Michael Moore's New Film

Few areas of policy have the potential to erupt and capture the American imagination during campaign season as the bailout of the banks and financial institutions.

Visceral populist outrage is a political operative's dream.

At whom will this outrage be directed?

President Obama has resisted for several reasons the naming of names and demands for accountability from specific parties as his administartion has literally saved the world from a depression.

Can one new film by Michael Moore change the political landscape? Yes.

Moore is a brilliant political journalist and filmmaker with an unusual aptitude for understanding American political culture.

Accountability and the naming of names will be demanded and Moore's film, coming to theaters October 2, may well be the impetus

Watch for a qualitative difference in the political culture, demands for the naming of names "supplied by [Treasury Secretary Timothy] Geithner, identifying the criminally negligent, arrogant speculators."

'Save our CEOs' Teaser for Michael Moore's New Film Hits Theaters!

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

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.

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.

Geithner Looks to Make Banks Lend and What Else

Update: Do read William K. Black on The Prompt Corrective Action Law, and Black's interview on the Bill Moyers show.

Geithner: We Won't Hesitate to Change Management at Banks; banks will lend or the bankers will be out of a job.

An increasing number of Americans will judge the policy addressing the banking crisis on the basis of how Americans are affected. Odd.

See Noam Chomsky on the economy and democracy. Plan is recycled Bush/Paulson. We need nationalization and steps towards democratization.

"When the Associated Press sent journalists to interview bank managers, investment firm managers, and asked them what they'd done with the TARP money [Troubled Asset Relief Program (TARP)], they just laughed. They said 'it's none of your business, we're private enterprises. Your task, the public, is to fund us, but not to know what we're doing. But the government could find out.'"

Much of the American public, veering into populism aka democracy, sees the financial managers as the incarnation of the voracious mafia chief, Fausti 'the Fist' Dellacava, in Jimmy Breslin's I Don't Want to Go to Jail.

The Fist often simplified questions over the allocation of resources by decreeing, "Give me all the money."