UP@NIGHT

In thinking about the financial crisis—Wall Street, brokers and bankers, and their supporters in Congress, those who have promised us so much in return for so little these past few decades—I remembered hearing the words, “We ask only that you trust us.”

But I was not trusting.  I was suspicious.  I was ill at ease.  Yet, who was I to question the wonders that they produced, the capital that they created, the products they financed, the fortunes they made.

But now I recall.  We had been warned.  They would come bearing gifts.  And then….  Here is that warning (in abridged form), drifting over the air waves for almost fifty years.

It begins with an introduction by Rod Serling, “Respectfully submitted for your perusal: a Kanamit. Height: a little over nine feet. Weight: in the neighborhood of three hundred and fifty pounds. Origin: unknown. Motives? Therein hangs the tale, for in just a moment we’re going to ask you to shake hands, figuratively, with a Christopher Columbus from another galaxy and another time. This is the Twilight Zone.”

Consider as you watch that “a Kanamit” may have been a clever way to say  “a Capitalist” back in Serling’s day.  For as Wikipedia tells us, “Throughout the 1950s, Rod Serling had established himself as one of the hottest names in television, equally famous for his success in writing televised drama as he was for criticizing the medium’s limitations. His most vocal complaints concerned the censorship frequently practiced by sponsors and networks. ‘I was not permitted to have my Senators discuss any current or pressing problem,’ he said of his 1957 production The Arena, intended to be an involving look into contemporary politics. ‘To talk of tariff was to align oneself with the Republicans; to talk of labor was to suggest control by the Democrats. To say a single thing germane to the current political scene was absolutely prohibited.’   Twilight Zone’s writers frequently used science fiction as a vehicle for social comment; networks and sponsors who had infamously censored all potentially ‘inflammatory’ material from the then predominant live dramas were ignorant of the methods developed by writers such as Ray Bradbury for dealing with important issues through seemingly innocuous fantasy.”  The Twilight Zone

RockefellerJ.P. Morgan in action

Obama’s budget is smart and far-sighted.  I wish I could say the same about the bank bailout.  We are certainly not out of the woods on this one.

On April 1st, the New York Times ran an Op-Ed piece by the noble winning economist, Joseph Stiglitz.  (There is an excerpt and  link below.)  It’s about as clear a presentation of the issues involved as I have seen (in a short piece). And it lays out why we should be concerned about the plan, which is no doubt the work of Geithner and Summers.  I worry, as many do, that the red-herring rhetoric of “nationalizing” the banks will prevent us from properly addressing the situation.  I worry that Geithner and co., for all of their good intentions, are too close to Wall Street not to be sucked into the myth that “nationalizing” must mean socialism or the appearance of socialism.  (The irony here is that this is precisely the rhetoric that the right has used so successfully in the past to prevent such needed programs as universal medical insurance.)   I worry that this plan is viewed as a shrewd move to get the Wall Street/banking crowd on board by Geithner and co., but will end up providing the banks only a temporary boost in liquidity, yielding “profits” that will once again allow them to laugh all the way to their own banks.

J.P Morgan headquarters

My hope is that if the plan doesn’t work, the Administration will quickly turn around and say, we tried, and move on to a solution more appropriate to the problem.  I am confident that Obama the pragmatist would make such a move.  The question at hand: how hard will his own soft ideologues fight to avoid the appearance of “nationalizing” the banks?

Obama’s Ersatz Capitalism (excerpt)

by JOSEPH E. STIGLITZ

THE Obama administration’s $500 billion or more proposal to deal with America’s ailing banks has been described by some in the financial markets as a win-win-win proposal. Actually, it is a win-win-lose proposal: the banks win, investors win — and taxpayers lose.

Treasury hopes to get us out of the mess by replicating the flawed system that the private sector used to bring the world crashing down, with a proposal marked by overleveraging in the public sector, excessive complexity, poor incentives and a lack of transparency. . . .

What the Obama administration is doing is far worse than nationalization: it is ersatz capitalism, the privatizing of gains and the socializing of losses. It is a “partnership” in which one partner robs the other. And such partnerships — with the private sector in control — have perverse incentives, worse even than the ones that got us into the mess.

So what is the appeal of a proposal like this? Perhaps it’s the kind of Rube Goldberg device that Wall Street loves — clever, complex and nontransparent, allowing huge transfers of wealth to the financial markets. It has allowed the administration to avoid going back to Congress to ask for the money needed to fix our banks, and it provided a way to avoid nationalization.