Financial Oligarchy Is Named

Even as the depth of depravity of the financial crisis's array of bad actors rings out, the rightwing shouts "The extreme-left is desperately trying to take over every aspect of your life."

Here's a link to Simon Johnson's piece in The Atlantic: The Quiet Coup, describing an American financial "oligarchy" that most Americans blame for the financial mess.

From this confluence of campaign finance, personal connections, and ideology there flowed, in just the past decade, a river of deregulatory policies that is, in hindsight, astonishing:
• insistence on free movement of capital across borders;
• the repeal of Depression-era regulations separating commercial and investment banking;
• a congressional ban on the regulation of credit-default swaps;
• major increases in the amount of leverage allowed to investment banks;
• a light (dare I say invisible?) hand at the Securities and Exchange Commission in its regulatory enforcement;
• an international agreement to allow banks to measure their own riskiness;
• and an intentional failure to update regulations so as to keep up with the
tremendous pace of financial innovation.
The mood that accompanied these measures in Washington seemed to swing between nonchalance and outright celebration: finance unleashed, it was thought, would continue to propel the economy to greater heights. ...
The conventional wisdom among the elite is still that the current slump 'cannot be as bad as the Great Depression.' This view is wrong. What we face now could, in fact, be worse than the Great Depression—because the world is now so much more interconnected and because the banking sector is now so big. We face a synchronized downturn in almost all countries, a weakening of confidence among individuals and firms, and major problems for government finances. If our leadership wakes up to the potential consequences, we may yet see dramatic action on the banking system and a breaking of the old elite. Let us hope it is not then too late.

Tim Geithner Will Not Be the Effective Front

Timothy Geithner's appearance on Meet the Press makes one thing perfectly clear: Geithner cannot be the pitchman for the Obama recovery from the machinations of AIG and the like and their political and regulatory allies.

There is simply no political passion, identification of bad actors, nor populist (democratic) appeal from Geithner. As Paul Krugman said on ABC's This Week, "It's a plan to rearrange the deck chairs and hope that that keeps us from hitting the iceberg. They've done some things very fast, but they've been very small things ... There's no way this could be enough." (See Huffington.)

And Republicans are absurdly appropriating the populist message in the political battle.

Obama likely sees this. So, look for Obama to be a FDR-like frontman, as he should be.

And, if you have not read it yet, do read Matt Taibbi's 8,700-word piece in Rolling Stone.

We Needed This Under Bush

Update: Obama fields questions on offshoring, health care, jobs and so on. Hey, this guy actually believes in solving problems.

Geithner to Outline Major Overhaul of Finance Rules - Officials said the plan, which will be unveiled Thursday, will subject hedge funds and traders of exotic financial products to governmental supervision.

About time, so will critics of these unregulated exotic financial products now rule the airwaves?

And M. Shihid Alam asks 'what about the victims of financial markets?'.

But, one ought to note, even Nouriel Roubini (Dr. Doom) has good things to say about the Geithner overhaul. From Roubini's e-mail:

Nouriel Roubini (March 25): Finally, Geithner and Bernanke (see respective testimonies at AIG hearing on March 24) have come to agree about the need for a new insolvency regime for systemically important financial institutions (bank holding companies and non-bank financial institutions) in order to avoid another Lehman and expensive ad-hoc bailouts like AIG

Necessary features: A new conservatorship/receivership regime of insolvency could be similar to the one used to manage the orderly takeover of Fannie and Freddie. As soon as the stress test is done some large and systemically important banks (and their holding companies and non-bank financial arms) will have to be taken over. To do it orderly we absolutely need a special insolvency regime like the one we have for the bank arms of bank holding companies and similar to the one we have for Fannie and Freddie

On the other hand Paul Craig Roberts sees financial deregulation and offshoring (shipping American jobs overseas) as having done such tremendous damage to the U.S. economy that Obama's interventions and spending may be insufficent to bring us out of this recession, with one catastrophic result being the "depreciation of the US dollar and loss of its reserve currency role":

The enormous trade deficit that has been created by the pursuit of short-term corporate profits can only be closed in two ways. One is to stop the offshoring and to bring home the offshored production. Possibly, this could be done by replacing the corporate income tax with a tax based on whether value added to a company’s output occurs domestically or abroad.

