Stiglitz and 'Fear Index' See Trouble; Recovery v. Crazies

Five-year Vix Fear Chart - Now up near 50

Substantial changes to the banking system forcing banks to make loans to small business could be the answer to stagnation. But this is unlikely to make it through the current GOP Congress, says a depressed Joseph Stiglitz

Today, the world looks to see if 2011 will offer a repeat of the nightmare of 2008, following plummeting stocks yesterday, capping a bad 10 days.

Adding to fear about Europe, [Europe Considers Ban on Short Selling], is the emergence of a potent political force, the American Tea Party, that is literally cheering for an economic melt-down as the GOP in a somewhat more muted fashion attempts to talk the economy down for political ends.

But talk down not just into another recession that runs in a somewhat predictable cycle, but rather the more awful condition of an unpredictable financial collapse, a global economic crisis.

So, the general public will get a crash education in the VIX fear index.

VIX fear index

Fear breeds fear; Crazy breeds the unknown.

The VIX index measures fear and resulting volatility of investors, offering an educated guess on the next 30-day period of the CBOE Futures Exchange (CFE) and S and P 500 Index.

Market psychology and pathology impact ultimately the performance of one's 401-K, and the VIX functions as a red flag and early warning.

The higher the VIX, the more the volatility and fear.

The VIX is at trading at $41.76 (down from the opening; -1.23(-2.86%))  at 10:22 this morning, and the Dow is up 185 points at 10:22 A.M.

On October 24, 2008, the nightmare of 2008, the VIX reached a day-high record of 89.53.

An investment manager told the Financial Times that the last few days' trajectory of the VIX occurs only "during systematically important shock events such as the 2008 financial crash, Bear Stearns bankruptcy, 2010 flash crash, and the 2007 credit market meltdown."

Joseph Stiglitz spoke with Jeff Macke at TechTicker yesterday, and the Nobel Prize-winning economist looks an appropriate representative of the economy that a major American political party is desperate to oppress: Stiglitz looked like a Zombie. Check out the video.
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Professor Joseph Stiglitz

From Jeff Macke at TechTicker:

Professor Joseph Stiglitz has won two Nobel Prizes, taught at the finest schools in the world, and is one of the most highly regarded economic minds in the world. Perhaps it is exactly this intellectual firepower causing his "very depressed state of mind" when he considers the state of the American economy.

The professor joined me and my Daily Ticker colleague Aaron Task, simultaneously honoring us with his presence, bumming us out with his forecast, and giving us hope for a solution; even though his best-case scenario is the United States flat-lining like the Japanese "Lost Generation." How could he not be glum these days?

For starters, we can't get out if we don't know how we got into this mess. Stiglitz says the matter started at the top. "The problem was the economic downturn, the crisis, was much worse than the Obama Administration wanted to own up to." And in his view the stimulus was too small, too brief, had too many tax cuts, and too few drivers of economic growth. I would've pointed out that the Administration was passionate about the sorry state of affairs to the extent the President could blame his predecessor, but that would seem argumentative.

Fiscal policy didn't cure our economic woes, so Aaron and I inquired about the role of Ben Bernanke and his merry crew, which was meeting at the time of our conversation. Can the Fed help break the economic slump?

An emphatic "no," responded the normally loquacious Stiglitz. Failed monetary policy of the past was one of the causes of our current problems and stimulus from the Fed has done what it can. Short-term rates are de minimis and real interest rates are negative, a stance which isn't going to change until at least 2013.

Big corporations are awash with cash, notes the Noble Laureate, but small companies, the real drivers of employment, can't get loans. Substantial changes to the banking system which would force banks to make loans by in effect, penalizing them for keeping cash on the books, could be the answer. But this is unlikely to make it through the current Congress.

The subsequent statement from the Fed represents an effort to do exactly that at the monetary level. Real interest rates are even more negative than they were yesterday morning. Holding cash comes with a cost. Will this lead banks to get cash off their books by lending it to the small businesses that need it? That's up to the elected officials. The Fed has done what it can, their "hands are tied," as our esteemed guest said.

