UP@NIGHT

A poll recently done for the New York Times and CBS News on the state of the American Dream has some interesting results.  It appears that more Americans believe that they have achieved the American Dream today (44%) than they did four years ago (32%).  The results may seem strange given the depth of the recession.   However, it appears that for a substantial number of Americans the way in which the Dream is understood has undergone a revision.  There is now less emphasis on financial security.  The New York Times article excerpted below is worth a read, although the examples given in the article are open to alternative interpretations.

What Happens to the American Dream in a Recession? (excerpt)

The Times and CBS News asked this same open-ended question four years ago and again last month: “What does the phrase ‘The American dream’ mean to you?”

Four years ago, 19 percent of those surveyed supplied answers that related to financial security and a steady job, and 20 percent gave answers that related to freedom and opportunity.

Now, fewer people are pegging their dream to material success and more are pegging it to abstract values. Those citing financial security dropped to 11 percent, and those citing freedom and opportunity expanded to 27 percent.

….

Delacroix’s Lady Liberty leading consumers and investors who say, enough is enough.

We have all wondered how the financial wizards down on Wall Street managed to help tank the economy.  No doubt creative accounting played a substantial role.   This clip will explain to you, in a straightforward and easily accessible fashion, just how simple creative accounting can be.

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.

In times such as these, our times, when unregulated capitalism has once again proven that it can bring down the house, literally, it’s worth reminding ourselves about the voices that have spoken so eloquently in favor of selfishness over the years.  (Not Adam Smith, by the way; he thought that sympathy was a basic feature of human nature.)  Here is Colbert discussing one of the leading lights of selfishness, Ayn Rand.

The Word – Rand Illusion | March 11th | ColbertNation.com

On Capitalism Run Amok, readers might want to check out Sullivan’s site today, March 23rd, “Are The Jacobins At The Gates?” Let’s just say, a bit over the top, but worth a look.  (Btw, Sullivan thinks of himself as a conservative.)

P.S.  Interesting fact:  Stephen Colbert was a philosophy major at Hampden-Sydney College.  Training in philosophy has its uses.

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): 

The word is out.  Unless AIG pays their executives millions more in bonuses, they might lose the best and the brightest of their employees.  Corporate raiders will swoop out of the clouds and plunder their human capital.  And then where would AIG be?  And then where would we be?   (According to FOX, if AIG cannot retain their top execs, it has threatened to morph into a black hole and take the inner planets with it.)

But wait.  We may have nothing to fear but fear itself.   Let us not forget that AIG is in the business of insuring companies against their own incompetence.  The solution is simple.  AIG should insure itself against its own incompetence through one of its products, for example, FinancialGuard (see below).  So, even if it were to lose its best and brightest by not paying out the bonuses, AIG could still survive through the miricle of insurance.

……

Here is AIG/Australia hawking one “product” that can help save it (and us):

FinancialGuard™ Civil Liability Insurance

What is it?

Professional indemnity insurance on a civil liability basis

Why do you need it?

The activities of regulators, the changing distribution of financial institutions products and a more informed and litigious consumer environment lie behind the increase in the frequency of civil liability claims against financial institutions….

Our Civil Liability product provides blanket protection against the financial consequences of a legally enforceable obligation in which a civil liability is incurred arising from services provided. Covers includes defence costs and civil penalties.

Who needs it?

All Financial Institutions including Banks, Building Societies, Investment Management Companies, Insurance Companies and Stockbrokers.

…….

And under a discussion of assets on the AIG site we find the following pitch:

A company’s assets are vital to its operations. And protecting those assets is essential to the well being of a business. Assets can be tangible and intangible and can include a company’s corporate reputation, as well as physical assets such as property or goods. We offer standard or customised programmes on a domestic or global scale as well as a wide range of products covering more demanding and specialist risks.

Protection of assets!!  Protection for corporate reputation!!  Protection from the activities of regulators!!  AIG can save itself (and us). 

Up until now little beside blind greed and gross incompetence have been offered to explain AIG’s behavior.  Here is an alternative hypothesis: Someone inside AIG decided that the best way to stimulate the market for its financial insurance products was to come up with an example (AIG’s own failure) that would scare the daylights out of even the most confident of finance people, pushing them right into the arms of AIG’s financial insurance sales force.   Insanely diabolical, wouldn’t you say?

