March 23, 2009

3/23: Geithner vs. The Netroots

Details about Treasury Sec. Tim Geithner's toxic assets plan leaked out over the weekend, and the reception in the liberal blogosphere could not have been worse. Led by New York Times columnist Paul Krugman (who repeatedly attacked Geithner's plan on his blog before lambasting it in his Monday column), lefty bloggers spent much of the weekend criticizing Geithner's proposals. Josh Marshall complained that Geithner's plan forces taxpayers "to pay or underwrite purchasing these bad debts from the banks at inflated, perhaps wildly inflated, prices." James K. Galbraith called Geithner's plan "a Rube Goldberg device for shifting inevitable losses from the banks to the Treasury, preserving the big banks and their incumbent management in all their dysfunctional glory." Influential liberal blogger Atrios summed up the general sentiment in the liberal blogosphere when he declared: "We are so screwed."

Conservative bloggers, meanwhile, don't really have a consensus position on Geithner's plan. Michelle Malkin criticized it, but other righty bloggers noted that the financial markets seemed to react positively to Geithner's announcement. It appears that conservative bloggers are more upset about the size of Pres. Obama's budget than his specific plan for dealing with insolvent banks.

What else is happening in the blogosphere?

• Conservative bloggers (Morrissey, Lane, Faughnan, Bandow) are buzzing about rumors that three companies are working with congressional Dems to write "compromise legislation that would make it easier for organized labor to unionize but preserve a workers' ability to decide using a secret ballot vote."
• Conservative bloggers (Malkin, Hinderaker, Reynolds) are complaining that the national media isn't devoting sufficient attention to the "tea party" protests.

GEITHNER TOXIC ASSETS PLAN: Timmy Strikes Out Again

Liberal bloggers spent the weekend tearing into Geithner's plan:

• Ezra Klein: "It's probably a bad sign that the administration leaked the details of their full banking plan in a Friday night newsdump. And reading it, you can see why."
• TPM's Marshall: "[This] seems like another twist on the basic concept of getting taxpayers to pay or underwrite purchasing these bad debts from the banks at inflated, perhaps wildly inflated, prices."
• Think Progress' Matthew Yglesias: "[T]he Geithner Plan, even if all goes well, will leave us with a situation in which essentially the same large firms with essentially the same management still dominate the economy, but now with a bunch of added moral hazard."
• Atrios: "Aside from setting up an overly complicated plan to try to disguise what they're really doing, the utility of the Geithner plan rests (or pretends to rest, not sure) on one fundamental premise: that Big Shitpile is greatly undervalued by 'the market' and that these mortgage securities really have expected revenues which justify higher prices. One could have reasonably believed this months ago, I have no idea why anyone would believe this now. The housing bubble burst, and now recession is here. There's a lot of shit to be eaten, the question is who will eat it? Timmeh wants to make sure it's not the banksters."
• Firedoglake's Christy Hardin Smith: "After several weeks of pushback on [Henry] Paulson redux for TALF, the Obama administration appears to have settled on...the Paulson redux plan with assorted new shiny windowdressings. Oh joy and rapture."
• TPM's David Kurtz: "Geithner['s] bank plan is as bad as advertised."
• dday: "Basically, the government will subsidize investors to overpay for bad assets, meaning that cash will simply flow from taxpayers to banks. Instead of shrinking the wealth and value of the financial sector relative to the greater economy, this plan would keep it in place. The White House clearly sees paying off the banksters as equal to saving the economy, making the solution far more expensive than the problem, especially considering that this probably won't work."
• digby: "The only way to look at this that makes any sense is to believe that the toxic assets are actually worth more than everyone outside the government thinks they're worth. And that requires that we give ourselves up to the faith-based notions of the last administration, in which we simply buy in because 'they must know things we don't.' Whenever that happens, it's time to be very, very skeptical. [...] I'm getting more and more convinced that Matt Taibbi is right: we are officially, royally fucked."