Paul Krugman Throws In Towel, Says We're Headed For Another Depression

By Henry Blodget at Tech Ticker:

For the last several months, Princeton professor Paul Krugman has become increasingly agitated about what he feels is a disastrous mistake in the making -- a sudden global obsession with "austerity" that will lead to spending cuts in many nations in Europe and, possibly, the United States.

Krugman believes that this is exactly the same mistake we made in 1937, when the country was beginning to emerge from the Great Depression. A sudden focus on austerity in 1937, it is widely believed, halted four years of strong growth and plunged the country back into recession, sending the unemployment rate soaring again.

In Krugman's view, the world should keep spending now, to offset the pain of the recession and high unemployment--and then start cutting back as soon as the economy is robustly healthy again.

Those concerned about the world's massive debt and deficits, however, have seized control of the public debate, and are scaring the world's governments into cutting back.

Which fate is worse? It depends on your time frame.

Cutting back on spending now would almost certainly make the economy worse, at least for the short run. Not cutting back on spending later, meanwhile (and Congress has shown no ability to curtail spending), will almost certainly keep us on a road to hell in a handbasket.

The White House's own budget projections show the deficit improving as a percent of GDP to about -4% by 2013. After that, however, even the White House doesn't think things will get much better. After a few years of bumping along at about -4%, the deficit will begin to soar at the end of the decade. And thanks to the ballooning costs of Medicare, Medicaid, and Social Security--along with inflating interest payments from all the debt we're accumulating--the White House expects the deficit to soar to a staggering -62% of GDP by 2085.

What Krugman and his foes agree on is that that's no way to run a country. And it's time we finally faced up to that.

In the meantime, we'll continue to fight about what to do in the near-term. And Krugman thinks he has lost that war and we're headed for another Depression.



See why Krugman's nemesis, Niall Ferguson, thinks the U.S. is screwed >

Bond Market Bubble? Put Your Money in 'Cash,' Says Analyst

Update: For an opposing view, see also Tech Ticker which is running several looks at this issue.

From Tech Ticker, a financial site with a short video and analysis that you should watch and read each morning, top-rate analyses that the Internet brings us commoners.

Robert Prechter of Elliott Wave International says that the huge and inflated bond market is a dangerous bubble. "The individual investor has been more or less abandoning stocks" and buying bond funds, Prechter (says). "I think that is going from the frying pan into the fire. The bond market is the biggest bubble in the history of the world. "

Do you have your money in "dangerous" stock mutual funds and the bond market. Likely. Put a lot of your money in actual cash, cash equivalents and Treasury Bills. "Cash is King," says Prechter. Watch the video about five times at Tech Ticker. Check out his book.

Bullish a Year Ago, Robert Prechter Now Sees "the Biggest Bubble in History"

In February 2009, Robert Prechter of Elliott Wave International predicted a market rallythat would be "sharp and scary for anyone who is short."In recent months, Prechter returned to more familiar territory, declaring here in November the market was in a "topping area."

A few weeks ago, the veteran market watcher told the Society of Technical Analysts in London that a "grand, super-cycle top" is at hand, The WSJ reported.

"What has happened is a complete change in psychology from extreme negativity [a year ago] to extreme optimism" heading into the market's recent top in January, Prechter says.

Among the many sentiment indicators he watched, Prechter cited the very low levels of cash at mutual funds, which is approaching levels seen near major tops in 1973, 2000 and 2007.

"Nobody should be taking risk right now. This is a time to be safe," he says.

But considering U.S. equity funds suffered about $46 billion of outflows from August to December 2009 while bond funds took in about $198 billion, according to ICI, aren't investors already playing it safe -- a bullish contrarian signal?

"The individual investor has been more or less abandoning stocks" and buying bond funds, Prechter concedes. "I think that is going from the frying pan into the fire. The bond market is the biggest bubble in the history of the world. "

Corporate debt, municipal debt, mortgages and consumer loans will all suffer in the great deflation Prechter believes is already underway, as detailed in his book Conquer the Crash.

So is there any way for investors to protect themselves from the carnage? Check the accompanying video for Prechter's recommendations [at Tech Ticker].