The other way the trade deficit can be closed is by the inability of Americans to pay for imports. If debt monetization wrecks the dollar and drives up import prices, Americans will have to learn to live with less imported energy and manufactured goods. American annual consumption would shrink by the amount of the trade deficit.

Obama Scores

Why broadcast reporters do not comment on the erudition of Barack Obama v. the stammering ignorance of George W. Bush remains a mystery.

One thing is clear: Obama has made leveling with the American people an urgent priority.

Still, one wonders if the hollowed-out economy that Bush and his nihilists loosed onto Americans can be saved by Obama.

Obama is trying.

See Obama shoots back and scores - With a sharp retort about AIG, the president was on his game with the press, weaving through questions and driving home his economic plan. (Madden)

Paul Craig Roberts Warns Things Could Fall Apart

In his When Things Fall Apart (CounterPunch) former Assistant Secretary of the Treasury in the Reagan administration, Paul Craig Roberts warns "If the US government is forced to print money to cover the high costs of its wars and bailouts, things could fall apart very quickly."

Just an idea, but how about we halt these two bullshit wars in Iraq and Afghanistan like right now.

Operation Iraqi Freedom and Operation Enduring Freedom can no longer be sustained by the U.S. Treasury and can no longer be endured by the populations that were supposed to be freed.

Not one more dead!

Obama Scaring GOP with Candor

As President Obama holds a prime-time news conference to further explain and defend his economic policies, clarity and specifics are now the pressing order of every day. [See also Rescue Plan, With Some Fine Print, Dazzles Wall Street.]

From the Obama White House blog:

Last week the President and the Treasury Department focused on ensuring that homeowners take advantage of the President’s Homeowner Affordability and Stability Plan to keep people in their homes and stabilize the mortgages that underlie the assets involved in the financial crisis. This morning the President and the Treasury unveiled the plan to unlock the credit markets, one of the most complex and intractable obstacles to economic recovery. Treasury Secretary Tim Geithner penned an extensive op-ed in the Wall Street Journal, and posted a detailed explanation of how the plan will function on the Treasury Department’s website. The President spoke to the press about the plan this morning after receiving the Economic Daily Briefing in the Roosevelt Room.

Obama is making good on his promises on energy and the environment as he pledges billions for renewable energy projects.

Look for a details-laden, plain-spoken and candid address to the public tonight in the press conference.

In the words of Ralph Waldo Emerson: "The world is upheld by the veracity of good men: they make the earth wholesome. They who lived with them found life glad and nutritious. Life is sweet and tolerable only in our belief in such society."

That's what Americans are looking for: Candor and commitment. And such virtues scare the holy hell out of the contemporary Republican Party.

Toxix Assets and Winston Wolf

Update III: Geithner seeks new powers over financial companies

Update II: The President and the Treasury Department unveil the plan to get credit flowing to working families again by bringing stability to the financial system.

Update: Frank Rich Warns of a ‘Katrina Moment’

Treasury Secretary Timothy Geithner and the rest of Obama's recovery team need to demonstrably channel Winston "I-Solve-Problems" Wolf, the fast-acting, hyper-efficient fix-it man from Pulp Fiction (1994, Quentin Tarantino).

News from today' Times (Toxic Asset Plan Foresees Big Subsidies for Investors) is spot-on in this needed Wolfian aspect of Obama's recovery plan.

From Edmund L. Andrews, Eric Dash and Graham Bowley.:

Treasury Department is expected to unveil early next week its long-delayed plan to buy as much as $1 trillion in troubled mortgages and related assets from financial institutions, according to people close to the talks. The plan is likely to offer generous subsidies, in the form of low-interest loans, to coax investors to form partnerships with the government to buy toxic assets from banks.

Long-awaited is right. We believe Obama is on this, we understand the repercussions, so thank you for bringing in the cleaners now.

"You're sending the Wolf? Shit, negro, that's all you had to say."
- Jules (Samuel L. Jackson)

As for congressional Republicans and any Democrats who resist soaking up this trillion-dollar toxic pool, as the Wolf said: "I'm here to help. ... So pretty please, with sugar on top, clean the *&%$ (mess)."