GEITHNER TOXIC ASSETS PLAN II: The Experts Agree: This Plan Sucks

Several liberal economists in the blogosphere wrote much-linked posts trashing Geithner's plan:

• Galbraith: "If I'm right and the mortgages are largely trash, then the Geithner plan is a Rube Goldberg device for shifting inevitable losses from the banks to the Treasury, preserving the big banks and their incumbent management in all their dysfunctional glory. The cost will be continued vast over-capacity in banking, and a consequent weakening of the remaining, smaller, better- managed banks who didn't participate in the garbage-loan frenzy. This will not achieve the stated goal, of bringing on new lending, for reasons already explained at length. It's all about not-measuring true asset quality at the big banks, permitting them to escape a clean audit, and therefore preserving them as institutions, while forcing the inevitable shrinkage of the financial sector to occur elsewhere. In short, the plan seems to me to be a very bad idea."
• Krugman: "[This is] exactly the plan that was widely analyzed -- and found wanting -- a couple of weeks ago. The zombie ideas have won. The Obama administration is now completely wedded to the idea that there's nothing fundamentally wrong with the financial system -- that what we're facing is the equivalent of a run on an essentially sound bank. As Tim Duy put it, there are no bad assets, only misunderstood assets. And if we get investors to understand that toxic waste is really, truly worth much more than anyone is willing to pay for it, all our problems will be solved. [...] This plan will produce big gains for banks that didn't actually need any help; it will, however, do little to reassure the public about banks that are seriously undercapitalized. And I fear that when the plan fails, as it almost surely will, the administration will have shot its bolt: it won't be able to come back to Congress for a plan that might actually work. What an awful mess."
• The American Prospect's Dean Baker: "House prices are currently falling at more than a 20 percent annual rate. If they fall another 20 percent in real terms, they will be back at their trend level. A further 20 percent decline will hugely increase the percentage of mortgages that are underwater, reducing the value of mortgage backed securities from their current level. There is no obvious reason that house prices should then again rise above their trend level. The failure of people like [Fed Chair] Ben Bernanke and Timothy Geithner to recognize the $8 trillion housing bubble led to this crisis. It appears as though they somehow still don't understand it."

GEITHNER TOXIC ASSETS PLAN III: You Say You Want Nationalization...

A number of liberal bloggers have suggested -- either implicitly or explicitly -- that the Obama admin. should temporarily nationalize insolvent banks. However, other lefty bloggers are arguing that nationalization isn't a great option by any means:

• BooMan: "For proponents of bank nationalization as a panacea for our problems, it should be pointed out that the FDIC nationalized IndyMac last year. They just sold it (after failing to find any larger banks that would buy it) to a consortium of former Goldman Sachs executives and hedge fund managers (including George Soros). They sold it at an estimated loss of $10.7 billion. The FDIC provided $9 billion in financing to the consortium and agreed to assume 80% of the losses on future (existing) loan defaults. That is what nationalization looks like. [...] I think it is safe to say that if no banks were able or willing to swallow IndyMac, no banks are going to be able to swallow Wells Fargo, CitiGroup, or Bank of America. Who will buy them back from the government? A: Hedge Fund managers and ex-investment bankers, that's who. And they're not going to buy them without sweetheart financing and the assumption of risk for future loan defaults by the taxpayer. There are good reasons to nationalize the banks and (certainly) to fire current management. But don't think we can avoid these fundamental realities by nationalizing banks."
• Mother Jones' Kevin Drum: "[I]t's worth noting that taxpayers are going to eat almost all of this shit no matter what happens. If Geithner's plan fails, we eat it. If we nationalize the banks and become owners of all the toxic waste, we eat it. This financial crisis is going to cost the government a ton of money no matter what we do at this point. [...] Nationalization would hurt bankers a little bit, and it would give taxpayers a bigger upside than the current plan. That's good. But it would also be ungodly complex and create plenty of problems of its own. It's worth avoiding if there's another solution."