Changed America

Sarah Palin's squawking [and let's pray to the Almighty that she becomes the Republican 2012 nominee] aside, writers like Paul Craig Roberts at CounterPunch have been warning for years the offshore-the-jobs, screw-the-workers' policies are devastating.

Dingbats like Sarah Palin screech U.S.A., but do not think the sentiment ought include the American working class.

A couple of not-altogether pleasant reads explain why the jobless future in the offing is not a good thing. See by Don Peck' How a New Jobless Era Will Transform America and Ismael Hossein-Zadeh's The Retrogression: New Phase, Not Just Another Recession.

Put aside the free market nostrums that Palin spouts without comprehension, we need a government committed to the great majority of its citizens, an economic democracy.

Faced with joblessness, a lame jobs bill now being batted about to unanimous Republican opposition is not close to a step in the right direction. But it's not too late to help Americans.

Though Palin will pick up on traditional GOP racial and class resentments, she is a poor, political vehicle. The question is will President Obama step up to offer a challenge, he has not to this point.

Keeping Merc

Mercury Marine (a division of Brunswick Corp.) wants to ditch Fond du Lac and the Fox Valley.

Merc says it needs to scrap its contract with the Machinists union, (IAM) Local 1947.

So how about Fond du Lac, Fond du Lac County, surrounding communities and Wisconsin pony up on a capital project paying Merc the difference in wages and benefits that Merc says it cannot afford on the existing contract?

Sounds reasonable to me.

Call it "economic protection fees" for the good of the neighborhood.

Bad Sign of the Times

Update: See also After 174 years, Ann Arbor News folds.

What the hell is going on with Fond du Lac?

First we read that Mercury Marine might close shop and now comes word the FDL Reporter will close its downtown offices, relocating "all non-production work" [that would be news and sales staff] to a small printing facility on the west side. (Editor and Publisher)

The Reporter, the Gannett Company's 13,207-circulation afternoon daily, is continuing the downbound path of print newspapers the nation-over.

Local news is the bread and butter of all smaller newspapers, and this service appears in peril.

It's not just technological change causing this trend. The recession is killing off newspapers everywhere, clinging to survival through consolidation and other business moves.

Reports Editor and Publisher, "At the same time, printing and packaging will move to the Gannett Wisconsin Media Production Facility in Appleton." There goes a few dozen more jobs of dedicated employees.

One can't help seeing corporate greed driving professional news reporting during these hard times. Gannett’s Quarterly Earnings Fall 60% in April, the New York Times reported.

Greed, maybe that's too strong a word. Maybe not.

Ganett's (CGI) stock is up 48 percent in the last month, and nine percent today. This news likely won't thrill the employees losing their jobs.

On the other hand, if you're a stockholder, you might have been concerned that Gannett isn't making enough money to declare decent dividends and to bolster the meager stock price.

Old-school

The newsroom at the Reporter as depleted as it is, is still staffed by old-school professionals.

Can't treat this as anything but tragic. It's painful to think of the Reporter's newsroom operating not downtown—yards from the YMCA, City Hall and the Police Department—but rather from Rolling Meadows Drive near the Fond du Lac County airport.

It seems one beautiful city, one community, is beginning to shake at its pillars.

And Fond du Lac epitomizes the United States of America that is heading toward the century's second decade with shaken confidence and growing apprehension.

Those passing 33 West Second Street in Fondy and reading the "The difference is news," on the Reporter building will soon see these words disappear.

Everyone knew this was coming, but maybe not so fast and so harsh.

The Next Big Bad Thing?

Here Comes the Option ARM Mortgage Explosion reads, screams a headline in TechTicker (via the Business Insider).

From The Business Insider, May 21, 2009:
Subprime is done. All the teaser rates are over, the interest rates have reset and the writing is on the wall.

But in the coming quarters, the scenario will play out with other exotic mortgages, Option ARM (pick-a-pay), Alt-A, etc. The homebuyers may have had better credit, but they had the same strategy: Get a low interest rate upfront, and then deal with the reset down the road, by either refinancing or selling the home. But, whoops, home values are way lower and the economy sucks. Plan derailed.

