Archive for the ‘1930s’ Category
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.
Music to the rescue in the face of economic troubles….In this case some saxophonists.
Another reason to support the arts, even in times of trouble.
At today’s Congressional Hearing:
“We are meeting today at a high point of public anger,” said Mr. Liddy, a former chief executive of Allstate who was installed as A.I.G.’s chief when the Federal Reserve announced its rescue package. “I share that anger. As a businessman of some 37 years, I have seen the good side of capitalism. Over the last few months, in reviewing how A.I.G. had been run in prior years, I have also seen evidence of its bad side.” NY Times, March 18, 2009.
I watched a good portion of Edward M. Liddy’s testimony before Congress today. I hadn’t planned to. I got caught up. Liddy took on the job of CEO at A.I.G. for 1 dollar a year. He appears to be a man sincerely dedicated to the service of his country. However, while by no means clueless about the possible reaction of the American people to the AIG bonuses, he did not realize that his arguments amounted to telling the American people that we had been blackmailed. If he hadn’t agreed to pay the executives of the compromised division their bonuses, they would have walked, AIG would have tanked, and our economy would have headed into a death spiral. Or so he claimed. Liddy needed to retain these folks. And he could only do so by paying out millions. (Yes, he made it clear time and again that there were contracts that had to be honored, but as congressmen pointed out, the company could have chosen not to pay and accepted the possibility of being sued.)
“Of the 418 employees who received bonuses, 298 got more than $100,000, according to the New York attorney general, Andrew M. Cuomo. The highest bonus was $6.4 million, and 6 other employees received more than $4 million. Fifteen other people received bonuses of more than $2 million and 51 received $1 million to $2 million.” NY Times, March 18, 2009
The danger to the nation due to a complete financial collapse is far greater than the danger of terrorism. And this is just what Liddy was claiming might happen if these executives walked and AIG tanked. So we have people dying in the fight against terrorism, but we have others insisting on the entire amounts of their bonuses in order to cooperate and prevent financial ruin. As patriotic Americans (that is, those who are Americans), they should have offered to work for a small portion of what they were being paid, especially the top earning executives.
Each contract with each employee had its own unique structure, reported Liddy. They simply couldn’t hold back the funds. However, today he reported that he has asked the executives to return 50% of the money. They don’t have to, but as good Americans they might. (Why didn’t he ask this of them last week? or a month ago? or ask for more?) Think about this, as you think about all those who are on the street without jobs, including Wall Street people. Think about the sense of entitlement that these AIG executives have. Think about why so many of us didn’t see this sense of entitlement as dangerous to the well-being of our nation until very recently.
The American people have been sold a bill of goods for almost two generations now, and it goes something like this: if we take advantage of the magic of the market, if we just look out for number 1, the free market will reward us as a nation. Yes, there are folks in the military who sacrifice, and there are those who volunteer for civilian service, but at the end of the day we serve our country and communities best by seeking our own fortunes.
I am putting this too starkly you say? Perhaps. But it became the mantra of Wall Street. And as they once said about GM, what’s good for Wall Street is good for America. Just watch those 401k’s grow, and never take any money out of them. The market always makes a profit in the long run. (Of course what they forget to tell you is that the long run can be very long indeed.)
The party’s almost over, as so many have declared. The party, however, is not just about living the high life in good financial times. The party is about having a set of beliefs that comfort and aid us in getting on in the world. And one set of these beliefs has involved the goodness of capitalism and the free market. We have spoken about them as if they are gods. They are not. Capitalism can be an exceedingly productive economic system, but only when operating under proper guidance and regulation. There are no free lunches and there are no entirely free markets. Believing so is exceedingly dangerous, especially when this ideology replaces our common sense about the sacrifices and labors required to build and maintain communities and a nation.
AIG, Bernie, foreclosures, housing bubble, -401K, recession, depression, global financial meltdown, Eric Cantor, Mad Money, etc.
It’s time for a break, if only a short one.
Let’s return for a moment to how our grandparents (or perhaps our great-grandparents) kept their spirits up in the Great Depression. From “Follow the Fleet” (1936):
And here is Late Night with Conan O’Brien – Stephen Colbert String Dance Off (2/17/09)