In a separate post, Drum offers another reason to support Geithner's plan: "Do supporters of bank nationalization really think it's either legally or politically feasible at this point in time? I'm skeptical on both counts. Legally, I'm not sure Obama has the statutory authority to take over a big bank. He may well need congressional authorization of some kind first. And even if he doesn't, does anyone really think it would be wise to go down this road without broad congressional support anyway? I don't. Like it or not, there's only one way to get this support: show that (a) one or more of the big banks really is insolvent and (b) every other option for rescuing them has been exhausted. Geithner's plan does both."

Meanwhile, Berkeley econ prof. Brad DeLong was another progressive who defended Geithner's plan (although Krugman and Atrios both critiqued his argument).

OBAMA: Where's The Diversity Of Views?

Many liberal bloggers are complaining that there aren't enough progressives in Obama's inner circle of economic advisers:

• Open Left's Paul Rosenberg: "Instead of having folks like Krugman, Galbraith, [Nouriel] Roubini, [Joseph] Stiglitz, [Dean] Baker, etc. all on the outside criticizing noisily in the public square, [Obama should] have at least some of them -- or others who think like them -- on the inside challenging [Lawrence] Summers and Geithner every step of the way. This is a minimal requirement for avoiding group think."
• AMERICAblog's John Aravosis: "[W]e can't name a single senior Obama economic adviser who represents the Krugman/Stiglitz wing of economic theory and policy. It's not a matter of expecting Obama to buy, and implement as policy, every single thing that Krugman and Stiglitz say. But it's not clear that anyone is even listening to what they have to say, or representing their philosophy at the table when options are being discussed. That is scary. And it's what the last guys who messed up our economy used to do."

Meanwhile, Arianna Huffington became the latest liberal blogger to call for Geithner's dismissal: "Geithner's actions throughout his career, including his time as Treasury Secretary, are proof that the toxic thinking that got us into this mess is part of his DNA. That's why every proposal he comes up with is déjà vu all over again -- a remixed variation on the same tried-and-failed let-the-bankers-work-it-out approach championed by his predecessor, Hank Paulson. Geithner's Masters of the Universe, the people he still thinks are the ones we should turn to to save the day, are the same people who brought us here. And that is why Geithner either needs to go or keep his job but have his authority stripped and transferred to someone who does not share his Wall Street Weltenschauung. Use any window dressing you want, just take the steering wheel out of Geithner's hands."

Daily Kos' Markos Moulitsas made a similar point via Twitter: "Geithner is starting to look like Obama's [Donald] Rumsfeld."

EMPLOYEE FREE CHOICE ACT: A Compromise The Rightroots Can Accept?

Conservative bloggers are buzzing about a new Washington Times article detailing how Starbucks, Whole Foods Market and Costco are working with congressional Dems to create "compromise legislation that would make it easier for organized labor to unionize but preserve a workers' ability to decide using a secret ballot vote." Some conservative bloggers think this compromise would be a major improvement over the EFCA in its current form:

• Hot Air's Ed Morrissey: "This might seem like bad news for Card Check opponents, but a closer look at the compromise makes it look more like bad news for its advocates. [...] It's not great, but it's not horrid, either. In truth, it gives the unions little that they don't already have, and it strips them of two of their cherished prizes. It also gives politicians on Capitol Hill a way to throw a bone to union rank and file without offering a complete game-changer. If it's incrementalism, it's an increment of the smallest variety possible."
• RedState's Moe Lane: "[This compromise] is much more likely to pass the Senate than the current version. In fact, the current version is not likely to pass the Senate at all. This doesn't mean that this is a good result, of course. [...] But it is the result that occurs when both Houses of Congress and the Presidency are held by a political party that is heavily pro-labor union management (note the precise designation there)...if you're lucky."
• Commentary's Jennifer Rubin: "So what does all this really mean? Most people who can count votes in Congress have figured out that EFCA is going nowhere -- at least for the foreseeable future. So the scramble begins for pro-Big Labor operatives and their allies to find ways of retreating and declaring victory in the face of defeat. But make no mistake: the central planks of EFCA -- doing away with the secret ballot and mandatory arbitration -- are withering on the legislative vine, no matter what the spinners say."