Zacks analyst Dirk van Dijk warns of the troubles ahead:

The vast majority of the homeowners with these 'pick a payment' mortgages pay only the minimum payment. When it exceeds a set level, or at a set date in the future (whichever comes first), the mortgage holder has to start paying the fully amortizing payment of the now much larger mortgage. This can cause huge jumps in the monthly payment, with increases of over 50% not uncommon.

These are the ultimate in 'exploding mortgages.' The number of these recasts is relatively small right now -- at about $1 billion per month -- but that number is set to grow dramatically over the next few years, exceeding $8 billion per month in the fall of 2011. If the equity in your house is gone and your monthly mortgage payment suddenly jumps from $2000 per month to over $3000 per month, what do you think is going to happen? How about if one or both of the people in the household has been laid off?

TNR Profiles Dr. Doom

The New Republic has a profile on Nouriel Roubini, "the economist known to the general public as Dr. Doom, Prophet of the Financial Apocalypse," by Julia Ioffe.

Though he hasn't attacked the Obama administration's policies with Paul Krugman's fury, and though he is no longer the most bearish of the bears, his short-term outlook is still quite bleak: a 36-month downturn, double-digit unemployment, and sluggish, recessionary growth well into 2010. ...

Roubini understood better than anyone just how weak the fundamentals of our economy were. The day after the now-famous 2006 IMF talk, he went on 'Kudlow & Company,' on CNBC. Roubini was, as always, the foil to Kudlow's chipperness. 'All my friends are in a great mood, Nouriel. They're in a terrific mood. They love America,' Kudlow sang. Roubini countered starkly: 'Well, they're all rich,' he said. 'The average American actually is in debt'--a sign to Roubini that housing would only be the catalyst of something larger.

Swiftboating Healthcare

Among one of very bad things that the GOP hates Obama for is healthcare reform to guarantee that every American will have access to what is perceived by the vast majority of the world as a human right.

Not surprisingly the GOP and its allies are out to swiftboat Obama's initiative that is planned to get through Congress by June 31.

Obama is fighting back, with the same innovations that knocked back the GOP in the 2008 campaign. The GOP is going to find out very quickly 2009 is 1993.

Medicare needs this for to halt the costs of healthcare; America needs this and so does the administration that needs to repair some bridges with the people who put him into office very fast.

From the Obama Organizing for America:

We knew healthcare reform would face fierce opposition -- and it's begun.

As we speak, the same people behind the notorious 'swiftboat' ads of 2004 are already pumping millions of dollars into deceptive television ads.

Their plan is simple: torpedo healthcare reform before it sees the light of day by scaring the public and distorting the President's approach.

We need the resources to take them head on with an urgent, grassroots campaign to pass real healthcare reform in 2009.When the swiftboaters flood the airwaves with distortions, we'll flood the streets with volunteers armed with facts. When they send lobbyists to tell Congress to back down, we'll send millions of calls, letters, and stories from real Americans asking them to stand up.

Please donate $5 or more by midnight Sunday to fight back against these phony attacks and take our message of reform to the American people.

The swiftboaters are once again trying to sell the American people short. As during the election, we deserve a serious conversation -- not fear-mongering and deceit. You and I see the importance of healthcare reform every day. We can't miss this once in a lifetime opportunity to face one of America's greatest challenges head on.

Passing real healthcare reform will be the toughest, most important challenge we've faced together since electing Barack Obama President.

But it's also a big reason we fought so hard to get here. I know that by working together, and speaking with one, determined voice, we can prevail over the cynics and defenders of the status quo. America's families are counting on us to do just that.

Stiglitz Is Coming to Town

Update: A reader recommends a March piece by Paul Krugman in which he blasts the bank bailout plan. "But Treasury is still clinging to the idea that this is just a panic attack, and that all it needs to do is calm the markets by buying up a bunch of troubled assets. Actually, that’s not quite it: the Obama administration has apparently made the judgment that there would be a public outcry if it announced a straightforward plan along these lines, so it has produced what Yves Smith calls 'a lot of bells and whistles to finesse the fact that the government will wind up paying well above market ... .'"