And if this hypothesis is incorrect, I have another:  AIG is a corporate comic genius.

P.S.  Here’s five bucks.   Feel free to buy yourself half a dozen shares of AIG.

Here are several labels that have recently and often been applied to Obama: pragmatist, bipartisan, compromiser, and centrist.   The Republicans take no prisoners strategy regarding the stimulus package–which has been driven not by concerns about pork, but by an ideology that still affirms that the market always knows best–has depended on using Obama’s bipartisanship to their advantage.  They typically view him as someone whose pragmatism guarantees a willingness to compromise and operate in a bipartisan fashion.  And yes, it’s true,  Obama would prefer bipartisan solutions.   But be not confused, Republican comrades, pragmatism and bipartisanship are not two sides of the same coin.

Obama, as I have argued elsewhere, is not only a political pragmatist, but a philosophical one.  Two points here:  1) Philosophical pragmatists are not dogmatists; they are falibilists who are suspicious of those who claim to possess certainty in political and ethical matters.  2) Broadly speaking, pragmatists seek what works.

Much confusion is possible regarding these points.  One might think that if someone doesn’t believe in certainty and also looks to what works, he isn’t deeply committed to any values.  This is specious inference.  Pragmatists can be deeply committed to any number of values.  They just don’t think that they have a direct line to the Deity regarding the truth of these values.

So, then, how does this relate to the Republicans’ misreading of Obama?  Republicans have been assuming that Obama’s desire for bipartisanship and compromise is at the heart of his pragmatism.  If they push hard enough, his pragmatism (read: desire to get things done “only” through compromise) will win the day for them.  They will be able to hold back the tide of reform.

But bipartisanship and compromise are strategies and goods, not absolute goods for the philosophical pragmatist.  The pragmatist respects them because they speak to his or her commitment to fallibilism and community, and because they might help us get the job done.  However, if they are failing as strategies to achieve pressing ends, a philosophical pragmatist will not hesitate to engage in triage.  If people don’t have jobs and are without medical care, if the economy is in a death spiral, well, we have an obligation to address these problems.  Be nice to do so through having everyone on board, but we can always return to pursuing bipartisanship another day.  It’s a good, not The Absolute Good.

If bipartisanship is not working as a strategy to get the stimulus package through, which Obama deeply believes is necessary for the well-being of the country, his political and philosophical commitments, and temperament, will move him to turn his energies to figuring out what will work.  And what will work here may turn out to be an offensive against recalcitrant Republicans whose failed policies cost them two elections, 2006 and 2008.  And you know what, he’s got the upper hand if he makes this move. (Republicans might think that Obama wouldn’t dare because he will need them down the line.  However, if they aren’t playing ball now, he can’t be sure they will do so down the line.)

A piece of advice to Republicans:  Don’t push this guy too hard.  You are dealing with a mindset that you haven’t seen in a couple of generations. You will end up regretting it. (He’s perfectly capable of wearing the black hat.)

(Image from The Boston Phoenix)

UPDATE, February  9th, 2009, PM.  The following is an excerpt from The New York Times of Obama’s first press conference as president:

So my whole goal over the next four years is to make sure that whatever arguments are persuasive and backed up by evidence and facts and proof, that they can work, that we are pulling people together around that kind of pragmatic agenda. And I think that there was an opportunity to do this with this recovery package because, as I said, although there are some politicians who are arguing that we don’t need a stimulus, there are very few economists who are making that argument. I mean, you’ve got economists who were advising John McCain, economists who were advisers to George Bush — one and two — all suggesting that we actually needed a serious recovery package.

And so when I hear people just saying we don’t need to do anything; this is a spending bill, not a stimulus bill, without acknowledging that by definition part of any stimulus package would include spending — that’s the point — then what I get a sense of is that there is some ideological blockage there that needs to be cleared up. [emphasis added]

….

UPDATE, February 10, 2009  Peter Baker in the New York Times writes (excerpt):

Taking on Critics, Obama Puts Aside Talk of Unity

“It is not too late to craft a bipartisan plan that creates more jobs and helps get our economy back on track, and Republicans stand ready to work with the president to do this,” Representative John A. Boehner of Ohio, the House Republican leader, said after the news conference.

For his part, though, Mr. Obama seemed to suggest it was too late, and that the time for bipartisanship lay further down the road. He said he recognized that some Republicans had good-faith doubts about his program, but he also characterized some of the opposition as an effort to “test” the new president.