Other conservative bloggers are upset that these three companies are "backing down" to the unions:

• RedState's Brian Faughnan: "Is corporate America really this suicidal? [...] Prior to this report, it looked quite possible that Card Check could be defeated on a straight up-or-down vote. While the unions might have been able to muscle through a win, the greatest danger seemed to be a compromise that preserved the worst elements of Card Check. And now we learn that three of the companies most affected by the legislation are prepared to give the unions half a loaf. [...A] compromise today will teach Card Check opponents a valuable lesson: don't invest heavily in protecting corporate America from the unions; they're bound to cave at the end of the day."
• AmSpec Blog's Doug Bandow: "It has long been obvious that among the greatest enemies of capitalism are the alleged capitalists. Corporate America is one of the least constant defenders of the market economy, ever ready to sell out the system. Businessmen constantly request subsidies and bail-outs, as we have seen in recent months. Similarly, some companies may be preparing to back organized labor's 'card check' bill, which would allow union acitivists to initimidate their way to victory without a secret ballot election."

MEDIA CRITICISM: Teabagging The Media

Conservative bloggers are complaining that the national media isn't devoting sufficient attention to the "tea party" protests:

• Malkin: "Maybe if the Tea Party protesters burned the American flag instead of waving it proudly, the AP would send out reporters..."
• Power Line's John Hinderaker: "One emerging theme is the absence of press coverage, especially at the national level. For some reason, reporters and editors believe it is not news when thousands of people, all around the country, gather to protest the government's bailouts, trillions in debt, etc."
• Glenn Reynolds: "Maybe some of that press mob should have been retasked to Ridgefield? But that would assume that they saw their job as covering actual news, rather than advancing the proper political narrative."

On the left side of the blogosphere, Blue Texan argues that conservatives' complaints are unfounded.

THOUGHT OF THE DAY: The Trouble With Twitter

Balloon Juice's John Cole:

"Here is what I don't understand about twitter. When blogs came out and started to rise in popularity, lots of folks in the MSM and elsewhere said 'Great. Just what we need. The undigested, unedited thoughts of the rabble.' If blogs are the undigested thoughts, tweets are the orts.

And I say this as a guy who fires off numerous posts a day without properly thinking through most of them, usually in a fit of pique, later having to come back and apologize and correct the record or both. I had a twitter account for approximately an hour and thought to myself 'No good can come from this.'

And not only that, the few times I have attempted to read 'tweets,' I can never figure out who is saying what and why, and they all read like cell phone text messages between 12 year olds."

LEST WE FORGET: Getting Randomly Picked To Make Half-Court Shots Now Best Way To Earn Living

From The Onion:

"WASHINGTON -- A new study released by the U.S. Bureau of Labor Statistics Tuesday confirmed that the most dependable source of income for American workers in the current economic climate is to win a novelty contest in which one must successfully shoot a basketball from half-court. 'After factoring in the odds of your ticket number being called while attending a game, the median dollar value awarded, and the athletic ability of the average American citizen, and cross-referencing these data with employment forecasts and current job-security indices, we have determined that half-court shooting contests are currently the most effective way to support a family of four,' the report read in part. 'While this may seem like dire news, keep in mind that the consolation prize for missing the shot usually includes a food item from the concession stand.' The report cited several other possible methods of securing a livelihood, including 50-50 raffles, lotto scratch-offs, and inventing YouTube."

Posted by Ian Faerstein at March 23, 2009 01:15 PM