Next Tuesday's (May 19) Joint Economic Committee (JEC) hearing will hear testimony by Nobel Laureate economist Joseph Stiglitz.

Stiglitz is widely admired for his book (co-authored with Linda J. Bilmes), The Three Trillion Dollar War: The True Cost of the Iraq Conflict, putting a price tag on the obscene Bush-Cheney-Rice lie that continues to kill to this day.

That's the thing about Nobel Laureates. They often feel free and obliged to tell the hard, unvarnished truth.

To give you an idea of what Stiglitz will say on the economy, consider his commentary in The Spring of the Zombies, excerpted below after this political aside.
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No one envies the Obama administration's task to revitalize after 20 years of neo-liberal/neo-conservative globalization, offshoring of jobs, and facilitation of financial speculators.

But Obama's resort to Bushian secrecy on matters ranging from the bank bailout plan to photos of American torture victims does not inspire confidence, much less reassurance that our president is on the same team as we.

An unprecedented number of Americans (myself included) worked to get Obama into the White House; and America still suffers from eight years of a genuinely hostile force in the White House.

We expect better from Obama. In so many words: You don't lie to a man who just got out of the can.

We are either in this together or we are not

Obama's refusal to provide the pubic with details on the mysterious creation of Zombie banks and the censorship of the black art of American torture makes everyone wonder about the nature of the man in charge.

The audacity of opacity is not the message that any administration should be sending to American citizens especially now. It's a tremendous mistake.
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From Stiglitz:

(E)xamine the fundamentals: in America, real estate prices continue to fall, millions of homes are underwater, with the value of mortgages exceeding the market price, and unemployment is increasing, with hundreds of thousands reaching the end of their 39 weeks of unemployment insurance. States are being forced to lay off workers as tax revenues plummet.

The banking system has just been tested to see if it is adequately capitalized – a ‘stress’ test that involved no stress – and some couldn’t pass muster. But, rather than welcoming the opportunity to recapitalize, perhaps with government help, the banks seem to prefer a Japanese-style response: we will muddle through.

‘Zombie’ banks – dead but still walking among the living – are, in Ed Kane’s immortal words, ‘gambling on resurrection.’ Repeating the Savings & Loan debacle of the 1980’s, the banks are using bad accounting (they were allowed, for example, to keep impaired assets on their books without writing them down, on the fiction that they might be held to maturity and somehow turn healthy). Worse still, they are being allowed to borrow cheaply from the United States Federal Reserve, on the basis of poor collateral, and simultaneously to take risky positions. ...

In earlier crises, as in East Asia a decade ago, recovery was quick, because the affected countries could export their way to renewed prosperity. But this is a synchronous global downturn. America and Europe can’t export their way out of their doldrums.

Fixing the financial system is necessary, but not sufficient, for recovery. America’s strategy for fixing its financial system is costly and unfair, for it is rewarding the people who caused the economic mess. But there is an alternative that essentially means playing by the rules of a normal market economy: a debt-for-equity swap.

With such a swap, confidence could be restored to the banking system, and lending could be reignited with little or no cost to the taxpayer. It’s neither particularly complicated nor novel. Bondholders obviously don’t like it – they would rather get a gift from the government. But there are far better uses of the public’s money, including another round of stimulus.

Every downturn comes to an end. The question is how long and deep this downturn will be. In spite of some spring sprouts, we should prepare for another dark winter: it’s time for Plan B in bank restructuring and another dose of Keynesian medicine.

Joseph E. Stiglitz, Professor of Economics at Columbia University, chairs a Commission of Experts, appointed by the President of the UN General Assembly, on reforms of the international monetary and financial system. A new global reserve currency system is discussed in his 2006 book, Making Globalization Work.

Roubini Hits Stress Tests

Roubini and Matthew Richardson in the WSJ:

The results of the government's stress tests on banks, to be released in a few days, will not mark the beginning of the end of the financial crisis. If we are to believe the leaks, the results will show that there might be a few problems at some of the regional banks and Citigroup and Bank of America may need some more capital if things get worse. But the overall message is that the sector is in pretty good shape. This would be good news if it were credible

Low Wages Are No Good

You offshore American jobs and people lose their jobs.