(Baker’s article, which includes discussion of the press conference, is worth a read.  It’s clear that Obama’s pragmatism does not require him to stick to  “bipartisanship” and that the Republicans are about to find out that they have overplayed their hand.   Poor Boehner, the Republicans’ goose egg vote in the House, of which he was so proud, is coming back to haunt him.)

….

UPDATE, February 14, 2009, excerpt from UPI.com:

WASHINGTON, Feb. 14 (UPI) — U.S. President Barack Obama plans to travel and campaign more to pressure Republicans in Congress rather than trying to win their loyalty, sources say.

Now that a mammoth, $787 billion economic stimulus bill has been approved virtually without Republican support, White House advisers have determined that Capitol Hill horse-trading with GOP opponents wasn’t successful and that Obama should instead tap his immense popularity and public salesmanship skills to push legislation in the future, the Washington publication Politico reported Saturday.

Posters from the WPA, Library of Congress Collection

Sometimes you can almost smell a cheap shot.

The stimulus package that passed the House last week failed to receive one Republican vote.  Among the worthwhile provisions in the bill is fifty million dollars for the National Endowment for the Arts.  This is no mere give away.  The money would help to stimulate the economy, even though it is a rather paltry sum for the whole nation–the price of one CEO’s jet to be exact.   But the arts certainly make for an easy target, especially when you are willing to lie about  the contents of the bill.

While the debate over the stimulus package was raging, the Republican whip, Mr. Eric Cantor, claimed that $300,000 had been set aside in the bill for a sculpture garden in Miami.  Well, here are the facts.  No such provision exists in the bill.  It seems that Cantor felt that the package wasn’t specific enough for his taste, so he decided to claim on national TV that a project that had been funded in the past is in the current bill.   From Politifact.com (St. Petersburg Times):

In an interview with Fox News on Jan. 23, 2009, Virginia Rep. Eric Cantor, the House Republican whip, said that in a meeting with President Obama, Cantor asked if he “could use his influence on this process to try and get the pork barrel spending out of the bill. I mean, there’s $300,000 for a sculpture garden in Miami.” . . .

“We don’t know what they’re going to spend it on,” Bradley [a Cantor spokesperson] said. “There is no direction to the NEA on how to spend it.”

So to give people an idea of how the NEA spends its money, Cantor’s staff looked at some recent grants awarded by the NEA.

And in 2008, the NEA gave $300,000 to the Vizcaya Museum and Gardens in Miami to restore an outdoor statuary. The Vizcaya estate is one of the country’s most intact remaining examples from the American Renaissance, a period when the very wealthy built estates to look European. The $300,000 grant was to help restore some of the outdoor sculptures — statues, urns and fountains — that had been severely deteriorating due to South Florida’s salty, damp and subtropical climate, not to mention the hurricanes.

But again, this was an NEA grant from last year .

Vizcaya Museum and Gardens

Yes, there certainly have been more serious lies by politicians, but the point is that here you have the House whip willing to make stuff up (non-existent pork)  in order to help sink the stimulus package.  Pretty shameless stuff.   (As a matter of fact, Eric, it’s a shanda fur die goyim. You should know better.)

The fact is that 1) artists have lost jobs in the current recession and 2) the arts are economic engines in many communities.  There is good statement on the website of the National Endowment for the Arts detailing reasons for supporting the provision for the arts in the stimulus package.  For example, the statement cites a report by the National Governor’s Association:

A recent study released by the National Governors Association titled Arts & the Economy: Using Arts and Culture to Stimulate State Economic Development states, “Arts and culture are important to state economies.  Arts and culture-related industries, also known as ‘creative industries,’ provide direct economic benefits to states and communities:  They create jobs, attract investments, generate tax revenues, and stimulate local economies through tourism and consumer purchases.”

P.S.   Eric Cantor appears to be a major piece of work.  Here he is trying to blame Congress during Jimmy Carter’s administration for the current housing crisis.

UPDATE  2-11-09.  More Cantor…This guy is just what the Republicans need to make sure that they remain the minority party for the next few generations.  Go, Eric (and his Office), Go.

The Plum Line, Greg Sargent’s blog
Cantor’s Office Responds: Video Depicting AFSCME Members As Goons