul Krugman is that whether the sky is raining cinders or dropping rose petals on a perfumed breeze seems increasingly arbitrary, and prone to weekly shifts.  I already have a magic 8-ball, thanks.

    I don't know who any of the leading (none / 0) (#86)
    by Green26 on Wed Mar 25, 2009 at 12:17:24 AM EST
    left bloggers are (except ones I've seen cited on this site on occasion), but the first thing that comes to my mind is: how many of them understand and have an appreciation for business? Do they look at situations with at least semi-objectivity, or do they let their politics overly influence their analysis of things relating to business? One of my criticisms of Krugman is that I think he lets his politics overshadow his views.

    At least Geithner understands business and Wall St. I don't know whether Obama does.


    At NY Magazine, (none / 0) (#93)
    by BackFromOhio on Wed Mar 25, 2009 at 08:48:00 AM EST
    John Heilman (sp?) says that Geithner is not an ideas man, but a technocrat -- tell him to do something (make policy decisions), and he implements.  If this is correct, Geithner is hardly someone who has the breadth of perspective needed to lead on business/economic policy, IMO.

    This is what you get when you elect 'leaders' (none / 0) (#55)
    by tokin librul on Tue Mar 24, 2009 at 04:22:44 PM EST
    based on "hope."

    Not results, not experience. Hope.

    I prefer Obama to McCain/Bush. But that's like saying I prefer drowning to being buried alive.

    Of course, the Pukes threw the "election." They stole more votes from Kerry in '04 than were necessary to install Bombin' John over Obama. Obama 'won' with a 6-7 point margin. The Pukes stole close to 10 percent vs. Kerry.

    I don't know. (4.66 / 3) (#65)
    by inclusiveheart on Tue Mar 24, 2009 at 05:13:03 PM EST
    I think this is what you get when you elect "leaders" rather than "public servants".

    Bush was viewed as a leader - led us right off a cliff.

    People tend to defer to leaders.  They make demands of public servants - at least that's how it should work in theory.


    To recover or not to recover that is (none / 0) (#69)
    by joze46 on Tue Mar 24, 2009 at 06:17:20 PM EST
    To recover or not to recover that is the question; Of course we want recovery...

    What appears to me is this plan is a sort that is very close to that of reverse economic engineering. Something I never thought of before but should naturally be part of the project to flush out the real core of the problem is the center stage of this plan.

    Perhaps the real reason the Republicans are on a rant to oppose it at every effort. This plan is basis dated for the economic turn down at 2007 which is well way back into the Bush and Company mischief. If that proves even earlier the Republican Neo's will likely go wild to engage in all kinds of smear and rant to oppose it.

    This timing is well into the next election that would likely diminish the Congressional and Senate seats, and GOP slots at a time well into the ownership of wild Republican deals that could be the cause of the melt. To be sure Republicans do not want to be proved they are responsible for deliberate deceitful fraud and deception or calamity by their leadership. But it looks that way, so the fireworks will really light up.

    There can be no other reason why they refuse to take part in being able to get free money. Heck, the recovery deal sort of reminds me of a profit sharing where if you kick in a hundred dollars you company will kick a hundred dollars. That sounds like a 100% return for banks interested if one has a good investment manager.

    But what is really funny is all these years I have heard from the Republicans the country should be run like business. LOL and here we jumping right in and the Right wing neo-con's ranting that its not right for the government to this. It's so funny.

    Two things seem to be out standing one is the "At Will" principle in business that always exercised its prerogative to be able to run things at will. Well now we the people are right there sharing the fun and they don't like it.

    The other was the very funny comment Chris Mathews about taxing the heck out of this bonus bail out banker was not fair to use legislation to zero in on them. As I was sitting listening to that while thinking about the Federal Reserve, the Jekyll Island group, that was legislated almost a hundred years ago, that has zeroed in on the middle class for a century, was very funny to me anyway.

    Chris know whats happening that one guy on Joe in the morning his wife works for one of the bail out banks and I am sure she is not clerk, pat buchanan has stock in one of the bail out banks, then we have the original pretty pirate Andrea Mitchell wife of former Federal Reserve board chairman giving selected question and answer sessions. They wonder why Obama is laughing...MSNBC and CNBC are hardwired in bias and corruption big time.