No good, not for Americans and not for the economy.

Krugman offer some advice against falling wages; might seem obvious but Republicans love the idea of falling wages.

Concern about falling wages isn’t just theory. Japan — where private-sector wages fell an average of more than 1 percent a year from 1997 to 2003 — is an object lesson in how wage deflation can contribute to economic stagnation.

So what should we conclude from the growing evidence of sagging wages in America? Mainly that stabilizing the economy isn’t enough: we need a real recovery.

There has been a lot of talk lately about green shoots and all that, and there are indeed indications that the economic plunge that began last fall may be leveling off. The National Bureau of Economic Research might even declare the recession over later this year.

But the unemployment rate is almost certainly still rising. And all signs point to a terrible job market for many months if not years to come — which is a recipe for continuing wage cuts, which will in turn keep the economy weak.

To break that vicious circle, we basically need more: more stimulus, more decisive action on the banks, more job creation.

Credit where credit is due: President Obama and his economic advisers seem to have steered the economy away from the abyss. But the risk that America will turn into Japan — that we’ll face years of deflation and stagnation — seems, if anything, to be rising.

Bondholders v. Taxpayers

Update: Durbin: Bankers "own" the U.S. Congress

This is an idea gaining increasing currency on making banks healthy, wealthy and lending.

See Reorganising the banks: Focus on the liabilities, not the assets, and Henry Blodget in TechTicker:

From The Business Insider, April 29, 2009:
We are pleased to discover that we're no longer shouting down a rain barrel.

The idea that the government should draw on a massive pot of money available to fix the banks that is NOT coming from the U.S. taxpayer is finally going mainstream!

Today, the NYT's David Leonhardt has devoted an entire column to the idea of making bondholders -- the people who lent the banks the money that they incinerated -- pay for some of the cost of fixing them.

What's more, Leonhardt says that Larry Summers actually mentioned this as a possibility in a TV interview.

Politically, it's not difficult to see how this approach might take the air out of the Republicans' getting all populist on us.

Take this approach combined with the Geithner project, described by Chadwick Matlin as: "A healthy derivative market leads to a healthy bank leads to a healthy economy leads to a healthy life," and you can see some light and a lot of room for Democrats to move right over the Republicans and out of their Battered Wife Syndrome.

Let the Republicans say no, no and get downright abusive and Democrats can get the country moving again.

Roubini: We're in a U-shaped Recession

Dr. Doom, aka Dr. Realist, has an interview with Newsweek/Washington Post writer Lally Weymouth.

Roubini says:

No, I am not Dr. Doom. I am Dr. Realist. I don't believe we are going to end up in a near-depression. Six months ago I was more worried about an L-shaped near-depression. Today, after the very aggressive policy actions taken by the U.S. and other countries . . . we are, instead, in the middle of a U.

Jeffrey Sachs: Geithner Plan Is Unconscionable Rip-Off

This developing, weeks-old story is more scary that a bio-engineered, airborne Swine Flu virus invented by a bio-terrorism novelist.

See John Carney's Jeffrey Sachs: Geithner Plan Is An "Unconscionably Large" Rip-Off in Business Insider, and Sachs' piece at Huffington Post. Read his piece a couple of times.

I hope Sachs is way, way off.

Chadwick Matlin has the knockdown of Sachs' concerns at The Big Money from Slate, which you should probably read about three, four times.

Writes Matlin:

... (L)ast time we checked, functional markets have banks buying and selling things with other banks. If we're trying to return to normalcy, why would we stop the very mundane and typical process of banks buying and selling from other banks? Yes, taxpayer money is involved, but it would be involved with whoever bought the assets. I'd rather bail out the banks a little bit further than enter into new pseudo-bailout contracts with hedge funds, who will make the politically deaf banks look like saints.

Some of the attacks rightfully focus on the possibility of collusion. If the banks are buying from one another, they may agree to set a floor for their bids (60 cents to the dollar, when they're really worth 30 cents, for example), then the assets will still be overpriced. If the assets are still overpriced, then we're back where we started from, with immobile assets stuck on balance sheets, slowly draining the life out of zombie banks.

This, though, jumps the gun in two ways. First, we don't know that the banks are colluding. Profit motives suggest that they would, but political pressures suggest they may not be. And it only takes one rogue bank to underbid the cartel and sabotage the plan.

Second, and more likely, the government could set a ceiling to the price of the assets. To understand what this would entail, think about an eBay auction, in which oftentimes the seller will set a price minimum. The minimum prevents the good from being sold unless the winning bid clears the threshold. The Treasury is conducting a reverse auction, so it would set a price maximum, not a minimum. It would say that an asset could not be purchased for more than, say, 40 percent of its original price.

This would warp the market, certainly, but it would also prevent collusion. Plus, it would allow the banks to start acting like banks, just like they were before the crisis hit. That would be good for everybody's confidence.

One thing is certain: Nothing is clear and certain.

Krugman Blasts Bank Execs

I wish the Obama administration would ask for Krugman's resignation at the Times, and put this guy in charge of the economic recovery.

From Krugman:

On July 15, 2007, The New York Times published an article with the headline 'The Richest of the Rich, Proud of a New Gilded Age.' The most prominently featured of the “new titans” was Sanford Weill, the former chairman of Citigroup, who insisted that he and his peers in the financial sector had earned their immense wealth through their contributions to society. ...

All of which explains why we should be disturbed by an article in Sunday’s Times reporting that pay at investment banks, after dipping last year, is soaring again — right back up to 2007 levels. Why is this disturbing? Let me count the ways.

Moyers Delivers on the Financial Crisis

Bill Moyers' Journal features an exhilarating conversation with scholars Simon Johnson and Michael Perino on the economic crisis.

The conventional wisdom is that the financial chimeras, like CitiBank, Bank of America, and AIG, who are targets of popular outrage, receiving massive government bailouts (to prevent a depression and promote a recovery), comprise too-big-to-fail entities. If they go down, we all go down.

"The guys who remain are more powerful, okay? And their position is, 'Look, if you want a recovery, if you want get your economy back, you've got to be nice to us,'" said Johnson.

Johnson is the Ronald A. Kurtz (1954) Professor of Entrepreneurship at MIT's Sloan School of Management, and Perino is the Dean George W. Matheson Professor of Law at St. John's University School of Law in New York.

Johnson blogs with James Kwak on The Hearing at the Washington Post.

Poll: Country Behind Obama

And over 90 percent view the economy as important, a historical high.

RON FOURNIER and TREVOR TOMPSON:

WASHINGTON – For the first time in years, more Americans than not say the country is headed in the right direction, a sign that Barack Obama has used the first 100 days of his presidency to lift the public's mood and inspire hopes for a brighter future.

Intensely worried about their personal finances and medical expenses, Americans nonetheless appear realistic about the time Obama might need to turn things around, according to an Associated Press-GfK poll. It shows most Americans consider their new president to be a strong, ethical and empathetic leader who is working to change Washington.

Now is the time to play some long ball, throw some Brett Farve passes. Let Fox and the rightwing culture warriors squeal all they want; no one cares about them anymore.

Geithner Sounding Alarm

Update: NYT: "Despite huge government efforts to restore lending to normal, Treasury Secretary Timothy F. Geithner said Tuesday that borrowing costs remained high and credit was still not flowing normally."

Watch Treasury Secretary's Geithner at: http://www.cspan.org/Watch/C-SPAN_wm.aspx

Geithner said there were "systematic failures" requiring very, very serious reforms.

Uncertainty

Uncertainty has the same effect as lack of confidence. Henry Blodget:

Believe it or not, the "stress tests" that the government is performing to see how that banks will do if the economy continues to get worse were originally intended to inspire confidence.

The government would subject the banks to all sorts of horrifying scenarios, the theory went, and it would then report that the banks had passed with flying colors--thus reassuring a nervous public that the financial system was sound.

Alas, from the beginning, the stress tests weren't stressful enough. The government then said it was planning to withhold the results of the stress test to avoid harming the bad banks--which defeated the whole purpose.